Value of BTC (likely to drop soon?)

[riniks92]

Can anyone provide an educated prediction whether bitcoin value could drop significantly in the following month?
I don't want to buy some BTCs and wake up the next morning having them less value.
Although the value tends to rise I'm afraid it would ''burst'' as they say.

Just feeling a little uneasy purchasing BTCs right now.

Any feedback much appreciated!

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[DataPlumber]

All I know is, when I look at the chart of the last 60 days, "sustainable" isn't the first word that comes to mind.

[RodeoX]

Can anyone provide an educated prediction whether bitcoin value could drop significantly in the following month?
...

No. There is no one with the expertise you seek. Even the best Wall street analysts do only slightly better than odds. This is a new phenomena with out a real comparable. Bitcoin should still be considered in beta and a somewhat risky option when used as an "investment".
   

[shkiser]

Keep an eye to see what happens this week. I myself will continue to buy but I think this week is big.

[sub0]

I doubt anyone can predict near-term fluctuations with any kind of certainty. It's all driven by supply and demand.

Considering that the vast majority of Internet denizens have never even heard of Bitcoin but with increasing awareness of Bitcoin as a payment system and a currency + most people here holding onto coin because they believe in Bitcoin's long-term viability, then IMHO the long term exchange rate will only keep going up.

I've been buying since $4.50 and I'm still buying today. It sucks only getting 1/10 the amount of coin today than you did a year ago but that doesn't make Bitcoin any less of a good investment today.

If you buy in small regular increments, then you will either be averaging up with a rising rate, or averaging down with a falling rate. Either way, the impact of any single buying decision will not matter too much.

If you like many believe Bitcoin is an unstoppable idea then the sky's the limit.

[Lethn]

Don't speculate with Bitcoin, while people have made fortunes from it yes I think the prices are too erratic really, it's entering new highs but for how long? I don't think anyone will know for sure what's going to happen in the next couple of months though I hope it still stays valuable.

[boscorocks]

The thing that makes me most nervous is the sudden crash of BTC in 2011 from $30 down to $2. I expect this to happen again very soon...well maybe not down to $2 but perhaps lose half its value.
Heard that there are ASICs starting up now, so theoretically, wouldn't that flood the market with BTC and drive down the value?  At any rate I expect the month of March to be a crazy emotional rollercoaster

[CecilNiosaki]

The thing that makes me most nervous is the sudden crash of BTC in 2011 from $30 down to $2. I expect this to happen again very soon...well maybe not down to $2 but perhaps lose half its value.
Heard that there are ASICs starting up now, so theoretically, wouldn't that flood the market with BTC and drive down the value?  At any rate I expect the month of March to be a crazy emotional rollercoaster

It depends if the owners of those ASICs choose to sell all of the BTC that they make at once. I'm not sure we'd see a drop down to $2 anymore. If BTC were to fall by half, I'd imagine there is enough confidence in BTC that it'll be bought up.

[louisejonesxxx]

nobody knows

[zdavidi]

Is the value of BTC not related to the number of BTCs per block?

[Stephen Gornick]

Is the value of BTC not related to the number of BTCs per block?

Over the long run that affects new supply and thus weighs in on price discovery where supply and demand meet.

Over the short run, the exchange rate is determined by organic demand (you can't send a bitcoin across the blockchain unless you've acquired it first), speculative interest -- how much traction is bitcoin getting / will it be seeing wide use as a competitor to PayPal and/or Western Union, will bitcoin see traction as a payment method at retail, will Bitcoin compete against SWIFT payment messaging network, etc.   

Add all that up and you get the current market price.

[Mikko]

I think the price will drop to ~20-25 USD in couple of weeks.

So no, I won't buy now.

[DannyHamilton]

- snip -
Heard that there are ASICs starting up now, so theoretically, wouldn't that flood the market with BTC and drive down the value?
- snip -

No.  The protocol automatically adjusts the difficulty to keep the average block generation around 10 minutes.  ASIC will make difficulty increase, but it won't significantly increase the rate of production of new bitcoins.

[zdavidi]

- snip -
Heard that there are ASICs starting up now, so theoretically, wouldn't that flood the market with BTC and drive down the value?
- snip -

No.  The protocol automatically adjusts the difficulty to keep the average block generation around 10 minutes.  ASIC will make difficulty increase, but it won't significantly increase the rate of production of new bitcoins.

So, no matter the speed of hashing, there is a constant calculation that makes the block sizes large enough to generate one block per 10 min (on avg)?
If ASIC adjustment is only going to keep things the way they are, what's all the fuss about them? How are they going to be so profitable if everything is just re-adjusted?

[Mike Christ]

- snip -
Heard that there are ASICs starting up now, so theoretically, wouldn't that flood the market with BTC and drive down the value?
- snip -

No.  The protocol automatically adjusts the difficulty to keep the average block generation around 10 minutes.  ASIC will make difficulty increase, but it won't significantly increase the rate of production of new bitcoins.

So, no matter the speed of hashing, there is a constant calculation that makes the block sizes large enough to generate one block per 10 min (on avg)?
If ASIC adjustment is only going to keep things the way they are, what's all the fuss about them? How are they going to be so profitable if everything is just re-adjusted?

It means the only way for mining to be profitable is to "step it up" and get an ASIC.  Then if there's an ASIC 2 which trumps the normal ASIC, everyone has to upgrade.  In other words, GPU mining will be obsolete, then ASIC will be obsolete, so you gotta keep competing with hashing power to stay in the game.

[zdavidi]

So, my pre-order of a BFL Jalapeno was a good move? Even though it might take me all summer to get it, I'll eventually be somewhat "ahead of the curve" by having stepped into the realm of ASICs?

[Explodicle]

Can anyone provide an educated prediction whether bitcoin value could drop significantly in the following month?

Yes, it could because it has before. But be very skeptical of people who tell you this kind of advice, because they might be trying to manipulate you. No one knows for sure.

If you honestly think you're better at speculating than the average bitcoin speculator, then you should try to play the market, starting with small amounts.

If you're new to bitcoin I highly recommend you take sub0's advice and buy small incriments over a long period of time to average out. Don't be scared of "missing the boat" just because it's going up fast right now; until you see more local vendors accepting bitcoin, this movement has a long way left to go. It will probably crash and bubble up again several more times before reaching the stability of a major world currency.

Either way, don't invest more than you can afford to lose, and put your long-term savings in a cold wallet.

[gradient vector]

In the next few weeks I doubt the price will drop. According to a reddit post a few days ago. There were more than 1000 new entries waiting for Mt. Gox verification.

[Mike Christ]

So, my pre-order of a BFL Jalapeno was a good move? Even though it might take me all summer to get it, I'll eventually be somewhat "ahead of the curve" by having stepped into the realm of ASICs?

For a while, yeah, until everyone else catches up.  The better everyone else is doing, the less you'll make.  So being ahead of the curve is vital to making good profits in mining.

[Nicolai]

So, no matter the speed of hashing, there is a constant calculation that makes the block sizes large enough to generate one block per 10 min (on avg)?

It's not the block size, it's the difficulty :-)

[DannyHamilton]

- snip -
Heard that there are ASICs starting up now, so theoretically, wouldn't that flood the market with BTC and drive down the value?
- snip -

No.  The protocol automatically adjusts the difficulty to keep the average block generation around 10 minutes.  ASIC will make difficulty increase, but it won't significantly increase the rate of production of new bitcoins.

So, no matter the speed of hashing, there is a constant calculation that makes the block sizes large enough to generate one block per 10 min (on avg)?
If ASIC adjustment is only going to keep things the way they are, what's all the fuss about them? How are they going to be so profitable if everything is just re-adjusted?

Not block size, block difficulty.

The way mining works is that a bunch of transactions are gathered together and then a hashing algorithm is used to create a 256 bit digest (called a merkle root) representing all those transactions.  If anything in the transactions were to change, then the merkle root would have to change, so the merkle root is used as a representation of the collection of transactions.

The merkle root is included in a field in the header of the block, along with various other information identifying the block.

Then the miner calculates a SHA-256 hash of the block header.  That is a 256 bit number that represents the block header.  The miner compares this number to a target defined by the protocol.  If the value of the hash is lower than the target, then the miner has successfully "solved" a block and can broadcast it.  If the value of the hash is higher than the target, then the miner increments a value in a special field in the block header called a nonce.  The sole purpose of the nonce is to change the header so the miner can recalculate the SHA-256 hash and come up with a new value.  The miner repeatedly increments the nonce, calculates the SHA-256 hash, and compares to the target until the value of the resulting hash is lower than the target.

By decreasing the target, the protocol can make it less likely that a generated hash will be low enough, forcing the miners to put forth more effort trying to find a low enough hash (in other words, increasing the difficulty).  By increasing the target, the protocol can make it more likely that a generated hash will be low enough, allowing low enough hashes to be found with less effort (in other words, decreasing the difficulty).  Every 2016 blocks the protocol looks at the number of blocks that have been added to the blockchain and adjusts the target either up or down to try to keep the average success rate close to one per ten minutes.

In the beginning when most people don't have ASIC yet, and only a few people do, those with ASIC will be supplying far more hashing power than their peers.

Here is a small scale example as an analogy:

If there are 100 people each supplying exactly the same amount of hashing power to the network, then they each have a 1% (1 out of 100) chance of being the lucky one who solves the next block and gets the block reward.  If a new block is found every 10 minutes, then on average they each will find a block every 1,000 minutes (100 blocks generated in 1,000 minutes and they each get on average on of those 100).  If we ignore transaction fees for the moment, this means that they will average about 25 BTC every 16 hours and 40 minutes (or about 36 BTC per day).

Now imagine that one of those individuals suddenly develops a new technology that allows them to supply 50 times as much hashing power as any of their peers. Now this individual is 50 times more likely to find a block as any peer.  All the other peers now have a 0.67%  (1 out of 149) chance of being the lucky one who solves the next block and gets the block reward, and this individual has a 33.56% (50 out of 149) chance.  The target adjusts so that blocks are still found every 10 minutes.  This means it is now more difficult to find a low enough hash.  Each peer will now find a block every 1490 minutes (149 blocks generated in 1490 minutes and they each get on average one of those 149).  Continuing to ignore transaction fees, each peer will therefore average about 25 BTC every 24 hours and 50 minutes (or about 24.16 BTC per day).   Meanwhile the individual with the new technology will on average solve 50 out of every 149 blocks, giving them 1250 BTC every 24 hours and 50 minutes minutes (or about 1208.16 BTC per day).

Notice that the number of bitcoins generated per day hasn't changed, but one miner is getting much richer much faster:

100 miners each at 36 BTC per day = 3,600 BTC per day for the total network
99 miners each at 24.16 BTC per day plus 1 miner at 1,208.16 per day = 3,600 BTC per day for the total network.

Now some time goes by and 85 of the miners have all started using this new technology.  The total netowrk hashing power is now (85 x 50 + 15 =) 4,265 times bigger than the original pre-technology power. The 15 miners still using the original technology have a 0.023% (1 out of 4,265) chance of solving the next block.  The 85 miners using the new technology will each have a 1.17% (50 out of 4,265) chance.  The target adjusts so that blocks are still found every 10 minutes.  Each of the 15 miners using the old technology will now find a block every 42,650 minutes (4,265 blocks generated in 42,650 minutes and they each get on average one of them). They will each therefore average about 25 BTC every 29 days 14 hours and 50 minutes (or about 0.844 BTC per day).  Meanwhile, those with the new technology will solve on average 50 out of every 4,265 blocks, giving them 1,250 BTC every 29 days 14 hours and 50 minutes (or about 42.2 BTC per day).

As you can see, even though the total number of blocks (and coins) per day across the entire network hasn't changed, those few who can get in on the new technology really early can reap huge rewards while the rest of the network is still catching up (our example miner went from 36 per day to 1,208 per day while everyone else fell back a modest amount to 24 per day).  Eventually most of the network catches up with the new technology and while the rewards may be slightly better than before, they are no longer huge (those using the new tech in the example increased their revenue from 36 to 42 per day).  Those who don't adopt the new technology are eventually left in the dust (dropping from 36 per day to 0.844 per day).

The important questions to consider are:

What percentage of the network will already be using ASIC when you finally get yours?
What percentage of the total network hashing power will you be contributing?

Imagine if a huge number of people are running 1,500 GHash/s BFL BitFore Mini while you are running a single Jalapeno.

[Telera]

Nice example Danny.  There has to be some investment cost offset which makes things very slightly less advantageous to those who adopt the new technology.  Additional power costs as well unless the new tech is much more power efficient. Never mind the lost income from having money tied up in a pre-order for so long, or perhaps lost altogether (keep the faith BFL'ers!).

[DannyHamilton]

Nice example Danny.  There has to be some investment cost offset which makes things very slightly less advantageous to those who adopt the new technology.  Additional power costs as well unless the new tech is much more power efficient. Never mind the lost income from having money tied up in a pre-order for so long, or perhaps lost altogether (keep the faith BFL'ers!).

It is my understanding that ASIC are significantly more power efficient.  But yes, there are capital costs in purchasing the new tech when you already have perfectly working old tech.  As you mention there is also lost income from having spent money in a pre-order when that money could have been used to increase revenue during that time.  My example used some extremes for the sake of making the effect obvious (only 100 miners, a single miner acquiring 33% of the entire network's hashing power, etc). In reality a person needs to take into consideration a lot of variables:

• What is the current total network hash rate?
• What is the future total network hash rate likely to be?
• What is the purchase cost of the device you are considering pre-ordering?
• What is the expected hash rate of the device you are considering pre-ordering?
• How much hash power could you immediately supply with current technology for that same price?
• How much electricity per hash is used by the current tech?
• How much electricity per hash is used by the new tech?
• How much do you pay for electricity?
• What is the current bitcoin exchange rate?
• What are your predictions for future bitcoin exchange rates?
• What is the risk that the future tech won't be delivered on time?
• What is the risk that the future tech won't be delivered at all?
• How reliable is either tech, and what sort of warranty is available?
• What is the re-sale value of either tech likely to be in the future?

I'm sure I'm missing a few, but clearly it isn't a simple answer and the answer will be different for everyone depending on their own predictions, expectations, risk tolerance, and costs.

[Massage4BTC]

Nobody really knows, so you should buy bitcoins because you want to hold them for whatever reason. That reason might be actually spending them on available items in the marketplace instead of speculating on dollar value profit.

[zdavidi]

But wouldn't that make the difficulty increase almost exponentially once ASICs are really integrated?

[antimattercrusader]

The thing that makes me most nervous is the sudden crash of BTC in 2011 from $30 down to $2. I expect this to happen again very soon...well maybe not down to $2 but perhaps lose half its value.
Heard that there are ASICs starting up now, so theoretically, wouldn't that flood the market with BTC and drive down the value?  At any rate I expect the month of March to be a crazy emotional rollercoaster

No, the number of BTC produced is set and finite. Difficulty is adjusted to scale based on network hashrate.  Basically, the same number of BTC are going to be produced regardless of processing power - but the recipients of those set number of coins is based on processing power.

[enocog]

ASICs~if the people who are making these believed in Bitcoin they would not sell the technology as it would be profitable to make the machines for yourself. These people are out for USD or EUR...etc I guarantee they aren't paying the ASIC chip manufacturer in BTC. 

[DataPlumber]

ASICs~if the people who are making these believed in Bitcoin they would not sell the technology as it would be profitable to make the machines for yourself. These people are out for USD or EUR...etc I guarantee they aren't paying the ASIC chip manufacturer in BTC. 

Wells Fargo didn't make their money mining gold, they made it selling shovels.

[enocog]

ASICs~if the people who are making these believed in Bitcoin they would not sell the technology as it would be profitable to make the machines for yourself. These people are out for USD or EUR...etc I guarantee they aren't paying the ASIC chip manufacturer in BTC. 

Wells Fargo didn't make their money mining gold, they made it selling shovels.

Wells Fargo & Company (NYSE: WFC) is an American multinational diversified financial services company with operations around the world. Wells Fargo is the fourth largest bank in the U.S. by assets and the largest bank by market capitalization.[3] Wells Fargo is the second largest bank in deposits, home mortgage servicing, and debit cards. In 2011, Wells Fargo was the 23rd largest company in the United States.[4] Wells Fargo is headquartered in San Francisco, California, but has major "hubquarters" in other cities throughout the country.[5]

In 2007 it was the only bank in the United States to be rated AAA by S&P,[6] though its rating has since been lowered to AA-[7] in light of the financial crisis of 2007–2012. The firm's primary U.S. operating subsidiary is national bank Wells Fargo Bank, N.A., which designates its main office as Sioux Falls, South Dakota.

Wells Fargo in its present form is a result of an acquisition of San Francisco-based Wells Fargo & Company by Minneapolis-based Norwest Corporation in 1998 and the subsequent 2008 acquisition of Charlotte-based Wachovia. Although Norwest was technically the surviving entity in the 1998 merger, the new company renamed itself Wells Fargo, capitalizing on the 150-year history of the nationally recognized name and its trademark stagecoach. Following the acquisition, the company transferred its headquarters to Wells Fargo's headquarters in San Francisco and merged its operating subsidiary with Wells Fargo's operating subsidiary in Sioux Falls.

In 2012, Wells Fargo had more than 9,000 retail branches and 12,198 automated teller machines in 39 states and the District of Columbia. It has over 270,000 employees and over 70 million customers.[8]

History

Main article: History of Wells Fargo
The current Wells Fargo is a result of a 1998 merger between Minneapolis-based Norwest Corporation and the original Wells Fargo.[11] Although Norwest was the nominal survivor, the new company kept the Wells Fargo name to capitalize on the long history of the nationally recognized Wells Fargo name and its trademark stagecoach (the company's previous slogan, "The Next Stage," is a nod to the company's wagons-west motif). After the acquisition, the parent company kept its headquarters in San Francisco. The company's current tagline, "Together we'll go far" also references the stagecoach motif, its customers and the company name.

[edit]In-store branches
There are many mini-branches located inside of other buildings, which are almost exclusively grocery stores, that usually contain ATMs, basic teller services, and, space permitting, an office for private meetings with customers.[12]

[edit]Wachovia acquisition


A former Wachovia branch converted to Wells Fargo in the fall of 2011 in Durham, North Carolina.
On October 3, 2008, Wachovia agreed to be bought by Wells Fargo for about $14.8B in an all-stock transaction. This news came four days after the Federal Deposit Insurance Corporation (FDIC) made moves to have Citigroup buy Wachovia for $2.1B. Citigroup protested Wachovia's agreement to sell itself to Wells Fargo and threatened legal action over the matter. However the deal with Wells Fargo overwhelmingly won shareholder approval since it valued Wachovia at about 7 times what Citigroup offered. To further ensure shareholder approval, Wachovia issued Wells Fargo with preferred stock holding 39.9% of the voting power in the company.[13]

On October 4, 2008, a New York state judge issued a temporary injunction blocking the transaction from going forward while the situation was sorted out.[14] Citigroup alleged that they had an exclusivity agreement with Wachovia that barred Wachovia from negotiating with other potential buyers. The injunction was overturned late in the evening on October 5, 2008, by New York state appeals court.[15] Citigroup and Wells Fargo then entered into negotiations brokered by the FDIC to reach an amicable solution to the impasse. Those negotiations failed. Sources say that Citigroup was unwilling to take on more risk than the $42 billion that would have been the cap under the previous FDIC-backed deal (with the FDIC incurring all losses over $42 billion). Citigroup did not block the merger, but indicated they would seek damages of $60 billion for breach of an alleged exclusivity agreement with Wachovia.[16]

[edit]Predecessors
Wells Fargo operates under Charter #6, the first national bank charter issued in the United States. This charter was issued to First National Bank of Philadelphia on June 20, 1863 by the Office of the Comptroller of the Currency.[17] Traditionally, acquiring banks assume the earliest issued charter number. Thus, the first charter passed from First National Bank of Philadelphia to Wells Fargo through its 2008 acquisition of Wachovia, which in turn had inherited it through one of its many acquisitions.
Selected predecessor companies

Crocker National Bank
First Interstate Bancorp
First National Bank of Philadelphia
First Security Corporation
Norwest Corporation
Wachovia Corporation
[edit]2008 financial crisis
On October 28, 2008, Wells Fargo was the recipient of $25B of the Emergency Economic Stabilization Act Federal bail-out in the form of a preferred stock purchase.[18][19] Tests by the Federal government revealed that Wells Fargo needs an additional 13.7 billion dollars in order to remain well capitalized if the economy were to deteriorate further under stress test scenarios. On May 11, 2009 Wells Fargo announced an additional stock offering which was completed on May 13, 2009 raising $8.6 billion in capital. The remaining $4.9 billion in capital is planned to be raised through earnings. On Dec. 23, 2009, Wells Fargo redeemed the $25 billion of series D preferred stock issued to the U.S. Treasury under the Troubled Asset Relief Program’s Capital Purchase Program. As part of the redemption of the preferred stock, Wells Fargo also paid accrued dividends of $131.9 million, bringing the total dividends paid to the U.S. Treasury and U.S. taxpayers to $1.441 billion since the preferred stock was issued in October 2008.[20]


OK yeah that makes sense now. it the same. So a ASIC miner is the same as a simple saving account with  a bank that's monies are controled by a government or "Federal Reserve" ...etc  controlling the currencies.

[zeaster]

Let's see what happens after Bitinstant has been stolen $12,000 valued bitcoins.
Not that big money loss, sure, but what about psycological outcomes?
Not to count some comments on  blog bitinstant com show some users still not being able to get access to their money, even several days after the heist.

[DataPlumber]

@enocog

This is what I get for typing glib retorts without fully researching them.  You're right, it wasn't Wells Fargo, it was Sam Brannan I was thinking of, who famously got early wind of the California gold rush and made a fortune selling "picks and shovels".

And you get a gold star for going *way* out of your way to miss the point.

[Notanon]

I'd say it might ease off a bit with regards to how fast it's currently climbing to a more sustainable level, due to more ASIC miners coming online and making GPU mining more increasingly obselete or getting some people to shift to Litecoin and other cryptocurrencies for a chance at better returns, which might in turn boost their trading value against Bitcoin. Ripple itself could either act as a dampener or a booster, depending on how well and quickly it becomes adopted, but it's a bit of a wildcard at the moment, IMO. More websites adopting it as a form of payment will probably happen once the rise in price slows to a more stable rate.

In short, there are way too many variables at play to make a close guess, but I'd say a more sustainable rise could be the order of the day.

[albinosincave]

pppppppp pricedrop! Hopefully

[pera]

IMO it's really difficult (probably impossible) to predict that Bitcoin will not crash next month, but I think is very plausible that in a period of less than two years the price will be, at least, the same as now. So, if you don't mind holding onto your bitcoins for a while the risk to lose your money is low. I think the only thing that could stop Bitcoin would be a law against distributed crypto-currencies in USA, Europe, China, Japan and Russia...

cheers

[mrp]

bitcoin market is not the stock market