
Bitcoin Trading Agents [pdf] - tombell93
http://tombell93.co.uk/wp-content/uploads/2015/05/BitcoinTradingAgents.pdf
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chollida1
> Ciaian’s study develops an empirically estimable model of Bitcoin price,
> which accounts for supply and demand fundamentals, investors’ interest and
> macroeconomic development (1). p B t = β0 +β1pt +β2yt +β3vt +β4bt +β5at
> +β6mt +t (1) In this model at time t, p B t is the price of Bitcoin, pt is
> the general price of goods and services, yt is the size of the Bitcoin
> economy, vt is the velocity of the bitcoins in circulation, bt is the total
> stock of bitcoin in circulation, at captures Bitcoins attractiveness to
> investors, mt captures the global macroeconomic indicators, t is an error
> term and βi , i = 0, 1, ..., 6 are coefficients which weight each term.

Go ahead and trade bitcoin based on that formula, I dare you:)

It reminds me a bit too much of the drake equation
[https://en.wikipedia.org/wiki/Drake_equation](https://en.wikipedia.org/wiki/Drake_equation)

or maybe more appropriately this form of the drake equation:

[https://xkcd.com/384/](https://xkcd.com/384/)

I haven't gone through the referenced paper's but the below also seems a bit
dubious..

> Ciaian et al. found a high correlation (corr > 0.8) between the DJIA (Dow
> Jones Industrial Average) and the total stock of bitcoins and the size of
> the Bitcoin economy.

How these are so closely correlated eludes me but maybe the reference papers
will expand on this.

Having said all of that, the section 5 Factors unique to bitcoin is pretty
good. And considering the lack of literature on how to trade bitcoin it's nice
to see someone take the time to try and apply some rigor to the subject.

Hat's off to the author.

I haven't spend much time looking at it but the time I have spent show that it
does trade differently from a typical currency.

Sadly the Trading Bitcoin section doesn't contain alot of actionable code or
information but that hardly makes it unique in the world of trading.

~~~
johnloeber
Just looking at that multiple regression equation has alarm bells going off in
my head: "OVERFIT! OVERFIT! OVERFIT!"

------
jackgavigan
This paper isn't really about trading agents. There's no primary research or
analysis. All of the equations, models and graphs are from other papers. In
fact, most of this paper consist of summaries of findings from other papers,
some of which are somewhat dubious. For example, the paper by Yelowitz and
Wilson found positive correlation in Google Trends data for searches for
"Bitcoin", "computer science" and "Silk Road" and concluded that "that
programmers and criminals are the primary drivers of interest in Bitcoin".

One error jumped out at me. In the conclusion, the author asserts that "the
volatility of Bitcoin is correlated with the CBOE VIX" but no evidence is
presented to support that assertion. He seems to have misinterpreted one of
the findings in the paper by MacDonell that found an inverse correlation
between the _price_ of Bitcoin and the VIX.

I'm not impressed.

Edit: Out of curiousity, I checked to see if there is any correlation between
Bitcoin price volatility and the VIX from August 2010 to today. There isn't.
[https://twitter.com/JackGavigan/status/623836628960808960](https://twitter.com/JackGavigan/status/623836628960808960)

