Benford's Law Applied to Bitcoin
Continuing the series as we consider the validity of this approach, here are the midpoints across magnitudes for Bitcoin. For more information regarding the origin of this analysis please refer to previous posts linked below.
Benford's Law, also known as the Law of Anomalous Numbers, describes the tendency of the leading digit of an unrestricted collection of data to conform to a power law distribution as seen below. This natural law is the underlying basis for using logarithmic price charts in order to view rate of change over time. By taking midpoints, I am simply adding gridlines to the chart, but have found it interesting how these and other midpoints act as support or resistance time and time again.
The probability of leading digits:
P(1) = 30.1%
P(2) = 17.6%
P(3) = 12.5%
P(4) = 9.7%
P(5) = 7.9%
P(6) = 6.7%
P(7) = 5.8%
P(8) = 5.1%
P(9) = 4.6%
Legend:
1.33 light blue
1.78 purple
2.37 pink
3.16 red
4.21 orange
5.62 dark green
7.50 light green
10 dark blue
Next order of midpoints in gray
I couldn't keep the next order of midpoints for the entire price history since tradingview only allows so many lines of pinescript code. You should still notice how minor and major highs and lows occur at these midpoints shown and additional midpoints not shown. As we'll see when looking at other assets, I've become convinced that this approach of viewing price over time should be included when forecasting potential minor and major highs and lows.
Benford's Law, also known as the Law of Anomalous Numbers, describes the tendency of the leading digit of an unrestricted collection of data to conform to a power law distribution as seen below. This natural law is the underlying basis for using logarithmic price charts in order to view rate of change over time. By taking midpoints, I am simply adding gridlines to the chart, but have found it interesting how these and other midpoints act as support or resistance time and time again.
The probability of leading digits:
P(1) = 30.1%
P(2) = 17.6%
P(3) = 12.5%
P(4) = 9.7%
P(5) = 7.9%
P(6) = 6.7%
P(7) = 5.8%
P(8) = 5.1%
P(9) = 4.6%
Legend:
1.33 light blue
1.78 purple
2.37 pink
3.16 red
4.21 orange
5.62 dark green
7.50 light green
10 dark blue
Next order of midpoints in gray
I couldn't keep the next order of midpoints for the entire price history since tradingview only allows so many lines of pinescript code. You should still notice how minor and major highs and lows occur at these midpoints shown and additional midpoints not shown. As we'll see when looking at other assets, I've become convinced that this approach of viewing price over time should be included when forecasting potential minor and major highs and lows.
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