I assume the OP is talking about the complete historical chart.


It's an interesting argument. Not sure what I think of it.

That much is definitely true. If you can tell which way the wind is blowing, you can blow pure balancer-trading out of the water.

I think the main thing is that is plays on a different underlying assumption about price action.

When you talk about a "winning" asset and a "losing" asset, the assumption is that an asset which has just gotten a "win" will continue to win in the future, and that the "loser" will continue to lose.

My feeling in the Bitcoin world is that sudden reversals are the rule, rather than the exception. That up-and-down is the name of the game. It's a highly volatile thing - the price moves 10% and people call it a slow week. So instead of seeing a rally as BTC "winning" and USD "losing", what just happened is that BTC are "more expensive" and USD are "cheaper".

If the price will ever return to what it is today, a balancer strategy will make you money.

If BTC are going to the moon, well, that's another story.

How so?

Putting aside the FBI for the moment, there are at least a half-dozen (possibly over a dozen) users who each have over 400kBTC apiece.

Of course, they might all be turbobulls who will never sell until bitcoin is current money and they can spend their stashes directly. There's no way to know for sure.

But because there's no way to know for sure, I don't think this is a scenario which will ever really leave the realm of possibility (unless, y'know, bitcoins become current money and cashing in your stash stops requiring that it be sold).

What I've done for this is basically to doctor the prices in the manner of forex sites. In Bitcoinland, commissions are usually percentage-based, so it's simple to just pretend that the market ask is a little higher, and the market bid is a little lower. The natural result is that the rebalances wait for the market to shift a little more than they otherwise would in a zero-fee world before rebalancing in the opposite direction from the previous move. (I'm leaving a couple steps out of the math here, but I'll be happy to elaborate if people are interested.)

This is unfortunately a classic problem with no real answer until we get decentralized exchanges (and/or someone trustworthy operating a national-currency-backed colored coin). I've still got about a grand of FRNs sitting in Goxwire purgatory.

The trick is managing the amount that you buy/sell. My usual approach is to keep a trading purse that's half BTC, half my favorite national currency. Then, as the price rises and falls, I buy/sell so as to keep those balances equal. There's a strong underlying assumption (namely, that neither BTC nor my favorite national currency are in danger of falling to zero), but given that, and given long-term BTC bullishness, you're able to profit from swings without risking losing all your ammo.

Shamir published a paper analyzing the flow of coins in the Bitcoin network as of May 2012. One of the interesting takeaways was that certain coins seem to be mined and then moved around between a closed set of addresses which never have commerce with the rest of the network - Shamir's conclusion was that these were likely owned by individuals who wanted to make it less obvious that they were sitting on huge bitcoin stashes. Based on this information, the paper puts together a list of 19 "interesting" users, which either do a lot of transactions, or hold a lot of coins, or both:

Entity ID	Number of Addresses	Accumulated Incoming BTC's	Number of Transactions
A	78,251	2,886,650	246,012
B (Mt.Gox)	156,722	2,206,170	477,526
C	13,289	941,013	77,525
D	12,520	867,996	48,347
E	191	692,864	1,353
F	12	660,000	23
G (Instawallet)	23,649	633,606	92,593
H	9	580,000	59
I	10,561	514,066	49,550
J	4	500,021	6
K	134	479,254	1,039
L (Deepbit)	2	452,929	814,044
M	9	442,000	10
N	128	432,161	137
O	10	432,286	14
P	1	432,078	3
Q	14	430,490	23
R	2,124	321,866	300,486
S	1,037	20,308	197,334

The paper is a bone of contention around here; in particular, there's a number of people who hold that User A is a result of Shamir misinterpreting the data, and that the addresses (which the paper claims are controlled by one person moving their bitcoins around to make the coins look like they aren't hoarded) are in fact multiple people using BTC in the expected way. But even if you buy that, many of the later users on this list - cliques of a dozen cold storage addresses, containing hundreds of thousands of bitcoins - are much less likely to be misinterpretations.

These old-coin stockpilers, with the ability to single-handedly crash the BTC market, I've taken to referring to as "Shamir users".

At the moment, a sell of about 200kBTC would bring us back to $10/coin, if only momentarily. So to me, this question is really: "will we see $10k/coin before a Shamir user decides that they want out?"

To me, that's a bit of a toss-up. It's not clear that anyone in the 100kBTC club would want to cash out, but on the other hand, it's not clear that we'll ever see 10k$/coin, especially if other blockchains with new, interesting features get popular (a prospect that seems not that unlikely to me). I think, given all that, I favor the $10/coin scenario slightly over the $10k/coin scenario.

On the other hand, I think $1000 is quite a bit closer than $10.

There was a huge bulk sell on multiple exchanges at once.

Someone was liquidating a large purse.

Don't count your horses before they're hatched. This doesn't look like a reversal of the market; more likely it's a single trader dumping their half-a-million bucks worth of BTC. That could be the trigger for a correction, but it's also possible that limit orders will start filling in and we see a recovery.

Keep your eye on the ball. The next few hours might get pretty interesting.

If it's really a bubble, it'll take 2-4 months.

I'd contend that this period of strong growth isn't necessarily a bubble, though. Not because "this time it's different" - that's wishful thinking. More because it might level out or correct before the characteristic psychological elements of a bubble arise.

If that narrative is to be believed, it sure adds lovely poetic overtones to that September DPR response to Atlantis's closure.

Oh, absolutely. The amount seized is only, like, 5% of what Silk Road supposedly made in commissions? If Ulbricht was saving most of his winnings, he's a Shamir user by now.

Bitcoin existed before Silk Road.

It'll exist after.

Maybe we'll return to $2/coin for a while, but whatever. Even if you think the black market is necessary for a bitcoin-denominated economy to sustain itself (I don't), that just means it's an obvious niche and sooner or later someone with better identity security will step in to fill Silk Road's shoes.

Don't forget OKCupid (Alexa <1000), 4chan (Alexa <1000), and Reddit (Alexa <100).

So your contention is that Silkroad, a website that processes tens of thousands of bitcoins worth of transactions every month, has no hot wallet?

Watching the recent block confirmations. A lot of big transfers by fat wallets. Either some involved party is busy hauling off Silkroad's corpse, or this crash is going deeper than I expected.

That's only the case if Silk Road didn't support instant withdrawal.

If instant withdrawal was supported, then there was a hot wallet that can't be password protected (or is password protected with a plaintext password stored elsewhere - equally useless). Of course, given that the seized BTC stash is less than 10% of the supposed commissions collected during Silk Road's operation, there's a significant chance that Silk Road has a cold password-protected wallet not covered by the reported seizure, and a near-surety that Ulbricht has other coins at some other address.