Here's the brutal truth about cryptocurrencies:
They are insanely volatile, and no one can accurately predict where they are going to go.
Everyone wants to be the next crypto-millionaire, but the majority of coins have a higher chance of going to zero, than to the moon.
In the prior article I posted regarding 10 price predictions for 10 cryptocurrencies, I ran Monte Carlo simulations on 10 different currencies. The final analysis gave an expected range of prices for each, and showed just how crazy the prices can be.
But let us not stop there.
SURPRISING RESULTS
When I ran the last analysis, I did not expect to see some of the results that the model output. Some of the more surprising results:
- OmiseGO volatility makes Bitcoin look like a municipal bond
- Bitcoin, Ethereum, OmiseGO, NEO, and Monero all estimated positive. However...
- Bitcoin Cash, EOS, Litecoin, Ripple, and Zcash all drifted negative over 1,000 simulations
We will be taking the exact same forecasting methodology, and apply it to 6 additional cryptocurrencies.
A BETTER METHOD FOR ESTIMATING CRYPTO PRICES
If you already know the methodology, you can skip straight to Dash, which is the first coin analyzed.
From the prior article:
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.
DASH
What is DASH?
DigitalCash (DASH) uses a new chained hashing algorithm approach, with many new scientific hashing algorithms for the proof-of-work.
On top of Bitcoin's feature set, it currently offers instant transactions, private transactions, and operates a self-governing and self-funding model that enables the Dash network to pay individuals and businesses to perform work that adds value to the network.
One-Year Simulation
One-Year Simulated 1,000 Times
Verdict
We can be 95% certain that Dash prices will fall between $84, and $5,299 with a mean of $1,571.
ETHEREUM CLASSIC
What is Ethereum Classic?
There is a pretty long explanation for the creation of Ethereum Classic, but I will lead you over to our friends at Blockgeeks for the full explanation.
In a nutshell:
Ethereum Classic is an attempt at keeping the Ethereum blockchain unaltered by the part of the community that opposed the hard fork and the return of The DAO funds. It started trading on Poloniex and is getting more and more traction.
One-Year Simulation
One-Year Simulated 1,000 Times
Verdict
We can be 95% certain that Ethereum Classic prices will fall between $1, and $99 with a mean of $26.
IOTA
What is IOTA?
From Cryptocompare:
IOTA is an open-source distributed ledger protocol that goes 'beyond blockchain' through its core invention of the blockless ‘Tangle’.
The IOTA Tangle is a quantum-proof Directed Acyclic Graph, with no fees on transactions & no fixed limit on how many transactions can be confirmed per second in the network. Instead, throughput grows in conjunction with activity in the network; the more activity, the faster the network.
Unlike blockchain architecture, IOTA has no separation between users and validators; rather, validation is an intrinsic property of using the ledger, thus avoiding centralization.
IOTA is initially focused on serving as the backbone of the emerging Internet-of-Things (IoT). For a more in depth look at the technical design of IOTA read their https://iota.org/IOTA_Whitepaper.pdf.
One-Year Simulation
One-Year Simulated 1,000 Times
Verdict
We can be 95% certain that IOTA prices will fall between $0.02, and $17.72 with a mean of $3.82.
QTUM
What is Qtum?
Qtum is an open source Blockchain project that is developed by the Singapore-based Qtum Foundation.
Qtum is a hybrid blockchain application platform. Qtum’s core technology combines a fork of bitcoin core, an Account Abstraction Layer allowing for multiple Virtual Machines including the Ethereum Virtual Machine (EVM) and Proof-of-Stake consensus aimed at tackling industry use cases.
QTUM believes this will allow Smart Contracts and Decentralized Applications to run on a familiar foundation, while offering a robust environment for developers.
One-Year Simulation
One-Year Simulated 1,000 Times
Verdict
We can be 95% certain that Qtum prices will fall between $0.01, and $0.45 with a mean of $0.14.
SANTIMENT
What is Santiment?
Santiment aims to create market standards for cryptocurrency market data, best practices, and project transparency, all available in one place — essentially becoming the data and information hub of cryptocurrency and blockchain assets.
This will be accomplished by making the market data infrastructure for cryptocurrency and blockchain assets as the first platform for datafeeds in the space.
It provides cryptocurrency-related datafeeds, exclusive content streams, and a regularly updated database of cryptocurrency projects for reference.
One-Year Simulation
One-Year Simulated 1,000 Times
Verdict
We can be 95% certain that Santiment prices will fall between $0.009, and $1.96 with a mean of $0.55.
CONCLUSION
Whether you are investing in Dash, IOTA, or Qtum, 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!
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