Bitcoin Forum

From two months ago, in a thread about bubbles:
In the end, it seems clear that this read was incorrect; at the time, the price of one bitcoin was something like $20.

However,
(please don't laugh!)
fool that I am, I suspect that the chart has finally begun to apply.

Recently, people have pointed out that there are many, many new accounts being created at the major exchanges. Bitstamp account IDs have tripled in the past month. Mt. Gox made a post discussing their increased volume. And with the Cyprus haircuts (or scalpings, if you prefer), many major news organizations are reporting on Bitcoin as a currency of flight for panicked Europeans.

That's "Media Attention" - the beginning of the public investment (mania) phase of a bubble.

Does this mean I predict a price crash tomorrow? Of course not! After all, even if my read is correct (a long shot, to be sure), it only puts the bubble at preliminary levels, far below the peak. If the chart holds, we'll see prices in the hundreds before the spaceship comes crashing down, and the crash isn't even guaranteed to break through $10/coin.

But I feel as though the conditions that create a textbook bubble have finally begun to emerge.

Just one foolish forum member's thoughts. Take them however you will.

I agree.

31 was the first sellof
2 was the bear trap
something between 78 and infinity will be new paradigm

and finally
despair will go below 1.

ohlawdythespeculationiskillinme.

Unlike tulips, the internet stocks were a bubble but somehow the internet has completely transformed everyone's lives and made a lot of people a lot of money. 

Add this bubble chart to a decade+ long term "S" curve (we are still in the very beginning so it is not distinguishable from exponential) and you'll have what I think bitcoin will do.

That's an unusually long view of the data. I'm skeptical of it, for two reasons:

• We spent months at $5. A months-long stable price is hardly expected behavior for the middle of a bubble.
• If $33->$2 was a mere bear trap, the main event is going to be, what, three orders of magnitude? Sub-$1 to super-$1000? Such multipliers would be a first in recorded history - not even tulip bulbs saw that sort of inflation.

 
Also a valid interpretation. Personally, I'm still pretty confident that the blockchain technology is the future of asset transfer, though I'm not 100% convinced that Bitcoin will be the implementation that wins.

Personally, I see $2 as the despair of bubble nr. 1, but its not that big  a difference I guess.


Umm, no.  You are overlooking the fact that bitcoin has a very nice 'mean' trendline going on, so in absence of fundamentally really bad news, I doubt we'll ever see $1 again (and I have my doubts if we'll ever see single digits again, my money is on no)

In the long run, we are just starting to see institutional investors starting to dip their toes in (though in this case, maybe the public might like bitcoin faster than institutions?  dunno).

As spiff points out, there can be more than one bubble, and the crash can just be a return to more moderate growth (rather than an Enron-type crash to zero). Also, it's not clear what "public investing" means for Bitcoin. We obviously have a lot of public investing now, but in terms of the chart, if public investing comes after institutional investing, this might mean people investing in a Bitcoin ETF (or something like that) which can be traded on standard exchanges, and with Apple-esque public awareness and confidence. My retail investor friends are too scared and suspicious to invest in Bitcoin, and I think it will take something like availability on a main-stream exchange before they will give it a go. So, maybe we are just starting to exit the stealth phase. Yeah, I know, this is an overly optimistic thought - more likely the model just doesn't fit Bitcoin very well. But it's fun to speculate.  ;D

Absolute minimum floor right now is $50. Even self-confessed bears will be buying at $50 or above. Remember that BTC is a currency, not a stock.

I think most would be happy to just hold on to $50 too. Those who don't -- no big loss.

Wait! Wait! This time it's different... right?

Bitcoin is immune from human nature  ::)

Haha -- It's not different at all. We all see the hourly/daily crazy fluctuations in price.

Doesn't mean this is the top of a bubble though...

Perhaps you didn't get my sarcasm...

Yes, because it's a new paradigm!  ;)

No way, really? I just add 'haha' to the beginning of everything I write :P

$5 was the end of the bear trap.
In the template is something like a 1:3 relation between first selloff and new paradigm. That would leave us with a peak of roughly USD 100. It doesn't have to stick to those figures, what is important is that the general relationships apply and they certainly do when looking on the all time chart. After all the slope of the initial runup was kind of steep. So it would still hold even if the top were something like ~500.

I'm not saying bitcoin must adhere to the template, but I really think that if it does the all time chart is the most applicable.

You're proposing an eighteen month bear trap in the bubble pattern of an asset that's only existed for four years. You're proposing a bear trap that constitutes 60% of the asset's all-time trade history.

Isn't there something weird about that assertion?

I think it's a lot less weird than most of the other things written on here.

Why not? Human psychology and the spread of information doesn't care much about how old the thing at hand is. If Bitcoin had existed in the shadows for longer, that wouldn't change much about the current situation. Economic bubbles have typical life-spans of a few years, so in terms of the time-span it's not a long shot.

Everyone holding mid-term made profits so far. If people make a rule out of that, we're bound to get bubbles with a life-span of years, not just months. These people will tend to hold independent of fundamentals or market valuation, stating "doesn't matter if it went wrong, in a year or two I'll have a profit anyway". It does become a problem eventually, though nobody knows when as long as the user base is growing.

It's quite simple: statements that use price trends to predict price indicate bubble-type activity, no matter the time-scale. If this is a dominating factor, it becomes a problem. It certainly is a problem right now.

I would say the absolute floor is more like 12 USD.

People who don't think this picture applies.  That is because you haven't felt the fear/despair yet.

If you want to speculate then it is easy, "buy and hold". If you panic sold then don't cry because you already made your money. The bigger market cap the more people can use Bitcoin for shopping. Somebody must take risk invests his money and give Bitcoin a VALUE.

If you still do not understand then learn fundamentals WHAT IS BITCOIN. :-)

according to history it stops where it started

The 2011 bubble started at 1 usd stopped at 2x or 5x where it started, depending on if you end it at 2 usd or call that the bear trap and the actual end was when it leveled off at 5 usd. I would say it looks like this bubble started at about 12 usd, is the price going to go back to that level, or will it again level off at a point higher than it started, like 24 usd or 50 usd?

Nah, I think we could still see single digits easily.

http://www.youtube.com/watch?v=PpccpglnNf0&t=24

fwiw I think op makes a lot of sense. The patterns so far have all taken place in a nerd microcosm. The nerds have had their hype cycle, and in the grand scheme of things i think the first bubble will barely register as a blip inthe awareness phase

Makes perfect sense to me that this is media attention, and when the world gets hold of this today's vertical rise will become tomorrow's foothill of the bubble that we are about to enter.

my optimism is of course based in the fact I am holding a big (for me) chunk of coins ;)

>>I'm not going to elaborate further<< i hear you!!

this BTC is revalue in the world, and reorganizing it, think of it as growing into a percentage of world trade that state FIAT/Fractional reserve banking etc, AND store of wealth...currently occupies.

its people who are stuck in the mindset, its a stock, its a bond its a derivative, they just cant get thier head around what FRB/FIAT/CRR are and how it works and why it has value or not.

Reminds me of Platos' shadows on a cave.

Think of it like this. Imagine you go from anaerobic to oxygen breathing bacteria, the latter is a new paradigm and makes 38 ATP rather than 2 ATP.

Its a paradigm change.

I ain't seeing the irony in that.
"New Paradigm" !!!   :D


Further food for your thought. (http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2012/08/20/4-signs-an-investment-might-be-in-a-bubble)

The problem with that article is that it also applies to a whole bunch of bubbles that turned out not to be bubbles at all... like the advent of television, population growth, energy consumption and so on. Sometimes, a good idea is just a really, really good idea.  ;D

#4
This time its different!  :D

To further elaborate this: Bitcoin is not a technology. It's a proof of concept of one and a such a implementation. Nobody uses lightbulbs made by Edison himself.
Second the bubble concerns using bitcoins as a speculative investment not the software.

Actually it is. Yes all  this bubble talk is well known. But I do accept that Bitcoin is revolutionary new form of money. It is a singularity and it is a new paradigm indeed. Just like fire, wheel, printing press and the internet. These new paradigms and new singularities do happen from time to time.

Those who refuse to accept this... well whatever, you chose to "join the party fashionably late", not my problem.

Bullshit. reminds me of this (http://www.youtube.com/watch?feature=player_detailpage&v=ejvvPIaYrSo#t=12340s) btw.

(stopped reading right there.)

You have no vision. That's elephant shit then.

Well, then this is what the whole argument boils down to, isn't it? Either Bitcoin is a truly revolutionary idea, which will radically change the way in which we humans transact and assign value, or it isn't.

If you think it isn't, then it stands to reason you should assume it's a fad, like tulips, or cheap mortgages, or SOME (not all) of the companies that chose to build stuff around this new internet concept back in the late 1990's.

If you think it is, then it stands to reason you should assume it will continue to grow. Certainly with some ups and downs, mostly driven by greed and market forces, but essentially moving in one direction. Kind of like the internet itself.  :D

The argument is simple... some of the variables are known, some are not. From the ones that are, and an educated guess as to which ones aren't, I've made a decision as to which side of the argument I take.

Let's revisit it in 2040, shall we?

I think that's a bit of a false dichotomy!

I see the blockchain as a revolutionary technology, which will radically change our financial systems.

Even so. Even so. Humans in markets tend to act a particular way, which causes the kinds of patterns we see over and over. Remember, there have been gold bubbles. There was a dot-com bubble, even though the Internet really has changed how we live. The reason? You have something people can get excited about, they get too enthusiastic too fast, the price balloons way past what's sustainable, new buyers run out and people start taking profits, it all comes crashing down, and eventually you return to the old trendline, wiser about what the market can support.

None of this has anything to do with the inherent value of the underlying asset. The asset can be the best thing since sliced bread - all that's necessary to create a bubble is that people who don't fully understand the asset get excited about it and buy in, and then panic when growth stalls.

Has it occurred to anyone that the current, second bubble already started before the first, 2011 bubble truly ended? These may not be two independent bubbles, they may be just one that begun with a little foreplay in 2011.

To those who think that bitcoin ought to rise in value very quickly because it is a revolutionary new paradigm, ask yourself the question why people are buying bitcoin right now. Are they buying because they understand the greatness of the concept? Are they buying because they are Cypriots or Spaniards, trying to escape their banks? Or are they simply buying because the price is going up?

All parties in this argument could be actually correct simultaneously. Very much depends on "which chart  you r trading".

If you are trading 1 minute chart, then hell yes shout bubble right now and you will be right. Some of us are "trading" weekly and monthly and even yearly chart. What for some is a bubble or two for others is just white noise.

That's a bit like asking those who got their first email accounts in 1992 did it because they understood the revolutionary nature of the internet, because they needed to communicate with friends and family or because everyone else was doing it. The answer is, quite likely, a bit of all three... but it doesn't really matter.

I love that OP graph, very cool, however, its hard working out where we are on it because its a retrospective graph.

The dot com boom took a good 7 years to pop.  While we are able to get out data quicker these days, we are also able to grow an idea far further than ever before, so that bubble can get massive.  

I have a feeling we are still at the lower levels of the slope at the moment, and there is easily a potential for bitcoins to go to 1000s before common sense kicks in.  Think of it as the domain name craze where business.com and sex.com went for silly money, but neither today are gateways to the biggest and best of what they describe.

BTW, the term bubble has a real meaning, rather than just huge growth in a little time.  A real bubble is when your mum borrows money to buy bitcoins.  When that happens, then its a bubble, and I dont see that happening for a few years.

Ah, the meat of the discussion.

The reason I think we're farther right now is because of the sort of media attention Bitcoin has been getting. It's being covered on mainstream news, and the growth factors (3-4x in the last two months) are being mentioned. That's the kind of data that gets people without specialist knowledge over-excited and over-investing (i.e. Aunt Flo borrowing money to buy in).

I agree that it'll probably take a while, though.

FTFY

Really?

That is frightening - I still use the old fashioned idea that I only invest cash I can afford to lose! ;)

Look around on the forum, they are all over the place. Most of them don't brag about it right away but if you read carefully you'll notice and that is just the tip of the iceberg.

I still think the google trends for "bitcoin" searches to be a good leading indicator, a methodology that's been rigorously examined for flu and other health trends.  Search volume this week is almost 50% higher than the last peak two weeks ago.  Add in the 5500 person approval queue at Gox, the re-launching of Tradehill for accredited investors only, and the fact that people love round numbers like $100, and I think we'll be at $120 in the next week, with $100 as the new floor.  In short, I don't think this is a bubble yet.

Another round of articles will happen when the $1B market cap is passed at $91.  And in other news, today Apple dropped from an open of $456 to $452, losing about $4B in market cap this morning. :)