Bitcoin Forum

There's been a rally for an entire month... time for a correction.  I'm going to predict a target of around $2.5-3 for this correction, but definitely not <$2.  The correction will probably come in the next week or two.

4.25 is next target...

fyi  :D

The macro picture will determine which of you is right.  It's foolish to think bitcoin is completely separate from the rest of the economy.  However, the uncertainty in the wider picture combined with the steady rise for the past month makes me lean bullish.

+1

correction to 3-3.2 with following spike to 4.5-5 and back to 3.8-4

dec-jan

That would be fantastic.  My bot loves volatility.

Oh no, I'm beginning to think if we drop below 3.61, we're going down below 2

Too much renewed faith in the system to let it drop that low..  doubt it will hit below 3 for a long long time..

ever think the "rally" we have been seeing is a price correction, form the many months of value drop?
I think we'll see huge ups all year, next year
and even bigger ups the year after that.

for my new year resolution; I plan to spend some money in the bitcoin economy!  ;)

I have buys around 3.6 because of the trendline S3052 identified, so if we correct I would expect it to be hit

Of course, if it is broken we could have a larger correction

Either way I'm long term bullish

We'll probably be trading in a rather tight range until around 3-5th of January, where I will expect it to start another rally.

Edit: More like 4-6th of January after taking a second look.

How are you obtaining that figure?  Just tracing S3052's trendline up?

I had a quip but it turned into a slope :)

From another thread:


What caused the about turn in your forecast?

he's short on bitcoinica? What else makes anyone bearish on this forum. lol

Almost all of the posts in this subforum are propaganda. However, despite the likely bias of the OP, I tend to agree with his analysis. I think we will probably be seeing $3.20 again very soon, with further falls to about $2.60 over the next week or two. I don't think it will go much further than that. I liquidated some of my own holding earlier today, and am tentatively considering moving into fiat in the short term.

I like all the 'feelings' and I'm 'thinking' going on. Keep up the good work.  ;D

Personally, I am relying on my weegie board. It says after playing 'Chicago' backwards the price will fall to $3.85  ;D  JK

But seriously,

 Could people state the reasons for said feelings and thinking. I.E. Site statistics are declining, Christmas is coming and people will be converting to cash (although that didn't happen), the RSI is showing overbought and after backtesting (LOL) there should be a 20% correction downwards, etc..., etc...

I like to see these views and opinions other than feelings...

And if you by chance do find a correlation post it immediately so we can make it disappear.  ;D

The correction already happened, from $4.5 to $3.5.

The major players are too smart to take a dump on the rally this early, me thinks.  They'll bide their time, and wait till $10, at the least.  If we're going there, it will be sooner rather than later.

I would think that you should take the volume and depth at those prices.

Is volume going up or down? If volume is going down and price going down, what does this imply. (and permutations of the two)

What percentage of BTC are being used to purchase durable goods, etc... rather than just transactional.

Is their a 'hydrological cycle', ie Miners pay for their equipment and power bills in BTC and then the suppliers of said services use BTC to purchase their resources, etc... ?

Or is it just a means of moving money from and to one currency and country to another ?  If a combination of both, at what percentages?

Is the market 'Cornered' ?  How do you work within a 'cornered' market?

Can this data: http://www.alexa.com/siteinfo/mtgox.com  be put to any use?  Although there are some more detailed stats for Paid Stats.

Or

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

http://www.google.com/trends?q=bitcoincharts%2Cmtgox%2Cclarkmoody%2Cmtgoxlive&ctab=0&geo=all&date=all&sort=0


Personally,

 I 'feel' a good TA would entail a causation for events. Or at least trying to find the causation for events. Predicting behavior is like a meteorologist predicting weather. He only gets it right more than 50% of the time to win.

I could state the logic behind my opinion, but why should I give you the advantage of my analysis?
Oh yeah, because it might become a self fulfilling prophecy if enough people believe it. Fair enough...

http://img267.imageshack.us/img267/4964/chartxi.png

As you can see on the chart, we have had an RSI of over 70 for the past 6 days, with 32 days of positive divergence on the MCAD, and we are currently trading along the top range of the bollinger band. We hit a resistance of $4.5, bounced off it, and have had very weak buying activity since then. Also, you can see a hanging man doji on the candlestick chart 3 days ago. If the price closes below this doji, it is a strong signal to suggest the end of the rally.

In addition, I have been recording a historic market depth log, and the past few days have seen an increase in the ask side of the order book, associated with a significant drop in aggregate demand to the tune of about $150,000. The total demand on MtGox right now is $699,684. The total on the ask side is 202,637 btc. If all of the money on the bid side rushed into the ask side, the average price of a bitcoin would be $3.45, which is 50c below what we are currently trading at.

Since the start of the rally, about 200,000 new coins have been mined yet the total supply on mtgox has been diverging away from the relative total bitcoin supply. We should soon see a correction in this divergence when this month's newly mined bitcoins hit the markets, and this will be associated with a sharp drop in the price.

My opinions are not based on 'feelings' but real data.

Thank You,

That is speculation, much appreciated.

Do you put more weight on RSI or StochRSI as being a better indicator?

My analysis is based on these points:

1. Elliott waves.  I have a feeling that what we just experienced (1 month long rally) might've been II.b.1 (or however you say it).  Of course, Elliott waves are rather unreliable.
2. RSI at 70 for a while.
3. Daily parabolic SAR, a reliable indicator of massive selloffs, is approaching the price.  Last three times this happened:
(a) August selloff.  $13 -> $5.7
(b) Early September selloff.  $8 -> $4.2 low
(c) Mid-November selloff.  $3 -> $2
Yeah, yeah, sample size 3... but it's hard to get a larger sample size in the larger movements of Bitcoin markets :P
Also, it changes rarely, but when it changes, it has predicted 33-60% decreases, which is pretty damn interesting, if not completely predictive, in my book.
4. It's gone up, up, up for a month... it's simply time for a correction, which we haven't had on a large scale yet.

was't all that true before the jump on the 19th? what is different now?

so you think we are on a downtrend still or an uptrend like you said on another thread? II.b.1 being the wave you think we are in.. but it's unreliable.. Maybe you have some bids up? :)

This section of the forum is quite fun to keep up with. Interesting to read what people put up here based on btc market conditions.

Either way, I guess if you think past selloffs are indicative of future btc performance then it seems safe to assume you think we are still in bear territory and rally was just a correction of the long half year long downtrend. I hope we are past that though and finally moving upwards in the coming year.

What scares me the most, and I must discount until a certain price point, is the amount of unused BTC. The price is getting set by a relatively small amount of transactions based on the total BTC of 7.48 Million. I would try to apply the increase in volume activity with an increase in Ask volume to try and decide at what price points do people start to sell to claim profits.

The reason I discount the unused BTC, is if it wasn't heavily sold at $30, it probably will not be sold at anything <$30.

Although, I do wonder why? it wasn't sold at $30 in greater volume. Of course we had the 'crash', which I would have thought should have happened naturally rather than by a 'hack'.

The application of supply and demand of the miners, for me somewhat plays a role, since they removed the ability to mine from the GUI client. If they put that back in, then the supply and demand price means little since if miners can't afford to mine, the difficulty goes down possibly to a point of CPU client mining. Technically one could meet their own demand in a sense or at least with relatively a small amount of miners.

BTW, I didn't expect you to give away your analysis for anyones benefit, but just explain a little. Obviously if you find a correlation that works for you, you wouldn't tell a soul. :)

I know some discount TA as a joke in this market, but I do believe that when certain things occur others must happen. I.E. If it is 0º (F) the water will be frozen whether the temperature is going up or down and when it reaches a certain point it will melt.

It is the dam Timing, that screws with everything :)

Anyways, thanks for your views.

I've actually reevaluated my count.  I don't think it's III anymore, because it's entirely possible that netrin's count was actually wrong but this is still II.b.  I was led to believe that it was III through a false dichotomy that I established for myself, unfortunately.

Now that all the major indicators are saying it's overbought, I think the correction might come soon.

I'm with you, I called it as being a trap and I think I'll be proved right soon. 

OK, now look at the weekly RSI.

(Not that the RSI and bollinger bands have been the most reliable predictors of bitcoin price changes in the past).

And as for the bounce from $4.5, I prefer to see it as very weak selling activity since then.  Similar to just before, when it was hanging around $3.20 for a while, before the pop to $4.5.

I think Santa just bought that $30k wall at $4.00.  

*ahem

And I think it was the toothfairy who sold immediately after.

No, that was just a bot and it was very low volume.  

The buy took out a $30k wall at $4.0 and up to $4.10, it was over $50k in total.  And it was Santa Claus.

MtGoxLive shows about 10,000 btc volume at the peak, and about 18,500 at the trough, so the sell was almost equal in magnitude to the buy as far as I can tell.

Ah, yes it seems you are correct.  Hmm.. *ponders bot algorithm*

Hey guys... Amount bought = amount sold - fees.

And amount sold = amount bought + fees. Obviously, there are two parties on the end of every trade. But there is a big difference between a bid and an ask order, as the price is affected differently /stating the obvious.

Today I made $782... Thanks santa  ;D

Also just realised I bought 100BTC on tradehill at 2.8 at some point :D ... fuckin tradehill eh?

What do you mean?  Do you mean you had an order execute last night on Tradehill for $2.80?  Or are you saying you forgot you had an order on Tradhill from a month ago that executed?  Either way, rock on!

Is this the major correction this thread has been discussing?  ;D

Dec. 16, 2011, 5:12 a.m. Had the order in probably since the 10th (last time it was down that low), but just saw it now, tryna sell it now at 4.35, thats the sell point i made the money off on mtgox today too.

Also just lookin at the charts for Dec 16th, i probably even got lucky buying that low.... veeeery bottom of the barrel, probably very few trades executed below that 2.8 on that day.

I got lucky also. I put in a buy at ~$3.80 before going to bed. Woke up to find the price dipped down to my price then rocketed up to $4.28. Santa likes me. :D

the fuck, another rally!?

making me confused... maybe this is III after all

Oh it is... oh it is!!! Merry Christmas!

Will it touch $5.00?

Told you guys, 4.25 was the next target..


Thank you, thank you... :D

Nice!

LOL!

you do know that Santa Claus has alotta money right?

I'm pretty sure Papa Christmas is like the fed, he doesnt need to own that much fiat, he can create as much as he needs by deminishing the value of what he ows other kindred spirits.

There really isn't a way to know this, but looking at the 1 minute charts it almost looks like somebody sold 18k BTC, the price immediately bounced back and began moving slightly up with strong support and the person who sold panicked and bought back in.  That's wildly speculative, but, hey, that's what this place is for, right?

If you're talking about that initial pop above $4, the buy was first and it was about 10k BTC.  The sell followed immediately afterwards and it was about 9k BTC.  But then the bids filled up really quick.

Here comes Santa Claus, here comes Santa Claus
Right down Santa Claus lane..

Thanks.  I wasn't watching at the time and it's always hard to tell exactly how things went from the charts.  The bids have been filling in quite rapidly.  Just a couple of days ago the asks to $5 and bids to $3 were pretty even in terms of bitcoin depth at around 50,000.  Now it's 82,000 to $3 and 28,000 to $5.  That's a pretty dramatic shift.

Pretty nice press lately. Bitcoin is proving that it's not going anywhere, that it's just getting started. This is basically what I've been saying for a long time, now we are starting the slow gradual process of convincing the skeptics.

This process has just started, reading comments from the numerous articles lately lead to the conclusion that even among the tech-minded, a good number of people are still totally clueless of Bitcoin and the revolutionary potential it has.

My own view is more bullish than ever. From a technical price standpoint and most of all, because I love Bitcoin. I want to keep a portion of my wealth as bitcoins. In fact, I decided today that I will increase that portion by a few percentages. I feel it's a good idea right now.

yes, me too.  i spent the last week taking a break from my blog to accumulate even more Bitcoin.  at these prices how could i not?

Though I believe we will definitely have a reasonably large correction soon (that's just how markets work...), I'm with you.  We'll see triple digits in 2013, if not 2012 :)

lol indeed

https://i.imgur.com/tRYfR.png

Hey if this is your idea of a failure I can live with this

I said trap, not failure.  Interesting you think the two are the same though, they really aren't. 

hey if this is your idea of a trap I can live with this

Me too, already hit my bids.

glad to hear you're buying!

amount sold + fee = amount bougt + fee | fee same for both

amount sold = amount bought

maybe mtgox is not a "sane" market and technical analysis just wont work reliably (yet).. many black swans.

just cause it seems interesting to me, and has been there for a long time now on intersango:

you see that buy-order of 1200 BTC? ..there are alot more buy orders on intersango in euro, than bitcoin are beeing offered to sell at this price levels. not that  intersango is big at all or something, but its comfortable, charges no fees or very small fees and is getting bigger and bigger. i prefer it over MTGOX.

http://img502.imageshack.us/img502/7749/inters.png

you're clearly a seller. I'm a buyer, still use intersango for my fresh money. We'll likely make a deal soon ;)

I, too, encourage sellers to use intersango. Good prices, guys ;) and nice SEPA working well.

lol.

i don't mine bitcoins - in fact i have been buying them all the time throught the last month^^

I also like Intersango. Money getting there next day, not in 4 days like in mtgox.

I've been doing quite a bit of trading on Intersango as well, mostly on the GBP market (which is quite liquid) and on the EUR and USD markets as well.

Seems like the EUR market is a bit overpriced and has been for a while.  Seems everyone over there wants bitcoins and nobody wants to sell for Euros.

to over-generalize: yeah, the europeans are buying. americans and rest of world with low power cost still mining.

what do you guys think, mega rally brewing on its way or not yet?

Oh the irony  ;D

Mega rally on its way. Very soon a mega rally will always be on its way, right after the previous mega rally of course. Hehehe. =)

Steady growth seems to be what is happening, rather than a mega rally :)

once it reaches $5, all bets on steady slow climb are off imo it will rather turn into another snowball effect

Indeed at the moment, I've been enjoying it, but it was quite something to go from 3.25 to 4.5 in the blink of an eye. I'm mostly just thinking of history repeating itself from the summer. We shall see how it plays out.

Slow and steady growth is much healthier imo. So wild spikes on charts dont scare potential investors.

Wow, the buy pressure is ramping up again... small bidwall just went up at 4.16.

most buyers here are thinking that if they just get another chance at $2, they promise this time they will buy.

problem is its very difficult to pick the bottom exactly so if you're bullish long term, you might as well buy now.  we've already had our double bottom chance come and go.

yup last chance to grab coins cheaper than 5 is now...

Buy now while you got a chance

I believe the volume is important with price increase. If volume is growing with price, OK. If volume is stagnant or decreasing with price increase, not good.

You can price yourself out of the market. I would think, while it might initially hurt miners, have a low entry threshold for new comers would in the long run benefit the community. I would also think the MTGOX would rather make a small amount of fees off of a larger community rather than larger fees off of a small community.

If the price ever gets to parity again and there is the right market in place, I would think you would see an explosion in the use of bitcoins.

Most people still don't know or trust bitcoins, yet !!!

The un-used BTC also needs to come into play a little more. I don't like the idea that on a percentage wise basis; the un-used BTC could collapse the market. Saving is good, but to much saving is bad. IMHO.

It may still touch $5 before end of year. I'm shorting now, waiting for a big dump in the $4-4.15 range.

Only considering a daily chart, yea, I might short too. but longer period, shorter periods, and volume based charts look fine. and that's only looking at charts, anyway. ;)

The chart below is why I think any rallies in the short term are going to be abruptly corrected:

http://img23.imageshack.us/img23/1986/chartnm.png

The red line shows the total bitcoin supply - a linear increase.
I have adjusted it to fit on the scale of the blue line, which represents the total supply on mtgox.

Notice the divergence of the two lines on the right, compared with left when I began recording the datapoints.
A large volume of btc is sitting out there somewhere just waiting to be sold.

Is it possible that this just means other exchanges are picking up the slack? Or that more people are trading outside of exchanges (possibly for goods and services instead of currency)?

Why does everyone assume ALL the mined coins are dumped instantly ?

I think it's unreasonable to make that assumption.

(so it doesn't get taken 'the wrong way'. The trollface is because I am reminded of that image every time I see teflone's avatar. No malice or whathaveyou intended. :D

why would you make that assumption?  i could just as easily look at that graph and say the diminishing volume at mtgox means less ppl are wanting to sell and call that bullish and thats even with the total supply rising.

i for one own a significant amt of bitcoins and am not waiting to sell anything...

I just hope this "correction" keeps up! :P

I'm going to tentatively say that we might see something interesting at 8 PM EST.  Don't be disappointed if this doesn't play out the way I expect it to, but something might happen.

What makes you think that? :)

Aren’t the numbers on the y axis wrong? There are currently just below 8 million BTC.

That's the time when we reach 4.3-4.35, assuming parabolic movement :P
Of course, the time window is 8PM - midnight.  4.3 - 4.35 is a crucial resistance level, and if we break it, something WILL happen.
edit: oh man something is already happening.  Look at mtgoxlive... no spike, but plenty of buying volume.

this is a rally, son!

Bidwalls are going up now... watch out.
edit :HOLY SHIT!!!!

it's accelerating.... 422 viewers at mtgoxlive.

liquidated at a nice profit

you were short so how's that?

hahahaha.. nailed

i wasnt, im short now

"I'm shorting now?"

you need to keep up, that was so 10 minutes ago lol

look guys, a daytrader on bitcoinica!  :O

Come on, baby!  Keep on correcting!!

Is it just me, or can't I buy more Bitcoins on Bitcoinica to go long with? It says "No Reserve" when I place an order. Are so many people long that it actually drained their Mtgox account completely from all their USD? :p ::) Pretty Bullish sign isn't it?

My oscillator is showing some scary divergence on the 480 minute chart, and has almost established a peak on the daily chart :(
I wonder if that means the rally is almost over.

If that's the case, it indicates bullishness among bitcoinica users, but it is a tempting opportunity for anyone with the funds to try and squeeze those longs.

What the hell. A friend of mine can't even liquidate his short because of the "no reserve" error. Sucks being stuck with a short if you think the market is going to go up...

Are you kidding me?

This would be upsetting if it weren't hearsay

Nope. And there seem to be more people with the same problem: http://help.bitcoinica.com/discussions/questions/48-no-reserve

Looks like their entire balance is currently in BTC, preventing everyone from going long or from liquidating their shorts...

hahahahahaha!  bullish sign.  When zhoutong gets more float, we are going to see a massive spike.

http://i41.tinypic.com/maa0qw.png

Here's two orders. One I tried to go long for 1BTC, which didn't work. Then I went short for 0.1BTC as a test, which did work. When I tried to liquidate the position, another order of 0.1BTC showed up, which again isn't able to go through.

Huh, and I was just wondering why the volume on Mt. Gox is so low despite the interesting situation. Just how much of the trading on Gox does Bitcoinica drive these days?

They are responsible for roughly 1/4 to 1/3 of Mtgox's volume.

??? :o

zhoutong better fix this ASAP.

How? If Bitcoinica's out of USD, they either need to get a loan somewhere or some longs need to be liquidated. Before long, the latter will happen, but it's an interesting question how the folks left hanging onto their shorts will be dealt with if the rates go up before things balance out.

Or am I completely missing something here?

The only way to fix this is involves selling a large amount of btc in order to restore bitcoinica's USD reserve.
I think that bid wall is going to get eaten up pretty soon.

Repost:
https://bitcointalk.org/index.php?topic=55931.0
Official Bitcoinica statement: they aren't actually out of funds, and the problem will be fixed in a couple of hours.  

Why is the official bitcoinica line coming via you and not bitcoinica themselves? Did you contact them about this or did you hear about it elsewhere? So is this for sure a software problem? I wonder if they are going to 'fix' it by selling a ton of btc.

Well, the statement says they aren't actually out of money, so they shouldn't have to sell BTC.

Yeah, I did see that part, but I would like to hear it from zhou directly.

I've contacted Jon (COO).  He has promised to alert Zhou when he wakes up and says the problem should be fixed within a couple of hours.  If you want, I can get Jon to post here.

How are they going to handle people losing money on shorts they can't liquidate?

For further inquiries, please contact Jon yourselves.  He will be more than happy to respond to questions and comments related to this incident.

jon@bitcoinica.com

sounds like to me the only "selling" will come from "shorting" into the bid walls.  who's crazy enough to do that right now?

see, this is the problem with running a bucket shop with one 17 yo kid.  even if he's the most brilliant 17 yo around his algorithm apparently isn't as automated as he'd like us to believe.  in the meantime, the market is running away from him and the shorts.

expect to be Zhoutawnged!

hmm, "no reserve" on sells too?

I imagine they have bigger fish to fry right now than dicking around on the forums.

Does anyone know what exactly mean by "No Reserve"? Can't buy or sell, or this is the Zhoutong's way to stabilize Bitcoin market? >:(

Bitcoinica appears to be functioning again.

buying works?!

Momentarily… Too many buy orders.

The door shut seconds after...

Maybe Bitcoinica should just dump all the BTC they have in order to get USD, which in the process could very well trigger a panic and cause forced liquidations of everyone going long? :p

Maybe we should leave this to some speculators that want to take advantage of the long squeeze.

We know how profitable this can be, but sorry, evil doesn't belong here.

oh, this is beautiful!

time for a run on the illegal loan entity bank thing.

I hate to say I told you so. Actually, no... I love it.
Get your bitcoins out of this bucket shop now, while you still can.

Today's been an interesting day... I swear I didn't have insider knowledge xD

Good call.

didn't you say something was going to happen at 8pm?  you didn't say the price was going UP!

you did say so.

"Curiouser and curiouser!" cried Alice...

A correction is coming, but it will be from closer to $10, back down towards the new support (which will be the old resistance that we are facing now: $5).

The pattern since the 20th, broke out of a symmetric triangle (itself a continuation pattern), and has formed an ascending triangle (an even stronger continuation pattern).  So the indicator is that the trend will continue, and by now its pretty obvious what the trend is.

Why would the price itself (as opposed to maybe it's steadyness) have an effect on peoples decision to use bitcoin? It doesn't matter if you buy 1 BTC for $10 and then use 1 BTC to buy gardening supplies as opposed to buying 10 BTC for $10 to get the same amount of gardening supplies.

What you say sounds to me like: "we need to inflate the money supply to support a growing economy", which is total bullshit.

Any amount of money can support any size of economy as long as divisibilty of the money is given (which is clearly the case for bitcoin).

Demand for "money" (don't confuse with demand for wealth, which always exists), in the sense that people need more liquid buying power to be able to do more substantial transactions whenever they please, will automatically lead to lower price levels (of goods and services), because people will reduce their demand for goods (save some money) or even sell goods (acquire some money). This mechanism (essentially a feedback loop that regulates the price of money) allowed the gold standard (essentially limited amount of money) to be so successful in supporting a growing economy at various times and in various places throughout history.

You forget the simple fact that bitcoins are limited. If price is 10$, it means a small number of ppl use bitcoin. If more ppl use it and buy them, their price MUST increase

Fact: Any amount of money can support any size of economy.
Fallacy: Any change in money supply can support any growth of economy.

I wouldn't be surprised at a correction down to $3 or even below in the next couple weeks, though I don't think it's likely.

Zhoutong has said that most of his users are long right now, and I presume this is on the order of tens of thousands of coins.

If there were a 30k btc dump down to $3.80, liquidation of 10-to-1 leveraged longs would start, which might drop the price to $3.50 - $3.60 range. There's very little support under $3.50, with only 5k btc between $3.21 and $3.49.  If the price does managed to break $3.60 or so, the spread would start liquidating 5-to-1 leveraged longs taken at $4.20, and would certainly drive the price to $3.00-$3.10 given the shallow support below $3.50.

There's another 70k btc in bids between $3 and $2.  If $2.50 is breached from panic selling, recently taken 2.5-to-1 long leveraged positions would start being liquidated, and would push the price close to $2.  It would be an epic mess.

For whatever it's worth, I'm mostly in USD right now, and have bids in the $2-$3 range to catch the dagger on the offchance it falls.  I hope it doesn't, but I really have no idea what's going to happen next.

I should add that if there were a 30k btc buy instead of a 30k btc sell, a short squeeze would drive the price straight to $5.  Basically, any big move is amplified due to rampant leveraging combined with irrational exuberance and irrational bearishness (Nagleism?).  I think it's worth keeping this fundamental in mind when placing your bet.

I'm glad to hear that some people cashing out and holding USD right now.  We'll have these conservative, impatient traders to thank for pushing this thing past $5 as they're chasing the rally (if we rally, that is).

Based on a little correspondence with Zhoutong I have no reason to be overly critical. In fact I had a very good customer service experience with him with regard to a short liquidation that seemed overpriced. His explanation was honest and informative as were the actions he took to address the matter. I couldn't give him anything less than a grade of A on this particular situation along with hearty encouragement to keep up the good work.

However, IMO he should probably tread carefully around making statements such as the above, assuming he actually did. It would be best to either keep the pool dark and the customer's positions private, or to make systematic disclosures in a consistent fashion visible to the entire customer base through the web site. Statements like "most of his users are long right now" are not particularly helpful without quantitative grounding and worst case could certainly be construed as attempts at manipulation.

In this example, on the one hand one could conclude that there's a lot of coins long as you do. On the other hand. the net customer positions at any brokerage are nearly always going to be long, except in the specific cases of securities that are heavily shorted. The statement could therefore be entirely true and also quite devoid of useful meaning.

One of the basic principles of successfully handing out financial analysis is to always have an explanation no matter what may actually happen. If you follow the U.S. stock market you may know of a fellow named James Cramer, he's a master of this. He often has 2 or 3 explanations such that one can be dredged up to support just about any viewpoint or outcome. At the same time he's well known for a track record that has been flat over time. Since he makes his living not from investing but as a sort of entertainer/stand up comedian/raconteur this is ideal, it makes any suggestion of manipulation hard to substantiate. He's a crafty little bastard, and no one should take him seriously other than as a data point regarding a certain type of hustle  :)

That his customers were long was disclosed by Zhoutong last night after bitcoinica ran out of USD.  I for one am boycotting Bitcoinica until they move away from fractional reserve and hold assets to back every position.  Regarding disclosure, I would prefer the long vs. short balance updated in real time on the site, but I will not boycott for that if they solve the backing issue.  With realtime long/short balance users would know if they were taking a position that had a large risk of being squeezed.

I believe even without him confirming it (though he almost had to given the "reserve error"), anyone with half a brain could guess most people on Bitcoinica were long and that was why they ran out of funds. Anyway, I'm sticking to regular MtGox trading now; my attempts at using Bitcoinica have been unsuccessful, and leverage means I lost more money than if I had just "gambled" on MtGox.

Fair enough. Here at the Church of Whatever Amuses Right Now, Bitcoinica is still the most interesting game in Bitcoinsville. Of course that can change in a New York minute. A few years ago Etrade jerked my chain the wrong way when I was stuck with a captive account there, later on it was with great pleasure I eventually took them out for a nice little drive in the country and buried the relationship in an unmarked grave, but not before I checked for harvestable gold teeth  ;D

Why do you think they do fractional reserve?  Zhoutong has denied this many times - is he lying?  As to the USD shortage - this is easily explained without any conspiracy - when people want to go long on Bitcoinica, Bitcoinica needs to buy BTC on MtGox with their USD funds and those funds are not unlimited - so when they are drained they refuse to let people go long.  This is a result of them not wanting to have uncovered positions - quite the opposite of what you are suggesting.

By they way I hate Bitcoinica for the volatility it produces.

Thanks for the smile, please share it. Maybe you and this guy oughta leg wrestle and put it on YouTube  ;D

Heck, I'd throw a few bitcoins to see that, this could go big, maybe even Pay-Per-View big  :P

https://bitcointalk.org/index.php?topic=54390.msg649199#msg649199

Conservative, impatient traders? Isn't that a bit of an oxymoron?
To me, it seems just as likely that those who are holding btc will end up pushing the price down further when they sell into a falling market.
Oh and if we rally? What do you think has been happening for the past 30+ days?

What he said was this:
If he'd been craftier, he may have been able to communicate that there was a temporary problem without revealed this interesting bit of market data about market longs.  But people would have, well, speculated about the reason, so it was likely fruitless to lie about the reason.

But I think you're right that his website would have been a better place for the explanation.  Then again, someone else on this forum wrote up a "How Bitcoinica Works" document for him, something that should have been written long ago & made available at bitcoinica.com, so at least he's consistent about posting info here. Alas, a number of interesting tidbits of market information are only found on this forum, or on IRC as a results of semi-random MagicalTux comments. Then again, the market is so small, it's almost like non-arms-length transactions: there's only a few dozen folks that really have their hands up in this beast.

As this is the first time Bitcoinica has run out of money, it appears quite meaningful.  One would hope that they've amassed some profits from their operations since their grand opening several moons ago, and that they have more capital on hand now than they've ever had before, and yet, they still ran out of cash.

Ah yes, I've seen him, entertaining chap, and I don't believe a word he says.  Reminds me of how the nightly local newscast pronounces any movement of the stock market, up or down, to be the result of a single, easy to articulate reason, like "inflation fears" or "sunspots".

How would you have a short squeeze when zhoutong's out of money? ;)

not a short squeeze per se but it would wipe out their accts by being Zhoutonged.

The problem is there were short positions that were uncovered because their USD was used to buy BTC for the longs.

I don't think Zhou used the term "fractional reserve" properly here. He had full reserve of his users accounts, just not in USD. It would be fractional reserve if the value of the bitcoin he held + the value of USD he held were less than the stated amount of the sum of his users accounts.

i think you're right.  his English has caused alot of confusion.

What if the price moved down but not enough to force any liquidations and the longs stood firm.  At that point, he would not have enough reserves.

there would too be reserves. they would be BTC reserves waiting for people to sell.

wouldn't this just be a "paper loss" since the shorts couldn't cover their positions despite being in a profitable position? 

Yea, I suppose.  A patient trader ought to be equally patient to buy as to sell.  But a conservative trader will be quicker on the sell.  That'll protect him from a bear market, but in a bull market he'll tend to lose potential gains.  During the infamous bubble of April-June, my risk profile was upside-down (lost gains during the bull, then was unprotected for the bear), which only helped to inflate the bubble.

Being conservative is smart, but that's easy to forget when you're chasing a rally.  If you have an appetite for risk, better to let it taper off as your gains increase, rather than build up as they pass on by.


I guess I'll agree here.  Whether you buy into a rising market or sell into a falling one, you're equally guilty of pushing the market further from equilibrium. 


Retracing the early October drop from $5?

Exactly... Screen says I'm winning, and my call was correct but I can't take my profits.  Worse yet, I can't get those profits until a long takes a loss or it moves far enough to force such.

*no I wasn't really short*

you were smart to vacate Bitcoinica...

Exactly! Nothing to add to this post. This is exactly what happened. :)

I already pointed out the problem with this.  The price can change, and if you're holding the wrong asset you lose.  Period.  No USD + downswing = reserves are now fractional.

Wrong. If your holding the wrong asset the customer that took that position loses, and the loss is deducted from the customer's balance, so that Bitcoinica's balance stays equal. Please read the topic that explains how hedging on Bitcoinica works. Bitcoinica has a certain BTC and USD balance, and not accounting for spreads, those balances would stay exactly the same if everyone liquidates. Those imbalances only exist temporarily as long as people have open positions.

But what if the longs buy the dips or add to their margin with a BTC deposit?  If they stand firm, bitcoinica can't pay out the short's profits.  If you can't see the problem with this I give up.  If I ever get the capital, I'll fuck all the shorts by depositing 100k BTC and buying everything I can long without leverage.  I'll buy up any sells and no shorts will be able to take their profits when the price recovers from the spike I caused.  The only thing preventing this is the fact that if a single entity did it, Zhoutong could fuck them to save his ass.

wouldn't people sell after seeing the price spike that would cause? I'm not saying that things can't go horribly bad for bitcoinica customers, but some of the shorts would would be able to cover from people selling to reap gains.

+1
I wish I had more capital too! :D

99% of the time, yes.  But maybe they get greedy.  I'm not saying it will happen, just that the possibility exists.  The only solution to this is set aside funds for all positions, but then Bitcoinica wouldn't be able to offer nearly as much total leverage as they do now.

Are we correcting yet?

shame on you, dear. :D

Yes, and we have been for about a month now, it may bot be the direction some want but that does not mean it is not a correction.

We certainly are...we're correcting a few idiots who keep "warning" us about how the price is going to be pennies soon.  ;D