Bitcoin Forum

I am creating this thread to discuss and share with you my thoughts and expectations about BTC price by the end of 2012. I am expecting BTC price to reach $25 by the end of 2012 and here is why:

When BFL started to accept pre-orders for FPGA Singles end of 2011, Bitcoin price kept rising until it reached "$7.25". Such rising period took around 3 months, and when BFL started delivering the Singles, BTC price started to move down slowly toward $4. Actually it move down from $7.2 to $4 in 5 stages. Now BFL is accepting pre-orders for ASIC. There is no doubt that the price of BTC is gonna double "once again", but this time from $5 to $10 "already started and at the time of this writing BTC is @ $8". The amount of money needed to invest in ASIC devices is almost double the amount needed to invest in FPGA. To be more specific, the amount of money needed to upgrade FPGA/GPU farms to ASIC is almost double the amount of money invested in such FPGA/GPU farm from day one "to be able to get the same reward when ASIC hits the network". So if the amount of money that will be invested in ASIC "by the last quarter of 2012" will be double the amount of money invested in FPGAs "last quarter of 2011", you should expect BTC price rising more than double "$12 to $15". At that time the block reward is gonna be reduced to 25 BTC instead of 50 BTC, so this time when BFL delivers ASIC BTC price is not gonna move back as it did when BFL delivered the FPGA Singles, but it is gonna start a new rising wave. For that am expecting BTC price to reach at least 20$ by the end of 2012 beginning of 2013. I already started saving as much BTC as I can, and you can consider this thread as an invitation for you to join the party by increasing your BTC savings.

Why would these two have anything to do with each other?

would you please clarify your question? which two?

I'm guessing money spent on FPGA vs money spent on ASIC.

That was one of my guesses, thats why I want him to clarify.

Lemme guess? You just bought a bunch OP...  ::)

I'd like to know the answer with that pair.

Correlation != Causation (and in this case they aren't even correlated).

You really think its not related? So can you explain to me why BTC price moved from 6 to 8 during the last month? Could you please get back to BTC charts and analyze how BTC price moved starting from 23rd of JUNE "the date BFL started to accept orders for ASIC".

The point is BTC price is controlled by big players, who create large ask/bid walls! Such walls can not stand the rush on buying BTC when a new BTC realed product gets into the market. They have to remove or reduce their walls until BTC price stabilize. So yes, in a way you are right, there are other factors here that play big rule in the equation. The relation may not be direct, but indeed there are multiple indirect relations.

It is somewhat related to those orders. That is because people were buying BTC in order to pay for those BFL preorders and BTCpay is refusing to sell em back into the market, effectively driving the price up.

Some people realized this might be a good time to start pumping and now you have it.

No.

Exactly! and thats why it would be a good time to join BTCpay behavior! Thats why I've started saving and created this thread to invite you to do the same! My savings and yours wouldn't affect the market but if we all start saving now and join forces, we can really add a new factor to the equation ;)

So they can dump em' after I bought into the price? NO I'm not those kind of sucker. But on the bright side: My LTC investment seems to get back into the positive, from the USD it long has and from the frenzy it seems from the BTC side too. If I had spare money I know what I would do.
LTC seems to be the leverage option for this current move ;)

ASIC development, just like everything else concerning mining hashpower, has little to do with the value of Bitcoins. While what ElectricMucus said about converting to buy hardware may be true, a speculator having that same thought might just correct the entire movement.

Value stems from the usage possibilities, not from the difficulty or effort to make something. If you'd use an energy-matter converter to synthesize a bit of stone with all the funds of humanity, and then lose it in the Sahara before someone saw it, it's worth the same as any other stone there. The buyer cares about result, not effort.

There is a minor effect because difficulty protects against >50% attacks, but that might see some changes regardless of the type of hardware used. Fee-based mining isn't figured out very well yet, and minting will lose half its output in December.



@Topic, $25:

We mostly agreed it's not a bubble yet -- that doesn't mean it's the best idea to go into maximum bullmode right away. :P

We've seen last October and November what kind of liquidity waits in Bitcoin if things go extreme. It's been eight months since we were at 2 USD, that's a factor four. Give the infrastructure some time to catch up, or else we're just risking another phase of instability.

I would agree with you if we were 1 year away from the 25 BTC block reward. I don't think they will dump em' now! it would be too stupid to dump em' before the 25 BTC block reward ;) think it over!

no one dumps these days

if you have a very large amount of bitcoin you want cash out, you sell it off slowly ( Especially when price is rising like it has... )

so i would say that supply selling pressure will remain pretty much constant through-out this WHOLE thing...  only months after the reward drop will the limited supply really start to effect selling pressure

demand has/is/will grow, its clear the price will contunie make you highs for years to come (so long as the protocol remains intact... and thats not a hard bet to make  ;))

I didn't think for a second while creating this thread that BTC price will reach 9$ in the same day! It seems that by now it can reach 12$ at ease!

Already did that in June 2011. Silver was about $33 an ounce and bitcoins hit about $32.

Parity with gold would be golden!

I guess noone noticed how bitcoinica was keeping the price stable around 5 and that the price started moving up just after the last debacle at the end of may.

You are utterly wrong in when the rise started, btw.
It started to rise around june 1st, not 23rd.
The rise after 23rd is a nice continuation of the move that started at the beginning of june.

So i think your theory is based on flawed data and is therefore itself completely flawed.

If you want to understand why the price moves up you will need to investigate bitcoinicas grip on the price ant the lack thereof at the moment.

Thank you for pointing this out. I didn't count that! but still 23rd of JUNE was a beginning of a new wave that is still active.

Bitcoin will clear far more than $25, although whether it does so by the end of the year is anybody's guess.

Here's why bitcoin price increases are just getting started:
http://img6.imageshack.us/img6/7319/028trillions.png

The infographic is part of a larger presentation on the potential of bitcoin (http://bitcoinmedia.com/using-memes-to-explain-bitcoin/) which I made.

You realize that forex volume isn't any real currency in any sense don't you? It just trade volume.
That makes your graphic deceptive to the unknowing reader.

If anyone wants to know why the Bitcoin price is going up or down during a certain period, I'd advise you to ignore everything related to mining completely (with a small caveat that the block reward halving will reduce supply a bit and this will have a subtle effect on price).

Anyone who claims that bitcoin is rising or falling because of X reason related to mining, or ASICs, or BFL, etc etc... is fundamentally misunderstanding Bitcoin.

With that said, I think $25 price at the end of the year is totally realistic, perhaps likely. But it's got nothing to do with mining :)

So why is it rising then?

More users, more businesses, more confidence, and we're still nowhere near our potential.

this may be hard to understand but

the price is rising because 25$ by the end of the year is totally realistic,
and
because the price is rising,  25$ by the end of the year is totally realistic,

 :D

forget my troll post above this it the reason....
I'm in a weird mood today ... could it be... I'm ... turning into a bear ???

I think bitcoin's "fair" value (which stems from its usability and rate of adoption) is roughly correlated with Tx/Block. This does not need to grow all that much to be knocking on the current protocol limits.

I'm kind of concerned about the developers not taking scalability seriously. I'm strongly of the opinion that any Moore's law related arguments against improving the scalability are seriously flawed.

This is also my sentiment.

Are there any other developers out there who would be willing to help develop a scalable protocol?

you'd need a big team
first making the new protocol itself is a huge job
second you'd need a top notch exchange site to even think about competing with bitoin

if done right, and you come out with a truly and easily scalable version of bitcoin ..... I'd be buying in, BIG TIME

but are the developers really not taking scalability seriously?

I too think it is rising because there have been orders for ASIC worth several million USD, and many paid using Bitcoin, which has driven it's price up a little.
But I doubt it would go above $15 by year's end.

Actually its vice versa: Any one who claims that the rise in the price has no relation with mining, ASIC, FPGA, BFL, ... is totally misunderstanding Bitcoin ;) Why?

The price of Bitcoin is usually related at a certain level to the expenses involved in producing 1 BTC. Thus it is strongly related to difficulty and the ROI of the mining hardware. If you can buy a mining device that has a ROI of 4 to 8 months, so immediately Bitcoin price adjusts to such value. No one would buy BTC @ 20$ where he can buy a device for 400$ to 600$  that has a ROI of 4 to 8 months. Also difficulty plays a big rule here. The easier it is to mine 1 BTC the lower value its gonna be traded, and when difficulty and ROI of hardware rises "which is the situation with ASIC", only then BTC price can start to rise.

What makes me confident about BTC price reaching 25$ by the end of 2012 beginning of 2013 is that when ASIC hits the network the ROI of any FPGA device will turn into 3 to 5 years instead of ~6 months. And with the 25 BTC block reward, the ROI of ASIC devices would be more than 12 months. So the price of BTC will adjust according to these facts "whenever it happen" to turn ROI of ASIC into an acceptable level of around "6 months".

No one would buy instead of mining except the 95% of the population who doesn't have a clue about the hardware/software necessary to mine.  Sure, it's easy, but people don't like to learn when there is another path.

You've got it completely backwards. Miners switch on or off their mining gear depending on the price. If whatever technology they use happens to be unprofitable because the exchange rate is too low, then there's no point switching it on and losing money. And Vice Versa: if Bitcoin becomes more expensive, more miners re-activate their mining gear as a consequence of the price. Sure, if ASICs are suddenly introduced and a huge number of cheaply-made made bitcoins are put onto the market, then yes, the price is likely to drop... for a maximum of 2 weeks. But after that time the difficulty will increase and bring the costs back up.

Many people believe this. It's nonsense. Consider the expenses required in producing one bucket of fine sand from the bottom of the ocean floor. This sand would cost thousands of dollars to bring to market. How much will the sand be worth? It won't be worth anything, because nobody wants it. It is not useful. 

Bitcoin's price comes not from the cost of producing it, but from the ever-changing balance of supply and demand of the coins. The price is far more reliant on "how useful the world finds Bitcoin to be" and far less reliant on "how much it costs to make a new one."

The supply of newly mined coins is constant (7200 per day right now). No amount of new mining technology, or new interest in mining, will ever change this new supply rate. When the rate halves in December, perhaps the price will be higher due to somewhat smaller supply (remember new coins are only a part of supply at any given time), but again this has nothing at all to do with mining.

The only way that mining would significantly influence Bitcoin price is if it changed the rate of coin production. And in this case, the new technology would make greater supply, and thus push the bitcoin price down, not up.



^all of the above is irrelevant, given my prior statement

Suppliers can not go lower than the ROI of 12 months of the mining cost "thats why BTC didn't drop lower than ~2$", and can not go higher than the ROI of 3 to 4 months of mining cost "thats why BTC highest traded price during the last year was ~7.2". But today the equation has changed with the ASIC expected delivery date! GPU and FPGA miners has to return the investment in a shorter time frame. Such time frame is geting shorter every single day.

Mining cost + difficulty indeed affect the supply!


The total amount of mined BTC daily is constant "nothing is gonna change that". Thats why difficulty increases with every single GH added to the network. If you can mine 1 btc a day @ difficulty 1000, you would need 2 days to mine 1 btc @ difficulty 2000. If you can mine 1 BTC a day @ the current difficulty, with the same hashing power it would require at least 20 days to mine 1 BTC when ASIC hits the network. Still the total amount of the network daily mined BTC will remain the same. Most of the mined BTC by then will go to ASIC farms. What I wanna point here is that there will be great changes in the supply chain. Realizing such fact today, makes bitcoiners evaluate their currently owned bitcoins at a higher value, and increases the market demand on buying BTC before it crosses 10$.

Do you have any facts that support these satements?
How is $2 related to some 12 month ROI?
How is $7 related to some 3 month ROI?
Why can suppliers not go lower (or higher) than 12 months ROI?

"The price of Bitcoin is usually related at a certain level to the expenses involved in producing 1 BTC. "

Did it cost 32 dollar to make one bitcoin in June 2011? Nope.
Did it cost 2 dollar to make one bitcoin in November 2011? Nope.
Then why do you think it is true now?
Most people mine with GPUs from day one.
Also, the most efficient GPU for that job was available when bitcoin boomed last year.
Yet the price managed to fluctuate between 32 and 2 dollar.
It would be bizar to relate this swing to the specific form of mining going on at the time as it was all mostly GPU mining with similar ROI. Mining did not change significantly, but bitcoin price swung by an order of magnitude.

As i see it, ROI is completely dependant on price and is thus just another float on the sea of speculation.
You cannot predict ROI in the bitcoin ecosystem. It is just not stable enough.
So actually thinking about mining rig ROI in this economy is nonsense. You just don't know.
Funny thing is that most miners kept mining at $2. This means most miners were somehow losing money (extending the ROI faster than they could make up by selling their mined coins. Break even point is covering electricity costs (if extended to infinity the buying price of the rig becomes insignificant) so the price could not have gotten lower than the price you pay in electricity to mine one coin. Yet it did and people were still mining.
People were mining despite the fact that their rigs had ininite+ ROI.
Mining is therefore a speculative undertaking and has no simple direct relation to current price.
You need to take into account the miners expectation of future price.

Being a miner for a year I can say that so far I have never been compelled to sell my mined coins for fiat because they cost me to mine. I have been saving most of them until the economy is more mature, buying goods with BTC now and then.
I hope it hits $25 I am bullish long term for BTC, it has already once and proven resilient in the face of so much drama so imo its a matter of time not if.

No it didn't.
So why would it do that in the future?
Difficulty adjusts itself to hashrate.
Hashrate lags on price and difficulty lags on hashrate.
So difficulty is decided by the market price

So there is a relation there.
The higher the price of bitcoin, the more people are willing to mine.
But forget about ROI or other such fantasies.
ROI can only be calculated if you know the future price, which is the same as crystal ball fondling in bitcoin land.
ROI in bitcoin is a fantasy.

No it doesn't.
Difficulty increases with a higher GH/s rate, not just with every GH.
So the current -speed- of mining decides difficulty.
Less people currently mining = less difficulty.
http://bitcoin.sipa.be/ shows this clearly.
Between 1 year and 6 months ago the difficulty was falling because hashrate was falling because the price was falling.

Well hopefully butterfly labs didn't sell all the BTC they got for the pre orders.
If they didn't they have nearly doubled their money.

Huh? BTC was at 6.4 on 6/23 when they opened the presale. Nowhere near 12 yet. Also, I'm pretty sure Bitpay converted to USD for them. Would have been smart for them to hold the BTC though.  :)

Okay saying nearly doubled was a stretch. I'll make the same post in a week or so  :D

Bitpay still has the BTC, they refuse to sell em which is the main reason we are up this fast.
People buy BTC to preorder BFL units > price goes up > Bitpay refuses to deal on the exchanges and is looking for private deals > missing selling pressure > others notice that and start buying because it's easy driving up the price.

So the first event should be a rise in BTC price "with no relation to mining". Good point! So what do you think about the price of BTC @ 25$ by the end of the year?

Seing the history of bitcoin it could be anywhere between $2 and $50....
Depends on how greedy the speculation will get.
Another factor is whether there will be a new bucketshop on leverage that will suck up the speculation.
I think that around $5 was the natural nonspeculated price of bitcoin (with bitcoinica entertaining the speculators in their little shop of buckets) so we are now in a speculation bubble.
Wait for it to burst and sell before that happens. :)
Speaking of bubbles..

RAAAALLLYYYYYYYY!!!!!!

Except Bitcoinica wasn't a bucketshop.

And what it was?

A trading platform with leverage. All trades were done either on Mtgox as a hedge or internally if two different people took opposite positions.
Bitcoinica fucked up a lot of things (Or atleast the Intersango guys did), yes. But it wasn't a bucketshop. Bitcoinica never took positions against their clients.

Your evidence for this? By "the BTC" do you mean all the coins, even those from 6/23 sales? They have said that they won't just dump coins on the market b/c they don't want to drive down price. But otherwise they seem eager to sell. If you have a link or something showing that they are holding most of the coins, I'd like to see it - as far as I can tell they haven't said much about what exactly they are doing with the coins. What little they did say suggests to me that they are selling the coins gradually - i.e. as quickly as they can without driving down price. 

For bitcoinica to NOT be a bucketshop they would need to push through their users transactions to mtgox.
They were not, they kept the transactions local most of the time and once in a while they did a bulk transaction with mtgox.
So most of the time people on bitcoinica were only playing against oter people on bitcoinica.
That is a bucketshop.

I think even Zhou refered to it as his little bucketshop.
The sad thing is that a shop like bitcoinica cannot actually function without having some bucketshop characteristics. The infrastructure is just not there to do it all in real time so what Zhou actually created was pretty impressive.
It was just impossible to NOT make it a bucketshop and still offer leverage afaik.

from wikipedia:
"As defined by the U.S. Supreme Court a Bucket shop is "[a]n establishment, nominally for the transaction of a stock exchange business, or business of similar character, but really for the registration of bets, or wagers, usually for small amounts, on the rise or fall of the prices of stocks, grain, oil, etc., there being no transfer or delivery of the stock or commodities nominally dealt in." "

This was what bitcoinica was except for the brief times where they did bulk updates against mtgox to bring their shop in balance.
Again, MOST of the time people played against other people there.
As long as people understand this i don't think there is anything wrong with that...

Actually, they frequently pushed transactions through to mtgox and even published what percent was hedged each day.  The only time it didn't go through was when two customers took opposite sides of the same bet.

That frequency was no where near the trading frequency.
Inbetween the transfers it was effectively a bucketshop and everything was canceled against everything else.
So by definition of US law (see above) they were a bucket shop most of the time.

Cool story bro.  How much of the source code have you read?  If the answer is 0, how can you be so sure you know how it operated?

Hey, mobodick, excelent and exhaustive explanation as for me, thank you.

It seems that the lending services OPs have started to do their thing in the range of 7.8$ <-> 9.2$. Do you really think that there are any kind of demand on borrowing BTC for such lending services? I think the lending services are collecting BTC just for day trading with huge amounts. It seems that their target now is 1$ profit per round. This is just speculation.