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Author Topic: Bitcoin gonna burst?  (Read 11208 times)
The Koolio
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June 05, 2011, 10:13:50 PM
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Hi guys, my friend wants to invest in a mining rig, he's new to this and he asked whether its a bubble waiting to burst? I dont know how to respond as so far its all been taken nicely!

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June 05, 2011, 10:25:12 PM
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http://bitcoinweekly.com/articles/comic-reaction-after-dramatic-rise-of-bitcoin-s-value

Vector
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June 05, 2011, 10:37:11 PM
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I think it did some time last night
The Koolio
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June 05, 2011, 10:41:33 PM
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tbh i think the last 24 hour movement is part of normal market movement. Until we see a crash of over 1/4 - 1/3 in one or two days i wudnt call it a crash

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June 05, 2011, 10:45:04 PM
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This isn't the stock market. The Bitcoin market, and its investors, are extremely fragile. It won't take much to topple the house of cards.
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June 05, 2011, 10:58:21 PM
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This isn't the stock market. The Bitcoin market, and its investors, are extremely fragile. It won't take much to topple the house of cards.

>I like to underestimate financial systems that aren't back by billions of dollars and politicians.

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June 05, 2011, 11:27:46 PM
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I think it did some time last night

Did this last weekend too, the market slows on the weekend.

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bitcoinfrenzy
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June 05, 2011, 11:32:21 PM
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This isn't the stock market. The Bitcoin market, and its investors, are extremely fragile. It won't take much to topple the house of cards.

It depends, the stock market can get overleveraged and overbought also.  It remains to be seen whether Bitcoins have hit that point.  The real question is who is buying Bitcoins now and why?  Many of the big early holders got their Bitcoins from mining, not through debt financed purchases.  Are new buyers buying with debt?  Are they buying more than they can afford, and will need to sell them soon?  Or are they mostly people who are intrigued by Bitcoins and just buying a few to take part in this cool system with some spare cash?  Once the suckers buy en masse, that's when it will probably crash, although whether it will be a mini-crash or a major crash will depend on who the majority of holders are.

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June 06, 2011, 12:25:09 AM
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That's the ultimate question. Why are people buying?

I think it's because it is profitable. But it won't always be profitable, and when it isn't, demand and price will fall, and people that got into the game for profit will sell. Sell-off? Probably. But maybe not.
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June 06, 2011, 12:44:51 AM
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We need more people to develop the economy, there has already been real growth.

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marcus_of_augustus
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June 06, 2011, 01:10:07 AM
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A pull back is always welcomed when you're in for the duration.

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June 06, 2011, 01:40:07 AM
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So far the pattern has been huge rally, partial decline, huge rally, partial decline, etc. During the rallies people say $1000 by year's end, and during the declines people wonder if it will collapse. Personally, I don't forecast a collapse since I can't possibly imagine everyone suddenly losing interest in Bitcoin simultaneously for no reason. Minor pullbacks, however, will always happen.
CravenEconomics
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June 06, 2011, 01:46:02 AM
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A pull back is always welcomed when you're in for the duration.

this. there are too many people waiting to buy up cheap bitcoins for a major crash

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June 06, 2011, 02:29:09 AM
 #14

Hyman Minsky’s seven bubble stages:

http://economicedge.blogspot.com/2009/04/signs-of-bubbles-betting-on-market.html

Step 1 Disturbance - not sure about this. Maybe the creation of bitcoin and the launch.

Step 2 Expansion: media attention --> price increase

Step 3 Euphoria / Easy Credit:  this forum is full of euphoria.  Credit (in US dollars) is available at the lowest rates in 50 years.

Step 4 Over-Trading: the market accelerates. It went up 30% and 40% in two days.

Stage Five – Market Reversal/Insider Profit Taking: not yet happened

Stage Six – Financial Crisis/Panic

Stage Seven – Revulsion/Lender of Last Resort

Don't day trade.
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June 06, 2011, 03:03:43 AM
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Hyman Minsky’s seven bubble stages:

http://economicedge.blogspot.com/2009/04/signs-of-bubbles-betting-on-market.html

Step 1 Disturbance - not sure about this. Maybe the creation of bitcoin and the launch.

Step 2 Expansion: media attention --> price increase

Step 3 Euphoria / Easy Credit:  this forum is full of euphoria.  Credit (in US dollars) is available at the lowest rates in 50 years.

Step 4 Over-Trading: the market accelerates. It went up 30% and 40% in two days.

Stage Five – Market Reversal/Insider Profit Taking: not yet happened

Stage Six – Financial Crisis/Panic

Stage Seven – Revulsion/Lender of Last Resort


You have to go way outside the box to find economic analysis of the monetisation of a newly discovered form of commodity currency.

Minsky was good but I don't think he was that good. I don't think anybody was .... icbw.

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June 06, 2011, 05:06:52 AM
 #16

he's new to this and he asked whether its a bubble waiting to burst? I dont know how to respond as so far its all been taken nicely!

Tell him there's no bubble so he would come and buy some of my over-priced coins and later sell his over-over-priced coins to someone else. If we told everyone there's no bubble things will continue to be fine, just as in a pyramid scheme.
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June 06, 2011, 10:57:23 AM
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This isn't the stock market. The Bitcoin market, and its investors, are extremely fragile. It won't take much to topple the house of cards.
The real question is who is buying Bitcoins now and why? 

It seems to me that the botom of the upward exponential curve began right when BTC hit parity with the USD. That is a milestone that tends to generate a little bit of chatter in the financial media and would have a fresh batch of economists and speculators exposed to bitcoin for the first time. Now hands up who's heard of the butterfly effect? My guess is that some critical mass of smart money people, who can see bitcoin for what it is, suddenly wanted in and the seculators seeing the sudden rise followed suit. Then we have the masses who are curious but unsure, riding on the sudden wave of publicity. So many of them now, are all hearing about bitcoin for the first time and they only need to be buying $100 or less worth of BTC to play with for micro transaction and the price will continue to rise. I don't think it's realy a bubble at all. I agree with Koolio, It's just normal market dynamics. The price of one bitcoin will have to be $1000 USD one day (if enough people want to use it as currency) and it might just as well go up now as anytime.

Some speculators may panic sell, but as long as many more average joes want to buy up smaler amounts to use it for trading and holy on to the little amount's they do have, then I don't see that it has to crash at all. It may spike (like the last couple of days) flounder around for a while like today and then grow more slowly until another spike drives it higher. I'm realy just speculating here, but I can't see the price crashing like the stock exchange has.

Commodities and financial products are traded on the stock exchange, almost exclusively by speculators mostly professinal, without a large reserve being held by people who buy it for it's utility. People seem to either think about bitcoin like investment brokers or like traders/consumers . But the market contains a combination of investors and consumers and traders the consumers and traders, wont stop wanting to make use of this utility bitcoin has, for making small online transactors. So of course that sugests the need to offer more diversity in the products and services that are traded in bitcoin is high priority, but nobody is going to go into a fit of panic, becasuse they have 73.50 worth of BTC in their wallet and hardly anything they can spend it on, especialy not if the price keeps rising. Even If the price goes down, they havn't got much to loose. It isn't worth trying to pull $25 out of the market because you think it's going to crash. Wouldn't the larger numbers of smaler amounts have a buffeing effect on any downward spirals? Not everybody in this market is a gun ho, stock broker trying compete with other stock brokers for nothing other than profit. In any case the serious investors will be smart enough to settle in for the long haul. Not everybody is going to go into overtime trying to sell out on the falling market.

I think we'll see a few dips of a few dollars, over the time frame of days perhaps, but generaly over weeks and months, I think BTC has to trend upwards. Bitcoin is too usefull to NOT be taken up by more and more people, and generaly it has to be divided more and more, while accrueing value as it must, to support the masses who want a piece of a limited pie. The scarcity and utility both function together, to make this a currency/comodity like nothing there ever was. I always assumed there would have to be a time of exponential growth as the masses caught on to the idea. Conversely, I just don't see why there must be a backlash counteracting the boom. I'm not saying this out of feverish optimism. I just don't see how a crash, is anywhere near inevitable, as if bitcoin were some infinitely renewable, artificialy generated comodity (like fiat currency). Of course I might not be seeing this correctly at all.  Undecided That's always a possibility.  Grin
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June 06, 2011, 11:12:47 AM
 #18

Talking of bubbles...



I suggest that we are in Stealth Phase right now, not even approaching the take off point yet.

Bitcoin indeed is going to burst... but not just yet... we will be in 7 digit territory by than...

Whoever is buying now clearing all the asks up to 100$ perhaps is SMART MONEY . Institutional investors have not even heard or seriously considered bitcoin.

When first bitcoin ETF comes online we will be around Enthusiasm and maybe Greed phase.


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June 06, 2011, 11:31:58 AM
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At one end of the scale i'm thinking the wealth of these so called "bitcoin millionaires" must be coming from somewhere. Have they produced any products/services, done any work to justify their new found wealth? No, so it must be coming from the new investors pockets, this is why many people liken it to a ponzi scheme.

On the other hand if you think of bitcoin as a startup, by buying coins your buying shares in a company. Now do you think a company which can provide cheap, fast, anonymous transactions is worth $50milllon? To the black market, almost certainly, how much are companies like e-gold and liberty reserve worth? Of course not all 21m coins are yet in circulation, at the current price of $19, that would
require a market cap of around $400m. Is bitcoin worth $400m at present? I don't think so, but of course it has a lot of potential.

To sustain the current price and offest production $140,000 worth of new money needs to be coming into the system every day. Who knows how long that will be possible to sustain.

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June 06, 2011, 11:48:07 AM
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At one end of the scale i'm thinking the wealth of these so called "bitcoin millionaires" must be coming from somewhere. Have they produced any products/services, done any work to justify their new found wealth? No, so it must be coming from the new investors pockets, this is why many people liken it to a ponzi scheme.

On the other hand if you think of bitcoin as a startup, by buying coins your buying shares in a company. Now do you think a company which can provide cheap, fast, anonymous transactions is worth $50milllon? To the black market, almost certainly, how much are companies like e-gold and liberty reserve worth? Of course not all 21m coins are yet in circulation, at the current price of $19, that would
require a market cap of around $400m. Is bitcoin worth $400m at present? I don't think so, but of course it has a lot of potential.

To sustain the current price and offest production $140,000 worth of new money needs to be coming into the system every day. Who knows how long that will be possible to sustain.


Today more than $1M will be exchanged in mtgox. And miners don't sell every bitcoin they earn. I actually think a bitcoin's real value is about $22 right now.

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