Logarithmic (Regression) Growth Curves

 A popular model touted by "crypto-influencers" is the logarithmic growth curve (LGC).  This model has been used to predict future bitcoin prices because the model appears to track bitcoin's price -over time- well.  Financial influencers use the model with growth bands to explain how bitcoin's price behavior changes over time.

I have included two different (yet simple) LGCs. I generated these charts using data from Quandl/Nasdaq.  

The first chart shows the actual price of bitcoin paired with the fitted (predicted) bitcoin price from the LGC model.  While there are large differences between the actual and fitted bitcoin price, influencers contend that the LGC tracks bitcoin's price well.



The second graph shows the price of bitcoin with different bands.  In this graph, influencers point out that at the beginning of bitcoin's life it fluctuated between the orange and teal bands.  After 2016, Bitcoin now fluctuates between the orange and red bands. This would suggest that over the years bitcoin's prices is less volatile.




As Richard Feymann would state " all models are considered right until they are proved wrong and overtime all models are eventually proved wrong."




Comments

Popular posts from this blog

Coingecko Error: Exceded Rate Limit

Reducing my request from Conigecko

Is Solana dead? Thoughts from ChatGPT.