Feb 13, · On 22 October , Trolololo released a Logarithmic (non-linear) regression where he estimated Bitcoin’s value over the next 8 years, at the time of publication. His prediction stated that Bitcoin would cross $10, on 22 December Jul 02, · First, Shostak describes bitcoins as a medium of exchange but then argues that the regression theorem says that it cannot become money because it has no intrinsic value. However, the origin of a medium of exchange has no bearing on the reasons that a . Dec 02, · The initial value of money, before it becomes widely traded as money, originates in its direct utility. It’s an explanation that is demonstrated through historical reconstruction. That’s Mises’ regression theorem. Bitcoin’s use value. At first glance, bitcoin would seem to be an exception. You can’t use a bitcoin for anything other.
Bitcoin regression valueBitcoin Fair Value and Peak Logarithmic Regression Bands for BNC:BLX by bjcowen — TradingView
Thus, it would appear to be a violation of the regression theorem if bitcoins were to become a medium of exchange. There are two fallacies inherent in the statement of this apparent paradox.
The first is an argument from lack of imagination. Just because the nature of bitcoins' original value is unclear does not mean that there isn't one. The second is a violation of subjectivism, which is fundamental to Austrian methodology. The economist need not demand to understand the reasons why people value anything—demand is proven by the fact that something has a price, not by the fact that the economist understands why people pay for it. I don't deny that a lottery ticket is an economic good even though I can't understand why anyone would buy them.
Bitcoins are known to be a medium of exchange today. This proves that the regression theorem must apply to them even if it is hard to understand the original demand. The correct approach should have been clear to any Austrian economist, but until recently, Austrian analyses of Bitcoin have been superficial.
It is not yet generally understood among Austrians that Bitcoin is fundamentally different from both gold and fiat currencies, and therefore requires a fundamental analysis going back to first principles. This may have to be reiterated a few more times before the Austrian movement is convinced. The anti-Bitcoin Austrians are incapable of mounting a reasonable case against Bitcoin.
They are convinced that something must be wrong with Bitcoin, but when they attempt to articulate it, they arrive at conclusions which are either subjective or fallacious. Praxeological arguments are only capable of saying that certain causal relationships are possible or impossible. It is not possible for something in real life to violate a praxeological law, even momentarily. I believe that this reaction has to do with a misattribution of the reasons that fiat currencies and bitcoins by analogy are unsustainable, as compared with the reasons that gold is superior.
Gold has obvious productive uses; dollars and bitcoins do not. However, gold is not stable and the dollar unstable for those reasons.
Rather, the dollar is unstable because the organization issuing it is presently tampering with it. If the tampering should stop and the government should provide real evidence that it will manage the dollar responsibly, then there will be no reason to expect the dollar to be unstable after that. On the other hand, because gold has obvious and widespread productive uses, its price cannot go to zero as long as it still has these uses.
Bitcoins are a puzzle to resolve, not an excuse to deny reality. They must have had an original value. The critical moment for bitcoins was when they were first sold. Why did people begin to pay dollars for additional bitcoins beyond those that could be obtained for free? This is not a praxeological question, but it is most definitely an interesting one, and it also is at the heart of Austrians' confusions about Bitcoin.
It is clear that bitcoins cannot be thought of simply in analogy with gold, and some other story must be given for it before it will seem natural to people who are used to thinking of money in terms of gold and fiat. In general it is not always possible to explain peoples' desire very well because they are so subjective. However, a good can be explained as an instrumental, as opposed to an intrinsic good.
There is no explaining human fashion, but given that it exists, there is no difficulty in explaining fashion shows or designer clothes as means of advancing peoples' quest to stay ahead of the latest trends. It is not enough, therefore, say that they were "cool" or had "mystique". Ordinarily, things are cool or mysterious for reasons, not because of a sudden mass delusion although this is not impossible.
An explanation suggested by Graf is that bitcoins were originally demanded because of an appreciation of Bitcoin's engineering. A well-engineered encryption scheme "may indeed be more highly valued to some people in some contexts than certain 'real' economic objects or specific quantities of fiat money. Regardless of any potential future indirect-exchange value, one can imagine such persons expending hundreds of hours of effort in creating and breaking encryption codes, just because they like to ".
The problem with this explanation is that it does not distinguish between Bitcoin the program and bitcoins the currency. An appreciation of Bitcoin's engineering explains why someone would download the program to play with it or peruse the code, but it does not explain why someone would pay for an inert and arbitrary string of data.
Any amount beyond a few satoshis would be enough to try out everything that Bitcoin could do. Why, indeed, would an engineer prefer to engage with the Bitcoin block chain when he could start his own and have the entire system to himself to experiment with? Two centuries ago, oil was less than worthless. It was a blight that people would pay to have removed from their land.
However, suppose one day a mysterious stranger appeared claiming to be a time-traveler. He told everyone that one day oil would be the world's most valuable fuel. It would called "black gold".
Wars would be fought over it and enormous machines would be built to collect every last drop. Though no one knew if the purported time traveler was telling the truth or how to develop the technologies that would one day make oil valuable, some entrepreneurs believed him and began to collect oil to prepare for the day that it became black gold. They built large vats to store it and bought it up by the ton. Because these entrepreneurs established a baseline for the value of oil, other people bought smaller amounts to speculate on the price to store their wealth outside of traditional banks.
After a financial panic, the greenbacks people had been trading with became worthless. Needing something to trade with, and finding oil to be a commodity in widespread demand, people begin to trade and quote prices in it. Soon oil becomes their new money without anyone having figured out how to use it as a practical fuel. By the time the technologies to use it as fuel are understood, oil is too valuable to be burnt up.
In real life, there is no time traveler but entrepreneurs can sometimes glimpse the future. When Bitcoin was first invented, bitcoins had no exchange value and were given away free just to generate interest. However, once the right entrepreneurs began to suspect that bitcoins might actually be used as money some day, they were willing to pay dollars to have larger amounts than were available for free.
They may not have understood precisely how it could happen, but actually thinking it might would certainly be enough to give bitcoins a mystique. This theory states that the financial performance of a company ie.
However, many stocks have wild upside moves despite shedding cash flow and maintaining negative earnings. To get around this problem, analysts such as the aforementioned John Murphy, suggested that chart patterns are the independent variables.
That is, recurring patterns between the ever-evolving psychology between bulls and bears are the ultimate drivers of asset price. This theory is called technical analysis. With bitcoin, I would argue that the most appropriate independent variable to utilize in regression analysis or technical analysis specifically is recurring market patterns. For whatever reason, perhaps the presumed safety in familiarity, human behaviors are redundant.
The same is likely true for financial markets. How in the world did I get such a specific figure? I first noticed that bitcoin has a predominant trend — the rounding bottom pattern. This is characterized by a sharp spike in price point, followed by a shallow, U-shaped slide-and-recovery swing, which then culminates in an even larger spike.
When looking at the charts, the price action resembles a soup bowl. Coincidentally, between November until now, we are in the tail end of another soup bowl.
It stands to reason, according to regression, that if the first soup bowl resulted in a blow-off move, then the second soup bowl will react in a similar manner.
Interestingly, between January 1, and April 9, , bitcoin gained 1,