24 days after the April 11 peak



Has the Great Capitulation of 2013 ended? Did we reach bottom at $80 two days ago?

The retracement to $115 is an impressive recovery, albeit low volume which suggests less significance within containing patterns.

My entire analysis of the price action after April 10 as recorded in this thread, depends on whether, and to what extent, bitcoin bubble 1 provides insight when viewed from the framework of speculative financial bubble theory. And by the latter, I mean mostly the common predictable behaviors that bubbles have.  And in particular, the part of the theory that pertains to my analysis is a very simple rule: From the peak of the bubble, prices decline all the way back to the underlying trend in approximately the same duration as it took for the bubble to rise to its peak.

Therefore my primary bitcoin analysis constraint - the outermost technical pattern - is that prices will very likely collapse from the peak at $266 to somewhere between $13.50, which was a price in January, and the current post-peak low of $50. The price bias is thus strongly downwards.

In the accompanying chart, the smaller blue line indicates the current retracement. The larger downtrend appears to collide with it soon, and one trend will prevail.

I believe that conditions will soon enable the initiation of another down leg to this capitulation. To me, it has not gone deep enough when compared to the corresponding capitulation from August 2011.

I humorously described on the wall thread a scenario from among those I think likely.


My lowest bid got filled at $82 and my highest ask got filled at $104.

My highest ask at $104.5 got filled an hour ago, and the one day rally is still going.

I commend your goals and I applaud your efforts. A dealer network should not only secure more bitcoin investments, it will as you say permit large-order trades in the network even if blinded by lag at Mt.Gox plus you could have robust order routing among all the exchanges. These things will help mediate the factors in the bitcoin economy that lead to price bubbles.

Most traders here have little knowledge about the size and global scope of the client-facing precious metals market, which I assume that you are actually addressing. I think that your pitch to them should be irresistible - simply a very attractive hot new financial product to add to their hard money business.

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I fear that the very infrastructure you are creating will be the foundation for the next, and order-of-magnitude larger bitcoin bubble 3. In two years, the next flood of new bitcoin adopters, merchants, users, traders and investors will be, say 10-20x more than what we have now.

By bubble, I mean the commonly accepted notion of speculative financial bubble as used by the press, traders, financiers and economists. I am not so much interested in your definition of bubble, but rather how you would characterize the price action from January 1 to present, and how to profit from it.

Namely, could you recognize the next bubble when it comes? And if you did, what actions would you take? If you do not accept that prices will be lower after a bitcoin bubble collapse then how can you execute a sell-high, buy-back-low trade - you would not have the preconditions to make the trade!

You believe that the underlying bitcoin economy is growing very very rapidly. I believe that it is growing very rapidly. My belief allows for bubbles.

I sold a bit at $100 and $103 and am currently positioned to sell more at $105. Back to bed.

My open limit orders are not walls - they are way smaller than that. I simply place them in front of walls so that they get filled by the matching engine before the wall below my order in the case of a bid, or the wall above my order in the case of a bid.

Breaking out of a triangle on the 15-min chart - in relatively thin volume. Technical analysts consider a low volume move to be less significant.

This move however is squarely blocked by my ask in front of the wall at $105. Will it get eaten?

OK, not actionable advice - just one of many likely instantiated scenarios. Suppose it unfolds sort of like back in August 2011 ...

Stopped by the ask wall at $70 early Monday morning in the USA. Two hour goxlag-blinded drop below $85 to reach the wall and bounce back. Mt. Gox wall-busting volume over 25000 each of those two hours.  Clark Moody ding-ding-O-Meter chatters like a jackhammer with red orders flying past and huge spreads between bid and asked.

Your analysis makes me feel comfortable with a prudent-sized profit-taking limit order for the weekend positioned in front of the ask wall at $105, using some of the lots bought at $87 and $80.

Based solely upon a comparison with the corresponding August 1, 2011 capitulation, I believe that this bottom of this capitulation could still be two or three days away, i.e. Monday, and could also feature a 15% culminating selling blow-off as did the comparison. And most importantly, I believe that this bottom is not the post-bubble bottom.

For reference, I have dubbed this one the Great Capitulation of 2013 - none bigger.

I accuse you, yes you, of selection bias.

Hey, when the first team is off the field, they send in the likes of me.

I saw the channel containing the embedded pattern. Regarding nested patterns, to what degree are containing patterns influential with regard to immediately contained technical patterns?

I am considering a limit sell order in case some big, 9000+ BTC buyer says damn all to slippage over the weekend. Biased to the downside for three days, sell at say $105 this weekend, anticipating a buy back on Monday morning below $90?

Yes, but those very whales have been taking recent weekends off. On the other hand, if this is really the biggest and baddest capitulation of 2012, 2013 and probably all of 2014, then yes we could crash big this evening or this weekend.

Because I plan only one set of relatively low risk and highly profitable (should events unfold as planned) round-trip trades per capitulation, I really don't have to pay attention to the embedded day trading opportunities.

It is getting quiet in my home office - no Clark Moody ding-ding-O-meter chattering away !

Despite the calm, I don't envy big money and their advisors that are holding maybe 25% losses in just three days, with a potential goxlag-blinded Black Monday sell off. That unfortunate group knows that the first one to sell gets the tastiest bids and the last one to sell books the biggest client loss. They cannot sell during the weekend without huge slippage.

A band-break at the bagholder's ball.
 

Does anyone else think that volume has dropped off? If so then no wall-busting power until likely Monday.

And yet another triangle. Duh ... make that one hour - not four hours as it says in the immutable image below.

+1

My bid orders at Mt.Gox got filled at $95, $87 and $80. I have more outstanding at even lower prices. Yes I would buy here and have done so. I expect that when this capitulation is over, prices will retrace to maybe $120 - and then time to sell.

Risto has changed his mind. He said that if prices drop he will buy more.

As matter of fact, I applaud his efforts as an experienced, professional  bitcoin broker/dealer to create infrastructure that will gain him even more clients. There is a crude cliche that applies, at least partially to his behavior - Fake it until you make it.

I expect Risto to make it.

Good point. It is useful to give proper names to instance concepts that are frequently referred to, e.g everyone knows what the Great Depression, and Great Recession are. The bubble collapse of 2011 featured six selling capitulations. I named the first and most significant one the Great Capitulation of 2011.

I believe, and will not know for sure until this bubble collapse is complete, that the current capitulation will be the most significant one this time around - we have already dropped a crushing 45% in three days, and many traders now realize that the bubble is over.

Is this the Great Capitulation of 2013? I think so, and I think too that it is not over, and will not be the bottom of the bubble collapse.