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1181  Economy / Speculation / Re: Yet another analyst :) on: February 12, 2013, 11:50:27 AM

If you live in a technical cave it was bearish. When you consider the fundamentals and recent news it was and still is bullish as hell

'fundamentals' and 'news' are all priced in gradually and do not cause trends but support or dampen them. the mid-term RSI was bearish until a midline bounce that actually predicted the rally.

ironically, that was about the time lucif started posting Tongue
1182  Economy / Economics / Re: How economy grow with a deflationary currency? on: February 12, 2013, 11:38:06 AM
But if you're educated in the matter, please inform me what the ideal economic circumstance is.
The ideal economic circumstance is the one that all participants freely choose; the circumstance that exists when coercion is removed.

+1 @O
1183  Economy / Speculation / bubble or bulltrap? on: February 12, 2013, 11:18:11 AM

the Detrended Price Oscillator suggests that this move up is an important breakout. bubble or bulltrap?
1184  Economy / Speculation / Re: [poll] - when will the rally end? on: February 12, 2013, 11:02:43 AM

the last time we re-entered the overbought (red) after crossing the centerline but not reaching blue, there was a significant correction.
1185  Economy / Speculation / Re: Explanation for BTC price surge? on: February 12, 2013, 10:48:33 AM
It's the market finally catching up with the organic growth & big speculative news we've seen over the last few months. Just look at google trends, the casino announcement in the US, wordpress etc.

 I disagree. This is not the market catching up. This is something else. Feels like a classic bubble brought on by irrationality.

 I hope I am wrong.

i too am suspicious of organic growth alone being the sole motivator of 500% ROI yearly growth.

i was trying to talk about this over in the economics mainforum but i just got shat on. it's partly a deflation event. the google trends data is telling; demand is growing rapidly but supply is limited.
1186  Economy / Speculation / Re: Yet another analyst :) on: February 12, 2013, 10:44:35 AM
lucif, i had faith in you as a speculator

made me lawl

but really

the market looked really bearish back when we were in the massive triangle spanning the pirate crash price range, but then we broke out strongly upside which has turned into a self-fulfilling trend it seems.

i got out a while ago.

1187  Economy / Speculation / Re: Yet another analyst :) on: February 12, 2013, 10:41:00 AM
Do you read me? I call top from now to 26. This means 25 breakout possible - if you familiar with school math.

You try to call top on bull market. Then complaint.

we are obviously not communicating well.

im glad we agree that we will break $25 shortly. however, i do not expect a correction until the mid-term. perhaps not until as high as $30 price levels.

you call bull top. i say no
1188  Economy / Speculation / Re: this rally reminds me of... on: February 12, 2013, 10:36:27 AM
people holding their breath...who can hold their breath the longest. Those who can't end up selling and those who endure hold bitcoin.

Don't exhale.....just "outhale" lol

1189  Economy / Speculation / Re: will we hit $25 this week? on: February 12, 2013, 10:33:59 AM
if everyone is bullish, is it time to sell? Wink

Hmm, I suspect to do a proper contrarian analysis would require taking into account how typical those on this subforum are, from among all the people buying and selling bitcoins. For example, what percentage of the whole actually spend much time watching trends? How many are investment-savvy? There seem to be reasons to doubt this little subgroup is typical of the broader market.

this is prescient. perhaps we speculators have much less an effect on the market now than two years ago, for instance, because of the influx of new users and new coins?
1190  Economy / Speculation / Re: BTC price shooting up to $24/BTC on: February 12, 2013, 10:26:21 AM

What does greed have to do with this at all? or the reference with musical chairs?


Bitcoin is going up. Why ? Because fundamentally it has to just like gold and silver did,

this is true. but greed is a quantifiable thing. take that the bitcoin market behaves in an extremely volatile manner compared to commodities with massive market caps:

the basic hypothesis is that people are irrational and will overestimate rewards vs risk. this will manifest itself in a game of musical chairs where everyone plays along until we reach a really unstable state where everyone rushes to sell sell sell. last one out loses (net loss) because trading is a zero-sum game. this state is "unstable" as the price exhibits extreme volatility, which sometimes can hide the underlying deflation.

while this occurs in all markets, with bitcoin it is exacerbated by the smallness of the market cap. the mechanism for this is related to the interplay between the relative sizes of the trade volume and the market cap. (if mean volume is large in proportion to the market cap, single buys and sells more drastically affect the market).

in other words, this rally could be a 'fluctuation' much larger than the underlying deflationary nature that gold and silver exhibit. the btcusd rate should increase over time, but that does not necessarily mean that this price event is due to that effect.

it could just as easily be musical chairs...


I dont understand how greed would come into play here, and like most who have followed bitcoin the situation we are in now is 100000000000x different than the crash we experienced 1 year ago

>the situation we are in now is 100000000000x different
>100000000000x different
1191  Economy / Speculation / Re: Yet another analyst :) on: February 12, 2013, 10:01:10 AM
lucif, i had faith in you as a speculator. but you've made numerous unfulfilled bear calls in this thread. early on, i shorted coins but closed when i saw the trend forming. i have been uneasy about this rally ever since. i too feel that we are extremely overbought but i don't think a correction is coming for awhile. this trend has a lot of momentum.

this recent breakout after three new highs is telling. the market depth is very bullish.

i expect $25 to be broken in the next 24-hour period.

of course putting off a correction should cause a downtrend on the midterm.
1192  Economy / Economics / Re: Bitcoin's first major deflation event, and its consequences on: February 11, 2013, 11:03:55 PM
-Why cant Bitcoin be both a store of value and a currency?

-What is wrong with deflation?
Again your definition of deflation is referring to the Keynesian definition where prices are falling.
As far as im concerned, Bitcoin is still inflating and will then be stable in terms of money supply.
Deflation was never part of the design, save for people losing coins which should be minimal/0 by the time rewards reach 0.

thanks for taking me seriously.

bitcoin can, and has, for the majority of its lifetime, been both a store of value and a currency. the recent shift towards the former that i have perceived can be described as follows:

say you wanted to invest in shares of satoshidice. say your expected ROI is something like 50% yearly. if your expected ROI of simply holding bitcoins is 500% yearly, then it would not make economic sense to use bitcoins to purchase shares. it would make a lot more sense to use a currency that is not expected to appreciate in value more than 50%. however, even if bitcoin is expected to appreciate in value by only 45% yearly, it would still make more sense to purchase the shares with another currency, so you can get 50% returns on the shares in addition to the 45% returns on the value you have stored in bitcoins, instead of just the marginal increase of 5% yearly that you'd get from purchasing the shares with bitcoin.

example: (using imaginary currency whose value fluctuates negligibly 'stablecoin' or STC)

100 shares of satoshidice available for sale for 10 stablecoins.
at t=0, 1 stablecoin = 1 btc
satoshidice shares yield 20% ROI yearly
bitcoins appreciate 10% yearly

scenario 1:
seeing the good investment opportunity, you purchase 100 shares for 10 BTC at t=0 (remember that the BTCSTC rate is 1 at t=0)
at t=1 yr, you sell those shares for a net profit of equivalent value to 2 stablecoins (20% of 10 btc at t=0).

however, in scenario 2:
instead of purchasing shares with BTC, you purchase them with STC and keep your 10 BTC.
at t=1 yr, you sell the shares, and you also sell the BTC for a net profit of:
2 stablecoins (from above) + (1 [btc at t=0] = 1 STC) = the equivalent value of 3 STC

in other words, you lose out when you purchase shares with bitcoin because you are no longer holding the bitcoins, but only the shares. whereas in the second scenario you are holding both BTC and shares. and this is for an ROI for btc that's LOWER than that of the shares. the very fact that BTC has a non-negligible ROI creates the better economic strategy of using an alternate currency for investments, limiting its use in this respect.


for your other points, there isn't anything 'wrong' with deflation. that statement is rather malformed. further, it is true that there is a small inflation rate associated with btc right now. however, that is dwarfed by the large increase in demand. as the BTCUSD rate rises, the purchasing power of a btc increases compared to the proverbial basket of goods. this is the definition of deflation. there are two halves: supply and demand. the supply is inflated, and will eventually be stable, but the demand will increase until the price discovery phase is over. once this happens, deflation will stop.

in other words, the deflationary spiral i am describing is not a never-ending process that will end in the death of bitcoin, but rather a long phase of its growth that may exhibit a dangerous positive-feedback behavior that will have negative effects on the makeup of the bitcoin economy and commerce and its adoption as a currency.

1193  Economy / Economics / Re: Bitcoin's first major deflation event, and its consequences on: February 11, 2013, 10:59:47 PM
What is your problem? You came on this board to raise an issue that doesn't exist, and which has been talked to death already. Saving (hoarding) is a natural market action when there is a certain confidence the price level will maintain. Given the built-in scarcity and the fact more people are willing to put their time and effort (money) into it then you have a steady price increase.

I'm not trying to be rude at all, only save you time, money and reputation. I don't think you go onto gold bulletin boards and tell people to stop stashing gold because they will experience some deflationary spirals. Get on with your life and start learning how markets really work.

i'm glad you think this issue doesn't exist so we can discuss our differing opinions. my problem is exactly your tone in this post. you don't mean to be rude but because you are so sure that you are correct you're hampering actual discussion by being dismissive (with comments like </thread>). one gets the same reaction going to a creationist forum and arguing for evolution. i'm trying desperately to explain that i'm not beating the deflationary spiral IN THE GENERAL dead horse, but rather reopening the discussion in light of the present price increase, which seems to me to be a deflation event. i'm not arguing against fundamentals of the free market, i'm not a keynesian, and i'm not stupid. please stop treating me as the above criteria. i mostly spend time in the speculation forum, and as such, the recent price behavior has brought some questions to my mind as it seems fundamentally different than any movement in the past two years. if you think otherwise, please elaborate.


the price increase looks like a deflation event, not a rally or a bubble. if you disagree with me here, please explicate.

how do you think users and markets are going to react to the 5x price increase? we haven't seen such a movement in such a short time frame in quite awhile.
1194  Economy / Speculation / Re: What if it just doesn't go down again? on: February 11, 2013, 02:28:27 AM

For the price to continue to go up, there has to be a continueing inflow of money into Bitcoin. Bitcoin will find a natural price range within this halving, where some of the long term investors will dump some of their Bitcoins.

As prices get higher, small investors only able to buy a few Bitcoins, Don't have anyway of making money off 1-2 Dollar swings in price, so new investors has to be of a more serious size, investing a few thousands first time they get into Bitcoin.

So from a pure scalability point of view, The inflow in Dollar has to increace exponentially and every next generation of investors has to invest an amount the same magnitude larger as the previous price increase.

So two conditions has to be met for the price to increase forever. Each of the two conditions mentioned, has a natural breaking point, so you will see a Bitcoin crash in your life time, don't worry!

funny... this sounds exactly like a ponzi scheme Tongue if you believe that this is going to happen you should put a sign on your head: "BAGHOLDER"

it's funny not because BITCOIN IS A PONZI LAWL

but rather because markets don't allow such things to happen. the 'weak hands to strong hands' point is a very prescient one. long squeezes will occur regularly and force some people 'out of the game' so that fewer and fewer profit in the end. this will have the effect of moving the price around a (probably steadily increasing) price point in a very complex way. good luck predicting that stochastic-ass behavior.
1195  Economy / Economics / Re: Recent BTC Surge and its Implications on: February 11, 2013, 02:18:57 AM
I'm sure everyone knows what I'm referring to when I say the "recent surge" in Bitcoin prices, although now they have somewhat leveled out. A couple weeks ago they were about $17 and like overnight they didn't drop again below $20.
My question is this: I feel like people are hoarding their BTC. I frequent the marketplace and there is no where near the type of commerce going on that there usually is-except for expensive items like ounces of gold (another testament to the recent surge). Obviously, this is a contributing factor to the surge. So what happens next? Will prices go back down? I know Butterfly Labs is sending their mining rig out soon-how drastically will that affect the supply of bitcoins? Also, is it true that there are about 6 million in circulation and 21 to ever be in circulation?
Obviously bitcoins are ultimately a deflationary currency. But will we see inflation at all in the near future, with the release of new mining rigs? My final question is a tough one that probably can't conclusively be answered now. As mentioned, bitcoins are a deflationary currency. That means I should get as many of them as I can before they are gone. But-is the bitcoin truly too big to fail? Should I spend my bitcoins now and take advantage of this surge, or continue on my pursuit to acquire and not spend as much as possible?

did you copy my thread or something? Huh

"Bitcoin's first major deflation event, and its consequences"
"Recent BTC Surge and its Implications"

it's alright, i just got flamed, too. Tongue

although it may have helped if you had done a little more research before posting...
1196  Economy / Economics / Re: Bitcoin's first major deflation event, and its consequences on: February 11, 2013, 02:08:54 AM
I'm sorry this deflationary spiral issue left a "scar" on your mathematical brain but you're completely wrong on your assumptions. Free market will prove you that with enough time.

you're stating things with certainty that you really don't have certain knowledge of. at least i'm stating my assumptions. may we discuss?

do you believe that:

a) the current rally is not a deflation event
b) these kinds of five-fold price increases will be commonplace and you'll be VERY VERY rich
c) you stopped reading my post three sentences in because it's obviously misguided fud and definitely not worth your time to deconstruct my argument.

if a) i beg to differ
if b) your assumptions are wrong as markets minimize such profits
and if c) why even come here at all? go throw your bits in the air around you and act smug elsewhere.

1197  Economy / Economics / Re: Bitcoin's first major deflation event, and its consequences on: February 11, 2013, 01:57:22 AM
Quote from: basically everyone in this thread
no one will hoard forever; that makes zero sense

in the OP i talk about the effects of hoarding on the price right now, and how it may incentivize people with large holdings to trade bitcoins back for fiat in a realllly long game of hot potato instead of using them to purchase goods. this, again, is not the standard BITCOINZ GUNNA DIE CUZ DEFLATION. i talk about the bloating of the financial sector as opposed to growth in commerce, and how the bloating of the financial sector might hamper growth in commerce. if you're going to say the quoted above, post it in the other million threads debunking the hoarding forever myth.

What is this first major deflationary event in the bitcoin economy that you're watching?
What kind of price behaviour is it, that will or will not change the perception of bitcoin either way regarding the currency vs. store-of-value dichotomy?

I really don't get it, I don't see any unusual price behaviour, nor deflationary event.

skyrocketing demand + limited supply = deflation. this is a textbook definition. this deflation is recognizable as a rate of change of price similar to price bubbles in the past, but fundamentally different (selloffs don't cause panics and are almost immediately absorbed by buying pressure, for one).

if you're trying to make a snide point about how you don't believe the present price action is due to deflation at all, then i'd appreciate that more open discussion. i think you know what i mean by price behavior: $5 -- > $25 in about 10 months.

And for most of the coins not being moved, why would I care? All I care about is that it's possible for me to move them around, superfast, supereasy, supercheap.
I just don't care about what other people do with their coins, hoarding, spending, burning, it's their choice, not mine.

if you didn't care at all about what other bitcoin users are doing you wouldn't be on bitcointalk discussing the economics of the system. i realize i hit a nerve when i mentioned deflationary spiral, but i'm seriously just trying to engage you guys in discussion here...

realizing there are wayyy too many responses id like to make to quote everyone... i hope this is followable.

gmg -- that actually does make sense because currency refers to money velocity. it is a vacuous truth, in a way.

solex -- stores of value and units of account can be conflated but are also very different concepts.

nagato -- gold doesn't have much of a support economy. it's difficult to purchase goods for gold. this is exactly the point, and why it is a good example of a medium that has shifted more towards store-of-value and less towards currency. do we want our bitcoins in vaults or do we want our bitcoins in a marketplace? also, if a single wall street banker is behind this (which unless he has a google search bot he most certainly isn't) then we are in sorry shape indeed. exploding demand + limited supply = significant deflation.

phatsphere -- there is at least one pure strategy nash, that is hoard. there are also many mixed strategies. this is true of many games but that is beyond the scope of this discussion.

lethn -- this is neither faulty mathematics nor economics. you're simplifying my argument to "EVRYONE HOARDZ FOREVER LAWLZ" but massive deflation even in the short term could set us up for a massive 'long squeeze'.

hazek -- this is not sophistry and please discuss this with me in a non-condescending way. the key here is that spending coins and selling them back for fiat produce two very different effects on the market.

asdf -- no systemic catastrophic failure, just perhaps a bunch of long squeezes. but your systems analysis is almost besides the point. how functional will bitcoin be as a currency if its growth is marked with such volatility so long after its widespread adoption? your step in the chain "economy contracts because there is no commerce so price goes down" reads a lot more tame than it would be -- not a gradual contraction but rather an extreme price correction. edited multiple times



i'm sorry the words deflationary spiral left a bad taste in your collective mouth. i actually come from an economically and mathematically informed background and would like to continue to hear your thoughts. if you guys don't think that the price behavior in the last 10 months is any cause for alarm, may i ask you why?

if you are holding significant amounts of bitcoins, please keep in mind that the market tends to minimize profits. the mechanism i'm presenting here is an eventual long squeeze.

if you don't care about what others do with their bitcoins, that is okay. but what others do with their bitcoins affects the value of your own and it might be wise to keep that in mind.

if you think that keynesian economics is merely an excuse for the powers that be to abuse the money supply, i am in full agreeance. but that belief in itself shouldn't be an excuse to develop an allergy to critiques of the Austrian school of economics.
1198  Economy / Economics / Re: Deflationary Spiral on: February 10, 2013, 06:38:23 AM
i understand that im not the first person to ever connect the dots between bitcoin and deflationary spirals. i also understand that the standard argument OHNOES BITCOIN IS GUNNA DIE CUZ DEFLATION is completely misinformed.

the threads you have linked fully exhaust the discussion regarding this matter in the general. i will edit the title to focus on the points i wanted to discuss:

Watching the first major deflationary event in the bitcoin economy, have your feelings changed about its future? Did everyone fully expect the price to quadruple in half a year?

Will this kind of price behavior change the perception of bitcoin either way regarding the currency vs. store-of-value dichotomy?


How do you feel about the fact that most coins have not moved? Did you expect this because of the deflationary nature of Bitcoin? Do any of the previous arguments about why people will NOT hoard make less sense in light of the data?

the point is, there is new data to discuss. i apologize if i did not make that clear in the OP.
1199  Economy / Economics / Re: Deflationary Spiral on: February 10, 2013, 06:24:49 AM
Are you suggesting that everyone, or at least the large holding early adopters, will not be altruistic enough to actually buy anything when their bitcoins are worth billions of dollars ...

of course not. im suggesting that due to the effects of runaway deflation, there will be no support economy to make bitcoins economically wise to spend. as such, the only thing the big fish can do really is to 'cash out' -- to take profit, and to leave all these people who are busy sucking up the "cheap" $20 coins holding the bag.

Not this again....

i apologize if this has been covered already. i've been completely dumbfounded by the behavior of the price as a speculator recently, and decided to reassess the fundamentals. do you at least agree that this is bitcoin's first significant deflation event? i have read the bitcoin wiki's counterargument to why a deflationary spiral is not possible, and i am still not at ease. could you restore my confidence in traders' long-term awareness?
1200  Economy / Economics / Bitcoin's first major deflation event, and its consequences on: February 10, 2013, 05:57:36 AM
So it seems that the bitcoin userbase has made a decision about the currency vs. store-of-value dichotomy and has overwhelmingly chose the latter.

A recent thread in the speculation forum seems to suggest that the common practice for most is to buy and hold (read: hoard).

while this is fine and dandy, and everyone can do with their bits as they please, it might have some unexpected consequences for bitcoin as a whole. one of these is a decreasing appeal as a currency. let's talk about the idea of a deflationary spiral:

the bitcoin wiki has a nice page describing how bitcoin is 'immune' to such a disaster, the reasoning being "Bitcoins only deflate in value when the Bitcoin Economy is growing."

there is no question that bitcoin has undergone (or is continuing to undergo) a massive deflationary period. this comes as no surprise because demand is rising and the total number of bitcoins, as everyone knows, is fixed.

let's talk about what isn't happening:

    -it isn't about the block reward halving. everyone thought that that was already priced in, before it happened, in the rise from $5 to $10 in the early summer. i have reservations about whether or not that is really the case (the inflation rate decreasing by half doesn't mean that the value should double), but that aspect of the protocol must have been priced in already.

    -it isn't about any major news either. the best candidate is the wordpress announcement, but the rally, again, started before and continued thereafter.

    -it isn't about any new market opening up for bitcoin, either... the main drivers are still online gambling and the silk road.

    -it also is not a bubble, as many have been saying. at the very least, we are not in bubble territory yet. there have been two large sell-offs that have let off a little steam while maintaining the upward momentum.

so what's going on? the bitcoin wiki swears that the bitcoin economy MUST BE GROWING in order for this massive deflation to occur. and the economy is growing, indeed, but which sector?

you see, just like the world economy, the 'financial' sector is about an order of magnitude larger than any real commerce. as evidence for this, i can point to that fact that more than 3/4 of the bitcoins that exist haven't moved much at all. this is troubling. if there are so many coins, where are the asks on mtgox? the answer: people are pulling them, skewing the supply, with the idea that hoarding will be very profitable as the slow and steady deflation pushes the price up, up, up.

this brings us back to a very important, and possibly dangerous, idea: the deflationary spiral. users are reluctant to sell their coins because of the idea of larger future worth (standard deflation), which causes them to hoard their coins which creates a feedback loop which increases the perceived value of the coins.

why is this dangerous? everyone knew deflation was built-in to bitcoin, anyway, right?

the problem is that if you are discouraged from spending your coins because you know they will be worth more in the future, the nash equilibrium is for everyone to hoard. this means no investments and subdued commerce. in other words, bitcoin turns into gold as we know it today. not a currency at all, but a store of value.

we are already seeing the effects of this. why invest in satoshidice shares when you'd be multiple times better off just holding onto the coins? even if you mean to purchase things with them and never convert to fiat, unless a large support economy exists the suppliers of the goods will have to convert to fiat to pay off their own costs. but the deflationary spiral disincentivizes the formation of this necessary support economy!

in other words, the bitcoin economy is growing. the "financial" sector is swelling like nothing we've seen before. and if it doesn't stop, we may never see bitcoin payment systems because they will simply not make sense.

even worse, the price as it stands today is much higher than it would be if 100% of the coins were in common trade. as it stands, less than 1/4 are. and now everyone is rushing to buy because they see the profits and protection of a deflationary store of value. so the game is to suck up as many coins as you can, and hold them forever? then what is the point? we've all been relying on the relative altruism of the early adopters and miners who are undoubtedly the owners of those large, quiet addresses. i'm rather afraid that some of them may be less altruistic than we believe.

i know that FUD is common when prices rise to unprecedented levels, but this is not speculation. this is a challenge to the economic fundamentals and goals of the project. i'm not saying that one of these big fish are going to cash out tomorrow, but as the price rises, the incentive for them to will only increase. is this a good direction for bitcoin?

edited for formatting
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