Question 1

What is logarithmic regression?

Accepted Answer

Logarithmic regression fits a straight line through price plotted on a log scale. The fitted line is the fair value estimate, and the deviation from it is how far price has strayed.

Question 2

Why use a log scale for crypto prices?

Accepted Answer

On a normal axis, an asset that went from $1 to $100 makes its first ten years invisible. On a log axis, equal vertical distances mean equal percentage moves, so a 50% drop in 2015 looks the same size as a 50% drop today. For assets that have moved across several orders of magnitude, that is the only view that shows the whole history honestly. A straight line on a log chart is exponential growth at a constant rate. Fitting one is a way of asking: what steady compounding rate best describes this asset's history, and where is price relative to it?

Question 3

How do you read the deviation from the regression line?

Accepted Answer

The deviation figure is the gap between today's price and the fitted line, as a percentage. Positive means above the long-run fitted trend; negative means below it.

Question 4

Where does logarithmic regression break down?

Accepted Answer

Log regression assumes growth continues at roughly the historical rate forever. Nothing does. As an asset matures its growth rate falls, and a line fitted to its explosive early years will keep reporting "undervalued" as the real trend flattens beneath it. The fit also depends heavily on the start date — moving it a year changes the answer. It is a useful description of the past. It is a weak forecast.

What is logarithmic regression?

Why use a log scale for crypto prices?

How do you read the deviation from the regression line?

Where does logarithmic regression break down?

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