Bitcoin Cash as a Medium of Exchange
By Steven J. Grisafi, PhD.
The Bitcoin Cash market analysis will be launched on Sunday, August 13, 2017. To avoid historical bias within the data of a rapidly changing price market I decided to limit the data analysis to a rolling ten day period. The quadratic isosurface for the price potential has seven undetermined coefficients. So it needs an absolute minimum of seven data points for determination of those coefficient values. The linear isosurface has only three undetermined coefficients. So it could roll with as little as three data points. But, to have some statistical determination in an ordinary least squares sense for both sets of coefficients, I will use a ten days rolling analysis period. If fluctuations prove too large the rolling period may have to be lenghtened.
The analysis implements a new procedure for trackng the exchange rates of the two varieties of Bitcoin. Its use and evaluation of eigenvalues for the time series data is analogous to the optimization technique for linear system equations known as linear programming. As preparation for a comprehensive understanding of all aspects of the forthcoming Bitcoin Cash market analysis, all persons interested in the analysis are advised to read the research article Stream Space Eigenvalues: BTC vs. BCH Exchange Market. One equation and two new paragraphs have been added to this report as of August 11, 2017. The key to the analysis is the evaluation of the eigenvalues for the inner product of the time series matrix. For complete understanding of the BCH analysis it is necessary to read this report.
Since the launch of Bitcoin Cash there has been some enthusiasm, but also must disparagement, of the new venture. One may wonder why the Grisafi Finance Rheology Learning Center feels that the new cryptocurrency is worthy of all the effort the new analysis entails. We at the Grisafi Learning Center hope that Bitcoin Cash will become what Bitcoin never achieved. Bitcoin has failed as a medium of exchange and has become only a vehicle for investment. However, it is our belief that only a fool would purchase Bitcoin using his own sovereign currency in the hope that Bitcoin could be used as an investment. If one had only hope for the use of Bitcoin as a vehicle for investment the only prudent course of action would be to mine the coin. Trading for Bitcoin is always a losing proposition for investors. Only the trading houses have any hope of acquiring a profit. This is primarily because Bitcoin is useless as a medium of exchange. It fails as a currency. Although there do exist merchants who accept Bitcoin as payment for goods or services, the transaction fees are in the range of several US Dollars so that only purchases of exceeding large price make the use of Bitcoin as a currency as worthwhile endeavor over one’s sovereign currency. Simply put, the price of Bitcoin is riduluously high and nonsensical. Our hope is that Bitcoin Cash can avoid this pitfall.
It was a technology dispute that caused the mitosis of Bitcoin creating Bitcoin Cash. Of the two competing technologies, it is the opinion of the Grisafi Learning Center that Bitcoin Cash has taken the more prudent path. The original Bitcoin has now implemented its technology known as Segregated Witness. Bitcoin Cash avoids this by raising the block size of the block chain from one megabyte to eight. The proposal to do so was rejected by many miners because its would require higher bandwidth on their Internet connections. But raising the block size is the more conservative of the two proposals. The Segregated Witness protocol chooses not to include all information of each transaction within the block chain, but instead relies upon those paries to a transaction to provide the details. For someone who envisions the use of cryptocurrency blockchain technology as a basis for the sovereign currency of central banks, this is unacceptable. The central bank must always have complete information, if not complete control, of any currency its supports as sovereign.