Bitcoin Forum

It's because of bitcoinica. When there were no mass adoption of bitcoinica, the price was $2.
After that many bulls come to bitcoinica (https://bitcointalk.org/index.php?topic=58771.0) and take long position with 2,5 leverage.
This lead to the current situation ($2 + $2 * 2,5 = 7)
when bitcoinica is constantly showing "no buys" sign.

You got it... Bitcoinica users magically set the price at 7 with your flawless maths.

You got it wrong. The price was $7 before the adoption of bitcoinica. That was in September 2011.

I don't see logic. The price of $7 was in the mid of May 2011 (that point is more relevant to the current situation than september).
Both that points are irrelevant to my current observation, because they was before $2 (and was caused by different reasons).

I just wanted to point out that Bitcoinica caused the prices to go low from $7 down to $2 last autumn.

It was not the bitcoinica, it was several hacks of exchanges and wallets and inflation, caused by mining

Most of that happened before bitcoinica opened their doors.  Bitcoinica shorts caused an overcorrection until the market adapted to all the shorting.

Do you have a proof ?

Do you have proof of your assertion besides 2 + 2.5*2?  You can't be serious.

+1

Zhoutong even admitted that bitcoinica sold down below $2.

Yes:
1) the volume of trades through bitcoinica reaches 83% of all trades (see a link at the first message).
This mean, that almost all positions go through bitcoinica.

2) bitcoinica shows "no enough dollars" star
This mean that all positions are leveraged.

This and the start price gives the formula, which you quote

But the volume of bitcoinica trades was not so high at that time

1) That was one time during a no fee special.  Also, it was one side of 83% of trades.  If you count both sides, bitcoinica accounted for 41.5% of volume.

2) This is true, but doesn't make your math realistic.

Personally, my leverage is currently at 3.23:1 and has varied from -3:1 to 10:1 between 2 and 7.  There is certainly room for a squeeze if you have the funds to burn through the support, but as always the price is determined by those who trade successfully and don't run out of money, not some magical formula of
arbitrary start price + levergage * arbitrary start price = final price.

bullshit. 2011 rally was without any margin trading platform and brought $32 high. This time much more people involved. And if bitcoinica will join, it will just accelerate the price spike.

I don't think it's quite that simple, but it does bring up another point for me.

If this rally from $2-$3 to $7 is highly leveraged, what would a reversal in price look like?  People are betting on a higher price with other people's money, but if the market turns it could be a swift and violent shock downwards as speculators are liquidated and short selling intensifies.  

It's easy to bet with leveraged money when the market is rising.

This will happen... the only question is will it happen before or after $10?

On the way down people leveraged on the bet it was going to continue going down. When those shorts got liquidated we got a nice price spike. They are short on USD which means people are overleveraged for it it to go down, meaning more fuel for the rocket. It is for this reason bitcoinica exaggerates movement in any direction.

Only bad trades will over exaggerate the movement.  Bitcoinica is just a tool.  It doesn't exaggerate anything.  People who use it to exaggerate movements will eventually run out of money... just give it time.

Also, bitcoinica is out of USD, which means people are overleveraged long, meaning resistance for the rocket as the take profits.  There is fuel for a downspike if we move down far enough to trigger significant liquidations.

Bitcoinica: Adding volatility to volatility since 2011.

It seems the price is being driven down by one determined bear at the moment. Looking on clark moody the person keeps on piling their 430BTC ask lower and lower.

Keep thinning out $6.90 to $7.10 ... thats fine by me.

The ability to short is what will prevent the next bubble.  A bubble is caused by positive feedback.  Buy and the price goes up; that meant your buy was sensible.  Therefore buy more and the price goes up more... yay, more profit.  Positive feedback always results in unstable systems.

Last June, there was no way to short.  The price was going up and up.  Those who thought that bitcoins were overpriced, but held dollars, could express that opinion by... not buying.  The absence of a bid is not the same as the presence of an ask; it's neutral.  Dollar holders couldn't profit from the overpriced market.

This time... shorting is possible.  As the bubble gets more and more out of control, those who see that can supply a downward pressure.  Profit is a healthy motivator, so they will want to short.  The more overpriced they become, the more profit to be made from shorting.  This is negative feedback.  Negative feedback results in stable systems.

The downward pressure from shorting will meet the upward pressure from the bubble and find a balance point.  That point will be a (more) stable price.  Who knows what that price is, but shorting helps the market find it and stick to it.

Shorting makes markets less volatile, not more volatile.

I think the results are already obvious; the growth rate this time around is much slower.  There are repeated pushes back down from $7.2.  It's much healthier in the long run.

Very well said!

Well said indeed. We will not see a repeat of June this time, it will be different. But the price won't be stable at single digits, that's for sure.

Quite so; I wouldn't want to pick any particular price.  If I knew that I'd be rich.  I simply wanted to observe that shorting (despite its reputation) doesn't build more volatility in; it acts as a counter to volatility.

However, shorting doesn't prevent genuine price rises, just as the ability to create an ask price for a bitcoin doesn't prevent price rises. Price rises will still happen (I hope), but they won't run away with us and form a bubble.

LOL!

Bitcoinica: Using the fuck out of a new exploit on the market.



https://i.imgur.com/RtjDr.jpg

No.  That was me.


I was longing with 10:1 leverage.  I got liquidated and so the price dropped as my BTC got liquidated.


Because a lot of people had buy orders that weren't being executed because of the "no reserve" problem, once I got liquidated they were able to buy once again.

Let me see your history data  ::)


your explanation has hardly to do with the simultaneous rise in equivalent magnitude.

This is how it's supposed to work. You use an event like a press release, trade show, media event, etc as bait to bring in fresh fish. You first reel them up in price and then you set the hook. Tee hee!

I was just thinking of the TV show, which I still haven't watched. I burned out on formulaic crap TV written by robots assisted by monkeys a lot time ago and the show itself sure looks likes it from here, but I probably will get around to watching it sometime this week.

Well IF he really got liquidated on a big position, it might bring in enough USD to Bitcoinica. It wouldn't surprise me if they have loads of pending buy orders waiting till the asterisk leaves the buy button, which it would once fresh USD comes in. That would cause an upward spike immediately after the sell-off.

The rise wasn't simultaneous in magnitude. It went down about 10k, and then up about 2k.

What was the USD volume... that would be more relevant.

Doesn't have to be. It could be they are reserving extra USD for the shorties, so they can still liquidate if they want. It isn't far fetched those supplies were a little bit drained as well from shorties liquidating their positions. That's why the up-spike wasn't as big volume-wise.

Good point.

Looks like the media event gambit worked quite nicely. This sort of thing was SOP during the internet bubble day trading days and most often done with a press release:
1. Lunchtime Day 1: Press release announces dimwit.com has cured cancer.
2. Afternoon/Evening Day 1:  The fish all line up to load up on dimwit's stock, it shoots up. Short into the buying.
3. Morning Day 2: Continue shorting.
4. Lunchtime Day 2: Press release clarifies that cancer is only cured in the virtual online world created by dimwit.com. Stock tanks.
5. Afternoon Day 2: cover.

The above timeline is only an example, sometimes it might all be over by the end of Day 1, sometimes the fish would keep pushing dimwit.com up for a couple of days before it tanked and they moved on to the next internet miracle.

***

I did try to watch "The Good Wife" episode. It took a bit of fast forwarding, it was every bit the piece of tedious legal procedural "drama" it promised to be, 48 minutes, bleh! They said "bitcoin" a lot. Resolution was inane beyond belief. I think "Mr. Bitcoin" should have been a pet name for her husband's penis, revealed during the discovery process by an unusually located tattoo  ;)

Whether its Bitcoinica, Manipulators, Irrational Sentiment, etc.... it has taken us in the last 3 weeks to
a $6-$7 trading range. Stability is good.

Interesting possibility there, Dutch.  What if the same person that did the buying starting January 1st, is also the person doing all the selling now?  Denial can be strong, but one must admit that it's a possibility. 

What I find very interesting is that even with the price down to ~$5 now, the player that's been selling heavily to $6.50 appears to have no chance of buying back in at that level, with depth to $6.50 of only 8k btc.

And on the amusing side, the order book appears balanced again. :)

I don't think so.

http://bitcoincharts.com/charts/mtgoxUSD/accumulated_orderbook.png

As you can see, none of those sold coins appear to have come from the giant ask accumulation of the past day.  So, um, that's probably not good.

Can you imagine such a thing happening? How surprising it would be!  ;)