casey on Nostr: What makes the #bitcoin power law a good model? It's not a complex mathematical mess; ...
What makes the #bitcoin power law a good model?
It's not a complex mathematical mess; it's extremely simple!
The model has one single parameter: time.
The below chart is an approximation of the power law model. Here I'm computing it using calendar time when it's usually done with block time yielding an even better fit.
To yield the characteristic straight line, the trick is to take the log of both axes (time and price). This results in a linear trend upward, with the price wrapping around the trendline for an extremely tight and compelling fit.
Additionally, when thinking about the bitcoin price in log terms, price drops from 60k to 50k, or 73k to 58k are literally inconsequential. It's a better framework for thinking about bitcoin's long term trajectory.
I'm not sure how long the #powerlaw model will hold, but I doubt it will break any time soon. I do think the liquidity model is equally valid and likely provides a more robust framework for understanding #bitcoin's price movements.
It's not a complex mathematical mess; it's extremely simple!
The model has one single parameter: time.
The below chart is an approximation of the power law model. Here I'm computing it using calendar time when it's usually done with block time yielding an even better fit.
To yield the characteristic straight line, the trick is to take the log of both axes (time and price). This results in a linear trend upward, with the price wrapping around the trendline for an extremely tight and compelling fit.
Additionally, when thinking about the bitcoin price in log terms, price drops from 60k to 50k, or 73k to 58k are literally inconsequential. It's a better framework for thinking about bitcoin's long term trajectory.
I'm not sure how long the #powerlaw model will hold, but I doubt it will break any time soon. I do think the liquidity model is equally valid and likely provides a more robust framework for understanding #bitcoin's price movements.