.

[chodpaba]

.

[Okurkabinladin]

BtcChina is currently having 40-45% share of day trades. To me it looks like Chinese superceded Gox, not like diversification. Atleast not yet.

EDIT: AND in 2017, seems like I was proven right again. It would take another three years from this original post before both exchanges AND volume will start to look healthy again. Oh, if I ever got one satoshi per every time I was right...

[ElectricMucus]

What evidence do you mean concretely?

[DeathAndTaxes]

BtcChina is currently having 40-45% share of day trades. To me it looks like Chinese superceded Gox, not like diversification. Atleast not yet.

Well when you consider that at one time MtGox has 80%+ (sometimes reaching 90%) of trade volume even a 40% player is diversification.  Maybe not as decentralized as some would like but certainly less centralized.   Also I think the larger point is that unlike the old "MtGox moves up and everyone follows +/- some difference based on difficulty of moving fiat) that isn't happening with BtcChina.  There are times when it leads and times when it follows and sometimes it is moving in a different direction than the US exchanges.

[Sitarow]

BtcChina is currently having 40-45% share of day trades. To me it looks like Chinese superceded Gox, not like diversification. Atleast not yet.

As you can see the volume charts on the right of this screen shot mtgox for the past day has been higher then on BTCChina and bitstamp following close behind.

[Peter R]

I have shifted my view that friction between markets does not matter. I now think it is actually desirable.

I have come to the same conclusion.  In linear systems theory* or dynamic feedback control, friction (or the D term in a PID controller) tends** to increase stability margins.  In other words, friction makes the system more reliably converge to its equilibrium point with less over-shoot/under-shoot. 

I believe there are two equilibrium points for bitcoin: 1 BTC > $100,000 (globally recognized money) and 1 BTC < $100 (niche currency).  From a game-theory perspective, I believe the $100,000+ point is the stronger equilibrium.  Everyone has the chance to risk, say $500.  If we settle at the upper equilibrium point you've vastly multiplied your investment, if we settle at the lower equilibrium point, well the loss was small.  I expect all rational actors to eventually invest at least a small amount of money in what seems like a positive expected-value gamble.


*yes I know bitcoin is not a linear system

**"tends to" perhaps should be "always"

[I_bitcoin]

I have shifted my view that friction between markets does not matter. I now think it is actually desirable.

I have come to the same conclusion.  In linear systems theory* or dynamic feedback control, friction (or the D term in a PID controller) tends** to increase stability margins.  In other words, friction makes the system more reliably converge to its equilibrium point with less over-shoot/under-shoot. 

I believe there are two equilibrium points for bitcoin: 1 BTC > $100,000 (globally recognized money) and 1 BTC < $100 (niche currency).  From a game-theory perspective, I believe the $100,000+ point is the stronger equilibrium.  Everyone has the chance to risk, say $500.  If we settle at the upper equilibrium point you've vastly multiplied your investment, if we settle at the lower equilibrium point, well the loss was small.  I expect all rational actors to eventually invest at least a small amount of money in what seems like a positive expected-value gamble.


*yes I know bitcoin is not a linear system

**"tends to" perhaps should be "always"

Not to over quote an old favorite but still...   This is Nassim Taleb reasoning at it's best.   Coordination is not going to happen and these markets are going to continue to froth at the mouth and move in a variety of directions "seemingly trending up."   The system is now even more "antifragile" and is forced to move towards the macro economic view as a result.

Now we have three :-).

[ElectricMucus]

What evidence do you mean concretely?

Mostly, I am referring to the way that BTC China and Gox have been crossing over each other. The USD/CNY hasn't moved that much.

Given that observation I have shifted my view that friction between markets does not matter. I now think it is actually desirable.

What do you have to say about that the Yuan has outperformed the Dollar for years now, with no end in sight?
If the Bitcoin market really is dominated by deflationary effects shouldn't have the USD/BTC rate risen faster than the CNY/BTC rate rather than the other way around?

[ElectricMucus]

Yes it's silly, much like suggesting Bitcoin as a hedge of inflation, saying "The dollar has fallen against Bitcoin" or things like that.

[thezerg]

That's one problem with mathematical models; they are very bad at predicting events that exceed their initial structure -- like predicting the sudden adoption in the world's 2nd largest economy.  But the human brain is amazing at imagining the world and projecting a future.  A combination of both techniques works best...

China is coming...

The engine is firing on more cylinders -- USA, Europe, Asia.  I feel that the last "bubble" was mostly driven by USA.  Of course Europe was a major player but rallies occurred during USA day time (mostly).  In contrast this 65+ rally seemed to be USA, 130+ rally was pulled by Asia, but now the Second Market fund, Canada ATM news, etc is also driving the exchanges up 24 hrs a day.  Note how major psychological barriers are just blown through -- for every barrier 1500, 2000 CNY, 200,250,300USD, 200EU, there are 2 other currencies where that level is irrelevant.

Africa, India, and much of South America are still missing.  They will be instrumental for the next one...

The question is, "will this difference translate into a sustainable rally at these rates?"  I think the answer is that it will be sustainable at higher rates, but of course in the end there will be a blow-off.  There always is.  Personally, I'm hoping for a daily-pullback today, I think we need one...

Recently, by correlating hacks, DDOS, etc. with dumps you can get an idea of how well the manipulators are doing.  Not that well, it seems.  People seem to be looking at the other (still up) exchanges and not panicking.  This decreases volatility dramatically.

[thezerg]

That's one problem with mathematical models; they are very bad at predicting events that exceed their initial structure -- like predicting the sudden adoption in the world's 2nd largest economy.  But the human brain is amazing at imagining the world and projecting a future.  A combination of both techniques works best...

China is coming...

The engine is firing on more cylinders -- USA, Europe, Asia.  I feel that the last "bubble" was mostly driven by USA.  Of course Europe was a major player but rallies occurred during USA day time (mostly).  In contrast this 65+ rally seemed to be USA, 130+ rally was pulled by Asia, but now the Second Market fund, Canada ATM news, etc is also driving the exchanges up 24 hrs a day.  Note how major psychological barriers are just blown through -- for every barrier 1500, 2000 CNY, 200,250,300USD, 200EU, there are 2 other currencies where that level is irrelevant.

Africa, India, and much of South America are still missing.  They will be instrumental for the next one...

The question is, "will this difference translate into a sustainable rally at these rates?"  I think the answer is that it will be sustainable at higher rates, but of course in the end there will be a blow-off.  There always is.  Personally, I'm hoping for a daily-pullback today, I think we need one...

Recently, by correlating hacks, DDOS, etc. with dumps you can get an idea of how well the manipulators are doing.  Not that well, it seems.  People seem to be looking at the other (still up) exchanges and not panicking.  This decreases volatility dramatically.

Actually, no. The human brain does a decent job with linear models, but is horrid at exponential projection. I am quite optimistic about the computer models' ability to compete, particularly with multiple data streams.

I never said anything about the human brain and exponential projection.  "A combination of both techniques works best..." is what I said.  I predicted China in May, and the macro-economic ramifications a month ago.  These predictions were given at a time when they were economically valuable. 

I thought "uncle..." meant you were open to a reassessment of your prediction methodology so I just thought I'd opine...

[Pruden]

Given the latest evidence I think I am going to have to moderate my view on ever-increasing volatility

If volatility is decreasing, how come has Bitcoin recovered within a week from a 50% drop and then gone on to set a new ATH? Never before had a 50% drop been less than a crash, yet now it is just a correction shrugged off as any of the ~30% corrections to be found on every bull market in Bitcoin history. You could say it was a normal correction exacerbated by the US Congress hearings mania, but that would still show volatility as being constant.

It is so clear to me that I must be missing something.

[keystroke]

What's new? It's been so long!

[benjamindees]

If Bitcoin exchange continued to behave as a single, flat market then a micro-economic model might suffice. But the friction between markets has the effect of pushing more Bitcoin into the larger economy as it seeks a path to equilibrium between markets, and the larger that volume becomes the more dominant will be macro-scale effects.

So, what you're saying is that Bitcoin, um, er... uh... finds a way?

[Adrian-x]

Zerocoin is going their own way. That's exciting.

Everything else just seems like so much iteration.

Happy new year chodpaba,

how so? are you referring to this?

if so what implications do you see for Bitcoin and Zerocoin?

[sickpig]

Zerocoin is going their own way. That's exciting.

Everything else just seems like so much iteration.

Do you think that stealth address along with bitcoin inertia would in some way hinder zerocoin adoption?


Edit: fix syntax error

[Tzupy]

Chodpaba, why do you call Zerocoin a 'contender'? From what I've read it seems to be compatible with bitcoin and other cryptos. Quoting from zerocoin.org:

Zerocoin is a proposed extension to the Bitcoin payment network that adds anonymity to Bitcoin payments. Just as paper currency once gained its value from being redeemable for gold, zerocoins gain their value from being redeemable for bitcoins. We believe that tools such as Zerocoin are necessary as the current Bitcoin payment network does not offer strong privacy protections. The main idea behind Zerocoin is to place anonymity technology into the Bitcoin network itself. This is substantially different from previous anonymization technologies such as “laundries”, since Zerocoin does not rely on a trusted centralized party that can fail or become corrupted.

What makes Zerocoin different from previous approaches:

    Zerocoin operates in the Bitcoin network and is implemented as a series of extensions to the existing Bitcoin protocol. This approach means that Zerocoin can be deployed without relying on a central coin issuer or bank (as used in previous e-cash schemes). Moreover, since no single trusted party operates the Zerocoin system, attacks on Zerocoin must take on a substantial fraction of the Bitcoin network.

    Zerocoin uses provably secure cryptographic techniques to ensure that Bitcoins cannot be traced. These techniques allow users to conduct transactions on the Bitcoin network while receiving strong mathematical guarantees that the transactions cannot be traced. These guarantees remain in place even if a portion of the Bitcoin network is compromised by an attacker.

    Other anonymous cash systems rely on distributing the work of anonymizing users amongst a set of parties. This approach works well if all parties are fully available but can be subject to “denial of service” attacks where a small number of nodes are taken offline. Because Zerocoin is built on top of Bitcoin, it is widely distributed among all the Bitcoin peers, ensuring that the system can remain available even when many nodes are compromised.

[Tzupy]

Zerocoin being a separate crypto, competing with bitcoin, is a long-term bearish news, I'll have to get some zerocoins.

[Tzupy]

Well, for me, adding zerocoin on top of bitcoin was long-term bullish. A competitor coin, other than litecoin, and who
will provide the shady economy (that bitcoin relies on) something better than bitcoin, is long-term bearish (for bitcoin) to me.
But it's still too early to tell if zerocoin will succeed on it's own. I still haven't found clear info on how it will be mined,
which algos it uses, how they'll deal with the ever-increasing blockchain problem, etc.