rpietila Wall Observer - the Quality TA Thread ;)

[aminorex]

In a post you made in this thread earlier today, you said you expected a pretty straight breakout to $500 on Stamp.

It seems like this would be the time for it?

I did expect a strong movement.  It hasn't materialized.  (But when I said "next leg down"  I meant the next movement, not necessarily the large-scale C wave.)  That mean's I'm starting to gradually lose faith in the predictive capacity of that specific wave analysis.  It won't be categorically refuted soon unless we exceed 880, at which point there is no way to defend it, or we stay below 880 stamp but we fail to take a *major* leg down before the end of the month -- mid-February at the latest.  Levels are usually quite a bit easier to predict than timing.

I'll expand on that.  In these fora there is always the threat that someone might blindly follow your comments, often misinterpreted, and hurt themselves. Let not my lack of disclosure mislead anyone:

My best luck trading on my own technical analysis has been in picking a direction, and sticking with it until it plays out to some sort of maturity.  Essentially all of that experience was in equity, commodity, fx and rates.  I am relatively new to BTC, and my history with technical analysis has been a *losing* one so far, applied to BTC:  I would have done better to buy and hold 100% from day one. I would have more coins.  If you trade with me, you trade with a proven BTC loser.  I am here to learn from rpietila and other successful BTC traders.

That said, I've done quite well in predicting price trajectories in other markets where I have had more experience, and I am generally well-versed in most forms of technical fundamental and quantitative analytics, so I think I may have useful input.  When I do comment, I will try to enunciate my uncertainties and cast estimates in terms of distributional topologies, although accurately expressing such in these small margins is quixotic at best.  In your mixture model I should be a weakly weighted oracle.  Better yet, my comments should only serve as an occasion for you to entertain their concepts in your own independent analysis.

My current position is 60% cold store.  I have a 30% short swap position capitalized in 30% BTC and 10% fiat which I am gently masticating into a higher basis during this sideway action, but if it does not start to gain substantial value soon, I will bias my mastications towards exit of the position.  Exactly when will depend on current evidence, as always.

I often don't do what I would advise others to do.  It's generally best to position yourself for a continuation of the current trend, as soon as you can recognize it as a new trend, and get out (in my risk ideology, out means out of fiat) as soon as your pre-established exit criteria have been met.  Trying to anticipate a turn is likely to cost you.  Unless you are willing and able to endure those costs repeatedly until success, it's a foolish waste of time and energy.

My great sadness with BTC is the lack of asymmetric hedging instruments.  It forces me into levels of risk I have not previously endured.  To achieve my goals will require substantial risk, so I will often do things I would not advise others to do.  Few people if any are under such compulsion as I. Almost everyone has the moral option not to trade at all, for that matter, and for most people it is the best option.

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[windjc]

In a post you made in this thread earlier today, you said you expected a pretty straight breakout to $500 on Stamp.

It seems like this would be the time for it?

I did expect a strong movement.  It hasn't materialized.  (But when I said "next leg down"  I meant the next movement, not necessarily the large-scale C wave.)  That mean's I'm starting to gradually lose faith in the predictive capacity of that specific wave analysis.  It won't be categorically refuted soon unless we exceed 880, at which point there is no way to defend it, or we stay below 880 stamp but we fail to take a *major* leg down before the end of the month -- mid-February at the latest.  Levels are usually quite a bit easier to predict than timing.

I'll expand on that.  In these fora there is always the threat that someone might blindly follow your comments, often misinterpreted, and hurt themselves. Let not my lack of disclosure mislead anyone:

My best luck trading on my own technical analysis has been in picking a direction, and sticking with it until it plays out to some sort of maturity.  Essentially all of that experience was in equity, commodity, fx and rates.  I am relatively new to BTC, and my history with technical analysis has been a *losing* one so far, applied to BTC:  I would have done better to buy and hold 100% from day one. I would have more coins.  If you trade with me, you trade with a proven BTC loser.  I am here to learn from rpietila and other successful BTC traders.

That said, I've done quite well in predicting price trajectories in other markets where I have had more experience, and I am generally well-versed in most forms of technical fundamental and quantitative analytics, so I think I may have useful input.  When I do comment, I will try to enunciate my uncertainties and cast estimates in terms of distributional topologies, although accurately expressing such in these small margins is quixotic at best.  In your mixture model I should be a weakly weighted oracle.  Better yet, my comments should only serve as an occasion for you to entertain their concepts in your own independent analysis.

My current position is 60% cold store.  I have a 30% short swap position capitalized in 30% BTC and 10% fiat which I am gently masticating into a higher basis during this sideway action, but if it does not start to gain substantial value soon, I will bias my mastications towards exit of the position.  Exactly when will depend on current evidence, as always.

I often don't do what I would advise others to do.  It's generally best to position yourself for a continuation of the current trend, as soon as you can recognize it as a new trend, and get out (in my risk ideology, out means out of fiat) as soon as your pre-established exit criteria have been met.  Trying to anticipate a turn is likely to cost you.  Unless you are willing and able to endure those costs repeatedly until success, it's a foolish waste of time and energy.

My great sadness with BTC is the lack of asymmetric hedging instruments.  It forces me into levels of risk I have not previously endured.  To achieve my goals will require substantial risk, so I will often do things I would not advise others to do.  Few people if any are under such compulsion as I. Almost everyone has the moral option not to trade at all, for that matter, and for most people it is the best option.

Wow. Your honesty is refreshing. We should all have more of it.

[aminorex]

I must be a reformed man.  I've actually been getting positive feedback lately. 

Back to TA:  I've been burned more often by pessimism than by optimism, in BTC (since September), so I'm sensitive to chart signals that a notional bearish scenario is inaccurate.  Presently I'm cuing on the Fisher transform and the pending MACD crossover on the 4-hour chart.  Fisher is showing a fairly deep long bottom, and any deeper cut would be a statistical outlier. 

I need a platform where I can code-up a DeMark Sequential countdown or a TrendStall indicator.  There's no BTC price feed on the Bloomberg, and those proprietary studies have served me best in other markets, especially FX and commodities.  Maybe CQG?  TradeStation?  Any analytic platform experiences, recommendations out there?

[TERA]

Do any of you guys who only use "10% of coins for trading and 90% in cold storage" or whatever the ratio is find it frustrating every time you double up the 10% but missed the opportunity to double up the rest of the 90%? If I did such a thing it would feel like a huge loss to me.

[aminorex]

Do any of you guys who only use "10% of coins for trading and 90% in cold storage" or whatever the ratio is find it frustrating every time you double up the 10% but missed the opportunity to double up the rest of the 90%? If I did such a thing it would feel like a huge loss to me.

My big mistake was not going all-in immediately.  It was nice that I timed the start of my BTC purchases with the ramp, and at any other time in history, I would have done well, but I missed about 30% of the potential on the way up by scaling in, piecemeal.  My cold store is a hedge against that, and similar errors.  I may use more in the future, after I've had more experience with BTC.

I've generally performed best during longish trends, where I settle into a rhythm of trading in and out.  During a strong directional trend, I do well by levering up gently and booking small gains in short cycles.  I will gain 1-2% in coin daily, with my day job distracting me.  During a mild directional trend I do well by focusing on using the volatility to improve my cost basis, .5%-1% in coin daily is typical on  a workday.  Again, better on weekends.  During a mild trend I will usually outperform a much larger directional commitment, but underperform during a strong trend.

I don't care so much about the scale of gains on short time frames.  I'm really only interested in how they average out when I approach the time when I need them, and I have no expectation of that being any time soon. Net shorting bitcoin seems like a very difficult thing to do successfully, almost always, and going 100% fiat is almost as likely to cost you coins in the long run, given the strong upside bias, so I'm unlikely to do either unless I'm extremely supremely confident.  So far I'm too new to BTC to be that confident.  Thus trading more than the present fraction seems counterproductive, in the long run.

I'm thinking of trading the weekday cycles in a separate account, to diversify strategies -- but diversification robs the upside, so I'm unlikely to do it, and if I do, it will be with part of what was until then my cold store.

[Wekkel]

Indeed, bearishness has been costly in the BTC market.

[Peter R]

Do any of you guys who only use "10% of coins for trading and 90% in cold storage" or whatever the ratio is find it frustrating every time you double up the 10% but missed the opportunity to double up the rest of the 90%? If I did such a thing it would feel like a huge loss to me.

When you nail a sell and a buy with only 10% of your coins, yeah sure, you wish you had bet more than 10%.  But then when the price rockets from $250 to $1242 after you sell 10%, you're pretty happy you didn't bet any bigger!  

I think it is actually crucial to always be a heavy net long: worst case you lose all your capital (so divest accordingly), best case you increase it by an order of magnitude and beyond.  It is very difficult to predict when these "rockets to the moon" will occur.  

[giletto]

Do any of you guys who only use "10% of coins for trading and 90% in cold storage" or whatever the ratio is find it frustrating every time you double up the 10% but missed the opportunity to double up the rest of the 90%? If I did such a thing it would feel like a huge loss to me.

First Trader Rule:

Keep greed and fear under control or in balance.

If you feel frustrated about that reason, you still are greedy.

[nanobrain]

Do any of you guys who only use "10% of coins for trading and 90% in cold storage" or whatever the ratio is find it frustrating every time you double up the 10% but missed the opportunity to double up the rest of the 90%? If I did such a thing it would feel like a huge loss to me.

First Trader Rule:

Keep greed and fear under control or in balance.

If you feel frustrated about that reason, you still are greedy.

Absolutely.

And viewing your trading from a hypothetical perspective is unproductive and ultimately incapacitating.

[Wilderness]

I must be a reformed man.  I've actually been getting positive feedback lately. 

Back to TA:  I've been burned more often by pessimism than by optimism, in BTC (since September), so I'm sensitive to chart signals that a notional bearish scenario is inaccurate.  Presently I'm cuing on the Fisher transform and the pending MACD crossover on the 4-hour chart.  Fisher is showing a fairly deep long bottom, and any deeper cut would be a statistical outlier. 

I need a platform where I can code-up a DeMark Sequential countdown or a TrendStall indicator.  There's no BTC price feed on the Bloomberg, and those proprietary studies have served me best in other markets, especially FX and commodities.  Maybe CQG?  TradeStation?  Any analytic platform experiences, recommendations out there?

yeah great posts Aminorex. Regarding the number of wallets, does it take into consideration people having multiple wallets? As BTC becomes more mainstream will the amount of wallets per user increase?

[aminorex]

Regarding the number of wallets, does it take into consideration people having multiple wallets? As BTC becomes more mainstream will the amount of wallets per user increase?

A quadratic model will be very accurate, I think.  An a*t^2 term for nonce wallets resulting from network size, a b*t term for dynamic wallets, and a constant term c for static wallets.  a is very very small now and can be ignored, unless apps arise which inflate it.  b dominates over time, currently.
 

[aminorex]

850 continues to hold, so the ABC scenario remains in play.  Channel bound 770-850.  The North American day should see a minor uptrend now, unless there is a catalyst.

[doctor877]

850 continues to hold, so the ABC scenario remains in play.  Channel bound 770-850.  The North American day should see a minor uptrend now, unless there is a catalyst.

IMO the minor uptrend just seems like a minor correction to the whale dumps,  think we'll still drift a bit lower today.

[rpietila]

Yesterday was the venerable Behike 56, today something less. Chaga tea is a good companion, preferably lukewarm, but because of laziness, I usually drink it cold. Our tea dates back to the foundation of Silver Club in 2010, so it has some special energy in it.

David brought about the issue of The Chasm, and I would have liked to see some comments on it. I don't have an opinion, except a mild hunch that 2012 could have been a sort of chasm already.

As for the current price, I see no indication that the train is abruptly about to leave the station. Making an ATH so that it is clear it's not a double top would be a confirmation. Then it would be possible to get 66% of the coins relative to buying now. But waiting for 400 would net you 200% of the coins, which is a more interesting proposition for me, and should be for those who already have a position in bitcoin.

As for the superexponential trend some have been suggesting, we already lived through one in 2010-2011, but from the hindsight it has been called a bubble. I think betting for a short-term superexponential trend is not very intellectual if you don't honestly think it will go all the way to the logical end, which is the destruction of the fiat system this year. Otherwise it is likely that you end up buying rather high, and need to guess the top (even if you are right about the short term rapid growth). If not, you only end up buying rather high.

I want to underline that I think 99% of the people should not pay attention to the short term fluctuations of the price. At the instant when you are ready to buy in, do it. Then only accumulate the position whenever you feel like it and don't sell (regardless if you feel like it or not). Then after you are sure it does not make sense for you to buy more (because you already have so many that having more would not matter), construct a diversification schedule to sell a fraction every time the price reaches a certain milestone. Make it such that you have a comfortable number of bitcoins left when the price reaches $1 million. If you have BTC10 now, I advocate to sell anything between BTC5-BTC9 during the runup. Make the plan, and stick to it. After you have started selling, I don't advice to buy back even if the price goes down. Enjoy your gains rather.

[SlipperySlope]

I want to underline that I think 99% of the people should not pay attention to the short term fluctuations of the price. At the instant when you are ready to buy in, do it. Then only accumulate the position whenever you feel like it and don't sell (regardless if you feel like it or not). Then after you are sure it does not make sense for you to buy more (because you already have so many that having more would not matter), construct a diversification schedule to sell a fraction every time the price reaches a certain milestone. Make it such that you have a comfortable number of bitcoins left when the price reaches $1 million. If you have BTC10 now, I advocate to sell anything between BTC5-BTC9 during the runup. Make the plan, and stick to it. After you have started selling, I don't advice to buy back even if the price goes down. Enjoy your gains rather.

More great advice.

Accordingly I prepared 36 paper wallets to spend monthly for the next three years, each computed to draw down the then-current bitcoin balance by 0.85%. About 73% of my original bitcoin stake will remain after three years when and if the log trend reaches the $1 million price.

[cAPSLOCK]

So a serious question/comment.

I see the number 1,000,000 tossed around frequently.  I also see many scenarios that are that fantastic seemingly considered as serious possibilities.

If this is the "quality" TA thread does it not knock down the quality a bit when the million dollar number and things like it get tossed around?

Even if it's tongue in cheek it seems to be so overly fantastic as to undermine so much of the good analysis that goes on.

A corollary: Assuming there are bulls here who seriously think $1MM/BTC is a real possibility would someone give me a good argument as to how this is possible.

I am personally a BTC bull, but I have a hard time imagining the sort of scenario where BTC is worth $1MM USD.  I feel that level of price would require the sort of social upending that would threaten the networks needed to keep BTC valuable.

[neilol]

So a serious question/comment.

I see the number 1,000,000 tossed around frequently.  I also see many scenarios that are that fantastic seemingly considered as serious possibilities.

If this is the "quality" TA thread does it not knock down the quality a bit when the million dollar number and things like it get tossed around?

Even if it's tongue in cheek it seems to be so overly fantastic as to undermine so much of the good analysis that goes on.

A corollary: Assuming there are bulls here who seriously think $1MM/BTC is a real possibility would someone give me a good argument as to how this is possible.

I am personally a BTC bull, but I have a hard time imagining the sort of scenario where BTC is worth $1MM USD.  I feel that level of price would require the sort of social upending that would threaten the networks needed to keep BTC valuable.

I assume you will get some better quality responses in this thread, but to put it in a macro perspective:

In terms of market cap, just the Bitcoin currency (ignoring its obvious value as a payment network/p2p ledger) could roughly be compared to the current M2 USD supply (~$10 trillion) plus total value of gold mined on the planet (~$8 trillion). A $1MM BTC price would give a total possible market cap of ~$21 trillion, ignoring lost coins. Not too far off.

In this scenario, which is being given a decent probability on this forum, Fiat money systems have essentially failed and are massively devalued as BTC takes over as the main world reserve currency. Separation of money and state.

[KFR]

Good post.  Cheers RP.

[User705]

So a serious question/comment.

I see the number 1,000,000 tossed around frequently.  I also see many scenarios that are that fantastic seemingly considered as serious possibilities.

If this is the "quality" TA thread does it not knock down the quality a bit when the million dollar number and things like it get tossed around?

Even if it's tongue in cheek it seems to be so overly fantastic as to undermine so much of the good analysis that goes on.

A corollary: Assuming there are bulls here who seriously think $1MM/BTC is a real possibility would someone give me a good argument as to how this is possible.

I am personally a BTC bull, but I have a hard time imagining the sort of scenario where BTC is worth $1MM USD.  I feel that level of price would require the sort of social upending that would threaten the networks needed to keep BTC valuable.

Keep in mind that $1MM USD may or may not be as valuable as you think in the future.  It's an arbitrary number.  1 XBT is worth 100,000 Yen right now but the right question is how much real purchasing power that represents.

[aminorex]

US-centric model is poor.  Global GDP is about 46 tln USD.  With 15 mln BTC (for a while) and V=6, that gives 1 BTC ~= USD 4.4mln.

We can reduce M due to saving, since saving is appealing.  Perhaps 1.5 mln BTC actually circulate.  But 100% of GDP is unrealistic.  Maybe 25% of GDP is the maximum feasible penetration.  Then 1 BTC ~= 11 mln USD.

Thats probably the top-end, at least until the economy can start to grow meaningfully in real terms per BTC, around the year 2035.
If we start to mine asteroids, and population grows, there's no upper bound really.