So, you’re sitting at your computer
with money to invest.
You have made some good money already
in the market, but you want more.
Cryptocurrencies have reached a
record $600 billion in
market value after the recovery, with the inevitable $700
billion mark right around the corner.
The price movement of top currencies
remains a mystery. But it doesn’t have to be.
THE PAIN OF
UNCERTAINTY
Cryptocurrencies are volatile,
irrational beasts.
Simple methods of forecasting grossly
over/underestimate the potential of a volatile currency.
For example, moving averages are used
frequently to estimate future prices. Moving averages, however, suffer from many pitfalls that make
them poor estimators of volatile markets.
Every great and successful investor
has a plan. You will add one more tool to your arsenal today.
A BETTER
METHOD FOR ESTIMATING CRYPTO PRICES
In my prior article about estimating the movement of Bitcoin Prices, I spoke of a
method that is used frequently in the stock world to estimate prices.
This method is a Monte Carlo
simulation using the geometric Brownian motion model.
I won’t cover off on the full
methodology here, but essentially I am going to:
1.
Get historical daily
prices for 10 top cryptocurrencies
2.
Calculate daily returns
3.
Simulate a year
4.
Simulate a year many
times
By the end of the article, you will
have the following:
·
A one-year simulation of
top cryptocurrencies
·
Likely price range of
each cryptocurrency
·
A downloadable model to
complete yourself
A note on
forecasting, simulations, and recommendations: Monte Carlo simulations are to
be used as guidelines and tools, not as gospel. I am not offering financial or
investing advice.
BITCOIN
What is Bitcoin?
You know what Bitcoin is, stop it.
Verdict
We can be 95% certain that Bitcoin prices will fall between $4,179,
and $273,028 with a median of $31,380.
BITCOIN CASH
What is Bitcoin Cash?
From the Bitcoin Cash project website:
“Bitcoin Cash is peer-to-peer electronic cash for
the Internet. It is fully decentralized, with no central bank and requires no
trusted third parties to operate.”
Really, it was an additional currency
that was created after a fork from Bitcoin core.
Verdict
We can be 95% certain that Bitcoin Cash prices will fall between $94, and $94,225 with
a median of $2,899.
ETHEREUM
What is Ethereum?
Ethereum is a decentralized platform
that runs smart contracts: applications that run exactly as programmed without
any possibility of downtime, censorship, fraud or third party interference.
Ethereum has been busy recently.
Multiple steps have been pushed in motion for the upcoming large change — reaching a new consensus method.
Ethereum’s Byzantium hard fork was only one half of
a two-part process designed to transition the decentralized application
platform to a new method for reaching consensus — proof-of-stake. The next hard
fork, called Constantinople, was recently discussed during an Ethereum core
developer meeting and could include VitalikButerin’s Casper update.
Verdict
We can be 95% certain that Ethereum prices
will fall between $706, and $30,062 with a median of $4,791.
EOS
What is EOS?
EOS is a blockchain-based,
decentralized operating system, designed to support commercial-scale
decentralized applications by providing all of the necessary core
functionality, enabling businesses to build blockchain applications in a way
similar to web-based applications.
Verdict
We can be 95% certain that EOS prices will fall between $9.58, and
$14,898 with a median of $307.
LITECOIN
What is Litecoin?
Litecoin is a peer-to-peer Internet
currency that enables instant, near-zero cost payments to anyone in the world.
Litecoin is an open source, global payment network that is fully decentralized
without any central authorities.
Mathematics secures the network and
empowers individuals to control their own finances. Litecoin features faster transaction confirmation times and
improved storage efficiency than the leading math-based currency.
With substantial industry support,
trade volume and liquidity, Litecoin is a proven medium of commerce
complementary to Bitcoin.
Verdict
We can be 95% certain that Litecoin prices will fall between $30,
and $7,636 with a median of $472.
OMISEGO
What is OmiseGO?
OmiseGO is building a couple of
things:
1.
Decentralized exchange
2.
Liquidity provider
mechanism
3.
Clearinghouse messaging
network
4.
Asset-backed blockchain
gateway
OmiseGO is not owned by any single one
party. Instead, it is an open distributed network of validators which enforce
behavior of all participants.
According to Blocknight:
Also, OmiseGo counts VitalikButerin (Ethereum), and
Joseph Poon (Lightning Network Co Author) among their advisers. Joseph Poon is
actually billed as author of the OmiseGo whitepaper.
Those are some pretty big names.
Verdict
We can be 95% certain that OmiseGO prices will fall between $1.17,
and $190.71 with a median of $15.74.
NEO
What is NEO?
NEO (formerly known as AntShares) is a
smart asset platform and the first open source public blockchain project in
China. Smart assets are the combination of smart blockchain contracts and
digital assets.
Verdict
We can be 95% certain that NEO prices will fall between $27, and
$13,229 with a median of $458.
RIPPLE
What is Ripple?
Ripple is a system created for banks
to enable immediate payments and lower costs.
The vision of the Ripple creators is
to allow a bank transfer in a few seconds (instead of the horribly annoying 2–3
business days).
Of note, is that Ripple is a U.S.
based company. From the xrphodor blog:
Ripple is a US-based company.
Why is this an important point to consider? A
US-based company like Ripple is subject to some very stringent laws regarding
securities trading and money transmission. These include requirements that
define how Ripple might interact with crypto markets and both institutional and
retail crypto traders.
Verdict
We can be 95% certain that Ripple prices will fall between $0.02,
and $175 with a median of $2.12.
MONERO
What is Monero?
Monero attempts to solve privacy and
fungibility issues that persist in Bitcoin.
Part of the algorithm for Monero
automatically mixes transactions with previous transactions and does this by
implementing ring signatures.
Verdict
We can be 95% certain that Monero prices will fall between $88, and
$10,338 with a median of $972.
IOTA
What is IOTA?
IOTA enables companies to explore new
business-2-business models by making every technological resource a potential
service to be traded on an open market in real time, with no fees.
The main innovation behind IOTA is the Tangle, a
revolutionary new blockless distributed ledger which is scalable, lightweight
and for the first time ever makes it possible to transfer value without any
fees.
Contrary to today’s Blockchains,
consensus is no-longer decoupled but instead an intrinsic part of the system,
leading to decentralized and self-regulating peer-to-peer network.
Verdict
We can be 95% certain that IOTA prices will fall between $0.13, and
$175 with a median of $4.55.
YOUR VERY
OWN FORECASTING TOOL
Since i’m so nice, I went ahead and
created a forecasting tool for you to use.
SERVICES
USED:
1.
Google Sheets
3.
StockTwits
4.
CoinMarketCap API
Full disclosure: The google sheets
add-in is a 14-day free trial, and $15 per month after. However, no one should
be refused access on the basis of money (especially true for students and less
fortunate). Send me a message, and I will make sure you are not left in the
dark.
A NOTE
ON SECURITY
Users have expressed hesitation about
running a google sheets add-in on their main computer, so I will attempt to
ease those concerns:
·
I am located in the
U.S., and my business is registered in the state of Maryland
·
If this were malicious,
people would have downvoted the add-in into oblivion, and it would have been
removed from the store
·
If you are still worried, you can open it within a virtual machine and
test it first
WHAT
IT PULLS:
·
90-day history of ~24
different cryptocurrencies
·
1-Year simulation of prices
·
1-Year simulation of
returns
·
1-Year simulation ran
1,000 times
GETTING THE
SPREADSHEET TO WORK FOR YOU
1. Install the Spreadstreet add-in for
Google Sheets
·
Follow the installation
instructions included with the add-in and log-in
2. Get sheet ready for use with the
add-in
·
Important Open the
template, click the menu Add-ons / Spreadstreet / Help / View in store, and
then click Manage and in the dropdown menu click Use in this document.
·
Login to the
Spreadstreet add-in for the first time (Add-ons ->Spreadstreet -> Open)
and keep the window open
3. After logging into the add-in,
change the dropdown reference
·
In the analysis tab,
change the “SELECT CURRENCY” dropdown (B3) to one of the other choices…this
refreshes the pull
·
Note: CoinMarketCap API
has limits. Be careful when attempting to refresh the sheet too many times
TROUBLESHOOTING
1.
Important Open the template, click the menu
Add-ons / Spreadstreet / Help / View in store, and then click Manage and in the
dropdown menu click “Use in this document.”
2.
A reload of the entire worksheet
fixes quite a few problems.
3.
Deleting and re-pasting
the formula in A1 of the “Candles” tab fixes things as well.
4.
If all else fails, drop
me a message
5.
The “SELECT CURRENCY”
cell in the Analysis tab (B3) refreshes the pull. Change the results for new
data.
When I try and
change a coin, I get a #DIV/0 error
Login to the Spreadstreet add-in, and
keep the window open. Try changing the dropdown again.
I have tried
logging in, activating the template with “Use in this document” and refreshed
the sheet…still nothing.
Head to the “Data” tab. Delete the
formula in cell A1, and repaste the following: =SS(“candles-bitfinex”, ticker,
“1D”, “hist”, true, “”, “”, “”, “0”)
CONCLUSION
Whether you are investing in Bitcoin,
Ethereum, or SpankCoin, it is imperative to have a plan. Most notably, a
worst-case scenario.
The Monte Carlo simulation is a
fantastic way to get a range of prices for a cryptocurrency. And after reading
this, you can see how the final values change drastically depending on what you
are looking at.
I urge you to download the sheet and
try your own hand at simulating different coins. The sheet is setup to pull in
every single coin from CoinMarketCap.
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