rpietila Wall Observer - the Quality TA Thread ;)

[chriswilmer]

I would add more more thing to rpietila's excellent observation.

There are those who bought early, but didn't really understand.  Perhaps they bought on a friend's advice, or just on a lark.  These are the coins that get shaken loose on the next downturn.  Getting in early is only half the battle. 

Oh, let me add to that! Some are worried that criminals (i.e., hackers) are holding tons of bitcoins. If we are worried about uber wealthy criminal hackers in the future, it's not enough that they stole bitcoins today (or in the past), they would also need to believe in the vision of Bitcoin's future to hold on to them. My bet is that many hackers did the opposite, they just tried to get rid of their stolen booty as quickly as possible. If there are hackers who are holding for the very long term, then at the very least they appreciate Bitcoin's value and are unlikely to crash the market with a huge sell some indeterminate time in the future.

[jmw74]

I would add more more thing to rpietila's excellent observation.

There are those who bought early, but didn't really understand.  Perhaps they bought on a friend's advice, or just on a lark.  These are the coins that get shaken loose on the next downturn.  Getting in early is only half the battle. 

Oh, let me add to that! Some are worried that criminals (i.e., hackers) are holding tons of bitcoins. If we are worried about uber wealthy criminal hackers in the future, it's not enough that they stole bitcoins today (or in the past), they would also need to believe in the vision of Bitcoin's future to hold on to them. My bet is that many hackers did the opposite, they just tried to get rid of their stolen booty as quickly as possible. If there are hackers who are holding for the very long term, then at the very least they appreciate Bitcoin's value and are unlikely to crash the market with a huge sell some indeterminate time in the future.

I think a lot of high profile thefts tell a different story - in many of them the coins never moved from the original theft address and still remain there.

Of course, the reason the hackers haven't moved them probably has nothing to do with ideology.  It's more to do with not getting caught.  They are waiting until they can confidently mix and sell their coins without being tracked.

[BitchicksHusband]

if r.p. is an überbull what do we call a.m.? 

Bitchick-lite™?

[adpinbr]

So Reptillia is basing it as if Bitcoin will be the sole means of wealth transmission and currency, I am a bull to, but do not neccessarily agree with that premise, however I still will only re-evaluate my position and consider selling at around 20-30K, based on what the Crypto scene looks like then. I think both new and old players will innovate and take away a lot of the added value that bitcoin offers over our current financial system. EG if you can send Facebook dollars for free than the micro-payment argument for bitcoin is passe.

[BitchicksHusband]

So Reptillia is basing it as if Bitcoin will be the sole means of wealth transmission and currency, I am a bull to, but do not neccessarily agree with that premise, however I still will only re-evaluate my position and consider selling at around 20-30K, based on what the Crypto scene looks like then. I think both new and old players will innovate and take away a lot of the added value that bitcoin offers over our current financial system. EG if you can send Facebook dollars for free than the micro-payment argument for bitcoin is passe.

I think his $100,000 valuation doesn't assume that.  It assumes that it will be used by a lot of people, but not everyone.

[hdbuck]

So Reptillia is basing it as if Bitcoin will be the sole means of wealth transmission and currency, I am a bull to, but do not neccessarily agree with that premise, however I still will only re-evaluate my position and consider selling at around 20-30K, based on what the Crypto scene looks like then. I think both new and old players will innovate and take away a lot of the added value that bitcoin offers over our current financial system. EG if you can send Facebook dollars for free than the micro-payment argument for bitcoin is passe.

I think his $100,000 valuation doesn't assume that.  It assumes that it will be used by a lot of people, but not everyone.

fiat and banking system is hardly used by 2Bn people.

[Siegfried]

So Reptillia is basing it as if Bitcoin will be the sole means of wealth transmission and currency, I am a bull to, but do not neccessarily agree with that premise, however I still will only re-evaluate my position and consider selling at around 20-30K, based on what the Crypto scene looks like then. I think both new and old players will innovate and take away a lot of the added value that bitcoin offers over our current financial system. EG if you can send Facebook dollars for free than the micro-payment argument for bitcoin is passe.

Even if Facebook dollars would be better for microtransactions, people would still want to hold their wealth in Bitcoin because it cannot be manipulated or confiscated by a central authority. No amount of branding by any corporation or government is ever going to overcome that fundamental advantage of Bitcoin.

[Carlton Banks]

There's good evidence of late that any truly competitive cryptocurrency cannot be a tweak of the Satoshi design. For one, Peter R's ledger hijack proposal has a great deal of merit. In addition, the side chains proposal from Adam Back suggests that the purpose of the main bitcoin blockchain could evolve to that of a super-asset, one from which all other innovated assets on their respective side-chains derive their value. The function of all alts and/or information service hybrids (e.g. Namecoin or StorJ) can be run as a parallel, inter-operating branch of the main blockchain. The sidechains can compete with one another for the same service, or could be created to serve the purpose for real-world conditions that are only temporary. Experimental sidechains can flourish or die.

So the case for bitcoin's being the "only" system is looking more likely, at least while it's hash rate and fundamental properties remain unblemished. I suspect that a different paradigm is the only system that will supersede bitcoin.

[SlipperySlope]

There's good evidence of late that any truly competitive cryptocurrency cannot be a tweak of the Satoshi design. For one, Peter R's ledger hijack proposal has a great deal of merit. In addition, the side chains proposal from Adam Back suggests that the purpose of the main bitcoin blockchain could evolve to that of a super-asset, one from which all other innovated assets on their respective side-chains derive their value. The function of all alts and/or information service hybrids (e.g. Namecoin or StorJ) can be run as a parallel, inter-operating branch of the main blockchain. The sidechains can compete with one another for the same service, or could be created to serve the purpose for real-world conditions that are only temporary. Experimental sidechains can flourish or die.

So the case for bitcoin's being the "only" system is looking more likely, at least while it's hash rate and fundamental properties remain unblemished. I suspect that a different paradigm is the only system that will supersede bitcoin.

Sidechains from the Bitcoin blockchain are very interesting.

http://letstalkbitcoin.com/blockchain-2-0-let-a-thousand-chains-blossom/#.U0w8Eh__5k8

We have known for a while that Bitcoin is more than a deflating store of value, and more than an efficient peer to peer payment mechanism. We have known that Bitcoin is a disruptive technology platform.

Sidechains, as I understand them, are merged mined with a slightly modified Bitcoin protocol that permits two-way pegging to Bitcoin. The only coins mined are the Bitcoins mined by Bitcoin miners, and any bitcoin can be purchased into a sidechain where they are stored until such time as they may be sold back into the Bitcoin blockchain to again become available for ordinary bitcoin transactions. Each of many potential sidechains motivates Bitcoin miners to merge mine a certain sidechain by way of sufficient transaction fees - the Bitcoin reward, and fixed 21 million limit, are left alone. Sidechains are isolated from the Bitcoin blockchain, and are likely to be less conservative than, and more innovative than Bitcoin.

Sidechains seeking bitcoin will have to outbid other users, and therefore prices will rise should sidechains gain acceptance. Altcoins do not have the interoperability offered by sidechains, and most distinguishing features of altcoins could be implemented as a sidechain, e.g. very fast transaction confirmation, micro payments, etc.

It is hard to see how Bitcoin could be superseded, but is it is obvious that Bitcoin is a flexible platform for building upon.

[Carlton Banks]

The only coins mined are the Bitcoins mined by Bitcoin miners, and any bitcoin can be purchased into a sidechain where they are stored until such time as they may be sold back into the Bitcoin blockchain to again become available for ordinary bitcoin transactions.

I don't believe that "purchased" and "sold" are the best way to describe what is happening. I think it is better to describe the operations of moving into and out of sidechains as "conversions", with a conversion rate that is determined by the way the rules that a given sidechain is coded.

How much expression is permitted to define the convertibility rules will be a significant point of interest. The full implications may be over the heads of those that will make the decision to accept or reject any proposed protocol alterations (I'm thinking primarily of pool operators here). One worth watching IMO, in any event.

[billyjoeallen]

Hmmm. This is interesting. From wikipedia: http://en.wikipedia.org/wiki/Sunk_costs

Features characterizing the sunk cost heuristic

Two specific features characterizing the sunk cost heuristic worth mentioning are:

    An overly optimistic probability bias, whereby after an investment the evaluation of one's investment-reaping dividends is increased.
    The requisite of personal responsibility. Sunk cost appears to operate chiefly in those who feel personal responsibility for the investments that are to be viewed as sunk cost.

Just though I'd put this in here instead of doing the probability estimation thing.

[MahaRamana]

My congratulations to Risto for his predictions.

Ten days ago or two weeks ago he predicted that we would probably be back above 500 by the 15 April.

[rpietila]

My congratulations to Risto for his predictions.

Ten days ago or two weeks ago he predicted that we would probably be back above 500 by the 15 April.

Thanks. 500 was just flashing when I first read that

I am thinking to show the example of accountable forecasting, as follows (figures example only):


In 30 days, 2014-5-15, USD/BTC (Bitstamp daily vwa) is:

75% = 700
50% = 600
25% = 500

In 90 days, 2014-7-15, USD/BTC (Bitstamp daily vwa) is:

75% = 1800
50% = 1000
25% = 600

After the prediction expires, let's say the first one closes at 550, then we calculate the difference of the price in log scale to the forecasted prices:

75% = 0.105
50% = 0.038
25% = -0.041

Now our common goal is to find a formula that lets us compare different people's price forecasts equitably.

With the midprice, I propose that we use the least-average-error method, ie. take the absolute value of each error over time and average them. (It should be penalized imo if someone is consistently wrong to either side, though, but how to do it without making the system gamable?)

With 25% ja 75% bands it is more tricky. My intention is that it should be a target to give as tight bands as possible, and allow 25% of the forecasts to be in error to the tail side. Perhaps calculate the difference of the 75% and 50% forecasts (in log) and make an average of these, up to the limit of (1-75%) of the forecasts to be erroneous. If the forecast is too conservative, it is reflected in wide bands and thus a worse score. If it is too tight, and more than 25% of the results end up on the tail side, there would be a significant penalty based on the difference of actual prices and the forecasts multiplied by the number of excessive erroneus results.

I have not thought it through, wanted to have feedback!

[aminorex]

I have not thought it through, wanted to have feedback!

From my background the intuitive thing is to use F1 measure as a score.  Or area under ROC curve.  There are good wikipedia articles about these.

Precision is not always a good thing.  It leads to over-fitting.

There is a book which seems pertinent,  "Evidence-based Technical Analysis" although I have yet to read it -- it's next to my bed, but in another state.
http://www.amazon.com/Evidence-Based-Technical-Analysis-Scientific-Statistical/dp/0470008741/ref=sr_1_1?ie=UTF8&qid=1397582403&sr=8-1&keywords=evidence+based+technical+analysis

[SlipperySlope]

I have not thought it through, wanted to have feedback!

Wisdom of Crowds theory says that the average of our guesses should be more accurate than any single guess. This should be a motivation for us to contribute our predictions regardless of our self-supposed expertise.

What I would add to your thinking is to distinguish bubbles as the chief bitcoin price phenomenon.

Furthermore, I suggest a survey in addition to particular predictions. Survey data to be gathered would include . . .

• whether the participant agrees that there are bubbles
• what is the current bubble phase, i.e. pre-peak, post-peak, pre-bottom, post-bottom
• what is the predicted time to the next bubble phase
• peak price of the next peak
• month of the next peak
• price of the next post-peak bottom
• month of the next post-peak bottom
• year during which 50% adoption occurs

If there is no better place, I would conduct such a survey each month on my logistic price model thread.

[SlipperySlope]

There is a book which seems pertinent,  "Evidence-based Technical Analysis" although I have yet to read it -- it's next to my bed, but in another state.
http://www.amazon.com/Evidence-Based-Technical-Analysis-Scientific-Statistical/dp/0470008741/ref=sr_1_1?ie=UTF8&qid=1397582403&sr=8-1&keywords=evidence+based+technical+analysis

Thanks. I ordered it. It may be helpful in my work observing the bitcoin price data series.

My own trading, if any, is limited to selling at the bubble peak and buying back later. I am very happy making small almost daily purchases from my nearby Robocoin ATM, when the price is below the trendline.

[Peter R]

The market today does not give more than 12% probability of that happening; probably much less than that.

That's why I am buying and telling others to buy.

Bitcoin has a long and glorious history that its price has had nothing to do with long-term expected value. My estimate of scenario-probability-weighted discounted 2020 value of 1 bitcoin is about $500,000 and the fact that the majority of players in the market think differently, is my advantage.

And I am quite sure I know the reason for that. It is the extreme information asymmetry between Bitcoin owners and non-owners. (To simplify,) Bitcoin owners know that bitcoins are very valuable, and they buy and hold as much as they can. But as a result of their price going up, it forces people to sell, not because they don't trust Bitcoin, or expect the EV to be anything less than $100k or whatever in a few years, but because their entire net worth consists of bitcoins and it is rational to diversify (cf. Kelly betting). Even if the price goes down, these true believers cannot buy much more because the same optimal allocation strategy holds true.

The ones who don't own bitcoins, don't know it is good They are converting to bitcoiners at an exponential rate, though (see my previous post, and this thread for the ownership distribution). This increasing adoption gives the steam to the rise of price, in a self-sustaining virtuous cycle.

First only very few people knew about Bitcoin, and they were technologically astute and early adopter type. Many could start using Bitcoin immediately upon hearing. In the second phase more people heard, but they were, on average, slower. In the third phase or so, in which I belong, I heard and it took me 12 months to buy. In the next one, people who heard in 2011, propelled the boom in 2013 because their average decision making time was even longer. In the whole of 2013, especially the time around the peaks, 100s of millions of people heard about Bitcoin. On average, these people are even slower than previous ones, perhaps taking on average 24 months to enter (and also a smaller percentage of them enters). But they are so many! There is nothing you can really do to prevent the fraction of these people adopting Bitcoin, and by doing it, their action increases the price again by a decade, letting the rest of the planet to hear about it and putting hundreds of millions of people in the pipeline.

Bitcoiners know it, the rest don't. The price does not go to $1 million in an instant because only the ones who realize the above thing, can push the price up, but it will nevertheless go there eventually, because the above thing is a self-sustaining loop. Therefore buying bitcoins when you read and realize it, is the most lopsided bet you can ever make. You can actually pay $460 for something whose EV (expected value = average payback of all scenarios weighted by their probabilities) is in between $100k and $1M+. ONLY the fact that people realize this one at a time, slowly but exponentially, keeps the bitcoin price "at check", growing at an average of 1000% per year, for 5+ years now.

My wealth is dependent on the above being true. Nobody has explained to me, why it is not so. The stage is yours!

Kudos for the person who explained this to me in 2010, after which it took me 12 months to buy, after which it took an additional 18 months to realize it, which realization threatened my sanity, which was only saved by starting to smoke cigars. After 12 more months I tell it to you, please don't repeat my mistakes. Consider if it is valid, and invest accordingly. I am quite sure that next month you will not see this low prices any more, because the information is freely available.

+1000

This is such a concise articulation of what I also believe to be exactly correct that I am considering printing it out and hanging it on my wall

Agree.  This was a fantastic post Risto, and it further clarified my understanding of the dynamics at play.

[rpietila]

Quick TA update:
- 6H candle color/volume: BREAKING - huge green candle beats the previous reds AND action afterwards is very promising, conclusion: probability of recent reversal further increased
- Bid/ask strengh at market (Bitstamp): slippage to sell 5k: $84, slippage to buy: $143, conclusion: potential for extreme volatility
- Trendline comparison: we are now at -0.341 log units. The trendline is at $1,015 and rising $7 per day, conclusion: rock bottom (note: it is not necessary that 'rock bottom' will change until the parabolic uptrend starts, because the trendline is itself rising)
- Sentiment: short covering/panic buys are starting
- Prognosis: getting better; probability for going <400 gets smaller by the day, long-term buy zone

And only 1 day after...
Quick TA update (at $500):
- 6H candle color/volume: after a row of tall reds we have turned exclusively tall green, conclusion: reversal seems confirmed
- Bid/ask strengh at market (Bitstamp): slippage to sell 5k: $77, slippage to buy: $83, conclusion: potential for high volatility
- Trendline comparison: we are now at -0.310 log units. The trendline is at $1,022 and rising $7 per day, conclusion: rock bottom (note: it is not necessary that 'rock bottom' will change until the parabolic uptrend starts, because the trendline is itself rising)
- Sentiment: awaiting a breakout or a pullback
- Prognosis: reversal seems confirmed and <400 fades, long-term buy zone

[SlipperySlope]

Here is the Blockchain adjusted transaction quantity chart, for 180 days using the 7-day moving average. The rightmost 4 days appear to confirm the reversal of the price trend.

[BitChick]

Quick TA update:
- 6H candle color/volume: BREAKING - huge green candle beats the previous reds AND action afterwards is very promising, conclusion: probability of recent reversal further increased
- Bid/ask strengh at market (Bitstamp): slippage to sell 5k: $84, slippage to buy: $143, conclusion: potential for extreme volatility
- Trendline comparison: we are now at -0.341 log units. The trendline is at $1,015 and rising $7 per day, conclusion: rock bottom (note: it is not necessary that 'rock bottom' will change until the parabolic uptrend starts, because the trendline is itself rising)
- Sentiment: short covering/panic buys are starting
- Prognosis: getting better; probability for going <400 gets smaller by the day, long-term buy zone

And only 1 day after...
Quick TA update (at $500):
- 6H candle color/volume: after a row of tall reds we have turned exclusively tall green, conclusion: reversal seems confirmed
- Bid/ask strengh at market (Bitstamp): slippage to sell 5k: $77, slippage to buy: $83, conclusion: potential for high volatility
- Trendline comparison: we are now at -0.310 log units. The trendline is at $1,022 and rising $7 per day, conclusion: rock bottom (note: it is not necessary that 'rock bottom' will change until the parabolic uptrend starts, because the trendline is itself rising)
- Sentiment: awaiting a breakout or a pullback
- Prognosis: reversal seems confirmed and <400 fades, long-term buy zone

   Good times ahead it appears! 

Hey, my fortune cookie from today at Panda Express said, "YOU WILL BE COMING INTO A FORTUNE"

Does that count as confirmation!?