rpietila Wall Observer - the Quality TA Thread ;)

[SlipperySlope]

I am watching both Huobi and Bitstamp on Bitcoin Wisdom. The Chinese are driving prices lower and Bitstamp is following. It has been reported that certain exchanges have indeed been notified by their respective banks that accounts used to receive customer deposits must be closed.

On Bitstamp, the price is currently $431.76 which is a lower low than a few days ago. Big red candle on the 6 hour chart. I am on my way to the local Robocoin ATM to put a few more fiat bills into it.

[2017orso]

@ slipperyslope, peter r

do you think transaction volume is largely a lagging indicator?  

how much emphasis should we place on coin trade when viewing the correlation between transaction volume and price, or does the exclusion of popular addresses nullify this by disregarding exchanges for the most part?  still in that case, how do we determine how much of that volume belongs to personal exchanges of btc/fiat?

[AnonyMint]

Peter frames the Q.T.M. as if Bitcoin's economy is a consumer market. Rather as he admits, the economy is primarily a speculation (and not even a fixed capital investment, i.e. NAV) economy at this time.

In a speculation economy, the variables in the QTM have different meanings roughly as follows:

M = total number of shares in circulation
V = total perceived future volume of bitcoin transactions per year / total number of bitcoin shares in circulation
P = price levels measured in shares
Q = supply of potential to increase future transactions

Re-reading my debate with Aminorex with the above definitions in mind will make it more clear.

I wanted to dip my toe into the Aminorex / AnonyMint debate.

Like Aminorex pointed out, we must be careful with our units.  When applying the Quantity Theory of Money equation (MV=PQ) to bitcoin, one must measure everything in bitcoins.  I believe it is reasonable to assume:

M = total number of bitcoins is circulation
V = total volume of bitcoin transactions per year / total number of bitcoins in circulation
P = price levels measured in bitcoins
Q = real output (per year)

So, the velocity of money for bitcoin is not going to be proportional to the number of transactions per day.  Instead it will be proportional to the volume of bitcoin transactions per day.

You surely meant to write proportional to the relative (a.k.a. unit) volume (volume / shares).

Below is the plot I get for the yearly velocity of money for bitcoin.  Velocity has been decreasing over the last year, which I believe makes sense.

Because you are not measuring the correct V. Whereas the proxy for V is the number of unique addresses and goods+services accepting and operating with BTC are a proxy for Q, because that correlates to the Metcalf Law value potential. Speculation is all about valuation.

Bitcoin's primary use is a store of value so as the coins become distributed across the population more efficiently, I believe it is reasonable to expect aggregate behaviour to increasingly favour holding to spending.  

Backwards. The more distributed, the more spending. That is why money is power-law distributed. See my citation upthread of a research paper proving that.

This means that price levels P must decrease to an extent greater than real output Q increases.  In other words, due to the store-of-value property of bitcoin, and based on empirical data over the last year, the price of bitcoin against a stable currency should increase at a rate faster than bitcoin's underlying economy.  

Seems you are attempting to conflate the tiny consumer economy QTM with the dominant speculation economy QTM.

[Peter R]

I have thought about the proportion of transacting bitcoins vs the held-in-storage bitcoins. Coinbase reported that approximately 80% of their customers were buy-and-hold. The proportion I think is important when trying to figure out a maximum value of bitcoin. But your graph neatly sidesteps the issue because the shape of the function is independent of any consistent adjustment of the bitcoin quantity available for transactions. Right?

Yes, I believe so.  The velocity V shows how many bitcoins are sloshing around per year, therefore able to pay for economic activity.  The way I see it, if V decreases and N (number of TXs per day excluding popular addresses) increases, then this suggests both that people are increasingly using bitcoin as a store of value and that the underlying bitcoin economy is growing.  I think this would be healthy at bitcoin's current stage of evolution.    

The problem I see with my graph however, is that it relies on the estimated transaction volume form blockchain.info to calculate V.  Blockchain.info attempts to subtract of "change" and may not always do this properly.  Also, blockchain.info cannot discriminate between internal transfers (a user moving his money around) and external transfers (transfers for goods or services).    

[AnonyMint]

creekbore, I told you bull trap.   (sounds like "bull crap" hehe)

RAJSALLIN did you see me flinch as price headed back up. I told you price is going lower. Because I know something everyone else hasn't figured out yet.

[Syke]

P.S. Mining is now concentrated in one pool with greater then 51% attack hash power.

Why do you keep claiming that?

https://blockchain.info/pools

No pool is close to 50%.

[bassclef]

P.S. Mining is now concentrated in one pool with greater then 51% attack hash power.

Why do you keep claiming that?

https://blockchain.info/pools

No pool is close to 50%.

Guys, he has an IQ of 150. He must be right.

[farfiman]

Perhaps watch again and note the example about the doubling of grain of wheat on each square of the chessboard. It works out to more wheat than has ever been harvested in the history of mankind.

This shows that humans don't comprehend that exponential growth can't continue unabated, and the large things must grow more slowly.

When they see huge nominals ahead, they think this means exponential rate of growth hasn't slowed, because humans only pay attention to nominal size not to (de-)acceleration.

You see that is an example of difference between our abilities or acumen. I can extract the generative essence (model) which has nothing to do with direction (deceleration or acceleration). The essence is humans don't correlate properly nominal size with exponential rate in any direction.

Yes I guess you have superior intellect , but our points of view depend on what square on the chessboard you and I think bitcoin is.

[Peter R]

@ slipperyslope, peter r

do you think transaction volume is largely a lagging indicator?  

I am hoping to compute the cross-correlation function between number of transactions, N, and price when I get some more time. However, it is already clear that at least at the "peaks," N is a lagging indicator.  If you zoom into the Metcalfe Value graph, you'll see that N increases for a while after each peak in market cap.  I think this makes sense because people continue to furiously send coins to the exchanges to dump!

I believe in the bigger picture, there is no clear leader or lagger.  If price increases, then this attracts media attention bringing in new users (causing an increase in N).  If the bitcoin economy grows (N increases organically), then I think we expect this to cause an increase in price based on the quantity theory of money (since we are growing the bitcoin economy).  

EDIT: but still N seems to increase with less volatility than price.  It appears more consistently straight on a log chart.  
  

how much emphasis should we place on coin trade when viewing the correlation between transaction volume and price, or does the exclusion of popular addresses nullify this by disregarding exchanges for the most part?  still in that case, how do we determine how much of that volume belongs to personal exchanges of btc/fiat?

I don't think it matters.  As long as the % of economic transactions to non-economic transactions remains relatively stable, I don't see why the absolute number matters (and we can't calculate it anyways).  

[AnonyMint]

P.S. Mining is now concentrated in one pool with greater then 51% attack hash power.

Why do you keep claiming that?

https://blockchain.info/pools

No pool is close to 50%.

Guys, he has an IQ of 150. He must be right.

Oh here come the ad hominem attacks again as if attacking me will change the facts. Or the bitter emotions as if I am responsible for the collapsing price. Grow up and grow some balls stop acting like women.

I saw an article which claimed it had increased to 50% recently. I can't find that article again. I find articles such as these:

http://news.slashdot.org/story/14/01/10/1422206/largest-bitcoin-mining-pool-pledges-not-to-execute-51-attack

I see it reached at least 42%:

http://www.coindesk.com/bitcoin-miners-ditch-ghash-io-pool-51-attack/

Any way, just take 2 or 3 of the pools and you have over 50%. So my point remains.

Pedantic resistance of the facts is just wasting everyone's time.

[AnonyMint]

Perhaps watch again and note the example about the doubling of grain of wheat on each square of the chessboard. It works out to more wheat than has ever been harvested in the history of mankind.

This shows that humans don't comprehend that exponential growth can't continue unabated, and the large things must grow more slowly.

When they see huge nominals ahead, they think this means exponential rate of growth hasn't slowed, because humans only pay attention to nominal size not to (de-)acceleration.

You see that is an example of difference between our abilities or acumen. I can extract the generative essence (model) which has nothing to do with direction (deceleration or acceleration). The essence is humans don't correlate properly nominal size with exponential rate in any direction.

Yes I guess you have superior intellect , but our points of view depend on what square on the chessboard you and I think bitcoin is.

Again that wouldn't matter. The growth rate has never been linear. That was some imaginary fiction concocted by curve fitting a line to a non-linear data set.

To an ant, a rock appears to be a flat surface.

[jmw74]

Any way, just take 2 or 3 of the pools and you have over 50%. So my point remains.

Pedantic resistance of the facts is just wasting everyone's time.

This is not even relevant, unless you are worried about a 51% attack that lasts for one hour.  That's how long it would take for individual miners that make up these pools to bail out, once they realize the mining pool operator has screwed them over.

[Peter R]

Peter frames the Q.T.M. as if Bitcoin's economy is a consumer market. Rather as he admits, the economy is primarily a speculation (and not even a fixed capital investment, i.e. NAV) economy at this time.

In a speculation economy, the variables in the QTM have different meanings roughly as follows:

I think that is a fair criticism of my approach.  Indeed I have mixed the speculative economy with the goods/services economy.  Modern economics theory has never witnessed a hyper-monetization event like bitcoin, and I think some fresh thinking here is fine.  I believe the goods/service economy and the speculative economy are actually just the economy.  Furthermore, we have empirical data on the economy and it is speculative in itself to try and dissect it.  

The challenge for bitcoin now is to continue to grow its user base and economy.  I am doing this by trying to hire people in the bitcoin space for projects that I would normally contract out locally.  For example, I am looking for someone to do schematic capture / PCB layout (in Eagle or Altium).  If you have experience and would like a small job, I will pay fair market rates.  Please PM me if interested.  

[AnonyMint]

Any way, just take 2 or 3 of the pools and you have over 50%. So my point remains.

Pedantic resistance of the facts is just wasting everyone's time.

This is not even relevant, unless you are worried about a 51% attack that lasts for one hour.  That's how long it would take for individual miners that make up these pools to bail out, once they realize the mining pool operator has screwed them over.

I've had this argument a zillion times. It is boring already. I don't feel like repeating myself on the details on how the mass switch you expect can't change the outcome. Go on in your delusion about the lack of effects from centralization. When you wake up one day with government regulation of 51% of the pools and owners of ASICs and your coins are blacklisted, don't come whining to me.

I'll offer you two sentences.

If necessary SWAT teams show up at physical locations where the bulk of the ASICs are since for example one miner has 10% of network hash rate all in one location in East Washington. But most non-personal miners wouldn't need to physically persuaded, a regulation is all that is needed to compel them to comply.

A cpu-only coin won't have this problem. The government can't regulate millions of individual miners. Whereas, Bitcoin is fucked.

[2017orso]

@ slipperyslope, peter r

do you think transaction volume is largely a lagging indicator?  

I am hoping to compute the cross-correlation function between number of transactions, N, and price when I get some more time. However, it is already clear that at least at the "peaks," N is a lagging indicator.  If you zoom into the Metcalfe Value graph, you'll see that N increases for a while after each peak in market cap.  I think this makes sense because people continue to furiously send coins to the exchanges to dump!

I believe in the bigger picture, there is no clear leader or lagger.  If price increases, then this attracts media attention bringing in new users (causing an increase in N).  If the bitcoin economy grows (N increases organically), then I think we expect this to cause an increase in price based on the quantity theory of money (since we are growing the bitcoin economy).  

EDIT: but still N seems to increase with less volatility than price.  It appears more consistently straight on a log chart.  
  

how much emphasis should we place on coin trade when viewing the correlation between transaction volume and price, or does the exclusion of popular addresses nullify this by disregarding exchanges for the most part?  still in that case, how do we determine how much of that volume belongs to personal exchanges of btc/fiat?

I don't think it matters.  As long as the % of economic transactions to non-economic transactions remains relatively stable, I don't see why the absolute number matters (and we can't calculate it anyways).  

Agreed - absolute value is irrelevant.  More interested in a determination of - as you say - economic vs non-economic transaction volume as related to price discovery as a coefficient, something you have already shown to some extent, great work.

As infrastructure evolves and becomes more complex we should see a decrease in the ratio of acquisition vs trade transaction numbers even with an exponential increase in acquisition numbers.  Something which is likely obvious to some who have manipulated the data in some way, and would certainly be reasonable.  That is my main point of consideration.

Side note -N drop lagging past price peak can be a variety of reasons - coin dumping at exchanges, coin acquisition from new buyers still taking place as a result of a) exchange administration in verification and fiat transfer b) cotinued mania of ATH + runup (esp if absolute value of acquisition on average is smaller then size of large holder dumps trading the market) etc

EDIT  Also agree that bitcoin economy = speculation + trade atm - market is coming to life...

[RAJSALLIN]

creekbore, I told you bull trap.   (sounds like "bull crap" hehe)

RAJSALLIN did you see me flinch as price headed back up. I told you price is going lower. Because I know something everyone else hasn't figured out yet.

I didn't expect you to flinch since you are certain in your predictions and you have no desire to buy any coins in the first place. Your predictions of new lows may be coming soon. Exciting. Let's see how it plays out.

[AnonyMint]

creekbore, I told you bull trap.   (sounds like "bull crap" hehe)

RAJSALLIN did you see me flinch as price headed back up. I told you price is going lower. Because I know something everyone else hasn't figured out yet.

I didn't expect you to flinch since you are certain in your predictions and you have no desire to buy any coins in the first place. Your predictions of new lows may be coming soon. Exciting. Let's see how it plays out.

I am not certain about the level of the bottom price, as such curve fitting can't be that precise. Only the market knows where the equilibrium is. TA may help and other ways of analyzing such as the compounding from prior bottoms as I did ($300 - $350).

What I am gaining confidence about is that the adoption rate and thus growth rate of the price is slowing (yet still phenomenal). And I feel good odds that I am correct about price not racing past $10,000 before end of 2015 and the price appreciation in 2016 being roughly par with gold (within a factor of 2 or at most 3). I expect gold to go to $5000 at least (2017?) with a rocket to ATH in 2016 (as the confiscations begin and global collapse begins in earnest).

[RAJSALLIN]

creekbore, I told you bull trap.   (sounds like "bull crap" hehe)

RAJSALLIN did you see me flinch as price headed back up. I told you price is going lower. Because I know something everyone else hasn't figured out yet.

I didn't expect you to flinch since you are certain in your predictions and you have no desire to buy any coins in the first place. Your predictions of new lows may be coming soon. Exciting. Let's see how it plays out.

I am not certain about the level of the price, as such curve fitting can't be that precise. Only the market knows where the equilibrium is. TA may help and other ways of analyzing such as the compounding from prior bottoms as I did ($300 - $350).

What I am gaining confidence about is that the adoption rate and thus growth rate of the price is slowing (yet still phenomenal).

I think if we break $400 we will visit the old high of $250 and possibly overshoot to the low 200s. Adoption rate is something I feel no one can really have a sure grasp on atm. Interesting right now is that the U bottom we are in is getting a wider and wider base. I think there is still possibility that this is the bottom but whoreally knows. We are all just guessing here. Some are better than others but no one comes close to knowing.


Edit: about Gold. Do you know what Armstrong is predicting? Several years ago he said $5000 was likely but then when all the gold bugs started attacking him after gold turned in 2012 he seemed to not want to make any new clear predictions.

[jmw74]

I've had this argument a zillion times. It is boring already. I don't feel like repeating myself on the details on how the mass switch you expect can't change the outcome. Go on in your delusion about the lack of effects from centralization. When you wake up one day with government regulation of 51% of the pools and owners of ASICs and your coins are blacklisted, don't come whining to me.

I'll offer you two sentences.

If necessary SWAT teams show up at physical locations where the bulk of the ASICs are since for example one miner has 10% of network hash rate all in one location in East Washington. But most non-personal miners wouldn't need to physically persuaded, a regulation is all that is needed to compel them to comply.

A cpu-only coin won't have this problem. The government can't regulate millions of individual miners. Whereas, Bitcoin is fucked.

You are hilarious.  When we were talking about co-opting bitcoin, I was hopelessly naive for thinking the government can't pull it off.  But if we use a CPU-only coin, then the government is suddenly hapless and helpless?  That is a hoot.

Intel and AMD are both in the US.  The government is already known to slap secret court orders on companies just like them to keep their mouths shut.  You are the one who's hopelessly naive if you think that buying CPUs is harder for them than making a huge spectacle of raiding miners' datacenters.

Besides, a CPU-only coin is a figment of your imagination, there's no such thing.  All known hashing algorithms can be sped up with specialized hardware, and there's little reason to think this doesn't apply to all algorithms in general.

There is no solution to this kind of POW attack.  Bitcoin is about as good as it gets.  If you want to defend against 51% you need some other mechanism like proof of stake.

[AnonyMint]

Edit: about Gold. Do you know what Armstrong is predicting? Several years ago he said $5000 was likely but then when all the gold bugs started attacking him after gold turned in 2012 he seemed to not want to make any new clear predictions.

I am going to exceed my 10 per day limit, so I better make this the last post and go eat/sleep.

He is still calling for gold to blast off after Sept 2015. For his Pi = 3.1459 computer model that correlated all of the world's historical cycles, 2015.75 is when this current economic bounce in the USA peaks and we turn down over a cliff much worse than 2008. But this time, the Fed won't bail out any banks, instead it will be bail-ins (confiscations from depositors and bankruptcies of pensions) and thus gold will do the opposite of what it did in 2008 and skyrocket. Gold is out of favor right now, because the USA is improving (due to capital flows escaping developing world bond markets and rushing back to the dollar safe haven as BRICs are collapsing as we speak).

I've had this argument a zillion times. It is boring already. I don't feel like repeating myself on the details on how the mass switch you expect can't change the outcome. Go on in your delusion about the lack of effects from centralization. When you wake up one day with government regulation of 51% of the pools and owners of ASICs and your coins are blacklisted, don't come whining to me.

I'll offer you two sentences.

If necessary SWAT teams show up at physical locations where the bulk of the ASICs are since for example one miner has 10% of network hash rate all in one location in East Washington. But most non-personal miners wouldn't need to physically persuaded, a regulation is all that is needed to compel them to comply.

A cpu-only coin won't have this problem. The government can't regulate millions of individual miners. Whereas, Bitcoin is fucked.

You are hilarious.  When we were talking about co-opting bitcoin, I was hopelessly naive for thinking the government can't pull it off.  But if we use a CPU-only coin, then the government is suddenly hapless and helpless?  That is a hoot.

Intel and AMD are both in the US.  The government is already known to slap secret court orders on companies just like them to keep their mouths shut.  You are the one who's hopelessly naive if you think that buying CPUs is harder for them than making a huge spectacle of raiding miners' datacenters.

Besides, a CPU-only coin is a figment of your imagination, there's no such thing.  All known hashing algorithms can be sped up with specialized hardware, and there's little reason to think this doesn't apply to all algorithms in general.

There is no solution to this kind of POW attack.  Bitcoin is about as good as it gets.  If you want to defend against 51% you need some other mechanism like proof of stake.

I love these boastful, overconfident people who think they know computer science better than me (which I have been doing for 30 years on and off). It is going to be fun watching them react soon. I am going to especially enjoy seeing Risto react since he was given every early opportunity and expected 30% share. No way Jose. I didn't need you Risto, it was about friendship and doing the right thing for humanity. It was about sharing excitement and creating something. But you are not capable of leading because you are into something about Bitcoin. I can't really determine where your mental perspective originates from. I thought maybe pride, but based on your recent comments maybe it is just you can't see what I see. You are speculator, it is all you know. You'd better to play Dominion while we nerds do other things.