Bitcoin Forum

Why has the price been hanging around $17 for so long? Is there some market fundamentals I'm missing? Is 17 some significant occult number? is Mister Seventeen toying with us?

The magic 17  ;D

The buy orders do not outnumber the selling orders. There is not enough excitement in the Bitcoin community yet.

Huh?

http://i52.tinypic.com/ouwidz.png

Someone is trying to keep the price low. Check how straight is the line of price.

http://mtgoxlive.com/orders

But that's not gonna last for long.

A sign of the currency stabilizing, perhaps. Which can only be a good thing.

BECAUSE.  8)

Someone please explain what the green line is

It's the exchange rate over time. As you can see, every time there is a rise, in some way there is the exact compensation.

Might be a big hoarder who decided to cash out at 17$, now instead of later.

I meant that that the buy orders are lower than the sell orders. There is a gap. Thanks for pointing that out.

I'll explain what is going on a little later. At the moment, its top secret :)

None the less though, having the price stable at 16.80 isn't a bad thing. Stable bitcoin is good for bitcoin businesses. Now you can buy and sell your goods/services and know that bitcoin price will remain around 16.50-17.00 at least for a couple days.

Probably won't be like that forever, unfortunately.

Long term bitcoin has good potential for growth.

It's always better to enable the "oneaxis" version of this:
http://mtgoxlive.com/orders?oneaxis;ratesoff
then you can see better which side is "stronger".

It's funny how people adapt their expectations. What do you mean by "for so long"? A couple months ago the price of 1 BTC was below $1. It's changing damn fast.

Seems like $17 dollars might be the price in kWh to produce a Bitcoin under current conditions?

Why would a seller want to keep the price down?

Perhaps, but mining follows bitcoin market, not the other way round.

If so, should it be reflected here?
http://www.youtube.com/watch?v=9q3UtmhR9G8&playnext=1&list=PL1BC72CA6DBEE5BAE

There is almost zero spread on Mt Gox because certain active traders were granted zero commissions for 30 days following the security problem.  Without commissions to compensate for, bid and ask prices sometimes agree to four significant digits! This situation represents an "ideal" market.

Not even close.

If current conditions were stable ( they are not, but we are talking about the current conditions) then a miner could expect a 500% ROI on reasonably cost efficient rigs, and not particularly cheap electricity.

The value of bitcoins is currently higher than their cost of production, and if nothing changed in the market it would stay that way for a decade, at which point the block reward would have dwindled to near the price in kWh.

That's good. I'll expect the Bitcoin price to increase 6 fold before stabilising then.

Excellent news!

Show me how you got your 500% and I'll send you some cash and you can keep half of the ROI. Scrap that. I'll just buy more coin.

Let me consult my magic 17 Ball (1+7=8)

"Looks cloudy - Try again later"

A typical electricity cost now is $1.50 per BTC. This doesn't account for equipment depreciation or time invested, just electricity. Of course, it varies according to your rate and this is based on 0.10 US$/kWH.

We're sitting at $17 because some holders of BTC have arbitrarily decided they won't sell less than that.

I thought this might be the case too, but the numbers don't really back it.  20k is a low volume.  If all the trades were buy at 16.75 and sell at 17.0 then there is only 5,000 USD in value flopping around at the extreme.  Of course most trades are closer to the market price and not everyone is trading to make a few pennies on the zero commission.  I've personally been doing a couple hundred trades each day(sell, then buy back) not caring if I win or lose a dollar or 10 but trying to see what changes happen near the boundary.  Without any great data all I can say is that nothing happens.  I would guess that a few others are also essentially buying and selling to themselves too just for shits and giggles and if that is true then the true volume is even lower than 20k. Maybe someone is trying to game it, but the main reason it's so stagnant is that nobody else is doing anything.  

Couldn't the same be said for the people arbitrarily deciding they will not pay more than 17 for a BTC?

coins are going for $20-30 on ebay.

Of course I can't say how many people are buying them using stolen ebay/paypal information which is very likely unfortunately.

Boss

Yea thats just a storm-front passing...outlook forecast is fine and sunny :)

That sounds like an old figure.

At the current difficulty of 1,379,223 you need roughly 1,370 MHash/s to generate 1 BTC per day.
The efficiency of most GPU miners hovers at a bit under 1.3MHash/J which means you need to have just the GPUs consuming at least 1kW of electricity to get that MHash rate.
1kW over 24 hours = 24kWh
24kWH*0.10$=2.4$/BTC
This is a very conservative estimate as real world mining rig efficiencies as measured at the socket are even lower. But still your point is valid and the mining price is way lower than $17.

that's because more people have ebay accounts than mtgox accounts...

look the problem is adoption...  at most there are what... 100,000 of us.. total (as it stands now).

If the adoption rate increases than the prices increase....   the problem is 99.9999% of the population don't know what a bitcoin is..  and the .00001% of the population that does is hording them....  in other words it's changing hands ONLY within that 100,000 people....   you need to widen the market to get this to work.. it needs to reach 100,000,000 people....   

You're trying to go international with a population of Allentown, PA.

you need easier to use clients,  mobile access, central wallets,  debit cards that work with it,  you need to adopt this currency to a quasi tangible one...  merchants need to be able to log bitcoins in their quickbooks as a cash deposit...  the IRS wants to tax them the same way they tax dollar transfers... 

I think your getting the point...  the problem is out of the 100,000 people using them.. only hundred or two of them are actually building tools to make it more used.

this will take years to develop ....

I just checked and I'm actually using the same figure, 1370.
So it must just be a bit different power usage in equipment.
I was using 3x5770s 600MHs @ 375W total, 0.625x24x0.10=1.5

mp3 players had been around for ages and no one was buying them.. then apple came along and changed everything overnight.


this could do it for bitcoin, and it could do it overnight

Bitcoin is already international  :Di live west of bali
The problem is the population.

Agree... but hoping togo exponentially soon

Good stuff.  My own guess about recent price stability is that some early adopter(s) decided not only to sell above 17, but to buy below it, thus stabilizing the price.  If so, it's a personal sacrifice for them, but a boon to the bitcoin economy, which will lose the speculators, but gain merchants.  Ultimately, this is good for the speculators too, but it will be awhile before they can cash out.

with recent events of hacking and bitcoin trojans im not surprised its stable at 17 and also the diffculty will rise again making it hardder to earn any coins. I have 2 6990s and only make 1 coin a day and sometimes just .88 so hopefully mtgox will be back on their feet and we will be getting $30+ per coin.

OK. Let's assume that it costs $1.50 - $2.50 in electricity/equipment to make a bitcoin.

Why don't I give up work and start mining tomorrow?

There's labour costs / opportunity costs.
There's the accumulation of knowledge.
Lack of hardware supply? (supply drops, price is higher)

There's more cost than just the electricity at the moment but eventually the electricity costs will be the main factor. I don't think people are factoring in the really big costs - the opportunity cost being the greatest.

Seems possible that $17 might be close to the cost of producing a bitcoin given the current conditions (opportunity costs, hardware availability, knowledge acquisition, electricity) and perhaps that's why it has stabilised.

My comment regarding kWh per BTC was misleading.

See this post for a similar discussion regarind mining cost / price correlation...
http://forum.bitcoin.org/index.php?topic=23360.60

coins are more expensive on Ebay because there is a "risk premium". If you sell on Mt. Gox, you can be sure you are not cheated by the buyer (ie. no chargebacks.) You do not have that protection on Ebay, so sellers demand a higher price for their increased risk.

People were freaking out when the price was jumping around and the market was very volatile, now people are freaking out that the price is too stable...

Because we will see $14 or less soon.

The reason is simple:

http://www.google.com/trends?q=bitcoin&ctab=0&geo=all&date=ytd&sort=0

We've temporarily leveled off on google trends. Our search engine trend has been _highly_ correlated with the price of bitcoin. See my post here from a few weeks ago.

http://forum.bitcoin.org/index.php?topic=17318.0

I think this lull is temporary, and as soon as interest picks up in new, more mainstream sectors, the price will start rising again. Just keep checking the google trend line, when it goes up, you've got about a day or two before prices start rising (google trends is delayed three or four days, which is about the time someone needs to get money in).

cost of a btc has nothing to do with cost to mine it. mining difficulty will naturally seek an equilibrium based on worth of btc. worth of btc is determined by demand for them (increase of supply is set up to remain known) - nothing more, nothing less. not sure why this fallacy is repeated over and over again on these boards.

also not sure how a few days of no fluctuation equals "stability" in a currency that has still increased many times in value over the past 30 days, much less the past year. Give me three months with no more than +-1% per day fluctuations and no greater than +-5% fluctuations overall and we can start talking about price stability.

So effin true :D

Taking a look at the charts:
http://bitcoincharts.com/charts/mtgoxUSD#rg60zigHourlyzvztgSzbgBzm1g10zm2g25zi1gMACDzi2gRSIzi3gSStoch

Current trading volumes are down, on par with early/late may, we're in between cycles at the moment, and those who are playing are being rightly conservative....why just buy in when you can hang out for a better deal.

Also...people....bubble mentality! I know we all share great confidence in the idea, but bitcoin is as liable to fall as it is to rise.....you'll never know when it's as good as it gets until after.

Come on, someone push it up to 17.25!

Not going to happen.  In all likelihood, the market is being manipulated down by people with the money/BTC to do it.  My prediction is further exchange rate decreases as they buy the bitcoins that scared sellers sell to them and subsequently move their flypaper bids even lower.

Quite possibly the case. However, I think its quite clear to most people by now that BTC is quite a robust little bugger that has a potential value many times higher than its current rate of exchange, and so owners of the coin are just as happy to sit this out. I doubt BTC value is going to drop anytime soon so I think owners of BTC have nothing to fear and nothing to lose. Of course, this isnt the case for potential issue buyers face playing this game which is new buyers moving into the market and buying up. This of course will raise the price. Then we will see the fence sitters will rush in too to get coins before they go too high, increasing the price even further, and its game on.

Let's go for 100 bucks before X-Mass, come on peeps!!!!!! :D

But, wait, why should we expect new buyers to buy up into the asks?  If they have a bit of sense they'll look at the past few days of trade data and realize that sellers are selling down into the buys, so if they really, really want some bitcoins they don't need to attack the asks as they can simply place a lower bid which will likely get filled.  Thus, they spend less than if they had bought into the asks.  But, honestly, seeing this picture, why would they be itching to put their money in in the first place, at least right now?  I'm not detecting a lot of confidence in bitcoin these days, unfortunately.  Those large bids, and there are a lot of them, are pulling the price down, and chances are good the price is going to go (much?) lower than it is now.  

If I really wanted bitcoins right now, after having observed the last few days, I'd be reasonably confident taking the risk of waiting even longer to buy because it looks like more downward movement is in the cards.  People are just looking at the bid/ask graphs and seeing that there's more money on the visible bids side than the visible ask side.  That's true.  But you've also got to look at what's going on on the ground, and that paints the opposite picture from merely looking at the graph.  I'm not a buyer right now, so, honestly, I hope I'm wrong, but things don't look good for those of us who would like to see the value go up.

Most members of the crisis got free transaction fees.


If it goes up 10 cents, they profit. So they aren't sitting on their investment as long. They are buying and selling at the same time, kind of like playing pong with your own two hands.

For example: you place 100 buy orders to the left side of the midpoint, and 100 sell orders on the right side.

Let the computer do all the work.

http://i451.photobucket.com/albums/qq234/07GLI/17-dollars-now-thats-gangsta-poster.jpg
I'm disappointed in you guys.

lol +1

17 is about the number of $-cents a bitcoin is worth and should be traded at, so multiply that by 100 for the bitcoin-mania, and there you go  ;D

I'll tell you what will drive up the price.  One thing:  Increasing the perceived likelihood that Bitcoin will have a long-term value as a currency.

If there are news stories, it will generate interest.  And people will buy in.
If there is a true value as a currency, people will "give it a try".

So get off your butts and start getting Bitcoins accepted by merchants!!!!


Don't think that increasing mining difficulty will increase the price - that's crazy talk.  The ONLY way that increased mining difficulty could possibly have a positive impact is if the miners say "It took me $20 to generate each Bitcoin, and I refuse to sell at a loss, therefore I'm not selling."  (We're seeing this in the housing market right now, but it's more likely in the housing market because people borrow money to buy their houses, and if they are "underwater" with their mortgage and they sell, then they have to come up with the cash difference.   I doubt that anyone is taking out loans that are secured by bitcoin generation.)

This thread is pure art.

I can't even count. "Market manipulation" is always a great shout, though kind of a classic and thus not very innovative. "Mining cost determines price!" is pretty much a meme now, and is the best replacement for "DERP" I've seen so far. But! A competitor appears! "Da Seller wants to push da price down!" :D

Wait, wait... one more. "a big hoarder who decided to cash out at 17$" ... whoooaaa big hoarder made the volume go... uh... what volume?

Man, I hope this is the work of trolls... I hope it for the sake of humanity.

It's not as if the volume is tiny relative to the bitcoin economy.  Bitcoin charts shows that over 10,000 bitcoins have swapped around in the last 20 hours.  Obviously we've seen much more than that, but it's not like the volume is sooooo low.  Also, who said "sellers want to push the price down"?

The FED has put a control loop on the Bitcoin price. That's what they do right... stabalize currency. :-)

+1
it is definitely funny to read those wild theories

Joke?

This is what I meant by an "ideal" market. With zero commissions for certain active traders, the spreads are very narrow because market making as you describe it can return a profit, e.g. 0.001 BTC on tiny spreads.  The spread should widen only when volatility increases, which according to market theory arises because of the sudden entrance of "informed" traders into the market, e.g. some merchant needing to unload 1000 BTC at market.

Everybody and their mother injected money into their Mt. Gox account hoping to catch BTCs on the cheap during the crash expected after the Gox reopening. Since that didn't happen, nothing is happening. Everyone wants to obtain the "early adopter" position.

Proof that this is just a speculation circlejerk with no actual goods/services backing. And no more more money is coming in.
 

Not a fallacy. That's why.

Whilst the cost to mine a bitcoin is less than the price to sell one, there will be an incentive for people to start mining. Difficulty and even technological advances are irrelevant.

It's not only true of bitcoin, it's true of gold and very other natural scarce resource that I've looked at so far. Not precisely but certainly the same order of magnitude.

Price of a fish ~= Cost to get that fish on your diner table.

But stabilization will lead to it being accepted more... thus the price will go up, alas slowly.

Bit-coin really is a win win situation.

I guess you never did economics :p

The price of anything is not related to the cost of production, only the price decided by the market.  If you're selling widgets, or fish, or whatever, you sell for whatever people will pay. If they won't pay for your cost of production then that's tough, really... you either take the loss or go and do something else (or run an advertising/rebranding campaign to bring the perceived value up).

Hmm.. what happend now? Transaction about 900k happened?

You guys who keep peddling this bullshit theory are disregarding two things:

a) No one who sees fit to "invest" in Bitcoins from an outside perspective really gives a shit about the cost to mine. If they do any sort of research, they might look at the overall hash rate of the network and compare how much it would cost an outside party to attack the network, but I doubt most even do that. They certainly don't give a shit about what kind of ROI you expect on your mining rig;

b) There are always going to be people who mine cheaper than you do. You're thinking that Bitcoins cost $X to mine because your rig cost this much and you're expecting to pay it off over a 6 month period and the difficulty went up so blah blah blah. No one gives a shit. Johnny CollegeStudent just bought a 2x 6870 rig with his grant for college and his dorm room's power is "free" (in his eyes). He doesn't give a shit that you really need a $15+ Bitcoin this week for your ROI plan not to nosedive - he wants a dimebag and he doesn't have a Silk Road account so he's going to sell it for whatever he can get on MtGox.

Your argument might hold water if all miners held the line and no one wanted to drop below a certain figure - you're a fool if you think that's gonna happen. My 5770 is all paid off, so depending on what the market's doing I'm going to mine for whatever I feel comfortable making a profit at (and stop beating the shit out of my brand new, free GPU if it falls below that), and I don't particularly give a shit to hold some line or another - I'm going to take $16.80 today than risk having to take $13 tomorrow, and I'm sure I'm not the only one.

Looking over my Mt Gox trade log, I do not see any single large transaction that caused the move.  Rather there are many small, almost random sized transactions on the way down and on the way partly back up.  Here is one of the larger ones that occurred shortly after the 16.65 level was breached ...

[mtgoxUSD 1309472003463345 2011-06-30T17:13:23.000-05:00 269.10395017@16.64001]

It would be a chance for certain market makers subject to the .3 % commission rate to make a profitable trade - given how relatively large the spike down was.  I suppose that once the swing began, existing bid limit orders were cancelled and moved lower thus drawing the price downward in the face of continuing market sales orders.  I do yet track Mt Gox open order issuance, matching and cancellation, but once that happens it will be easier to explain this sort of behavior - but only the point of ignoring open orders in the dark pool.

Modern trade execution prefers to break up a single large order into seemingly unrelated smaller chunks.  Even if executed from the dark pool to hide the order, trades become  public knowledge once matched.  Breaking up a such a trade is a tactic to out-game front-running algorithms. 

Oh, hey, whadya know...

I bought 1Ghash that pulls 900W for $800.

go to http://bitcoinx.com/profit/index.php and plug in those numbers for a 12mo period. The calculator counts your hardware as a cost, but it's really more of a capital investment, and should not be counted against ROI.

Now 500% ROI is pretty sweet, but this is a risky investment. My miners would go off tomorrow if my countries government decided that BTC was a criminal enterprise, and I would be left sitting on unproductive capital. I would not add capital to this market with ROI under 300%, and I don't see how any business person could rationalize such an investment. Perhaps I would change my tune in 12-18mo, but not in the short run.

What you call ROI is more correctly called operating income - which supports your point just fine.  Return on investment is all about return on capital invested. 

That calculator does not take into account future difficulty. In a month, you could be only getting a third the bitcoins you are now. Make sure you factor in difficulty. As a general rule of thumb, the bitcoins you make in the first 10 days are 1/3 of all the bitcoins you are ever going to make.

1.  About midnight GMT yesterday (that can match the 17:13:23 of your log if your timezone is way to the west) I noticed that there is one very big bid at 16.64, and very very small bids over it.  For a long time I've suspected that the large bids are bluffs and yesterday I tried this theory by selling all the way down to that large bid.  Immediately this bid disappeared and the price dropped to below 16 in a few minutes.  It later rebound - but it is still way below 16.7.  For the price of selling a lot of bitcoins at a good price (for now) I verified my little theory about these large bids.

2. I don't think there are dark pool orders now - at least I cannot do any dark order now.  It would be nice if MtGox clarified this - but maybe that it too much to expect from them.

3. The big bids did not appear back today - the charts show about 20K BTC of accumulated bids above 14.7 while this was more than 40K yesterday.

4. Maybe someone was trying to stabilize the strong down pressure of the market now by placing these big bids - but they were not determined enough to keep these orders when they were close to be realized.

Interesting move.  I guess you could have taken out the bid by putting your sell order in as one big sell, but that wouldn't have "proven" that the big bid was a bluff.

Now the pertinent question - did you make a quick profit by buying back in when the price support evaporated?  :P

I'm just sad I don't have a ton of money to manipulate the market :(
 
Everytime I put in a bid for something then it swings the other way, and then after a few days of that I cancel my bids, and then it hits my target *sigh*

I did not - apparently I am not that good day trader, but maybe this is actually a good time to realize my profits?

It's true that in a mature market the cost of making the Bitcoins would have little influence on the trading price, I think here you need to take into account that some sizable percentage of the Bitcoins for sale at any moment are from miners who just newly minted them.

If some miners decide that they won't sell below X price then it's going to have a fairly strong impact on this market due to the low volumes. 500 new BTC come into play every hour and my guess is that many miners want to sell them asap. If they were on the verge of leaving the business they might accept lower prices to get out but I don't think most miners are in that mindset.

When you try just this month - this looks much more pessimistic:

http://www.google.com/trends?q=bitcoin&ctab=0&geo=all&date=mtd&sort=0

Interesting that Swedish, Finish and German ranks higher than English.
Also Canada and Australia higher than USA.

I am bloody annoyed with myself, my previous post in this thread is complete nonsense and makes no sense whatsoever.

There's a name for that phenomenon: It's called 'day trading'.

A miner would want to keep the price down to keep other miners from starting/expanding mining ops, to therefore keep difficulty in check. Eventually that miner would want to lift their price control and let the price rise so they could dump all their BTC onto the market.

If that were what was happening you could work backwards from the BTC price to figure out what their mining costs are. I'm making a rough guess and saying they pay about $.18/kwh and want the BTC price to stay above their mining costs. If smart, such a person would  have set the price in advance of the difficulty, because hashing power is still increasing.

I don't think anyone would do this though. Just throwing it out there as an interesting scenario.

There's no bullshit just facts, mathematics, reason and economics.

If you can make/find/mine for a price cheaper than you can sell then they'll be an incentive for new entrants. Competitive markets have low profits.


If people won't buy your fish for the cost it took you to get it to them then you'll stop fishing because that signals increased supply and/or reduced demand. (N.B. I'm talking all costs here - assets, labour, opportunity, knowledge attainment.) If BTC mining becomes a bigger operation then you can bet that the bulk of those costs will be fuel for the rig and that will be damn close to the BTC price as it is with everything else.

An oz of Gold costs about the amount it takes to get it out of the ground. Same with oil, copper, iPhones, whores, cocaine, apples, oranges, fish, widgets. Similarly, a bitcoin will find its value at about the amount of energy/time/knowledge/opportunity cost that it takes to produce one.

I can't believe that anyone would even dispute this. It's just economic reality. 'Money making machines' don't stay 'money making machines' for long.

PS. I'm not a miner. I bought my BTC.

The difference between bitcoins and gold and other products is that it does not matter how many people mine bitcoins - the supply of bitcoins is constant (up to minor fluctuations and assuming that the computing power of the bitcoin network mostly grows), the algorithm adjusts the difficulty to the computing power of the network so that there should always be about 50 new bitcoins every 10 minutes.  The price is relative to the supply and demand and in normal circumstances the supply depends on the cost and thus cost influences the price.   But it is not the case with bitcoin.

zby:
> 2. I don't think there are dark pool orders now - at least I cannot do any dark order now.  It would be nice if MtGox clarified this - but maybe that it too much to expect from them.

There are no dark pools now.

While ROI is calculated against capital investment, it does not assume the liquidation of capital. Now you could, of course, depreciate your capital, but that becomes rather insignificant with ROI in the mid triple digits.


While this is true, the question was weather we had reached parity NOW, and we have not. I don't see any way for the mining market to rationalize significantly expanding given the current legal and market uncertainty unless there is > 300% ROI on the day the hardware is ordered.

Bluff bid/ask orders attempt to manipulate the market by providing a false indicator to traders' and algorithms' depth-of-market decisions.  These are legal, and risk of actual order filling is reduced if a high-frequency algorithmic bot cancels the order in time.  On the other hand, actually placing orders to "paint the tape" may constitute illegal activity in regulated financial markets.  See http://en.wikipedia.org/wiki/Market_manipulation (http://en.wikipedia.org/wiki/Market_manipulation).

Your personal trading activity is stereotypical with regard to modern markets dominated by market-making algorithmic bots.  Such algorithms are not based upon emotions, i.e. greed and fear. Personal market making or day trading without the aid of a computer trading system is nowadays difficult. Of course there may be plenty of profit without a computer trading system - simply buy dips and hold, or even more simply - cost average bitcoin purchases and hold. 

See: http://en.wikipedia.org/wiki/Dollar_cost_averaging (http://en.wikipedia.org/wiki/Dollar_cost_averaging)