Xoel Lopez Barata developed some amazingly interesting Bitcoin price scenarios for this year using the Monthe Carlo statical projection method combined with what are known as random walks.
He published an experiment that includes a simulated price projection for all of this year. Barata used daily returns and price variants. However he added “extreme events have a higher probability of happening” as a note.
The Monte Carlo
The method he used is called The Monte Carlo. It’s usually attributed to a WWII Greek-American scientist Nicholas Metropolis.
Mr. Barata says “We assume that the future behavior of the price of an asset will be similar to its past behavior, and we generate a lot of random versions of that future, called random walks, similar to the past. That’s done taking random samples from the past and stacking them together to build each one of those random walks.”
Barata took random samples, added one to each and multiplied them cumulatively until the end of the year. “Then we multiply the current price of bitcoin times the values of the random walk to get the simulated future prices. This will be done a lot of times (100,000 in this case) and at the end of the year we will see the distribution of final price for each random walk.” he said.
The Bitcoin price for 2018 he finds is $58,843. He found different but close numbers when he changed the methods. What he said about the Bitcoin price for 2018 is so important: “This will be done a lot of times (100,000 in this case) and at the end of the year we will see the distribution of final price for each random walk.”