So, you’re sitting at your computer with money to invest.
You have made some good money already in the market, but you want more.
Cryptocurrencies have reached a record $600 billion in market value after the recovery, with the inevitable $700 billion mark right around the corner.
The price movement of top currencies remains a mystery. But it doesn’t have to be.
THE PAIN OF UNCERTAINTY
Cryptocurrencies are volatile, irrational beasts.
Simple methods of forecasting grossly over/underestimate the potential of a volatile currency.
For example, moving averages are used frequently to estimate future prices. Moving averages, however, suffer from many pitfalls that make them poor estimators of volatile markets.
Every great and successful investor has a plan. You will add one more tool to your arsenal today.
A BETTER METHOD FOR ESTIMATING CRYPTO PRICES
In my prior article about estimating the movement of Bitcoin Prices, I spoke of a method that is used frequently in the stock world to estimate prices.
This method is a Monte Carlo simulation using the geometric Brownian motion model.
I won’t cover off on the full methodology here, but essentially I am going to:
Get historical daily prices for 10 top cryptocurrencies
Calculate daily returns
Simulate a year
Simulate a year many times
By the end of the article, you will have the following:
A one-year simulation of top cryptocurrencies
Likely price range of each cryptocurrency
A downloadable model to complete yourself
A note on forecasting, simulations, and recommendations: Monte Carlo simulations are to be used as guidelines and tools, not as gospel. I am not offering financial or investing advice.
BITCOIN
What is Bitcoin?
You know what Bitcoin is, stop it.
Simulations
Verdict
We can be 95% certain that Bitcoin prices will fall between $4,179, and $273,028 with a median of $31,380.
BITCOIN CASH
What is Bitcoin Cash?
From the Bitcoin Cash project website:
“Bitcoin Cash is peer-to-peer electronic cash for the Internet. It is fully decentralized, with no central bank and requires no trusted third parties to operate.”
Really, it was an additional currency that was created after a fork from Bitcoin core.
Simulations
Verdict
We can be 95% certain that Bitcoin Cash prices will fall between $94, and $94,225 with a median of $2,899.
ETHEREUM
What is Ethereum?
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
Ethereum has been busy recently. Multiple steps have been pushed in motion for the upcoming large change — reaching a new consensus method.
From Jordan Daniel at ethnews.com:
Ethereum’s Byzantium hard fork was only one half of a two-part process designed to transition the decentralized application platform to a new method for reaching consensus — proof-of-stake. The next hard fork, called Constantinople, was recently discussed during an Ethereum core developer meeting and could include Vitalik Buterin’s Casper update.
Simulations
Verdict
We can be 95% certain that Ethereum prices will fall between $706, and $30,062 with a median of $4,791.
EOS
What is EOS?
EOS is a blockchain-based, decentralized operating system, designed to support commercial-scale decentralized applications by providing all of the necessary core functionality, enabling businesses to build blockchain applications in a way similar to web-based applications.
Simulations
Verdict
We can be 95% certain that EOS prices will fall between $9.58, and $14,898 with a median of $307.
LITECOIN
What is Litecoin?
Litecoin is a peer-to-peer Internet currency that enables instant, near-zero cost payments to anyone in the world. Litecoin is an open source, global payment network that is fully decentralized without any central authorities.
Mathematics secures the network and empowers individuals to control their own finances. Litecoin features faster transaction confirmation times and improved storage efficiency than the leading math-based currency.
With substantial industry support, trade volume and liquidity, Litecoin is a proven medium of commerce complementary to Bitcoin.
Simulations
CONCLUSION
Whether you are investing in Bitcoin, Ethereum, or SpankCoin, it is imperative to have a plan. Most notably, a worst-case scenario.
The Monte Carlo simulation is a fantastic way to get a range of prices for a cryptocurrency. And after reading this, you can see how the final values change drastically depending on what you are looking at.
I urge you to download the sheet and try your own hand at simulating different coins. The sheet is setup to pull in every single coin from CoinMarketCap.
Cheers, and happy hunting!