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Author Topic: Monthly average USD/bitcoin price & trend  (Read 117340 times)
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rpietila
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November 12, 2013, 05:38:10 PM
 #101

I expect that the "inflated expectations" phase will correspond (closely, but not simultaneously) to the extreme peaks in valuation that rpietila has been hinting about. (Since all current pricing is based on expectations of future value). Followed by a collapse back to much lower valuations, followed by relative stabilization at the more sustainable 300K levels as massive adoption kicks in.

Cool post.

What kind of money we are talking about? Bitcoin is growing so quickly and holders tend to hold tightly that the ratio of (market cap growing)/(new money invested) is a multiple of 1.

I have actually estimated this using data from exchanges starting 2012. The most relevant calculation I made is using combined Bitstamp + Gox market volume, multiplied by 33% (assuming that on average 33% of the volume is virgin money and the rest is trading) and relating this to the increase in market cap in the given time. The ratio was 3.9. This means that in order to reach $300k (corresponding to 4.5T market cap), a little bit more than 1,000 billion dollars need to exit the current system and demand conversion to bitcoins.

If it happens too quickly, not even 1,000 billion can enter*. In extreme times such as 1.1.-8.4.2013 ($13.5-143 with six 20-30% flashcrashes but no deeper corrections or negative weeks), the ratio can reach 10. This was even after modifying the virgin money share to 60%.

A corollary is that the current bitcoin holders receive 1,000 billion USD. Miners don't count since they amortize their investment but not much net gain. Traders don't count since they cancel each other with some winning, others losing (in practice most of this money goes to active traders because they lose so much bitcoins in the process, the net loss of bitcoins being large in comparison to the net gain in dollarz).
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rpietila
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November 12, 2013, 05:40:51 PM
 #102

*If all the money and stocks and bonds and tax shelter accounts tries to enter bitcoin, I think you can 10-double the valuation of all that tries to fit through the hole (given short enough timeframe) and this will be the final bubble valuation of bitcoin.
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November 12, 2013, 05:55:21 PM
 #103

Holy shit. That blows my mind - just the numbers involved and the speed with which it can happen - and it also shows how BTC has so many unique and unpredictable aspects vs. any "traditional" tech innovation/adoption/value cycle - even compared to another disruptive game-changer.  Shocked
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November 12, 2013, 07:54:13 PM
 #104

What kind of money we are talking about? Bitcoin is growing so quickly and holders tend to hold tightly that the ratio of (market cap growing)/(new money invested) is a multiple of 1.

I have actually estimated this using data from exchanges starting 2012. The most relevant calculation I made is using combined Bitstamp + Gox market volume, multiplied by 33% (assuming that on average 33% of the volume is virgin money and the rest is trading) and relating this to the increase in market cap in the given time. The ratio was 3.9. This means that in order to reach $300k (corresponding to 4.5T market cap), a little bit more than 1,000 billion dollars need to exit the current system and demand conversion to bitcoins.

If it happens too quickly, not even 1,000 billion can enter*. In extreme times such as 1.1.-8.4.2013 ($13.5-143 with six 20-30% flashcrashes but no deeper corrections or negative weeks), the ratio can reach 10. This was even after modifying the virgin money share to 60%.

A corollary is that the current bitcoin holders receive 1,000 billion USD. Miners don't count since they amortize their investment but not much net gain. Traders don't count since they cancel each other with some winning, others losing (in practice most of this money goes to active traders because they lose so much bitcoins in the process, the net loss of bitcoins being large in comparison to the net gain in dollarz).

This post makes an important point. We need to model not just the future price trends, but also the amount of money that needs to flow in. 
Can anyone elaborate on any possible models for this, this would be much appreciated.
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November 12, 2013, 08:02:39 PM
 #105

*If all the money and stocks and bonds and tax shelter accounts tries to enter bitcoin, I think you can 10-double the valuation of all that tries to fit through the hole (given short enough timeframe) and this will be the final bubble valuation of bitcoin.

I remembered that you understood math at one time. Surely then you understand that not even 1% of the masses can ever buy Bitcoin and the dystopian outcome is assured.

Speculation fever manipulation (instead of rational speculation where you don't talk at all) is all you will ever be good at my friend? You will destroy the world.

And you have accomplished nothing to actually help.

May the force be with you, you are going to need it.

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November 12, 2013, 09:18:56 PM
 #106

*If all the money and stocks and bonds and tax shelter accounts tries to enter bitcoin, I think you can 10-double the valuation of all that tries to fit through the hole (given short enough timeframe) and this will be the final bubble valuation of bitcoin.

I remembered that you understood math at one time. Surely then you understand that not even 1% of the masses can ever buy Bitcoin and the dystopian outcome is assured.

Speculation fever manipulation (instead of rational speculation where you don't talk at all) is all you will ever be good at my friend? You will destroy the world.

And you have accomplished nothing to actually help.

May the force be with you, you are going to need it.

Bitcoin and other monies are means of exchange: they don't deprive people of the value of their non-money assets, unless, like fiat currencies, they are subject to governments diluting them by printing ever more to spend.

Bitcoin is a way to avoid a dystopian inflationary outcome ...
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November 12, 2013, 09:34:43 PM
 #107

Doesn't that mean that $300,000 is VERY unlikely, even under the best of circumstances?

Interestingly, the value by the end of 2014 will more accurately tell us the peak.

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November 12, 2013, 09:47:39 PM
 #108

It is interesting how good a fit the least-squares method gives applied to a log graph of bitcoin's price history. How far we can rely on an extension of the line for future projections of value I am unsure: it may all happen sooner than we might expect.

Looking at graphs of historical hyperinflations, it seems to me people will discard a currency very rapidly indeed if they lose confidence in it.

Governments are playing with fire with today's fiat currencies as they borrow heavily from their central banks. If bitcoin continues to grow it may make fiat stability even more precarious as people find they have somewhere better to go.

The German Weimar and recent Zimbabwean inflations became so rapid the log graphs of their currency depreciations are themselves exponential: there is no best fit line. I wonder if that will happen with bitcoin?

Weimar paper mark hyperinflation log graph (Wikipedia):




Zimbabwe Dollar hyperinflation log graph (Wikipedia):

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November 13, 2013, 03:39:09 AM
 #109

*If all the money and stocks and bonds and tax shelter accounts tries to enter bitcoin, I think you can 10-double the valuation of all that tries to fit through the hole (given short enough timeframe) and this will be the final bubble valuation of bitcoin.

Surely then you understand that not even 1% of the masses can ever buy Bitcoin and the dystopian outcome is assured.



Where is your argument for this conclusion? I followed your links and just found more proclamations and hyperbole. I'd like to see your analysis.
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November 13, 2013, 04:34:37 AM
 #110

Just another economic ignoramus. For some reason they like to hang out on the economics forum.

Edit: Worse, a minarchist. Minarchists always think everything is a conspiracy because they still fundamentally believe in the supersition of statism and that therefore all the ills of the world must be about conspirators corrupting it.

AnonyMint thinks Bitcoin is a central banker conspiracy.
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November 13, 2013, 03:49:05 PM
 #111

Just another economic ignoramus. For some reason they like to hang out on the economics forum.

Edit: Worse, a minarchist. Minarchists always think everything is a conspiracy because they still fundamentally believe in the supersition of statism and that therefore all the ills of the world must be about conspirators corrupting it.

AnonyMint thinks Bitcoin is a central banker conspiracy.

Yes, maybe so. His views are certainly paranoid and extreme  Undecided - I definitely don't want to live in his reality. But he seems to have done some very strong thinking on real threats and weaknesses of bitcoin.
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November 13, 2013, 03:52:40 PM
 #112

AnonyMint thinks Bitcoin is a central banker conspiracy.

Perhaps.

I don't think we can rule it out. Therefore it is smart to take that scenario into account also. Regardless of whether Bitcoin was salted since the beginning or not, as long as central bankers rule the world, the more wealth you have in any kind or form, to be ignorant of central bankers is dangerous. But the fearmongering does not take us anywhere. Rather we should prepare how to use the incredible financial resources that will soon be at our disposal, to the benefit of mankind.

CB have coerced Bill Gates &co to give away their wealth to detrimental causes such as abortion clinics, vaccination, primary propaganda education, GMO, climate change, and the like. If we do likewise, Bitcoin did not bring much benefit. If we do nothing, same thing. Since I am more sure than ever that bitcoin's exchange rate will continue to go up, I have given up trying to make more of them, rather try to make the most benefit of them.

See my main thread also.
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November 13, 2013, 07:19:51 PM
 #113

I revised my bitcoin logistic adoption price analysis charts to combine four possible scenarios on one chart ..



red - assume a $5,000,000 maximum bitcoin price when fully adopted by financial speculators
orange - $1,000,000
green - $100,000
blue - $40,000

I also re-fit each case to more accurately pass through the final price history data point. It is clear now that the exponential portion of the logistic curve, i.e. the straight line on the log chart, does not predict the maximum price. Here are the corresponding price targets summarized ...



The key result of this analysis is that we should not expect the current exponential growth of bitcoin prices to last more than 36-48 months - even under the most bullish imaginable scenario. Buy sooner rather than later is my obvious conclusion.

The shared spreadsheet containing commentary, calculations and charts can be viewed, or copy/edited, at ...

https://docs.google.com/spreadsheet/ccc?key=0ArD8rjI3DD1WdGhDN3FBWFptTlZTREN0cFkxZ3JHTnc
rpietila
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November 13, 2013, 07:54:26 PM
 #114

The key result of this analysis is that we should not expect the current exponential growth of bitcoin prices to last more than 36-48 months - even under the most bullish imaginable scenario. Buy sooner rather than later is my obvious conclusion.

The speculative bubbles always see a blowoff top, which is characterized by steepening slope in the price curve (ie. "going parabolic" instead of just "exponential"). In this sense your curve can only be correct if we expect an overshoot of a hefty magnitude over the trendline. In 2011 the price reached 50x the trend, last spring 4 times, now we are already 1.3 times. If the final bubble is a mere 10 times the long-term valuation, we are talking about $50 million per coin. If otoh your line is used to predict the bubble top, it is drawn incorrectly from the general price trend.

If your point was to say that after 36-48 months we will start the ascension to Alpha Centauri, then we certainly agree, and the most sensible timing for purchase is NOWGrin
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November 13, 2013, 08:09:55 PM
 #115

If your point was to say that after 36-48 months we will start the ascension to Alpha Centauri, then we certainly agree, and the most sensible timing for purchase is NOWGrin

My logistic analysis is akin to your own log regression analysis. It does not say much about the bubble fluctuations that we have seen in the past and expect in the future. Rather it suggests some average trends.

And could not agree more with your timing advice.
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November 13, 2013, 08:44:54 PM
 #116

*If all the money and stocks and bonds and tax shelter accounts tries to enter bitcoin, I think you can 10-double the valuation of all that tries to fit through the hole (given short enough timeframe) and this will be the final bubble valuation of bitcoin.

I remembered that you understood math at one time. Surely then you understand that not even 1% of the masses can ever buy Bitcoin and the dystopian outcome is assured.

Speculation fever manipulation (instead of rational speculation where you don't talk at all) is all you will ever be good at my friend? You will destroy the world.

And you have accomplished nothing to actually help.

May the force be with you, you are going to need it.

Bitcoin and other monies are means of exchange: they don't deprive people of the value of their non-money assets, unless, like fiat currencies, they are subject to governments diluting them by printing ever more to spend.

Bitcoin is a way to avoid a dystopian inflationary outcome ...

If as the us dollar declines in relative value to Bitcoin and the assets of the masses don't appreciate in us dollars as fast as Bitcoin is, then they are being devalued. Bitcoin has already risen from pennies to $370 which is roughly 30,000x. If Bitcoin becomes the global currency, then it rises another 30,000x to get there, then the masses will be roughly 1/30,000 poorer, unless we also revalue their assets upwards simultaneously.

However, such an implosion of the us dollar will mean the global economy implodes so most assets will actually decline in value, since there are very few people who own Bitcoin to buy them (rich are conservative with investments and don't spend a high percentage of their wealth on discretionary items). Also most of the masses don't own any assets and are in net debt.

This is why the design of Bitcoin's coin reward supply is fatally flawed. If you don't distribute it out the masses, then you end up with dystopian outcomes.

I don't have time to tit-for-tat respond to every comment that appeared here since my prior post, so I will just refer them to the following two linked threads so they can read my rebuttals to their incorrect logic:

https://bitcointalk.org/index.php?topic=318001.msg3571891#msg3571891

https://bitcointalk.org/index.php?topic=331325.msg3570718#msg3570718

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AnonyMint
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November 13, 2013, 08:55:27 PM
 #117

AnonyMint thinks Bitcoin is a central banker conspiracy.

Perhaps.

I don't think we can rule it out. Therefore it is smart to take that scenario into account also. Regardless of whether Bitcoin was salted since the beginning or not, as long as central bankers rule the world, the more wealth you have in any kind or form, to be ignorant of central bankers is dangerous. But the fearmongering does not take us anywhere. Rather we should prepare how to use the incredible financial resources that will soon be at our disposal, to the benefit of mankind.

CB have coerced Bill Gates &co to give away their wealth to detrimental causes such as abortion clinics, vaccination, primary propaganda education, GMO, climate change, and the like. If we do likewise, Bitcoin did not bring much benefit. If we do nothing, same thing. Since I am more sure than ever that bitcoin's exchange rate will continue to go up, I have given up trying to make more of them, rather try to make the most benefit of them.

See my main thread also.

Remember the larger your capital is, the less effectively you can invest it to good. This is just a fact that smaller things grow faster. Find the math in the links of my prior post.

More knowledge nearly always produces more good than more money. Money is just a claim on future labor, but the claim is only as valuable as your knowledge to deploy it.

This is why money eventually growing wings and flys away. It must be that way, else life stops advancing and dies. The wise return it back to society so it can be employed effectively sooner.

I revised my bitcoin logistic adoption price analysis charts to combine four possible scenarios on one chart ..

Exponential growth (linear on a log axis as you've drawn) is inherently unstable, as no exponential growth goes on forever.

The key takeaway in my mind is the incentive for a strong altcoin is now unfathomably rich. It is unthinkable that an altcoin won't appear soon that significantly challenges Bitcoin. Luckily you will get some warning of that and time to evaluate.

If I were investing in BTC, I would be holding and buying as much as could on a regular basis and especially increasing purchases on significant dips. I am not investing in BTC because I think it is insane from a tax perspective when the G20 is planning to confiscate everything and there is not reliable anonymity in (nor that can be layered on top of) BTC (when considering the threat of jail time and targeting by the socialism as a "wealthy speculator" who caused the entire crisis). The anonymity we can layer on top of Bitcoin is maybe reliable 95% of the time if we are really careful (which most of you have no clue on), but 5% is just too risky considering the threat.

Gold fever tends to make people blind to the threats.

And I don't trust they won't clawback and raise taxes retroactively to past years! Governments do very crazy things when they implode.

It is a very dangerous time to have wealth.

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November 13, 2013, 10:03:46 PM
 #118

Do you remember the verse in the Bible, they will toss their gold and silver into the streets?

For me at this time, it is much more important to have my freedom than to have wealth that makes me a marked man by society.

With my freedom, I can do amazing new technology. I need almost no wealth, just a computer, the internet, and my brain.

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November 13, 2013, 10:06:36 PM
 #119

Do you remember the verse in the Bible, they will toss their gold and silver into the streets?

For me at this time, it is much more important to have my freedom than to have wealth that makes me a marked man by society.

With my freedom, I can do amazing new technology. I need almost no wealth, just a computer, the internet, and my brain.

And with the freedom my wealth will afford me,  I can help build a better world where wealth is irrelevant.

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November 13, 2013, 10:30:55 PM
 #120

Do you remember the verse in the Bible, they will toss their gold and silver into the streets?

For me at this time, it is much more important to have my freedom than to have wealth that makes me a marked man by society.

With my freedom, I can do amazing new technology. I need almost no wealth, just a computer, the internet, and my brain.

And with the freedom my wealth will afford me,  I can help build a better world where wealth is irrelevant.

Concrete details please?

Because I've heard that nonsense many times and it never works out once we discuss the details. It is always some uneconomic delusion you are feeding yourself.

Tell me how? Enlighten me.

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