rpietila Wall Observer - the Quality TA Thread ;)

[podyx]

This is legit TA. $250,000 by September confirmed.

I will take the notional other side of this legit TA and say $250 dollars by mid/late May 2014.

Sarcasm?

[MatTheCat]

Sarcasm?

No.

$250 is my prediction.

[rpietila]

The table below summarizes the historical 30d changes in USD/BTC. There has been 1341 datapoints.

Change is given in log (log10) base units and also percentages.

The variance in 30 day change is quite extreme, you could have made more than 8 times your money, or lost 60%.

The 10% upper tail is +157% or better, 10% lower tail is -27% or worse.

The long-term amusement that bitcoin rises 60% of the 30d sequences and goes down only 40% still holds 

I read the proposals with enthusiasm and thought, which one would be easier for the forecasters - producing a continuous probability distribution, or producing a discrete distribution like the one below. The ones who can handle continuous distributions, can easily process them to give piecewise results, but not necessarily the other way round.

I would propose that the ones who want to participate, need to produce a table that gives the probabilities (adding to 100.00%) for each log slot. The slots would be with 0.05 intervals like below. Eg. 3.00-3.05 == $1,000-$1,122. Once the correct result is known, we take a geometric mean of the probabilities given to that slot in the predictions. Then you get + or - points depending if your prob was higher or lower than the average. Eg. if your prob was 8% and average was 4%, you get 8/4-1 = 1 point. If your prob was 1% and average was 3%, you get -3/1+1 = -2 points.

(in the table comma = point (US))

Code:

LOG	MIN CHANGE	MAX CHANGE	PROBABILITY
0,90	0,95	694 %	791 %	0,15 %
0,85	0,90	608 %	694 %	0,15 %
0,80	0,85	531 %	608 %	0,37 %
0,75	0,80	462 %	531 %	0,30 %
0,70	0,75	401 %	462 %	0,97 %
0,65	0,70	347 %	401 %	1,34 %
0,60	0,65	298 %	347 %	0,82 %
0,55	0,60	255 %	298 %	0,67 %
0,50	0,55	216 %	255 %	1,19 %
0,45	0,50	182 %	216 %	2,09 %
0,40	0,45	151 %	182 %	2,46 %
0,35	0,40	124 %	151 %	2,09 %
0,30	0,35	100 %	124 %	2,68 %
0,25	0,30	78 %	100 %	2,91 %
0,20	0,25	58 %	78 %	5,74 %
0,15	0,20	41 %	58 %	5,15 %
0,10	0,15	26 %	41 %	6,86 %
0,05	0,10	12 %	26 %	10,37 %
0,00	0,05	0 %	12 %	14,09 %
-0,05	0,00	-11 %	0 %	12,98 %
-0,10	-0,05	-21 %	-11 %	12,08 %
-0,15	-0,10	-29 %	-21 %	6,04 %
-0,20	-0,15	-37 %	-29 %	4,33 %
-0,25	-0,20	-44 %	-37 %	1,79 %
-0,30	-0,25	-50 %	-44 %	1,64 %
-0,35	-0,30	-55 %	-50 %	0,45 %
-0,40	-0,35	-60 %	-55 %	0,22 %
-0,45	-0,40	-65 %	-60 %	0,07 %

[bitfair]

I read the proposals with enthusiasm and thought, which one would be easier for the forecasters - producing a continuous probability distribution, or producing a discrete distribution like the one below. The ones who can handle continuous distributions, can easily process them to give piecewise results, but not necessarily the other way round.

Sensible. I agree.

I would propose that the ones who want to participate, need to produce a table that gives the probabilities (adding to 100.00%) for each log slot. The slots would be with 0.05 intervals like below. Eg. 3.00-3.05 == $1,000-$1,122. Once the correct result is known, we take a geometric mean of the probabilities given to that slot in the predictions. Then you get + or - points depending if your prob was higher or lower than the average. Eg. if your prob was 8% and average was 4%, you get 8/4-1 = 1 point. If your prob was 1% and average was 3%, you get -3/1+1 = -2 points.

Mostly sensible. Comments/Questions:
1) I don't see why the intervals would need to be of a fixed size
2) I don't understand why you need to logarithm (I understand why it's used for modelling, that's fine, but for reporting and interpreting results I don't see the reason)
3) Furthermore, I find you choice of base 10 unnatural (base e is the natural choice!;)
4) What's the exact logic of the point system? Why is there a division and a subtraction/addition? What do the numerators and denominators represent? Why do the points seem asymmetric, i.e. lose more points on a bad guess than you gain with a good guess?
5) The intervals need to be in absolute terms, not relative to the price at posting time - otherwise you would also need to keep track of the price at posting time for each prediction (not difficult, just an avoidable pain in the ass)

[BTCtrader71]

And I am quite sure I know the reason for that. It is the extreme information asymmetry between Bitcoin owners and non-owners.

This is a great point. As I was trying to explain information asymmetry to a newbie as a rationale for a heavily bitcoin-weighted investment portfolio (as opposed to a more traditional diversified portfolio), it occurred to me that there are two implications. Assuming that I am a long-term bitcoin bull, a hodl'er, who follows the space very closely and understands the fundamentals very well (all of which I believe to be true):

1) I am in a very GOOD position to profit from long term price RISES due to continued favorable fundamentals. This is because I am competing against the bitcoin non-owners of the world who will eventually appreciate how great bitcoin is, but they will be very slow on the uptake.

2) I am in a BAD position, relatively speaking, to benefit from price FALLS secondary to unfavorable fundamentals. This is because I am competing against the bitcoin owners of the world who will be able to digest bad news extremely quickly.

In my mind, the greatest threat to bitcoin as an investment is if something significantly better comes along. I have been following "bitcoin 2.0" projects (Ethereum, sidechains, etc) very closely and so far, I have not seen anything so far that appears likely to replace bitcoin. Indeed, things like sidechains will only strengthen bitcoin's fundamentals. But suppose something better did come along, and caused the value to bitcoin to plummet. Would I anticipate it faster than the market? Maybe -- after all, I follow this space VERY closely -- but then again maybe not, according to my above reasoning.

Thoughts?

[bitcoinsrus]

And I am quite sure I know the reason for that. It is the extreme information asymmetry between Bitcoin owners and non-owners.

This is a great point. As I was trying to explain information asymmetry to a newbie as a rationale for a heavily bitcoin-weighted investment portfolio (as opposed to a more traditional diversified portfolio), it occurred to me that there are two implications. Assuming that I am a long-term bitcoin bull, a hodl'er, who follows the space very closely and understands the fundamentals very well (all of which I believe to be true):

1) I am in a very GOOD position to profit from long term price RISES due to continued favorable fundamentals. This is because I am competing against the bitcoin non-owners of the world who will eventually appreciate how great bitcoin is, but they will be very slow on the uptake.

2) I am in a BAD position, relatively speaking, to benefit from price FALLS secondary to unfavorable fundamentals. This is because I am competing against the bitcoin owners of the world who will be able to digest bad news extremely quickly.

In my mind, the greatest threat to bitcoin as an investment is if something significantly better comes along. I have been following "bitcoin 2.0" projects (Ethereum, sidechains, etc) very closely and so far, I have not seen anything so far that appears likely to replace bitcoin. Indeed, things like sidechains will only strengthen bitcoin's fundamentals. But suppose something better did come along, and caused the value to bitcoin to plummet. Would I anticipate it faster than the market? Maybe -- after all, I follow this space VERY closely -- but then again maybe not, according to my above reasoning.

Thoughts?

Hey, I am glad someone else mentioned ethereum, will you or anyone else reading this buy the ether coins when they come out?  1 btc/1000 eth I think.  Would this be a smart investment?

[sgbett]

Most bitcoin holders would not be able to hold through a 100X or 200X increase happening so fast.

ORLY?

[BTCtrader71]

Hey, I am glad someone else mentioned ethereum, will you or anyone else reading this buy the ether coins when they come out?  1 btc/1000 eth I think.  Would this be a smart investment?

I have about 5-10% of my crypto investment spread across some of the major altcoins -- mostly litecoin, but a few others as well. If you're in the mood to gamble, you might want to convert some bitcoin into some cheap-o alts before the next parabolic rise in bitcoin, then convert back into bitcoin after the parabolic rise. But I consider this to be "speculation" (trying to predict what the market will do based on psychology rather than fundamentals) which is less worthy of respect than investing, which is based on one's understanding of market fundamentals.

As for ether, I'll probably buy a little bit, but I plan to reassess when it comes out. I read something recently by Vitalik about bitcoin sidechains in which he said that Ethereum would probably not work as a sidechain, bc it's too different, but he also indicated that Ethereum could work *with* bitcoin and other alts as opposed to being a competitor that might replace bitcoin. As a long term bitcoin investor, I am encouraged by that.

[MNDan]

Hey, I am glad someone else mentioned ethereum, will you or anyone else reading this buy the ether coins when they come out?  1 btc/1000 eth I think.  Would this be a smart investment?

I have about 5-10% of my crypto investment spread across some of the major altcoins -- mostly litecoin, but a few others as well. If you're in the mood to gamble, you might want to convert some bitcoin into some cheap-o alts before the next parabolic rise in bitcoin, then convert back into bitcoin after the parabolic rise. But I consider this to be "speculation" (trying to predict what the market will do based on psychology rather than fundamentals) which is less worthy of respect than investing, which is based on one's understanding of market fundamentals.

As for ether, I'll probably buy a little bit, but I plan to reassess when it comes out. I read something recently by Vitalik about bitcoin sidechains in which he said that Ethereum would probably not work as a sidechain, bc it's too different, but he also indicated that Ethereum could work *with* bitcoin and other alts as opposed to being a competitor that might replace bitcoin. As a long term bitcoin investor, I am encouraged by that.

Why would you get out of bitcoin BEFORE it's parabolic rise? I must be missing something.

[bitcoinsrus]

Hey, I am glad someone else mentioned ethereum, will you or anyone else reading this buy the ether coins when they come out?  1 btc/1000 eth I think.  Would this be a smart investment?

I have about 5-10% of my crypto investment spread across some of the major altcoins -- mostly litecoin, but a few others as well. If you're in the mood to gamble, you might want to convert some bitcoin into some cheap-o alts before the next parabolic rise in bitcoin, then convert back into bitcoin after the parabolic rise. But I consider this to be "speculation" (trying to predict what the market will do based on psychology rather than fundamentals) which is less worthy of respect than investing, which is based on one's understanding of market fundamentals.

As for ether, I'll probably buy a little bit, but I plan to reassess when it comes out. I read something recently by Vitalik about bitcoin sidechains in which he said that Ethereum would probably not work as a sidechain, bc it's too different, but he also indicated that Ethereum could work *with* bitcoin and other alts as opposed to being a competitor that might replace bitcoin. As a long term bitcoin investor, I am encouraged by that.

Why would you get out of bitcoin BEFORE it's parabolic rise? I must be missing something.

Yea I found that a little strange.   Maybe he made an error?

[BTCtrader71]

Why would you get out of bitcoin BEFORE it's parabolic rise? I must be missing something.

The long term goal would be to increase one's bitcoin portfolio. The reasoning is that over the past few runs, when bitcoin gets on a parabolic rise versus fiat, altcoins rise significantly versus bitcoin. In between, the alts tend to fall versus bitcoin.

Once again, there's part of me that is not exactly "proud" of this strategy; it's game playing, and I see myself as an investor, not a speculator, in crypto. So I only do it with a very small fraction of my bitcoin investment. In a way, I see it as a test of whether I think I can outguess the crypto market.

[bitcoinsrus]

Why would you get out of bitcoin BEFORE it's parabolic rise? I must be missing something.

The long term goal would be to increase one's bitcoin portfolio. The reasoning is that over the past few runs, when bitcoin gets on a parabolic rise versus fiat, altcoins rise significantly versus bitcoin. In between, the alts tend to fall versus bitcoin.

Once again, there's part of me that is not exactly "proud" of this strategy; it's game playing, and I see myself as an investor, not a speculator, in crypto. So I only do it with a very small fraction of my bitcoin investment. In a way, I see it as a test of whether I think I can outguess the crypto market.

Yea that makes sense.  But I would be careful of newer alts.  They seemed to be pumped and dumped some times.  It would have been good to get into auroracoin before it got big, but now I am not sure where it is (probably not steadily increasing).

[Trolololo]

(...)
3) Furthermore, I find you choice of base 10 unnatural (base e is the natural choice!;)

That would be rally interesting!

[BTCtrader71]

Yea that makes sense.  But I would be careful of newer alts.  They seemed to be pumped and dumped some times.  It would have been good to get into auroracoin before it got big, but now I am not sure where it is (probably not steadily increasing).

Auroracoin has tanked big time. Spaincoin has also declined significantly since its highs.

Bitcoin: only invest what you can afford to lose.

Alts: only invest what you can lose without even noticing that it's gone ....

[ArticMine]

Hey, I am glad someone else mentioned ethereum, will you or anyone else reading this buy the ether coins when they come out?  1 btc/1000 eth I think.  Would this be a smart investment?

I have about 5-10% of my crypto investment spread across some of the major altcoins -- mostly litecoin, but a few others as well. If you're in the mood to gamble, you might want to convert some bitcoin into some cheap-o alts before the next parabolic rise in bitcoin, then convert back into bitcoin after the parabolic rise. But I consider this to be "speculation" (trying to predict what the market will do based on psychology rather than fundamentals) which is less worthy of respect than investing, which is based on one's understanding of market fundamentals.

As for ether, I'll probably buy a little bit, but I plan to reassess when it comes out. I read something recently by Vitalik about bitcoin sidechains in which he said that Ethereum would probably not work as a sidechain, bc it's too different, but he also indicated that Ethereum could work *with* bitcoin and other alts as opposed to being a competitor that might replace bitcoin. As a long term bitcoin investor, I am encouraged by that.

Why would you get out of bitcoin BEFORE it's parabolic rise? I must be missing something.

Yea I found that a little strange.   Maybe he made an error?

No he did not. Take a look at LTC/BTC https://bitcoinwisdom.com/markets/btce/ltcbtc for example. The peaks in LTC/BTC tend to coincide with the peaks in BTC/USD and vice versa with the lows. I sold my NMC for BTC close to the December 2013 peak for this reason at around 0.012. Today I would get less than half the amount of BTC.

If one wants to panic sell out of BTC at the bottom of a bear market running to one of the "senior" alt coins such as LTC or NMC may actually make a lot of sense.

[rpietila]

The chances of this happening are small.
Most bitcoin holders would not be able to hold through a 100X or 200X increase happening so fast.
Bitcoin holders would find themselves sitting on trillions of wealth forcing them to diversify away from bitcoin. This would prevent such steep and sustained increase.

I think all of the above is wrong, because:
- The chances of this happening are surprisingly big, because it is a self-sustaining loop.
- The exchanges are not in the position to deal with it, so it will be very risky to sell bitcoins, trapping most of the current bitcoiners from selling even though they wanted to diversify.
- The countries have issued capital gains tax edicts, which makes you pay $100-$500 million tax per every billion you sell, and you don't have time to scale up your organization and tax planning
- Because your wealth goes up so quickly you are inundated with all kinds of considerations, might go crazy in a positive way or paranoid in a negative, but anyway not able to orderly sell such wealth
- Because price is going up steeply and people are not selling, quite small demand will push the price up ever more steeply until it goes really high and only then collapses. In the final phase of the bubble the price can double with essentially no volume.

TL;DR: There is no real reason why the next bubble would not be able to go to $100,000 even this year.

[lynn_402]

Auroracoin has tanked big time. Spaincoin has also declined significantly since its highs.

Bitcoin: only invest what you can afford to lose.

Alts: only invest what you can lose without even noticing that it's gone ....

Serious alts are relatively safe to invest in. Peercoin, Dogecoin, Namecoin and most others who have a raison-d'etre have been doing great and actually lost less value than Bitcoin since yesterday.

[bitcoinsrus]

The chances of this happening are small.
Most bitcoin holders would not be able to hold through a 100X or 200X increase happening so fast.
Bitcoin holders would find themselves sitting on trillions of wealth forcing them to diversify away from bitcoin. This would prevent such steep and sustained increase.

I think all of the above is wrong, because:
- The chances of this happening are surprisingly big, because it is a self-sustaining loop.
- The exchanges are not in the position to deal with it, so it will be very risky to sell bitcoins, trapping most of the current bitcoiners from selling even though they wanted to diversify.
- The countries have issued capital gains tax edicts, which makes you pay $100-$500 million tax per every billion you sell, and you don't have time to scale up your organization and tax planning
- Because your wealth goes up so quickly you are inundated with all kinds of considerations, might go crazy in a positive way or paranoid in a negative, but anyway not able to orderly sell such wealth
- Because price is going up steeply and people are not selling, quite small demand will push the price up ever more steeply until it goes really high and only then collapses. In the final phase of the bubble the price can double with essentially no volume.

TL;DR: There is no real reason why the next bubble would not be able to go to $100,000 even this year.

[BTCtrader71]

Agree with all of what rpietila said. But for me, especially this:

- The countries have issued capital gains tax edicts, which makes you pay $100-$500 million tax per every billion you sell, and you don't have time to scale up your organization and tax planning

[podyx]

[quote

Serious alts are relatively safe to invest in. Peercoin, Dogecoin, Namecoin and most others who have a raison-d'etre have been doing great and actually lost less value than Bitcoin since yesterday.

http://media.giphy.com/media/9rWmUuwkNQvra/giphy.gif