5 ms·

Bitcoin Bubble Burst will warn you if Bitcoin is about to crash

34 points by everdev 9y ago

drumhead 9y ago
If a system is good at predicting prices and makes you money, why sell it to others. It would be worth millions. The quant hedgefunds spend millions developing "black boxes" to carry out trades and guard the secrets within like it was their own life. And yet here we have these people giving it away or selling it for 2.99 on the Play store.
deleted 9y ago
[deleted]
golemotron 9y ago
What could possibly go wrong?
jjxw 9y ago
Sounds like a classic case of overfitting training data. Bitcoin and cryptocurrency as an asset class is so nascent that I wouldn't be making any significant bets on what the algorithm outputs even if the cross validation is good. As with all investing claims, the pertinent question to ask is "if this works so well, why are you spending time marketing your method instead of making boatloads of money using this system you developed?"
- everdev 9y ago
  Exactly. Markets adjust to information, so even if the algorithm was somehow accurate, people acting on the information will correct the market. And at some point it may even become self-reinforcing if enough people buy into this "black box" that can predict the price of Bitcoin.
- travmatt 9y ago
  I went to a tech conference this past year, one of the talks was regarding machine learning and investing. I remember the speaker being distinctly negative on the ability of machine learning to predict prices accurately such that his firm could make money. He was much more optimistic about using machine learning to understand the forces that driving prices
throwaway0255 9y ago
If Bitcoin continued its 2017 growth rate for 5 more years, the market cap of Bitcoin would be about 140 quadrillion dollars, which is about 300x the value of all public and privately owned assets in the entire world.
- deleted 9y ago
  [deleted]
- kylehotchkiss 9y ago
  When would it hit the value of all public and private assets at current growth rate?
  - throwaway0255 9y ago
    Based on the numbers I chose (~500 trillion global assets, 1500% compounded annually) I think it'd take a little under 3 years.
- albertgoeswoof 9y ago
  This is a good point. A lot of people are investing expecting 1000x returns based on historical data, but that ship has long sailed. I wonder if it’s possible to use power and cpu manufacturing capacity to work out a maximum price the network could support.
  - vasco 9y ago
    It hasn't sailed. If it crashes again, it can climb again just as fast.
    - everdev 9y ago
      I think there's much more historical support for rapidly growing investments than one that rapidly grows, rapidly declines then rapidly climbs again. After the first rapid expansion it had everyone's attention and is probably less volatile. Only thing close might be healthcare stocks based on clinical trial results and FDA approval.
carbocation 9y ago
It not only predicts a "bubble burst," but also the price of Bitcoin in the near future. If such a system were actually accurate, what would compel anyone to share it publicly?
- dest 9y ago
  If everybody uses that software and follows trading advice, the price could get more predictable. Creators could then make lots of money. /s
  - everdev 9y ago
    Knowing the future is much more valuable than any monetization model.
shantanubala 9y ago
This sounds like a great way to manipulate the price of Bitcoin
kmfrk 9y ago
Even AWS can't get their status pages right, how about people don't put their faith in something like this.
n8n3k 9y ago
Hard to believe that any one who could credibly predict this would give it away, instead of making money with shorting Bitcoin. Seems more plausible that this is itself something that's supposed to crash Bitcoin, so that the owner can make money selling it short. If it isn't, someone will hack it and ...
natalyarostova 9y ago
There is a difference between the naive sample size (just your raw n value), and the information content of your sample size. How many crashes has bitcoin had? Depending on how you measure it, somewhere between 3-10? And even then, these crashes varied in magnitude, and some occurred at times when bitcoin was fundamentally different than it is now. The point is, you can have the richest data sources you want, at any time granularity, but you can't solve a hard information problem, which is that you only have a small small handful of true points to train on. The rest of the training data is going to be extrapolating or learning from small movements, which should have different dynamics from crashes.
magnetic 9y ago
<conspiracy> To all those who claim that it can't predict the bubble burst accurately, you are probably right, but it may not matter at all to the author. If this software gets seeded to many people - and presumably the target market is Bitcoin investors - the author may have a simple way to trigger a selloff. All you have to do is send a push to your app users saying "Burst About to Happen!" and watch the selloff happen from your panicky users. If you can trigger a selloff at will, you can start playing the market (short). The nice thing about it is that it's a self fulfilling prophecy at that point. You can trigger the sell off manually, and those receiving the notification will say "man, this app is really good, it really predicted it!", and will be conditioned to sell off the next time they get another notification. </conspiracy>
- taneq 9y ago
  Given the volatility of the market, this isn't as wild a theory as it sounds, especially when you account for not only the app's direct impact but also the following chain reaction of news stories.
thisisit 9y ago
> Using Artificial Intelligence to predict Crypto currency value. The AI thing had me rolling on the floor with laughter. Some shitty TA stuff used to "predict" cryptocurrency value. The lengths people are going to incorporate the words - AI/ML into their products.
0x4f3759df 9y ago
It crashed $1200 yesterday ($11868 -> $10600) when it approached $11868 which seems arbitrary until you realize that 10000€ = $11868, which triggered a round of sell orders.
- fjsolwmv 9y ago
  That tells me people are just wildly speculating

34 points by everdev 9y ago

If a system is good at predicting prices and makes you money, why sell it to others. It would be worth millions. The quant hedgefunds spend millions developing "black boxes" to carry out trades and guard the secrets within like it was their own life. And yet here we have these people giving it away or selling it for 2.99 on the Play store.

deleted 9y ago

[deleted]

golemotron 9y ago

What could possibly go wrong?

jjxw 9y ago

Sounds like a classic case of overfitting training data. Bitcoin and cryptocurrency as an asset class is so nascent that I wouldn't be making any significant bets on what the algorithm outputs even if the cross validation is good. As with all investing claims, the pertinent question to ask is "if this works so well, why are you spending time marketing your method instead of making boatloads of money using this system you developed?"

everdev 9y ago
Exactly. Markets adjust to information, so even if the algorithm was somehow accurate, people acting on the information will correct the market. And at some point it may even become self-reinforcing if enough people buy into this "black box" that can predict the price of Bitcoin.
travmatt 9y ago
I went to a tech conference this past year, one of the talks was regarding machine learning and investing. I remember the speaker being distinctly negative on the ability of machine learning to predict prices accurately such that his firm could make money. He was much more optimistic about using machine learning to understand the forces that driving prices

throwaway0255 9y ago

If Bitcoin continued its 2017 growth rate for 5 more years, the market cap of Bitcoin would be about 140 quadrillion dollars, which is about 300x the value of all public and privately owned assets in the entire world.

deleted 9y ago
[deleted]
kylehotchkiss 9y ago
When would it hit the value of all public and private assets at current growth rate?
- throwaway0255 9y ago
  Based on the numbers I chose (~500 trillion global assets, 1500% compounded annually) I think it'd take a little under 3 years.
albertgoeswoof 9y ago
This is a good point. A lot of people are investing expecting 1000x returns based on historical data, but that ship has long sailed. I wonder if it’s possible to use power and cpu manufacturing capacity to work out a maximum price the network could support.
- vasco 9y ago
  It hasn't sailed. If it crashes again, it can climb again just as fast.
  - everdev 9y ago
    I think there's much more historical support for rapidly growing investments than one that rapidly grows, rapidly declines then rapidly climbs again. After the first rapid expansion it had everyone's attention and is probably less volatile. Only thing close might be healthcare stocks based on clinical trial results and FDA approval.

carbocation 9y ago

It not only predicts a "bubble burst," but also the price of Bitcoin in the near future. If such a system were actually accurate, what would compel anyone to share it publicly?

dest 9y ago
If everybody uses that software and follows trading advice, the price could get more predictable. Creators could then make lots of money. /s
- everdev 9y ago
  Knowing the future is much more valuable than any monetization model.

shantanubala 9y ago

This sounds like a great way to manipulate the price of Bitcoin

kmfrk 9y ago

Even AWS can't get their status pages right, how about people don't put their faith in something like this.

n8n3k 9y ago

Hard to believe that any one who could credibly predict this would give it away, instead of making money with shorting Bitcoin. Seems more plausible that this is itself something that's supposed to crash Bitcoin, so that the owner can make money selling it short. If it isn't, someone will hack it and ...

natalyarostova 9y ago

There is a difference between the naive sample size (just your raw n value), and the information content of your sample size. How many crashes has bitcoin had? Depending on how you measure it, somewhere between 3-10? And even then, these crashes varied in magnitude, and some occurred at times when bitcoin was fundamentally different than it is now. The point is, you can have the richest data sources you want, at any time granularity, but you can't solve a hard information problem, which is that you only have a small small handful of true points to train on. The rest of the training data is going to be extrapolating or learning from small movements, which should have different dynamics from crashes.

magnetic 9y ago

<conspiracy> To all those who claim that it can't predict the bubble burst accurately, you are probably right, but it may not matter at all to the author. If this software gets seeded to many people - and presumably the target market is Bitcoin investors - the author may have a simple way to trigger a selloff. All you have to do is send a push to your app users saying "Burst About to Happen!" and watch the selloff happen from your panicky users. If you can trigger a selloff at will, you can start playing the market (short). The nice thing about it is that it's a self fulfilling prophecy at that point. You can trigger the sell off manually, and those receiving the notification will say "man, this app is really good, it really predicted it!", and will be conditioned to sell off the next time they get another notification. </conspiracy>

taneq 9y ago
Given the volatility of the market, this isn't as wild a theory as it sounds, especially when you account for not only the app's direct impact but also the following chain reaction of news stories.

thisisit 9y ago

> Using Artificial Intelligence to predict Crypto currency value. The AI thing had me rolling on the floor with laughter. Some shitty TA stuff used to "predict" cryptocurrency value. The lengths people are going to incorporate the words - AI/ML into their products.

0x4f3759df 9y ago

It crashed $1200 yesterday ($11868 -> $10600) when it approached $11868 which seems arbitrary until you realize that 10000€ = $11868, which triggered a round of sell orders.

fjsolwmv 9y ago
That tells me people are just wildly speculating