Stephen Reed's Million Dollar Logistic Model

[dennydotco]

It looks like the real testing of the log chart's association with bitcoin values is about to begin. In order to stay close to the chart values in 2015 would have to ride the model from $6xxx at the beginning to $88xxx at the end of the year. That alone would be absolutely phenomenal, and I can't imagine what kind of impact that would have on our economy, but 2016's log growth is from $88xxx to $581xxx. That kind of math is just silly.

Is this even realistically possible? Everything about the idea seems unfathomable and unrealistic to me. I know, I know. 2013 saw Bitcoin grow from $13 to $1100, but that total market cap was still relatively small. For a single Bitcoin to be worth $581xxx the market cap would be phenomenally high.

[cuddaloreappu]

It looks like the real testing of the log chart's association with bitcoin values is about to begin. In order to stay close to the chart values in 2015 would have to ride the model from $6xxx at the beginning to $88xxx at the end of the year. That alone would be absolutely phenomenal, and I can't imagine what kind of impact that would have on our economy, but 2016's log growth is from $88xxx to $581xxx. That kind of math is just silly.

Is this even realistically possible? Everything about the idea seems unfathomable and unrealistic to me. I know, I know. 2013 saw Bitcoin grow from $13 to $1100, but that total market cap was still relatively small. For a single Bitcoin to be worth $581xxx the market cap would be phenomenally high.

The reality is market cap has nothing to do with the price of cryptocoin..just go to coinmarketcap and look at the coins just launched, they have volumes which are less than 10,000 dollars but market cap is around millions...
www.coinmarketcap.com

[jbreher]

Bitcoin is not a monetary item as clearly indicated by the Bitcoin Foundation in a Texas court right now. The Bitcoin Foundation is currently demonstrating that bitcoin is not a monetary item in that court case in Texas.

Citation please? Thanks.

Bitcoin is a variable real value non-monetary item. There is nothing monetary about bitcoin. Bitcoin is an experimental digital medium of exchange. Cigarettes normally are a medium of exchange in prisons (so I read). That does not make cigarettes money.

Sure it does. Cigarettes are indeed money - in the limited economies where they serve as a store of value and a medium of exchange.

For bitcoin to be money it has to be relatively stable in real value, like the major fiat currencies, e.g., the USD, Euro, Pound, Yuan, Yen, etc. The world economy is based on (uses) the Historical Cost Accounting model. The HCA model is based on the stable measuring unit assumption: accountants and economists assume money is perfectly stable in real value over time for the measurement of a great part (not all) of the world´s economic activity.

Perhaps economists use this HCA of which you speak. I wouldn't know. However, what you list as the basic fundamental assumption is completely bone-headed. Fiat currencies being perfectly stable? In a world where the currency of international settlements (USD) has lost 98% of its purchasing power since its inception? A theory based upon such flawed axioms is worthless.

Edited to add:

I have personally experienced Bitcoin to be a phenomenal medium of exchange, and as a store of value has so far exceeded my wildest dreams. Whether old-school economists in stuffy academic ivory towers want to deny it monetary status is no concern of mine. From my viewpoint, it has been performing as money superior to any other money I have ever had the privilege to have known.

And here's the kicker. As the masses slowly awaken to the benefits of Bitcoin, they're not going to be concerned with whether the same-said economists call it money either. If they see Bitcoin as providing attributes superior for their individual purposes than does fiat, they'll use it as their dominant store of value, medium of exchange, and, as adoption becomes pervasive their unit of account -- even if economists refuse to call it a form of money.

[SlipperySlope]

Bitcoin is not a monetary item as clearly indicated by the Bitcoin Foundation in a Texas court right now. The Bitcoin Foundation is currently demonstrating that bitcoin is not a monetary item in that court case in Texas.

As a US taxpayer, the tax treatment of bitcoin transactions is most favorable when Bitcoin is categorized as a commodity, such as gold. I endorse the domestic legal actions of the Bitcoin Foundation in this regard.

If and when some national jurisdiction chooses Bitcoin as a legal tender currency, we in the USA may pay ordinary income taxes on the gains resulting from using bitcoins to buy stuff. My understanding that foreign currency held for investment however, e.g. a possible future Bitcoin currency, receives favorable tax treatment when sold for dollars.

Bitcoin is a currency however right now, simply because enough people worldwide believe it to be one. It certainly has the primary properties of a currency: Durability, Divisibility, Transportability, and Noncounterfitability.

[Adrian-x]

I won't judge stupid behavior (here I am feeding the troll) but if products and services get cheaper and cheaper (price deflation)  only stupid people would risk buying 1 car today when they can buy 2 better cars for the same price next year.

Re read that Hayek book you were given at school.

Unless they need a car. If I need a car I will buy when I need it no matter what that money can do in the future, because I need it now. If I merely would like a better car, but could wait for that better car another year or two while their price drops/my purchasing power rises I will wait. This seems like it would be good for the world to deter overconsumption, build more rugged products in the first place, and maintain what we already have.

Bang on.  Now if your money supply is dependent on debt and interest payments to bond holders this situation represents a deflationary death spiritual, but to a finite world it represent deferred and appropriate consumption, your point proves the Austrian model is viable.

[marcus_of_augustus]

probably a more interesting/accurate model analysis is using total bitcoin value instead of price (i.e. bitcoin price times total coin in existence)?

Since price is usually only a lagging indicator for monetary inflation, it probably will not pick up the total technological good value of the network with any temporal accuracy.

[kutaka]

I won't judge stupid behavior (here I am feeding the troll) but if products and services get cheaper and cheaper (price deflation)  only stupid people would risk buying 1 car today when they can buy 2 better cars for the same price next year.

Re read that Hayek book you were given at school.

This assumption is wrong.

1. You are never sure if will be able to buy two cars next year.
2. You might need the car for business, which will let you earn 3 times the value of car, so it is profitable.
3. You might just need the car of living - for example leaving on some remote land, where closest shop is 20km from you.

Just to make this theory even more wrong:

You can put your money in bank, getting (hopefully) more interest than inflation rate. Let's say you get 3%. So if you buy next year you can buy 1.03 cars.  Ergo, everyone who buys anything is stupid according to you.

[deisik]

Bitcoin is not a monetary item as clearly indicated by the Bitcoin Foundation in a Texas court right now. The Bitcoin Foundation is currently demonstrating that bitcoin is not a monetary item in that court case in Texas. Bitcoin is a variable real value non-monetary item. There is nothing monetary about bitcoin. Bitcoin is an experimental digital medium of exchange. Cigarettes normally are a medium of exchange in prisons (so I read). That does not make cigarettes money.

Bitcoin is a digital medium of exchange and a relatively unstable store of value. Bitcoin is not money or a monetary item. To be a monetary item, accountants must be able to assume that bitcoin is perfectly stable in real value over time like they do with all fiat currencies when they account a great part (not all) of the world´s economic activity.

Money is not what you declare as money (despite whatever any court might say to the contrary) but what works as it. Being a medium of exchange makes something into money, since this is the essence of what is money...

They could just as well ban the law of gravity (I mean that Texas court)!

[ZephramC]

I won't judge stupid behavior (here I am feeding the troll) but if products and services get cheaper and cheaper (price deflation)  only stupid people would risk buying 1 car today when they can buy 2 better cars for the same price next year.

Re read that Hayek book you were given at school.

What about computers, harddrives and mobile phones? They decrease in price for the same parameters and improve their parameters for the same price. And people still "risk" buying them.

What about food? Imagine food (even dinner in restaurant) gets cheaper 1.1x each day (about 2x in a week, about 15x cheaper in a month, etc.). How long would you be hungry?

I see world where people consume responsibly and think twice or three times is something is really "necessary to have today". I see world where you must think very, very carefully before you borrow money (you have to be extra sure about profitability of your investment) and saving is a virtue.

[SlipperySlope]

[reposted from the rpietila quality TA thread]

Here is an interesting chart comparison between the great bubble of June 2011 and the November 2013 bubble. The general shape is that of a dampened oscillation. Because 2013 was a year in which two bubbles occurred, perhaps the November 2013 bubble will have a longer period of collapse than the April 2013 bubble.

This is the weekly chart from Mt. Gox from the 2011 bubble . . .



And here is the current weekly chart from Bitstamp . . .

[SlipperySlope]

Note the strong growth of bitcoin transaction quantity in the past month below. Metcalfe's Law suggests that bitcoin price is proportional to the square of the transaction quantity. Perhaps the growth in transaction quantity predicts a price increase, or conversely transaction quantity will soon plummet to match its lows of early summer.

[lyth0s]

Is that taken literally? As in 70,000 squared (4.9 billion) should be bitcoins market cap?

[bitrider]

Is that taken literally? As in 70,000 squared (4.9 billion) should be bitcoins market cap?

"proportional to the square"

[SlipperySlope]

Is that taken literally? As in 70,000 squared (4.9 billion) should be bitcoins market cap?

Here is the descriptive chart post on my thread that refers to excellent work posted elsewhere on this forum.

Metcalfe's Law Explains 10x Price Growth Vs. 3.2x Transaction Quantity Growth

[zimmah]

Note the strong growth of bitcoin transaction quantity in the past month below. Metcalfe's Law suggests that bitcoin price is proportional to the square of the transaction quantity. Perhaps the growth in transaction quantity predicts a price increase, or conversely transaction quantity will soon plummet to match its lows of early summer.

Funny how each peak has about 2x the volume of the previous peak, but after the last peak there was a lot of stagnation. And even though a growth is visible now, we are not yet above the previous peak even, let alone 2x above it.

If the volume keeps rising and starts getting near 80k we will most likely see another peak in price and in volume, volume hitting 150k or so and price hitting 5~6k or so.

If the volume drops significantly however it shows customer adoption is lagging behind a lot. And therefore we will have to wait for it to pick up.

[wachtwoord]

Fixed money supply? interesting. like the tulip bubble. great experiment. i am better off with my pseudo-science, Sir.

Wow, someone actually believes a certain type of flower is an example of a fixed supply.... I .... I don't even know where to start with this one. Biology perhaps? 

[Beliathon]

Fixed money supply? interesting. like the tulip bubble. great experiment. i am better off with my pseudo-science, Sir.

Wow, someone actually believes a certain type of flower is an example of a fixed supply.... I .... I don't even know where to start with this one. Biology perhaps? 

Generally speaking, science is not the strong suit of the superstitious-minded.

[bucktotal]

Note the strong growth of bitcoin transaction quantity in the past month below. Metcalfe's Law suggests that bitcoin price is proportional to the square of the transaction quantity. Perhaps the growth in transaction quantity predicts a price increase, or conversely transaction quantity will soon plummet to match its lows of early summer.

Funny how each peak has about 2x the volume of the previous peak, but after the last peak there was a lot of stagnation. And even though a growth is visible now, we are not yet above the previous peak even, let alone 2x above it.

If the volume keeps rising and starts getting near 80k we will most likely see another peak in price and in volume, volume hitting 150k or so and price hitting 5~6k or so.

If the volume drops significantly however it shows customer adoption is lagging behind a lot. And therefore we will have to wait for it to pick up.

it almost looks like something really significant happened around the end of february/beginning of march... something that really shook the market. what was that place that used to hold everyones bitcoins that were stolen? i forget... ah well...  it looks like its recovering, but we got some catching up to do 

[painlord2k]

i forget... ah well...  it looks like its recovering, but we got some catching up to do 

The catch up will be pretty funny.

[zimmah]

Note the strong growth of bitcoin transaction quantity in the past month below. Metcalfe's Law suggests that bitcoin price is proportional to the square of the transaction quantity. Perhaps the growth in transaction quantity predicts a price increase, or conversely transaction quantity will soon plummet to match its lows of early summer.

Funny how each peak has about 2x the volume of the previous peak, but after the last peak there was a lot of stagnation. And even though a growth is visible now, we are not yet above the previous peak even, let alone 2x above it.

If the volume keeps rising and starts getting near 80k we will most likely see another peak in price and in volume, volume hitting 150k or so and price hitting 5~6k or so.

If the volume drops significantly however it shows customer adoption is lagging behind a lot. And therefore we will have to wait for it to pick up.

it almost looks like something really significant happened around the end of february/beginning of march... something that really shook the market. what was that place that used to hold everyones bitcoins that were stolen? i forget... ah well...  it looks like its recovering, but we got some catching up to do 

it seems as though once it gets above the previous peak, the rush towards 2 times about the previous peak is quick and happens within a month or two, after which it drops (to the volume it was just prior to the peak) and takes several months to recover. Besides the peaks, the volume is pretty consistently increasing (exponentially), which would encourage an exponential price increase, (or even double exponential, due to metcalfe's law). This is also what we have seen in the past, and are likely to see in the future as well.

However, and this is probably the reason why bitcoin has not seen a peak since late 2013, around march the volume dropped by a lot, and we are indeed still not above the level of the previous peak. We are nearing it though, and once we reached it, the next peak will likely be only about 50 days away. I'd say we'd reach the next peak just around December, which would coincidentally be about a year after the previous one. Whereas previous peaks where about 8 months apart. The delay is probably not all bad though, since during the previous year a lot has happened which has probably not been priced in yet and also awareness spread, so once the price starts moving many who are sceptic now will consider buying in as to not be left behind.

I think it's possible the next peak could be $15000 around december