[XMR] Monero Speculation

Quote from: aminorex on July 05, 2017, 09:29:13 PM

Supply consists of dishoarding, transaction churn, and mining. Mining means almost nothing, relative to daily volume. Dishoarding seems to have come to its end, at this price, leaving market makers and transactional flips to dominate the exchanges. The flip rate appears to be, therefore, about 3mm USD per diem. Using pq=mv and assuming the pessimal velocity of 365 / escrow time (21d) = 17.4, we can estimate the transactional float as 3mm*365 / 17.4 = m = 63mm USD = 1.3mm XMR. (The global velocity is then about 1.6, which is rather low for a healthy economy but pretty good compared to major global currencies ATM).

Assuming reserve demand to be stable (again, a pessimistic assumption), doubling the transaction rate while holding velocity steady should double the clearing price. Pessimistically, then, the clearing price should be directly proportional to transaction flow rate.

There are thus three ways to increase the clearing price: Add reserve demand (reducing the effective float), add transaction demand (increasing the size of the economy) or decrease the velocity (reducing transactional supply).

In fact, I would expect velocity of the effective float to rise rather than fall, so hope of future appreciation is either speculation (on the madness of crowds), or else it is dependent on the fundamental assumption of rising reserve and/or transactional demand. In practice these two demand factors are highly correlated: observing a rising transactional demand motivates an increased reserve demand, while a rising price motivates dishoarding, which is subject to re-hoarding in a process of saver churn, known as "stronger hands".

Notionally, the reserve market is discounting the future transactional market as well as its own dishoarding rate. R_now = R_eq + r * Dt * (dM/dt + dR/dP) , where Dt is the equilibrium horizon, P is the clearing price, dR/dP is a negative value, - dR/dP << dM/dt, and r is a discounting ratio per unit of t (time). For fixed velocity, then, knowing the growth rate of the transactional market, dM/dt, would allow one to estimate the mean discounting rate and the dishoarding rate by observing a sequence of equilibrium prices, and hence provide a prediction of the price over time as a functor parameterized by the equilibrium horizon. (I made one particularly egregious simplification, of the kind that motivates the moniker "dismal science", in order to keep this post short).

I am slowly buying below 45$ these days, and my daily return on market making capital is now less than 50bp. I have returned to booking gains as XMR until the next time XMR exceeds $60, whereupon I intend to return to booking gains in BTC.

Is aminorex off his meds again?

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