It's not a bubble I promise

[Barek]

I am not dismissing them but i can promise you that you will curse them enough in the future. The big dump has already started

Well, it's time to say good night in China soon, so my guess is trading is going to slow down. But hey, what do I know?

[pand70]

The math speaks for itself.

That nearly killed me.

It is shocking how poorly some people are using econometrics,time series, etc to make arguments regarding the price of bitcoin.

[Altoidnerd]

What will happen when lot of miners start to take profit?
Right now I believe they are just hoarding.

According to this simple supply and demand model, the price will eventually stop climbing exponentially because everyone who could have will have already heard of bitcoin and the supply halts.

At this point I don't know what it will do other than the simplest answer probably being true, its charts will resemble any other currency...it will have a quasi-static strength vs other currencies that fluctuates randomly but certainly it cannot continue the way it is going now.  I have point out two separate "early times" effects that have made bitcoin have insane gains at its outset that will not last. 

Bitcoin will not be brand new news forever. 

[Altoidnerd]

The math speaks for itself.

That nearly killed me.

It is shocking how poorly some people are using econometrics,time series, etc to make arguments regarding the price of bitcoin.

What about it exactly is incorrect?  The best thing you can do is use functional forms in systems with many interacting elements.

[oser41eric]

The big dump has already started

Nope, I dont see any big dump yet, but it will come later this week for sure because the price cannot sustain such daily increase without many taking profits

[Altoidnerd]

The big dump has already started

Nope, I dont see any big dump yet, but it will come later this week for sure because the price cannot sustain such daily increase without many taking profits

My bet is that the price right now is quite close to the equilibrium value.  That doesn't exclude the high velocity of the past few days causing some fluctuations about the equilibrium point. 

But by a great many metrics I find this is not the same situation as april.  So while it is true the velocity has been too high and will cause some disturbance, there wont be a big dump.  There will be a little overshoot and some ringing effects while it the system comes to rest at its equilibrium place. 

Anyone want to put some BTC where their mouth is ;-)?

[gadman2]

Send 100 btc to my sig address, I can double it, trust me.

[Altoidnerd]

I can't I only got like 6.

[justusranvier]

[laowai80]

Altoidnerd,

I agree with your assessment of the bitcoin future trend provided there is no successful intervention by non-market force of any kind, and not the PR sort of intervention in the media which as we have witnessed recently has become less efficient, but of a more influential sort of force, the possibility of which cannot be ignored.

[Altoidnerd]

justusranvier -

They correspond to the demand function in my model which is certainly an exponential for times much less than the prolongation time



Yep those are some great plots.  They represent the cumulative distribution function that is the solution to this problem dammit I cannot remember what it's called and I'm drawing a blank on deriving it right now.

http://www.reddit.com/r/math/comments/1q3ui9/what_function_represents_the_probability_pt_that/


It looks like we can almost use this data to estimate the constant that describes that exponential behavior.  It is then a matter of comparing that rate constant to the bitcoin generation halving rate (4 yrs?) because as I said you would arrive at price goes like (for t small compares to the characteristic time of this distro)

P(t) ~ 1/t * exp[t / t₀ ] * 2 ^t/t_h

where

• t₀ is essentially a characteristic time of propagation for bitcoin on earth,

• t_h is indicative of how often the BTC/block halves what is it 4 years? (and this factor is fudged because ok...this one is weird...this function is discrete but I have a feeling human beings, who are aware of the function will sort of smooth out those kinks....could be wrong though...this factor is loosely correct on say 4-8 year scales then)

• keep in mind for god's sake this is a ridiculously simple baseline model that is only capable of describing behavior on the time scale of YEARS if even that.  But it has some fundamental inescapable truth.  

Actually it presents a neat way to measure the speed what which a signal propagates throughout the world today in 2013.  if you look at those plots the characteristic time was much longer in the past and the curves are way noisier

[Altoidnerd]

Altoidnerd,

I agree with your assessment of the bitcoin future trend provided there is no successful intervention by non-market force of any kind, and not the PR sort of intervention in the media which as we have witnessed recently has become less efficient, but of a more influential sort of force, the possibility of which cannot be ignored.

yes absolutely.  I am talking about the bottom level interactions driving the price and it is an extremely simplified model.  I do think it does explain the log plot and also suggests today's price is less stressful on the market than april's

[dominicwin]

I'm no theorist or economist, but I would attribute the increase in price just to be all the global press lately including some highly publicized articles worldwide about people becoming rich off bitcoin even if it has been happening for a long time lol. I need to start penning a book on all those bitcoins I bought a couple years ago for dollars.

[birkomester]

What is bubble?

[Altoidnerd]

I figured out the probability function which represents demandwas a logistic curve closely related to Tanh[t].  Then it was all pretty smooth...the model absolutely NEEDS the supply of bitcoin to distinctly less than a linear function or else it doesn't go well but yeah, this model does seem to loosely respect the large time scale behavior we have seen of bitcoin.

Here is a google drive with the mathematica files as well as outputs as PDF's of the plots, the raw text files, and "CDF" files which apparently are computable even if you don't own mathematica but I'm not sure.

https://drive.google.com/folderview?id=0B2HU2oGcAN_SSllnYkd0VThTcW8&usp=sharing


This is the main idea of the code there though there is a bit more in the google drive... this will get a dynamic set of plots going you can mess with with your hands varying parameters.  The plot shapes all look pretty good and are extremely sensitive to the supply function controlled by the parameter th:

(* Bitcoin price model plotter // Altoidnerd 2013*)

Demand[t_] := 1/(1 + Exp[-t/tp])
Supply[t_] := t*2^(-t/th)
{Slider[Dynamic[tp], {0, 29, .1}, ImageSize -> 1300],
 Dynamic[tp], "= propogation time tp"  ,
 Slider[Dynamic[th], {0, 3, .00001}, ImageSize -> 1300],
 Dynamic[th], "= effective bitcoin supply"}
Dynamic[
 Plot[Demand[t]/Supply[t], {t, .0000001, 20}, ImageSize -> 500,
  AspectRatio -> 1/1.6^2]]
Dynamic[
 Plot[Log[Demand[t]/Supply[t]], {t, .0000001, 20}, ImageSize -> 500,
  AspectRatio -> 1/1.6^2]]

(* You can comment out this table if you just want to use the sliders \
to mess with the graph.  If you run both the dynamics and the table \
you'll see a cool animation but after that you'll be manipulating \
over 200 plots simultaneously*)

(* Table[
{Plot[Demand[t]/Supply[t],{t,.001,5},ImageSize\[Rule]500],

Plot[Log[Demand[t]/Supply[t]],{t,.01,5},ImageSize\[Rule]500]},{th,1*\
10^-3,.9995,5*10^-3}] *)