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[nrd525]

There are thousands or millions of small economic markets that have better price stability than bitcoin. Size has nothing to do with stability - look at the price of gold.

[1714917049]

1714917049

[Technomage]

I have back burnered longer range projections for the time being after realizing the amount of calculation that is really needed increases exponentially with each day forward, and my shortcuts were not getting the results I wanted. It was simply a matter of diminishing returns. However, I ran a little projection going forward and for the short term all I can say is I see more of the same... Single digit prices with some peaks and dips, no big rally, no big crash, and plenty of volatility.

The best case scenario in my opinion is simply slow natural growth as trade is incrementally attracted to Bitcoin. As much as I would like to see a big rally it is probably not the best thing for this market. Holders can expect to hold for a long time, traders will be able to make a little, but this market is really made for the bots and I expect to see more bot action, including occasional strangeness resulting from them interacting with each other.

I am well aware of actually well reasoned arguments why Bitcoin would go to zero, but there is one basic flaw in that reasoning. It presumes that Bitcoin exchange should be modeled like exchanging shares of a stock, but it is not a stock and there is no rationale to expect it to behave as such.

But then there is always the wild card. Somebody that comes along and wants to do something big with Bitcoin. But then Bitcoin is not a very big market, if they want to do something big it will mean buying a lot of coins, because tens of millions doesn't participate very well in an economy that has billions sloshing around in it.  

If you want that to happen then play nice with each other... But watch out for those that would burn it all down.

+1

This is exactly what I was talking about when I speculated on the possibility of a drop-stabilize-stable scenario. Meaning that we trade within a certain range for a long time, at least long in the Bitcoin-world. There will be high volatility within that range but still, it'll be very stable compared to what we've had in the recent months.

The slow natural growth scenario is possible but I think that when the time comes for big news and increased interest, we will see another bubble. That spark will attract speculators and investors to buy again, which multiplies the effect. But until a spark large enough happens we will probably be stuck in a relatively stable scenario which is hopefully fueled by slow natural growth.

Even if a big rally isn't the best thing for the market, that is very likely as long as the size of the market is so small. But it does require a significant spark to happen first, not enough people will commit otherwise.

[netrin]

Hi Chodpaba, you may not be able to nail specific prices at specific times, but you seem to have a very accurate picture of daily volatility. In another thread we are discussing how a merchant may set prices with such volatility. Merchants can peg prices to recent VWAP, add daily inflation rate (1.7% since June), but this offers no protection from wild swings (roughly one 40% + drop each month). Is there a hard and fast way to calculate the expected volatility today based on past performance? And how would that risk translate into price?

[nrd525]

>>Size, and volume, have everything to do with price stability. Volatility is also affected by market correlations.

That is true.  The problem is the relative (high) volume of speculation vs the (small) bitcoin economy.

While I speculate that a total collapse is the most likely option, I could also see bitcoin end up as a small (and very stable) niche economy somewhere in the 0-$1 range - perhaps for people who use Silk Road or to meet some libertarian/techie niche.

[sukiho]

according to http://www.bitcoinmonitor.com/ the volume of speculating is relatively small in the overall economy, smaller then the impression I had anyway

[dree12]

according to http://www.bitcoinmonitor.com/ the volume of speculating is relatively small in the overall economy, smaller then the impression I had anyway

Yeah, the rest is depositing and withdrawl into exchanges, pool withdrawls, and gambling.

[turquoise9955]

according to http://www.bitcoinmonitor.com/ the volume of speculating is relatively small in the overall economy, smaller then the impression I had anyway

Can't always rely on that

[dree12]

according to http://www.bitcoinmonitor.com/ the volume of speculating is relatively small in the overall economy, smaller then the impression I had anyway

Can't always rely on that

It should be fairly accurate though. Most of the activity is depositing and withdrawl from exchanges and pools I assume.

[netrin]

Bravo!

(thUSD failed to deliver )

[netrin]

Even with your new 'day is not a day' perspective, I'm curious if it is possible to look ahead one day given assumptions of today? For example scenario #1 if close $4, scenario #2 if close $5, scenario #3 if close $6.

[netrin]

You can use the principles we have discussed in the thread to build your own system, and I encourage you to do so. But even so, I think the snapshot of the output I publish is still valuable, which is not a bad deal since it it free. But the live output is even more valuable...

I am currently trying to hone my skills with charts but have found your information very valuable. I try to guess at the 37.5% and 12.5% and have applied (1-prob)(spread) successfully, though I tend to hit only on the buy side or the sell side. None the less, I think I'm up a few coins since Friday. Are you taking donations?

[TiagoTiago]

Once you become a millionaire (or billionaire or whatever) doing this, you should consider publishing a book about your approach.

[ineededausername]

It's going back down into the doldrums again?
Damn.

[maxll]

Do pay attention to those tails...

Yes, that happened.

What do you mean? Bears turned back?

[zapeta]

Do pay attention to those tails...

Yes, that happened.

What do you mean? Bears turned back?

I am referring to the current chart, we hit the high tail. The case I am trying to make is that a good way to balance risk/return is to place orders throughout the probability distribution.

Yeah, I've got buy orders through the low part of the distribution...doesn't look like we're going to get there today.

[Jixtreme]

Mr. Chodpaba, I gotta say, I continue to love your work.

If I could very humbly give you some feedback on the appearance of the chart: I frequently get thrown off by the THICK green bars representing yesterday's price.

Being from the physics persuasion, I see this chart as a ball stuck in a valley. Using past support/resistance, you estimate the "topography" of the valley. Trade volume, then, is kinetic energy, pushing the ball back and forth. The box-plots are, unsuprisingly, the probability that the "ball" will arrive at a given price... but then... there are those heavy green bars, which look to me as potential energy walls - barriers - when, really, they are just markers. Others might not have as much trouble as I do... afterall, I endorse Log-scale charts, which, apparently, makes me a lunatic around here.

Again, I love the charts! Keep it up!

-Jix

[gibson042]

Mr. Chodpaba, I gotta say, I continue to love your work.

If I could very humbly give you some feedback on the appearance of the chart: I frequently get thrown off by the THICK green bars representing yesterday's price.

Same here, on both counts. What would you think of something like this?

https://i.imgur.com/3H5Lf.png

[Jixtreme]

Same here, on both counts. What would you think of something like this?

I was thinking just a little marker on the axis at the high and low point would suffice.

The gray, to me, still implies that it's related to today's movement.

[BadBear]

Same here, on both counts. What would you think of something like this?

I was thinking just a little marker on the axis at the high and low point would suffice.

The gray, to me, still implies that it's related to today's movement.

Well it is related.  I like the grey outline much better, it should be a foreground thought instead of a big green line drawing your attention.  However, it is still nice to see the ranges, in a relative way, especially with the huge ups and downs it can see in a day.  Little marks would suffice as well I suppose, be easier to decide if you would make one up real quick.  Maybe use little bitcoins?   

[netrin]

physics persuasion.. chart.. ball .. valley .. support/resistance .. "topography" .. Trade volume .. kinetic energy .. back and forth .. box-plots.. probability. afterall, I endorse Log-scale charts, which, apparently, makes me a lunatic around here.

I think everyone here is a lunatic. We're in good company.

The grey box is also nice. Perhaps if we beggars can be choosers, we'd have a (busy) curve above symbolising the previous day's volume weighted movement, the local maximas and minimas, or just the rotated graph mtgoxlive.com style.