Last week I introduced a new Bitcoin (BTC-USD) (OTCQX: GBTC) (COIN) pricing model called the Bitcoin Z-Signal. This model is a work in progress and should be used with caution.
In order to provide more timely information, I have been working on a way to publish changes to this model daily. Up to now, I've been taking 48-hour samples, mostly because of the best data source. However, more recent data is now available on a daily basis. So I've changed the last year's data, which has increased the total size of our observation set.
We had 1,511 data points (a little over eight years of data, one sample every other day, limited by the first time at Bitcoin price was recorded). Now we have 1,693 data points.
I have come up with the idea. I was just excited about the concept, and with the market moving I thought people would find it useful.
There are certainly bugs that I will need to work out, kinks in the system etc. For example, just today I published the Z-Signal on Twitter and over on The Bitcoin Pub.
I have failed to notice that when I increased the observation set, the hash power P-value fell out of the acceptable range. I know I ended up publishing the paper with this error.
I have removed the hash power from the data set and re-run the multiple regression. The good news is that the R ^ 2 values are now slightly higher with the additional data. However, this has changed the high and low points of the Z-scores.
At any rate, here's the new chart.
Source: blockchain.com and author's charts
Because of the huge outlier at the end of 2010, it can be hard to see what's going on here. Let's zoom in on the last two years.
Source: blockchain.com and author's charts
There are a few things to note about this chart.
- With the inputs, the Z-scores hit 2.4 in the last bubble, in December of 2017. With the new data set, the last bubble came in at 1.214.
- Additionally, the Z-scores now show that we have dipped below zero several times already this year.
- The lowest Z-score this year occurred on Nov. 21, when the price dropped to $ 4,500 from $ 6,400 in just nine days. That reading was -0.0875.
- The price was set on February 15, 2015, when the price hit was $ 243.99 and the Z-score was -0.410.
It is important to note the lowest. It's just the lowest price related to the model's prediction.
It could be possible to use the Z-signal for short-term trading, However, a more cautious approach would be to look for the widest deltas and take a long-term approach.
However, I must reiterate that this is not "investment advice." I can use this and other metrics to make buying decisions. If the Z-Signal is part of your research, then I'm honored. Remember that it is still in the future (which could have impacted the historical problem).
If you would like to verify or replicate this process, you are more than welcome to. When I ran the regression analysis, this was the output.
Source: blockchain.com and author's excel
Decentralized, What Now?
This is a bit off topic, but there's a guy named Peter Saddington. Bitcoin Lambo Guy. "
Now, at first glance you might think this guy is kind of to "Bro." But, in reality, he's one of the hardest working people in the space. He has multiple Bitcoin / Crypto startups, several Master's degree … the guy is a machine. Oh, and he first bought Bitcoin at $ 2.00 (life goals).
Here are some of Peter's startups / businesses / sites:
I know, I was super honored when I responded to one of my recent articles.
Well, we did that interview and here it is. You'll have to forget my terrible video setup (and my face). If it was not for those two setbacks I think the interview would have been even better.
If you like the interview, drop a comment below and let me know.
I have published I'm published. Ideally, I'd like to be able to access this data and gain a basic understanding; while the more in-depth analysis of the models remains the premium service which is published here (along with my other articles).
I hope you have a good holiday weekend, and I also want to thank you for the support of the community.
This article was published first in Crypto Blue Chips.
disclosure: I am / we are long BTC-USD.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.