Mark Karpeles Willy Bot Bitcoin Trading Bot On Mt. Gox ...

Historical Data - Transactions per Day per Active Address (balance > 0) (June 2010 - June 2014)

I posted previously on some long term metrics that i track here:
and originally, here:
I wanted to make a significant correction (completely my error)...specifically in regards to the transaction per day per active address calculation. 1st part of the equation is unchanged: Transactions per day (from here:
don't know how i missed this, but I found more accurate data on snapshots of active address count at points in time in the is charted here:
with credit to gbianchi at;all
main correction is instead of infering active address count from total users (as i did in the past), the above imgur chart is exact counts for all previous time periods.
Date Active Addresses on Blockchain Transactions per Day (Excluding Popular Addresses) Transactions per Day per Active Address (Excluding Popular Addresses)
2010/7/1 53,000 188 .0035
2011/1/1 70,000 650 .0093
2011/7/1 325,000 8,397 .0258
2012/1/1 550,000 3,564 .0064
2012/7/1 750,000 8,390 .0112
2013/1/1 1,100,000 12,959 .0118
2013/7/1 1,900,000 26,076 .0163
2014/1/1 2,400,000 39,141 .0156
2014/7/1 3,000,000 56,597 .0185
so transactions per user about doubled 3-4 years! Much better than the flatlined "tx's per address" that i reported on my previous posts
edit: i threw this together in a rush, but if someone wouldn't mind going through and checking that i read that imgur chart right that would be great. I'll check again later, when i have time
edit2: calc for 12/15/2014 =87K trans per day/ 3.8M active wallets = .023 transactions per day per address. Still a rising trend
edit3: the above analysis fits only data from pre april 2013 bubble, as I believe the willy bot artificially pumped up the price...My guess: we are on a slow trend back to actual and predicted market caps meeting. That could be either 1) a drop to around $100 in 2015...or treading water in the $300 - $400 range until we reach fair value (anywhere from 2017 to 2023 depending on which model you use..see my comment to this thread below for more details)
edit 4 (on 2015-12-16): this is a major edit. Everything above this line remains unedited, but I am going to introduce a second pricing model. This original post used active address and tried to find a relationship between number of unique address and the bitcoin market cap. I still believe this will be the most accurate model in the long term. However in the short run, i think there is a better model. IN a perfectly efficient market, as the price of an asset rises, presumably many of the current holders will begin to sell. If this holds true then the active address to btc market cap relationship should hold up. However in the short term (say next 5-10 years...until 2025) i tend to think that bitcoin isn't all that efficeint. A $1000 per coin price rise may not bring as many sellers as a fully efficient market would imply . I think so many current holders of bitcoin are long term holders waiting for $10K per coin or more. That being said I think a second model, which I'll call a "Flow of funds fair calc" should be used instead. The basic idea is to still use the number of users, but instead of relatiing that to market cap, we are going to relate it to the total number of new coins created in a given period
Lets use an example. IN december 2015, there are approx 600,000 world wide users of bitcoin (those holding more than say .1 bitcoin - for further explanation see my previous posts linked in the orignal post). What i did was create a table back to 2009, by month, with the number of users in column A, number of new coins created in that given month in column B, and the implied relationship of "new $ added to the system per user" in column C. Column C basically says, given X users (column A), and the market cap at the time (and again assuming no selling), how much new dollars per new coins was there. If the price per coin remained the same (say $300 per coin), but 100K new coins came into existence via mining, then new $ to the system was 300 * 100K = $30M new dollars. if there were 500K users, then 30M/500K = $60 worth of new dollars per user per month. this $60 is the value in column C. It turns out that over time, column C is relatively stable. In times where it is significantly above $60, (ie 2013 bubbles) is when willy bot artificially pumped up at the price...see my previous posts on why we should ignore these bubbles when making our pricing models (it wasn't true market demand). Here is how that $60 number fluctuated over time.
Using this $60 number (like minds can disagree but its generally been historically between $18 and $90), we can extrpolate into the future what the price per coin will be..taking into account block halvings etc as well as estimating future growth rate in number of users (which has also been relatively constant..see my earlier posts for details on user growth rate in the future as well as comments replying to this post).
So here is how my new flow of funds calc did in the past in comparison to actual price
and here is how both models look going forward assuming a 37% annual growth rate in users and a constant $60 new dollars per user per month number for the foreseeable future
so a few things to note. On the first image, you can see that predicted price is fiarly accurate (especially lately in late 2015) and is much more accurate as of late than the original user count to market cap correlation (which calls for sub $100 coins in Jan 2016).
My guess is that again, for the next few years (3-10 years), flow of funds will be more accurate as a price predictor...then starting sometime in the 2020s as the market grows bigger and more efficient, and as the fair value is reached in people's minds, then long term holders will begin selling, and the market will even out to more efficient can see that in the future prediction table, the flow of funds looks accurate to about 2030 or so, after which it starts calling for $5M + coins, which is impossible as the entire wealth of the world would have to be put into bitcoin. by 2040, the flow of funds calc calls for bitcoin market cap worth 5x the entire world worth...again clearly impossible
The below graph compares the future predictions for both of the models. Again, right now the green line is more accurate, but over time we should approach the red line. Note log scale on the graph below
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The Bitcoin Phony Rally of November 2013 has distorted the price for all of 2014. Here's how:

(1) Someone apparently infiltrated a leading but unsecure exchange by using a virus/bot that created fraudulent data in MySQL and PHP so that they could pretend to have, say, over a hundred million dollars in fake fiat.
(2) They used this fake hundred million dollars to buy real bitcoins - spending, say, around 2 and half million fake dollars every few days, in over 40 buying sprees, to eventually scoop up around 270,000 real bitcoins over the course of a month.
(Note: As most traders know, buying a lot all at once like this usually isn't smart - because it causes a lot of "slippage" - ie, everyone sees the buyer starting to buy, and so the price rises before the buyer is finished buying. But in this case, since the "dollars" being spent are fake anyways, the buyer doesn't care if they make the price rise due to "slippage". The dollars they're spending didn't come from their bank account, because with a few keystrokes, some knowledge of PHP and MySQL - and access to the servers in Tokyo hosting this unsecure exchange - they were able to "magically" invent over a hundred million fake dollars out of thin air. They don't even have to suffer the privacy invasions and indignity of KYC/AML either.)
(3) Speculators around the world (especially the Chinese, who are said to enjoy speculating) got fooled by this phony price rise, making them think a major rally was underway. When they saw all this fake fiat being spent, they jumped on the bandwagon and spent their real fiat due to FOMO (fear of missing out).
This made the so-called "price" on this unsecure exchange go sharply upward by a factor of 12x in just one month: from USD 100 to USD 1,200 in November 2013.
Actually (due to the "no-arbitrage" principle of economics) the price went up around 12x on all markets around the world (including over-the-counter - OTC - and - LBC) because everyone (including the media) had fallen into the habit of using that leading but unsecure exchange (now secretly hosting a virus/bot) as their main pricing reference.
(4) Now the fake buyer disappears with 270,000 BTC, bought using fake fiat. The market peaks and eventually does a "mean reversion" (dropping from USD 1200 back down its more typical trend-line around USD 300). And the unsecure exchange which they infiltrated eventually declares bankruptcy and goes out of business due to fraud / incompetence / malfeasance.
(5) Now instead of everyone being excited and saying "Great, bitcoin went up 300% from USD 100 to USD 300 in just one year! Best investment of 2014!!" ...
Instead, everyone's depressed and saying "Damn, bitcoin went down 75% from USD 1,200 to USD 300 in one year! Worst investment of 2014!!"
Plus, a lot of people will be scared away by "volatility".

OK, we have no hard evidence that anything like the above scenario actually did take place in November 2013. But we do at least have circumstantial evidence of the existence of such a virus/bot (called Willy Bot) on Mt Gox:
So, what can we learn from this?
People need to realize that all the "good" news of 2014 regarding infrastructure and momentum (VCs, vendor acceptance, consumer awareness, remittance - plus the ongoing stability of the Bitcoin network itself, for over 5 years now) has been overshadowed by one very major piece of bad news:
We apparently let a virus/bot create an exciting but fake one-month 12x price spike of USD 100 to USD 1200 in November 2013... And now after that virus/bot has gone away, we're seeing a long and painful one-year 75% price drop from USD 1200 to USD 300 during 2014.
Maybe people need to reject the possibly fraudulent fantasy that the price ever legitimately was USD 1200. Maybe the price never "really" was USD 1200. Maybe we just need to get over that fantasy.
Why do we continue to base the "narrative", the "story" of bitcoin's price on this USD 1200 figure from a shady exchange which collapsed in scandal? - How do we know that "price" of USD 1200 wasn't just a figure of our collective imagination?
People did hand over 270,000 Bitcoins - that we do know for a fact.
But did they ever get USD 112 million in return?
(Ask the people who got screwed over by Mt Gox. Remember how Mt Gox was famous in 2013 because you couldn't get your fiat out. Hmm... wonder why that was? Could it be... that the fiat you "had" was actually from the Willy Bot - so that fiat never existed?? Sounds pretty plausible.)
Glass half-full or half-empty?
It's quite possible a virus/bot created the illusion that the price went from USD 100 to USD 1200 in one month. (And we do know that many people who tried to ride this wave upwards got screwed later when it crashed.)
Imagine if people had instead seen the price of bitcoin simply go up slowly but surely from USD 100 to USD 300 over the last 12 or 13 months.
I bet a lot more Russians would be trying to move their devaluing rubles into bitcoin right now... if we were at 300 USD, up from 100 USD last year, instead of being at 300 USD, down from 1200 USD last year. The Willy Bot makes all the difference between saying "Bitcoin worse than Ruble in 2014" versus "Bitcoin better than Ruble in 2014". It all depends whether you think Bitcoin started from USD 100 - or from USD 1200 - around November and December of last year.
So if this Mt Gox Willy Bot did indeed exist, then it seems like it has seriously injured the image of Bitcoin - and people's preference for it as an investment.
It's going to take time - and honesty and education - to put this damaging delusion of the Bitcoin Phony Rally of November 2013 behind us.
TL;DR - Someone apparently infected a major exchange with an "infinite fiat" virus to artificially pump the price up from USD 100 to USD 1200 in one month around November 2013. And then the price went back down from 1200 USD to USD 300 over the next year.
Result: Instead of saying "the price went up 3x in 2014" (from USD 100 to USD 300) everyone has ben saying "the price went down 4x [ie, down 75%] in 2014" (from USD 1200 to USD 300).
It's all relative. If you want a little more realism, maybe it's best to zoom out on the price chart - and ignore the Bitcoin Phony Rally of November 2013 - and focus on the steady rise from 100 to 300 USD, minus that totally fake-looking short-lived 12x blip.
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A Bot Named Willy: Did Mt. Gox’s Automated Trading Pump Bitcoin’s Price? There is more speculation today that bitcoin’s November 2013 surge and Mt. Gox’s trading volumes were built in part ... To be more specific, the Willy bot is responsible for buying large amounts of bitcoin on the exchange over a six-week span. Given the low bitcoin price at that time, it appears the bot had access to enough funds to purchase about 250,000 bitcoin. Up until that point, there had never been such a high demand for bitcoin, which sent the price rocketing to its all-time high with relative ease. CHARTS; Updated news about bitcoin and all cryptocurrencies. Karpeles Admits to Running WillyBot, Pleads Not Guilty to Charges. Most Bitcoin users experienced the MtGox disaster first hand or heard accounts of it from other users. Mark Karpeles -the chief executive of MtGox- is standing trial on charges of embezzlement and data manipulation in the Tokyo District Court. He has plead not guilty ... The bot reportedly started operating in September 2013. The bot would buy large amounts of bitcoin over a six week span. Reports show that the bot was able to purchase approximately 250,000 bitcoin. Some reports even show that the Willy bot accounted for 30 to 50% of Mt. Gox’s entire trading volume – which is a significant amount, to say ... Prominent trader Willy Woo has tweeted that Bitcoin needs to decouple from traditional markets in order to begin soaring again and prove to be a safe haven asset. He shared several bullish BTC charts from various areas. The first one shows that Bitcoin and gold may have started delinking from one of the biggest conventional market indexes – S&P500 – three days ago. Woo states that Bitcoin ...

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