It seems that some investors had imagined a very different "Satoshi Nakamoto" and were quite disappointed by the Newsweek version.

We did of course consider the theory that the Manuscript was the work of a teenager who liked to play the alchemist.  (In fact I doubt that there is any theory left that we did not consider.)  One strong piece of evidence for that theory is the hundreds of drawings of naked women, which impress the reader for their quantity but however hint at a limited  concrete experience with the topic in question.  Indeed, it seems that at first the author drew dresses over their naked bodies, and only after a few pages he got bold enough to leave them /au naturel/.  There is also a six-page fold-out with what appears to be a fantasy world spread over a handful of little islands, like those that many kids conceive and draw in their teens.

We even had a candidate for the author, a mentally ill Bohemian (Czech) prince who lived recluse in the ~1600s.  However the carbon dating of the manuscript to ~1480 ruled him out.

The problem with that theory is that the manuscript is too long, consistent, and boring in many sections -- it seems very unlikely that a teenager would keep focused on a goal for that long, and would not put more fantastic stuff in it.  But that is not strong argument, of course.

Hm, it seems that Huobi's clients did not like the news that Bitcoin's inventor is a Japanese who has worked for US defense contractors... 

And that man worked many years for defense contractors on classified projects...

It is possible however that the man is not the Real Satoshi, and that the reporter stretched the facts a bit to fit a theory that she got excited about but which in the end was not conclusive.  Carefully pick one or two sentences from what the relatives actually told her, change a word here and there...

I have seen it happen to many of those who looked into the Voynich manuscript.  To all but one of them, actually. 

The total trade volume today (Wednesday Mar/05 00:00-23:59 UTC) on the exchanges that I monitor was ~524 kBTC, on the same level as the previous two days, almost exactly one half of the peak on Feb/25.

Volume in the Chinese exchanges increased 16% compared to yesterday (from 422 to 490 kBTC).  While Huobi decreased 27% (from 268 to 196), OKCoin jumped 108% (from 137 to 286) and surpassed Huobi by a large margin.  Indeed today's volume at OKCoin was the second largest in its history.  BTC-China and Bter fell by about 50%, and are still insignificant compared to the other two.

On the other hand, volume outside China fell 60% (from 85 to 34 kBTC).   The decrements at the three largest exchanges were  55% at Bitstamp, 61% at BTC-e, and 67% at Bitfinex.  Bitstamp is again the largest, but BTC-e is a close second, and Bitfinex a more detched third.

With these changes, the Chinese slice of the total volume rose to a historical record, 94%.

Daily volumes of BTC trade to/from USD and other national currencies (in kBTC):


             !    Tue !    Wed !    Thu !    Fri !    Sat !   Sun !    Mon !    Tue !    Wed !
  EXCHANGE   !  02/25 !  02/26 !  02/27 !  02/28 !  03/01 ! 03/02 !  03/03 !  03/04 !  03/05 ! Currencies considered

  Bitstamp   | 115.76 |  49.11 |  17.05 |  22.63 |  14.30 |  6.44 |  64.91 |  28.03 |  12.72 | USD
  BTC-e      |  73.86 |  33.61 |  14.60 |  12.74 |   9.55 |  4.58 |  41.71 |  28.83 |  11.19 | USD,EUR,RUR
  BitFinEx   |  94.55 |  37.71 |  12.04 |  15.29 |   8.62 |  3.13 |  50.92 |  25.03 |   8.38 | USD
  Kraken     |   2.23 |   1.87 |   0.89 |   1.34 |   0.39 |  0.32 |   2.82 |   1.81 |   0.87 | EUR
  Bitcoin.DE |   2.23 |   1.00 |   0.50 |   0.70 |   0.31 |  0.32 |   1.34 |   1.02 |   0.40 | EUR
  CaVirtEx   |   2.15 |   0.32 |   0.31 |   0.33 |   0.15 |  0.19 |   0.55 |   0.33 |   0.22 | CAD
  CampBX     |   0.42 |   0.36 |   0.05 |   0.07 |   0.08 |  0.07 |   0.28 |   0.14 |   0.04 | USD

  SUBTOTAL   | 291.20 | 123.98 |  45.44 |  53.10 |  33.40 | 15.05 | 162.53 |  85.19 |  33.82 |

  Huobi      | 352.76 | 250.64 | 123.38 | 122.00 | 104.12 | 40.64 | 253.71 | 268.47 | 196.00 | CNY
  OKCoin     | 275.68 | 150.41 |  83.60 | 129.17 |  73.29 | 34.99 | 126.48 | 137.35 | 286.05 | CNY
  BTC-China  |  27.72 |  14.72 |   6.71 |   7.17 |   5.02 |  2.64 |  16.59 |  15.36 |   8.04 | CNY
  Bter       |   1.10 |   0.53 |   0.31 |   0.29 |   0.30 |  0.24 |   0.67 |   0.64 |   0.31 | CNY

  SUBTOTAL   | 657.26 | 416.30 | 214.00 | 258.63 | 182.73 | 78.51 | 397.45 | 421.82 | 490.40 |

  TOTAL      | 948.46 | 540.28 | 259.44 | 311.73 | 216.13 | 93.56 | 559.98 | 507.01 | 524.22 |


All numbers were collected by hand from the site http://bitcoinwisdom.com. Beware of possible errors.

For each exchange, the numbers include only the trade volume to/from the currencies listed in the rightmost column. Trade between BTC and other cryptocoins, such as LiteCoin, is NOT included.

Dates on the header line are UTC. Specifically, "01/15" means "from 01/15 00:00:00 UTC to 01/15 23:59:59 UTC". (Beware that Bitcoinwisdom uses your local time, so the date may appear to be off by 1 day.  For example, if you are 2 hours west of Greenwich, it may show "01/14 22:00" when the UTC time is "01/15 00:00".)

It is a BITCOINcidence.

The "03:00 am" is local China time, which is 19:00 UTC (Greenwhich time) and 16:00 here in Campinas.

Chinese Slumber Method prediction for Thursday Mar/06


Prediction valid for: Thursday 2014-03-06, 19:00--19:59 UTC (not before, not after)
Huobi's predicted price: 3872 CNY.
Bitstamp's predicted price: 633 USD.

Huobi

The red and green strokes are actual Huobi hourly prices.  The Huobi prediction for the next Slumber Time is the rightmost magenta rectangle.  The blue rectangle is the prediction for the last Slumber Time (see below). The light blue-gray rectangles are the previous predictions.  The orange and grey dots are the Slumber Points, the mean Huobi prices at 19:00 UTC every day. The albertosauri are the False points, the glyptodons are the True ones. The grey lines are trends fitted a posteriori to the True points. The orange line is the trend that was assumed for the prediction.

Bitstamp

The red and green strokes are actual Bitstamp hourly prices.  The dots, dinosaurs, lines, and rectangles are Huobi's Slumber Points, dinosaurs, trends, and predictions, scaled by the currency conversion factor R (6.40 for Feb/07--09, 6.12 for all other times).

Checking the previous non-prediction

The prediction that I told you yesterday that I would not make was

Prediction not posted on: Tuesday 2014-03-04, 23:40 UTC
Prediction was not valid for: Wednesday 2014-03-05, 19:00--19:59 UTC

Huobi's non-predicted price: 4050 CNY
Huobi's actual price (L+H)/2: 3956 CNY
Error: 94 CNY (~15 USD)

Bitstamp's non-predicted price: 663 USD
Bitstamp's actual price (L+H)/2: 668 USD
Error: 5 USD

NOTE: Dinosaurs are used only for descriptive purposes in the above charts because I was not able to ascertain whether their use for technical analysis and prediction has been patented by the user who first applied them for such purposes.  Hopefully the issue can be resolved and more advanced rpietila reptilians will appear in future issues.

A> Hello, this is Alexey of Bitscamex-e. I'd like to talk to
     Carlos Trumffett of Graball Coins Investment, please.
C> Carlos speaking.
A> Hi, remember that I told you we invited a bitcoin hacker to "audit"
     our exchange? He is here.
C> So?
A> I gave him the list of addresses that you gave me.  He checked that they have the
     coins that we told him that we are supposed to have.  As we expected,
      he now wants us to prove that we own those coins.
C> I am ready.
A> He asked us to move 0.0001234 BTC from account a8fc... to account 76b0.... I told
      him we had to do it offline in the safe room for security reasons.
      Could you do the transfer and tell me when you are done?
C> I can do better.  Attached find the signed transaction request, you can send it out
     yourself under his nose.
A> Thanks! Bye...

EDIT: "the coins we are supposed to have" --> "the coins that we told him that we are supposed to have"

Which opportunity are you referring to?  Putting all their money into BTC at 1100 USD, and being forced to sell them at 700 USD?  Or putting all their money into MtGOX and losing it all?

Is that hate directed at bitcoin itself?  I believe it is directed at the bitcoin pushers and hypers.

The message they get across is "if you don't invest in bitcoin, you must be very stupid indeed".  Well, guess what, people don't have much love for those who call them idiots...

BTC-China is a very strange marketplace, I cannot tell wether they have real trade or just arbitrage.  Anyway they have a lot less volume than Bitstamp. 

Let's see what happens when Huobi starts LTC trading, as its CEO promised.

A stock that is well-supported by fundamental data should give several percent return above inflation. 

To the extent that inflation can be predicted over a certain time span, loans at a fixed interest rate can do that too.

Cattle seems to be a lucrative investment here (investor buys a calf and lets a farmer do the rest).

Sure, cash under the mattress is definitely a bad investment.  On the other hand, the stock of a good company usually has a positive net expected value, typically around 5% of the price plus inflation.


When I started paying attention to bitcoin, a few months ago, one of the two main "selling" points used to convince people to invest in it was the demand/supply argment, ostensibly proving that its price would rise to six figures or more when, at some not too distant future, everybody starte using bitcoins.  (A few days ago someone posted a photo of a projected slide showing such numbers for various scenarios, ending with "investment/pension funds keep their capital as bitcoin" and some astronomical number beside that.)  And in this thread, the "hodlers" apparently still believe in that math.

There were (there are) several things wrong with that argument, the main one being the implicit assumption that cryptocoin = bitcoin.  A year ago, the salesman could jump from "cryptocoins are so nice that everybody will want to use them" to "bitcoins will be used in X% of all e-payments" without people noticing the gap.  Back then, altcoins were only a theoretical possibility, which was dismissed by claims about the "Network Effect" and "First-Movers Advantage".

Well, since then altcoins became a reality, did not fail as predicted, and some of them seem to be strong competitors to bitcoin.  One thing that bitcoiners missed is that any "Satoshi" who creates an altcoin can make a lot of money by selling his pre-mined coins at the right moment, even if the coin flops later on. Clearly the Network Effect and First Mover Advantage weren't strong enough to counter that "Copycat Advantage".  Moreover, some altcoins do have some advantages over bitcoin, such as faster processing, democratic distribution of pre-mined coins, or a lethally cute puppy face.

Anyway, now bitcoin salesmen cannot do that jump any more. They must keep saying "cryptocoin" instead of "bitcoin" all the way to the final demand/supply formula. But since the supply of cryptocoins is infinite, not 21 million, the conclusion will be that "when cryptocoins are used to their full potential, the price of a cryptocoin will be at least zero." In other words, that demand/supply argument just went poof. 

The sad fact is that now there is no argument or statistical analysis that will justify any claim about the value of a bitcoin in that ultimate future.  It definitely may be zero, even if cryptocoins succeed beyond all dreams.


That is a very different "market", namely the speculative investors who aim to make money by buying and selling as the price changes.  Indeed, because of its high volatility, bitcoin may appeal to those speculators who believe that they are smarter than their peers.  However, short-range speculation is basically a zero-sum game. In practice, it is a negative-sum game, because of trading fees and time wasted. So, the expected value for a randomly chosen speculator is negative, like that of a lottery ticket.

And, anyway, that use is not what cryptocoins were invented for.  One thing that the world does not need is another financial instrument for speculators to play with.

If the expected return of bitcoin is positive according to your probabilities, go ahead and invest on it.  I am not trying to talk anyone out of it.

But you cannot honestly tell others that it is a good investment, because you cannot claim that your probabilities are more reliable than mine or than those of that guy over there.

It seems that those investors whose expected value is 1,000 USD or more are very few, and they have run out of money; otherwise they would keep buying BTCs until the price gets over their expectation. 

Therefore, most of the "loaded" traders have expected values less than 700 USD right now.  To get that value they must assign  very small probability to "bitcoin will be eventually worth more than 700,000 dollars".  Specifically, they think that the chances of that happening are less than 1 in 1000. (Even if they do not externalize that probability, it is implicit in their reluctance to pay more than 700$ for one bitcoin.).

But why P = 0.001 and not P = 0.002 or P = 0.00001?  There is no logic or experience that will help one choose between those probabilities.  Yet they lead to very different expected values.   And indeed, in the last two days we saw that the price is pretty random: it can rally by more than 100 USD on a rumor, and remain there after the rumor is proven to be false.

instead of a lottery ticket, a better analogy could be an old piece of paper that someone claims to have found among their great-great-great-great-grandfather, with what appears to be the map of an island with a "X" and a note "three tons of gold buried here".  How much would you pay for such a map?  Is paying 700$ for that map a good investment?

Bitcoin is not exactly like a lottery ticket, it is a bit better in some sense, a bit worse in other senses.

Bitcoin is just like a lottery ticket in that its price is known (its current market price) but its payoff is not (its value N years from now). 

Bitcoin is worse than a lottery ticket, because its expected value is not well defined.  The odds and prizes of a lottery ticket are known, thus one can compute its expected value.  Moreover most people who know a bit of mathematics will assign the same odds to those prizes, and therefore will agree on its expected value.  For bitcoin, on the other hand, there is no logical way to assign probabilities to the possible outcomes (possible values N years from now). So, there is no consensual expected value.

If N is less than 3, say, "value" can only mean the market price at that time.  One cannot predict the BTC price even 5 minutes ahead of time, much less N years from now.

If "N years from now" is taken to mean "after cryptos are in general use", then one needs to assign probabilities to "cryptocoins will eventually be in general use", "cryptocoins will be used in more than 1% of e-commerce transactions", "the same cryptocoin cannot be used more than N times per day", "X% of those cryptocoins will be bitcoins" and so on.

On the other hand, indeed Bitcoin is a bit better than a lottery ticket, in that it is not demonstrably a bad investment.  The expected value of a lottery ticket is invariably less than its price, so it everybody will agree that it is a bad investment.  Since the expected value of a bitcoin is not defined, one cannot prove mathematically that it is less than its current market price.  But by the same token, one cannot prove that it is a good investment, either.

So, how can one honestly recommend investing into bitcoin as a hedge against a possible dollar collapse, as a way of becoming a millionaire, or whatever the "salesmen" are saying these days?  It is like buying a ticket for a crazy lottery that does not tell its clients what are the odds and prizes, and may or may not be seeking to lose money.

Good!

Don't trust your feelings, they can be easily manipulated.

Well, I always understood that the greenhouse effect was this: shorter wavelength radiation crosses the atmosphere in spite of any CO2, gets absorbed by the ground, is re-radiated as infrared, and this is prevented from escaping by the CO2.

If so then Venus may not have a greenhouse effect because the shorter-wavelength radiation gets reflected by the clouds without being converted to infrared, and therefore does not get trapped by the CO2.  But I am just, er, academizing about it.