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Friday, 1 December 2017

Exponentiation, How Distribution Works, Absoluteness-Relativity and Financial Speculation

Someone asked me why the use of 2^13 and 2^14? 
This is a good question.

It is all about exponentiation at specific points.
An exponential function is a mathematical function of the following form: f ( x ) = a ^x. where x is a variable, and a is a constant called the base of the function. The most commonly encountered exponential-function base is the transcendental number e , which is equal to approximately 2.71828; a=2 is also an important relation in natural law governing the universe.

When 2^12=$4096 was broken up, the next natural phase was to go for 2^13=$8196, which was why I had given a rough target of $8000-$9000 a few months ago. This was consistent with my illustration of past history using past exponentiation bubbles in Gold, Nikkei-225, NASDAQ and Iron Ore. In fact, Tulips followed the same path.

As my target few months ago was near psychological resistance of $10000, I gave the target of $10000 too in case it over-runs. It did. And I would had expected Bitcoins to make its true peak from around this over-run area and start its crashing journey. However, 2 main issues caused me to judge that this is not true peak for Bitcoins: 1. too much pessimistic coverage on international media 2. NASDAQ listing in addition to earlier CME introduction of Bitcoins for trading.

This means that there is not enough platform to chalk up shorts against the Bitcoin bubble which is a highly lucrative business. It also means that for the next 1-3 years, Bitcoins will not crash because the bubble will have to blow larger towards the next destination and the next destination is the power of 14 giving $16,384 as the set-up. This will take 1-3 years for stories to sell.

The grandmothers and people on the streets, including traders and investors, need to make some money from $10,000-$16,384 area so that they will also help sell the stories and spread messages about how their Bitcoin investments are giving them nice returns. This takes time. It is a process. It also allows time for chalking up of shorts against them. Everyone will have to feel good and everyone will brainwash everyone that Bitcoins and Cryptocurrencies are the digital future, much like NASDAQ Tech bubble of 2001.

From $10,000-$16,384, this will look like a high gain of more than six thousand dollars per coin, but it is just a gain of 63.84% (6384/10000). However, embedded within such a gain is an enormously high downside crash of 90%-99%.

Most people are not very smart in this world. They see things in absolute terms. But the real world works in relative terms. It is what made Albert Einstein brilliant, because he sees things in relative term every day, and trains his mind for that, which is why it eventually led him to a genius theory of relativity with enormous physics revolution.

In relativity, the real deal in mathematics of life, this table will help one to understand that a 90% loss is actually a 900% loss because you need a gain of 900% to break even the loss; similarly, a 95% loss is never a 95% loss but a 1900% loss because you will need to use the rest of your life or half your life to wait for a multi-fold, multi-bagger gain of +1900% to break even. When it comes to power, it is never about absoluteness in life. It is about relativity. Relativity is the first fundamental (approach) involving mathematics, physics and philosophy in synthesis to excel in finance.

I still see Bitcoins and Cryptocurrencies as scams with convincing stories backing them, there is no change to my principle. However, as CME and NASDAQ are both joining the fray, the bubble is guaranteed not to burst for the next 1-3 years. Henceforth, instead of bursting at $10k zone, it is now almost guaranteed to blow to $16384. The appetite for this bubble is big. When $16384 area comes again, I have to see the sentiments and how Wall Street is reacting before I will know if the bubble will burst at 2^14=$16384 or that 2^15=$32768 is the next target.


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