Bitcoin Forum

How to predict crash in bitcoin price or any bubble in general? It's not all random and some guys seem to guess right when that happen. Any tips or insights?

Well, you can't..

I prefer to predict the crash of fiat currency

You can't predict the market trends for certain, but you can make an informed guess.

So how do make a well informed guess with probability of happening over 50%?

You read/get the news about some catastrophic event for Bitcoin and react fast.
But you will have to confirm that it's true and that this event most likely has an enormous impact within minutes (more time, if you got this as insider).
That's the only way to reach such a good probability.

first you need a bubble and I dont think we have one yet

when you find posts here stating that bitcoin has doubled in the last few days faster and faster and that it will take another few days for singularity to occur...

It's a game of poker.  It's psychology - you have to guess when everyone else will start selling.  But there's no way to know what everyone else is thinking.  And since by that point everyone knows it's a bubble, sentiment can change very rapidly - once people think the bubble is bursting, they try to get out with their profits, making the crash a self-fulfilling prophesy.

Judging when a bubble will burst is notoriously difficult, and requires a lot of luck - for each person who guessed right there will be a dozen who guessed wrong.

roy

Check the charts on a constant basis.

http://bitcoincharts.com/charts/bitstampUSD#rg360zigWeeklyztgSza1gSMAzm1g7za2gEMAzm2g14zxzi1gUOzi2gMACDzi3gRSIzi4gCCIzvzl

Use quantum theory

Quantum theory? :D How?

You are asking the right question.

To make a well informed guess you must be well informed. In order to be well informed you must inform a lot. Reading a lot about bitcoin here, on reddit. Be also well informed about the broader economy, cycles, money, banking, markets, politics, psychology, entrepreneurship, investing, innovation, history etc. Ie: a vivid curiosity for knowledge and understanding is required.

Then your probability calculation will be better informed.

Capital allocation strategy is also crucial. It does not make sense to go all out on a probability of only 60% for a correction. Use the Kelly criterion (http://dqydj.net/optimal-asset-allocation-with-the-kelly-criterion/) to scientifically calculate how much you should bet on a certain odd.

And learning from your mistakes. When you end up losing money, was your probability calculation correct looking back on it? And did you scale the capital correctly? Or did greed or fear influence your probability estimation or allocation decision?


After you did all that you may decide it ain't worth it and switch to a simple buy and hold. ;)

http://der-mann-und-sein-auto.de/wp-content/uploads/2011/07/757609629_508f24829d.jpg

then return and post here  :D

What is this?

Magic 8-Ball (http://"http://en.wikipedia.org/wiki/Magic_8-Ball")

something like that:
http://magische-miesmuschel.com/images/muschel.jpg

Buy as much bitcoins as possible, then wait a year without looking at charts. After that you will get more profit than those who spend sleepless nights "predicting" crashes and bubbles.

P.S. Even those who bought at $266 in April 2013 will have significant profit a year after if they were patient enough and didn't sell with loss.

This is good advice.

I wish I could do that but I am a grad student at the moment and my income is rather sporadic so I place orders at way below market value, and wait patiently :)

i follow a couple of solid analysts and try to get a feel for the market..... and then since i can't crystal ball, i just do dollar costs averaging and set limit orders up and down to take advantage of price movement.

I think if you see a huge spike, and it continues, there will probably be a buble

easy - use a crystal ball.  ;)

Read all the news and apply various trend analysis to all the charts.  Then buy or sell based on that.  You'll probably be correct half the time.  You'll at least generate a lot of fees for the exchanges who will love you.

Wow, thanks for your post. It looks it takes a lot of time to even have a chance to guess it right. You are simply holding or are you trying to earn something more? :)

I was before a one having sleepless nights but I hadn't enough info about investing. I lost some money and still loosing (I have some LTCs). Now I try to know more and decide if it's worth that time. So you are not trading yourself?

Do you have some sources you could recommend? Have you read some books or which experts are you checking?

Figure out all of the things that could go wrong with Bitcoin. Then get inside information from all angles of those that could be involved in such a thing and when that bad thing happens, take advantage of the impending price drop.

For Silk Road all you had to do was track down who the guy was that was running it and monitor him and the FBI to see when they arrest him.

There was the bug in the code early in the year, you could have learned the code and found the bug yourself and waited to see if anyone else found it as well. When they did, sell.

You could have found out who Pirate was and figured out when he was going to start defaulting on all of his promises.

When the government stole MtGox's money you could have had a mole in the government to tell you before they did it.

All very simple things that could be done. Find out the next thing that will drop the price and just time it.

So you think only way to predict such thing is only via inside information?

Slowly purchase bitcoin, as much as you can afford (to lose).. If bitcoin takes a dive for some reason, buy as much as you can, it will recover.. I Plan on using my coins for retirement, so the only time Ill sale any is if its my only option. The one thing that i've learned with  bitcoin is that with every crash there has been a recovery, and vice-versa.

Don't worry about the small dips and gains, over all, btc is cheap right now. Ill keep buying, although the amounts will be less and less as the bitcoin continues to rise.

I think this is a great advice! I always worry about bitcoin where some crash occur but in some time it's recovered.

It is a way. All you need is all knowledge of everything and you are all set.

Ok, I'll take it as option. You may or may not obtain this kind of information.

Have you heard about Black swan theory? http://en.wikipedia.org/wiki/Black_swan_theory (http://en.wikipedia.org/wiki/Black_swan_theory)

How to predict a crash:

1) The price of bitcoin starts going up exponentially over a short period of time.  About a week.

2) Coupled with the above, this forum becomes full of posts predicting the price doubling by next week and so on.  See March/April 2013 posts.

You then know it's time to sell.  Knowing when to buy is the harder part.

Hey there, your best bet is to check for patterns, and compare the charts... and monitor them closely every day. Check the news all the time about bitcoin. Little hint though, bitcoin in some way is kind of like gold in the sense that it's defensive. I noticed that when there's fear about the general state of the economy, BTC tends to go up like gold.. and when the economy is doing well, BTC tends to go lower. Just an observation I noticed, not an expert here.

I've still got the same coins I had at the beginning of this year. Plus a lot more newly bought ones to accompany them.

Still yet to ever sell a coin & I'm well and truly in profit, just hang tight my friend.

Crystal ball? What is this nonsense?

Just ask the all-knowing one.

It says that the price will go to $240 before diving to $40. Remember, this is what it said. Take it as a mountain of salt.

Very true...the worst time to buy is when everyone is excited about how rich they are going to be.


The best time to buy is when even you believe that Bitcoin has failed and people should just get out what they can before it falls to zero.

When mainstream news pundits are talking about the amazing price growth, that's early warning. So far *crickets*

Mainstream news pundits always include the word "bubble" whenever mentioning Bitcoin and a rise in price.

It'll be hard for them to say that if we clear $300 when they said the same thing six months ago and it's already left that bubble peak in the dust. People will be thinking, "Shit this thing has more lives than a cat! It's not stopping!" Then we could see a *real* bubble.

there are also fibonacci retracements...

If Mtgox gets sized again, then you should expect rapid price drop.

It's just a matter of time when they get sized again....

... but it won't kill Bitcoin...

Perfect time to buy!!

Someone should double check me, but bitstamp is hovering at almost exactly the 61.8% fib retracement from the earlier year high to the low that followed a couple days later...

I think the emergence of China has invalidated any form of TA that could be used based on previous charts (if TA could ever even have been used on bitcoin in the first place). Suddenly the market needs to correct to accept the injection of billions of Yuan.

How accurate is that? Have you used them in the past?

That's certainly a possibility. For example, even if Bitcoin were only used outside of China, we would still expect exponential growth. With the addition of China growth can be faster. Not double exponential, but faster than it was. However, this assumes that China was not already part of the exponential growth so far. Still, Japan for example is not part of it as there is almost no adoption in Japan. If Japan jumps aboard, price could again go up faster. The old exponential curves would have to be slightly updated. Though given how fast the growth is (10x per year), adding in China or Japan is only like fast-forwarding a few weeks perhaps.

well... some people say that the 61.8 or the 38.2 fib act as resistance/support...  the 61.8 fib on bitstamp is at 177 and mtgox is 183, and we are over both of them.

but then again this market is really f--ked up so who knows, we could be pissing into the wind and not know it

You can't really predict a crash, but only guess.

I've speculated away quite a few BTC to gain that insight, reading TA and all that shit. If one wants to fuck around daytrading it's better and less expensive to buy some alts and play pump and dump. My BTC are back in paperwallet to stay for good this time.

When price fluctuates, dollar cost averaging is a good idea. When price grows, it isn't.

What's the difference between bitcoin market and other markets? Why is that fucked up?

Bitcoin is tiny compared to most markets.  This results in way more volatility and way less liquidity.

most of all, bitcoin is a technology. not a stock. its "rate" may appear like a stock chart but pictures something completly different: adaption.
take mobile phones. cool technology, everyone wants to have it, everyone buys into it and a few company giants get incredibly rich. did anyone shout "ponzi" here? bitcoin is a cool technology. an incredibly fast growing stable network, programmable money, internet cash.... you want to be part of it ? you know what?: it´s free. it´s already there. everyone with internet access can participate within seconds. feel free to take a ride.
and indeed it will be a ride. bitcoin combines money with the net. the web gets "monetized", some bigger chunks of the economy will start to ride/exist online. the internet will become an universal tool to transfer private or public wealth.
since it had to start from small it has a direction/momentum. as a technological infrastructure it has to level up with the old technolgogy it will replace. this up-leveling is the ride you are experiencing and interpreting as stock-chart behaviour.
again, bitcoin is a cool technology, soon everyone might want to have some, just like other every technology. but this time it´s not phones, it´s our money. we will have a lot of fun, be prepared.

600watt,I agree with you. Once we pass the treshold it'll be mainstream and after that we won't even consider it as someting "new". It'll be just part of our lives not realizing it wasn't like this before.

Have you read something from Kevin Kelly? Great author writing about technology/technium. -> kk.org

It's different from other markets because it's difficult to get in and out.  Buying and selling BTC are not really easy.  Hell, holding BTC isn't even easy.

Is that working out for you?

I'm not that patient. I simply bought/buy and hold. I figure it's only going up, so if I'm down a bit now, it's only temporary, and I'm better off simply locking in the long term value.

I invest all my btcs to ltc some time ago but now ltc's future is as bright as it was. Since then I got some BTCs and holding them. I think best thing to do if you don't know how to predict things.

That seems to be the smartest way in my opinion. This isn't going down and stay there for long

Nobody here can answer this question.

when i do this, i occasionally get a catch (it is like every few months during reversals and random flash crashes, sometimes i bid too low or think it will fall lower than it does but i rather be safe, and i am up a lot...), and then i can sometimes double my money and make a stack ;)

if i even get tempted to day trade i make like way lower returns with a lot more effort.

and as i said i don't have regular income as a student and i don't want to worry about btc crashing 80% while i am writing my thesis and thinking sh-t i need to sell 10% of my btc just to pay my rent, etc...

This is what I wanted to hear. I was trying to daytrade but it consume so much time and profit zero. How have you learned that? Could you please give me some advices?

Not sure I can give any good advice other then just everday adjust your order to 30% under market price before you go to sleep...  one day you win the lottery... for example look at the night sr was taken down (it was night time for me)

Then do not get too greedy, I usually am happy with 50%, but definitely at 100% you should take out your original buy amount.

Also I just noticed that the all time high was actually much higher on btchina, it was something like 300.  Since they lead the rally, I need to figure out what the fibonacci retracements would be for them.

How do you mean being happy with 50% or 100%? So you buy it 30% cheaper and sell back when you earn 150% to 200% of originial amount?

For it to hit $40 the NSA would have to come out and says they are going to focus all their resources on destroying Bitcoin.

That gives me an idea on how to get cheap coins, if i can fake some news articles.

This guy, Didier Sornette, can, and has proven it:
http://www.ted.com/talks/didier_sornette_how_we_can_predict_the_next_financial_crisis.html

Probably related to Log Periodic Power Law (LPPL) crash prediction:
http://www2.math.su.se/matstat/reports/serieb/2009/rep7/report.pdf

I'm working on my prediction, trying to use LPPL applied to Bitcoin data. Will post when I have results!

Some more, the Bubble Index:
http://www.prlog.org/12161811-the-bubble-index-predicting-stock-market-crashes.html

If you could predict it, so could the majority, so they'd get out in time and sell before the crash. Which would actually make the crash happen earlier. Which, if predicted, would recursively cause the crash to occur even earlier. And so- OMG, that means it's about to crash!! SELL SELL ;D

One can only predict if it will happen, not when.