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BTC short term sentiment


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BTC short term sentiment

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  #1 (permalink)
bob666s
Auckland + auckland/new zealand
 
 
Posts: 33 since Jun 2016
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I've seen a few sentiment estimates for bitcoin that may be a bit too complex for their own good. So I wanted to take a simpler approach, by looking at price impact of it against a basket of stock indices where long term correlations have been fairly stable.

With the selling in the previous day, my estimated sentiment is close to neutral at this point.
https://bastion.substack.com/p/btc-st-rough-sentiment-estimate

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  #2 (permalink)
 SMCJB 
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Would you care to elaborate a little more on how you are calculating the sentiment?

Also for what it's worth, most of the crypto platforms are exchanges where you are trading with a central order book and not a dealer/market-maker. They are unregulated though, and do not offer the protection that a regulated exchange would, and as you say, they often offer leverage at rates not seen on regulated exchanges.

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  #3 (permalink)
bob666s
Auckland + auckland/new zealand
 
 
Posts: 33 since Jun 2016
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SMCJB View Post
Would you care to elaborate a little more on how you are calculating the sentiment?

Also for what it's worth, most of the crypto platforms are exchanges where you are trading with a central order book and not a dealer/market-maker. They are unregulated though, and do not offer the protection that a regulated exchange would, and as you say, they often offer leverage at rates not seen on regulated exchanges.

I understand what you mean, since most of these dealer platforms are really just OTC desks, data from them isn't very reliable. I've looked through option data from Deribit, and found some issues making it almost unusable.

My main theory is that since there's a growth in institutional investment, their allocation, rebalancing of BTC is likely to increase price impact. So my calculation right now is mainly a return-variance weighted average of change-in-price spreads of BTC cash price (data from bitfinex) vs. a basket of stock indices. I use volume/OI quite a bit for exchange traded products for similar ideas, but since we know that OTC data isn't reliable, I am relying on the price variance to estimate sentiment extremes, assuming they may run for the doors in more of a rush due to excessive leverage.

I also just began to track the CME bitcoin futures options crowding, but I don't really have a lot of data out of that to display anything interesting, yet.

Any ways, I've made a few adjustments to the model, mostly to make it easier to read. Current level is slightly negative, but nothing close to extreme.

You can see the model adjustment details, latest graph here: https://bastion.substack.com/p/bitcoin-macro-sentiment-v02

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  #4 (permalink)
 hedgeplay 
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Hi Bob @bob666s,

Just wanted to say these are interesting comments and an interesting chart you created.

Thanks for posting.

HedgePlay

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  #5 (permalink)
bob666s
Auckland + auckland/new zealand
 
 
Posts: 33 since Jun 2016
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Thanks, HedgePlay.

I've decided to combine the sentiment estimate along with my production cost, fair value derivations.

Latest sentiment is at -2.1%

Current Average Production Cost is estimated at $37.8K~
Current Fair Value is estimated at $52.4K~

Updated graphs are available at https://bastion.substack.com/p/bitcoin-mix-update

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 SMCJB 
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Nice. So the production cost estimate is a function of chain complexity (computing power needed) and electricity prices?

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  #7 (permalink)
bob666s
Auckland + auckland/new zealand
 
 
Posts: 33 since Jun 2016
Thanks: 5 given, 24 received


SMCJB View Post
Nice. So the production cost estimate is a function of chain complexity (computing power needed) and electricity prices?

So what I did was take the total electricity cost index, which is power used per day, divided it by the estimated number of BTC coins mined per day.

Then, apply an estimated ratio for total production cost / electricity cost, this I adjust over time with respect to estimated gross profit margins at the average producers. However, this doesn't change the estimated fair value/price magnet over time, since if it increases estimated production cost, then it must lower average producer profit margin.

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  #8 (permalink)
bob666s
Auckland + auckland/new zealand
 
 
Posts: 33 since Jun 2016
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Weekend update.

Production cost, fair value estimates haven't really changed.

I've begun to post implied sentiment from CME Bitcoin Reference Rate Futures Options, it's currently showing aggressive net buying of puts, which is bullish short term.

Also, I have put the variables used in the "macro sentiment" into a few statistical methods to estimate short term price bias of BTC. Using KNN and ARIMA fits, current outlook is slightly bearish.

All details, graphs of above are updated here: https://bastion.substack.com/p/bitcoin-sentiment-mix-price-bias

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  #9 (permalink)
bob666s
Auckland + auckland/new zealand
 
 
Posts: 33 since Jun 2016
Thanks: 5 given, 24 received

Updated estimates:

Average Production Cost: $35.9K~
Next Quarter Fair Value: $49.9K~

Macro Sentiment: Slight fear, which is slightly bullish.

Statistical price bias based on macro data mix: slightly bearish for the next few days.

Details and charts: https://bastion.substack.com/p/bitcoin-mix-update-a59/comments

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  #10 (permalink)
bob666s
Auckland + auckland/new zealand
 
 
Posts: 33 since Jun 2016
Thanks: 5 given, 24 received


Updated Estimates:

Average Production Cost estimate: still about $35.9K USD
Expected Price Magnet for the coming quarter: about $49.9K USD

Macro Sentiment: just turned slightly positive from negative. But it's so close to 0 it's basically neutral, which implies little to no information advantage from this value for now.

Quantitative price bias from macro data: turned from slightly bearish to slightly bullish for the coming few days now.

Details and graphs: https://bastion.substack.com/p/bitcoin-mix-update-4e6/comments

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