ChristianKl comments on A proposed inefficiency in the Bitcoin markets - Less Wrong

3 Post author: Liron 27 December 2013 03:48AM

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Tags: reasoning markets bayesian rationality bitcoin efficient applied

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Comment author: ESRogs 04 January 2014 12:57:04AM 0 points [-]

I'm having a little trouble understanding the model.

I used to think an "efficient market" was necessarily a market which current price captures people's consensus expectation of future prices. But in my example, it seems possible to have a guaranteed-positive-return trading strategy: investing say 10% of your portfolio in BTC, and constantly trading as required to rebalance your 10% asset allocation.

Is the Bitcoin Guru correct in his predictions? If so, is he taking into account that people might be using your drag trading strategy? If not, then it sounds like the strategy no longer offers guaranteed returns.

Comment author: Liron 07 January 2014 11:34:24PM 1 point [-]

Yes, the Bitcoin Guru makes accurate predictions.

No, he doesn't take into account people's drag trading behavior, because his conclusion is dominated by evidence about the underlying value of Bitcoin as usable money in the long-term.

Comment author: ESRogs 08 January 2014 12:44:29AM 0 points [-]

Hmm, I might just be misunderstanding.

To make slightly more concrete what it means to say that the Guru's predictions are accurate, could we say that all his predictions are for what the price will be on Jan 1st, 2019? So when we say he's accurate, we mean that on that day the actual price will be some starting price, times the product of a bunch of 1.25s and .8s according to whatever his predictions were on all the days in between.

Does this match what you had in mind?

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