Newbie wondering about the market value

[Bharel]

Hey guys!

My name is Bar. I've entered the Bitcoin market after 6 days of research. I've read about the whole system, from ups and downs, from FBI files to proofs-of-work. 2 days ago, I've decided entering into the market, and in 2 days, I got back my transaction fees. I invested a small amount of 100$ to test it. As of now, I like what I see. Today, I took out the big guns, and ordered a fair amount of Bitcoins. Question is this, what would the guys in here say? Will the market value continue to rise? Will it reach the 30$ like it did once? Will it drop right afterwards or continue to rise up to the sky? What is your forecast guys? 

I still regret I didn't hear about it earlier, in January when it was a great time to invest.

Many thanks,
Bar

[mjc]

I wrote this in response to a similar question a few weeks ago:  http://bitcoinsbs.wordpress.com/2013/01/21/market-confidence/

[thoughtfan]

Hey guys!

My name is Bar. I've entered the Bitcoin market after 6 days of research. I've read about the whole system, from ups and downs, from FBI files to proofs-of-work. 2 days ago, I've decided entering into the market, and in 2 days, I got back my transaction fees. I invested a small amount of 100$ to test it. As of now, I like what I see. Today, I took out the big guns, and ordered a fair amount of Bitcoins. Question is this, what would the guys in here say? Will the market value continue to rise? Will it reach the 30$ like it did once? Will it drop right afterwards or continue to rise up to the sky? What is your forecast guys?  

I still regret I didn't hear about it earlier, in January when it was a great time to invest.

Many thanks,
Bar

Welcome Bar.  Right now if you venture over to the Speculation sub-topic you will find hugely varying opinions on this with people arguing passionately why they believe the price will move up or down (not many arguing for leveling here though!).  Your $100 test is fine for testing the process of buying but I would advise strongly against looking at your gain over the last two days as an indication that you should invest more.

I think you need to come to an opinion as to whether you think Bitcoin has an immense potential and is likely to reach it (in which case they are currently really cheap), how likely do you think some replacement coin, a government clampdown, a technological attack or weakness or something else will come along and smash most if not all out of its price or something in between.  I'm talking long term here.  Once you have decided what you think is the most likely scenario there's the question of where we are now.  How widely is it used, how much of it is in the hands of those who are looking at some point in taking a profit in dollars/euros/pounds.  How much is in 'weak hands' or nervous hands where a drop in price would cause them to lose confidence and sell (thus accelerating a downward spike), how many who say if the price came down to x that they would use it as an opportunity to buy would in such a circumstance still remain confident enough to do so.  Where would you stand.  if you are going to buy would you consider yourself a 'trader' and try and sell to buy cheaper regularly (a dangerous tactic so far with many getting left behind with fiat having to buy back in more expensive)?  If you believe it likely it will be a lot more successful than it is and you are not trading would you be OK to watch it go to two thirds, half or an eighth of the price you bought (with no obvious reason undermining the fundamentals) just to hold on maintaining your belief it will raise again?

One advantage we have is that there is, as you have been finding out, a huge amount of information out there with facts about how it works and its potential, about its history and of course the records of the markets with fiat currencies.  And on top of that you've got the diverse opinions of people of journalists, economists and everybody on these boards.  If you spend time reading you'll get to find who you think is talking sensibly and may want to give more weight to their opinions than others.  Be wary not to let your own political opinions cloud your judgement as to the likelihood of Bitcoin succeeding.  At the same time, be aware of other people's preparedness to buy into and determinedly hold onto Bitcoin because of their own political beliefs.

Last but not least.  Whilst what you want to aim for (and to a certain extent have no choice about) is to trade your beliefs, also never forget nothing is certain in life and even if briefly, give yourself the opportunity without dismissing it too quickly of considering what would your situation be if Bitcoin crashed after you've invested most heavily.  Is that a scenario you'd be OK with.  If it scares you then maybe it would be an idea to be thinking of not speculating so heavily.

All the best with it all and welcome

Tf

[Bharel]

Are you here because you value Bitcoin's properties, or because you want to earn fiat dollars?

I will be honest with you, the reason I'm here is because I really like the idea. I've started putting some initial cash in order to kick-start my wallet. (after-all, no money, no wallet, no bitcoins, now what?)Problem is, that I am worried about the fact that I've spent a *bit* more than my initial 100$ test. I saw the price going up rapidly, and wanted to catch the wave, so I'll have some BTC. Next thing i see, is speculated drops because of the ASIC units. So it makes you wonder, why did you buy so many bitcoins at the high price.

And thank you very much for the long and thoughtful reply mate, I'll continue reading on the spec forum
The reason I created the post here is because I've read that I'm not allowed to post there.

Thanks again guys!

[Mike Christ]

I wish I could help you out, but I'm just here because I hate government controlled money    As far as I know, it's been going up ever since I started using it, but who knows where it'll go.

[thoughtfan]

Next thing i see, is speculated drops because of the ASIC units.

I wouldn't worry much about that simply because it doesn't make any sense.

Don't get me wrong, there will be drops. I just don't think ASIC mining is a valid reason.

It concerns me a little when I hear novices say 'the price did x because of y'.  One conceptual tool you could do well by bearing in mind when you're reading this forum (and in life in general) is 'Correlation does not imply causation'.  Sorry if that comes over as patronising but it's a powerful concept.  People ascribe all kinds of causes to what has happened and what will.  Nobody can disprove their theories but if they are trading their beliefs when they're wrong and the price moves differently to what they predicted...

[mjc]

Next thing i see, is speculated drops because of the ASIC units.

I wouldn't worry much about that simply because it doesn't make any sense.

Don't get me wrong, there will be drops. I just don't think ASIC mining is a valid reason.

It concerns me a little when I hear novices say 'the price did x because of y'.  One conceptual tool you could do well by bearing in mind when you're reading this forum (and in life in general) is 'Correlation does not imply causation'.  Sorry if that comes over as patronising but it's a powerful concept.  People ascribe all kinds of causes to what has happened and what will.  Nobody can disprove their theories but if they are trading their beliefs when they're wrong and the price moves differently to what they predicted...

If ASIC are the reason it will only be because once they arrive there will be a flood of orders.  Since the BTC are automatically converted to $ by BitPay, there could be a large sell of of BTC as BitPay recovers $.  This could trigger more selling.  If that does occur, how far do you think it will drop?  My gut tells me no too far as there is a much more robust market place today and there are a lot of people that will but back in.  So even after a drop it would rise again.

That's my 0.001 BTC worth.

[Bharel]

looks like the drop has started. hold on to your hats guys, that's a roller-coaster ride

[robertprosper]

Bitcoins are a currency and will behave in exactly the same way as the normal forex market at the moment it is an illiquid market so the movements make be irratic

[inge]

Hello Bharel,

Speculation on Bitcoin value only is one of the major systematical risks to the future success of Bitcoin. Bitcoins should become a transaction enabler, not an investment on it's own!

In October 2012 the European Central Bank published a report concluding that the true impact of Bitcoins will largely depend on the number of active users, as well as the number of merchants willing to accept the virtual currency for real transactions. Here they are hitting the nail on the head.

The number of Bitcoins in circulation cannot be altered like with fiat currencies; the growth of the number of Bitcoins is mathematically determined by the mining algorithm. Since the gross domestic product equals the money supply times its rate of turnover — something economists call velocity — this means that if the money supply is unchanged the G.D.P. can only grow with a higher velocity.

Because of the rising value of Bitcoins, without a rising velocity, the risk grows of Bitcoins being treated as an investment object instead of a transaction enabler. If the number of transactions with the real economy doesn’t grow, the G.D.P. of Bitcoins doesn’t either, and does the system indeed represents a pyramid scheme.

Inge

You can read my point of view on "How to Get the Bitcoins Moving" at bitcoinpeople.blogspot.com

[Wret]

Hello Bharel,

Speculation on Bitcoin value only is one of the major systematical risks to the future success of Bitcoin. Bitcoins should become a transaction enabler, not an investment on it's own!

In October 2012 the European Central Bank published a report concluding that the true impact of Bitcoins will largely depend on the number of active users, as well as the number of merchants willing to accept the virtual currency for real transactions. Here they are hitting the nail on the head.

The number of Bitcoins in circulation cannot be altered like with fiat currencies; the growth of the number of Bitcoins is mathematically determined by the mining algorithm. Since the gross domestic product equals the money supply times its rate of turnover — something economists call velocity — this means that if the money supply is unchanged the G.D.P. can only grow with a higher velocity.

Because of the rising value of Bitcoins, without a rising velocity, the risk grows of Bitcoins being treated as an investment object instead of a transaction enabler. If the number of transactions with the real economy doesn’t grow, the G.D.P. of Bitcoins doesn’t either, and does the system indeed represents a pyramid scheme.

Inge

You can read my point of view on "How to Get the Bitcoins Moving" at bitcoinpeople.blogspot.com

How much the value should be? Maybe you can buy a car with bitcoins but not a factory that produces cars.

[Endgame]

looks like the drop has started. hold on to your hats guys, that's a roller-coaster ride

One of the things to keep in mind with bitcoin is that there is a downward movement almost every weekend, like clockwork. There's a thread about it here. There are a number of theories about why this happens. Some people think its due to people being unable to fund their exchange accounts on weekends, others that it is just a self-fulfilling prophecy. Or maybe it is something else entirely. The point is, I wouldn't worry too much about the current selloff.

[bullioner]

Since the gross domestic product equals the money supply times its rate of turnover — something economists call velocity

Wrong.  GDP is the value of all final goods (and services) produced, which is a quite different thing.

[Anon136]

You are probably going to get burned, probably. However if the price does drop try not to look at it as all bad, try to look at it as an opportunity to acquire more coins at a better price.

a word of advise, if you are buying in at this price dont invest nearly everything you have, keep some liquid reserves on the sidelines so you will have the means to buy up some cheap coins if the price drops.

[inge]

Since the gross domestic product equals the money supply times its rate of turnover — something economists call velocity

Wrong.  GDP is the value of all final goods (and services) produced, which is a quite different thing.

There are different methods and formulas that use GDP. The one you quote here is the first one on GDP you can find on Wikipedia.
Economic theory may not be the most exact science, but still it uses some math. Like V = Q/M.
For further reading: http://en.wikipedia.org/wiki/Velocity_of_money

regards,

Inge

[Puppet]

Anyone making firm short term predictions is either lying or manipulating. There is no way to predict it, price is just the result of the collective of sentiments. It can go either way and fluctuate wildly. Odds of making money daytrading are IMO no better than on Satoshidice (even though Im sure a dozen people will now post how they have been making profits fairly consistently because they think they are smarter/have crystal ball or draw fancy meaningless triangles. Of course those that lost just as consistently will not speak up in so far they are still  reading and posting here).

TL;DR. Buy some, use some, keep some, see what happens.

[thoughtfan]

Anyone making firm short term predictions is either lying or manipulating. There is no way to predict it, price is just the result of the collective of sentiments. It can go either way and fluctuate wildly. Odds of making money daytrading are IMO no better than on Satoshidice (even though Im sure a dozen people will now post how they have been making profits fairly consistently because they think they are smarter/have crystal ball or draw fancy meaningless triangles. Of course those that lost just as consistently will not speak up in so far they are still  reading and posting here).

TL;DR. Buy some, use some, keep some, see what happens.

I think probably many more people believe they're doing well day trading than actually are for the following reason.  Unlike day trading shares or anything else where the trader will always look at their trading position from the perspective of the currency with which they bought the shares/currency/whatever, many people trading Bitcoin also intend to keep it long-term.  If trading from the 'home' perspective of USD for example, your position is  'open' when you've bought the shares/currency/whatever and is 'closed' when they've been sold.  Normally, calculations as to how well one is trading are made excluding the value of 'open positions'.  But because most people in Bitcoin believe in it longer-term there is no 'closed' position.

So with no intention to 'close' their Bitcoin positions counting success as described above won't show much whilst including 'open positions' as a measure of success omits the risk inherent in the 'un-closed' position;

Ah, but I hear the protests coming: 'But who is to say fiat is safer than Bitcoin?'.  True.  I tend to agree.  That's not what I'm intending to imply.  If the trader is thinking of Bitcoin as how they want to be conducting their day-to-day business then the logical position to be trading from, once one has one's long-term Bitcoin holding, is with Bitcoin as the 'home' currency.  An 'open position' then becomes when the trader has bought fiat when he/she believes it to be cheap and is 'closed' again when the temporarily owned fiat is sold again for Bitcoin.  This leaves us able to look at success in trading as the increase or decrease in the trading capital only of closed positions.  But I don't think many are thinking or trading this way.  For a start all the charts show the rising Bitcoin against the dollar (which is how you'd want to see it from a 'fiat-as-home' trading perspective).  Also, the posts here mostly come across as talking about their trading and their successes or failures from a dollar perspective.  

Trading in to a rising market is a lot easier than trading into a falling market.  The few I've seen around here who really talk as if they're trading from a dollar perspective (maybe holding a long-term Bitcoin position separately) unsurprisingly seem to do well (in dollar terms). But trading from a Bitcoin perspective is trading into a falling fiat market (the charts the appropriate way round for this perspective would show the USD largely on the decline).  One has to be smart and lucky to both spot and trade the fiat buying opportunities and to close the position at a reasonable profit or to close and accept a loss ready to try again.  I'd be interested to know what percentage of traders, were they to look at and count their successes or failures this way, would be doing as well as they currently believe they are.

[Merralea]

The answer depends on whether you're looking at BTC from a long-, medium-, or short-term perspective, and whether you're more into quantitative or qualitative analysis. As you implied you were interested primarily in btc-usd rates, I'll go with that.
I'm not a big fan of quants myself, but number-magic would say it's due for a correction in the short term, to around $18/btc or lower. This is mainly due to the recent appreciation rate (since mid-Jan. or so) being significantly higher than that of the average rate of the last year, to the point that the btc-usd chart is going exponential (almost never a good sign). That said, any decent qualitative reasoning explaining a sustained increase in demand since that time makes such analysis next to worthless.
Quantitatively in the medium/long term I'm not even going into as I'm not very talented at suspending disbelief.
Qualitatively in the medium-term...central banks gon' print, fiat gon' inflate, btc gon' retain value (and so increase vs usd) or better as more flee to it.
Qualitatively in the long-term...short of some technological disaster (again, not the person to know about this) or a somehow successful persecution of btc by .gov, there's nothing to say it will become worthless. The only thing stopping it from replacing usd is the tax issue-- both in that one can't pay taxes in anything other than usd, and that tax evasion is difficult if one wants to buy land, live well, etc without attracting suspicion. I'm hopeful. Others aren't.

[Bharel]

The thing is this. On one hand, I want the bitcoin to be widely spread and be available on the every day use. On the other hand, currently, apart from running around in circles and trading bitcoins to fiat and back all over the place, I can't seem to find a use for it. There is no business that accepts bitcoins in my country EXCEPT a current exchange  which is how I got into trading.
Perhaps the better question to ask isn't even about the market value. It does change it, but it's not the goal. The question is "How to spread bitcoins to more businesses" which leads to "How to make it easy for every day use (ie shops, grocery stores, gas stations etc.)".
The only way I can use it for example is either trading, or getting something at a considerably high price (because I transfer from USD to BTC and there are fees) from Bitmit (while ebay is still cheaper).
So... how do we do that?