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Feb 6 • 9 tweets • 4 min read
Building the DPC Model, Part III
Adjusting the projection line to #bitcoin's daily closing price
🧵 of 6

Part I:
Part II:

Latest weekly model update:
DPC model background:
1. We have seen that the foundation of this model is the power law and the halving cycle. As these two components work with average values, they can sometimes be too slow to adjust to changing circumstances. Therefore, a third component is needed to add agility to the model.
2. The two charts above show the impact of this adjustment due to daily closing prices. The added gold line is the projection line for the base DPC model (power law + halving cycle). There are three essential differences between the base (gold) and adjusted (red) projections.
3. These are:
== Projection in the past ==
a. The adjusted projection (red) is closer to actual prices
b. The base projection line (gold) is smoother
== Projection for the future ==
c. The adjusted projection line is a closer continuation of how actual prices are unfolding
4. These differences are the result of how the adjustment is made, which is as follows:
- Divide yesterday's closing price by yesterday's power law value (PLV)
- Take the geometric mean of this and yesterday's base power line deviation (base PLD)

This will be the adjusted PLD.
5. Recall that the base PLD is the cyclic component we calculated in the previous step (Part II). Multiplying the base PLD and PLV gives us the base projection line. Multiplying the adjusted PLD and PLV gives us the adjusted projection line.
6. This concludes the exposition of adjustment for daily price.

We will continue with looking at the fourth and final adjustment, which takes care of the diminishing effect of halving cycles (DPC Model, Part IV)
Part IV is here:
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More from @DeFi_initiate

DFi Profile picture
Feb 7
#Bitcoin DPC Model - The Collection
It's about time someone collected all the relevant tweets...

🧵 of 7
1. Initial post with description:
2. Final implementation of original vision (30 Jan 2022):
Read 8 tweets
DFi Profile picture
Feb 6
Building the DPC Model, Part IV
Adjusting the projection line to the diminishing effect of #bitcoin's halving cycle

🧵 of 11

Part I:
Part II:
Part III:
1. Latest weekly model update:
DPC model background:
2. The final adjustment to the projection line takes care of the diminishing effect of the halving cycle. The impact of the halving cycle was discussed in Part II. Why is this effect decreasing, and when will it disappear?
Read 14 tweets
DFi Profile picture
Feb 6
Building the DPC Model, Part II
Modeling #bitcoin's block subsidy (miner reward) halving cycle

A continuation of

🧵 of 14
1. What is the halving cycle, and why is it important for the price of #bitcoin? Let's review this article again before we go any further: investopedia.com/bitcoin-halvin…
2. Each block includes a reward for the miner who successfully solves the block; this is called the block subsidy. Every 4 years or so (210,000 blocks of ~10 minutes = ~3.99 years), this block subsidy (miner reward) is cut in half programmatically.
Read 19 tweets
DFi Profile picture
Feb 5
How is the projection line of the #bitcoin DPC model built? I'm glad you asked.

For starters, it would be helpful to check the latest update:

For model background, see this post:

Building the DPC Model, Part I - 🧵 8
1. To recap, the DPC model consists of two fundamental components (power law + halving cycle) and two refinements (daily price adjustment + cycle fading):

Context to power law:

Halving cycle explained: investopedia.com/bitcoin-halvin…
2. We start with the power law, which is shown as a green line on this monthly #bitcoin chart (blue candles indicate prices). To build this line, we need to compute linear regression (i.e., straight line estimation, a trendline) for the logarithm of both price and time.
Read 11 tweets
DFi Profile picture
Feb 5
#Bitcoin DPC Model weekly update (Feb 5)
- Projected closing price today: $49K
- Next cycle trough: $18K -43% / +76% (5 Jan 2023 ±74 days)
- Next cycle peak: $380K -51% / +106% (Oct 2025 ±7 months) ImageImage
Legend
- Dark blue: Daily closing price
- Red: Projected price
- Green: Power law centerline
- Light blue: DPC multiple (actual / projected price)
- Grey: Halvings
- Gold: We are here (equivalent points in previous cycles)
- Dotted grey: Power law slope
Model description and background:

A note on accuracy:

Current power law regression parameters:
- Slope (m): 5.88
- Intercept (b): -17.10
Read 4 tweets
DFi Profile picture
Jan 30
The Dynamic Power Cycle (DPC) model of #Bitcoin uses the power law as its base, and adds periodic behaviour resulting from the coin's 4-year block subsidy (miner reward) halving cycle. The implementation of the model now reflects my original vision (conceived in Oct 2021). 🧵 17
1. The red line on the chart above shows how the median price of bitcoin is expected to unfold over the next 3 years. Today's closing price is projected between $30K and $73K (median: $47K). Time uncertainty is ±34 days, and price tolerance is -36%/+56% (at 95% confidence).
2. The cycle trough is expected between Dec 2, 2022, and Feb 8, 2023 (midpoint: Jan 5), and the price at that time is projected at $11-27K (median: $17K). The next halving is expected to occur on Apr 24, 2024, and the price at that time is projected at $29-70K (median: $45K).
Read 20 tweets

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