Bitcoin Forum

Premise #1: New investors help drive up the price of Bitcoin.

Premise #2: Capital is fearful.  It runs away at the slightest hint of risk.

Conclusion #1: A volatile Bitcoin market, subject to flash crashes, tends to scare away potential investors.

Conclusion #2: It is in the long-term interest of those who are long Bitcoin to work to prevent any significant dips.

Proposed new investment strategy:

1.  When we start to see new all time highs, everyone interested in the long-term success of Bitcoin should temporarily convert 20% of their BTC holdings into USD (or the fiat of your choice) at Mt.Gox (or the exchange of your choice).

2.  Place a limit buy order backed by that fiat at 10% below the current price.

3.  As the price goes up, keep adjusting your buy order upwards.

4.  Next time a flash crash starts, the buy orders will execute, hopefully arresting the downward trend.

5.  Repeat.

I say it's better to be 80% invested in a long, sustained rally than 100% invested in a choppy market that scares away new investors.  We'll all make more in the long run.

If we had been following this strategy for the past few weeks, today's flash crash would never have gone from 95 to 75, as all our automatic buy orders would have triggered in the 85 range.  If the flash crashes are caused by big-money market manipulators, their purpose must be to get us to panic sell when the price starts going down.  If we consistently do the opposite of what they want, and buy instead, maybe they will stop disrupting our markets!

Who is with me?

Not me.  I've already done my share of selling without being able to rebuy.

Wait, so you're in?

Nope, I said not me, not notme :P.

Thanks!

I have currently have USD on the way to Mt.Gox.  My plan is to not buy in immediately, but to place limit orders to buy at 10% below the all-time high.  I'll keep adjusting them upwards as the price climbs.  I expect to automatically buy during the next flash crash.  Then I'll gradually start selling, and perhaps transfer more money in, as the price recovers.  My long-term goal is to be about 80% in BTC and 20% in USD during the bull runs.

We just need to get some big players to join our scheme!

What do you mean, "selling without being able to rebuy?"  What stops you from re-buying?

These flash crashes keep happening, one or more every week.  If you sold, then you have cash, so you can place limit buy orders.  If you keep a limit order at 10% below the all time high, you automatically get bought back in at the next flash crash.  What stops you from doing that?

Or are you trying to time the bottom, and then keep getting locked out by the Mt.Gox lags?  The solution is to forget about trying to catch the falling knife.  Instead, be content to automatically buy at 10% below the all time high, ride it back to a new peak, then repeat.

Sure, you could theoretically make more if you could time the bottom right, and not get locked out of trading my the Mt.Gox lags.  But neither of those is possible.

This strategy maximizes your long-term profit by helping to stabilize the market.

I'm not trying to time the bottom.  I'm not day trading this time around.  I was here in 2011 and even selling at an all time high 2 dollars higher than it was an hour ago could end up with you chasing the train.  I'm happy with my bitcoin profits as it is.  There is no need to take extra risk for a few extra percent, and I have much less stress.

Good luck with that.

You know the expression: "Like herding cats"?  Yeah.

http://en.wikipedia.org/wiki/Prisoner's_dilemma

Short term gain > Long term gain

If a good number of people convert 20% of their BTC to fiat as soon as we see a new ATH, that will be the next flash crash.

Only if everyone did it at exactly the same time.  Do you really expect Bitcoin owners to act like robots and act in perfect synchronicity?  I expect everyone to do it a bit differently.

All I'm saying is that if more of us will sell a little when the price gets high, and place orders to automatically buy on dips, the price will be more stable, and we will ALL make more money in the long term.

We have big traders in here trying to manipulate the market, using fear to get us to part with our money.  They start it off by selling when the price gets high.  Then apparently some less experienced investors join in and rush to sell into the crash.  Then the manipulators buy at the bottom.  Then the average Joe sees it recovering, and buys back in.

Many of us are smart and cool enough to ignore the flash crashes, except to attempt (usually in vain) to buy when it hits the bottom.  But if more of us were wise enough to anticipate the flash crashes, to sell a bit before the manipulators start the crash, and have orders in place to buy the dips, we can make sure the manipulator's game doesn't work.

The day trading manipulators are making profits and hurting Bitcoin in the process.  If the true believers act together, we can put a stop to their game, making Bitcoin safe enough for the whole world to join in.

We'll know our strategy is working when we stop having flash crashes on no news.

FTFY - I'm sick of hearing about the big bad Manipulator and the poor bitcoin poor believers.  Have Wall Street vultures found our little pool and decided to mess with us in order to make more money for themselves??  YES - ok know that and deal with it - this is SUPPOSED to be a free market after all.  What you're talking about is just as much market manipulation as anyone you imagine to be orchestrating the flash crashes.

Let's try this again: http://en.wikipedia.org/wiki/Prisoner's_dilemma

Selling 20% of your holdings each new all-time-high would destroy your holdings awfully fast.

If you want to increase your personal BTC capital and stabilize the economy at the same time there is a more mathematically sound way to do so.

First, decide how many bitcoins you are willing to use for this strategy, and how much range you want to cover.  For this example I'll say you have 40 bitcoins and you want to cover the range of BTC value up to $800.

The basic strategy is to buy low and sell high, period.  Nobody really knows the peaks or the lows though, so instead of selling and buying a huge percentage of your funds at any given value, you spread it out as much as possible.

Lets call the current value $89.  Whenever the value increases by 6%, sell one bitcoin.  Why 6%?  The values should be logarithmic, and 6% is the right number to carry the full range beyond $800. 

Whenever the value falls 6%, buy one bitcoin.  You want to buy low in addition to selling high, right?

There you go, all done.  If only there was an easy to program bot, you could fine tune it a lot more, but as explained it's a fairly viable strategy to follow manually.

To create a 20000BTC bid wall 10% below the ATH, 18000BTC has to be sold at the ATH, and this will pull it down >20% below the ATH.

We do not need to encourage a price gain. We do not need to encourage people to "invest in Bitcoin".

Bitcoin will sell itself as people use it for its intended purpose.

There is no need to try to get other people on board to buy and hold. Why would you do that knowing that it will continue to raise in value on its own merits? Do you not have more money that you will make that you want to put into Bitcoin?

When there is a debit card that will allow you to spend your local currency without the need for a bank account, people will willingly buy Bitcoins for that use. When someone wants to gamble online anonymously, they will willingly buy Bitcoins for that use. When people want cheaper goods online or services online, they will buy Bitcoin for that use.

Flash crashes are for those who do not understand Bitcoin.

I personally already keep a limit order at increasing intervals for lower prices whenever it gets close to a stable point. But it has been so hard to keep up that that last time I was able to do that was in the $40 range.

Do it for your own benefit if you must.

If the price is holding steady at $95 do this:
$94 buy X BTC
$93 buy X*2 BTC
$92 buy X*4 BTC
$91 buy X*8 BTC
$90 buy X*16 BTC   etc   (X could be .1 or 1 or whatever you can afford)

Then again, it is not often stable.

I've been trading against volatility since I started trading, and will probably continue to do it for the forseeable future.

Don't expect me to use your system, though - coins that aren't in my trading purse have been excluded from it for a reason. :)

It's a good idea though, but I don't want 10% of my money permanently staying on the exchange which may be seized by the government anytime in the future.

I'm familiar with the prisoner's dilemma.  While game theorists firmly believed that the prisoners would betray each other, are you aware that experiments have shown that actual humans have a natural tendency to act more in cooperation than pure logical self-interest would dictate?  It's in our genes to cooperate.  I believe many Bitcoin holders will be willing to sacrifice some short-term gain in order to help insure the success of the project.

This is demonstrated by Ron Paul's ability to raise many millions of dollars, even though there is no direct benefit to the donors.  It's purely a matter of people cooperating to achieve a common goal.

Buy. Hold/spend. DO NOT SELL.

If everyone except the miners and merchants had been doing this from the start, the price would be much more stable.

Never gonna happen, though, just like your plan.

Your strategy may generate fiat but finally you can lose all bitcoins.
example: you have 100 btc
1. 20 sold
2. price increased
3. you bought only 18
4. price increased you sold (you have more fiat)
5. price increased
6. you bought only 16
7. price decreases .. no fiat 4 btc lost
 ... (exchange got hacked, no fiat no btc)

Interesting point. Indeed, we have some survival of the species genes, not just survival of the fittest...

But that said, I think the pure game theoretic analysis is primary in this case. You might be able to get a couple big ideologically motivated traders to agree (there very well may be a few such early-adopters acting in the market to their slight disadvantage), but getting lots of small time guys to coordinate will be like herding cats.

The grass-roots political donations argument seems like an apt analogy, but the key difference is that there's no immediate profit potential sitting in front of people for them to take advantage of. That'll usually win out.

Price already seems to bounce back strongly as it is

It's the depth of the dips that scare away investors. 

Isn't it interesting how stable the markets are now, when the manipulators are not working.