Mattius459 - that would be great if you could do that. Thanks

Questions:
1) What are you (the Chinese Bitcoin investor) thinking about doing with your Bitcoins before the Chinese new year?
2) Do you think that the Chinese government will ban Bitcoins or just make it very difficult to invest in them?
3) Is there any regulation that prohibits Chinese citizens from trading Bitcoins in foreign exchanges?

hgmichna - very good issue that you brought up. I'm assuming that it is illegal for Chinese citizens to trade in foreign exchanges but I don't understand why localbitcoins.com would be a problem.

What do you think about the news today that the ‘Ebay of China’, TaoBao, announced that it would no longer allow sales of virtual currencies (Bitcoin, Litecoin, etc) and anything related to Bitcoin (rigs, manuals, etc)  starting next Tuesday?  For people who don't know, there are two ways to deposit Yuan into BTC China, cash deposit and BTCC Voucher. You buy a BTCC Voucher through a number of vendors, but all of them only have stores at TaoBao.com.  So after next week, the only way to deposit any Yuan into BTC China is though cash. Unless BTC China comes up with a new way to deposit Yuan, I don’t see how the exchange will be operational after January 31st.   This leads me to my next question.  Is the Chinese government after BTC China only or are they after all digital currencies or is the ban an overreaction by TaoBao over the new Chinese policy?   

If the Chinese government is trying to drive BTC China out of business, that would require an assumption that the government had direct contact with TaoBao to let it know of their displeasure of having digital currencies (vouchers) being sold at TaoBao.com.  This makes sense because the TaoBao ban basically closes BTC China but leaves Huobi (the leading exchange in China and the world) untouched. I don’t like this conspiracy theory because it is too complex and too publicly visible to pull off.   If you believe that the Chinese government is underhandedly trying to ban Bitcoin and all other virtual currencies you have to ask the question why are they not going after Huobi?  So the next option is the easiest for me to believe in. Lawyers and/or compliance department of TaoBao decided not to risk displeasuring their government for the very small revenue that Bitcoin related auctions bring in, so they decided to ban it.  If this is so, will Chinese investors realize this or believe that this is another step towards the banning (or making it very difficult to acquire or sell) of Bitcoins altogether? 

Returns are calculated using only Mt. Gox closing price.  Volume is for Mt. Gox only.



There is no better way to promote Bitcoins then returns. The Dow Jones industrial average finished the year up 26.5% and the S&P 500 gained 32.39% compared to 16.07% average daily return for Bitcoin.  The 3-year average return for Bitcoin is 89,523% (268,568% total return). I don't know of an investment that has ever produced returns like this. Wall Street has to take notice.



Note the currency volume for December 2013, when combined with BTC China, BitStamp and BTC-E, it's over the equivalent of 3.5 billion dollars that were exchanged in one month. While that is a huge amount of money being exchanged and a record for Bitcoin, keep in mind that $2 billion per day on average is traded in shares of Google.   

DISCLOSURE: I'm a retired financial analyst and I have a lot of experience on doing qualitative analysis (I know this doesn’t mean anything when dealing with Bitcoins). I've been long on Bitcoin since February of this year and I am a true believer as to the massive economic and social impact that Bitcoin will have upon the world in the future. With that being said, I do believe in protecting my gains, especially when I believe the #1 exchange (BTC China) in terms of volume is probably going to be shut down after January 31, 2014.

VOLUME: From August 22nd through December 19th (120 days), 3.9 million Bitcoins, 15.1 billion Yuan (approximately $2.29 billion) were traded on BTC-China. For the same period, 3.2 million Bitcoins ($1.4 billion) were traded on Mt. Gox (U.S. currency only) and 2.7 million Bitcoins ($1.2 billion) were traded on BitStamp (U.S. currency only).  At a Stanford Seminar, Bobby C. Lee disclosed the result of a survey that BTC China conducted to their Chinese costumers only. While disclosing that it was not accurate (a few receive an iPad for participating), the results were very interesting. Over 90% of their customers who participated in the survey held at least a university degree compared to the national average of 27%. Next they asked why they are buying Bitcoin. Five percent to purchase goods, 19% for novelty, 34% for short-term speculation and 41% for long-term investment.  Assuming that the survey was a somewhat accurate representation of Chinese users, approximately 1.6 million (3.9 million X 41%) Bitcoins were purchased for long-term investment. This 1.6 million Bitcoins that were purchased and held for the long term is a very conservative estimate considering that: a) it doesn't even count the number of Bitcoins that were mined in China; b) it is only 13% of the total number of Bitcoins in circulation (12.1 million) allocated to the 2nd largest market of Bitcoins.

BTC China: On December 5th the government of China banned financial institutions from having direct dealings with Bitcoins. I thought that the global market over reacted to a positive directive (regulation = legitimacy). Bitcoin's price dropped 43.7% from $1,237 at the opening of the trading day to the closing price of $696 on December 7th.  Then it went up 48.35% to $1,034 by the close on December 10th. On December 16th, the Chinese government, using their agent, People's Bank of China (PBOC), convened a meeting with third party channels demanding the end to custodian and trading services. With this news the price of Bitcoin dropped by 41.2% from $920 at the opening of the trading day to the closing price of $541 on December 18th. Speaking for myself, I didn't realize the importance of the December 16th meeting until December 18th when BTC China announced through their website that, as of now, it would not be able to accept new deposits into the exchange. Equally important, you won't be able to get your money (Yuan) off the exchange AFTER January 31, 2014. While Bobby C. Lee, CEO of BTC China, is not giving up yet, I personally think that the exchange is finished. I made the mistake of not seeing the writing on the wall on December 16th, partially because I'm ignorant of Chinese culture and partially because I wanted to believe that such an important market for Bitcoin's past and future growth could not end. My research on the internet has led me to conclude that the Chinese government has thought about the implications of the use of Bitcoins to evade their capital controls and has ended the Bitcoin experiment in China .

Mt. Gox order book depth currently has 108,000 Bitcoins to purchase before it hits the $100 mark. BTC China’s order book depth is only 20,000 Bitcoins until it goes to zero. That’s not much considering the average daily volume was 58,000 on BTC China for November.  From December 18th to December 26th, 227k, 172k and 332k Bitcoins were traded on BTC China, Mt. Gox and BitStamp, respectively. Obviously not every trade was from Chinese investors trying to dispose of their positions, so the amount of Bitcoins that need to be divested is still quite large. So I’m going to guess that 100K Bitcoins have been divested by Chinese investors so far which leave at least 1.5 million Bitcoins outstanding.

SCENARIOS:  So far, I can only think of only 3 options that the Chinese have:  a) hold them for the long-term and eventually trade them in gray markets (investment if Bitcoins are not yet illegal in China);  b) sell them in foreign exchanges for a premium; or, c) wait and see (if the Chinese government is really against Bitcoin or if BTC China is able to get a third party vendor to reinstate deposits and withdraws). If I missed any other viable scenario, please post it. No one option is what they are all going to do in the upcoming month, but I want to get a felling for what the majority of Chinese Bitcoin investors are thinking.

We know that a considerate amount of Chinese Bitcoin investors are male, under 40, and very well educated.

I need insight if they believe in Bitcoins enough to keep them for the long-term and possibly go against the wishes of their government.  If most Chinese investors believe in the very profitable future of Bitcoins, then, I believe, the effect on the price of Bitcoin will not suffer too much by January 31st.

I’m of the opinion that not too many Bitcoins have been sold in foreign exchanges (yet), but I have to believe that a +20% gain if sold on Mt. Gox instead on BTC China (like the price difference was of December 19th) will attract some Chinese investors.  About 8% difference in price between the two exchanges during the last 3 days is not enough to warrant an exchange between countries. I want to get some insight if these Chinese investors would travel to Japan or Europe to get their earnings and how hard it would be for them to exchange the U.S. Dollar or Euro for Yuan.  I don’t know what alternatives Hong Kong would provide, so if you have an idea, please provide.

I’m nervous that Chinese Bitcoin investors have a wait and see approach. Any news, either coming from the Chinese government, BTC China or Huobi, I believe, will cause significant change to the price. I’m concerned that Huobi, the current lead exchange in the world in terms of volume, is defying the Chinese government. I want to know if my concerned is warranted and what the Chinese government will do about it. If the Chinese government raids the offices of Huobi, like India’s Enforcement Directoratendia has done with buysellbit.co.in, there would be a huge crash on Bitcoins price. On the other hand, Chinese Bitcoin investors have more than a month to divest their Bitcoins. I believe the international Bitcoin market could buy the 1 million Bitcoins (500,000 stay in China for the long-term) without hurting Bitcoin’s price due to the immense attention that Bitcoin has been getting the last 2 months.

QUESTION:  Obviously the number 1 question is what Chinese investors are going to do with their Bitcoins. I'm asking the Bitcoin community for their intelligent input. What I really want are replies from people who have experience of living in China, know their culture or better yet, know people in China who are or were invested in Bitcoins. If someone can translate the Chinese forums to see what they are thinking that would be great too.

I don't want your emotional charged opinions to sell or buy, what the price you think it will be in a month, accusations of being a bear, etc. For the most part, we are all long on Bitcoin and know that its meme is the honey badger for a reason. China will not be the end of Bitcoin, but possibly a huge bump on the road. Please don’t respond to brainless replies, it gets us off the point. The point is to listen so we can make an educated assessment of what Bitcoin’s price is going to do in January.

That's why I only did it for 1 month, predicting 6 months or a year would be unreliable with this method.  Btw, at $103 the price has increased 10.72% from yesterday's close.

Thanks, I hope that you found it helpful.

You people are insane to sell now. Now is the time to buy, buy, buy. This is inexperienced investors who think that the bubble must be bursting because the price has decrease 20% from today's high. There is no news, nothing to cause this sell off but fear. Twice this has happened, the last one was just this Saturday when the price decreased by 25% to $52 only to come back in a couple of hours.

Yes, I cashed out of my retirement plan (not my 401K). You can't invest in Bitcoins using your 401K.  I don't have to pay a penalty, I'm retired, but they did have to hold on to 20% for taxes, but I will get most of that back next year.

Yes, a definitely yes. The thought that you even thought about redirecting your retirement funds into Bitcoins tells me that you are a risk-loving individual who sees that your 5% to 10% investment return in your 401k doesn't compare to the more then 100% return by purchasing Bitcoins.  So it doesn't take an intelligent person to see that purchasing Bidcoins over 401K is the right choice. But how do I know it's going to earn more than 100%? Because it's my gut feeling. Well that's a real shitty reason to or not to invest your retirement money, but that is the only reason that I have found that people are thinking that this is a bubble. No facts, figures or anything to explain why it is a bubble.  I don't listen to my gut feeling, I do my due diligence. I've created charts, spreadsheets, read every news story in the last 2 months that mention bitcoins and even dived into the laws that could govern the Bitcoin industry. I have the advantage of being retired (I have the time required to do this) and my experience as a financial analyst (where the people that tell your financial adviser what to buy) allows me to do my due diligence.  After watching and learning about the Bitcoin industry for 2 months I concluded that Bitcoins are very under-appreciated and the risk/reward model is nothing that I have even seen. By this I mean that the risk of loosing money (that it turns out to be a bubble) doesn't even come close to comparing to the profit potential. An analogy would be if you bet $100 that you can make a layup and your bookie gave you odds of 10,000 to 1 against. There is a chance that you miss but the profit potential is too much not to go for it.  As for me, and I'm only disclosing this because we are talking about retirement money, I decided to take half of my retirement funds and purchase Bitcoins. I invested most of it last Thursday and Friday and already I have a + 40% unrealized gain as of today.

If you are fully vested, and your employers offers it, you may want to consider taking a loan from your 401k. When you take a loan from your 401K you pay the interest to yourself. The 401K company sells your shares out of the fund and they hold on to it in a separate account. Since the money is still yours, the 401K company offers to lend you your own money for interest (let's say 8%).  Since you are borrowing money from yourself, you get the interest income generated by your loan.  If your 401K investment are returning 5%, it would make sense to borrow it and pay yourself 8% interest. Something else to consider is diminishing purchasing power.  If you invested $1,000 on January 1 to purchase Bitcoins, you would of purchase around 75.16 BTC. The same amount a month later and you would of purchased 48.78 BTC and on March 1, it is reduced to 28.98 BTC. April 1, $1000 is going to buy you less than 10 BTC and by May 1st I'm guessing that you will be lucky to buy 5 BTC for a $1,000.  So what I'm saying is that your investment of $150 a month will make you lots of money, but not as much as you would have if you invested $1,800 ($150 * 12 months).


I hope that helps.

P.S. Your company's 33% match is only for the first year and then you are back to 5% to 10% returns, whereas your purchase of Bitcoins will keep appreciating for years to come.


 

I want to find out why new investors (newbies) purchased Bitcoins in the last two weeks. Don't be afraid to post your reason (keep it short), the more people answer, the more we all can learn.

At $91.26 price we will be at 1 billion market cap (10,958,150 BTC in circulation right now) and with the price just 2 points away, I believe that it will happen by tomorrow morning.  As far as reaching $100, maybe tomorrow, probably the weekend, and certainly by Monday.

Your right, went back and calculated it ($64.46 opening, $52 low = 25% drop). Thanks!  Still, a 25% drop in 1/2 a day is still a pretty decent hammer and would bust any bubble. 

The Cypriot issue was just good press and got Bitcoins in many people's radar screen (in Europe and the U.S.).  Has anybody done any research to see if Cyprus has the infrastructure for it's citizens to buy Bitcoins.  They are a small country and probably don't have a middle money service like Dwolla or bitInstand and if they do, how much are their fees? They almost revolted over a 6.95% tax, after successfully defeating that, I think that they are not going to want to pay 5% in fees (bitIstand) just to keep their money safe. 

I think that returns are the main force behind last week and this week cash inflows. The one week return though Tuesday at midnight was 32.74% (closing 3/19/13- $59.14, 3/26 - $78.50 : based on closing prices as listed at http://bitcoin.clarkmoody.com/ ).  I have not seen a news story about any returns this week which really surprised me.  I think the media missed that the price fell 40% in less than 24 hours and was fully recovered by Sunday night.  This should of been major news because it debunks the fallacy that the recent rise of the price of Bitcoins was/is a bubble. No bubble can withstand being hit by a hammer and not break and a 40% drop in price is a very big hammer.     

If you can, go to silk road and the answer to your first example will be answered. In silk road, a seller can choose to sell their happy products either in BTC or $.  If the seller decides to sell their product in BTC, he/she is not going to make many sales when the price of BTC rises. If they set their prices in dollars, when you go to check out, the web site tells you how many BTCs are needed to complete the purchase.   

When I decide to buy my products at silk road is take my $ from Dwolla, exchange them at Mt.Gox and immediately transfer the same amount into my Silk Road account. Then I wait a couple of days for the price to appreciate and I can buy my weed for a reduce cost. For some reason weed gets me very high when I know that I got it for half the price. 

Monetary base for Bitcoins is $10.9 million BTC. The monetary base for Bitcoins has to be denominated in BTC, not dollars. I like total dollar valuation (TDV), it's a very descriptive term but I like market cap better. Why? Because everyone knows what the term "market cap" means (or should know the term), so lets keep it simple. I used to work with mutual funds and although technically they can't have a market cap, we used the term "market cap" for all the financial reports to the SEC. It is accepted finance lingo to say that shares outstanding multiplied by current price = market cap for any financial instrument whether or not the finance instrument really have "market cap".

With that, I say that I'm VERY interested in market cap and it's significance. Market cap is one of my primary reasons why I purchased BTC. There is 2 reasons.
A) Market cap determines liquidity. Major players cannot purchase Bitcoins if there is no liquidity. At our firm we classified "small cap" as companies with market caps of less than $500 million. Mid cap as companies with market caps of more than $500 million and less than 2 billion and Large Cap as companies with market caps of more than 2 billion. My opinion is that in order for the major players to purchase BTC, the market cap has to reach 2 billion or more. In order for the market cap of Bitcoins to reach this level the price for one BTC is around $180.

B) Reason A (above) I used market cap to valuate $180 as being the price where I think that the big money will roll in. Now I will use market cap to determine the price that I'm going to sell some of Bitcoins. I strongly believe that the market cap of Bitcoins will reach 1 trillion within 5 years. This is just a rough estimate, but I figure that there will be 14 million BTC outstanding at that time and it would put the price at $71,400 per 1 BTC.  Now that may seem high, but just keep in mind that there is about 8 trillion dollars in money markets and equivalents whose 30 day yield is less than 1 cent.  But in order to get the price to $71K, the market cap for bitcoins has to be more than 2 billion.



 

Yes, to get the mainstream's money you will have to have regulations.

You are wrong DannyHamilton!!! j/k  Actually you are technically correct "For EVERY buy, there is a SELL" but I think that the folks in this forum are capable of knowing what we are talking about when we say "more buying than selling".

It's common financial industry lingo to say "more buying" or "more selling" to express the effect  of supply and demand. I could of said "more amount of dollars in open orders to buy than the amount of dollars in open orders to sell " but it would further signify that I'm a know it all douchebag. 

You example is wrong. The rise in price can only happen if there is more buying than selling at the previous price. So between events 5 and 6 you are missing several events of people buying BTC thus driving the price up from $9 to $12. Same between evens 7 and 8. Thus the total $ amount invested is way higher than $10534.
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yes, at the previous price, read it again. More buy orders at $9, no sell orders, therefore price goes up to $12. It doesn't go magically to $12.
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I just gave you a real life example of when the price "magically" decrease by $10 and increase by $10 within a matter of seconds. I guess that I don't understand what you are trying to say.  Would it make easier and more believable to you if person A sold his BTC for a price of $9.01?  If so, it would not change what I was trying to say with the chart.

Also, I believe that the monetary base for Bitcoin is 10.9 million BTC. 

I agree, the price is almost guaranteed to go up next week but there are some Bitcoins companies like SatoshiDice who have to trade in their Bitcoins as soon as they get them. It would be bad business practice to hold on to BTC for speculation (gambling companies don't gamble with their revenue).  

You example is wrong. The rise in price can only happen if there is more buying than selling at the previous price. So between events 5 and 6 you are missing several events of people buying BTC thus driving the price up from $9 to $12. Same between evens 7 and 8. Thus the total $ amount invested is way higher than $10534.
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You are wrong, a rise in price may happen when there is more selling than buying if the sellers hold out until their perceived value target (the ask price) are realized by the buyers. Conversely, the price may decrease even though there is more buying than selling if the sellers have no confidence in their perceived value of the future of Bitcoins. An example of the first statement is if me and 7 friends are asking $90 for BTC, the last price was $80, and you and your cowardly friend are bidding $79. If me and my friends hold to our $90 asking price and your friend decides that he rather pay $90 then to be left without any BTC, then the price will rise.

You are wrong again!  There is no reason why person D pays $9 each for a Bitcoin and within seconds person A sells his Bitcoins for $12. Yesterday (3/23/13) early morning I was watching MtGox live (it's my porn now a days) and the price decreased from $65 to $55 and then increased back to $65 within seconds (and it happen at least twice).  That's a $10 or 15% spread between bid and ask price. That never happens when dealing with registered stock because the broker dealers are responsible for keeping the spread more close.  I like the Bitcoin way better because it is unregulated, it's like being in the old west.

Btw, I don't like expressing my opinion by saying that someone is wrong, partially because if I am mistaken in my retort I wouldn't like someone to point it out in a public space, it makes it look like I have no credibility and don't know what I'm talking about. But in this case I've decided to sink to your level. :-)