Litecoin – Nick – Medium
The Cult of the Drunks’ Dog
This article explores if there is a stock-to-flow relationship to Litecoin value. A log-log model is tested for statistical validity against the least squares assumptions, for stationarity in each variable and for potential spurious relationships. A Vector Error Correction Model (VECM) is built and tested against the stock-to-flow model. An interaction with the Bitcoin price is included in the terms and explored. These models provide sufficient evidence to reject the hypothesis that stock-to-flow is at all related to the value of Litecoin, but insufficient evidence to reject that the value of Litecoin is cointegrated with the value of Litecoin.
This is not financial advice.
We have already established that there is a non-spurious relationship between stock-to-flow (SF) and Bitcoin value [1, 2]. In  we show that SF is a non-random variable, akin to a road that the value of Bitcoin wanders upon. In  we explored the concept of cointegration. We found there was a cointegrating relationship between SF and Bitcoin value.
An old saying is “birds of a feather, flock together”, usually with some sort of undercurrent of social disilussionment. In this saying though we find an ultimate truth-similarities in consumers lead to similarities in behaviour. People buying Bitcoin are more able to buy other coins, simply because they are already part of the gang. One of the crew. They have been indoctrinated into the cult of cryptocurrency.
This false indoctrination is fought with vigor by those whom understand the true value of Bitcoin; that is — that it is ultimately not only driven by its’ use case, not only impelled from the fact that is digitally scarce, and nor is it induced solely by the truth that each Bitcoin is mined with unforgeable costliness. No, it is the interaction of these very special ingredients that gives Bitcoin its’ value.
Many separate patches of a beautiful Persian rug, does not a beautiful Persian rug make. Without all of the intricate complexities and interactions woven together as one, the patches would fray and fall apart at the slightest hint of any traffic.
Now, if Bitcoin is the whole damn rug, Litecoin is a cheap Aldi knock off. It attempts to replicate the whole of Bitcoin, if not for altering a few (essentially inconsequential) variables here and there. One of those occultists we described earlier might see this knock off version as a “cheaper” version of the same product. Of course we know, the product (Bitcoin) is a protocol and expensive or cheap isn’t really relevant in these terms. But let’s chase our indoctrinated friend through the cloud of opiate smoke and see if we can’t catch the shitcoin dragon.
Once again we build a model of the form established in :
Published at Sat, 26 Oct 2019 02:10:29 +0000