rpietila Wall Observer - the Quality TA Thread ;)

[AnonyMint]

creekbore, I am now convinced by aminorex's explanation (changed my mind) and I now think my point about unused addresses is irrelevant, as it is just part of the n^2 network effects.

However, I am still thinking p has some reverse feedback on n on the margins.

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[aminorex]

Given all the other evidence that points to the contrary, it seems rather hopeful to base ones attitude (ie bullish on BTC) on a single  chart.

Discriminating between signal and noise is a selective process.  This is the chart that meets the requirements for fitting to metcalfes law.  Value transfered per unit of time would be needed for fisher.  The laws can be validly applied and thus are useful.  I don't know of a generative model for fundamental value which is parameterized by or fit to the other charted factors, so I can't easily derive signal from them.  Lots of structural inference would be required, and need to be proven out.

The easy and sensible thing would be to do vector ARIMA.   Phase plots are likely to reveal some structure too - at least show where lag is varying.

[creekbore]

creekbore, I am now convinced by aminorex's explanation and I think my point about unused addresses is irrelevant, as it is just part of the n^2 network effects.

However, I am still thinking p has some reverse feedback on n on the margins.

Aminorex is most convincing  You both sound incomparable.

And it all sounds wonderful but is completely impenetrable.  If BTC crashes and burns tomorrow all the theoretical thinking will suddenly change "ah...we forgot to factor in...blah blah blah"  This happens often does it not, often because the theory is divorced from reality or based on inaccurate data.  

From my simplistic PoV the chart shows address used not the number of users?
My point is every time I use BTC I create a new address to either send from or receive to but I'm still a single user.  That probably sounds illogical but I suspect my behaviour is fairly commonplace.

Since the number of tx has remained steady, why not the number of users?

[AnonyMint]

p = price
n = number of unique addresses (a more relevant proxy for and than number of users)

If n at 150,000 is 33% too high above the bottoms trendline since 2012 (use a ruler on the "All time" plot), and if p is tracking n^2 per Metcalf's Law and Peter R's chart, then a 0.67 x 0.67 = 0.45 of recent price could be expected.

If I understood Aminorex's point, the correlation that Peter R's chart upthread showed is predominately n^2 driving p, because n^2 has more structural significance than p.

In other words, either just purely mathematical a n^2 term in a polynomial has more weight than a n term (because for example in the first derivative the n becomes constant, i.e. no velocity only position and I think Aminorex is also looking at it from a statistical math framework), or I added some real world interpretation noting that network effects (e.g. the creation of Bitpay and Coinbase) is reflected in those n^2 connections. Reed's law says that as n is nodes in network, maximum connections is n^2. Changes in price can't make Bitpay and Coinbase disappear. Thus n^2 has more significance than p.

Yet I am pointing out that probably p has some reverse feedback on n (the number of unique addresses, i.e. proportional to users), because some users react to price and sentiment considering that they entered because of a pumped up media blitz in November. So as p declines, n can decline on the margins.

And the correlation of the charts seems to say this is true on all the prior p crashes the n dropped (did Peter R show a chart back to 2011 so we can see if it is always proportionally to n^2 on the p declines?).

One could argue that something else beside p change caused n to drop which caused p to drop. I find that intuitively difficult to support because p is so important to the feeling of the users especially at this stage when Bitcoin is primary a speculation vehicle and not a utility vehicle like a washing machine or the internet. Do we want the internet to go up in price? No we use it because of utility. Bitcoin is not at that stage yet.

[aminorex]

If n at 150,000 is 33% too high above the bottoms trendline since 2012 (use a ruler on the "All time" plot), and if p is tracking n^2 per Metcalf's Law and Peter R's chart, then a 0.67 x 0.67 = 0.45 of recent price could be expected.

Gbianchi found the best R^2 fit was n^2.26.  I find the extra sqrt(sqrt(n)) intriguing but frustrating.  Its easiest to blame it on stochastic deviation but something bugs me about it.

[aminorex]

Yet I am pointing out that probably p has some reverse feedback on n (the number of unique addresses, i.e. proportional to users), because some users react to price and sentiment considering that they entered because of a pumped up media blitz in November.

I would have said in May.  Adoption is a gradual thing. The next adoption bump should be much bigger in that case.

[rpietila]

You are ignoring the evidence that bitcoin adoption is still increasing, which makes a comparison with silver invalid.

Where is the evidence of this increased adoption though?

This is the chart which matters:
https://blockchain.info/charts/n-unique-addresses?showDataPoints=false&show_header=true&daysAverageString=7&timespan=2year&scale=1&address=

Exponential fundamentals remain in place.

How can switch Blockchain.info default language away from Turkish to another language? It reverts back every time I click a page.

[aminorex]

http://blockchain.info/en

[AnonyMint]

You are ignoring the evidence that bitcoin adoption is still increasing, which makes a comparison with silver invalid.

So so while the utility of Bitcoin is predominately speculation, then my theory as presented is that price p still has significant feedback loop on n the proxy for adoption.

Fundamental adoption is growing exponentially, but I am arguing that superimposed on that trend is the reverse feedback loop of p on n.

Bitcoin and silver may be similar in that adoption is very sensitive to rising prices, because they are both predominately speculations at this stage, although Bitcoin is much more rapidly developing network effects and I posit that is why the distance between the crashes in Bitcoin is shorter than for silver (less than a year versus more than 2 years).

We had hoped to get network effects with silver, and Risto probably did more on that than anyone, getting silver retailed at the Post Office, created the most liquid market in silver for small retail investors emulating the concept of the London daily fix, and creating silverbank. I tried to do my part minting silver coins from 1000oz bars during the crash to $9 to get more supply of coins into the market. I supplied to Risto, Tulving (he didn't know it), and others. It was very risky and I think perhaps the mint I used ended up screwing over some people after I got out.

No where near as much fun as the software startups I did. Risto's serendipitous (mis)adventures was the most endearing part of it. I hate tangible ventures (love tangible for personal things such as sports and love).

[rpietila]

I suggest to Risto that he run his trendline fit on silver and see if the trendline was predicting silver would be several $100s by now? Trendline fitting is like any TA, it is correct about 50% of the time.  

Silver never ever had the paradigm that it would become generally used by all population. The reason for not having this paradigm is that silver was not better than the alternative. The rise in price can self-supply many things and would have been sufficient perhaps, IF silver was better suited as money than USD, but it wasn't.

Bitcoin is.

[AnonyMint]

There is a combination of powerful differences from fiat and also speculative fever that at times get too far ahead of where those fundamental network effects are. So on the one hand you are correct, but on the other hand it acts like silver on the extremes.

What happens to your trendline if you plot the linear projection from bottoms of the n on the log chart, then extrapolate and use n^2 correlation as the price projection? I'm curious.

I am concerned that you are not removing the irrational silver-like schizophrenia component from your data set.

In the upthread discussion we posited that n^2 is more dominant than p. So you should be trendlining n, not p. Then convert to p via the correlation to n^2. And I am suggesting you trend the bottoms of n (as representative of the strong hands and the fundamental trend of adoption, not the speculative frenzy), not the least squares fit.

[AnonyMint]

Well on that log10 n chart, from Jan 12 to Jan 14 is roughly a 10X increase on the bottom trendline, thus sqrt(10) per year, thus n^2 = 10X per year. Thus price should be increasing 10X per year. Does that concur roughly with your trendline of p?

[smoothie]

I suggest to Risto that he run his trendline fit on silver and see if the trendline was predicting silver would be several $100s by now? Trendline fitting is like any TA, it is correct about 50% of the time.  

Silver never ever had the paradigm that it would become generally used by all population. The reason for not having this paradigm is that silver was not better than the alternative. The rise in price can self-supply many things and would have been sufficient perhaps, IF silver was better suited as money than USD, but it wasn't.

Bitcoin is.

There is truth here. ^

[AnonyMint]

Well on that log10 n chart, from Jan 12 to Jan 14 is roughly a 10X increase on the bottom trendline, thus sqrt(10) per year, thus n^2 = 10X per year. Thus price should be increasing 10X per year. Does that concur roughly with your trendline of p?

If I compound weekly a 8 - 10X price increase per annum from the $65 bottom at end of first week of July 2013, I calculate $297 to $350 as of April 1, 2014.

That projects to $1425 to $1985 by Jan. 1, 2015. Something like this is probably more realistic as the bottom (fundamental) level of adoption.

The strong hands probably buy based on these sort of level-headed calculations, not those least square fit to irrational exuberance deviations from the fundamental level of adoption.

The fundamental speculator buys on that bottom trendline and sells into the irrational exuberance. And gets very rich doing so.

Also putting a ruler on the bottoms of the n "All time" chart, I see that adoption slope slowed after July 2011. That is normal because adoption should be logistic.

We should now shift into yet again a lower adoption slope than from July 2011 to December 2013.

[AnonyMint]

This appears to repeat nearly all the points I've made recently:

http://techcrunch.com/2014/03/30/bitcoin-slips-in-the-wake-of-the-irss-tax-decision/

[mmitech]

I would like to remind people about these charts:

Bitcoin Price movements:




Litecoin Price movements:




I want to trade this downtrend but it doesn't feel safe, I know a reversal is about to happen, and it could happen in a couple of days or couple of weeks and as they say never try to catch falling knives...

[N12]

I would like to remind people about these charts:

Bitcoin Price movements:

https://i.imgur.com/ejrTU8r.jpg

I'd like to remind people that 2011's bear market is conveniently left out from this chart. Can't possibly happen again after all, can it?

Quote from this same thread:

We have seen the ups and downs and have realized it all works out in the end.  

This is the great delusion that markets bestow upon people, that a trend is invulnerable and "it all works out in the end" almost sounds like religious faith. I know that nothing I can say could possibly make you think otherwise, but still, please consider how you would react if Bitcoin slid 80% or 90% from here during the next 6 months. Even if the probability is small, are you ready for it?

Because this has happened before, and it happened in this very asset (even if you tell me that times are "different" now – well, to compensate, the price is higher to begin with!). I remember that time well. At the time, there was a long-term log support trendline, too, that was being drawn by everyone in this forum. It was violently BROKEN:



And guess what? That break ended up being the best time to buy. But few bought, for few had money to spare, and many of those who did have given up on Bitcoin. I will tell you that all along this decline, there was plenty of good news as well. I believe Bitpay was created amidst the bear market for example.

All I want to say is that eventually, all trends break. Prepare yourself for the improbable, because it is devastating to lose almost all of your wealth. Do not let your mind be compromised by Bitcoin cultists. Let this be a lesson from a former Bitcoin cultist who has made a fortune off Bitcoin by turning himself into a Bitcoin pragmaticist.

[rpietila]

We should now shift into yet again a lower adoption slope than from July 2011 to December 2013.

What a heck makes you think so at a face of universal awareness that is just achieved?

I am more interpreting the sudden but unrelenting attack towards coin in this thread and elsewhere, that the bottom is in during these very days, and after 1 week we are already higher and never look back.

Yes, this is a quite strong statement but that is statistically correct: whenever the world around you goes mad so that you feel like not even interested to argue with them because they are stuck with bitcoin's doom and cannot consider alternative viewpoints, then

Don't expect me to soothe your(pl.) fears now. You have chosen fear, you could reject it like I do. Fundamentals have not changed, there is nothing in US or China statement that was new, or that threatens the adoption of bitcoin realistically. When you wake up, you see that all the things that you feared that week, were there since many months, and will still be there. It is called targeted propaganda that they are suddenly poured over you at one time and make you lose your mind.

Don't lose your bitcoins by selling now. Last time the runup from July-November was 63->1163, well worth the wait.

[IamComrade]

We should now shift into yet again a lower adoption slope than from July 2011 to December 2013.

What a heck makes you think so at a face of universal awareness that is just achieved?

I am more interpreting the sudden but unrelenting attack towards coin in this thread and elsewhere, that the bottom is in during these very days, and after 1 week we are already higher and never look back.

Yes, this is a quite strong statement but that is statistically correct: whenever the world around you goes mad so that you feel like not even interested to argue with them because they are stuck with bitcoin's doom and cannot consider alternative viewpoints, then

Don't expect me to soothe your(pl.) fears now. You have chosen fear, you could reject it like I do. Fundamentals have not changed, there is nothing in US or China statement that was new, or that threatens the adoption of bitcoin realistically. When you wake up, you see that all the things that you feared that week, were there since many months, and will still be there. It is called targeted propaganda that they are suddenly poured over you at one time and make you lose your mind.

Don't lose your bitcoins by selling now. Last time the runup from July-November was 63->1163, well worth the wait.

i agree with rpietila in a way i think there is also chance we go up from here but what about China rpietila don't you consider China ban being a huge dent for the short term? Also are you recommending people buy at this current price?

[sgbett]

We have seen the ups and downs and have realized it all works out in the end.  

This is the great delusion that markets bestow upon people, that a trend is invulnerable and "it all works out in the end" almost sounds like religious faith. I know that nothing I can say could possibly make you think otherwise, but still, please consider how you would react if Bitcoin slid 80% or 90% from here during the next 6 months. Even if the probability is small, are you ready for it?

Because this has happened before, and it happened in this very asset (even if you tell me that times are "different" now – well, to compensate, the price is higher to begin with!). I remember that time well. At the time, there was a long-term log support trendline, too, that was being drawn by everyone in this forum. It was violently BROKEN:

not from a ta perspective but from a psychology perspective, so many people have seen BTC bounce and rally that i think it is hard for people to truly capitulate. i think thats why the selloff has been slower and more gradual (bit like 2011).

so bottom could  be in, or it could be still a long way to go. either way the last thing i would do right now is sell, and (traders look away now) the best thing to do would be to be buying. insert standard "it could go to zero, don't risk what you can't afford to lose". I'm holding.

(and stacking a little silver too. pretty good prices if you ask me.)