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

[ChartBuddy]

Explanation

[Guinpen]

Nice poll question Adam most interesting in a while, the results so far are surprising.

Yes, but it's missing a valid viewpoint: "I couldn't care less about precious metals", which is not the same as thinking about it.

[boumalo]

Still waiting for bitcoin  death:) Just a bit more, few months maybe
I know i am just a bit impatient:)

It would make more sense to invest some time in something you believed in instead of being Bitcoin Mister Doom

[xulescu]

In the meanwhile, masterluc suggests red candles in the 'analysis never ends' thread ...

[Dabs]

So... no escrow I guess.

[JorgeStolfi]

Every exponential price trend that grows faster than population, inflation, and total economic output must perforce cease to hold at some point.  Unchecked, a 10x increase per year would mean that 1 BTC would buy the whole Earth within a few decades.

So, the question is not IF, but WHEN will Bitcoin's price stop following the historic exponential trend?

(Do I need to post again the Worldcom price chart? It followed an exponential trend much more closely and for a longer time than Bitcoin so far...)

Price trends should not be trusted without undersanding the fundamentals behind them.  Some bulls here have their explanation for Bitcoins historical exponential trend.  I have mine,  The conclusions seem to be very different...

[bitgeek]

In the meanwhile, masterluc suggests red candles in the 'analysis never ends' thread ...

Whatever, bitcoin is more than China and their fake trading.

[podyx]

Every exponential price trend that grows faster than population, inflation, and total economic output must perforce cease to hold at some point.  Unchecked, a 10x increase per year would mean that 1 BTC would buy the whole Earth within a few decades.

So, the question is not IF, but WHEN will Bitcoin's price stop following the historic exponential trend?

(Do I need to post again the Worldcom price chart? It followed an exponential trend much more closely and for a longer time than Bitcoin so far...)

Price trends should not be trusted without undersanding the fundamentals behind them.  Some bulls here have their explanation for Bitcoins historical exponential trend.  I have mine,  The conclusions seem to be very different...

I think we gonna see a last bubble before we pick up more stable growth
I'm thinking $7k this summer, fall to $3-4k, end this year at $5k, end 2015 at $15k and $2016 about $40k - all this with considerably less ups and downs

[rpietila]

Every exponential price trend that grows faster than population, inflation, and total economic output must perforce cease to hold at some point.  Unchecked, a 10x increase per year would mean that 1 BTC would buy the whole Earth within a few decades.

So, the question is not IF, but WHEN will Bitcoin's price stop following the historic exponential trend?

(Do I need to post again the Worldcom price chart? It followed an exponential trend much more closely and for a longer time than Bitcoin so far...)

Price trends should not be trusted without undersanding the fundamentals behind them.  Some bulls here have their explanation for Bitcoins historical exponential trend.  I have mine,  The conclusions seem to be very different...

I think we can agree on the following:

- If Bitcoin never makes it big and does not grow over its current 0.02% adoption of the target, it fails, and price per unit may collapse even from the present level.
- If it does make big and its adoption grows to even 500 million people, the price per unit is multiples of what it now is.

The domain of speculation is in whether it has the muscle to grow or not. Until now it has had. I think it still does. You think it does not.

[ChartBuddy]

Explanation

[JorgeStolfi]

I think we can agree on the following:

- If Bitcoin never makes it big and does not grow over its current 0.02% adoption of the target, it fails, and price per unit may collapse even from the present level.
- If it does make big and its adoption grows to even 500 million people, the price per unit is multiples of what it now is.

Yes, I think we agree on that.

[Adrian-x]

Every exponential price trend that grows faster than population, inflation, and total economic output must perforce cease to hold at some point.  Unchecked, a 10x increase per year would mean that 1 BTC would buy the whole Earth within a few decades.

So, the question is not IF, but WHEN will Bitcoin's price stop following the historic exponential trend?

(Do I need to post again the Worldcom price chart? It followed an exponential trend much more closely and for a longer time than Bitcoin so far...)

Price trends should not be trusted without undersanding the fundamentals behind them.  Some bulls here have their explanation for Bitcoins historical exponential trend.  I have mine,  The conclusions seem to be very different...

I know I can't even give this stuff away  
Until a better system than fiat actually takes hold I'm putting my faith in the logic that any better system will prevail (it was an act of faith when I first started mining Bitcoin). Until then I the exponential price trend to continue, it can only be stalled  by responsible fiat creation, and that is unlikely even if TPTB succeed in unification of all central banks.

[aminorex]

Looking at book depth on Huobi and Stamp, Stamp's 15 minute stopping time upper bound is ~464, while that on Huobi is about 2805 (~448).  Since the arb threshold appears to be about 11USD, Huobi sticking restricts stamp to <460, which is about a 5USD haircut over stamp's natural level.  That's splitting the arb margin, so it makes sense, if you consider that Huobi is still dragging stamp down, by about 1% ATM.  Very crude and patently fallacious reasoning here.

[oda.krell]

subject does NOT necessarily need to be complicated with odds and a whole lot of various ambiguous terms.

Now you are childish.

Poker players raise if they have 52/48 but not if it is 48/52.

I am calculating 90% odds for the certain outcome. If you think the odds are 95%, you should bet with me for +EV.

50% is obviously not same as 90%.

I am tired of writing to people who don't know about betting enough to justify opening their mouth but nevertheless do it.

So no bets here. The other thread will perhaps develop into a probability machine where you will always be able to check if your feeling corresponds with the majority, and bet with the ones who think the opposite.

Tail firmly tucked between your legs. As was to be expected when someone calls you out on your many bluffs.

I bet it'd be fun to play poker against you.

Some basics if you want to use the exponential trendline, or contend against its use. Two things must be observed:

[same old drivel as always]

Will you, for fuck's sake, let go already of your harebrained attempt to shoehorn a log-linear regression based trendline into short-to-mid-term trading advice?

Get it into your head: If (for whatever independent reasons) we will stay below that trendline long enough, it will look substantially different from the one you constructed right now. Happened in 2011, might happen again in 2014. Your "advice" of buying because we are currently below it is based on wishful thinking and extremely biased interpretation of the data.

But I waste my breath here. You made it abundantly clear over the years that you choose a good snake oil sales talk over objectivity any time of the day.

[aminorex]

Until a better system than fiat actually takes hold I'm putting my faith in the logic that any better system will prevail (it was an act of faith when I first started mining Bitcoin). Until then I the exponential price trend to continue, it can only be stalled  by responsible fiat creation, and that is unlikely even if TPTB succeed in unification of all central banks.

Personally, I think there's a preponderance likelihood that BTC will become something like the IMF SDR within 5-10 years.  It will become fiat.  I consider that a disastrous outcome, so I'm planning to diversify -- into MRO for now, and increasingly as it starts to get some traction and start-up risk declines.  On the other hand, it will be a beneficial outcome in terms of BTC investment value, and monetary utility, so I don't plan to convert entirely.  I just think BTC will have too much confiscation risk in future, for lack of anonymity.

If BTC has adequate evolutionary fitness to defend its moat, the SDR scenario seems almost inevitable, from my game-theoretically naive scenario analysis.  The exponential growth will continue until it reaches roughly the half-saturation point, if that is the case.  I'm thinking that's about twice as high as slipperyslope's model, from dead reckoning and Fisher's quantity theory.
 

[sleger]

To come back to yours, I think the error is in the first sentence: "the difference between successive values of Z(i) = log(P(i)) are independent random variables with probability distributions that are symmetric about zero"
Small proof: under log brownian (with no drift) the important basic concept is that the best expectation of price in the future is the current value of the price.

OK, it seems that I was using a definition of "log Brownian" that is not the standard one used in finance.

Indeed I was assuming that the increments D(i) = Z(i+1)-Z(i)  = log(P(i+1)/P(i)) were normal variables with zero mean, so that Z(i) would be a Brownian variable as it is usually defined in other areas - with no trend.  (Note that I am a prof of computer science, not economics!)

However, as you point out, by that definition the expected price E(P(i0+n)) would grow exponentially with n; which does not make sense in the trading context, where the "efficient market hypothesis" demands E(P(i0+n)) = P(i0).  (Or does it? See below.)

We agree at least that in a log-Brownian model the increments D(i) = Z(i+1)-Z(i)  = log(P(i+1)/P(i)) should be assumed to be independent random variables, yes?

The standard way to achieve E(P(i0+n)) = P(i0), in finance, seems to be: assume that the increments D(i) are Gaussian variables with slightly negative mean, mu = -sigma^2/2.  That is, one assumes a slight negative trend in the log-price Z(i) so that the broadening of the log-normal distribution of P(i0+n) as n increases preserves the mean P(i0).   Is that correct?

That assumption satisfies the "efficient market hypothesis", but implies (as you pointed out) that the price is slightly more likely to go down than to go up at each step.  Then Prob(P(i0+n) < P(i0)) increases with with the stride n.  Which seems weird too.

We can get rid of this weidness by assuming a probability distribution for D(i) such that E(D(i)) = 0, E(exp(D(i))) = 1.  It seems that these two conditions cannot be obtained with a Gaussian distribution, except in the limit when sigma → 0.  However, they can be achieved with other distributions that are symmetric about zero, especially if they have fatter tails than the Gaussian.  And, indeed, the most obvious deficiency of the log-Brownian model seems to be that, in real data, the distribution of the increments is not Gaussian.

If my math is correct, the distribution of the n-step increments too would satisfy both conditions: E(Z(i0+n)) = Z(i0), and E(P(i0+n)) = P(i0).  Moreover the distribution of Z(i0+n), being the convolution of n symmetric distributions, would be symmetric about Z(i0), implying that Prob(Z(i0+n) < Z(i0)) = 1/2, and hence Prob(P(i0+n) < P(i0)) = 1/2.

With these assumptions, even though the distribution of P(i0+n)/P(i0) approaches a log-normal distribution as n increases (by the central limit theorem), it remains sufficiently "log-abnormal" to satisfy those conditions (which a true log-normal distribution cannot achieve, it seems).

Perhaps you can tell me what would be a convenient "fat-tailed" symmetric distribution to assume for the increments D(i) that would satisfy both conditions.  (Perhaps a mixture of Gaussians with zero mean whose variance has log-normal distribution?  I would have a justification for that choice...)

Finally, about the "efficient market hypothesis": shouldn't it say that E(P(i0 + n)) = P(i0)*Q^n, where Q > 1 is the typical ROI factor of a generic investment per time step?  That is, if E(P(i0+n)) = X, then P(i0) should be less than X, otherwise other investments would be more profitable.

With that modification to the "efficient market hypothesis", the distribution of D(i) must satisfy E(exp(D(i)) = Q, not 1; and one can achieve that even with a zero-mean Gaussian if desired.  In that case one would have a legitimate log-Browninan model (with Gaussian increments) such that that E(Z(i0+n)) = Z(i0), E(P(i0+n)) = P(i0)*Q^n, and Prob(P(i0+n) < P(i0)) = 1/2.  Does this make sense?

EDIT: not sure whether the distribution must/may have fatter tails than a Gaussian.  Too sleepy to think now...

- "We agree at least that in a log-Brownian model the increments D(i) = Z(i+1)-Z(i)  = log(P(i+1)/P(i)) should be assumed to be independent random variables, yes? " yes
- "Is that correct?" yes
- "Then Prob(P(i0+n) < P(i0)) increases with with the stride n.  Which seems weird too." At first maybe, but this makes sense as the expectation of the price in the future being the current price, and the price being limited on the downside to 0, the pdf (probability density function) of the price in the lower than current area is higher to compensate for the fat tail of the density. Think that if current price is 100, there is a small but non zero probability that it will be 1million in 1 year. To keep expectation in 1 year being 100 and since we can't have negative prices, it means there is a large weight on small positive values, and therefore the probability of price being lower must be higher. I don't think there is any way to avoid that, one must just get convinced that it is not weird. And it isn't, if you look at historical prices of financial time series, this is a true historical fact.
- "Finally, about the "efficient market hypothesis": shouldn't it say that E(P(i0 + n)) = P(i0)*Q^n, where Q > 1 is the typical ROI factor of a generic investment per time step?" your Q is usually the risk less interest rate, which we assumed here to be 0 when we said no trend in the price

Glad we agree !

[aminorex]

Your "advice" of buying because we are currently below it is based on wishful thinking and extremely biased interpretation of the data.

Same advice I would give, because 99.99% of all humans have a time horizon that extends beyond the current week, and don't watch charts every day, let alone all day.

It looks really bad for you, this mocking contempt for maturity, realism, and rationality.  I wouldn't want to play poker with that much drama, personally.  But then I never really took to reality TV either.

I find it hard to imagine how you can consider it anything but dispassionately objective to note that the historic trend is still holding, and therefore can be expected to continue to hold, until it ceases to hold.

[Spaceman_Spiff]

In general, I agree with you.  I've noticed (I think) some who have long holdings but don't try to influence the mood of this thread.

The complex personalities here are the most interesting to me.  I believe that there are several who practice second level thinking when it comes to making a post here.  I also think that there are some who are capable of third level thinking.

Now you intrigued me  .  What do you call second level thinking?

...

Levels of thinking:

1.   The most common and least complicated; say, you are long and want the price to go up.  You post pictures of trains and rockets and post rebuttals to those opposed to that view.  Most of the participants here fall into this category.

2.   Less common and more difficult to pull off.  Say you are short but pretend to be long.  You enter conversations with those who are long, arguing unconvincingly that the price must rise, thereby giving the impression (to level one thinkers) that the price may, indeed, be ready to decline.

3.   Uncommon and requires much more effort and practice; a combination of 1 & 2 with a large dose of logic, numbers, and charts that back up your supposed position.  So, you are long but you want to influence the level 2 people to believe you are short.  Most of the time you are trying to get the level 2’s angry enough that they will do the opposite of what they believe you want, namely talk up the price so you profit.

4.   There are, supposedly, more levels but they come with increasing complexity.  You run the risk of misjudging and damaging your intent.
  
See also:  Roshambo (Rock, Paper, Scissors) for a game simple enough to be played by pre-school children, but is played by high-rolling gamblers.

For an example, I believe, of level 2 practice, see most of the posts by Proudhon.

Do you think the ramblings on this thread have much of an impact on the price?  
I don't know honestly, I just assume the comments don't matter for convenience's sake.  Well, at least in the short term.  The fact that ideas are being discussed is a good thing, and might have an effect long-term (depending on how much "capital" is reading this thread).

[ChartBuddy]

Explanation

[rpietila]

Get it into your head: If (for whatever independent reasons) we will stay below that trendline long enough, it will look substantially different from the one you constructed right now.

This would not have warranted a reply, except to refute once again the matter that he seemingly cannot get or cannot remember, no matter how many times it is repeated (note the rare use of dark green combined with bold):

The "rpietila exponential trendline" is updated regularly (monthly) with the latest data, so if the price is below the trendline for a month, it drags the trendline with it. If it is above, the trendline is also dragged upwards. Monthly is chosen due to the reason that for all practical purposes it is the same as updating it every day. During its active existence in this forum, it has been updated 8 times and the updates applied respectively.

ADD: OK, it seems I am again being too verbal 

TL;DR: You are wrong. And butthurt.