An index tells you when to buy at the bottom!
Since the publication of "Hoarding Bitcoin: Finding the Right Time to Buy" and "Finding the Right Time to Buy (Updated on August 4, 2019)", people have been asking me how the fitting curves in the articles were calculated.
Today's article will introduce the curve algorithm in detail and propose a new index - the ahr999 index, which is used to guide us in finding the right time to buy and hoard Bitcoin.
Without further ado, here are the pictures.
These two charts should be familiar to everyone. The red line in the upper chart represents the coin price, the blue dashed line represents the exponential fit to the price, and the green line represents the 200-day fixed investment cost line. When the coin price (red line) falls below both the exponential fit line (blue line) and the 200-day fixed investment cost line (green line), it's a good time to stockpile coins.
Many people wonder how the blue dotted line, which is the exponential fitting line, is obtained.
It’s actually very simple, let’s look at the picture below:
This graph plots the price against the coin's age, both on logarithmic scales. Coin age is the number of days since Bitcoin was born (Bitcoin's birthday is January 3, 2009). We find that on this graph, the price and age exhibit a linear relationship, with the fitting result being Y = 5.84X - 17.01. Converting back to standard scales, the price and age exhibit an exponential relationship: Price = 10^[5.84log(Coin Age) - 17.01].
Putting this formula into the first graph, we get the blue curve. This is a fitting result, and as the price of the currency fluctuates, the fitting result will also change. However, because the fitting data is based on the price of the currency over the past eight years, short-term price fluctuations have little impact on the fitting result.
Well, that's all about how the fitted line is derived. Now, let's take a step forward.
Previously, we defined two ratios: Bitcoin price/200-day fixed investment cost, and Bitcoin price/index growth valuation. When both ratios are less than 1, Bitcoin is undervalued, and buying Bitcoin directly is more cost-effective than investing in it over the long term.
However, it is troublesome to look at two ratios at the same time, and it is rare for both ratios to be less than 1 at the same time. To simplify the problem, we define a new parameter, which I call the ahr999 index.
ahr999 index = (Bitcoin price / 200-day fixed investment cost) * (Bitcoin price / index growth valuation)
In fact, it is very simple. Just multiply the two ratios, and then we just need to look at this indicator.
First, let's analyze the historical distribution of the ahr999 index, see the figure below.
We found that only 8.5% of the time, the AHR999 index was less than 0.45, which is the bottom-fishing range; 46.3% of the time, the AHR999 index was between 0.45 and 1.2, which is the fixed investment range; and 29.3% of the time, the AHR999 index was between 1.2 and 5, which is the waiting range for takeoff. Of course, there are also times when the AHR999 index is greater than 5, but we don't plan to sell the coins, so we don't consider them.
Then, let’s look at the price trend of the currency in combination with the ahr999 index.
How's that going? Today's AHR999 index is 0.68. What are your thoughts on the market's future trends? Feel free to leave a comment.
Final Chapter: Never Forget Your Original Intention
To Da Moon！
I'm really done with this. I'm very happy to have finished this.
The writing process has been a joy. I've received so much appreciation and encouragement from so many people, for which I'm very grateful.
In the Bitcoin circle, I am an outlier and don't fit in.
I am one of the very few people who have never stepped into any pit.
I am one of the very few people who only hoard Bitcoin.
I am one of the very few people who have never lost a coin.
I am one of the very few people who have quit all the groups I have ever joined.
I am one of the very few people who avoid having any vested interests in the cryptocurrency world.
Of course, I don’t care whether I fit in or not, I’m not in that circle anyway.
I have been excited about Bitcoin since the beginning and remain so today.
From the beginning, I have been looking forward to participating in this experiment, and I still am today.
I have been a staunch Bitcoin hoarder from the beginning and remain so today.
I haven't forgotten my original aspirations, and I'm willing to stick to my principles. I also know how to be grateful.
If you have some basic knowledge of psychology, you know that behavior can change thinking. My long-term Bitcoin hoarding has also changed my thinking.
I consider myself a very hardworking person. When I was little, my parents taught me that hard work leads to wealth, and I believed it. Bitcoin has changed my perspective on wealth: getting rich doesn't necessarily require hard work. Currently, all my income from work combined hasn't increased my wealth by hoarding Bitcoin.
However, I haven't become lazy because of this. Life is a journey, and wealth can undoubtedly make this journey more exciting. Diligence can also make this journey more exciting, which many people don't realize.
The essence of hoarding Bitcoin is savings, or more simply, saving money. Saving today's surplus wealth for tomorrow's greater use is a virtue, a traditional Chinese virtue.
I still remember when I was in elementary school, my mother took me to the bank and opened an account, asking me to deposit my allowance every month. She wanted to cultivate a saving habit in me. Coming from a poor farming family, she always calculated carefully and prepared for a rainy day.
That was the beginning of my saving, but I didn't stick with it for long. Saving in inflationary currency was pointless. On the contrary, the more you borrow, the more you earn. My parents, after a lifetime of hard work, haven't grasped the true nature of things, continuing to live frugally and save diligently. I couldn't bear to tell them the truth.
It was Bitcoin that taught me about saving, made me understand fixed deposits, and brought me returns, not just financially.
I never intended to use Bitcoin. Having it or not has no impact on my life. But it has a huge positive impact on my mentality. It's a solid foundation for me. I can pursue things that have risks but no returns, but are still valuable.
In other words, regardless of whether there will be gains or losses, I only consider whether something is really worth doing. Without Bitcoin, I am not sure if I can still do this.
Isn't that the point of saving? Only when you have enough to worry about later on can you move forward.
Writing about (hoarding Bitcoin) is obviously risky. I'm predicting the future price trend of Bitcoin, and there's a chance I might be wrong. But I'm going to write it anyway, because I can write whatever I think.
Writing (hoarding Bitcoin) obviously does not bring any benefits, and my Bitcoin holdings will not increase. It also does not help the development of Bitcoin. Whether I write or not, Bitcoin will develop in the same way.
As for the value of doing this, after all, value is subjective. The process of writing and sharing brings me great joy, so I personally think it is valuable. As for whether it can bring greater value, I will leave it to everyone to judge and time to test.
In any case, I have to thank Bitcoin for all the above changes! It may be the biggest opportunity that people in this era can encounter.
Hoarding Bitcoin is luck, fate, and blessing. Writing (hoarding Bitcoin) is also luck, fate, and blessing.
Thank you so much to everyone who has persevered to see this far!
I will always be with you to witness the greatness of Bitcoin.
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