Explain Bitcoin Like I’m Five - freeCodeCamp.org

ELI5: how is it that cryptocurrencies can act like a currency (Bitcoin) or a stock (an ICO)

I have seen crypto referred to as having a market cap bigger than a company such as GE, or a currency, such as the pound. Whilst I understand that stocks and traditional cast are ways of exchanging value, I'm confused as to how cryptocurrency can be both. For example, the market cap of the pound doesn't include the total value of Britain's companies. Yet cryptocurrencies seem to be understood in terms of shares and market cap.
submitted by UnevenMind to explainlikeimfive [link] [comments]

Bitcoin mentioned around Reddit: ELi5/AMA Cryptocurrency & Mining Thread /r/AMD_Stock

Bitcoin mentioned around Reddit: ELi5/AMA Cryptocurrency & Mining Thread /AMD_Stock submitted by BitcoinAllBot to BitcoinAll [link] [comments]

ELI5: Bitcoin vs. stocks/bonds/futures/forex /r/Bitcoin

ELI5: Bitcoin vs. stocks/bonds/futures/forex /Bitcoin submitted by BitcoinAllBot to BitcoinAll [link] [comments]

ELI5: Why are people buying bitcoins/stocks at such a high price?

Like the bitcoins right now, valued at 750 USD. Why would anyone buy at this high price on such a volatile market, and how do you manage to sell, say, 100 bitcoins in an instance? Are there other people really cashing out your millions of dollars, just to buy bitcoin in this market?
I guess the same thing would go for stocks as well, does this happen here?
submitted by Gavekort to explainlikeimfive [link] [comments]

ELI5: Why do people trade bitcoins like a stock, when it is supposed to be a currency?

It seems like its not the smartest thing to do, as it was never meant to be traded
submitted by mahoganybiscuit to explainlikeimfive [link] [comments]

ELI5: What is Bitcoin? How does it differ from regular stock Market?

Bird is indeed the word.
submitted by Tru_G91 to explainlikeimfive [link] [comments]

ELI5: Would it be possible to have a Bitcoin stock exchange ?

I am wondering :
Do you think it would be possible to create a Bitcoin stocks exchange ? I mean, economically could it be a good idea for a company to trade its shares on a Bitcoin market ? Wouldn't that be risky with Bitcoin volatility ?
I don't know much about finance so if someone could help me, it would be awesome !
submitted by Bzh2610 to Bitcoin [link] [comments]

ELI5: How can stocks go up and down, like bitcoin, gold and silver?

I know, if some bad information comed to public about a stock, it's very likely to fall. What causes this?
And to make sure i get it answered: what could cause a "bubble" like bitcoin to burst? What exactly happens when a stock loses value and everybody goes nuts?
submitted by brandtftw to explainlikeimfive [link] [comments]

ELI5: How did trading resources for other resources get so complicated to the point where we have things like bitcoin and the stock exchange

submitted by Twatbiscuit to explainlikeimfive [link] [comments]

Will someone ELI5 this for me? Why is this bitcoin derivative stock selling for $63 a share when BTC is currently valued at $438 each? /r/Bitcoin

Will someone ELI5 this for me? Why is this bitcoin derivative stock selling for $63 a share when BTC is currently valued at $438 each? /Bitcoin submitted by BitcoinAllBot to BitcoinAll [link] [comments]

UASF - 3 Year Anniversary - Look back

(This is how I look at it, specifics may be a little paraphrased)
User Activated Soft Fork
What was it
An alternative to scaling the block size limit (and thus altering bitcoins original protocol design parameters). This alternative would permit more transactions without the need to adjust the core protocol.
How did it come about?
Amidst ongoing scaling concerns, we saw many people proposing that bitcoin cannot scale and requires bigger blocks than 1MB, so it can cater to larger amounts of network activity.
Proposals for combinations between UASF (Activating Segregated Witness) and blocksize increase as a compromise, blocksize increase, or no two either and just a technical solution that doesn’t compromise the base layer.
Why it is important to understand
Bitcoin is money to some, it’s income to others, but as a technology it solves one single problem.
Digital scarcity. In order for anything in this world or universe to be deemed scarce, we must be able to prove it’s defensibility. Against being reproduced, copied, weather storms if it’s raw materials, or be resilient against robbery at a larger scale (like wars between governments over natural resources).
ELI5
If you teleport back to cave man days, and consider a cave man with a gold bar and a plank of wood. He takes them to the market to trade for food. 1 gold bar or 1 plank of wood can purchase a steak.
Now he returns back to his cave and has his wood and gold by the entrance. A storm comes, and it blows and rains, and bashes his stockpile to pieces.
Noticing the changes to his stock, his wood is brittle and diminished from the weather, but his gold has dirt on it, although still in tact. Knowing this, he now elects to spend his wood at the market instead of gold. His gold weathered the storm.
UASF was a defining moment in weathering the storm, and that’s why bitcoin reigns supreme as the crowned heavyweight champion for the Duration Of Immutability title.
Whatever happens moving forward, no matter how your relationship goes with bitcoin, remember that it’s super power may appear boring, but it is the long play. Generational play. It’s immutability is impossible to catch, the longer it goes, and the longer it goes, the stronger that conviction behind it being truly immutable is.
That’s my take on UASF, and it was eye popping once the penny dropped for me (h/t to Neil & Richard).
Do not dismiss immutability, ever. It’s the superpower because it requires the single thing that can’t be bought, time.
Felt this was an analogy that broke the ice to learn more, hope it is helpful to even just one person.
Considering how gentlemen this still is all these years later, hodl.
Long live 👑🌽
👏 DURATION 👏 OF 👏 IMMUTABILITY 👏
submitted by michaeldunworthsydne to Bitcoin [link] [comments]

What I like most about Cardano

Hey guys and gals,
I posted the following in a discussion on cryptocurrency earlier today, and though that I'd share here as well. I fixed one item (I had the epoch length wrong), and some grammatical errors.
Please share your thoughts or what you find exciting about Cardano in the comments, and if you are new here and just starting to fill your ADA bags, I really hope you find this useful!
What I love most about Cardano
  1. Slow and steady wins the race - The Cardano protocol is build on peer-reviewed academic research. This takes an excruciating amount of time to get things done, however what you end up with is a better product. They think first, then try and prove it wrong, and only if it is proven correct do they build. All of the code used for Cardano is high-assurance code, and no other cryptocurrency project is doing this to my knowledge. I truly believe this is why so many people on this sub hated on Cardano so much in 2018 & 2019. There were crazy high hopes for this project, but people wanted delivery right away and price increases. That's just not how things are done at Cardano, and I personally love it.
  2. Staking - Just for the testnet, Cardano had over 1000 stakepools. If this is true for the mainnet, Cardano will be the most decentralized cryptocurrency on Earth. Another project that I love is Tezos. However roughly 25% of all Tezos bakers are owned by the foundation, and there is nowhere near the same transparency when selecting a baker as there is when choosing a stakepool for your ADA. All the performance statistics, fees, and other info for stakepools is made available on the Cardano wallet, and if your current stakepool stops performing you can easily change to a different one. My rate of return on my ADA was over 10%, and rewards are issued back every day. On the mainnet, which launches in about 30 days, rewards from staking will be issued every 5 days, right to your wallet. This means you can compound your gains and stake more as you grow. Also, when you stake your ADA, they never leave your wallet or get locked up in any way. I am very much looking forward to staking through my ledger hardware wallet.
  3. Decentralization - Having over 1000 independent stakepools will make Cardano the most decentralized financial ecosystem in existence. And I predict that we end up with well over this number.
  4. Scalability - Full transparency: I own and love both Ethereum and Bitcoin. But my biggest problem with both is that they must bottleneck transactions when the volume is up. I remember a few years back when I couldn't use ETH for days because a bunch of people were feverishly trying to get rich buying and selling digital images of cartoon cats. Neither Ethereum nor Bitcoin can handle anything close to a billion users in their current forms. And I know that Ethereum is building Eth 2.0, and I'm excited to see what they come up with, however Cardano was built with this problem in mind from the get-go. Unlike our first and second generation systems, as more users transact on Cardano, it actually moves faster, not slower.
If you are really interested, the developers of Cardano have had their research on "sharding" not only peer reviewed, but published. Through sharding, Cardano could theoretically support over 1,000,000 transactions per second.
  1. Growth potential based on previous price - As a former stock investor, I am quite used to using this measurement in a bear market, for good or for ill. Whether it applies or has value here it to be determined, however for me it cannot be overlooked. Simply by measuring the current price vs the all time high price shows you that ADA must increase 16X just to get back to it's former high price ($1.31/.08). Ethereum on the other hand must only 6.5X to it's all time high ($1500/230), and both Bitcoin and Tezos must only 2X.
To be fair, this is not a proven method of measuring the value of cryptocurrency, but it is one that I am using nonetheless.
Hope this gets some good conversation going!
Edit:
  1. Most generous community - Two silvers and an ELI5?! Thank you guys!
submitted by GlowingViral to cardano [link] [comments]

ELI5 Time Banks and My Take On Yang's Purpose for Them.

Why I am writing this?
I noticed Andrew Yang proposed making a time bank backed by the reputation of the USA President/government. I am writing this, because I have seen the videos of time banking, and I heard the basic reasons people argue for their use. However, I thought I could do better. I am usually the one who studies things for my friends and eli5 the things I study. I wanted to leave this here for anyone interested.
What are time banks?
Imagine there is an accountant and a dentist. The accountant offers to do the dentist's taxes every year if the dentist gives the accountant a teeth cleaning. But let's say one year the dentist's taxes get much more complicated. This dentist gets into bitcoin and makes taxable income from that. The dentist has a 401k, and stocks. The dentist starts a side hustle hiring a high school kid to rent out bicycles to tourists from a street stand. This guy's taxes are epic. Or maybe the accountant needs a root canal and some molars removed one year.
So, they agree to continue this trade at an exchange for 1 hour accounting = 1 hour dentistry. Then, they add their friends, the janitor, the cook, and the landscaper. All 5 people agree to the 1 hour = 1 hour exchange. They elect one trustable friend to keep track of the hours ledger and write reports for everyone. Maybe this guy employs software to aid him, and all 5 members keep ewallets on their phones.
You can see what a real time bank looks like in action by reading the handbook of one of them. Here is one handbook. Here is a bunch of existing time banks you can look at. You might also look at the directory to see what kinds of services are being offered and which services are requested. I would like to note that in the handbook I linked, capital involved in a service is paid in real money by the receiver. This ensures that a time credit is strictly for the labor part of an exchange. However, other time banks may have different rules.
Edit: I was cut-off. So, I put the rest of this report in a comment below.
submitted by JJEng1989 to YangForPresidentHQ [link] [comments]

25 Tools and Resources for Crypto Investors: Guide to how to create a winning strategy

Lots of people have PM'd me asking me the same questions on where to find information and how to put together their portfolio so I decided to put a guide for crypto investors, especially those who have only been in a few months and are still confused.
This is going to be Part 1 and will deal with research resources, risk and returns. In Part 2 I'll post a systematic approach to valuation and picking individual assets with derived price targets.

Getting started: Tools and resources

You don't have to be a programmer or techie to invest in crypto, but you should first learn the basics of how it functions. I find that this video by 3Blue1Brown is the best introduction to what a blockchain actually is and how it functions, because it explains it clearly and simply with visuals while not dumbing it down too much. If you want a more ELI5 version with cute cartoons, then Upfolio has a nice beginner's intro to the blockchain concept and quick descriptions of top 100 cryptocurrencies. I also recommend simply going to Wikipedia and reading the blockchain and cryptocurrency page and clicking onto a few links in, read about POS vs POW...etc. Later on you'll need this information to understand why a specific use case may or may not benefit from a blockchain structure. Here is a quick summary of the common terms you should know.
Next you should arm yourself with some informational resources. I compiled a convenient list of useful tools and sites that I've used and find to be worthy of bookmarking:
Market information
Analysis tools
Portfolio Tracking
Youtube
I generally don't follow much on Youtube because it's dominated by idiocy like Trevon James and CryptoNick, but there are some that I think are worthy of following:

Constructing a Investment Strategy

I can't stress enough how important it is to construct an actual investment strategy. Organize what your goals are, what your risk tolerance is and how you plan to construct a portfolio to achieve those goals rather than just chasing the flavor of the week.
Why? Because it will force you to slow down and make decisions based on rational thinking rather than emotion, and will also inevitably lead you to think long term.

Setting ROI targets

Bluntly put, a lot of young investors who are in crypto have really unrealistic expectations about returns and risk.
A lot of them have never invested in any other type of financial asset, and hence many seem to consider a 10% ROI in a month to be unexciting, even though that is roughly what they should be aiming for.
I see a ton of people now on this sub and on other sites making their decisions with the expectation to double their money every month. This has lead a worrying amount of newbies putting in way too much money way too quickly into anything on the front page of CoinMarketCap with a low dollar value per coin hoping that crypto get them out of their debt or a life of drudgery in a cubicle. And all in the next year or two!
But its important to temper your hype about returns and realize why we had this exponential growth in the last year. Its not because we are seeing any mass increase in adoption, if anything adoption among eCommerce sites is decreasing. The only reason we saw so much upward price action is because of fiat monetary base expansion from people FOMO-ing in due to media coverage of previous price action. People are hoping to ride the bubble and sell to a greater fool in a few months, it is classic Greater Fool Theory. That's it. We passed the $1,000 psychological marker again for Bitcoin which we hadn't seen since right before the Mt.Gox disaster, and it just snowballed the positivity as headline after headline came out about the price growth. However those unexciting returns of 10% a month are not only the norm, but much more healthy for an alternative investment class. Here are the annual returns for Bitcoin for the last few years:
Year BTC Return
2017 1,300%
2016 120%
2015 35%
2014 -60%
2013 5300%
2012 150 %
Keep in mind that a 10% monthly increase when compounded equals a 313% annual return, or over 3x your money. That may not sound exciting to those who entered recently and saw their money go 20x in a month on something like Tron before it crashed back down, but that 3X annual return is better than Bitcoin's return every year except the year right before the last market meltdown and 2017. I have been saying for a while now that we are due for a major correction and every investor now should be planning for that possibility through proper allocation and setting return expectations that are reasonable.

Risk Management

Quanitifying risk in crypto is surprisingly difficult because the historical returns aren't normally distributed, meaning that tools like Sharpe Ratio and other risk metrics can't really be used as intended. Instead you'll have to think of your own risk tolerance and qualitatively evaluate how risky each crypto is based on the team, the use case prospects, the amount of competition and the general market risk.
You can think of each crypto having a risk factor that is the summation of the general crypto market risk (Rm) as ultimately everything is tied to how Bitcoin does, but also its own inherent risk specific to its own goals (Ri).
Rt = Rm +Ri
The market risk is something you cannot avoid, if some China FUD comes out about regulations on Bitcoin then your investment in solid altcoin picks will go down too along with Bitcoin. This (Rm) return is essentially what risk you undertake to have a market ROI of 385% I talked about above. What you can minimize though is the Ri, the aset specific risks with the team, the likelihood they will actually deliver, the likelihood that their solution will be adopted. Unfortunately there is no one way to do this, you simply have to take the time to research and form your own opinion on how risky it really is before allocating a certain percentage to it. Consider the individual risk of each crypto and start looking for red flags:
  • guaranteed promises of large returns (protip: that's a Ponzi)
  • float allocations that give way too much to the founder
  • vague whitepapers
  • vague timelines
  • no clear use case
  • Github with no useful code and sparse activity
  • a team that is difficult to find information on or even worse anonymous
While all cryptocurrencies are a risky investments but generally you can break down cryptos into "low" risk core, medium risk speculative and high risk speculative
  • Low Risk Core - This is the exchange pairing cryptos and those that are well established. These are almost sure to be around in 5 years, and will recover after any bear market. Bitcoin, Litecoin and Ethereum are in this class of risk, and I would also argue Monero.
  • Medium Risk Speculative - These would be cryptos which generally have at least some product and are reasonably established, but higher risk than Core. Things like ZCash, Ripple, NEO..etc.
  • High Risk Speculative - This is anything created within the last few months, low caps, shillcoins, ICOs...etc. Most cryptos are in this category, most of them will be essentially worthless in 5 years.
How much risk should you take on? That depends on your own life situation but also it should be proportional to how much expertise you have in both financial analysis and technology. If you're a newbie who doesn't understand the tech and has no idea how to value assets, your risk tolerance should be lower than a programmer who understand the tech or a financial analyst who is experienced in valuation metrics.
Right now the trio of BTC-ETH-LTC account for 55% of the market cap, so between 50-70% of your portfolio in low Risk Core for newbies is a great starting point. Then you can go down to 25-30% as you gain confidence and experience. But always try to keep about 1/3rd in safe core positions. Don't go all in on speculative picks.
Core principles to minimize risk
  • Have the majority of your holdings in things you feel good holding for at least 2 years. Don't use the majority of your investment for day trading or short term investing.
  • Consider using dollar cost averaging to enter a position. This generally means investing a X amount over several periods, instead of at once. You can also use downward biased dollar cost averaging to mitigate against downward risk. For example instead of investing $1000 at once in a position at market price, you can buy $500 at the market price today then set several limit orders at slightly lower intervals (for example $250 at 5% lower than market price, $250 at 10% lower than market price). This way your average cost of acquisition will be lower if the crypto happens to decline over the short term.
  • Never chase a pump. Its simply too risky as its such an inefficient and unregulated market. If you continue to do it, most of your money losing decisions will be because you emotionally FOMO-ed into gambling on a symbol.
  • Invest what you can afford to lose. Don't have more than 5-10% of your net worth in crypto.
  • Consider what level of loss you can't accept in a position with a high risk factor, and use stop-limit orders to hedge against sudden crashes. Set you stop price at about 5-10% above your lowest limit. Stop-limit orders aren't perfect but they're better than having no hedging strategy for a risky microcap in case of some meltdown. Only you can determine what bags you are unwilling to hold.
  • Diversify across sectors and rebalance your allocations periodically. Keep about 1/3rd in low risk core holdings.
  • Have some fiat in reserve at a FDIC-insured exchange (ex. Gemini), and be ready to add to your winning positions on a pullback.
  • Remember you didn't actually make any money until you take some profits, so take do some profits when everyone else is at peak FOMO-ing bubble mode. You will also sleep much more comfortably once you take out the equivalent of your principal.

Portfolio Allocation

Along with thinking about your portfolio in terms of risk categories described above, I really find it helpful to think about the segments you are in. OnChainFX has some segment categorization to think about:
  • Currency
  • General Purpose Platform
  • Advertising
  • Crowdfunding Platform
  • Lending Platform
  • Privacy
  • Distributed Computing/Storage
  • Prediction Markets
  • IOT (Internet of Things)
  • Asset Management
  • Content Creation
  • Exchange Platform
I generally like to simplify these down to these 7 segments:
  • Core holdings - essentially the Low Risk Core segment
  • Platform segment
  • Privacy segment
  • Finance/Bank settlement segment
  • Enterprise Blockchain solutions segment
  • Promising/Innovative Tech segment
This is merely what I use, but I'm sure you can think of your own. The key point I have is to try to invest your medium and high risk picks in a segment you understand well, and in which you can relatively accurately judge risk. If you don't understand anything about how banking works or SWIFT or international settlement layers, don't invest in Stellar. If you have no idea how a supply chain functions, avoid investing in VeChain (even if it's being shilled to death on Reddit at the moment just like XRB was last month). Buffet calls this "circle of competence", he invests in sectors he understands and avoids those he doesn't like tech. I think doing the same thing in crypto is a wise move.
What's interesting is that often we see like-coin movement, for example when a coin from one segment pumps we will frequently see another similar coin in the same segment go up (think Stellar following after Ripple).
Consider the historic correlations between your holdings. Generally when Bitcoin pumps, altcoins dump but at what rate depends on the coin. When Bitcoin goes sideways we tend to see pumping in altcoins, while when Bitcoin goes down, everything goes down.
You should set price targets for each of your holdings, which is a whole separate discussion I'll go in Part 2 of the guide.

Summing it up

This was meant to get you think about what return targets you should set for your portfolio and how much risk you are willing to take and what strategies you can follow to mitigate that risk.
Returns around 385% (average crypto market CAGR over the last 3 years) would be a good target to aim for while remaining realistic, you can tweak it a bit based on your own risk tolerance. What category of risk your individual crypto picks should be will be determined by how much more greed you have for above average market return. A portfolio of 50% core holdings, 30% medium risk in a sector you understand well and 20% in high risk speculative is probably what the average portfolio should look like, with newbies going more towards 70% core and only 5% high risk speculative.
Just by thinking about these things you'll likely do better than most crypto investors, because most don't think about this stuff, to their own detriment.
submitted by arsonbunny to CryptoCurrency [link] [comments]

Crypto Investing Guide: Useful resources and tools, and how to create an investment strategy

Lots of people have PM'd me asking me the same questions on where to find information and how to put together their portfolio so I decided to put a guide for crypto investors, especially those who have only been in a few months and are still confused.
Many people entered recently at a time when the market was rewarding the very worst type of investment behavior. Unfortunately there aren't many guides and a lot of people end up looking at things like Twitter or the trending Youtube crypto videos, which is dominated by "How to make $1,00,000 by daytrading crypto" and influencers like CryptoNick.
So I'll try to put together a guide from what I've learned and some tips, on how to invest in this asset class. This is going to be Part 1, in another post later I'll post a systematic approach to valuation and picking individual assets.

Getting started: Tools and resources

You don't have to be a programmer or techie to invest in crypto, but you should first learn the basics of how it functions. I find that this video by 3Blue1Brown is the best introduction to what a blockchain actually is and how it functions, because it explains it clearly and simply with visuals while not dumbing it down too much. If you want a more ELI5 version with cute cartoons, then Upfolio has a nice beginner's intro to the blockchain concept and quick descriptions of top 100 cryptocurrencies. I also recommend simply going to Wikipedia and reading the blockchain and cryptocurrency page and clicking onto a few links in, read about POS vs POW...etc. Later on you'll need this information to understand why a specific use case may or may not benefit from a blockchain structure. Here is a quick summary of the common terms you should know.
Next you should arm yourself with some informational resources. I compiled a convenient list of useful tools and sites that I've used and find to be worthy of bookmarking:
Market information
Analysis tools
Portfolio Tracking
Youtube
I generally don't follow much on Youtube because it's dominated by idiocy like Trevon James and CryptoNick, but there are some that I think are worthy of following:

Constructing a Investment Strategy

I can't stress enough how important it is to construct an actual investment strategy. Organize what your goals are, what your risk tolerance is and how you plan to construct a portfolio to achieve those goals rather than just chasing the flavor of the week.
Why? Because it will force you to slow down and make decisions based on rational thinking rather than emotion, and will also inevitably lead you to think long term.

Setting ROI targets

Bluntly put, a lot of young investors who are in crypto have really unrealistic expectations about returns and risk.
A lot of them have never invested in any other type of financial asset, and hence many seem to consider a 10% ROI in a month to be unexciting, even though that is roughly what they should be aiming for.
I see a ton of people now on this sub and on other sites making their decisions with the expectation to double their money every month. This has lead a worrying amount of newbies putting in way too much money way too quickly into anything on the front page of CoinMarketCap with a low dollar value per coin hoping that crypto get them out of their debt or a life of drudgery in a cubicle. And all in the next year or two!
But its important to temper your hype about returns and realize why we had this exponential growth in the last year. The only reason we saw so much upward price action is because of fiat monetary base expansion from people FOMO-ing in due to media coverage. People are hoping to ride the bubble and sell to a greater fool in a few months, it is classic Greater Fool Theory. That's it. Its not because we are seeing any mass increase in adoption or actual widespread utility with cryptocurrency. We passed the $1,000 psychological marker again for Bitcoin which we hadn't seen since right before the Mt.Gox disaster, and it just snowballed the positivity as headline after headline came out about the price growth. However those unexciting returns of 10% a month are not only the norm, but much more healthy for an alternative investment class. Here are the annual returns for Bitcoin for the last few years:
Year BTC Return
2017 1,300%
2016 120%
2015 35%
2014 -60%
2013 5300%
2012 150 %
Keep in mind that a 10% monthly increase when compounded equals a 313% annual return, or over 3x your money. That may not sound exciting to those who entered recently and saw their money go 20x in a month on something like Tron before it crashed back down, but that 3X annual return is better than Bitcoin's return every year except the year right before the last market meltdown and 2017. I have been saying for a while now that we are due for a major correction and every investor now should be planning for that possibility through proper allocation and setting return expectations that are reasonable.
How to set a realistic ROI target
How do I set my own personal return target?
Basically I aim to achieve a portfolio return of roughly 385% annually (3.85X increase per year) or about 11.89% monthly return when compounded. How did I come up with that target? I base it on the average compounded annual growth return (CAGR) over the last 3 years on the entire market:
Year Total Crypto Market Cap
Jan 1, 2014: $10.73 billion
Jan 1, 2017: $615 billion
Compounded annual growth return (CAGR): (615/10.73)1/3 = 385%
My personal strategy is to sell my portfolio every December then buy back into the market at around the beginning of February and I intend to hold on average for 3 years, so this works for me but you may choose to do it a different way for your own reasons. I think this is a good average to aim for as a general guideline because it includes both the good years (2017) and the bad (2014). Once you have a target you can construct your risk profile (low risk vs. high risk category coins) in your portfolio. If you want to try for a higher CAGR than about 385% then you will likely need to go into more highly speculative picks. I can't tell you what return target you should set for yourself, but just make sure its not depended on you needing to achieve continual near vertical parabolic price action in small cap shillcoins because that isn't sustainable.
As the recent January dip showed while the core cryptos like Bitcoin and Ethereum would dip an X percentage, the altcoins would often drop double or triple that amount. Its a very fragile market, and the type of dumb behavior that people were engaging in that was profitable in a bull market (chasing pumps, going all in on a microcap shillcoin, having an attention span of a squirrel...etc) will lead to consequences. Just like they jumped on the crypto bandwagon without thinking about risk adjusted returns, they will just as quickly jump on whatever bandwagon will be used to blame for the deflation of the bubble, whether the blame is assigned to Wall Steet and Bitcoin futures or Asians or some government.
Nobody who pumped money into garbage without any use case or utility will accept that they themselves and their own unreasonable expectations for returns were the reason for the gross mispricing of most cryptocurrencies.

Risk Management

Quanitifying risk in crypto is surprisingly difficult because the historical returns aren't normally distributed, meaning that tools like Sharpe Ratio and other risk metrics can't really be used as intended. Instead you'll have to think of your own risk tolerance and qualitatively evaluate how risky each crypto is based on the team, the use case prospects, the amount of competition and the general market risk.
You can think of each crypto having a risk factor that is the summation of the general crypto market risk (Rm) as ultimately everything is tied to how Bitcoin does, but also its own inherent risk specific to its own goals (Ri).
Rt = Rm +Ri
The market risk is something you cannot avoid, if some China FUD comes out about regulations on Bitcoin then your investment in solid altcoin picks will go down too along with Bitcoin. This (Rm) return is essentially what risk you undertake to have a market ROI of 385% I talked about above. What you can minimize though is the Ri, the aset specific risks with the team, the likelihood they will actually deliver, the likelihood that their solution will be adopted. Unfortunately there is no one way to do this, you simply have to take the time to research and form your own opinion on how risky it really is before allocating a certain percentage to it. Consider the individual risk of each crypto and start looking for red flags:
  • guaranteed promises of large returns (protip: that's a Ponzi)
  • float allocations that give way too much to the founder
  • vague whitepapers
  • vague timelines
  • no clear use case
  • Github with no useful code and sparse activity
  • a team that is difficult to find information on or even worse anonymous
While all cryptocurrencies are a risky investments but generally you can break down cryptos into "low" risk core, medium risk speculative and high risk speculative
  • Low Risk Core - This is the exchange pairing cryptos and those that are well established. These are almost sure to be around in 5 years, and will recover after any bear market. Bitcoin, Litecoin and Ethereum are in this class of risk, and I would also argue Monero.
  • Medium Risk Speculative - These would be cryptos which generally have at least some product and are reasonably established, but higher risk than Core. Things like ZCash, Ripple, NEO..etc.
  • High Risk Speculative - This is anything created within the last few months, low caps, shillcoins, ICOs...etc. Most cryptos are in this category, most of them will be essentially worthless in 5 years.
How much risk should you take on? That depends on your own life situation but also it should be proportional to how much expertise you have in both financial analysis and technology. If you're a newbie who doesn't understand the tech and has no idea how to value assets, your risk tolerance should be lower than a programmer who understand the tech or a financial analyst who is experienced in valuation metrics.
Right now the trio of BTC-ETH-LTC account for 55% of the market cap, so between 50-70% of your portfolio in low Risk Core for newbies is a great starting point. Then you can go down to 25-30% as you gain confidence and experience. But always try to keep about 1/3rd in safe core positions. Don't go all in on speculative picks.
Core principles to minimize risk
  • Have the majority of your holdings in things you feel good holding for at least 2 years. Don't use the majority of your investment for day trading or short term investing.
  • Consider using dollar cost averaging to enter a position. This generally means investing a X amount over several periods, instead of at once. You can also use downward biased dollar cost averaging to mitigate against downward risk. For example instead of investing $1000 at once in a position at market price, you can buy $500 at the market price today then set several limit orders at slightly lower intervals (for example $250 at 5% lower than market price, $250 at 10% lower than market price). This way your average cost of acquisition will be lower if the crypto happens to decline over the short term.
  • Never chase a pump. Its simply too risky as its such an inefficient and unregulated market. If you continue to do it, most of your money losing decisions will be because you emotionally FOMO-ed into gambling on a symbol.
  • Invest what you can afford to lose. Don't have more than 5-10% of your net worth in crypto.
  • Consider what level of loss you can't accept in a position with a high risk factor, and use stop-limit orders to hedge against sudden crashes. Set you stop price at about 5-10% above your lowest limit. Stop-limit orders aren't perfect but they're better than having no hedging strategy for a risky microcap in case of some meltdown. Only you can determine what bags you are unwilling to hold.
  • Diversify across sectors and rebalance your allocations periodically. Keep about 1/3rd in low risk core holdings.
  • Have some fiat in reserve at a FDIC-insured exchange (ex. Gemini), and be ready to add to your winning positions on a pullback.
  • Remember you didn't actually make any money until you take some profits, so take do some profits when everyone else is at peak FOMO-ing bubble mode. You will also sleep much more comfortably once you take out the equivalent of your principal.

Portfolio Allocation

Along with thinking about your portfolio in terms of risk categories described above, I really find it helpful to think about the segments you are in. OnChainFX has some segment categorization but I generally like to bring it down to:
  • Core holdings - essentially the Low Risk Core segment
  • Platform segment
  • Privacy segment
  • Finance/Bank settlement segment
  • Enterprise Blockchain solutions segment
  • Promising/Innovative Tech segment
This is merely what I use, but I'm sure you can think of your own. The key point I have is to try to invest your medium and high risk picks in a segment you understand well, and in which you can relatively accurately judge risk. If you don't understand anything about how banking works or SWIFT or international settlement layers, don't invest in Stellar. If you have no idea how a supply chain functions, avoid investing in VeChain (even if it's being shilled to death on Reddit at the moment just like XRB was last month).
What's interesting is that often we see like-coin movement, for example when a coin from one segment pumps we will frequently see another similar coin in the same segment go up (think Stellar following after Ripple).
Consider the historic correlations between your holdings. Generally when Bitcoin pumps, altcoins dump but at what rate depends on the coin. When Bitcoin goes sideways we tend to see pumping in altcoins, while when Bitcoin goes down, everything goes down.
You should set price targets for each of your holdings, which is a whole separate discussion I'll go in Part 2 of the guide.

Summing it up

This was meant to get you think about what return targets you should set for your portfolio and how much risk you are willing to take and what strategies you can follow to mitigate that risk.
Returns around 385% (average crypto market CAGR over the last 3 years) would be a good target to aim for while remaining realistic, you can tweak it a bit based on your own risk tolerance. What category of risk your individual crypto picks should be will be determined by how much more greed you have for above average market return. A portfolio of 50% core holdings, 30% medium risk in a sector you understand well and 20% in high risk speculative is probably what the average portfolio should look like, with newbies going more towards 70% core and only 5% high risk speculative.
Just by thinking about these things you'll likely do better than most crypto investors, because most don't think about this stuff, to their own detriment.
submitted by arsonbunny to CryptoMarkets [link] [comments]

We are averaging 2,000 new subs daily.

We just celebrated the 350,000 mark 5 days ago and today we are over 360,000. Nice to see this sub and the Bitcoin community in general growing this big and this fast.
If you are one of those many just coming in, welcome! I'm sure you'll find this place very interesting, fun and informative. We are here to help you to better understand what Bitcoin is and and how it works, and for ourselves to keep learning. This is my welcome post for newbies:
When you come asking when is a good time to buy, the answer is: Buy now, always Hodl in FUD times (Bitcoin has "died" many times, but Moneybadger don't care, buy the dips and never panic-sell, stuff like: "China ban Bitcoin...again!" will keep happening again and again.
Here's Bitcoin's response to Jamie Dimon. Stick to the real Bitcoin through all the 'forks' and 'splits' that accomplish nothing but new mediocre, unsafe and centralized altcoins, strengthen/immunize Bitcoin and give you free altcoins to buy more Bitcoin.
All Central Powers look silly trying to control or ban it. Learn from history and listen to this absolute Boss. There will never be enough Bitcoin for every existing millionaire to own just ONE SINGLE BITCOIN, Total number of millionaires (in USD value) worldwide is around 33 million. Get one while you still can.
Also relax, you are actually an early adopter if you start investing today, mentally prepare yourself for healthy and expected market volatility/dips/corrections/"crashes" (check out this amazing 'Corrections Trends Perspective') and remember all this regarding Bitcoin investment:
Never try to time the market. Dollar cost average by buying what you can afford to lose every week.
It is always a good time to buy Bitcoin if you are hodling long term and not just for day trading, so this is a great strategy. Remember that Bitcoin has practically been up most of the time, and the road to the moon is paved with minor corrections (Bitcoin is never really "down" when you zoom-out).
Everybody parroting: "The bitcoin bubble is about to pop" since 2009, don't know that bitcoin is a decentralized system with mathematically fixed, deflatioary and limited supply currency and its growth is exponential.
So is not farfetched to say that it will be at 100,000 by 2020, since it came from less than $1 to $5,000 in less than 10 years, and it hasn't even hit the bottom part of the exponential 'S-Curve' of adoption. Check out this great 2017 MIT study: "The Cryptocurrency Market Is Growing Exponentially". Patience pays, don't listen to the "Expert Analysts on MSM".
Bitcoin is a Moneybadger that get's stronger and immunized with every new attack and this broad picture of its price since infancy (1 year candles on a logarithmic scale) shows Bitcoin growth is not in a "bubble" right now. Learn the difference between Inflation (dollar) and Deflation (Bitcoin) and just take a look at the fiat >20 trillion (and growing fast) debt clock to get a visual shock of unlimited fiat supply (vs limited Bitcoin/Gold supply).
Bitcoin has outperformed every other currency, commodity, stock and asset since its inception in 2009: "2017: Bitcoin Beats Stocks, Bonds, And Gold, Again”. Bitcoin, the Moneybadger, is the first unseizable store of value in human history, unlike gold, equities, or fiat, it can't be confiscated if stored correctly. How banks think blockchain will disrupt their industry.
Also, remember its fixed, limited supply of 21 million coins ever, there are just ~4.5 million (~20%) bitcoins left to be mined till 2140 and the production will keep decreasing ("halving") every 4 years till then. So, remember this and don't wait for the Bitcoin "bubble" to burst or for the price to drop significantly again, because you could be waiting forever:
“The best time to buy bitcoin was a few years ago, the second best time is always now”.
Don't be -- this guy
Here is a good start:
"Introduction to Bitcoin" - Andreas Antonopoulos
Playlists on Andreas own YT channel
Check out this great articles:
"What Gave Bitcoin Its Value?"
"How do Bitcoins have value?"
"Yes, Cryptocurrencies are Valuable"
ELI5: BITCOIN
How to buy Bitcoin?
Where to buy Bitcoin list
Excellent "Crypto 101" by stos313)
Where to use Bitcoin list by Bitcoin-Yoda
Starter Guide "Bitcoin Complete And Ultimate Guide".
Who accepts Bitcoin? List of Companies, Stores, Shops.
Bitcoin is a worldwide-distributed decentralized peer-to-peer censorship-resistant trustless and permissionless deflationary system/currency (see Blockchain technology) backed by mathematics, open source code, cryptography and the most powerful and secure decentralized computational network on the planet, orders of magnitude more powerful than google and government combined. There is a limit of 21 million bitcoins (divisible in smaller units). "Backed by Government" money is not backed by anything and is infinitely printed at will by Central Banks. Bitcoin is limited and decentralized.
Receive and transfer money, from cents (micropayments) to thousands:
And that’s just as currency, Bitcoin has many more uses and applications.
Edit: Fixed some non-working links and added new ones.
submitted by readish to Bitcoin [link] [comments]

[Saturday, March 23 2019] Over 1 million march in London for a second referendum; Tyrannosaurus rex found in Canada is world's biggest; Royal Navy officer caught on tape: “no such thing as mental health”; AT&T’s “5G E” is actually slower than Verizon and T-Mobile 4G, study finds

/worldnews

/news

/science

  • Thorne-ZytkowObject
    Scientists studied a "super-smeller" who claimed to smell Parkinson’s disease. In a test, she smelled patients clothes and flagged just one false positive - who turned out to be undiagnosed. The study identified subtle volatile compounds that may make it easier for machines to diagnose Parkinson's.
    Comments || Link
  • mvea
    Teens and young adults who seek solitude may know what's best for them, research suggests (n=979). Despite stigma, solitude doesn't have to be problematic. Chosen solitude may contribute to personal growth and self-acceptance, and lead to self-reflection, creative expression, or spiritual renewal.
    Comments || Link
  • MiamiPower
    Car crash ER visits fell in states that ban texting while driving, study says
    Comments || Link

/space

  • RocketRundown
    Slow-motion footage of a Space Shuttle launch set to the beautiful Hans Zimmer Interstellar music
    Comments || Link

/technology

/Futurology

  • Wagamaga
    Following Monsanto, Exxon Could Be Next US Corporation to Face EU Lobby Ban. "It is the overwhelming consensus of experts studying the history of fossil fuel funding that companies, including ExxonMobil, have orchestrated, funded and perpetuated climate misinformation"
    Comments || Link

/business

/stocks

  • coolcomfort123
    Video-conferencing company Zoom files to go public with over $300 million in revenue — and it's even profitable
    Comments

/AskHistorians

  • bodombeachbod
    What's the history of iced coffee in the United States? A 1959 episode of the Twilight Zone caught me off guard when an "Iced Coffee" sign appeared behind the clerk.
    Comments

/AskReddit

  • Piperjamas
    Doctors of Reddit, what is a 1 in a million chance thing about your patient you have witnessed?
    Comments
  • sgtdogface
    Teachers of Reddit, when can you tell if a student is going through depression or self-loathing? If so, what do you try to do to help?
    Comments

/todayilearned

  • IHad360K_KarmaDammit
    TIL that when 13-year-old Ryan White got AIDS from a blood donor in 1984, he was banned from returning to school by a petition signed by 117 parents. An auction was held to keep him out, a newspaper supporting him got death threats, and his family left town when a gun was fired through their window.
    Comments || Link
  • MikkoTheMan
    TIL that all main actors in the movie Saving Private Ryan apart from Matt Damon were required to undergo military training. This was done so the remaining cast would build up genuine resentment for his character.
    Comments || Link

/IAmA

  • Hero_Prinny
    I'm a hearing student attending the only deaf university in the world. Ask me anything! 😃
    Comments

/explainlikeimfive

/food

/Baking

  • whit_knees
    Cheeseburger macarons I made for a themed dinner at a friend’s restaurant 🍔
    Comments || Link

/movies

  • BunyipPouch
    The grave of French film pioneer Georges Méliès, who inspired Martin Scorsese’s 2011 film Hugo, has fallen into disrepair. Now his family and fans are reanimating his fantastical legacy and launching a Kickstarter to restore it to its former splendor and protect it from further decay
    Comments || Link

/sports

/gaming

/television

/Art

/OldSchoolCool

/pics

/gifs

/educationalgifs

/mildlyinteresting

/interestingasfuck

/MostBeautiful

/aww

/Awwducational

  • deathakissaway
    Seagulls stomping on grass is called, the rain dance. This mimics rain by vibration, and brings earthworms and other bugs to surface.
    Comments || Link

Something New

Everyday we’ll feature a selected small subreddit and its top content. It's a fun way to include and celebrate smaller subreddits.

Today's subreddit is...

/birdstakingthetrain

Its top 3 all time posts
submitted by kaunis to tldr [link] [comments]

ELi5/AMA Cryptocurrency & Mining Thread

Based upon interest shown in my post here earlier today, the following is a ELi5 and AMA post on my perspective as a cryptocurrency investor and miner, specifically how I see the cryptocurrency space impacting AMD's performance in the near to medium term (0-3 years).
My Background:
I am not a computer scientist, and many on this form know significantly more than I ever will in regards to computing, computing hardware design, and software. Take this into consideration when reading my post, and feel free to open up discussion if you disagree with me. I am always looking to learn / assess new perspectives.
I do though have a background in STEM, until recently have followed AMD, Intel, and NVIDIA closely in regards to consumer and enthusiast hardware release, and have been mining Ethereum on a hand-built machine for roughly the past year, and investing in crypto for a decent amount of time as well. Given this, I believe that I can provide insight into the cryptocurrency and crypto mining realm, which is tightly coupled to AMD's GPU sales.
My Motivation for Writing This:
About a year ago I was a daily browser of this sub. Check my profile history if you wish. It was this very sub that gave me confidence to make my first investments outside of a 401k. Through this sub’s members I laid a foundation for making future investments that I will carry with me through life.
How I Got Started In Cryptocurrency:
Ironically, my start in cryptocurrency came through this very sub. As a daily follower of AMD_STOCK, during the initial Ethereum run-up early last year AMD and NVIDIA GPU’s were selling like hotcakes. Prices for GPU’s released months prior were rising instead of falling. I had no clue what a cryptocurrency even was. I distinctly remember reading through a post on this sub explaining the GPU shortage. It was simply “Ethereum”. I don’t know why, but this post struck me more than it should have. How could a shortage of hundreds of thousands of GPUs, totaling millions of dollars, be summed up in one word? This was the entrance to the rabbit whole that is cryptocurrency, or what I think is more telling, the financial and supply chain tech revolution.
Cryptocurrency Eli5:
Cryptocurrency is currently so much more than Bitcoin. Cryptocurrency is currently the financial, supply chain, + whatever else it ends up touching, technology revolution that is currently taking place as we speak. Cryptocurrency simply is a set of protocols that allow monetary/data transaction, smart contracts (think “if a, do b”), and/or storage in a distributed and trustless way, without a middle man.
Eli5:
It is a system that allows you and little Johnny from down the street to pay each other allowance money for things, without your mommies needing to get involved to make sure no one is getting cheated (Peer to Peer Payments). It can also allow you and Johnny to make deals with each other, and Johnny won’t be able to get out of it by saying “just kidding” later on (Smart Contracts). In both of these cases, you and Johnny write down the agreed upon payment, deal, information on a piece of paper, sign your names, and then send it out to everyone you know. Once those people recognize your and Johnny’s signature they sign it as well (distributed ledger). If there are any disagreements later, you look at the piece of paper and see what actually happened. For much more detail, visit cryptocurrency or some of the other cryptocurrency subs.
Proof of Work (PoW) vs Proof of Stake (PoS):
I had talked previously about handing out a copy of transactions to other peers for consensus. I was referring to a distributed ledger. This allows those who use the network to look over previous transactions and come to an agreement upon past history, avoid double spends (someone giving the same dollar to two different people), and verify a user’s current funds. Well, it doesn’t exactly work like that, and different cryptocurrencies employ different “consensus mechanism’s”. IT IS THESE CONSENSUS MECHANISMS THAT ARE OF IMPORTANCE AS AMD INVESTORS. I’ll try to go through the most prominent ones below.
Consensus Mechanisms:
Eli5: They solve the question: What if you and Johnny both hand out copies containing different information? Who decides what the truth is?
Proof of Work (PoW): Eli5: Proof of Work is like if you and Johnny hand out copies of your transactions to each of your classmates, the teacher decides that this isn’t a democracy, and that not everyone gets to vote on what they think happened. The teacher says that for each math problem in today’s math quiz a student gets right, they get one vote to put in the jar up at the front of the class. After the quiz is done and everyone puts their votes in the jar, the teacher then reaches in and grabs a random vote on if you or Johnny were telling the truth. It is then recorded. Also, the student’s who’s vote was selected gets a gold star today (mining rewards, what makes this all profitable for miners). How is AMD involved in this? AMD’s GPU’s are what solves the math problems for the students in this example. The more math problems that they can solve correctly before the quiz is over, the higher chance that they have at getting to decide what is recorded on the ledger, and thus receive mining rewards (free cryptocurrency).
Proof of Stake (PoS):
Eli5: Well the teacher decided that she didn’t like doing math tests anymore because they took too much time and thought that the paper and pencils consumed during the quiz’s were a waste of the school’s resources (electricity used in PoW). She decided that instead, each student would get one vote based upon how many gold stars (how much cryptocurrency) they already have. But the catch is, if a student is caught lying somehow on their vote, they get all of their current gold stars taken away. This is what is “At Stake” in the Proof of Stake model. How does this differ from PoW from an AMD perspective? Well, if you haven’t noticed, there are no more math problems to be solved in this model, thus high-performance GPUs are not necessary for PoS mining. This provides several advantages in terms of energy savings, but would not be good for AMD’s sales.
The Current State of The Market in Regards to PoW vs PoS:
Currently, a majority of cryptocurrencies operate on the PoW model, but that ratio is dwindling as currencies switch over to PoS models. PoS is seen to provide several advantages, with major ones being energy efficiency and a potential reduced transaction time. Major cryptocurrencies using PoW include Ethereum, Monero, Zcash, etc.. with the most profitable over the past year usually being Ethereum. Ethereum is currently planning on switching over to a PoS model, but that transition has been delayed, and now has planned to first transition to a hybrid model of PoW and PoS before fully transferring over to PoS. I have not heard any rumors from Monero or Zcash about transitioning over to PoS in the short term.
My Perspective/Predictions on AMD GPU Sales Over the Short and Medium Term:
  1. Cryptocurrency over the medium term will continue to flourish/rise. There may be a major “crash” in the future, but I believe that is at least a year away, and a crash event would still leave the total market cap higher than it currently is valued at ~600 Billion dollars.
  2. It will be 1+ year before a significant portion of current major PoW currencies phase out PoW for PoS.
  3. AMD will continue to sell out GPU products for the foreseeable future (~1 year) as 1 & 2 above create a recipe for sustained/increased profitability in cryptocurrency mining.
  4. Long Term – PoW will likely fade away as PoS grows in popularity. I foresee this happening in the 1-3 year time frame. What happens to AMD? Well, if the transition happens fast, gaming GPUs will flood the market and their new hardware sales will obviously be challenged to compete. If the transition happens slower, I see the trend being less violent to AMD as a company if they can keep performance improvements from generation to generation up. Although there will still be a flood of cheap used hardware on the market, before sufficient hardware floods the market new higher performance hardware could be released making old hardware obsolete for mid to high end gamers. This would be a huge win for AMD investors as it would minimize any impact to sales.
  5. Because of the statement above, pay close attention to the PoS transition timeframe for Ethereum. This will be the first mass selloff of consumer GPUs.
Things I did not Cover:
  1. AMD GPUs are typically more profitable than NVIDIA’s for cryptocurrency mining and why.
  2. You cannot mine Bitcoin with consumer GPUs profitably. They require custom hardware (ASIC).
  3. Getting into the actual process of how to mine (see the many Ethereum mining subs like ethermining for answers).
  4. Have I made a profit – Yes, I have paid off my investment and then some.
  5. What do I think of mining vs just investing – Okay I’ll answer this one. I personally would choose to invest directly into the cryptocurrencies over mining, unless you are using your existing gaming GPU, as I believe that investing will yield potentially an order of magnitude higher ROI over the next 2-5 years. Start with cryptocurrency and go from there. If you have specific questions, feel free to PM me. This is coming from a miner mind you.
  6. What coins are profitable and what to mine? This website is a good resource: https://whattomine.com/
  7. My exit plan for the market? Well, I’ve stated above that I think a major crash (greater than 50%, we see 50% crashes every 3 or so months, but these are often largely exceeded by gains after) in this market will likely dip to current or slightly below current total market cap. I could be wrong though, but that’s a risk I am willing to take given my deep dive on this space. I currently hold currencies that will pay PoS mining rewards. I plan to sell these rewards.
Thanks for reading guys. I hope you found some useful information. If you have questions or see anything you disagree with feel free to comment!
TLDR: I see cryptocurrency, cryptocurrency mining, and thus AMD GPU sales holding strong for the foreseeable short term ~1 year. This is just my opinion, do your own research, I could be wrong, but I live in this space.
submitted by Usrname_Not_Relevant to AMD_Stock [link] [comments]

Bitcoin Madness: How to Simulate Bitcoin Prices in Google Sheets

Original Medium post can be found here: https://medium.com/@spreadstreet/bitcoin-madness-how-to-simulate-bitcoin-prices-in-google-sheets-c61cb42f26ed
You know the scenario...
Bitcoin had another huge increase, but you missed the opportunity. You wanted to get in, but your gut instinct told you no. And rightfully so...no one knows where the price is going to go. What if you invested, and it had another 20% loss? These sort of price movements are common in the volatile world of cryptocurrencies.
Seriously...how far can this Bitcoin price really go?

BITCOIN IS A VOLATILE BEAST

Risk analysis must be a part of every decision you make.
You are constantly faced with uncertainty, ambiguity, and variability. Variability, in the case of Bitcoin, unlike anything we have ever seen before. And even though we have unprecedented access to information, we can’t accurately predict the future.
Luckily, we have methods that enable you to see all the possible outcomes of your decisions, and assess the impact of risk.

WHERE TO START?

Running simulations can prepare us for the worst.
Monte Carlo simulation (also known as the Monte Carlo Method) allows for better decision making under uncertainty.
One of the most common ways to estimate risk is the use of a Monte Carlo simulation (MCS). From Investopedia:
For example, to calculate the value at risk (VaR) of a portfolio, we can run a Monte Carlo simulation that attempts to predict the worst likely loss for a portfolio given a confidence interval over a specified time horizon - we always need to specify two conditions for VaR: confidence and horizon. (For related reading, see The Uses And Limits Of Volatility and Introduction To Value At Risk (VAR) - Part 1 and Part 2.)
A MCS can be run with many different models. Our own process will be:
  1. Specify a model (for here, we will use geometric Brownian motion)
  2. Get historical daily bitcoin prices
  3. Calculate daily returns
  4. Name the daily return range
  5. Summary statistics
  6. Simulate a year
  7. Simulate a year many times
  8. Multi-year summary statistics
  9. Quick analysis of results

STEP 1. WTF IS GEOMETRIC BROWNIAN MOTION?

The geometric Brownian motion (GBM) is a statistical method that is used heavily in the forecasting of stock prices. The reason the process is so attractive for this is because of the following:
The GBM is technically a Markov process, which is a fancy way of saying "A random process whose future probabilities are determined by its most recent values." Said another way, past price information is already incorporated and the next price movement is "conditionally independent" of past price movements.
Math geeks have a habit of making things infinitely more complicated than they have to be. I will do my best to make this as simple as possible.
The formula for GBM is as follows:
gBm formula
Where:
This formula can be broken down into two very important terms: "drift" and "shock".
For each time period, our model assumes the price will "drift" up by the expected return. But the drift will be shocked (added or subtracted) by a random shock. The random shock will be the standard deviation "s" multiplied by a random number "e". This is simply a way of scaling the standard deviation.

STEP 1A. THE THUNDER GOD ELI5

The ELI5 version: The thunder god Zeus is a great god. A just god.
But Zeus is subject to wild mood swings.
Every day Zeus can shoot his magic lightning into the price of Bitcoin, and cause it to go up or down.
Some days he is in such a good mood, that he shocks the price up by a random amount. On other days, he is in such a poor mood that he shocks the price down for opposing him.
Zeus Striking Down the Price
And thus, we have the essence of GBM: a series of steps with an expected upward drift, where each step is hit with a plus/minus shock (which is a function of the stock's standard deviation).

STEP 2. HISTORICAL DAILY BITCOIN PRICES

Copy the raw data scores from coinmarketcap. Paste the data into your own spreadsheet.
For this exercise, your columns will be: Time, Open, Close, High, Low, Volume.
Columns Setup OHLCV
Want to automatically pull in Bitcoin prices? Use the Spreadstreet Google Sheets Add-in.

STEP 3. CALCULATE DAILY RETURNS

Calculate daily returns from the "Close" price. in H2 put the formula:
=LN(C2/B2) 
Drag it all the way down to the end of the prices to fill the entire Returns column
Calculate Daily Returns

STEP 4. NAME THE DAILY RETURNS RANGE

Create a named range from the returns column, called returns, to make our life easier. Highlight all the data in column H, i.e. cells H1:H1000, then click on the menu Data > Named ranges… and call the range returns:
Name the range returns

STEP 5. SUMMARY STATISTICS

Set up a small summary table with the close, daily volatility, annual volatility, daily drift, annual drift, and mean drift of our population. The formulas are:
In K1, enter:
=C2 
and name it close.
In K2, enter:
=STDEV(returns) 
and name it dailyVolatility
In K3, enter:
=dailyVolatility*SQRT(365) 
and name it annualVolatility
In K4, enter:
=AVERAGE(returns) 
and name it dailyDrift
In K5, enter:
=dailyDrift*365 
and name it annualDrift
In K6, enter:
=dailyDrift-0.5*dailyVolatility^2 
and name it meanDrift
Create Summary Statistics Table

STEP 6. SIMULATE A YEAR

Setup the yearly simulation table with Time, Normdist, Log Return, and Simulated Price

Time

In J12 put 0, and in J13 put:
=J12+1 
Drag it all the way down to your preferred forecast timeframe. Here I simulated a year (365 days), so I copied down to J377
Time

Normdist

Let’s set up the normal distribution curve values.
Google Sheets has a formula NORMDIST which calculates the value of the normal distribution function for a given value, mean and standard deviation. Since we ascribe to the random walk theory, we want to use a mean of 0, and a standard deviation of 1.
In K13, put the formula:
=NORMINV(RAND(),0,1) 
Drag it all the way down to K377 to fill the whole Normdist column:
Normdist

Log Return

To get the percentage of daily stock movement, we will calculate log return.
In L13, put the formula:
=meanDrift+dailyVolatility*K13 
Copy the formula all the way down to L377:
Log Return

Simulated Price

Now to the real meat. Let's calculate the simulated Bitcoin price.
In M12 put the Close price, and in M13, put:
=M12*EXP(L13) 
Copy the formula all the way down to M377:
Simulated Price

Forecasted Bitcoin price for one year

Let's see what the pricing data looks like.
Select from M12 to M377, then Insert - Chart and select line chart:
Simulated Price for One Year
We have now successfully completed one simulation. And depending on your results, they could look normal...or downright crazy.

STEP 7. SIMULATE A YEAR MANY TIMES

We completed one simulation, but we want to run many different trials.
Create a scenario tab, setup a table to simulate 1,000 different one-year trials. In A3 to A1003, put the numbers 1 through 1000.
In B3, put the formula:
=Close*EXP((annualDrift-0.5*annualVolatility^2)+annualVolatility*norminv(rand(),0,1)) 
Copy the formula down all the way. Name this range "scores":
Simulate Bitcoin Prices for Many Years

STEP 8. MULTI-YEAR SUMMARY STATISTICS

Set up a small summary table with the mean, median, standard deviation, min, max, and range of our new population. The formulas are:
=AVERAGE(scores) =STDEVP(scores) =MIN(scores) =MAX(scores) =E6-E5 
Multiyear Summary Statistics

STEP 9. QUICK ANALYSIS OF RESULTS

My results will look different than yours (due to the random nature of NORMDIST and the time you pulled the Bitcoin prices). But let's take a look at the results:
Mean $27,147 Median $16,097 St. Dev $37,243 Min $556 Max $479,586 Range $479,029 3sd $1,486 2sd $3,005 1sd $5,850 Cur $16,098 1sd $43,896 2sd $81,998 3sd $190,129 
How to read: We can be 95% certain that the price of Bitcoin will fall between $3,005, and $81,998 in one year.
Wait really? Should I buy? No, this is not telling you to buy. This should be one tool of many to help you in your buying and risk decisions.
Lognormal Distribution of Bitcoin Prices

CONCLUSION

You now know how to complete a geometric Brownian motion analysis of Bitcoin prices. Congratulations!
Good statistical analysis methods can be scary, but they don't have to be. Here we covered off on a great method for estimating future Bitcoin prices, which can also be applied to other cryptocurrencies.
With this new tool in place, you can be confident in your risk analysis methods by seeing all the possible outcomes of your decisions, and assess the impact of risk.
Deliberate. Analytical. Intelligent.

WANT YOUR OWN COPY?

Simulate Bitcoin Prices Download

RELATED POSTS

High-Flyers and Shitcoins: What I Learned from Analyzing CoinMarketCap Data in Google Sheets
7 Smart Ethereum Price Prediction Methods for HODL’ers

About the Author

John Young is the founder of Spreadstreet, former financial analyst for a big-ass company, and runner-up in the 6th grade spelling bee. He would have invested in Google if he knew about it...and had any money.
He is the author of the Spreadstreet blog, which has over 3 readers (not a typo). He hopes to hit 10, but honestly writing is a lot of work.
submitted by 1kexperimentdotcom to BitcoinMarkets [link] [comments]

If I put my bitcoin into a bitcoin wallet, will the value still increase/decrease as if it was still on an exchange?

There is still a lot I don't understand about bitcoin wallets (and bitcoin in general).
I would like to invest money little by little and stay in for the long haul.
I see it is recommended to keep your bitcoin in an offline wallet. Again, don't quite understand how this works (I've read multiple ELI5 on this and still don't get it).
My main question, before I even consider putting any bitcoins in a wallet is, does the value of the bitcoin still rise/fall as if it were still on an exchange?
If I'm trying to accrue a profit, I don't want to take the money out of the exchange, right? Since bitcoin uses the term "wallet" to try to make it easier for people to grasp the concept, it doesn't make sense to me. If I have money in the stock market, and I make a profit, then I take that money and put it in a physical wallet in my pocket, it's no longer gaining any interest from that point forward. It's off the exchange and now in my pocket.
Does this work the same way?
submitted by PornKingOfChicago to BitcoinBeginners [link] [comments]

A Super Simple Cryptocurrency Arbitrage Spreadsheet (with ETH examples) for Finding Mismatched Prices

Crazy stat of the day: You can trade cryptocurrencies on over 170+ different exchanges throughout the world.
Compare this to the stock markets in the United States which have a whopping…2. You know them very well by now (NYSE and Nasdaq), but these markets have had decades of consolidation and mergers.
While this is not an apples-to-apples comparison, cryptocurrency exchange consolidation is a natural market force that will happen eventually.
However, we do not know if this will take months, years…or even decades.
The abundance of choices in exchanges presents a multitude of problems, one of which is a large distribution of prices across all platforms.

Many Exchanges Breeds Many Problems

New markets such as cryptocurrencies all experience the following problems:
  1. Transactional inefficiency
  2. Differences in prices
  3. Illiquidity
  4. Changing spreads
These problems exist due to imbalances in supply and demand. If there is a lack of sellers or buyers, the problems mentioned above are enhanced.
Complicating the matter even further, each pricing discovery process is silo’d within each different exchange.
Smart arbitragers recognize this as an opportunity, and they specifically hone in on #2: Differences in prices.
When buyers are able to capitalize on differences in prices between markets, this is known as arbitrage.

The ELI5 Version of Crypto Arbitrage

ELI5 Version of Crypto Arbitrage
You have been following the price of a certain coin (we will just call it “coin” for this example) for a while.
One day while looking at prices, you noticed that on exchange #1 the price of “coin” was trading at $95. Simultaneously at exchange #2, “coin” was trading at $100.
Being that you are a smart cookie, you decided to do the following:
  1. Buy 1 coin @ $95 on exchange #1
  2. Sell 1 coin @ $100 on exchange #2
  3. Profit $5 from the difference in price
The crazy thing is, these market inefficiencies in this super new industry are available every day. Wouldn’t it be nice if we had a tool that could spot these price differences easily?

The Solution

Screenshot of the arbitrage spreadsheet
I created a spreadsheet that aggregates coin prices across multiple exchanges for all of the top cryptocurrencies. The spreadsheet uses the following services:
  1. Spreadstreet Google Sheets Add-in
  2. Cryptonator API
  3. Google Sheets

How to Use the Spreadsheet

Quick gif on how the tool works
First time install
The tool is nice and simple to use. It requires about 2 minutes to setup, then after that you are good to go.
  1. Make of copy of the worksheet: Click here
  2. Install the Spreadstreet Google Sheets Add-in
  3. Follow the instructions and log-in to the add-in
  4. Formulas in the sheet should update
Changing the primary currency
Cell B7 houses the primary currency (aka, the BTC in BTC/USD). Cryptonator has a massive list of currencies, but some of the more popular ones include BTC (Bitcoin), ETH (Ethereum) and LTC (Litecoin).
Changing the secondary currency
Cell C7 houses the secondary currency (aka, the USD in BTC/USD). Once again, Cryptonator has a massive list of secondary currencies, with the most popular being USD (United States Dollar) and EUR (Euro).

How to Read the Graph

The graph will list all the exchanges that Cryptonator currently has trade volume, based on the user’s pairing choice.
Spreadsheet graph
In this example, we are using the Ethereum vs. United States Dollar (ETH/USD) pairing.
Cryptonator currently tracks 10 different exchanges, all of which have their own price and volume statistics for ETH/USD.
Using this graph, a savvy investor (AKA you) could:
  1. Purchase ETH/USD at the Kraken exchange for $463.17
  2. Sell ETH/USD at the Cex.io exchange for $479.99
  3. For a potential profit of $16.82

The Pitfalls of Crypto Arbitrage

Of course you, being a savvy investor, know that nothing in life is this simple. This form of trading comes with it’s own pitfalls, and it would be irresponsible of me not to point them out.

Conclusion

Arbitrage is a classic technique in profiting off of assets, and cryptocurrency is no exception.
The large amount of exchanges present in the market creates unprecedented arbitrage opportunity, as each exchange carries it’s own pricing discovery mechanisms.
Take some time and download the cryptocurrency arbitrage tool I created, and see if you can uncover any inefficiencies currently in the market.
Cheers, and happy hunting
Original article found at: https://medium.com/@spreadstreet/a-super-simple-cryptocurrency-arbitrage-spreadsheet-for-finding-mismatched-prices-a6e8b12dd8b0

Download Now

Click here to download the spreadsheet

Resources

Download the add-in: https://spreadstreet.io/tools/google-sheets-add-in
Help: https://spreadstreet.io/docs
First time install and login: https://www.youtube.com/watch?v=aLjtPR4T2bg
Cryptonator Ticker endpoint help: https://spreadstreet.io/knowledge-base/cryptonator-api-complete-ticker-endpoint/

Related Posts

10 Statistical Price Predictions for 10 Cryptocurrencies
High-Flyers and Shitcoins: What I Learned from Analyzing CoinMarketCap Data in Google Sheets
7 Smart Ethereum Price Prediction Methods for HODL’ers
submitted by 1kexperimentdotcom to EthAnalysis [link] [comments]

Bitcoin Madness: How to Simulate Bitcoin Prices in Google Sheets

Original Medium post can be found here: https://medium.com/@spreadstreet/bitcoin-madness-how-to-simulate-bitcoin-prices-in-google-sheets-c61cb42f26ed
You know the scenario...
Bitcoin had another huge increase, but you missed the opportunity. You wanted to get in, but your gut instinct told you no. And rightfully so...no one knows where the price is going to go. What if you invested, and it had another 20% loss? These sort of price movements are common in the volatile world of cryptocurrencies.
Seriously...how far can this Bitcoin price really go?

BITCOIN IS A VOLATILE BEAST

Risk analysis must be a part of every decision you make.
You are constantly faced with uncertainty, ambiguity, and variability. Variability, in the case of Bitcoin, unlike anything we have ever seen before. And even though we have unprecedented access to information, we can’t accurately predict the future.
Luckily, we have methods that enable you to see all the possible outcomes of your decisions, and assess the impact of risk.

WHERE TO START?

Running simulations can prepare us for the worst.
Monte Carlo simulation (also known as the Monte Carlo Method) allows for better decision making under uncertainty.
One of the most common ways to estimate risk is the use of a Monte Carlo simulation (MCS). From Investopedia:
For example, to calculate the value at risk (VaR) of a portfolio, we can run a Monte Carlo simulation that attempts to predict the worst likely loss for a portfolio given a confidence interval over a specified time horizon - we always need to specify two conditions for VaR: confidence and horizon. (For related reading, see The Uses And Limits Of Volatility and Introduction To Value At Risk (VAR) - Part 1 and Part 2.)
A MCS can be run with many different models. Our own process will be:
  1. Specify a model (for here, we will use geometric Brownian motion)
  2. Get historical daily bitcoin prices
  3. Calculate daily returns
  4. Name the daily return range
  5. Summary statistics
  6. Simulate a year
  7. Simulate a year many times
  8. Multi-year summary statistics
  9. Quick analysis of results

STEP 1. WTF IS GEOMETRIC BROWNIAN MOTION?

The geometric Brownian motion (GBM) is a statistical method that is used heavily in the forecasting of stock prices. The reason the process is so attractive for this is because of the following:
The GBM is technically a Markov process, which is a fancy way of saying "A random process whose future probabilities are determined by its most recent values." Said another way, past price information is already incorporated and the next price movement is "conditionally independent" of past price movements.
Math geeks have a habit of making things infinitely more complicated than they have to be. I will do my best to make this as simple as possible.
The formula for GBM is as follows:
gBm formula
Where:
This formula can be broken down into two very important terms: "drift" and "shock".
For each time period, our model assumes the price will "drift" up by the expected return. But the drift will be shocked (added or subtracted) by a random shock. The random shock will be the standard deviation "s" multiplied by a random number "e". This is simply a way of scaling the standard deviation.

STEP 1A. THE THUNDER GOD ELI5

The ELI5 version: The thunder god Zeus is a great god. A just god.
But Zeus is subject to wild mood swings.
Every day Zeus can shoot his magic lightning into the price of Bitcoin, and cause it to go up or down.
Some days he is in such a good mood, that he shocks the price up by a random amount. On other days, he is in such a poor mood that he shocks the price down for opposing him.
Zeus Striking Down the Price
And thus, we have the essence of GBM: a series of steps with an expected upward drift, where each step is hit with a plus/minus shock (which is a function of the stock's standard deviation).

STEP 2. HISTORICAL DAILY BITCOIN PRICES

Copy the raw data scores from coinmarketcap. Paste the data into your own spreadsheet.
For this exercise, your columns will be: Time, Open, Close, High, Low, Volume.
Columns Setup OHLCV
Want to automatically pull in Bitcoin prices? Use the Spreadstreet Google Sheets Add-in.

STEP 3. CALCULATE DAILY RETURNS

Calculate daily returns from the "Close" price. in H2 put the formula:
=LN(C2/B2) 
Drag it all the way down to the end of the prices to fill the entire Returns column
Calculate Daily Returns

STEP 4. NAME THE DAILY RETURNS RANGE

Create a named range from the returns column, called returns, to make our life easier. Highlight all the data in column H, i.e. cells H1:H1000, then click on the menu Data > Named ranges… and call the range returns:
Name the range returns

STEP 5. SUMMARY STATISTICS

Set up a small summary table with the close, daily volatility, annual volatility, daily drift, annual drift, and mean drift of our population. The formulas are:
In K1, enter:
=C2 
and name it close.
In K2, enter:
=STDEV(returns) 
and name it dailyVolatility
In K3, enter:
=dailyVolatility*SQRT(365) 
and name it annualVolatility
In K4, enter:
=AVERAGE(returns) 
and name it dailyDrift
In K5, enter:
=dailyDrift*365 
and name it annualDrift
In K6, enter:
=dailyDrift-0.5*dailyVolatility^2 
and name it meanDrift
Create Summary Statistics Table

STEP 6. SIMULATE A YEAR

Setup the yearly simulation table with Time, Normdist, Log Return, and Simulated Price

Time

In J12 put 0, and in J13 put:
=J12+1 
Drag it all the way down to your preferred forecast timeframe. Here I simulated a year (365 days), so I copied down to J377
Time

Normdist

Let’s set up the normal distribution curve values.
Google Sheets has a formula NORMDIST which calculates the value of the normal distribution function for a given value, mean and standard deviation. Since we ascribe to the random walk theory, we want to use a mean of 0, and a standard deviation of 1.
In K13, put the formula:
=NORMINV(RAND(),0,1) 
Drag it all the way down to K377 to fill the whole Normdist column:
Normdist

Log Return

To get the percentage of daily stock movement, we will calculate log return.
In L13, put the formula:
=meanDrift+dailyVolatility*K13 
Copy the formula all the way down to L377:
Log Return

Simulated Price

Now to the real meat. Let's calculate the simulated Bitcoin price.
In M12 put the Close price, and in M13, put:
=M12*EXP(L13) 
Copy the formula all the way down to M377:
Simulated Price

Forecasted Bitcoin price for one year

Let's see what the pricing data looks like.
Select from M12 to M377, then Insert - Chart and select line chart:
Simulated Price for One Year
We have now successfully completed one simulation. And depending on your results, they could look normal...or downright crazy.

STEP 7. SIMULATE A YEAR MANY TIMES

We completed one simulation, but we want to run many different trials.
Create a scenario tab, setup a table to simulate 1,000 different one-year trials. In A3 to A1003, put the numbers 1 through 1000.
In B3, put the formula:
=Close*EXP((annualDrift-0.5*annualVolatility^2)+annualVolatility*norminv(rand(),0,1)) 
Copy the formula down all the way. Name this range "scores":
Simulate Bitcoin Prices for Many Years

STEP 8. MULTI-YEAR SUMMARY STATISTICS

Set up a small summary table with the mean, median, standard deviation, min, max, and range of our new population. The formulas are:
=AVERAGE(scores) =STDEVP(scores) =MIN(scores) =MAX(scores) =E6-E5 
Multiyear Summary Statistics

STEP 9. QUICK ANALYSIS OF RESULTS

My results will look different than yours (due to the random nature of NORMDIST and the time you pulled the Bitcoin prices). But let's take a look at the results:
Mean $27,147 Median $16,097 St. Dev $37,243 Min $556 Max $479,586 Range $479,029 3sd $1,486 2sd $3,005 1sd $5,850 Cur $16,098 1sd $43,896 2sd $81,998 3sd $190,129 
How to read: We can be 95% certain that the price of Bitcoin will fall between $3,005, and $81,998 in one year.
Wait really? Should I buy? No, this is not telling you to buy. This should be one tool of many to help you in your buying and risk decisions.
Lognormal Distribution of Bitcoin Prices

CONCLUSION

You now know how to complete a geometric Brownian motion analysis of Bitcoin prices. Congratulations!
Good statistical analysis methods can be scary, but they don't have to be. Here we covered off on a great method for estimating future Bitcoin prices, which can also be applied to other cryptocurrencies.
With this new tool in place, you can be confident in your risk analysis methods by seeing all the possible outcomes of your decisions, and assess the impact of risk.
Deliberate. Analytical. Intelligent.

WANT YOUR OWN COPY?

Simulate Bitcoin Prices Download

RELATED POSTS

High-Flyers and Shitcoins: What I Learned from Analyzing CoinMarketCap Data in Google Sheets
7 Smart Ethereum Price Prediction Methods for HODL’ers

About the Author

John Young is the founder of Spreadstreet, former financial analyst for a big-ass company, and runner-up in the 6th grade spelling bee. He would have invested in Google if he knew about it...and had any money.
He is the author of the Spreadstreet blog, which has over 3 readers (not a typo). He hopes to hit 10, but honestly writing is a lot of work.
submitted by 1kexperimentdotcom to CryptoMarkets [link] [comments]

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Bitcoin Daily View 03-09-20 Markets Trip Circuit Breakers ...

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