Chances are that Bitcoin will grow exponentially in the years to come - that's the trend, and fixed allocation will cost you a lot of coins on the way up. Would you care to backtest the fixed allocation strategy since Gox opened trading in 2010 till today, and compare it with buy&hold?
"Invest in BTC as much money as you could comfortably lose" is the best simple advice you could have given to anyone in the last years, and I do not see that changing anytime soon. Obviously this is a volatile market and I do think we will test again $100 sooner than later, so Id recommend buying gradually, but the end goal in my book is to accumulate as much coins as possible - fixed allocation kills that purpose.
For the faint of heart, day trading is just a very expensive gambling, not only because the market is very small and thus volatility wild and unpredictable, but also because of huge fees and slippage.
As the most simple strategy, b&h is probably not bad advice for newcomers, but I would still advise against unconditional b&h, for two reasons: (1) a realistic estimation will see the number of new investors correlate with price and volume, i.e. more new people entered the market in April than now, for example. Agreed so far? The newcomers who bought in close to the April peak are still sitting on a loss -- even though they will turn a profit the long run in all likelihood. I suspect however that quite a few of them left the market again in frustration. My conclusion: I can only see benefits from teaching newcomers a modicum of TA to determine if conditions are severely overbought and about to correct, and if price is extremely volatile and it would be better to wait before buying in. Using very "conservative" tools, a new market participant whose money arrived on the exchange in April should have probably waited until early May, then bought in at a reasonable 100 to 120 USD, compared to buying in immediately at 160 to 200, or even more in the worst cases. tl;dr assuming bitcoin continues its growth path, it ultimately doesn't matter at which price you buy in, but for very understandable human reasons, it actually matters a lot. Some TA can help with finding the right entry point -- afterwards, b&h all you want :D (2) Buy and hold is outperformed by several parameter combinations of a simple average crossover strategy -- I backtested this myself. There is reasonable doubt about this of course: the parameters were optimized on the trading period itself, which is problematic. I have a long post saved that I'll post in goomboo's thread at some point, where I backtest several parameter combinations that outperform b&h under a more realistic methodology. What I'm trying to say is: I'm pretty sure that careful use of relatively simple (and testable) TA methods will allow some people to outperform b&h reliably. Not everyone perhaps, as it requires a bit of patience and willingness to get technical -- if you simply try to apply a recipe, you're probably going to lose. EDIT: added a sentence or two |
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Hey guys!!! I just got a call from a place called "White House", from a guy called Baraque, or something like that. He says he plans to buy btc worth 2 trillion (!) USD, as soon as his money arrives on mtgox. That's mega good news, right?
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big juicy red candle.
so glad that I am out. if it goes to 140, I will dump more.
So will many I suspect I said it before ... $100 to $148 was heavily manipulated rally on no volume ... I don't know about that. There was quite a bit of volume on bitstamp. And even on mtgox, just not spread evenly but in the form of a few big buys. If this would have been upwards manipulation, i.e. pump and dump, it would have failed pretty badly. more likely the rally was real, just not based on broad support but on a few big buyers. |
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Gentlemen. Let's play a game. 'Call the bottom'. Is it just a minor swing downward? Is it this the end of our beautiful July uptrend? Doesn't matter, just tell us what you think the bottom will be.
Guess I'll have to go first. I'm afraid we'll see a few more red candles, but we might have seen the bottom already at 130. The worst I can see is testing 125.
Who's next?
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Probably the first time that bitstamp was direction leader (+5% move).
Actually, no. I try to keep track of the clear cut cases, if for no other reason that I trade on bitstamp, and by my count this is the 3rd time a major movement took place on bitstamp before mtgox since July. |
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So what we see is (a) a shift of volume from mtgox to other exchanges, (b) more confidence by buyers, maybe for the wrong reasons, (c) an overall reluctance to sell coins. Looks good enough me.
Maybe we see the same thing, but give it different names. An uptrend lasting several months is never fake in my book, even if it ends in a crash. What matters is how fast price recovers, and if it ends higher or lower than before it took off.
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True, mtgox is still the market leader. Current 30d volume of mtgox vs 30d volume of bitstamp is 566k vs. 334k. That's an interesting definition of "dwarf".
I'm meaning the amount of funds present in the exchange, not the volume. I think that there is a big discrepancy between the volume and the amount of funds in the exchanges. Others have been lot more active in terms of relative volume but that doesn't change the funds on the exchange itself. Look, I'm very doubtful myself about the sustainability of the current uptrend. I wouldn't be all that surprised if we go down again, double digits down, and do so hard. But right now, we're not going up for the reason you mention. What does the order book matter, or total funds stored on the exchange, if people actually buy in large quantities on both exchanges? There's obviously enough cash on bitstamp to overtake mtgox on daily volume on occasion. What you describe would mean uncertainty drives up the price on mtgox, which then drives up the on the other exchanges, and so on. Problem is, it's not a feedback loop. If you buy coins to get out completely, you will sell on the the other exchanges, which would drive down the price. On the other hand, if you buy coins on mtgox to hold on to them, you might be willing to pay a premium, but then you hold on to them. The way it looks now, reality looks much more in line with the second explanation than with the first. |
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Spread is increasing overall, that the other exchanges follow mtgox still comes to no great surprise.
It is simply that the amount of USD in mtgox still dwarfs the amount present in the other exchanges. This can go a long way, in theory above the ATH actually.
The problem though is that there isn't really a mechanism to know where it would end unless you know how many funds are in the exchanges besides the order book.
True, spread slowly went up, from around 6% in July, 9% in August, to around 11% now. In the past weeks it stabilized, actually went down again from a peak about two weaks ago. In any case, that's simply not the development you would see if people would try to get out of mtgox (which they do) and rush out of bitcoin altogether (which they don't, at least not in large numbers). True, mtgox is still the market leader. Current 30d volume of mtgox vs 30d volume of bitstamp is 566k vs. 334k. That's an interesting definition of "dwarf". |
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Feedback from the mtgox liquidity crisis, nothing else.
Bullshit. We're in this trend since early July. Whatever the reasons (epic bull trap? actual reversal?), the often invoked, bordering on magical "liquidity crisis" can only be a minor part of it, otherwise you'd see not just a largely fixed spread between mtgox and the other exchanges, but a widely diverging price development. Whatever caused the recent jumps (apart from the obvious: large buys) needs to be seen in perspective of a now almost 2 month long, rather solid upwards trend on all other major exchanges. tl;dr don't be a lazy bear. at least be creative.  |
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Trust yourself. It is a lottery to pick someone to trust. Decide wether you yourself think bitcoins will rise long term. If you can reach that conclusion then the buy and hold strategy is by far the safest, you'll need plenty of patience to hold long term though.
Buy and hold does require a lot of patience, resolve and character that many fail to execute. The profits you make with buy and hold are sometimes euphoric as you haven't sold a single coin, making you considerably richer, and tempting one to buy even more on highs. Inversely the losses are sometimes enormous too, as not a single coin was sold on the high, shrinking ones capital dramatically and tempting one to sell on lows 'to at least have something left if it fails' . Depending on your entry point a buy and hold may end up showing a serious loss for over a year too. I strongly suspect that on average those that choose for a buy and hold tend to make less returns than a buy and hold would have offered due to the enormous volatility of their capital and the resulting emotional rollercoaster. Hence why I think a fixed allocation strategy is a better solution for most. Instead of allocating all the reserved bitcoin capital immediately. Allocate only say 75% and keep 25% in cash. If price goes up and your bitcoins become more than 75% while your cash becomes less than 25%, sell some so that you remain with 25% cash. If price goes down, and your cash becomes bigger than 25% and bitcoin less than 75%, buy some btc so that it's balanced again. This way you are forced to sell on highs, and forced to buy on lows. Even if you don't always execute this strategy as greed and fear take you over, at least you won't do the inverse! Your end result will be that your ride up and down is less volatile, and your profits will likely be higher than a buy and hold. Thanks  It worked wonders for me. The only tricky thing is to decide how much of your capital you want to allocate to bitcoin. I chose for 30% long term. However I added something extra. If price is relatively expensive (meaning price is above the 200 day moving average) I want a lower exposure than my long term target of 30%, if price is relatively cheap (below the 200 day moving average) I want a higher exposure than my long term target of 30%. Currently my exposure is 20%, 16% to btc and 4% cash on the exchange (meaning I chose 80%/20% btc/cash) because the price ($104) is currently above the 200 day moving average ($86), so relatively expensive. If price goes down I am not only buying more to balance my 80/20, but also to raise my current 20% exposure to 30% and possibly even 40% if price goes considerably below the 200 day moving average. This is basically a turbo put on the strategy so that you end up selling even more as it goes up, and buying even more as it goes down. I plan to continue this strategy for the time being as chances are low we go up soon. However once you go into a parabolic rise this strategy leads you to sell too many bitcoins too soon. So there are times where you want to change to a buy and hold, letting your bitcoins grow to possibly 90% of your capital, and only reactivate the strategy when the parabolic rise is starting to become dangerous. So during the rise from $13 to $266 this year I only sold some bitcoin at $70, but realized it was not smart as chances were high we would go into a mania like 2011, so I stopped selling and only relaunched the strategy when we went over $150. Even then I didn't stick to the plan and was selling to keep it down to 30% of my capital but I should have reduced to 15% because the price was historically high above the 200 day moving average. I didn't and lost some great profits due to this. But still my return on bitcoin since the start of the year is 1050% whereas a buy and hold has earned 'only' 650%. (Yeah, never expected to have to say 'only' 650% in my investing career ) How often do you adjust buying or selling BTC to fulfill the percentages? each day, week, month...? On average I check prices daily. If it is very volatile I trade several times a day and check prices hourly. If price is stagnant I start to check prices less and end up forgetting to check it every other day. My strategy only requires trading when prices change. A lot depends on the size of your capital since every transaction has a cost, not just the exchange fee, but wiring funds, your own time, etc. So if your capital is small it makes economical sense to have much wider balancing triggers. My target currently is 18% btc. If it becomes 19%, just 1% more, it is already worthwhile to do a trade for me since the capital is large enough. But for others it may be only worthwhile if btc goes up or down 5% in size in their portfolio before making a trade. There is also some speculation coming in. If I think prices won't go higher I'm quick to sell off btc to remain within my target and lock in those profits. But if I think it will continue to go up I dare to not balance to my target and let it grow bigger for a while. For example, since price has gone up recently above $100 to the current $140 I've been thinking all along it would crash so I've been balancing quickly, ie: on every $5 up move. But likely if it starts dropping I won't balance quickly as I currently think it will fall deep, so I'll probably balance only on every $10 down move. But yeah I'm behind the screen daily. If you follow such a strategy, say, deciding to keep a balance of 50% btc and 50% fiat, the first obvious question (that you answered now) is "on which interval should I execute trades?". You say during volatile time you trade daily, but that's only a partial answer: on a volatile day, price can wildly swing up and down, unrelated to where it will end up finally.. If you would execute your strategy on each of those swings, you'd be broke, because each time you lose some value to fees and slippage. But you say that much in your own post. So in reality you will probably set yourself some limits, e.g. "if price continues to fall throughout the day, I buy at the end of the day", or something like that. You use your intuition. My claim is: you're basically following a simplified and intuition based version of an algorithmic trend following method, for example like the one described in Goomboo's thread. (yes, they're not identical strategies, for example the entry/exit points of both strategies are different, but they are principally related: they both wait for trends to manifest, and then attempt to sell higher than the point at which you bought, and vice versa.) I'm not saying everyone should use an average crossover method like the one described in Goomboo's thread, but my point is, if you use a fixed allocation percentage strategy, you're almost half-way there to use TA to guide your trading. The only difference is that, instead of looking at derived indicators, you're basing your trading decisions on the price directly, filling in the blanks with your intuition. Nothing wrong with that, but my point is, it's not fundamentally different from using a more algorithmic method, which might have the additional advantage to reduce the influence your emotions have on your trading. |
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I find it amazing people here are so diligently looking for a way to destroy bitcoin.
Invalidate wallets? Forced redistribution? Wow.
That said entities that hold lots of coins are not powerful by means of the number of coins they hold. Bitcoins in a wallet have no real value until they are traded for something tangible.
The economy will redistribute itself over time. Think of the famous 10kBTC pizza. We will need to see lots more pizzas bought with btc before we ever need to worry about who is rich and powerful.
A fair economic system is not one in which everyone has the same amount of money. Think about why.
Your understanding of what you're reading is not significantly influenced by what is actually written, huh? |
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Good arithmetic here, but: There is a reason the welthy, and most other people for that part, have little money and lots of stuff. The reason is the inflation. What you call appreciating assets, is mostly inflation-safe assets. With sound money it is different, you don't have to panic buy these assets, therefore the demand for sound money might be higher than for fiat money, supporting a higher money value.
The point is that even if someday Bitcoin is worth more than all the currency in the world that is still a small fraction of all the wealth in the world. Your house isn't made of currency, Google isn't made of currency, the patent for a new drug ins't made of currency. They all contribute to the wealth of the world though. I still believe that Bitcoin becoming the single world currency is a dubious and highly unlikely pipe dream but lets say it happens. Even those with massive Bitcoin holdings would still have a rounding error of the wealth of the world. Unless they plant to eat Bitcoins, watch scrolling screens of private keys as entertainment, and sleep inside a Bitcoin they are going to liquidate some of the wealth (which is already a rounding error on total global wealth) to buy food, entertainment, housing, etc. I tried to address this point a few posts above. I also have to say, it doesn't really become clear in my original post because, well, I didn't really think of it that way yet when I wrote it. The point is not so much how big the share of the total wealth is, now with "traditional" billionaires or in the future with bitcoin "billionaires", but about the ratio between percentage of wealth owned now, and then. Follow my assumptions in the original post for a second, okay? Then my point is, the current richest person holds at most 0.1% of money supply (yes, only money supply, not overall wealth). In the brightest of all bitcoin futures, someone might hold more than 2% of money supply. So the point isn't that 2% is too much, but that this would constitute a 20-fold increase in relative wealth. That's at least worth thinking about, IMO. |
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Have been tangentially following this thread for a while now, because I think the declared goal is interesting at least: to create a history of predictions (and track record of posters).
But in the end, I have to agree with cypherdog and thezerg, the methodology of RS is very much lacking and nothing useful is being created here unfortunately. It's cherry picking quotes, without any attempt to put them into a context (of price at the time, contrasting them with general forum sentiment at the time, etc.)
Yes, it would be good to have a clearing house for "intentional predictions" where they can be tracked. There is lots of informal supposition that can be construed as prediction. The oracles that want accountability should have a place to get that, with a clear methodology. I dont't think there's a way to make it work. This place is way too informal to really "track predictions", half of the time half of us are trolling anyway. And in a way, I like it like that. It would be interesting however to to have a thread in which every active member makes a, say, 1 or 2 month prediction (price range, overall development, etc.), and the ones that did best will get magical Internet points. Everyone likes those. |
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Have been tangentially following this thread for a while now, because I think the declared goal is interesting at least: to create a history of predictions (and track record of posters).
But in the end, I have to agree with cypherdog and thezerg, the methodology of RS is very much lacking and nothing useful is being created here unfortunately. It's cherry picking quotes, without any attempt to put them into a context (of price at the time, contrasting them with general forum sentiment at the time, etc.)
There's something else though, I noticed in here: among early investors (compared to those who only came shortly before or after the 2013 peak/bubble) it seems to be common to bash daytrading, and recommend b&h instead. That's a bit of a naive position that ignores that those who only came a few months ago, needed to make a decision that is far from obvious, even if they are in principle inclined to hold long-term: buy in now, or later.
The performance of b&h of the "old guard" is undeniably fantastic. But keep in mind that of the huge number of new investors that came around/after April, many are still in the negative if they would have employed "unconditional" b&h and simply bought at the earliest possibility (although many of them are about to break even, I suppose). Contrast this with some mild form of TA guided trading, say, something crude like "buy if price crosses daily EMA20 from below, sell if it crosses from above". A ridiculously simple strategy, and it would have given the new arrivals a number of useful trading signals: assuming you held btc before the peak, it would have advised selling well before the bottom April bottom, assuming you arrived with fiat buying in at around 110 (which would be profitable by now). It also would have correctly, and with a nice profit, identified the long June downtrend.
Note that I'm not suggesting every newcomer should base his trading decision on this indicator. Just that the high praise for b&h can sound a bit shallow if it comes from investors that have been around for a long time already, well before the parabolic rise earlier this year.
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re: trillionaires. I'd like to see some source on that.
re: "super assumptions". #1 seems confirmed by the attention this thread got within hours. #2 and #3: I think you like to play a bit hard to get here. It's not exactly a big secret what the highest ranked people on the Forbes list owe their money to. I mean, in some cases they owe most of their wealth to publicly traded assets. And about estimating the money supply: it's basically a crude summing up of the reported money supply figures of the respective central banks. And I mean, no matter how tinfoily anti-fiat some here might be, it's not as if the central banks make a big secret out of their continous pumping out of new money. I'd say, I trust their figures on that one. Kind of like they're boasting with it, so maybe the figure is too low, actually :D
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Conclusion: If bitcoin would ever act as the world's primary monetary basis (and assuming of course the large bitcoin holdings mentioned above are not abandoned/sold in the meantime) we would have an unprecedented concentration of wealth.
You are confusing money and wealth. There is an incredibly huge difference between the global money supply and the global wealth. The person that owns 2.1% of all the bitcoins will never own a significant fraction of the global wealth regardless of the value of a bitcoin. I am working from exactly the scenario that many in here on some level seem to believe, if allowed to dream: that bitcoin could one day replace both fiat currencies *and* the current illiqid assets that act as store of value, like gold. And in that case, "2.1% of bitcoin" does in fact come close to "2.1% of overall wealth" Hang on. That is not true. That is the fallacy I am trying to point out. If someone owned 100% of the money in the world, all the bitcoins, dollars, gold, and whatever anyone might consider money, they would still own only a tiny fraction of the wealth in the world. Don't you consider the value of your car or house to be part of your wealth? What about land and businesses? There are a lot of things that represent wealth other than money. I really think you misunderstand my argument, or possibly, I'm not explaining it very well. Here's the condensed version: The richest person now holds 0.1% of M2 money supply - that's money and "near money". Let's call it M2+ when we add common stores of value like gold. So the richest person now holds less than 0.1% of M2+. The richest person in the bitcoin future holds 2.1% of all bitcoin value. Since bitcoin could function as a replacement for money, near-money and common stores of value like gold, this person would, in the best case, hold 2.1% of M2+ wealth. So in this - hypothetical - future, we might see someone more than 20 times wealthier than the richest person now. That's not just a gradual shift, that's a rather substantial difference. |
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I think the real solution might be something much more uncomfortable to us early and relatively early adopters and investors:
At some point in the future we might see that bitcoin's growth (price, adoption, whatever) will slow down, possibly because too many coins are in the hands of too little people. Another cryptocurrency (sure, call them "altcoins" if you wish) might start to rise, with less resistance than the original.
At this point, it is at least conceivable that redistribution of old coins will be discussed among us. Not a second earlier (after all, what do I care about the social aspects of distribution of wealth, as long as I'm at the upper end of the distribution). And it would be considered not for moral reasons, but because not redistributing might negatively affect the wealth of the old holders. But by that time, it might also be too late already.
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How would you design a cryptocurrency to solve the initial distribution problem? Imagine you are in 2009, when nobody knew that it could succeed as money at all.
Like I wrote in a comment before, I don't know of the solution. I'm just pointing out that bitcoin, by virtue of being attrative for early adopters (deflationary, big rewards for early miners), will also suffer from extreme concentration of wealth. Which ultimately might cause its downfall. |
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Hey! I haven't told you yet how difficult it is to make enough notches to store a real number.
(hint: you need a veeerry, very dense knife)
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Fine, now tell us how the number of coins relates to the number of addresses, or disk space for that matter.
it's because $address = abc123 $value = 200 takes up twice as much space as $name = abc123 $value = 100 That's right, kids: Each of those pesky little integers (or floats, or whatever) is stored by making a tiny little notch in the surface of your harddrive. And that takes a lot of time and work! So don't go throwing around big numbers thoughtlessly, okay? |
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