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I don't buy it. My intuition here is that Benford's law is a thing because for pretty much any statistical distribution, large numbers are less likely than sma
by qPM9l3XJrF 5y ago
I don't buy it. My intuition here is that Benford's law is a thing because for pretty much any statistical distribution, large numbers are less likely than small numbers, and small numbers are more likely to start with 1. But I'd only expect this effect to show up when aggregating across many different statistical distributions (e.g. looking at all stocks in the S&P 500 at once) rather than looking at individual distributions (i.e. I think maybe he just got lucky choosing Berkshire, and other S&P 500 stocks might not show Benfordness in their price even if they're not manipulated).
Plus, even if Bitcoin's price is mainly a product of manipulation -- speculators trying to make the price rise or fall relative to where it is right now -- there's no reason we can't think of that as also being a random process which produces some statistical distribution.
Benford's law works for detecting fraud because the process that humans use to choose random numbers -- just write down a bunch of random digits -- results in a statistical distribution that is unusual relative to what would be produced by a natural process. But it seems quite unlikely to me that Bitcoin price manipulation takes the form of a whale saying "OK, I just wrote down a bunch of random digits, this is our BTC price target for Wednesday".
- dannyw 5y agoCorrect. I've been in the bitcoin space for a decade now, and there were only brief moments* where it was difficult to buy or sell at the price quoted by major exchanges. * DDoS attacks, exchange illiquidity, etc.
- fluidcruft 5y agoI don't really know anything about this but every time I read these analyses using Benford's Law I don't understand why anyone would expect Bitcoin's exchange rate to begin with the digit "1" ~30% of the time. Once you're not talking about human-guestimated numbers, it seems more like a question of scale factors. If bitcoin's value fluctuates between 30k and 70k it's never going to start with a "1". Or if its value fluctuates between 120k and 180k then it's always going to start with "1". That's where I struggle trying to understand how Benford's Law is supposed to provide any insight.
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- x4e 5y agoI believe it’s about which numbers it ends with, not starts with
- y04nn 5y agoYes, I don't know if the prices should have a better Benford's Law fit when the price is around and 10k or 100k but then a lesser fit when the price is between 5/50k and 9k/99k if you have not enough data. But if there is enough data, maybe it should better fit the Benford's Law, and this may be a proof that arround 10k/20k the price was rigged and should have stay around it longer but manipulation put it around 30k/50k.
- FabHK 5y agoBenford's law tends to fit better when: * the numbers span many orders of magnitude * the numbers are produced by multiplication (where log(x) is normal-ish), not addition (where x is normal-ish) Your examples span half an order of magnitude, so it definitely doesn't apply (as you say).
- deleted 5y ago[deleted]