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The MtGoxLive.com depth chart can be deceiving because the left side is measured in BTC and the right side is measured in USD. I prefer bitcoincharts depth because both sides are USD BTC.
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Bill, have you looked at the BTC price history graph at all? Since the beginning of 2010. I urge you do so  Right now is the 3rd "all is lost" region so far. But the current downtrend is the most severe. And beyond a two month duration (will be reached during the coming week), it will also be the longest. Not to say that this downtrend can't reverse. It has a corollary: what goes down can go back up. Once the bears are all squeezed out, price will snap back up. The market will be consolidated into fewer hands each owning more BTC. These wealthy individuals can remove ask walls, and they also have the USD to push the market higher with successive bid walls. The bulls rush in after the reversal becomes apparent. Or atleast that's what I'm betting. I haven't done spectacular on these swings, about breaking even in USD terms. But I am happy with the increase in my BTC holdings. |
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I subscribe to a version of theory #3: we're in a speculative (or manipulated) downward spike. After this, price will snap back up ($10).
Anyone with $100k + of funds on mtgox can move this thin and shaky market, and they will do so in a way which maximizes their gain. The competition right now is to push it as low as it can go and buy there, before letting it snap back up by removing their own ask walls.
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Look how thin the market depth is. The price is going up and down on dinky trades.
It's been like that since the bots took over. Bots don't cause thin depth (they prevent it). Volatility does. The market was always thin back in April, when days with volume of $100k were unheard of. Now depth only gets thin on volatile days. |
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One should store one's bitcoin in an offline wallet. Using an online wallet service defeats bitcoin's beautiful purpose (that its decentralized and not seizable).
Hopefully, fund losses to centralized exchanges and deposit services are minimal.
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Sorry to deliver FUD but at the moment its not clear that the spike to $14.8999 was genuine, because that happened during the attempted upgrade (correct me if I'm wrong). So also not clear if the volume today is accurate. Waiting on a second update from support.mtgox.com "*** Initial announcement - more details will be made available within the next hours. ***" |
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Wow, those charts hurt my eyes. "BiTklein.com High Quality Bitcoin Charts" Is this a joke? |
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How about this for some chart voodoo. If price bottoms in the high elevens ($11.14-$11.90) before going back up, it would form a nice-enough "classic" ABCD bullish reversal pattern. The stronger the volume at the reversal, the better. The down leg (AB) is from point $16.50 on July 6th, to $12.50 on July 18th (12 days). The retracement leg (BC) was from $12.50 to $14.70 on the 25th (7 days) and was a ($2.20/$4.00) = 55% retracement, close enough to 62%. For the gentler "classic" pattern (bullish), the third leg CD is drop of 127% or 161.8% (of BC), or (1.27x$2.20) = $11.90 or $11.14. I especially like this pricepoint because the price over difficulty ratio here coincides with the historic low set during the drop to $0.59 in early April. The bullish "extension" pattern is more brutal, a 127% or 161.8% (of AB) drop. An additional confirmation is that the third leg (and last drop) before the reversal at point D takes a time T anywhere from 61.8% to 100% to 161.8% of the time AB (12 days) - so between 7.5 days to 19.5 days from point C the 25th. So the earliest date would be August 1st-2nd and latest would be the 13th or 14th, if it matches to this pattern. We kind of need a reversal soonish, to stay in the medium-term growth channel. A sustained fall into the single digits (satoshi forbid) would start forming a head and shoulders pattern. |
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$13.30 is a key support level pointed out by Enky on his Bitcoin Trading Signals blog and by S3052 on his twitter account @BitcoinAnalyst. Both analysts recommended selling (stop-loss) if the price falls below the $13.30 area. There was an ask wall of $50k-$75k between $13.50 and $13.75 placing downward pressure on a bid wall of $30k at $13.30, but that ask wall was just removed and price is on its way up at the moment, to the next ask wall at $14.00. $13.30 is the point of a 61.8% corrective Fibonacci retracement or a "golden retracement", from two recent extreme price differentials. The most recent one was the bounce from $12.50 to $14.70 on July 18-19. 14.70 - 0.62*(14.70 - 12.5) = 13.3. Before that, there was the bounce from $11 to $16.50 on July 5-6. 16.50 - 0.62*(16.5 - 11) = 13.09 (close enough). The correction to $12.50 after the high of $16.50 can also be considered a 76-78% Fibonacci retracement (72% to be exact). For the moment, it appears we've (weakly) bounced from $13.30. Now the question is: short-term retracement or trend reversal? Chart patterns are one tool for deciding which, but my best match of the current chart is to a symmetrical triangle, starting from July 5-6. From what I've read, breakouts from a symmetric triangle should happen before it reaches the apex. It's the sign of an uncertain market when there is no breakout, and price continues sideways past the apex. That seems to be the current circumstance. The apex of the triangle starting from July 5-6 was reached in the past few days, and price is continuing sideways right around the starting median ($13.75). My beginner's study of technical analysis. Comments and speculation welcome. |
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Its only free money if it actually sparks a sell-off.
Otherwise, the market holds.
The seller sees this and changes the bet. Removes the ask and buys back higher. Big buys in a thin market can start a rally, and panic buying.
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Step 1: Have a lot of USD and a lot of BTC - market price at $13.90
Step 2: Place an ask order for $150k BTC at $14.25 - build an ask wall
Step 3: Sell $100k worth of BTC - break the bid wall
Step 4: Hope for a sell-off
Step 5: buy them back cheaper!
Pretty clear there's some big players now (as opposed to the early days). It now takes $100k to move the market (used to take $10k).
When the market is bearish and thin, its easier to manipulate down (spark panic selling). When the market is thin and bullish, easier to manipulate up (spark panic buying).
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Joe Smith: "Mr bank, please initiate EFT to account XYZ."
Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
Which brings up the question -- What is Dwolla's business model? How can they do no chargebacks at only 25 cents per transaction? One fraudulent payment reversal in every 5,000 transactions would bankrupt them. They've clarified it today. They do chargebacks. Unfortunately they had told us that they don't. It's 4:15, I'm going to get some sleep, I'll be available tomorrow. Jered Well there goes Dwolla and Paypal. Too bad traditional banking institutions are the ones causing the currency fraud. For the time being Dwolla is still here, thankfully. IMO, they helped boost the bitcoin economy as much as bitcoin did theirs. They are still the cheapest and most convenient way for US customers to fund exchanges. However, since it is clear that Dwolla transactions are in fact reversible (contrary to their claims), exchanges like TradeHill might need to change how they process Dwolla deposits. To protect themselves, they may have to start withholding bitcoins purchased with dwolla deposits for a couple of weeks, until it is clear the deposit won't be reversed. Reversing transactions is really the only way to protect themselves against (ACH) fraud, so this shouldn't be much of a surprise despite their claims about "no chargebacks". Dwolla is still friendly to bitcoin, just not to fraud. We are lucky that bitcoin makes up the bulk of their business. Otherwise, they would probably choose to freeze MtGox and TradeHill's entire accounts (like PayPal would) rather than just reversing a few of their transactions. |
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Realistically, the price seems to have leveled out for now. It's roughly at mining cost; the mining forums indicate that running existing mining hardware is worthwhile, but buying new hardware is not.
Mining cost alone isn't enough to determine the price, but it does seem to have an effect.
Now that we've had a few weeks of reasonable stability, Bitcoin has more potential as a currency.
I know that the going trend is to state that mining has nothing to do with the price of bitcoins, however, I agree with you that I think mining cost has something to do with the price of bitcoins, probably more then most people think. have you noticed that if you say anything on the forum about price of bitcoins and mining people will get all crazy like "Bitcoin price and mining has nothing to do with the price, you moron". What you're describing is a "tangled hierarchy" and it is, in fact, the state of every economic system. Mining has an impact on bitcoin price and bitcoin price has an impact on mining. Many things have an impact on price, and many of those things are more substantial than mining activity - likewise price is not the only impact on mining, though price->mining is a stronger effect than mining-> price. Among other things, miners produce some 7200 new coins per day - in times of low market movement the influx of new fiat moneys can be less than the face value of the 7200 new coins, and in such markets price tends to decline. This is just one of the many recognizable effects and it is admittedly a minor one that occurs only under limited circumstances. Anyone who claims that they have the whole of the market "figured out" is either a fool or a liar. There are too many causes and effects and too many unknown ways in which the causes and effects interact, stack, tangle and loop back on themselves. The best we can do is look for indicators of mass market psychology and make educated guesses. Welcome to the wonderful world of economic theory Well-said. It was so often repeated that price drives difficulty, "not the other way around". I've always argued that the relationship is "two-way causality". Note that since the crash from $30, difficulty hasn't dropped. To the contrary, difficulty is still growing slowly but steadily, and seems on target to rise to between 1.8 and 1.9 million for the next re-adjustment. By saying two-way causality I mean that price drives difficulty, AND the other way around: difficulty drives price. To be precise, the evidence shows (see charts in my sig) that difficulty sets a bottom for the price. I don't think its coincidence that the price to difficulty ratio has only gone as low as about 0.75 (using a weighted average price), twice for the two bear markets of bitcoin's history. The first time was after price topped at $1.10 and fell from there, through March and early April. And the second time is now, which is where it has been since the crash from $30. If the the price to difficulty ratio continues hovering between 0.75 and 1 (until the coming rally  ), I think it makes for a pretty reliable economic indicator of the mass-market psychology of bitcoin. |
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I heard there was supposed to be a Battle of the Bids. Who called a truce?
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On their chart, Dwolla is claiming a million per week in June and a million per day in July. But the rally to $30 was in June, so either Dwolla has a substantial non-BTC customer base, or a lot of USD has moved to MtGox this month  |
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Nice work! I had been wanting to plot the three sets on the same graph..
I see you are using the actual difficulty factor (readjusted every 2016 blocks). How are you plotting the price?
I like being able to see the drop to $10.50 from $30 and the bounce to $25 on your chart. That's not visible on mine because I use the weighted average price over the 504-block window for the difficulty estimate.
Another formula to use when the reward is halved from 50 to 25 would be to multiply the difficulty by 2, which should have the same effect.
How about your thoughts on the correlation? Are we in agreement that difficulty sets a bottom for the price?
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