My screen name is a cliche that was appropriate for the Oil Drum forum that I frequented 8 years ago and I kept it.

That certainly happened on April 10.

Just before the pattern I outlined, approximately 120K BTC were purchased between $100 and $136, if prices drop those traders - if still holding, will be at a loss and be highly motivated to capitulate. If only 60K BTC sold at once, bids would be consumed down to $83, from where I would expect a nearly full recovery back to say $110 - 120.

Back in the summer and fall of 2011, bitcoin prices dropped steadily for three months as well commented upon by this forum at the time. The issue became 'where is the bottom'. What happened was that folks who had fiat at the exchange bought back bitcoins when they thought the price was low enough. Consequently, near the bottom, e.g. below $6, the majority of investors had already committed available funds and had little fiat left to spend, and little motivation to do so.

According to the theory of speculative financial bubbles, one should expect a full retracement of the bubble-related price increase. Looking at the chart, I think the bubble started in January at $13.50.

Looks to me that tops are trending lower and support holding at 110. Could this develop into a channel or will the depth squeeze be resolved with a break upwards or downwards?

Precisely my motivation during this bubble. There is no faster way and maybe no safer way to multiply bitcoin holdings other than selling near the top of a bitcoin bubble and waiting a few months to buy back - in my opinion. I recall June 8, 2011. A limit order could have sold above $20. Three months later, even waiting for prices to trend upwards from the bottom, bitcoins could be purchased for $4. That is a 5x increase in bitcoins in 3 months with no additional fiat invested.

I vowed last time not to miss the next bubble. I successfully gauged the day of the April 10 peak according to my bubble-experienced appraisal of the market mood. One of my preset limit orders filled at $255 and I am completely satisfied with the sell part of the plan. The buy back part is the issue - especially will prices drop like last time?

There is not an easy way to gauge the bottom as there was for the top. So I will buy some back at 2x, 3x, 4x and so forth and wait for a sustained recovery, e.g. a week of increases before buying back with the remainder of my fiat at the exchange.

What I am concerned about is being left behind should prices soar for some reason. Back in the summer of 2011 that concern was a manifest fear, and kept me in bitcoins during the majority of the collapse; I sold everything at 15 and bought back at 14. I increased my holdings slightly if at all - because of fear. This time around I am controlling my fear by persuading myself that prices must go down and that I will not be left behind when it comes time to buy back.

I applaud the super node concept. I posted some questions about the concept on your thread.

The price can fall in accordance with the theory and experience of speculative financial bubbles, if the establishment of supernodes is delayed, or otherwise limited such that total investor demand continues to drop as predicted by theory. Or it might be that potential buyers will be strongly motivated to wait out the bubble collapse no matter how reassurred they are about the infrastructure.

I believe, without sources, that one or more market-making bots are using a similar strategy on Mt.Gox. If this works for you, then make bot on one of the trading software applications.

I agree that the post-peak price action of bitcoin bubble 2 has deviated from the pattern set by bubble 1.

Technical evidence that would cause me to reconsider my  hypothesis would be a sustained uptrend that broke to new highs, in particular a new all time high, or an absence of the periodic capitulations that characterized the bubble 1 collapse, or maybe simply sustained volatility when stable decline is predicted. Fundamental evidence that would cause reconsideration would be a significant increase in bitcoin demand, such as a flood of new investors with reignited enthusiasm.

Technical evidence that would strengthen my hypothesis would be a multiple-months-long exponential, channel-bound decline to a bottom lower than most expect. If that indeed occurs, then there should also be periodic capitulations. Suppose that prices sink on average 1% a day - 20 days from now the price is at 100. Subsequently, e.g. 10 days later, the roughly 300K bitcoin purchased on April 19 at 100 will be loss positions prompting a capitulation.

Fundamental evidence that would strengthen my case would be majority investor sentiment that the bubble is indeed collapsing, e.g. back in 2011 in this forum there were frequent posts on when the bottom would be reached and what that low price might be. Or evidence that some indicator of the underlying bitcoin economy is retracing back towards a pre-bubble level, e.g. disgruntled speculators reducing their previously enthusiastic bitcoin transactions due to lack of interest.

Despite its failings, Google Trends and the other bitcoin web site indicators, might be the still the best way to gauge new investor interest in bitcoin. I simply look for sentiment confirmation that this bubble has peaked.

+1

Of course telling folks that this bubble is collapsing like any other speculative financial bubble, even with detailed technical analysis, will very likely not prevent the collapse from completely playing out.

By the way, watching both Bitcoinity and Clark Moody's realtime bitcoin charts over the course of this bubble has given me a deeper appreciation for the various patterns. They make more sense now that I see the outstanding limit orders, how resistance forms, how candle patterns form tick by tick, and so forth.

These are great! They are consistent with other measures of bitcoin interest, e.g. Google Trends.

I believe that Mt. Gox uses Prolexic for DDoS mitigation. The Prolexic site appears to target large enterprise customers, e.g. banks.

Agreed that the blockchain Trade Volume vs Transaction Volume Ratio displays the ratio transaction volume / trade volume. I transposed the factors described in this post. To check your constructive criticism, I ran the python script myself, and also inspected the most recent respective values from the two source charts: USD Exchange Trade Volume, and Estimated USD Transaction Volume. And I agree that as the bubble formed, the ratio decreased because of the relative increase of trade volume verses transaction volume.

Agreed. Lacking anything better I use the long term bitcoin price support trend as an indicator of the bitcoin economy growth rate. I estimate this rate to be approximately 5x annually - which is incredibly awesome. But speculators outpace this 5x annual rate during bubbles. From a possible start of the bubble, which I think could be January at 13.50, the price reached 266 on April 10, with a double exponential growth rate. The final doubling from 133 on April 3 to 266 on April 10 took in just 7 days!

+1

If this bubble is indeed similar to the June 8, 2011 bubble, then fierce resistance is to be expected all the way down to the full collapse of the bubble. Over the three months of decline back in the summer and fall of 2011 there were a number of memorable price points that I commented about at the time, e.g. one post was "15 is the new 17" and so forth.

By fundamental analysis, I suppose you mean a determination of fair value without recourse to price history,  In financial markets, and in commodity markets, there are no company reports to analyze - one must look at other factors to gauge current and future demand for bitcoins.

I have been looking for fundamental confirmation that this bubble peaked April 10. Here is what I have so far ...

• Google Trends for 'bitcoin' now shows decline from a peak, when viewed over a 12 month or shorter time frame. This important, because an on-boarding step for new bitcoin investors is to search for information about bitcoins.
• Blockchain.info chart for 'My Wallet Number of Transactions per day' appears to have peaked, when viewed on a log scale with 7 day smoothing. This data relates to the underlying bitcoin economy, including gaming.
• Blockchain.info chart for 'Trade Volume vs Transaction Volume Ratio' smoothed values peaked at 12 in early January, and bottomed out April 15 at 1.4.  I was puzzled by this particular chart at first, but a post today explains that the ratio is actually trade volume / transaction volume, i.e. more exchange trades yields a higher ratio.
  

There has been strong resistance at 128 and 135 before, which I would bet holds again.  When do you think 135 will be surpassed? Monday?

Before the DDoS, there was resistance at 128. I expect it to still be there.

Good luck to MtGox in their planned DDoS-handling upgrade.

Thanks for the great comparison chart. I regard Google search trends as a following, and confirming indicator for bitcoin price movements.