MONTE CARLO ANALYSIS FOR CRYPTO COINS: CASINO OR SCIENCE?

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By the end of the year it is a moment for many to look back. We look back with this overview of forecasts made in January 2018 based on the Monte-Carlo analysis. For this analysis, 1,000 simulations were used for 2018. The predictions can be seen below by crypto coin. We have added the current data.

How does the Monte-Carlo analysis work for cryptocurrency?

The goal of a Monte-Carlo analysis is to make an expectation of the price at a certain moment on the basis of many simulations. You do this by entering the historical rates via the computer and selecting the variables that you want to simulate. In the case of cryptocurrency, you can think of interest rate fluctuations, fluctuations in share prices, scarcity, market capitalization, etc. The simulations produce very different prices. You can summarize these in different ranges. Based on this you can determine the probability and median (middle number). By contrasting these against the prices you can weigh the results.

We reviewed the Monte-Carlo analysis of 10 cryptocurrencies that was made in January 2018 for a year. We compared this with the highest and lowest prices of the year and the current price (on 31 December). Based on this, we can conclude how well the Monte-Carlo analysis works to determine rates and look back immediately on crypto year 2018.

1. Monte-Carlo Analysis Bitcoin (BTC)

Based on the Monte-Carlo Analysis of the Bitcoin in January 2018, you see the following results.

Based on the graph, we see that the price at the time of writing was $ 10,899. Subsequently, the Monte-Carlo analysis indicates that the price after a year for 95% certainly falls between $ 4,179 and $ 273,028 at a median of $ 31,380.

In reality, the price of the Bitcoin (BTC) today (31-12) is $ 3,910. The highest price was achieved on January 1, 2018, when the price was $ 16.364.90. The lowest price was on December 10 of this year when the price was $ 3,236.27.

2.Monte-Carlo Analysis Ripple (XRP)

Of course there is also an analysis for the Ripple (XRP) available. This shows the following picture:

As you can see in the graph, the price at the time of writing was $ 1.22. On the basis of the analysis, it was expected with 95% certainty that the rate of the Ripple (XRP) would fall between $ 0.02 and $ 175, with a median of $ 2.12.

In reality, the rate of the Ripple (XRP) on this New Year’s Day 2018 is $ 0.36. The highest share price this year was reached on 1 January of this year, when the price was $ 3.37. The lowest price is seen at $ 0.2811, which was noted on September 10 and December 10, 2018, among others.

3. Monte-Carlo Analysis Ethereum (ETH)

On the basis of the Monte-Carlo Analysis of Ethereum (ETH), the following figures emerged:

Based on the graphs, we see that the price at the time of writing was $ 1,042.40. Based on the analysis, we can be confident that 95% of the price of Ethereum (ETH) will fall between $ 706, – and $ 30.062, – with a median of $ 4.791, -.

In fact, the rate of Ethereum (ETH) today (New Year’s Day 2018) is $ 134.73. The highest price was reached on January 8, 2018, when the share price was $ 1,308.11. The lowest price was recorded on December 10, when the price was $ 84.46.

Since the Bitcoin Cash (BCH) experienced a hard fork we do not include it in the overview, since it is not simulated.

4. Monte-Carlo analysis Eos (EOS)

The analysis of the Eos gave the following results:

Based on the graph, we see that the price at the time of writing was $ 14.14. Based on the simulations, we were 95% sure that the Eos (EOS) price would be between $ 9.58 and $ 14,898, – with a median of $ 307.

In fact, the price of the Eos (EOS) on the last day of 2018 is quoted at a rate of $ 2.57. The highest price reached the currency on April 23, when the price touched $ 23.25. The low point was with a price of $ 1.85 on December 3 this year.

Of course we do not just look at the top-10 altcoins, in order to get a broader picture, we also include the OmiseGo (OMG), which is around 25th in terms of market capitalization, in this analysis.

5. Monte-Carlo analysis OmiseGo (OMG)

The Monte-Carlo analysis gave the following insight:

We see that the price of this crypto coin stood at $ 15.67 at the time of writing. Based on the many simulations, it was expected that the price would be between $ 1.17 and $ 190.71 with a median of $ 15.74.

In fact, the price of OmiseGo (OMG) on this New Year’s Day 2018 is quoted at a rate of $ 1.43. The highest price was on January 8, 2018, when this currency was $ 22.82. The low point came at a price of $ 1.11 on December 10 this year.

If we look at the results of the Monte-Carlo analyzes of these cryptocurrencies, the conclusion is obvious. The rates are below the median and values ​​above the median are not or hardly seen. Values ​​below the 95% lower limit, however, above expectation often.

To conclude immediately that the Monte Carlo analysis for cryptocurrences is a casino, however, a bridge seems too far. From a statistical point of view, on the basis of the law of large numbers, the number of predictions that touch the top of the collateral should be greater. The cause can probably be found in the short history and the fact that the simulations all assume (as can be seen in the graph) increases and decreases above the closing price of 2017. Although this is generally a logical idea, it appears that this in 2018 was not for crypto coins, which the rates of January no longer achieved.

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