The fundamentals point to a decline towards some $20. In fact, single digits would not really surprise me either.

I also think that the price decline will take more than 6 months, perhaps more than a year.

I agree that this will not kill bitcoin completely. It does damage to its reputation though.

There certainly are some mad guys who don't see the light even if it shines directly into their eyes.

The good thing about a bursting bubble is that the idiots who contributed to giving bitcoin a bad name by trying to drive its price to the moon are now flushed out of the system.

Interesting questions:

Where will the first big bull trap be?

How fast will the price decline?

How low will the price go?

I guess the bust will take at least 6 months, possibly a year, perhaps even longer.

About time.

Now the interesting question is, at what price level will we see the first major bull trap?

You mean a "permanently high plateau" at around $190?

I have pondered this until my brain almost exploded. My best result is that a rough guess is possible, but it is fundamentally impossible to predict with any precision when or at what price a bubble bursts. This is similar to volcano eruptions. Sometimes you get some advance warnings, but a precise prediction is still impossible.

Why is this so? Because a single big seller can burst the bubble by selling a large amount and perhaps another large amount just when the price attempts to recover. If there is no big sale, the bubble can inflate higher and higher.

A second effect is that buyers simply run out of money. If you look at the bitcoin price curve of the last few months, you see that we have super-exponential growth, which is impossible to sustain for long. Even exponential growth quickly becomes unsustainable.

And when you look at historic price bubbles, one conspicuous observation is that the peak is always pointed. You never see a rounded head or a "permanently high plateau". It does not necessarily have to be pointed when you look at it through a microscope, but for any normal observer a price bubble always has a pointed peak.

This seems to indicate to me that the bubble also bursts on its own when the accelerating price increase cannot be sustained any longer.

I believe that there are a few simple psychological phenomena at work in these bubbles. You know how the run-up feels—you could observe that here all the time. After the burst you get the effect that many late buyers panic and sell at a loss, relatively quickly driving down the price.

By the way, let me try to explain the stupidity of a price bubble in a different way. From the dollar point of view, bitcoin trading is a zero sum game—no dollars are created or destroyed. They only change hands. This means that necessarily there will be winners and losers. But against all rational sense almost everybody believes to be a winner. That is like asking people whether they believe to be above average car drivers; some 80% answer that they believe exactly that.

The current movements have little meaning, because there is hardly any volume behind them.

I would say that the market is in one of its bitcoin-typical low-volume-wait mode phases. They seem to happen when the "speculators" have no idea where the price should go. To me they are an indication that the market is not reality-driven. It is phantasy-driven. This may just be a different expression for bubble.

Unfortunately, price bubbles are by their nature unpredictable. You can safely make a general prediction that the bubble will burst, but it is difficult to predict exactly when and at which price it will happen.

My personal guess is that the bubble will burst within days, but I have to admit that it is only a guess and that I cannot preclude that the price will go up to $200 first.

I forgot to mention that the bitcoin market sometimes goes into a low-volume-wait mode. That can delay everything else by days. We are in that mode right now.

Let me make a more detailed prediction. The price will gently begin to sink. Over a couple of days the downward trend will accelerate until the first bull trap will appear with the price rising again. But it will not rise to the earlier high levels. After the over-eager bulls have jumped onto the bandwagon, the price will turn around once more and slide to even lower levels.

The price will essentially sink for about half a year with a few major intermediate ups and downs, then it will slowly begin to stabilize. I cannot say at which level it will do that, but a very rough guess would be $20. This depends on circumstances in the past that I do not know exactly and also on circumstances in the future, which nobody can know in advance.

So you are telling me that in those three hours a lot of people suddenly saw the light and understood the essence of bitcoin, and therefore they pushed its price up by 20%? LOL.

The truth is that these newbie speculators want to get rich quick. They buy bitcoins because the price rises. Then the price rises because they buy bitcoins. That is how bubbles are made.

That said, I am essentially on your side and see the same things that you see. Bitcoin is an invention of fundamental importance. The idea of a high-tech currency that is independent from government meddling and from sucking banks will never go away again.

If bitcoin survives another couple of years, I agree that its price may well rise, and I am hoping for that just as you do. But in the short term we will keep seeing hordes of crazy pseudo-speculators, price bubbles, volatility, electronic theft, failing exchanges, Ponzi schemes, attacks from governments, the whole lot. And there is still the risk that bitcoin fails, for one reason or another.

The good speculator has a balanced view.

Sure? Not really. But just wait and see.

As to buying in lower, I think you'll have to wait half a year or a little longer. You can try to benefit from volatility, but it is difficult to make money in a falling market in which you cannot easily sell short or buy put options. That is a distortion that makes the bitcoin market slanted upwards. It helps creating bubbles, but makes it difficult to deflate them.

No. It is based on the expectation of getting rich quick. People buy bitcoin because the price is rising.


The profit comes from recognizing a price bubble in time and getting out when it is still possible.


A "permanently high plateau". We can talk again tomorrow, after you will have seen what the bitcoin price actually does instead.


A beautiful dream. They hoped for it because they wished it so much. Reality is rarely so nice.

If bitcoin survives for long enough, this dream might actually come true to some extent. But do not think we are there already. That will take more years and more price bubbles.

Tonight. If you're in America. Otherwise tomorrow.

Bitcoin price is a good predictor of Google Trends.

In a very theoretical sense you are right, but a commodity that nobody really needs can fall to a price of zero at any time, if anything starts a sell-off panic.

If you have some basic need, however, the price cannot fall below the required value. In the case of bitcoin, if some people need some bitcoins for actual real-world trades, the total market valuation cannot fall below the total value of those needed bitcoins.

By the way, it is interesting to note that Satoshi may have been a genius also because he set a very limited maximum speed for bitcoin transactions, so there can be no "inflation" due to increasing speed of transactions.

Rechnet vor Juni nicht mir mir. Ich habe bis dahin kaum freie Zeit.

Hans-Georg

It is difficult to get at any reliable data, but when you guess how much of the media coverage is based on increasing bitcoin use and how much merely on increasing bitcoin price, the picture is not encouraging.

Take the Cyprus myth, for example. It implies that the Cypriots are buying bitcoin. Even a bitcoin ATM was reported to already be there or, in other messages, going to be there very soon.

Nothing of this is true. The Cypriots could not get at their money, so they could not buy bitcoins. Even if they could, they would not buy bitcoins; they would buy gold. No bitcoin ATM will be there any time soon.

Spaniards are allegedly buying bitcoins. This was said because some kid wrote in his blog that he saw more bitcoin-related apps being downloaded on iPhones in Spain. There was and is no evidence that the Spaniards actually bought significant amounts in bitcoin. It is all only the wildest speculation.

Namecheap.com, wordpress.com, Reddit now accept bitcoins, but the latter two only for some add-on service. But who is going to pay with bitcoins there? Very few. I did pay one bitcoin to namecheap.com just for fun, because I'm one of their customers. But it needlessly complicates my bookkeeping, so I will perhaps not do it again. The estimate is that very few bitcoins are actually moved into any of these services.

Some time over a year ago the actually running bitcoin services, mainly Silk Road and some others, were running fine with a bitcoin value of $3. If their transactions doubled or tripled, they would justify $6 or $9 per bitcoin. If you add some more optimism, you may even get into double digits. But I find it very hard to justify a bitcoin price above $20 at this time. And the current bubble will damage bitcoin's reputation once more. Take your pick.

The sad truth is that the media report on bitcoin because its price rises. People read this and buy bitcoin because its price rises, so it rises more. Then the media report more, and more people buy bitcoins because they want to get rich quick. This is how bubbles are made.

Yesterday the buying frenzy got absolutely crazy with the bitcoin price rising 20% in three hours. People bought bitcoins for up to $148 each. How insane is that? Did real-world bitcoin use suddenly rise by 20% in those few hours? And still many bitcoin holders have not sold. It seems to me that an incredibly large fraction of the bitcoin-holding community is hare-brained.

The up-side is that a hare-brained speculator soon loses his capital. The market automatically rids itself of stupidity. The problem arose only because new, completely inexperienced "speculators" streamed into the bitcoin market. Many of them are now, or will be soon, out of it again, but I expect the next, similar bubble again in two or three years. Too bad that it is impossible to predict at which price a bubble will burst.

I think the same. Perhaps some trust-based micro-payment system on top of bitcoin could solve this problem. Bitcoin could then be used for regular (for example, daily) rebalancing payments. Bitcoin would, of course, still be used directly for large payments.

Excellent prediction, right on target, except for "never-ending". There are no never-ending bull runs. But I take that as a benevolent exaggeration, and so you should be admired, calian.

Of course there is always the suspicion that, with hindsight, we can now pick out just those predictions that turned out to be correct by sheer luck.

Outside bitcoin it is normal within some reasonable margin, so I'd expect it to become normal for bitcoin too, as soon as the bitcoin market is a bit more stable and mature.

Because to change bitcoin you would need a solid majority in favor of a particular change. Then  you'd have to fork, which can be a painful process involving double-spending and all kinds of technical errors and fraud.

But I agree that this is also possible. I wouldn't mind going that way if it turned out to be workable.

If you look at the price curve, perhaps at a smoothed average, you will see that the growth is exponential. This means that the total bitcoin market capitalization will very soon grow beyond any attainable value.

This is typical bubble behavior. The bubble suddenly bursts when the price no longer increases, because there are also quite a few people who are fully aware that this is a bubble and will try to get out before it bursts. There will also be people who just bought and now see their wealth shrinking fast. They will try to recover some of it by selling their bitcoins.

That is because most experienced speculators know that it will be difficult to sell bitcoins immediately after the burst.