Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[KFR]

The problem with your log-linear model isn't that it's not updated regularly. I know you do that.

The problem is the *extreme* laggyness of the model, and how you intend to use it. By the time your regression picks up the fact that we are in a huge bear market*, it is already much too late.

The log-linear trend can maybe, if you insist, be used to get an idea of the order of magnitude of the expected price, assuming nothing about the growth function up to now has fundamentally changed. And even then you should remind people that it is no guarantee either, just a reasonably motivated model.

I agree. Is there a point of controversy?

Yes. Your presentation of it.


"Buy now, because we are (almost) guaranteed to turn around anytime now, based on the log trend."

That's the essence of your sales talk, and it is doing a disservice to Bitcoin.


"Buy now, it has historically proven to be a good approximate spot, but be prepared to see your USD value go down further in case the bear market continues."

That'd be an honest presentation of the historic results, but one that I have yet to see in this form.


In case you accuse me of putting words in your mouth, here's the type of presentation I have in mind:

- Trendline comparison: we are now at -0.322 log units. The trendline is at $966 and rising $7 per day, conclusion: rock bottom (of all of the time between the 4/2013 and 11/2013 peaks, only 2% (5 days) was spent this low)

There is no such thing as "rock bottom" of the trendline. If the market continues to go down south, your model will pick that up long after the fact.

For fairness sake, you do add disclaimers when pressed (like: "don't invest what you can't afford to lose"), but you are still regularly abusing your model in discussions about short-to-mid term predictions (e.g. was this the bottom or not?), where this model has no place whatsoever.

When I pay a professional financial advisor I expect disclaimers.  When I read what some guy has posted on a forum I insert my own.  

[ChartBuddy]

Explanation

[oda.krell]

So Blitz (and others): do you have any better ideas? If so, I'm all ears

My idea is to consider the Metcalfe Value model.  It makes no attempt to extrapolate into the future; however, it does show that the bitcoin market cap has grown in proportion to the square of what I refer to as the generalized user base over 4 years and over 1,000,000% change in price.

This should make Oda and Blitz happy, since this is not a predictive model (in time).  However, it provides support for Risto's exponential growth model because bitcoin's generalized user base has actually deviated less from true exponential growth than bitcoin's market cap has.  




The question of price then becomes one of adoption.  Will bitcoin continue to be useful to a growing number of humans?

I've seen your model, and I like it. I consider it somewhat more motivated than a pure time-based one. Btw, I think a (roughly) similar one is being developed by an Italian guy whose name I forgot (something bianchi), who measures "adoption" based on zero addresses.

Anyway, an improvement maybe, but still based on one crucial assumption: user base is adequately reflected in total number of addresses (or transactions, or whatever info you prefer to download from blockchaininfo).

Not that it's wrong per se, but it's not obvious either. We're still pretty early into the adoption (and usage), and it's too early to say with certainty if we can use that data unfiltered to estimate the user base (I know, I know, "popular addresses excluded").

[JorgeStolfi]

Though the great thing about linear regression is that as long as the price starts out at 0, the slope can't ever be negative, so all is well, and all will forever be well so long as there is a non-zero trading price. Infinite profits ahead, guaranteed.

Eg.with Auroracoin the slope is already negative. Linear regression could not prevent it.

Hm, that points out a problem with using linear regression on all the monthly points.

Suppose two items A, B that start out both at the same price 1$. Item A then grows steadily to 1000$ over 2 years.  Item B shoots up to 2000$ on the first month and then decays steadily to 1000$ in the next 23 months.

Linear regression will give a positive slope for item A and a negative slope for item B, even though both increased by a factor of 1000 over that time span.

On the other hand, consider item C that starts out at 1000$, drops to 1$ on the first month and recovers steadily to 1000$ over the next 23 months.  Linear regression would give positive slope.

These examples do not prove that linear regression is "wrong", but should make one aware that its meaning is not what one may think.

"Your results are not right. They are not even wrong." --some famous scientist reviewing the work of some colleague

[chromosoma]

So, should we say hello 300$ mark?=)

[wachtwoord]

So Blitz (and others): do you have any better ideas? If so, I'm all ears

My idea is to consider the Metcalfe Value model (V ~ N²).  It makes no attempt to extrapolate into the future; however, it does show that the bitcoin market cap has grown in proportion to the square of what I refer to as the generalized user base over 4 years and over 1,000,000% change in price.

This should make Oda and Blitz happy, since this is not a predictive model (in time).  However, it provides support for Risto's exponential growth model because bitcoin's generalized user base has actually deviated less from true exponential growth than bitcoin's market cap has.  

FIGURE SNIPPED

The question of price then becomes one of adoption.  Will bitcoin continue to be useful to a growing number of humans?

Peter, I told you before I really really like your model. Mostly because this is about fundamentals and not price. When you value a company the stock price is not a factor at all (only for determining to buy or not). The main (and inherent) weakness with your model is that the only data we have to estimate the value of a number of transactions per day because you had to bootstrap this using Bitcoin's own price history. There's no other example in history to refer to.

[akujin]

 

[darklight]

Yawn. It often dips on Sundays

[p0peji]

So, should we say hello 300$ mark?=)

That would be awesome.

[podyx]

What's the reason for the dumps?

[p0peji]

What's the reason for the dumps?

China ban?

[N12]

Okay I read the article:

* It starts with a whole section about the US IRS. There are more countries in the world than the US who tax it differently. So it's off to a poor start.
* It get's better, but only by only focusing on the next quarter (3 months). Therefore this article is a totally different animal than the trend line: the article is short term, the trend line is long term
* The section about miners is purely speculative and doesn't use any data. Do miners sell more coins then before? I don't know and neither does the author (he merely speculates)
* The author agrees the reasons the price is depressed now (more merchants) is bullish long term
* The same applies for the buying going on off exchange. The thing with a constant supply and rising demand is that int he end the supply runs out.
* The price range in the end is completely pulled from his ass. Tbh I would predict the exact same price range as him for one simple reason: the future is most likely to be same as the present. I once saw a study which concluded that if you predict the weather for tomorrow to be the same as today all year long you outperform all weather forecasts worldwide. The same applies here.

Thanks for the article though. An interesting read none-the-less.

It was just an example that I was recently impressed with. Merril Lynch and Goldman Sachs have written more elaborate analysis. I just want to express that linear regression is neither a fundamental or a technical really, it's just a statistic. Actual trendlines are the way to go if you want to show a trend, in my view, because they can be invalidated. Hell, moving averages work well too, and you can use two different moving averages for their crossovers.

[podyx]

Maybe I should remove my 425 bids

Should I?

[KeyserSoze]

It looks really bad for you, this mocking contempt for maturity, realism, and rationality.

You're talking about Risto here? This is comedy gold!

[bitcoinsrus]

[bitgeek]

What's the reason for the dumps?

China ban?

Which ban? They are banning bitcoin every 2-3 weeks since December, get over it.

[p0peji]

Wasnt there a certain some1 on here who said that we would not visit 435$ again?

[p0peji]

What's the reason for the dumps?

China ban?

Which ban? They are banning bitcoin every 2-3 weeks since December, get over it.

The butthurt is strong in this one 

[Peter R]

We're still pretty early into the adoption (and usage), and it's too early to say with certainty if we can use that data unfiltered to estimate the user base (I know, I know, "popular addresses excluded").

It doesn't actually matter.  

What my model does is defines two abstract unmeasurable quantities called the "generalized user base," N and the "value of bitcoin", V.  I then define that these two variables satisfy the Metcalfe Model, V ~ N².

Everything is exact so far and I haven't made any assumptions.  Then I ask: "is this model useful?"  

To answer this question, I look for observable proxies for both N and V that are measurable.   Reasonable proxies for N include "unique address used per day" and "transactions per day excluding popular addresses," but one could also consider subscribers at r/bitcoin or users at bitcointalk.com.  In fact the more proxies for N that show self-consistency, the stronger my model becomes.  A reasonable proxy for V is the market cap of bitcoin.  

It has already been shown the the model is useful, and that it is in fact reasonable to infer that bitcoin's value grows as the square of its generalized user base.  Realizing that I am using the terms "bitcoins value" and "generalized user base" in a technical way, the task moving forward in time is to find ways to estimate N that simultaneously support the Metcalfe model without stretching the common-sense meanings of the words "value" or "user base."  If we have to stretch common-sense too far, then the model will no longer be useful.  


This is how we make progress in theoretical physics.  A good example is Newton's Second Law: f = m a.  A lot people think that this is some discovery about a "fundamental law of the universe," but it is actually just a definition.  The net force acting on an object is defined by humans to be equal to the product of the object's mass and acceleration.  You could equally create another "law" that says f2 = m v, where v is velocity and f2 is "force 2.0."  Both are correct by definition, but only one is useful.  If you calculate the "force 2.0" of gravity, you'll get a complex mess; whereas the "force" of gravity is an elegant equation.

[TeeBone]

Maybe I should remove my 425 bids

Should I?

Yeah, move them to 402-412. It's going much lower eventually, but that's a safe bet.