I'm gonna take a break for the day on the mystic side of myself. Today is about something I noticed in the crypto currency Bitcoin. For those of you who have no understanding of what Bitcoin is please check out this http://bitcoin.org/en/how-it-works. Then you will need to understand a bit about how Bitcoins come into being, for that please take a look at this https://en.bitcoin.it/wiki/Mining. Now that you have a bit of the basics, lets talk turkey. There are at any given time only so many Bitcoins in existence, There is also a limit on how many Bitcoins will ever be made. This combined with trade volume give you a fairly good picture of how the value of each Bitcoin is either over, or under priced. This is a pretty obvious one to one correlation.
This will give you the supply versus demand portion, this however is only half the picture. Due to how Bitcoins are created and the rate at which new, and more processing power is added to the network constantly there is another indicator, This is the network hashrate. What this tells you is how hard it will be to create the next bitcoin, as well as how much processing power is being used to create it. The charts for this can be found on http://bitcoincharts.com/ which has a link to http://bitcoin.sipa.be/ the latter being the charts for the creation, or mining of new Bitcoin.
Now I do not consider myself to be sophisticated when it comes to finance. From my perspective our currencies have become decoupled from the resources being used to create them. With Bitcoin the currency has no way to be decoupled. So as the demand for Bitcoin as a limited edition item goes up, the price for them goes up as well. By watching the creation side of it you can see how easy new Bitcoins will enter the market place in the next 30 to 90 days. This will give a clear picture of how over or under valued each bitcoin is currently. Allowing the savvy trader to predict peaks, and valleys well ahead of there actual appearance.
As I said I'm not a bitcoin or finance expert, I'm just a crazy person that sees patterns where others see chaos. Please feel free to correct assumptions I'm making you know to be incorrect.
Jack
aka
PanseyBard
This will give you the supply versus demand portion, this however is only half the picture. Due to how Bitcoins are created and the rate at which new, and more processing power is added to the network constantly there is another indicator, This is the network hashrate. What this tells you is how hard it will be to create the next bitcoin, as well as how much processing power is being used to create it. The charts for this can be found on http://bitcoincharts.com/ which has a link to http://bitcoin.sipa.be/ the latter being the charts for the creation, or mining of new Bitcoin.
Now I do not consider myself to be sophisticated when it comes to finance. From my perspective our currencies have become decoupled from the resources being used to create them. With Bitcoin the currency has no way to be decoupled. So as the demand for Bitcoin as a limited edition item goes up, the price for them goes up as well. By watching the creation side of it you can see how easy new Bitcoins will enter the market place in the next 30 to 90 days. This will give a clear picture of how over or under valued each bitcoin is currently. Allowing the savvy trader to predict peaks, and valleys well ahead of there actual appearance.
As I said I'm not a bitcoin or finance expert, I'm just a crazy person that sees patterns where others see chaos. Please feel free to correct assumptions I'm making you know to be incorrect.
Jack
aka
PanseyBard
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