Bitcoin to rally to $50+

[TraderTimm]

Based on what we've seen so far, 50% retracements from recent doublings isn't anything alarming. It would have to go through 15 to break the longer term trendline on a log chart.

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[bittersweet]

Because of the impending rise in difficulty, next time Bitcoin rallies its going to top $50US..it may even go to $100

Discuss

It's difficulty that follows the price, not the other way around.

[enmaku]

Difficulty follows price. It is the change in price which results in a change in Difficulty, not the other way around. The data shows that changes in Difficulty lag changes in price.

Again, this is only half of the equation. Changes in difficulty lag changes in price during times of increased value because the higher price motivates more people to become miners, thus increasing the number of hashes per second computed by the network as a whole.

To see the other half of the equation, look at the times when it appeared that BTC's value was going to tank, note the point at which the market value refused to go any lower. Plot these low points over time and they also correspond to difficulty, in a much tighter curve than the highs or averages do, actually. This is the low point beyond which the miners are hesitant to sell. This is because unlike investors, most miners have ongoing costs to cover and a profit to make for this to be worth their time/effort. I know my electric bill is certainly high enough that I'd be hesitant to sell below a certain point...

Nice theory bro... But the data shows the correlation of Difficulty with the 12 week moving average of price, moving up as well as moving down. And guess what... It's symmetrical.

So your opposing theory is what, that price moves down when a slew of miners mysteriously stop operations for no apparent reason when the market is at an all-time high? Investors create fluctuations above a baseline determined by the producers of a resource, how is this so hard to believe?

[enmaku]

Because of the impending rise in difficulty, next time Bitcoin rallies its going to top $50US..it may even go to $100

Discuss

It's difficulty that follows the price, not the other way around.

They follow each other, the system is self-referential.

[enmaku]

Look, I'm not saying you're all wrong, I'm saying each of you is right about part of the system. I'm all for Occam's Razor and everything, but neither simple answer correctly describes the system as a whole. Like most economic systems, bitcoin represents a tangled hierarchy of competing and interrelated interests. In this respect, the only difference between bitcoin and any other economic system is that bitcoin is still small enough that we can see most of the bits that make up that hierarchy. Within such a small hierarchy we can spot trends and make predictions somewhat more easily. The primary contention in bitcoin right now is between the miners and the investors. Some see the fact that price and difficulty correspond and say that they are causally linked. They then infer that in most systems one thing is always the cause and one is always the effect. In a tangled hierarchy you will often find various types of closed loops in which the outcome of one action, modulated by other factors becomes the input to the original action and thereby becomes its own cause.

I'm not saying anyone is right or wrong, I'm saying you're all right and wrong at the same time because you're all describing aspects of the same reality without really painting the entire picture.

[TraderTimm]

@chodpaba

Nice charts, I see your point. While there is variance regarding BTC Rate Price and Difficulty, the curve tends to adhere to an uptrend.

Got it.

Nice retrace on the BTC Rate, I'm a bit heartened that we didn't punch through 15 - the upward trendline would've been breached.

[digdugg67]

you mean supply and demand have nothing to do with it. 

I figured that with a high demand and low supply the price went up until they equalized.
and when fewer people were wanting to sell their items the price went even higher.
then someone decided to stop hoarding because they wanted to buy something else put their items up for sale increasing the supply others found that since the supply was higher, they had to reduce their asking price if they wanted to make a sale.

Once the buyers had their fill and wanted no more, the sellers still had some left but had diminishing sales. reducing their prices, attracting sales at a new lower equilibrium point.

It's all difficulty and price?

Damn my econ teacher!

[enmaku]

you mean supply and demand have nothing to do with it. 

I figured that with a high demand and low supply the price went up until they equalized.
and when fewer people were wanting to sell their items the price went even higher.
then someone decided to stop hoarding because they wanted to buy something else put their items up for sale increasing the supply others found that since the supply was higher, they had to reduce their asking price if they wanted to make a sale.

Once the buyers had their fill and wanted no more, the sellers still had some left but had diminishing sales. reducing their prices, attracting sales at a new lower equilibrium point.

It's all difficulty and price?

Damn my econ teacher!

Your major mistake here was not recognizing that the miners are the original suppliers and the primary issue they fight with daily is the difficulty rating. To this end, difficulty determines the psychology of the individual producer - while it certainly doesn't change the number of total coins available, it changes the number of coins available to each individual seller and therefore the resource becomes scarcer to them and so they demand more money. Resource scarcity is at the heart of supply and demand and it is not absolute - the scarcity of a resource is not simply a matter of "how many of thing X exist" but also "how many people must share the resource pool of X" - as more people must share the pool, the scarcity per capita increases and as so the value does as well.

Scarcity per capita, market depth, production cost and rate, investor demand, end-user demand and much more go into the price of a bitcoin. I'm saying that everyone who is taking some tiny corner that they perceive to be the "supply and demand" at the heart of bitcoin is wrong. There are many factors affecting supply and many factors affecting demand and they are interwoven in a complex and tangled hierarchy. The hierarchy as a whole tends to follow certain rules, such as "price is proportional to difficulty" because the factors built into the network conspire to make it so: more participants means more scarcity per capita and it also means more miners; value rises with difficulty. Neither is the cause of the effect witnessed in the other. They are both caused in this case by a simple increase in the market size without a corresponding increase in resource availability. In some examples one causes the other, in other example neither is the cause but are actually effects of some tertiary cause.

You are all over-simplifying things. If economics were this simple we'd all have to be quite stupid not to have been billionaires long before bitcoin existed.

[sketchman]

The bitcoin rush was a one-time fluke. There's not likely to be another influx of new investors after the price jump, especially with the market fluctuating so wildly. Investors are getting burned on its volatility.

[enmaku]

The bitcoin rush was a one-time fluke. There's not likely to be another influx of new investors after the price jump, especially with the market fluctuating so wildly. Investors are getting burned on its volatility.

There will indeed be another Bitcoin rush, it will happen several months after the halving of the block bounty, and it will only be for the big boys.

Or the people who are staying with it right now... Who by that time will probably be considered "big boys" so yeah

[flug]

If the 100th monkey effect hits and it suddenly becomes obvious to everyone in the world that bitcoin is the de facto world currency and invests in $10 worth of bitcoin, bitcoin will top $10,000 overnight irrespective of anything else

[Oldminer]

If the 100th monkey effect hits and it suddenly becomes obvious to everyone in the world that bitcoin is the de facto world currency and invests in $10 worth of bitcoin, bitcoin will top $10,000 overnight irrespective of anything else

I tend to agree with you.

[enmaku]

If the 100th monkey effect hits and it suddenly becomes obvious to everyone in the world that bitcoin is the de facto world currency and invests in $10 worth of bitcoin, bitcoin will top $10,000 overnight irrespective of anything else

I tend to agree with you.

Totally goes with what I was saying about scarcity per capita. If even 1% of the ~2.1 billion human beings with internet access were to jump on this bandwagon we'd be splitting the ~6.5 million existing btc another 20,950,060 ways. How much do you think the price would jump if the number of bitcoins divided by the number of users meant the average person had 0.31 BTC to their name?

And again, the sudden adoption would spike the number of miners which would spike the difficulty so it would increase proportionately with price

[enmaku]

The bitcoin rush was a one-time fluke. There's not likely to be another influx of new investors after the price jump, especially with the market fluctuating so wildly. Investors are getting burned on its volatility.

There will indeed be another Bitcoin rush, it will happen several months after the halving of the block bounty, and it will only be for the big boys.

Or the people who are staying with it right now... Who by that time will probably be considered "big boys" so yeah

True, but more specifically, it will the people that hang with it after the halving...

As long as it's still paying the cost of electricity / air conditioning I'll see you there

[NO_SLAVE]

Ive been in many trades with new and novel technology roll out.  This is the same animal, although a different commodity.
Frankly I do hope people vehemently hate BTC, say for a year or so. and then like all good duplicitous humans they will begin to love it and it will be their god. yes its true.

your heard it here first 

[Anth0n]

I think from here, we still have a long way to go until we reach a stable price. A $50+ price in the near future would not be a surprise. I see a lot of newcomers looking at the recent correction and panicking. No worries, this has happened multiple times before.

[jashan]

Bitcoin will never have a stable price, it is not supposed to have a stable price. The economic model was constructed specifically so that its price would never be stable.

It will be significantly more stable when more people use it to buy and sell services'n'stuff than people using it to sell and buy money. That's where Bitcoin needs to go to be disruptive. The question is: Do people want a decentralized digital payment method, or a commodity for speculation to make quick bucks. ATM, it looks like greed has taken over which most likely will do no good to anybody.

[bitcoinBull]

Difficulty follows price. It is the change in price which results in a change in Difficulty, not the other way around. The data shows that changes in Difficulty lag changes in price.

Again, this is only half of the equation. Changes in difficulty lag changes in price during times of increased value because the higher price motivates more people to become miners, thus increasing the number of hashes per second computed by the network as a whole.

To see the other half of the equation, look at the times when it appeared that BTC's value was going to tank, note the point at which the market value refused to go any lower. Plot these low points over time and they also correspond to difficulty, in a much tighter curve than the highs or averages do, actually. This is the low point beyond which the miners are hesitant to sell. This is because unlike investors, most miners have ongoing costs to cover and a profit to make for this to be worth their time/effort. I know my electric bill is certainly high enough that I'd be hesitant to sell below a certain point...

I agree.  Price and difficulty are correlated indicators, with price leading and difficulty lagging.  Lagging indicators "confirm the strength of a trend".

The empirical data shows correlation, but there is no control group with which to perform an experiment and determine the causal relationship.

When the difficulty rises to support a higher price floor, difficulty is effectively driving the price.  By this argument, the causality goes both ways (two-way causality).

[niemivh]

I believe the drop today can be completely explained by the two exchange sites both experiencing unclear problems with USD transfer out (problems that are now resolved).  I know this was because of API upgrades at Dwolla, but that wasn't explained anywhere on those sites.  All most users saw were two things, 1) Senator Schumer saying he was going to shut down bitcoin, then 2) USD transfers suddenly stop working.  All of this combined with the general background noise on the hate-bitcoin sites saying this is a scam, ponzi, etc, caused a crisis in confidence.  Hopefully it will resolve itself.

It's nice in our "society of laws" we live in that Senator Schumer is essentially sending the AG after BTC without any legal authority for doing so.  Is the AG his own private goon?  Shouldn't he be proposing a bill on this?  Is Schumer part of the executive branch?  What type of gulag are we living in?

[bitcoinBull]

Bitcoin will never have a stable price, it is not supposed to have a stable price. The economic model was constructed specifically so that its price would never be stable.

It will be significantly more stable when more people use it to buy and sell services'n'stuff than people using it to sell and buy money. That's where Bitcoin needs to go to be disruptive. The question is: Do people want a decentralized digital payment method, or a commodity for speculation to make quick bucks. ATM, it looks like greed has taken over which most likely will do no good to anybody.

You are correct, the purchasing power of bitcoin will be more stable when it stores a significant share of more people's value.

But remember that even today the purchasing power of the dominant currencies fluctuates significantly year-to-year (anywhere from 3%-10% depending on the estimate).

As for the fact that greed is what is driving the interest in trading of bitcoin, it will significantly speed up the adoption of bitcoin.  Which is good for every bitcoin user.