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January 26, 2023
The Gawker article led to the first Google search spike in Bitcoin’s life, as shown in Figure 3.1, and would drive the price of bitcoin from about $10 to $30 in the span of a week.
paled in comparison to the global Google search volume in March to April 2013, which corresponded with a nearly eightfold increase in price, from roughly $30 to $230 in about a month. The drivers behind this bitcoin demand were more opaque than the Gawker spike, though many point to the bailout of Cyprus and the associated losses that citizens took on their bank account balances as the core driver.
in November 2013, when increased demand for bitcoin in China along with interest from the U.S. Senate on the innovation led to a stratospheric ascent through $1,000 that grabbed international headlines.4
The difference boils down to whether a raw digital resource is being provisioned (cryptocommodity) or if the dApp is providing a consumer-facing finished digital good or service (cryptotoken).
Due to Ethereum’s wild success, other decentralized world computers have popped up, such as Dfinity, Lisk, Rootstock, Tezos, Waves, and more that can support their own dApps.
The company Augur seeks to provide a platform that allows users to wager on the results of any event, creating a market for people to test their predictions.34
Set follow that page for portfolio pages of leading crypto investment firms
For such bleeding-edge platforms, it is most important for the innovative investor to keep track of developer mindshare and miner support. Both are vital to the long-term growth and survival of these platforms.
the first time a price was established for bitcoin, October 5, 2009, when it was priced at 1,309 bitcoin to the dollar, or 7/100 of a cent per bitcoin. A small website called the New Liberty Standard established the rate based on the amount of money it needed for electricity and rent to maintain the computer that mined bitcoin versus the amount of bitcoin that had been reaped from so doing.
One of the easiest ways to visualize the volatility of an asset is to see how much its price changes day to day, or in other words, the daily percent price changes. The bigger the daily percent price changes are, the more volatile the asset is.
Volatility is most commonly derived by taking the standard deviation of the daily percent price changes.
Twitter was 50 percent more volatile than bitcoin in 2016, and bitcoin was nearly three times more volatile than AT&T.
In Figure 7.13 we see that bitcoin’s volatility has been the highest, with Netflix coming in second; and these two assets were the best performing. Interestingly, in this period bitcoin’s annual returns of 212 percent were threefold that of Netflix’s 73 percent, yet bitcoin’s volatility was only 35 percent greater than Netflix.
Figure 7.14 Sharpe ratio of bitcoin and the FANG stocks since Facebook’s IPO
simultaneous with decreasing volatility, bitcoin’s annual appreciation has calmed as well. In Figure 7.15, we once again see the relationship between risk and reward playing out as we view bitcoin’s Sharpe ratio every full year from 2011 through 2016.
Cryptoassets have near-zero correlation to other capital market assets. The best explanation for this is that cryptoassets are so new that many capital market investors don’t play in the same asset pools.
With the growing wave of digitalization, the bond markets are becoming increasingly liquid and transparent. The same can be said of markets for commodities, art, fine wine, and so on.
Cryptoassets have an inherent advantage in their liquidity and trading volume profile, because they are digital natives. As digital natives, cryptoassets have no physical form, and can be moved as quickly as the Internet can move the 1s and 0s that convey ownership.
Many still turn to gold in risk-off periods, when they want something safe from the groupthink trading in the bond and equity markets.
What did BTC do on e!ection night? And on any other risk-off periods during 2016? Vis a vis GLD?
exchanges have grown from just Mt. Gox in July 2010 to over 40 as of the start of 2017.5
Bitcoinity.org provide metrics like, “Spread 100 BTC [%],” showing how much the price of bitcoin would move on different exchanges if 100 bitcoin were bought.6
Other cryptoassets show similar trends as they mature, but because they’re younger than bitcoin, their variability in volume and liquidity is greater.
Overlay volume growth for 2g coins on to earlier periods for BTC
In December 2015, daily volume for the asset was $27,300, but by December 2016 it was $3.25M, well over a hundredfold increase. The price of the asset had appreciated more than 20-fold in the same period, so some of the increase in trading volume was due to price appreciation, but clearly a large amount was due to increased interest and trading activity in the asset.
Many cryptoassets will enjoy significant boosts in trading volumes upon sizeable price appreciation because a rising asset catches the attention of more investors and traders.
once the cryptoasset settles down into a price range, its trading volume will often settle into a new range
Some cryptoasset traders will then look for increases in volume as an early indicator that interest is picking up and that a move in the ...
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sometimes volumes that rise too far and too fast can be a sign of manipulation or overheating markets.
On January 6, 2017, the day after bitcoin hit an all-time high trading volume of $11 billion in one day and crossed the $1000-a-coin mark for the second time in its life, the People’s Bank of China (PBoC) announced it was investigating bitcoin trading on Chinese exchanges.9 Shortly after, the PBoC issued new regulations for the trading of bitcoin on exchanges within the country, including curtailing margin trading, requiring trading fees, and demanding stronger anti–money laundering and know-your-customer protocols.
Keep a really close eye on regulation and potential regulation! look for early signs mkre than absolute moves because everyone reports on the latter so there's not much value in it (except maybe do link collections on those for multiple perspectives?).
helped to legitimize bitcoin, but they did lead to a noticeable decline in Chinese trading volume, which for much of 2016
As a result, when the PBoC issued its regulations, there were plenty of other investors and traders outside of China to pick up the slack, leading to an inversion in market share of fiat currencies used to trade bitcoin, as shown in Figure 9.4.
Track this for all major coins/tokens and look for imbalances
Fiat currency pairs are particularly important for cryptoassets because they require significant integration with preexisting financial infrastructures. Due to high levels of required compliance, only a small number of cryptoasset exchanges offer the capability to accept fiat currency or connect to investors’ bank accounts. These exchanges, such as Bitstamp, GDAX, itBit, Gemini, Kraken, and a few others, are hesitant to provide access to all cryptoassets, as they do not want to encourage trading in those that are not reputable. Given their caution, it is a stamp of approval for a cryptoasset
...more
This also represents new money into the market! It also IDs exchanges that are most(?) important when tracking which assets are traded where
If our hypothesis on the importance of fiat currencies in cryptoasset trading holds, then as an asset grows in maturity and legitimacy, it should have more diversity in its trading pairs, with particularly strong growth in fiat currencies being used to buy the asset.
we can see that over the course of 2016 the diversity in trading pairs used to buy it has grown significantly.
overall fiat currencies have increased from less than 10 percent of ether’s trading volume in the spring of 2016 to nearly 50 percent in the spring of 2017.
monitor the increase of trading pair diversity as a way to check the growing robustness and maturity of a single cryptoasset within the broader asset class. CryptoCompar...
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We included dash because we posit that it will continue to have problems with volatility over time. While it is gaining in acceptance, which should decrease its volatility, its software architecture creates a liquidity problem by requiring masternodes (entities similar to miners, but unique to Dash’s architecture) to lock up a large amount of the dash outstanding.
For example, through 2016, bitcoin more than doubled in price but decreased in volatility. Its daily gains and occasional losses were close enough to the mean not to register as overly volatile. Such behavior can indicate big traders are taking positions in an asset; often they gauge how much they are moving the price of an asset and make sure not to do so above a certain percentage point.
Can i track addresses and look for recent accumulations?
Since litecoin is such a close derivative of bitcoin, investors likely became concerned that people would rotate out of litecoin and move into bitcoin if the bitcoin ETF was approved. Ether and monero, on the other hand, are significantly different cryptoassets and therefore are held as complementary to bitcoin in a crypto portfolio. As bitcoin rose and fell, so too did these assets.
recognize where correlations may or may not occur.
Similarly, cryptoasset bubbles can be created using extreme margin on some exchanges, where investors are effectively gambling with money they don’t have.
Can i track which ex hanges are offerring margin and how much?
overtook the markets. These times are worthwhile to examine and learn from, and it’s important to note that bitcoin has always recovered from these periods of mass speculation, a major differentiator from tulips. There are six periods over the last eight years when the crowd temporarily controlled the bitcoin market.
When Mt. Gox was established, bitcoin finally became accessible to the mainstream. Prior to this point, bitcoin holders had mostly been computer and cryptography wizzes, acquiring bitcoin as a function of running the computers that supported the network.
the percentage change in bitcoin’s price over 30-day periods, or what is known as month-over-month appreciation.
we will define a bitcoin bubble cycle as being recognizable on the first day that bitcoin’s price has doubled from its price 30 days prior. The bubble ends when the price stops falling from the month prior, firming up with month-over-month gains for three straight days.
Within the period defined as a bitcoin bubble, the average decline from peak price to trough price was 63 percent. The bubbles that peaked in June 2011 and December 2013 were particularly devastating, with losses of 93 percent and 85 percent respectively.
Sharp rises are often characterized by investor exuberance, quickly escalating as more and more jubilantly pile in. The falls, on the other hand, are sustained excruciation.
This is Willy Woo's dead cat bounce pattern?
On July 1, 2016, the total network value of Steemit was around $16 million. Two weeks later it was around $350 million, a more than 20-fold increase.20 Such rapid changes in price are almost always fueled by mass speculation and not fundamental growth.
The combination of limited initial supply with widespread demand led to a classic supply shortage that boosted the price of zcash. On the first day of trading, the coin momentarily achieved a price of 3,300 bitcoin, or more than $2 million dollars per zcash, on Poloniex.24 Within two days it had crashed below 1 bitcoin per zcash and continued to fall, closing out 2016 at a price of .05 bitcoin per zcash, or roughly $48.25
A key indicator of the unsustainability of mass speculation is when new and inexperienced entrants stream into the markets.
What are the easiest on ramps, GDAX? Look at crypto/fiat pairs volume from those exchanges as a proxy?
the World Bank has joined us in this opinion. In a 2014 report it states: Contrary to a widely-held opinion, Bitcoin is not a deliberate Ponzi. And there is little to learn by treating it as such. The main value of Bitcoin may, in retrospect, turn out to be the lessons it offers to central banks on the prospects of electronic currency, and on how to enhance efficiency and cut transactions cost.11
What problem does it solve? In other words, is there a reason for this cryptoasset and its associated architecture to exist in a decentralized manner? There are lots of digital services in our world, so does this one have an inherent benefit to being provisioned in a distributed, secure, and egalitarian manner?
