What would be necessary for someone be able to honestly describe their model publicly, without that reveal influencing the validity of the model, and with that person, and anyone else using that model, being able to profit at least as much as they would without the model being made public? In other words, is a profitable algorithm that takes into account not only it's own existence, but other people's knowledge about it's existence, possible at all? And what would such algorithm be like?
The intermediate-range model I am sharing perhaps addresses your question ...
- Its basis: that the rapid 4-5x annual underlying growth rate of the bitcoin economy will cause bubbles as speculators get ahead of the trend
- Speculative financial bubble theory predicts a certain price pattern, e.g. double exponential price growth that enables recognition of the start of the bubble, and a subsequent decline to the underlying trend post-bubble, where the decline has approximately the same duration as the run-up
- This pattern is stable because of the relatively large proportion of new, not-fully informed speculators who join the rally
- It is advantageous to proclaim the start of a bubble because not-fully informed speculators may be greedily motivated to jump on board assuming that they can exit before the top with big gains
- It is advantageous to proclaim the decline of a bubble, because that notion, when widely disseminated, facilitates the decline
- In a bubble, the majority of the participants are not knowledgeable traders, and thus ignore the published model
this is definitely a respectable model, but i don't think it fits the bill. it may not even work well in practice, as long as more than one market participant is privy.
from a game theory perspective, briefly,
it's not just about what the players know, it's also about what the players know about what the other players know.
in a market with a regularity that is known only to a small few, it will still be self-correcting (i.e. the regularity will dissapear) as there will be regressive attempts to undercut each other's profits, as long as each of them knows that the other knows about the regularity.
