SlipperySlope's Bubble Collapse Journal

[SlipperySlope]

[edited to add new posts and to reflect current events]

My principal comments regarding the collapse of April 10, 2013 bubble.

• Day 4 post peak - Compare two bitcoin bubbles.
• Day 5 post peak - Price dropping 10 times faster than back in 2011 bubble.
• Day 7 post peak - How many more seller capitulations before the bottom? ....[this bubble has at least one now]
• Day 11 post peak - Does the recent dramatic recovery from 50 to 136 USD/BTC negate the case for a short term bear market? ....[turned out that it did not]
• Day 12 post peak - Long term chart is awesome
• Day 13 post peak - Sucker's Rally ....[turned out to be a classic one]
• Day 20 post peak - Resistance at $160 ....[and yet unsurpassed]
• Tickets Purchased for the Bagholder's Ball
• Day 21 post peak - 24 hours of selling ....[indeed just the beginning, starting at $145]
• Alert - Perhaps the first, and largest, capitulation is at hand     ....[it was the first capitulation]

• Day 22 post peak - Second day of the Great Capitulation ...[reached a low of $80]
• Day 23 post peak - Third day of the Great Capitulation of 2013
• Day 24 post peak - 24 hours of buying - are we past the bottom? ... [yes, on our way up past $120
• Day 27 post peak - Reversal at $120 confirms primary collapse
• Does resistance trump support at $105? ...[no, prices climbed to $116 the following day]
• Day 28 post peak - Yet-unsurpassed peaks at $266, $166, $149, and $125 conform to classical bubble collapse
• Day 29 post peak - Diminishing volume post-peak conforms to classical bubble collapse
• Milestone Day 30 post peak - bubble 1 collapsed 55% from peak at 30 days, likewise this bubble
• Support trumps resistance at $112 - and breaks upwards ...[and stopped at $123]
• Day 32 post peak - Low volume, sideways price days are becoming more common.
• Day 33 post peak - Volume increased to complete a bearish wedge at $120
• Major post-peak support trendline breakout to the downside on news of Dwolla/Mt.Gox account seizure by U.S. Department of Homeland Security ... [The bad news abated and the breakout reversed at $103]
• Day 57 post peak - Sideways action suggests the collapse is over ... [However on May 26, the Great Slump of 2013 began]
• Day 91 post peak - Recent low of $65 says collapse is not over and could have 3 more months to bottom ... [Wrong! $65 was the bottom]

Here [was] the [intermediate] term bear case in a nutshell ...

• There will be no more enticing and greed-inducing news stories from the media. Now the benchmark is the crash and how speculators lost so much.
• Investor sentiment, especially new investor sentiment has reversed. Impatience to buy has been replaced by caution
• What is the correct valuation of fiat/bitcoin given what we know now? Certainly while the price doubled four times from January, the bitcoin economy did not do as well in percentage growth. Correct valuation depends then mostly on just how much of the run up since January is emotion, e.g. greed.
• If the downtrend continues, then coin holders are tempted to sell coin expecting to buy back for less fiat.

It happened, so now let's discuss ...

Question 1: what is the expected duration of the down trend? My rough guess as argued here is until September 2013.

Question 2: how far down does the trend go? As of May 8, I believe that this bubble will collapse down to a price greater than the high of the previous bubble, e.g. above $32, and lower than the lowest low after the peak so far, i.e. $50. Because bubbles collapse to a price lower than most expect, the bottom could be below $32.

Bitcoin Bubble 1 Peaked June 8, 2011





Bitcoin Bubble 2 Peaked April 10, 2013



Rather than behaving like the 2011 bubble collapse, the April 2013 bubble collapse appears to be a damped oscillation resolved to a price 9x higher than when the bubble began. Continued sideways price movement for the remainder of 2013 would allow the long term price trend to catch up.

When the next big bitcoin bubble arrives, probably in 2014-15, I plan to trade on the expectation that the bubble collapse will be a damped oscillation, featuring several very large price swings.

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[BitSlut69]

BTC is going for 30% of what it was two days ago and you want to know if shorting now is a good idea 

[BitSlut69]

Did you sell at $75? Price is over $100 on bitfloor now 

[Wuji]

Did you sell at $75? Price is over $100 on bitfloor now 

It is $94 on MtGox however, this could be Bull Trap #163.

[SlipperySlope]

The bid wall at 75 proved successful this afternoon and prices reached about 125 before turning back down. Like 2011, the Mt.Gox bitcoin exchange is the center of the discussion. DDoS attacks and a poor performing trading engine are to blame, and the uncertainty about trading bitcoins discourage new investors, and frustrate active traders.

I continue to believe that lessons learned from the 2011 crash are useful here when deciding tactics. Because the recent bubble took three months to form, I believe that the downside resolution will take more than a month, maybe two or three months to reach bottom. Impatience is the enemy now. I think that a trader having sold some coin to raise cash must simply hold on to that cash and wait for prices to fall deeply, even in the face of bull traps in the meantime.

As was well said by someone else, the lack of new buyers is like a great weight on the market. Despite the efforts of bargain hunters to prop up prices with bid walls and such, this weight is always present and affects every trade to the downside. Its really just the reverse of how the bubble was formed, when the flood of new buyers doubled prices three times in three months.

[just1nmc]

The bid wall at 75 proved successful this afternoon and prices reached about 125 before turning back down. Like 2011, the Mt.Gox bitcoin exchange is the center of the discussion. DDoS attacks and a poor performing trading engine are to blame, and the uncertainty about trading bitcoins discourage new investors, and frustrate active traders.

I continue to believe that lessons learned from the 2011 crash are useful here when deciding tactics. Because the recent bubble took three months to form, I believe that the downside resolution will take more than a month, maybe two or three months to reach bottom. Impatience is the enemy now. I think that a trader having sold some coin to raise cash must simply hold on to that cash and wait for prices to fall deeply, even in the face of bull traps in the meantime.

As was well said by someone else, the lack of new buyers is like a great weight on the market. Despite the efforts of bargain hunters to prop up prices with bid walls and such, this weight is always present and affects every trade to the downside. Its really just the reverse of how the bubble was formed, when the flood of new buyers doubled prices three times in three months.

So why do you think there is a lack of new buyers? Sorry, I'm not sure what post you're referring to.


The gox queue is over 20k, google trends for "bitcoin" has doubled since the peak last week, and the news coverage is growing and much less negative overall than I expected.

/r/bitcoin has had 30% growth this week, bringing it to ~34k subscribers, and I see a few new merchants accepting every day I go on there.
This forum has gained 8k members this month so far.

I don't know what will happen, but there sure seems to be a lot of momentum left.

[Ares]

The bid wall at 75 proved successful this afternoon and prices reached about 125 before turning back down. Like 2011, the Mt.Gox bitcoin exchange is the center of the discussion. DDoS attacks and a poor performing trading engine are to blame, and the uncertainty about trading bitcoins discourage new investors, and frustrate active traders.

I continue to believe that lessons learned from the 2011 crash are useful here when deciding tactics. Because the recent bubble took three months to form, I believe that the downside resolution will take more than a month, maybe two or three months to reach bottom. Impatience is the enemy now. I think that a trader having sold some coin to raise cash must simply hold on to that cash and wait for prices to fall deeply, even in the face of bull traps in the meantime.

As was well said by someone else, the lack of new buyers is like a great weight on the market. Despite the efforts of bargain hunters to prop up prices with bid walls and such, this weight is always present and affects every trade to the downside. Its really just the reverse of how the bubble was formed, when the flood of new buyers doubled prices three times in three months.

From Mt. Gox on APril 11th
- The number of new account opened went from 60k for March alone to 75k new account created for the first few days of April! We now have roughly 20,000 new accounts created each day.


Where did you get the impression that there is a lack of new buyers?

[Wekkel]

Where did you get the impression that there is a lack of new buyers?

The price action?

[SlipperySlope]

4 days after the April 9 peak

Issue 1 - Evidence for or against the Bear Case.

I believe that the post-peak negative sentiment will shut off the flood of new money that caused the bubble. I define this negative sentiment rather weakly - merely the lack of news about 10x price increases and lack of new significant all-time highs, e.g. 33, 50, 100, 150, 200. Clearly the wave of euphoria on Reddit /r/bitcoin has abated.

This is the first Monday after the peak. The flood of new users registering to trade and subsequently verified at Mt. Gox has not really felt the effect of the crash. We know that today more new users will be able to trade dollars for bitcoins. The question is whether enough of them will buy to inspire further new users to register at Mt. Gox. The record from bubble 1 suggests that it will take at least a week for volume to settle down.

Issue 2 - Compare two bitcoin bubbles.

To the extent that comparing the April 10 bubble top with the June 8, 2011 bubble peak is useful, here is the data presented in terms of doubles and halving of USD/BTC prices.

**** Bitcoin Bubble 1 peak occurred June 8, 2011 ****

The way up ...
 0.498 January 31, 2011 -
 0.997 April 15 2011 - doubling time 74 days
 1.99 April 28, 2011 - doubling time 13 days
 3.98 May 10, 2011 - doubling time 12 days
 7.97 May 13, 2011 - doubling time 3 days
15.95 June 4, 2011 - doubling time 22 days
31.90 The high on Wednesday, June 8, 2011 - doubling time 4 days

The way down ...
31.90 The high on Wednesday, June 8, 2011
15.95 June 11, 2011 halving time 3 days
 7.97 August 5, 2011 halving time 55 days
 3.98 October 7, 2011 halving time 63 days
 2.20 November 14, 2011 halving time 38 days

Commentary on Bitcoin Bubble 1

• the bubble price increase is double exponential, i.e. the rate of acceleration is itself increasing
• the up move from 1.99 to 31.90 took 41 days
• the down move from 31.90 to 2.20 took 159 days
• in contrast to the increase to the peak, after the peak the rate of decrease is rather constant, halving every 52 days

**** Bitcoin Bubble 2 peak occurred April 10, 2013  ****

The way up ...
   4.16 December 19, 2011: 8.31 July 16, 2012
   8.31 July 16, 2012 - doubling time 210 days
  16.62 January 21, 2013 - doubling time 189 days
  33.25 March 1, 2013 - doubling time 59 days
  66.50 March 25, 2013 - doubling time 24 days
 133.00 April 3, 2013 - doubling time 9 days
 266.00 Wednesday, April 10, 2013 - doubling time 7 days

The way down ...
 266.00 Wednesday, April 10, 2013
 133.00 April 11 [I am ignoring April 10 low of 60]
  66.50 [I am ignoring April 10 low of 60]
  33.25
  16.62

Commentary on Bitcoin Bubble 2

• the bubble price increase is double exponential
• the sharp move up seems to begin January 7, 2013 at 13.50 - this will be a downside target I think as classic speculative bubbles tend to give back *all* of their bubble gains
• the up move from 13.50 to 266.00 took 93 days
• the down move from 266.00 to approximately 13.50 may like bubble 1 take approximately 160 days, e.g September 17, 2013, and halve in value approximately every 53 days

[SlipperySlope]

I saw this image linked in another post. It perfectly illustrates the similarities between Bubble 1 and Bubble 2.

[BubbleBoy]

The gox queue is over 20k, google trends for "bitcoin" has doubled since the peak last week, and the news coverage is growing and much less negative overall than I expected.

This just in:
http://www.google.com/trends/explore?hl=en-AU#q=bitcoin&date=today%201-m&cmpt=q





The low point's tooltip says 53 (47% drop). That's the biggest drop to date and given the news dynamic I don't see how interest can pick back up. I concur 100% with SlipperySlope, the news has changed dramatically: it no longer invites greed but caution. The Gox verification queue is probably just a myth.

Disclaimer: I'm a perennial bear that made a small fortune during this bubble and it's subsequent bull trap, so yeah, i'd like the satisfaction that I got out at the right time.

[SlipperySlope]

... I'm a perennial bear that made small fortune during this bubble and it's subsequent bull trap, so yeah, i'd like the satisfaction that I got out at the right time.

At what price would you buy back in, and is there a minimum time that you would wait for things to settle down?

[blueberry]

The gox queue is over 20k, google trends for "bitcoin" has doubled since the peak last week, and the news coverage is growing and much less negative overall than I expected.

This just in:
http://www.google.com/trends/explore?hl=en-AU#q=bitcoin&date=today%201-m&cmpt=q





The low point's tooltip says 53 (47% drop). That's the biggest drop to date and given the news dynamic I don't see how interest can pick back up. I concur 100% with SlipperySlope, the news has changed dramatically: it no longer invites greed but caution. The Gox verification queue is probably just a myth.

Disclaimer: I'm a perennial bear that made small fortune during this bubble and it's subsequent bull trap, so yeah, i'd like the satisfaction that I got out at the right time.

Currently the process from signing up, verifying and transferring funds to Mt. Gox takes about 2 weeks. So that huge surge in interest over the last few days has not played a part in the bitcoin market yet. Hell, the smaller surge in early April probably hasn't even bought in yet. And the low point is still higher than at any point before the recent surge.

[BubbleBoy]

At what price would you buy back in, and is there a minimum time that you would wait for things to settle down?

When it dipped the second time, I had various buy orders at 30 ... 60. I couldn't get 100% back in and I lost the 120 secondary peak (sold all at about 100), but still, it's almost double money for free.

I think this is the best strategy when buying: buy on the long run, when market looks bear and "stable" and prepare ammo for the next bubble. Wait at least 6 months for the previous bubble to deflate before buying. OR, buy during panic moments and sell back after hours/days (higher risk).

I believe this is the worst market to buy in, an overheated "stable" high, with trigger happy people watching the price, ready to get out. It's a game of chicken with low potential upside and high risk.

Currently the process from signing up, verifying and transferring funds to Mt. Gox takes about 2 weeks. So that huge surge in interest over the last few days has not played a part in the bitcoin market yet. Hell, the smaller surge in early April probably hasn't even bought in yet. And the low point is still higher than at any point before the recent surge.

That's not the correct way to think about it, if you observe the interes/price relation of previous events they are perfectly correlated, there's no delay between the two lumps. So you will never be able to milk the very last people who enter on the peak, the only way to get their money is to have an even higher news peak today or this week. And I'm just saying the news space is saturated and the message is no longer greed inducing, but caution inducing.

[just1nmc]

The gox queue is over 20k, google trends for "bitcoin" has doubled since the peak last week, and the news coverage is growing and much less negative overall than I expected.

This just in:
http://www.google.com/trends/explore?hl=en-AU#q=bitcoin&date=today%201-m&cmpt=q





The low point's tooltip says 53 (47% drop). That's the biggest drop to date and given the news dynamic I don't see how interest can pick back up. I concur 100% with SlipperySlope, the news has changed dramatically: it no longer invites greed but caution. The Gox verification queue is probably just a myth.

Disclaimer: I'm a perennial bear that made small fortune during this bubble and it's subsequent bull trap, so yeah, i'd like the satisfaction that I got out at the right time.

Definitely something to keep track of, I'm not convinced yet though I think the next week of data will be interesting.

I don't think we could really expect to keep interest that high, but it's still 3 to 4 times what it was in March during most of the price increase. I'd be happy to go back to the levels in March, and continue slower growth.

There's also more to talk about this time than just the price. Much of the media coverage I've been seeing lately is focused on the benefits of merchants accepting bitcoins as payment. More will have to happen to keep it going though.

But as far as what price will be sustainable at that level of growth, I have no idea.

[SlipperySlope]

But as far as what price will be sustainable at that level of growth, I have no idea.

Smoothing out the boom and bust of the bitcoin price series suggests an annual growth of approximately 5x, or about 400% APR. I take this as a strong indicator of the relative value of the underlying bitcoin economy. Bubbles are happening in bitcoin because 400% APR is enormous and speculators naturally get way, way ahead of the underlying fundamentals as new people learn about bitcoins and big returns.

Back in January, bitcoin was fairly valued at 13.50 even though it advanced during 2012. I think this is sustainable as a base.

[blueberry]

But as far as what price will be sustainable at that level of growth, I have no idea.

Smoothing out the boom and bust of the bitcoin price series suggests an annual growth of approximately 5x, or about 400% APR. I take this as a strong indicator of the relative value of the underlying bitcoin economy. Bubbles are happening in bitcoin because 400% APR is enormous and speculators naturally get way, way ahead of the underlying fundamentals as new people learn about bitcoins and big returns.

Back in January, bitcoin was fairly valued at 13.50 even though it advanced during 2012. I think this is sustainable as a base.

No, bitcoin was undervalued at $13.50 in January. Like gold was undervalued at $250 and silver undervalued at $5. The price corrected upwards to reflect the real growth in the bitcoin economy and larger userbase and increase adoption. $266 was overvalued no doubt, but now Bitcoin has found it's new equlibrium at $100.

$100 is the new $13.50.

[Bitsaurus]

But as far as what price will be sustainable at that level of growth, I have no idea.

Smoothing out the boom and bust of the bitcoin price series suggests an annual growth of approximately 5x, or about 400% APR. I take this as a strong indicator of the relative value of the underlying bitcoin economy. Bubbles are happening in bitcoin because 400% APR is enormous and speculators naturally get way, way ahead of the underlying fundamentals as new people learn about bitcoins and big returns.

Back in January, bitcoin was fairly valued at 13.50 even though it advanced during 2012. I think this is sustainable as a base.

No, bitcoin was undervalued at $13.50 in January. Like gold was undervalued at $250 and silver undervalued at $5. The price corrected upwards to reflect the real growth in the bitcoin economy and larger userbase and increase adoption. $266 was overvalued no doubt, but now Bitcoin has found it's new equlibrium at $100.

$100 is the new $13.50.

$100 is the new $20 (in 2011).  It will drag on down to $32, doubt we'll ever see $13.50 though.

[blueberry]

But as far as what price will be sustainable at that level of growth, I have no idea.

Smoothing out the boom and bust of the bitcoin price series suggests an annual growth of approximately 5x, or about 400% APR. I take this as a strong indicator of the relative value of the underlying bitcoin economy. Bubbles are happening in bitcoin because 400% APR is enormous and speculators naturally get way, way ahead of the underlying fundamentals as new people learn about bitcoins and big returns.

Back in January, bitcoin was fairly valued at 13.50 even though it advanced during 2012. I think this is sustainable as a base.

No, bitcoin was undervalued at $13.50 in January. Like gold was undervalued at $250 and silver undervalued at $5. The price corrected upwards to reflect the real growth in the bitcoin economy and larger userbase and increase adoption. $266 was overvalued no doubt, but now Bitcoin has found it's new equlibrium at $100.

$100 is the new $13.50.

$100 is the new $20 (in 2011).  It will drag on down to $32, doubt we'll ever see $13.50 though.

We already hit the bottom 3 days ago at $54.25. If you didn't buy when you had the opportunity then commiserations.

[Bitsaurus]

But as far as what price will be sustainable at that level of growth, I have no idea.

Smoothing out the boom and bust of the bitcoin price series suggests an annual growth of approximately 5x, or about 400% APR. I take this as a strong indicator of the relative value of the underlying bitcoin economy. Bubbles are happening in bitcoin because 400% APR is enormous and speculators naturally get way, way ahead of the underlying fundamentals as new people learn about bitcoins and big returns.

Back in January, bitcoin was fairly valued at 13.50 even though it advanced during 2012. I think this is sustainable as a base.

No, bitcoin was undervalued at $13.50 in January. Like gold was undervalued at $250 and silver undervalued at $5. The price corrected upwards to reflect the real growth in the bitcoin economy and larger userbase and increase adoption. $266 was overvalued no doubt, but now Bitcoin has found it's new equlibrium at $100.

$100 is the new $13.50.

$100 is the new $20 (in 2011).  It will drag on down to $32, doubt we'll ever see $13.50 though.

We already hit the bottom 3 days ago at $54.25. If you didn't buy when you had the opportunity then commiserations.

Is that like we already hit the peak last week at $200?

[blueberry]

But as far as what price will be sustainable at that level of growth, I have no idea.

Smoothing out the boom and bust of the bitcoin price series suggests an annual growth of approximately 5x, or about 400% APR. I take this as a strong indicator of the relative value of the underlying bitcoin economy. Bubbles are happening in bitcoin because 400% APR is enormous and speculators naturally get way, way ahead of the underlying fundamentals as new people learn about bitcoins and big returns.

Back in January, bitcoin was fairly valued at 13.50 even though it advanced during 2012. I think this is sustainable as a base.

No, bitcoin was undervalued at $13.50 in January. Like gold was undervalued at $250 and silver undervalued at $5. The price corrected upwards to reflect the real growth in the bitcoin economy and larger userbase and increase adoption. $266 was overvalued no doubt, but now Bitcoin has found it's new equlibrium at $100.

$100 is the new $13.50.

$100 is the new $20 (in 2011).  It will drag on down to $32, doubt we'll ever see $13.50 though.

We already hit the bottom 3 days ago at $54.25. If you didn't buy when you had the opportunity then commiserations.

Is that like we already hit the peak last week at $200?

Yes we hit the peak at $266. I believe the price will remain in a trading range of $80-$150 for the next 1-3 months. The sentiment of the forum seems evenly balanced between bulls and bears. I think we are at equilibruim at $100 and sideways price movement in the short to medium term is likely. After that we'll probably rally past $200 later in the year but slowly.

[bitrider]

My experience watching markets suggests that V shaped recoveries are notoriously unstable and rarely lead to new highs. Bitcoin is moving very fast on every level so I think the U shaped recovery will not take as long as it did back in 2011-2012, I still think we will have 3-4 months of testing before we really get moving again. I think the market wants to test the new lows of 55 and maybe even back to 35 before going for the next big leg up. We may rally from here ($100) because there are lots of speculators in the game, but I would bet we will come back to test these lows. Of course I'm good either way. If btc goes down, I just get to buy more coin, if it goes up, I just hang on tight...

[afbitcoins]

I think people like SlipperySlope and bitrider are on the right lines.

Wether we like it or not the mania has ended (for now at least) and we are now in a new phase. From what I've seen speculative bubbles seem to follow a very classical pattern, there is the initial phase which is the bull run which grows exponentially over some time, at some point it can't be sustained any longer as the price increase becomes almost vertical.

In this case MtGox infrastructure causing lags was the cause of the fracture, but if it hadn't been that something else would have done it soon enough as the upwards pressure becomes unsustainable.

Next the price plummets as panic sets in and everyone rushes to sell all at once. This creates a huge spike down on the price chart. In the aftermarth of the crash, the price rebounds but not as high as the original peak (dead cat bounce). Then there is a long slow decline as enthusiasm fades more and more.

All of this has been repeated again and again in different markets, from tulip bulbs to gold and silver in 1980 to bitcoins in 2011, and I don't think this will be much different.

I have an entry in my blog where i also talk a bit more about this, 'Bull market tops'.

[gizmoh]

Bitcoin and Gold, Astounding similarities:

http://www.kitco.com/reports/KitcoNews20130415JW_am.html

[talnted]

I agree with much of what has been said already.  I feel that we will track down to sub 50 at which point bitcoin will stabilize.  This downward sell off will continue over the next 3 to 4 months.

[Bitsaurus]

But as far as what price will be sustainable at that level of growth, I have no idea.

Smoothing out the boom and bust of the bitcoin price series suggests an annual growth of approximately 5x, or about 400% APR. I take this as a strong indicator of the relative value of the underlying bitcoin economy. Bubbles are happening in bitcoin because 400% APR is enormous and speculators naturally get way, way ahead of the underlying fundamentals as new people learn about bitcoins and big returns.

Back in January, bitcoin was fairly valued at 13.50 even though it advanced during 2012. I think this is sustainable as a base.

No, bitcoin was undervalued at $13.50 in January. Like gold was undervalued at $250 and silver undervalued at $5. The price corrected upwards to reflect the real growth in the bitcoin economy and larger userbase and increase adoption. $266 was overvalued no doubt, but now Bitcoin has found it's new equlibrium at $100.

$100 is the new $13.50.

We already hit the bottom 3 days ago at $54.25. If you didn't buy when you had the opportunity then commiserations.

Is that like we already hit the peak last week at $200?

So I said we would head for $32.  We're definitely not stable at $100.  It shows a little bounce at $50 (probably the number) but sometimes before end of the week I'm guessing it will hit the magic $32.

$100 is the new $20 (in 2011).  It will drag on down to $32, doubt we'll ever see $13.50 though.

[SlipperySlope]

5 days after the April 10 peak

Issue 1 - Evidence for the Bear Case.

The post-peak negative sentiment shut off the flood of new money that caused the bubble. I define this negative sentiment rather weakly - merely the lack of news about 10x price increases and lack of new significant all-time highs, e.g. 33, 50, 100, 150, 200. Clearly the wave of euphoria on Reddit /r/bitcoin has abated.

Sunday/Monday price action was almost exactly reversed from before the peak. Previously, new deposits at Mt. Gox would propel the price strongly upwards. In contrast, the decline since Sunday has been continuous and brutal.

The most compelling evidence for the bear case is that a new post peak low was recorded this morning. This issue is closed.

Issue 2 - Comparison with Bitcoin Bubble 1.

The second halving of price from the 266 peak is 66.60. This price was reached today, April 16, which is six days after the peak. In the previous bubble, the corresponding point of decline occurred 58 days later. Accordingly, the rate of decline for this bubble is more rapid than the first bubble by a factor of 10.

I suppose that in this bubble, the smart money exited sooner - given what they learned from the first one.

[wobber]

5 days after the April 10 peak

Issue 1 - Evidence for the Bear Case.

The post-peak negative sentiment shut off the flood of new money that caused the bubble. I define this negative sentiment rather weakly - merely the lack of news about 10x price increases and lack of new significant all-time highs, e.g. 33, 50, 100, 150, 200. Clearly the wave of euphoria on Reddit /r/bitcoin has abated.

Sunday/Monday price action was almost exactly reversed from before the peak. Previously, new deposits at Mt. Gox would propel the price strongly upwards. In contrast, the decline since Sunday has been continuous and brutal.

The most compelling evidence for the bear case is that a new post peak low was recorded this morning. This issue is closed.

Issue 2 - Comparison with Bitcoin Bubble 1.

The second halving of price from the 266 peak is 66.60. This price was reached today, April 16, which is six days after the peak. In the previous bubble, the corresponding point of decline occurred 58 days later. Accordingly, the rate of decline for this bubble is more rapid than the first bubble by a factor of 10.

I suppose that in this bubble, the smart money exited sooner - given what they learned from the first one.



This would mean we are gonna recover faster

[SlipperySlope]

7 days after the April 10 peak

How many more seller capitulations before the bottom?

The previous bitcoin bubble that peaked back in June 8, 2011 at 31.90, did not finally reach bottom at 2.20 until 159 days later. It dropped on average about 1% daily and featured six capitulations, the last two reaching the bottom vicinity. The six capitulations on average occurred 31 days apart. In the previous bubble, every one of the six capitulations failed to make new highs.

In this bubble, I count April 12 as the first capitulation, and yesterday April 16 as the second capitulation. These are only 4 days apart and thus for these two, the capitulations in Bitcoin Bubble 2 are occurring 8x faster than in Bitcoin Bubble 1.

If this bubble has the same number of post-peak seller capitulations as the last one, then 3 or 4 remain until the bottom is reached.

[SlipperySlope]

This would mean we are gonna recover faster

You are saying that, by way of analogy and symmetry, that because the decline is faster this time, then the recovery will be too.  That is plausible, but I think that the bottom will not be reached until people have forgotten about the bubble peak - months away.

[rpietila]

This would mean we are gonna recover faster

You are saying that, by way of analogy and symmetry, that because the decline is faster this time, then the recovery will be too.  That is plausible, but I think that the bottom will not be reached until people have forgotten about the bubble peak - months away.

This bubble burst in 5 days instead of 5 months. Let's face it, $32 sustainable coin price any day from now, is becoming more and more of a slim chance. Even crossing $50 is difficult, since the price was tested 4 separate times in intraday trading during the last week.

Last time we saw a quick recovery from $2 to $7, and then a long base at $5. My numbers would be that $100 is the new $5 for the following months.

Since the opening of Mt.Gox, bitcoin's price has doubled on average in 90 days. I agree with all the ones saying that this rapid an appreciation is inherently chaotic, since the bubbles will inevitably form and burst. I think we are actually below the trendline now, and that this is a sweet entry spot. When Mt.Gox was opened, 1000 people knew about Bitcoin, and on average they were willing to invest $100. Now the price is up 1000-fold, but the fundamentals have gotten 10^4-10^5 times better.

It is good to remember the big picture. In 2016 we'll hit $300k.

[SlipperySlope]

This bubble burst in 5 days instead of 5 months. ...
My numbers would be that $100 is the new $5 for the following months.

Bubble bursting follows a double exponential rate of decay, which is the opposite of what happened in the run up. Post peak, one would expect the price halving time to increase - thus the first halving from 266 down to 133, then the second very quickly down to 66.5. In contrast to your view, I think that the having time to 33.25 will be some weeks away - if the rate of decline slows down as in a typical bubble collapse.

What is your basis for the growth rate of the bitcoin economy? A linear regression of the log closing price on Mt. Gox starting in 2010 to present suggests a bitcoin economy growth rate of 4.8x annually = 580%. That is a fantastic growth rate, but the market gets ahead of that when doubling several times in a few months.

[rpietila]

This bubble burst in 5 days instead of 5 months. ...
My numbers would be that $100 is the new $5 for the following months.

Bubble bursting follows a double exponential rate of decay, which is the opposite of what happened in the run up. Post peak, one would expect the price halving time to increase - thus the first halving from 266 down to 133, then the second very quickly down to 66.5. In contrast to your view, I think that the having time to 33.25 will be some weeks away - if the rate of decline slows down as in a typical bubble collapse.

What is your basis for the growth rate of the bitcoin economy? A linear regression of the log closing price on Mt. Gox starting in 2010 to present suggests a bitcoin economy growth rate of 4.8x annually = 580%. That is a fantastic growth rate, but the market gets ahead of that when doubling several times in a few months.

Mt.Gox first day = 0.06, yesterday 73. No linear regression, just  (days_open/30)th root (73/0.06) ~1.26, hence 3 months double.

It is more than you think. If we continue this way, $300k is expected in 2016 

[MatTheCat]

My prayers would be that $100 is the new $5 for the following months.

I have corrected that for you.

HTH.

[rpietila]

My prayers would be that $100 is the new $5 for the following months.

I have corrected that for you.

HTH.

Quoted in anticipation for moderator action. Not all people can immediately see the troll here, which would lead them to believe that I actually said something like that. Can somebody please tell whether it is OK to alter the text in quotes in the way described?

[zby]

I don't think any mathematical formula would fit it - because bubbles are built on feedback loops.  For example this latest crash was the result of people anticipating a long slow slide - they capitulated earlier - but the effect of it can be that this time there would be no long slow slide.

Personally I would rather expect a huge triangle here - there is lots of pressure up, even when the prices are crazy.

[blueberry]

This bubble burst in 5 days instead of 5 months. ...
My numbers would be that $100 is the new $5 for the following months.

Bubble bursting follows a double exponential rate of decay, which is the opposite of what happened in the run up. Post peak, one would expect the price halving time to increase - thus the first halving from 266 down to 133, then the second very quickly down to 66.5. In contrast to your view, I think that the having time to 33.25 will be some weeks away - if the rate of decline slows down as in a typical bubble collapse.

What is your basis for the growth rate of the bitcoin economy? A linear regression of the log closing price on Mt. Gox starting in 2010 to present suggests a bitcoin economy growth rate of 4.8x annually = 580%. That is a fantastic growth rate, but the market gets ahead of that when doubling several times in a few months.

The bid depth on the Mt. Gox order book hit an all time high today supporting current prices. This was not the case during the 2011 crash (bid depth back then was almost non-existent).

[BubbleBoy]

Everybody is expecting to catch another falling knife, and profit from the differential when it goes back up, that's why all the bids are there. That doesn't mean the fundamental problem with the bubble (irrational overvaluation) has disappeared. If price steadily drops over the next few weeks and the promised influx of buyers fails to materialize, which I think they will, the bid wall will vanish.

If you look at the google trends data, the interest peak becomes more and more clear a thing of the past, so there's nothing to salvage the situation short of a rapid valuation over 250$, so that reporters and news outlets are interested in the story again and dumb money starts flowing again.

[blueberry]

Everybody is expecting to catch another falling knife, and profit from the differential when it goes back up, that's why all the bids are there. That doesn't mean the fundamental problem with the bubble (irrational overvaluation) has disappeared. If price steadily drops over the next few weeks and the promised influx of buyers fails to materialize, which I think they will, the bid wall will vanish.

If you look at the google trends data, the interest peak becomes more and more clear a thing of the past, so there's nothing to salvage the situation short of a rapid valuation over 250$, so that reporters and news outlets are interested in the story again and dumb money starts flowing again.

So you're saying it's either a rapid shoot in price back over $250 or a slow drop in price over weeks/months down to new lows. And anything in between is impossible?

So the price stabilizing between $90-$110 for a month or two followed by a gradual increase to $150 by the end of the year is impossible?

[Bitmeat]

This bubble burst in 5 days instead of 5 months. ...
My numbers would be that $100 is the new $5 for the following months.

Bubble bursting follows a double exponential rate of decay, which is the opposite of what happened in the run up. Post peak, one would expect the price halving time to increase - thus the first halving from 266 down to 133, then the second very quickly down to 66.5. In contrast to your view, I think that the having time to 33.25 will be some weeks away - if the rate of decline slows down as in a typical bubble collapse.

What is your basis for the growth rate of the bitcoin economy? A linear regression of the log closing price on Mt. Gox starting in 2010 to present suggests a bitcoin economy growth rate of 4.8x annually = 580%. That is a fantastic growth rate, but the market gets ahead of that when doubling several times in a few months.

Mt.Gox first day = 0.06, yesterday 73. No linear regression, just  (days_open/30)th root (73/0.06) ~1.26, hence 3 months double.

It is more than you think. If we continue this way, $300k is expected in 2016 

You're drawing the line in the wrong place like everyone else who makes graphs on this site. End the numbers in late 2012 before the bubble started when it was around 10

And that forgets that bitcoin doesn't just go up magically because you whisper "bitcoin" in someone's ear. It gains investor confidence as more sites and companies start accepting it as a form of payment.

Unless you're serious about your belief that the total bitcoin economy will be worth 3 trillion dollars in just 3 years. In that case there's probably no point discussing it with you.

[BubbleBoy]

So you're saying it's either a rapid shoot in price back over $250 or a slow drop in price over weeks/months down to new lows. And anything in between is impossible?

So the price stabilizing between $90-$110 for a month or two followed by a gradual increase to $150 by the end of the year is impossible?

Something like that. 100$ -150$ stable over long term is less plausible because it requires something like 300.000 - 400.000$ fresh funds to enter the economy each day as mining revenue, profits + cost. When ASICs become the norm, profits will drop and even miners that are long in bitcoins will put cashflow pressure on the exchanges (miners seeking only USD profits are already doing it). In october - november the whole daily trading volume was around 500.000$, so I really don't see how the market can sink 400.000$ worth of BTC long term without dumb money caused by quick appreciation and media exposure.

Bottom line, nothing fundamental really changed in the last few months. If BTC price was stable around 5-10$ with a 50 BTC block reward, it should be stable at 10-20$ with a 25BTC reward. I'm willing to grant an extra 50-100% for the increased visibility, and I'm being generous. So 20$ to max 40$ could be stable long term, 100$ can't be.

So it's either another bubble or a slow death with a capitulation in the 20s (realistic) to 30s (optimistic).

[Brushan]

So you're saying it's either a rapid shoot in price back over $250 or a slow drop in price over weeks/months down to new lows. And anything in between is impossible?

So the price stabilizing between $90-$110 for a month or two followed by a gradual increase to $150 by the end of the year is impossible?

Something like that. 100$ -150$ stable over long term is less plausible because it requires something like 300.000 - 400.000$ fresh funds to enter the economy each day as mining revenue, profits + cost. When ASICs become the norm, profits will drop and even miners that are long in bitcoins will put cashflow pressure on the exchanges (miners seeking only USD profits are already doing it). In october - november the whole daily trading volume was around 500.000$, so I really don't see how the market can sink 400.000$ worth of BTC long term without dumb money caused by quick appreciation and media exposure.

Bottom line, nothing fundamental really changed in the last few months. If BTC price was stable around 5-10$ with a 50 BTC block reward, it should be stable at 10-20$ with a 25BTC reward. I'm willing to grant an extra 50-100% for the increased visibility, and I'm being generous. So 20$ to max 40$ could be stable long term, 100$ can't be.

So it's either another bubble or a slow death with a capitulation in the 20s (realistic) to 30s (optimistic).

You forgot to add value to what it might become. A lot of people see a bright future for Bitcoin, even more today than a couple of months ago.

[MatTheCat]

Quoted in anticipation for moderator action. Not all people can immediately see the troll here, which would lead them to believe that I actually said something like that. Can somebody please tell whether it is OK to alter the text in quotes in the way described?

Hey, loosen up slaphead!

This is a Bitcoin forum, not yer local Masonic Lodge.

btw, I am at least 10 years older than you are and i still have all my hair. don't wear no dorky school tie and blazer either.












(now I am trolling).

[awakening]

Quoted in anticipation for moderator action. Not all people can immediately see the troll here, which would lead them to believe that I actually said something like that. Can somebody please tell whether it is OK to alter the text in quotes in the way described?

Hey, loosen up slaphead!

This is a Bitcoin forum, not yer local Masonic Lodge.

btw, I am at least 10 years older than you are and i still have all my hair. don't wear no dorky school tie and blazer either.

(now I am trolling).

LOL

[SlipperySlope]

11 days after the April 10 peak

1. Does the recent dramatic recovery from 50 to 136 USD/BTC negate the case for a short term bear market?

Note that 136 is very close to halving the 266 peak. I suggest, based on price action, that the mid 130's is a significant resistance point. Perhaps, if the comparisons with bubble 1 are still valid, price peaks will be generally lower in the weeks and months to come. In the aftermath of bubble 1, prices declined on average 1% daily.

I have been looking for confirming signs that this second bitcoin bubble has peaked and is declining.

• Google Trends for 'bitcoin' now shows decline from a peak, when viewed over a 12 month or shorter time frame. This important, because an on-boarding step for new bitcoin investors is to search for information about bitcoins.
• Alexa web site traffic statistics for bitcoin.org show a decline from the April peak
• Wikipedia article traffic statistics for Bitcoin show a decline from the April peak here
• Blockchain.info chart for 'My Wallet Number of Transactions per day' appears to have peaked, when viewed on a log scale with 7 day smoothing. This data relates to the underlying bitcoin economy, including gaming.
• Blockchain.info chart for 'Trade Volume vs Transaction Volume Ratio' smoothed values peaked at 12 in early January, and bottomed out April 15 at 1.4.  I was puzzled by this particular chart at first, but a post today explains that the ratio is actually transaction volume / trade volume, i.e. as the bubble formed, the relative increase in trade volume caused the ration to diminish, and as the bubble collapses the ratio will likely return to pre-bubble levels.

Is anyone tracking the the number of Bitcoinity chart number of connected users? As of this writing it is 9021. One might reasonably expect this number to decline as less committed investors drop out.

2. What effect do Mt. Gox problems have on the bubble decline?

Back in June 2011, Mt. Gox was very seriously hacked and closed for several tense days. When the exchange reopened for business, prices sunk that day only to recover, and to gently continue the subsequent three-month long decline to the bottom. Compared to the first bubble, current Mt. Gox problems are much less serious. But as of this writing, Mt. Gox has been offline for hours with yet another DDoS attack.

[torba]

Did you sell at $75? Price is over $100 on bitfloor now 

It is $94 on MtGox however, this could be Bull Trap #163.

Oh how it wasn't...

[BTC Books]

I have been looking for confirming signs that this second bitcoin bubble has peaked and is declining.

• Google Trends for 'bitcoin' now shows decline from a peak, when viewed over a 12 month or shorter time frame. This important, because an on-boarding step for new bitcoin investors is to search for information about bitcoins.

A small quibble - but I believe it's time.

I place less and less importance on Google Trends these days, vis-a-vis bitcoin.  A couple of years ago:  yes, it was important.  Today?  Not so much.

Remember that unfortunate noob a few days ago who posted Trend comparisons on bitcoin + US Dollar; his point being that interest in bitcoin was obviously greater than interest in the dollar?  It was pointed out that not too many people Google the US Dollar, because pretty much everybody knows what it is.

I think that is also beginning to be true of bitcoin.  Now certainly bitcoin is nowhere as near as well-known as the dollar - but among those who might take an interest, it's getting there.

Just a thought.

[SlipperySlope]

I place less and less importance on Google Trends these days, vis-a-vis bitcoin.  A couple of years ago:  yes, it was important.

Despite its failings, Google Trends and the other bitcoin web site indicators, might be the still the best way to gauge new investor interest in bitcoin. I simply look for sentiment confirmation that this bubble has peaked.

[oda.krell]

@ SlipperySlope:

Can I ask you a question? Not rhetorical, but I'm actually interested in your answer.

I enjoyed reading your thread, and think your arguments were pretty solid (and I was inclined to agree with them in the beginning, on the first days after the correction from 260+).

But at least to me it seems that, with each day, there are more signs that the scenario you described does in fact not play out: a quick, sharp correction occured, shortly followed by another sharp drop (to 50), which was however rejected by the market to be lasting. 100 has been tested several times now, but didn't even fall when mtgox suffered from DDoS. There seems to be strong resistance at the moment to go anywhere near 150, but equall strong resistance to go anywhere below 100. Trading volume has been pretty low in the last days, so at the very least there is less panic driven behavior now.

So I'm wondering, under which circumstances would you revise your initial assumptions? I mean, like any good attempt to objectively describe (and predict) reality, you need a way to adjust your theory if confronted with contrary evidence, and I'd like to understand what you would consider to be (sufficiently) evidence to the contrary?

[SlipperySlope]

So I'm wondering, under which circumstances would you revise your initial assumptions? I mean, like any good attempt to objectively describe (and predict) reality, you need a way to adjust your theory if confronted with contrary evidence, and I'd like to understand what you would consider to be (sufficiently) evidence to the contrary?

I agree that the post-peak price action of bitcoin bubble 2 has deviated from the pattern set by bubble 1.

Technical evidence that would cause me to reconsider my  hypothesis would be a sustained uptrend that broke to new highs, in particular a new all time high, or an absence of the periodic capitulations that characterized the bubble 1 collapse, or maybe simply sustained volatility when stable decline is predicted. Fundamental evidence that would cause reconsideration would be a significant increase in bitcoin demand, such as a flood of new investors with reignited enthusiasm.

Technical evidence that would strengthen my hypothesis would be a multiple-months-long exponential, channel-bound decline to a bottom lower than most expect. If that indeed occurs, then there should also be periodic capitulations. Suppose that prices sink on average 1% a day - 20 days from now the price is at 100. Subsequently, e.g. 10 days later, the roughly 300K bitcoin purchased on April 19 at 100 will be loss positions prompting a capitulation.

Fundamental evidence that would strengthen my case would be majority investor sentiment that the bubble is indeed collapsing, e.g. back in 2011 in this forum there were frequent posts on when the bottom would be reached and what that low price might be. Or evidence that some indicator of the underlying bitcoin economy is retracing back towards a pre-bubble level, e.g. disgruntled speculators reducing their previously enthusiastic bitcoin transactions due to lack of interest.

[rpietila]

Fundamental evidence that would cause reconsideration would be a significant increase in bitcoin demand, such as a flood of new investors with reignited enthusiasm.

I don't think you should act in haste. But seriously, how can the price fall if this is what is happening, no matter what you or I think, duh?

[SlipperySlope]

how can the price fall if this is what is happening, no matter what you or I think

I applaud the super node concept. I posted some questions about the concept on your thread.

The price can fall in accordance with the theory and experience of speculative financial bubbles, if the establishment of supernodes is delayed, or otherwise limited such that total investor demand continues to drop as predicted by theory. Or it might be that potential buyers will be strongly motivated to wait out the bubble collapse no matter how reassurred they are about the infrastructure.

[rpietila]

As sergio points out in another thread, Satoshi was operating the only supernode back in 2009 (and got 1M coins in compensation )

At that point, you could be classified as a supernode if you could afford to run your computer 24/7, amend some bugs that might occur in the software, and pump your product. Satoshi did have the first two, but almost failed in the third one. I got it that he was almost quitting in late 2009 as there were no other supernodes entering the game, just some hop-on, hop-off nodes.

Today the resources in the Bitcoin network are vastly higher and several bright people are entering in. Prior to 2013, you had to be lucky to find out about Bitcoin. If you were smart, but did not possess integrity, you would turn to scamming 10,000s of bitcoins from the other users. Many did this, so the development of the social and power network (and price) were anemic in 2012.

2013 will be the year for legitimate bitcoin businesses, entrepreneurs that possess organizational, financial, legal etc. muscle, which far exceeds anything seen before. I watch with amusement, the number of coins traded in the exchanges at every minor dip just as this month. These are important in transfering the coins to the hands of the new supernodes. But don't sell your coins for too cheap. If you are not in a hurry to cash out, your BTC100 will enable your retirement in luxury after 2-3 short years. Or you can develop your own organization and become a supernode now for even as little as BTC100. More will come quickly, if you set yourself to increase the stash, instead of timing a fiat cashout, which will any way turn out to be your biggest regret after 10 years 

[ElectricMucus]

Fundamental evidence that would cause reconsideration would be a significant increase in bitcoin demand, such as a flood of new investors with reignited enthusiasm.

I don't think you should act in haste. But seriously, how can the price fall if this is what is happening, no matter what you or I think, duh?

So you are playing software architect now? That's a new role.  
Nevermind the fact that we have a subforum and a mailing list for project development. Oh I forgot you are not a nerd, hmm?

[SlipperySlope]

More will come quickly, if you set yourself to increase the stash

Precisely my motivation during this bubble. There is no faster way and maybe no safer way to multiply bitcoin holdings other than selling near the top of a bitcoin bubble and waiting a few months to buy back - in my opinion. I recall June 8, 2011. A limit order could have sold above $20. Three months later, even waiting for prices to trend upwards from the bottom, bitcoins could be purchased for $4. That is a 5x increase in bitcoins in 3 months with no additional fiat invested.

I vowed last time not to miss the next bubble. I successfully gauged the day of the April 10 peak according to my bubble-experienced appraisal of the market mood. One of my preset limit orders filled at $255 and I am completely satisfied with the sell part of the plan. The buy back part is the issue - especially will prices drop like last time?

There is not an easy way to gauge the bottom as there was for the top. So I will buy some back at 2x, 3x, 4x and so forth and wait for a sustained recovery, e.g. a week of increases before buying back with the remainder of my fiat at the exchange.

What I am concerned about is being left behind should prices soar for some reason. Back in the summer of 2011 that concern was a manifest fear, and kept me in bitcoins during the majority of the collapse; I sold everything at 15 and bought back at 14. I increased my holdings slightly if at all - because of fear. This time around I am controlling my fear by persuading myself that prices must go down and that I will not be left behind when it comes time to buy back.

[jmw74]

More will come quickly, if you set yourself to increase the stash

Precisely my motivation during this bubble. There is no faster way and maybe no safer way to multiply bitcoin holdings other than selling near the top of a bitcoin bubble and waiting a few months to buy back - in my opinion. I recall June 8, 2011. A limit order could have sold above $20. Three months later, even waiting for prices to trend upwards from the bottom, bitcoins could be purchased for $4. That is a 5x increase in bitcoins in 3 months with no additional fiat invested.

I vowed last time not to miss the next bubble. I successfully gauged the day of the April 10 peak according to my bubble-experienced appraisal of the market mood. One of my preset limit orders filled at $255 and I am completely satisfied with the sell part of the plan. The buy back part is the issue - especially will prices drop like last time?

There is not an easy way to gauge the bottom as there was for the top. So I will buy some back at 2x, 3x, 4x and so forth and wait for a sustained recovery, e.g. a week of increases before buying back with the remainder of my fiat at the exchange.

What I am concerned about is being left behind should prices soar for some reason. Back in the summer of 2011 that concern was a manifest fear, and kept me in bitcoins during the majority of the collapse; I sold everything at 15 and bought back at 14. I increased my holdings slightly if at all - because of fear. This time around I am controlling my fear by persuading myself that prices must go down and that I will not be left behind when it comes time to buy back.

I think this is a good assessment.

It really doesn't take much to change a lot of people's minds on what a bitcoin is worth.  Seems to me very unlikely we've seen sub-100 for the last time, and there is probably a reasonably good chance we'll see sub-50 again eventually.  Of course it could hit 1000 first.

I've got buy orders in from 80 all the way down to 17.  I think bitcoins are ultimately worth thousands of dollars each, but that is irrelevant if you want to know the best time to buy.  What matters is what everyone else thinks.  And what everyone thinks can change in the blink of an eye.

[SlipperySlope]

And what everyone thinks can change in the blink of an eye.

That certainly happened on April 10.

[SlipperySlope]

12 days after the April 10 peak



Yes the long term trend is up and its awesome.

Short term, I believe is the collapse of bubble 2. Below is a chart that illustrates the resistance around 125.

[rpietila]

I think you are late. It is already breaking to the upside, just like I said it would in 80/20 prob.

If you realistically think it could go to zero, $30, $50 or even $100 ever any more, I am glad to write puts. (The last one is still a chance so don't expect cheap, but the others I can safely just give away. PM. BTC1k min.

[SlipperySlope]

If you realistically think it could go to zero, $30, $50 or even $100 ever any more, I am glad to write puts.

Here is my most recent chart ...


No, I do not think bitcoin goes to zero - not now, and if you get those super nodes running, not ever. I am very content to patiently wait for the bubble to collapse back to the underlying trend line. No need for puts, thank you! I am foolish enough already.
 

[rpietila]

If you realistically think it could go to zero, $30, $50 or even $100 ever any more, I am glad to write puts.

No need for puts, thank you! I am foolish enough already.

What sort of bear is not buying almost free puts at $30-$50   

Don't you realize it's the only way you ever get your money out of bitcoins when they inevitably collapse!?

[SlipperySlope]

almost free puts at $30-$50

Now you have me curious, not really interested yet - just curious.

What are the terms of these puts? Are you writing them or connected with MPOe?  I know that option writers expect to make money and that option pricing factors in the strike price and the volatility of the underlying security and the duration of the option. I imagine the premium on a six month put @ $60 would be considerable.

[rpietila]

almost free puts at $30-$50

Now you have me curious, not really interested yet - just curious.

What are the terms of these puts? Are you writing them or connected with MPOe?  I know that option writers expect to make money and that option pricing factors in the strike price and the volatility of the underlying security and the duration of the option. I imagine the premium on a six month put @ $60 would be considerable.

I have a steady flow of bitcoins going out daily since I sell them. If it hits $50, people will be lining to buy them. So I am not risking too much if I write such puts, I just get cheap bitcoins effortlessly. Of course in the event it goes to $20, I may have to sell them at a slight loss to my buy price of $50, but you would be surprised to know that I can charge 25% premium OTC if the market is "crazy" (which I decide).

Any hit to $20 is extremely improbable short-term event, you need to be lucky if you want to sell unto such a slim chance...

So this is a legit hedge, I include all such diligently into my position spreadsheet, and I have 16 years of stock etc. trading experience. I can hedge if I want (this one can be hedged eg. against the markup of future sales). So by betting against me, you will be either insignificant or hedged. I will keep my 75-110% net long position anyway, just rake in +EV (free money) from my counterparties.

It's called market making. Some day I make $1k, another $10k, as I posted in my thread.

I think MPOE is playing a dangerous game (if they don't have the weekly fluctuation on their grips, I mean). It may still fold this month if too much underwater from insider swing trades. Dunno, at least they do reporting.

[SlipperySlope]

I think MPOE is playing a dangerous game (if they don't have the weekly fluctuation on their grips, I mean). It may still fold this month if too much underwater from insider swing trades. Dunno, at least they do reporting.

Just to show how ignorant I am sometimes, I bought MPOe pass-through bonds at the Bitfunder exchange for March. I took an 8% loss instead of the gain I expected. I likewise have a position in the April MPOe bonds that I will liquidate this week at settlement. I did not realize that MPOe bonds are not conventional bonds, but rather a way to share in the profits and losses from MPOe's option writing bot - whose pricing algorithm is not disclosed. I can only hope the the March volatility got fully priced into the April option premiums. From what I recall from IRC or a post here by MPOE-PR, that MPOe will reconfigure their financing arrangements, probably to make it less likely for the owner to suffer another big loss.

Thanks for the put option information. You might present your terms in the Securities forum, or additionally in your own thread.

[RationalSpeculator]

My principal comments regarding the short term bear case, and its potential for literally multiplying the number of bitcoins you sold to raise cash.

• Day 4 post peak - Compare two bitcoin bubbles.
• Day 5 post peak - Price dropping 10 times faster than back in 2011 bubble.
• Day 7 post peak - How many more seller capitulations before the bottom?
• Day 11 post peak - Does the recent dramatic recovery from 50 to 136 USD/BTC negate the case for a short term bear market?
• Day 12 post peak - Long term chart is awesome

Here was the short term bear case in a nutshell ...

• there will be no more enticing and greed-inducing news stories from the media. Now the benchmark is the crash and how speculators lost so much.
• investor sentiment, especially new investor sentiment has reversed. Impatience to buy has been replaced by caution
• what is the correct valuation of fiat/bitcoin given what we know now? Certainly while the price doubled four times from January, the bitcoin economy did not do as well in percentage growth. Correct valuation depends then mostly on just how much of the run up since January is emotion, e.g. greed.
• If the downtrend continues, then coin holders are  tempted to sell coin expecting to buy back for less fiat.

Great analyses. Thank you so much for sharing Slipperyslope. I read all your posts and admire your rational and kind state of mind. I share your opinion that chances are much higher for serious correction taking months. As to deal with your fear of missing the bottom, I think your system of gradually moving in is a very good way, though you do have a small risk to be left behind if the price would not go below $50 or even $100. It's a small risk, but a risk. You can solve that by having a small exposure nonetheless, and raising that exposure as the price goes down. It's a small loss if the price goes down, but you don't have to worry to be left behind.

[rpietila]

you do have a small risk to be left behind if the price would not go below $50 or even $100. It's a small risk, but a risk.

I regard this "risk" of never going down as so large - I am willing to write you $115 puts for surprisingly cheap!

This would allow you to buy in to bitcoins with much larger percentage of your fiat stash now, since you would only lose the premium if the price goes up. (In your scenario, you are fully exposed if sudden upward moves happen.)

If it goes down to $50, you get to sell your bitcoins to me for $115, and buy back a much larger number at $50.

All you will lose if anything happens, is the premium. If you are willing to "go short" with bitcoin (i.e. being long-term bullish but willing to invest less than 100% of the position at any particular time), would this not be a great improvement?

[SlipperySlope]

I regard this "risk" of never going down as so large

I assume that $13.50 back in January was a fair price at the time, and that the underlying price growth trend is on the order of 4-5x per year yields an expected 2013 year end value of $50-60 - without the bubble.

On the wall thread you said ...

I have charted the spot_price/ATH price over Jan-Mar, and I think the rally has already resumed. You can offer to bet with quite good odds that we will never cross 0.95*previous_ATH. And you win the bet with a surprisingly good probability. Chart it yourself, lol. I almost always bought at ATH during those months, since it was the least risky entry point.

The supply of people that think that we are in a bubble/denial/bear market/correction/consolidation/younameit is dwindling, and it's dwindling fast. Especially their economic share of the market is about to be crushed if they do not buy back soon.

What you say about demand is still consistent with speculative financial bubble theory to the extent that it takes a decline of approximately the same duration as the run-up to completely unwind the bullish enthusiasm that created the bubble.

In terms of logical argumentation, my falsifiable hypothesis, derived from theory, is that a price retracement to the underlying trend will occur before a new all time high.

[RationalSpeculator]

you do have a small risk to be left behind if the price would not go below $50 or even $100. It's a small risk, but a risk.

I regard this "risk" of never going down as so large - I am willing to write you $115 puts for surprisingly cheap!

This would allow you to buy in to bitcoins with much larger percentage of your fiat stash now, since you would only lose the premium if the price goes up. (In your scenario, you are fully exposed if sudden upward moves happen.)

If it goes down to $50, you get to sell your bitcoins to me for $115, and buy back a much larger number at $50.

All you will lose if anything happens, is the premium. If you are willing to "go short" with bitcoin (i.e. being long-term bullish but willing to invest less than 100% of the position at any particular time), would this not be a great improvement?

Interesting.

How do I know you are good for your money?

[gizmoh]

@slipperyslope:

Did you factor in the fact that a large proportion of fiat have been accumulated (on sold btc) in accounts at mtgox, expecting a crash and waiting to buy back 'cheaper', hence creating pressure on the bid sums and eventually reducing possible crash to corrections.

[SlipperySlope]

@slipperyslope:

Did you factor in the fact that a large proportion of fiat have been accumulated (on sold btc) in accounts at mtgox, expecting a crash and waiting to buy back 'cheaper', hence creating pressure on the bid sums and eventually reducing possible crash to corrections.

Ah yes! Indeed back in 2011 lots of cash I believe remained at Mt.Gox even after it was hacked. It took all the way from June 8, 2011 to November 14 that year, to wring the last fiat out of the most reluctant buyer. That is a bubble collapse and that is the sort of thing that I expect to happen this time - based upon speculative financial bubble theory and what we learned from Bitcoin Bubble 1.

Regarding corrections, I am preparing a post addressing that timely point.

[jmw74]

you do have a small risk to be left behind if the price would not go below $50 or even $100. It's a small risk, but a risk.

I regard this "risk" of never going down as so large - I am willing to write you $115 puts for surprisingly cheap!

This would allow you to buy in to bitcoins with much larger percentage of your fiat stash now, since you would only lose the premium if the price goes up. (In your scenario, you are fully exposed if sudden upward moves happen.)

If it goes down to $50, you get to sell your bitcoins to me for $115, and buy back a much larger number at $50.

All you will lose if anything happens, is the premium. If you are willing to "go short" with bitcoin (i.e. being long-term bullish but willing to invest less than 100% of the position at any particular time), would this not be a great improvement?

I think all RationalSpeculator wanted is a limit order on the exchange for $50.  Your put offer is totally different.  To win a bet against you, the price would have to be low in 6 months.  But all it takes is a momentary dip (that have happened many times) to be able to buy in cheap.

[SlipperySlope]

13 days after the April 10 peak

I now believe that the current situation, with due regard to speculative financial bubble theory, is within the zone of resistance named the Sucker's Rally. We did not have one in Bitcoin Bubble 1 so previously I did not even think to consider it.
.

.
Revisiting various famous bubble charts, we see strong corrections back upwards the previous peak, e.g. US Stock Market Bubble of 1929. Because this happens so frequently, the pattern has been given a name by experienced traders - the Suckers Rally. Note that the technical indicator shown is the Accumulation / Distribution ratio, which shows more relatively more buying volume than selling volume, almost two weeks after the crash. From this, I draw the conclusion that trader sentiment is still high - again fitting bubble theory.

I offer no guidance on timing the top of this rally beyond the historical support/resistance points on the way up and down. This is a scary time for a bear who fears being left behind as prices soar. But bubble traders must be patient and wait months for the bottom, or be skilled enough to swing trade.

[nkspace]

+1

[rpietila]

There is now a short-term bear case going on. Selling at this dcb to $144-145 and buying back after one hour at anything between $130-$136 is an option.

See, on topic 

[ElectricMucus]

There is now a short-term bear case going on. Selling at this dcb to $144-145 and buying back after one hour at anything between $130-$136 is an option.

See, on topic 

you are too kind

[smoothie]

@slipperyslope:

Did you factor in the fact that a large proportion of fiat have been accumulated (on sold btc) in accounts at mtgox, expecting a crash and waiting to buy back 'cheaper', hence creating pressure on the bid sums and eventually reducing possible crash to corrections.

Ah yes! Indeed back in 2011 lots of cash I believe remained at Mt.Gox even after it was hacked. It took all the way from June 8, 2011 to November 14 that year, to wring the last fiat out of the most reluctant buyer. That is a bubble collapse and that is the sort of thing that I expect to happen this time - based upon speculative financial bubble theory and what we learned from Bitcoin Bubble 1.

Regarding corrections, I am preparing a post addressing that timely point.

Back then "lots of cash" was like $500,000.

Current visible bid cash total is upwards of $22,000,000.

Big difference.

[smoothie]

+1

-2 

[mp420]

A brilliant thread.

I've revised my short term opinion about the price. We'll probably touch at least $200, maybe even a new ATH before the bubble crashes for good. I'm almost 100% cash on MtGox and I stand to lose (in BTC terms) if I buy back above $190 or so.

Regardless, I'm not comfortable buying. Things are happening too quickly, this is bubble all over again, and I'm not willing to spend all my time watching the charts and keeping my finger on the Sell button. I reckon the worst that can happen is a new bubble up to $500 or $1000 and then a huge crash. Although, at $1000 I'd be tempted to take some coins out of my longer term storage.

The thing is, Bitcoin demand is all about speculation. Bitcoin has some limited utility beyond speculation at the moment but over 90% of the price is about people betting that the price will be higher in the future. And there are too many layman traders and too few professionals buying and selling, which exacerbates the volatility in a small, thinly traded market.

[SlipperySlope]

A brilliant thread.

Thanks so very much!

I've revised my short term opinion about the price. We'll probably touch at least $200, maybe even a new ATH before the bubble crashes for good. I'm almost 100% cash on MtGox and I stand to lose (in BTC terms) if I buy back above $190 or so.

Regardless, I'm not comfortable buying. Things are happening too quickly, this is bubble all over again, and I'm not willing to spend all my time watching the charts and keeping my finger on the Sell button.

"this is bubble all over again"

Technical patterns in price, e.g. a bubble, are typically fractal with respect to the time domain - right? So it's turtles all the way down.

[rpietila]

There is now a short-term bear case going on. Selling at this dcb to $144-145 and buying back after one hour at anything between $130-$136 is an option.

Hmm..  If I cannot contain the rise of bitcoin.. I wonder who can  If indeed nobody can do it, it will soon become very valuable.

[RationalSpeculator]

[edited to add new posts and to reflect current events]

My principal comments regarding the short term bear case, and its potential for literally multiplying the number of bitcoins you sold to raise cash.

• Day 4 post peak - Compare two bitcoin bubbles.
• Day 5 post peak - Price dropping 10 times faster than back in 2011 bubble.
• Day 7 post peak - How many more seller capitulations before the bottom?
• Day 11 post peak - Does the recent dramatic recovery from 50 to 136 USD/BTC negate the case for a short term bear market?
• Day 12 post peak - Long term chart is awesome
• Day 13 post peak - Sucker's Rally

Hey SlipperySlope,

I'm looking for some more bearish talk on bitcoin

You have some?

What's your current analyses of the situation?

[rpietila]

[edited to add new posts and to reflect current events]

My principal comments regarding the short term bear case, and its potential for literally multiplying the number of bitcoins you sold to raise cash.

• Day 4 post peak - Compare two bitcoin bubbles.
• Day 5 post peak - Price dropping 10 times faster than back in 2011 bubble.
• Day 7 post peak - How many more seller capitulations before the bottom?
• Day 11 post peak - Does the recent dramatic recovery from 50 to 136 USD/BTC negate the case for a short term bear market?
• Day 12 post peak - Long term chart is awesome
• Day 13 post peak - Sucker's Rally

Hey SlipperySlope,

I'm looking for some more bearish talk on bitcoin

You have some?

What's your current analyses of the situation?

SlipperySlope is busy thinking, whether to attend my conference. I can say that we are on track to cross the ATH by May 2nd (which is Thursday this week), this would lead to exactly 3000% time compression compared to the 2011 bubble, both in the crash and the recovery part.

[SlipperySlope]

20 days after the April 10 peak



The most significant resistance to increasing bitcoin prices is currently above $145. The recent peak at $160 has not yet been surpassed.

Now that 20 days have elapsed after the all-time-high of $266, the amount of buying enthusiasm that used to arrive each Monday morning is waning. Based upon the decline back to underlying trend predicted by speculative financial bubble theory, and comparison with the June, 2011 bubble, I expect the trading emphasis to shift to defending the support at $120, rather than pushing above $160 to new highs. I believe, that until $120 is breached to the downside, the way down will be primarily motivated by profit taking, and below $120 by loss-staunching and periodic capitulations.

What would negate the case for a the short term bear market? New high prices, in particular a new all time high.  What would confirm the case? A long battle at $120 with a breakthrough to lower prices, in particular a low below $60.

Sentiment continues to cool 20 days post bubble peak, e.g. Google Trends, Reddit.

I sold some more bitcoins at $135 and have outstanding sell orders below $150, attempting to raise more $ selling into what I think is a Sucker's Rally.

[smoothie]

In a Suckers Rally, the only suckers are the ones selling bitcoins in a hyper-deflationary currency.

 

[SlipperySlope]

In a Suckers Rally, the only suckers are the ones selling bitcoins in a hyper-deflationary currency.

 

The usual notion of Sucker's Rally is to distinguish buyers who are misinformed about valuation, as subsequent price action reveals. Let's see what happens.

You joined in time for the first bubble collapse back in June 2011. Do you recall the steady, gut-wrenching decline from the $20's down to $2? I do. It's little comfort  withstanding a 90% drop in value knowing that bitcoins will eventually be worth $$$ each.

[Frozenlock]

I see a bullish continuation through the end of the year. Meaning I believe we will have broken the high of $266 by December of this year.

By December? How is that bullish?

[smoothie]

I see a bullish continuation through the end of the year. Meaning I believe we will have broken the high of $266 by December of this year.

By December? How is that bullish?

How is it not? lol

So many of you here are such short term thinkers.

"OMFG price went down today SELL! BEAR MARKET!"

[SlipperySlope]

All of the recent developments warrants this price we are at.

Ah yes.

But back in January, the price was warranted too - at $13.50. We all can see what has changed in those months, but the flood of new money that was the biggest change - appears to be waning.

[smoothie]

All of the recent developments warrants this price we are at.

Ah yes.

But back in January, the price was warranted too - at $13.50. We all can see what has changed in those months, but the flood of new money that was the biggest change - appears to be waning.

Well we can't say we KNOW how much money exists on gox or is flowing into bitcoin.

You can only see the bids. That's it. Well and your account balance.

[rpietila]

Gox is a big tape-painting club. The real bitcoin flows are moving to OTC as we speak. Most of the trade in gox is trading, not legit movements of bitcoins to new owners.

[Frozenlock]

And on which price are those OTC based?

[rpietila]

And on which price are those OTC based?

In the future, they will be based on Dealer Network Fix (3 times per day). Today they are based on gox, with a 6-15% margin on top.

I also buy bitcoins for 5% below gox.

[jmw74]

Gox is a big tape-painting club. The real bitcoin flows are moving to OTC as we speak. Most of the trade in gox is trading, not legit movements of bitcoins to new owners.

I'm not sure I understand the difference.

Also, by OTC are you referring to the IRC channel?  Why is someone selling you btc for 5% less than they would get on mtgox?  Volume?  Privacy? 

[shad0wbitz]

SlipperySlope is busy thinking, whether to attend my conference. I can say that we are on track to cross the ATH by May 2nd (which is Thursday this week), this would lead to exactly 3000% time compression compared to the 2011 bubble, both in the crash and the recovery part.

rpietila, reading your posts I wonder... Can I smoke some of what you are smoking?

[rpietila]

SlipperySlope is busy thinking, whether to attend my conference. I can say that we are on track to cross the ATH by May 2nd (which is Thursday this week), this would lead to exactly 3000% time compression compared to the 2011 bubble, both in the crash and the recovery part.

rpietila, reading your posts I wonder... Can I smoke some of what you are smoking?

Sure I'll show you what I have ... if you just come and see me

[rpietila]

Gox is a big tape-painting club. The real bitcoin flows are moving to OTC as we speak. Most of the trade in gox is trading, not legit movements of bitcoins to new owners.

I'm not sure I understand the difference.

Also, by OTC are you referring to the IRC channel?  Why is someone selling you btc for 5% less than they would get on mtgox?  Volume?  Privacy? 

Trading = buying and selling your own position, to make a profit/loss depending if you're right
Dealing/brokering = buying and selling to the client, to make a commission regardless of the price

I do both. The IRC channel I don't know. "OTC" is a general term for all trade that happens outside of the real-time exchange.

I dunno why people want to sell to me for 5% less but that's what they do. They also pay me 10% over.

[zeroday]

I dunno why people want to sell to me for 5% less but that's what they do. They also pay me 10% over.

Yes, I bought from rpietila paying 10% over gox's price. However, I got those bitcoins immediately without the need of waiting until my wire comes to the Gox. A week after the deal I gained 40% profit from that amount. That's why I preferred to deal with rpietila rather than with gox.

[Rampion]

Well, there are different indicators that point on opposite directions.

From one side, a long term bear market is a reasonable outcome of this correction: price declines so new money interested in riding the bubble stops flowing in, holders start to get nervous and want to secure some profits, price declines even more and there you have the downwards spiral...

But, this time the feeling is much different compared to 2011. News are still positive (in 2011 we had only FUD in all media), a lot of people is working to support BTC economy, infrastructure its on the way to improvement... And I would like to remark that news are still positive because more people is really understanding what is Bitcoin and how it works. This is really important. Yes, it's true that most of people is only interested in the get-rich-quick scheme, and that's why rise in price is directly proportional to new money flowing in. BUT, we still have a lot of both influential and normal people embracing Bitcoin.

Sure, we can expect a decline in the price discovery phase, but still Bitcoin feels stronger than ever. Short term bear case? Good opportunity to buy more BTC.

[rpietila]

Sure, we can expect a decline in the price discovery phase, but still Bitcoin feels stronger than ever. Short term bear case? Good opportunity to buy more BTC.

I don't know how you bears can pretend that you believe any of the FUD..

Reality is, bitcoin's usage is growing at a 10-30% weekly rate. Hard time believing that it would not be the price trend also.

When I went to a certain grade at school back in 1998, two people in the class had a mobile phone. When we graduated 9 months later, everyone except two had it.

Bitcoin will be the same, and year will be 2013. Only difference is that with mobiles, you always pay. With bitcoin, everyone who buys below the long term fair value of $300k/BTC, gets rich. This will only aid adoption, not hinder it. 

[notme]

All of the recent developments warrants this price we are at.

Ah yes.

But back in January, the price was warranted too - at $13.50. We all can see what has changed in those months, but the flood of new money that was the biggest change - appears to be waning.

I don't agree it is waning:


Bid sum is $5 million higher than at the price peak.

[SlipperySlope]

Bid sum is $5 million higher than at the price peak.

But is your belief weakened by the likelihood that a great many of those bids below $120 are simply waiting to spend the cash raised when they sold earlier? My sleep-at-night bids are already there. Who here with $ at gox does not have some bids in place?

Maybe new money is waning and their lack of bids is obscured by the new bids from recent sellers. And note those new bids are relatively larger in amount due to profit taken.

[zeroday]

In 2005 gold became affordable to mainstream. Look at the chart what happened to its price in the subsequent years.


Bitcoin goes the same way but it takes much less time. Good look, bears, waiting for $30/btc.

[Rampion]

Bid sum is $5 million higher than at the price peak.

But is your belief weakened by the likelihood that a great many of those bids below $120 are simply waiting to spend the cash raised when they sold earlier? My sleep-at-night bids are already there. Who here with $ at gox does not have some bids in place?

Maybe new money is waning and their lack of bids is obscured by the new bids from recent sellers.

Yeah, the truth is that taking out the money from the system is much more difficult that sending it in. Fuck, the apostille thing is crazy, the Gox guys take FOREVER to go through the docs, then you program a withdraw and it takes WEEKS to be processed... For the average Joe "cashing out" from Gox is even more difficult that buying its firts Bitcoins...

Everything needs to improve A LOT - BTC need to be widely available and easy to buy and to sell for it to be really huge. Now its very difficult for a newbie, the learning curve is sharp.

[SlipperySlope]

In 2005 gold became affordable for mainstream. Look at the chart what happened to its price in the subsequent years.

Wonderful chart that would support your point except that well known gold bubbles have different time frames than yours.

[rpietila]

Bid sum is $5 million higher than at the price peak.

Inconvenient Truth(TM).

Ask sum is easy to manipulate when the price is rather stable. You just send gazillion coins to gox and list them for sale.

When it is rocky, you can't do it without risk of your coins getting eaten. That's why the ask sum was very low during the last top of 266 - only the ones actually in the business of selling dared to "ask" anything.

Bid sum is now higher than back then. Hmm...

Perhaps we just continue on the adaptation curve set on January: On average, every week sees a 15% price appreciation. When we go to uncharted territory, and go to 50%-100% per week, that is bubblish and due for a correction.

[rpietila]

For the average Joe "cashing out" from Gox is even more difficult that buying its firts Bitcoins...

Everything needs to improve A LOT - BTC need to be widely available and easy to buy and to sell for it to be really huge. Now its very difficult for a newbie, the learning curve is sharp.

Everything you describe is happening.

Besides buying goxmoney is a neverending source of both profits and lulz for the otc dealers like me.

[SlipperySlope]

Perhaps we just continue on the adaptation curve set on January: On average, every week sees a 15% price appreciation. When we go to uncharted territory, and go to 50%-100% per week, that is bubblish and due for a correction.

Or maybe the 4-5x annual bitcoin price increase 2010 to Dec 2012 is enough to persuade your customers to buy and hold. No need to include the Jan-Feb rate which I argue is part, maybe the most important part, of the bubble.

[notme]

Bid sum is $5 million higher than at the price peak.

But is your belief weakened by the likelihood that a great many of those bids below $120 are simply waiting to spend the cash raised when they sold earlier? My sleep-at-night bids are already there. Who here with $ at gox does not have some bids in place?

Maybe new money is waning and their lack of bids is obscured by the new bids from recent sellers. And note those new bids are relatively larger in amount due to profit taken.

No... that strengthens my bullishness.  If the money was moved off exchange that would be bearish.  But the fact that so many sellers are hoping to rebuy lower leads me to believe they may not have the opportunity.

[Frozenlock]

Why? I'm pretty sure some were still hoping to get it cheaper at $10.
And they did.

[SlipperySlope]

But the fact that so many sellers are hoping to rebuy lower leads me to believe they may not have the opportunity.

That's exactly what happened back in the summer of 2011. After the first bubble peak, much of the commentary around here was 'was that the bottom?'. The bubble decline takes so long to play out because the most reluctant buyer gets the best price - and there will be a lot of buyers as you say.

[zeroday]

In 2005 gold became affordable for mainstream. Look at the chart what happened to its price in the subsequent years.

Wonderful chart that would support your point except that well known gold bubbles have different time frames than yours.

Considering gold as long term investment, there were actually only one bubble in the winter of 1979-1980 followed panic caused by the invasion in Afghanistan. June 2011 bitcoin bubble is comparable to that.

[Odalv]

SlipperySlope is busy thinking, whether to attend my conference. I can say that we are on track to cross the ATH by May 2nd (which is Thursday this week), this would lead to exactly 3000% time compression compared to the 2011 bubble, both in the crash and the recovery part.

rpietila, reading your posts I wonder... Can I smoke some of what you are smoking?

Sure I'll show you what I have ... if you just come and see me

Do you have MARIHUANA ? (was the question "what you are smoking")

[Brushan]

SlipperySlope is busy thinking, whether to attend my conference. I can say that we are on track to cross the ATH by May 2nd (which is Thursday this week), this would lead to exactly 3000% time compression compared to the 2011 bubble, both in the crash and the recovery part.

rpietila, reading your posts I wonder... Can I smoke some of what you are smoking?

Sure I'll show you what I have ... if you just come and see me

Do you have MARIHUANA ? (was the question "what you are smoking")

I think you need something stronger than that to have his high.

[Odalv]

SlipperySlope is busy thinking, whether to attend my conference. I can say that we are on track to cross the ATH by May 2nd (which is Thursday this week), this would lead to exactly 3000% time compression compared to the 2011 bubble, both in the crash and the recovery part.

rpietila, reading your posts I wonder... Can I smoke some of what you are smoking?

Sure I'll show you what I have ... if you just come and see me

Do you have MARIHUANA ? (was the question "what you are smoking")

I think you need something stronger than that to have his high.

Just trying to recognize where we are ;-)

[mp420]

Who here with $ at gox does not have some bids in place?

I do not. I'm all fiat on MtGox and I'll be all fiat until we reach the medium term bottom, which we haven't done yet.

While the bid sum is high, it's not growing. It is going to decrease eventually.

[SlipperySlope]

The most recent wave of big money buyers now has a strong motivation to sell.

[SlipperySlope]

$133 is half the all time high of $266 and thus could be an expected point of resistance for the price to retrace back upwards.

[RationalSpeculator]

$133 is half the all time high of $266 and thus could be an expected point of resistance for the price to retrace back upwards.

Interesting, thanks for sharing.

[jbord39]

The most recent wave of big money buyers now has a strong motivation to sell.

https://i.imgur.com/orUIZcO.png

Explain this 'motivation to sell'.  I don't mean to be cliche but, buy low sell high?? How are the recent wave of big money buyers motivated to sell low two days after they purchased?

[SlipperySlope]

Explain this 'motivation to sell'.

Commonly, stop loss orders are used by traders to limit losses without regard to duration after purchase. Therefore, as prices drop below $135 - that I have labelled as the start of this bubble's Sucker's Rally - those dropping prices are increasingly likely to trigger stop-loss sell orders.

[Aqui]

need 520 000$ by day for absorbe just the new bitcoin at this price ^^
+ the seller ^^

[SlipperySlope]

21 days after the April 10 peak



The last 24 hours have witnessed relentless selling pressure. After the failure to buy through resistance at $146, the bitcoin price has dropped to $128 while making two attempts to sell through support at $127.  A third attempt is underway as of this writing.

Based upon the decline back to underlying trend predicted by speculative financial bubble theory, and comparison with the June, 2011 bubble, I continue to expect the trading emphasis to shift to defending the support at $120, rather than pushing above $160 to new highs.

[master-P]

Still seems to be a lot of selling pressure. Looking at the orders, every time the price climbs up a little, a a few big sells take place causing the price to lose the ground it just made. I noticed a lot of people saying that if the price breaks $120, there could be a sharp downward trend caused by panic sellers.

[rpietila]

It is possible. However I see $200 by month's end a near certainty.

[SlipperySlope]

Alert - Perhaps the first, and largest, capitulation is at hand



The technical support at $120 is relatively strong, both as a numerical point for building bid walls and as a historically stable price point. Consequently, I believe the first and greatest capitulation of this bubble will occur as the price drops below this support. To the degree that this bubble follows the pattern set by the June 2011 bubble, expect this capitulation to be the largest, and to go deeper than most expect.

This expected capitulation is not the bottom.

[rpietila]

I don't believe the mid-term bear is over, before we visit $95 in the following max 48 hours. Buy as much <100 as you can.

(If we don't do it in that timeframe, I would go shopping again)

[SlipperySlope]

Buy as much <100 as you can.

Agreed, but patience I believe will be rewarded.

[SlipperySlope]

And for comparison with the recent drop from $145 is this analogous chart from August 2011. Note that the price dropped over 50% from the failed attempt at a resistance point, and then proceeded to recover nearly all the losses.

[SlipperySlope]

I recently decided to go through some of the posts from the 2011 bubble, so here is some of what I found. Feel free to read the threads to get a better understanding of what people were thinking.

June 11, 2011
"Heads up! Market Bottom? You can buy now for under $22/BTC..."
"...this is a high reward / somewhat low risk time to buy"
https://bitcointalk.org/index.php?topic=14914.0
I needn't tell you what happened next, but this was where we dropped below $13 and stabilized around $20, dropping to around $17 by the time MtGox got hacked.

July 18, 2011
"There are no rallies. There are no crashes.  There is just a slow, steady slide."
"I dont think its gonna go down to 7"
https://bitcointalk.org/index.php?topic=29900.0
It stayed stable at $14, but...

August 03, 2011
"I think we could nick $6 short-term, but looking at $8 in the mid-term"
"I can't help but feel we haven't seen the bottom yet"
https://bitcointalk.org/index.php?topic=34053.0
Both statements were right-on.

August 15, 2011
"...a reversed Head & Shoulders bottom formation has developed"
"...a target price of around 13,5 USD/BTC can be expected"
https://bitcointalk.org/index.php?topic=37296.0
After bouncing between $11 and $12 dollars the next few days, we dropped to around $8.

September 07, 2011
"We have seen the bottom. $6.12 will be the starting point for a long road upward."
"We will never see $6.12 again."
https://bitcointalk.org/index.php?topic=42094.0
A few days latter, the price dropped to just over $4 and stabilized between $5-$6 for about a month before dropping further.

September 09, 2011
"It is following the trend perfectly, now is the time to get in"
"If it drops below $4 today ... will you shut up?"
https://bitcointalk.org/index.php?topic=42495.0
"Bitcoin is over. If you're not out, get out."
https://bitcointalk.org/index.php?topic=42514.0
Stabilized between $5-$6 for about a month before dropping further.

October 22, 2011
"buy, buy, buy!!11111"
"The $3 wall: the gift that keeps on giving."
"We're not going to make it beyond $3.  Go ahead, watch."
https://bitcointalk.org/index.php?topic=49389.0
We broke above $3 and later dropped back to $2. But, if you bought at this time, you were golden.

Anyway, I hope you guys enjoyed this. I encourage more of you to go back and check the old threads out!

@Maged

This recollection is so awesome! I am quoting here for comparison vis-a-vis the current trader sentiment.

[Rampion]

I don't believe the mid-term bear is over, before we visit $95 in the following max 48 hours. Buy as much <100 as you can.

(If we don't do it in that timeframe, I would go shopping again)

didn't you just say we weren't going to see $115 ever again?

$115 never again, takers?

[SlipperySlope]

I don't believe the mid-term bear is over, before we visit $95 in the following max 48 hours. Buy as much <100 as you can.

(If we don't do it in that timeframe, I would go shopping again)

didn't you just say we weren't going to see $115 ever again?

$115 never again, takers?

Rpietila revealed in another post that because he manages bitcoin investments on behalf of clients, one should not take what he says publicly for what he takes to heart.

[SlipperySlope]

Tickets Purchased for the Bagholder's Ball.



There is now a mighty mass of bitcoins purchased since April 1 above current levels and yet unsold. Back in August 2011, the first and greatest capitulation of that bubble had two legs, dropping over three days. I believe the situation permits a breather at ~115 for a day, then another deep plunge - to the extent that a single carefully selected instance from 2011 serves to model all such bitcoin bubbles.

[Frozenlock]

Are you posting the same thing in multiple threads? 

[bitcon]

the people dumb enough to sell at these prices are the people who are going to be kicking themselves a few months down the road.

[SlipperySlope]

Are you posting the same thing in multiple threads? 

I will stop cross posting now that you have mentioned it. And I am sorry that it wasted your time.

[Frozenlock]

Thank you very much, I appreciate it.

[SlipperySlope]

The corresponding capitulation in bitcoin bubble 1 had two equally sized downward legs over a three day period. If this one goes into three days then I expect it also will have a second leg down - which is indicated as a likely completion of the illustrated triangle pattern.

[RationalSpeculator]

Are you posting the same thing in multiple threads?  

I will stop cross posting now that you have mentioned it. And I am sorry that it wasted your time.

I like you taking responsibility and able to correct yourself

I enjoy very much your analyses. Thank you so much

[rpietila]

I don't believe the mid-term bear is over, before we visit $95 in the following max 48 hours. Buy as much <100 as you can.

(If we don't do it in that timeframe, I would go shopping again)

didn't you just say we weren't going to see $115 ever again?

$115 never again, takers?

Rpietila revealed in another post that because he manages bitcoin investments on behalf of clients, one should not take what he says publicly for what he takes to heart.

I have managed to increase my family wealth by 41% APR, over the course of 10 years. Of course that is not perfect, but I can't recall many who have done as well. Except now in bitcoin, you just went all in and never sold. But can you introduce me a to a person who actually has done it. There are not so many of them.

First 6 years of my investment career I was making a constant loss. (It's not included in the 10 years that I made a profit )
I think if you likewise have started daytrading or whatever after 2008, chances are that you also make loss even until now, since it takes time to actually understand markets.

Reading my short term projections (even if you do 24/7 like I do) only gives you about 52-55% hit rate. It is high enough to (who did the math in the first paragraph?) increase your wealth by a factor of 30 in ten years, but low enough to not do it in ten months, weeks, days, or hours, which many seem to want to put in my mouth.

If you want to make 30x your initial investment, buy bitcoins, and do not trade or sell them. I believe by October 31st, this year, you have it. This is my actual advice. It takes 10 sockpuppets created in March/April 2013, to try to derail the forum into believing something else.

If you want, I can still write you puts for $115 and I only ask BTC0.25 premium (expire 30JUN2013). If it goes below $90, you gain, if it stays $90-$115, you may recoup partly if you bail out, if it goes to $115 and stays there, you only lose the premium of 25%.

But this is a put option, not a fiat bet. In order to profit, you must sell me the bitcoins. Hint: nobody has ever taken my puts even though they are reasonably priced. The pros know that they just lose bitcoins to me cheaply if they take them and exercise them (and pay me for the privilege). The noobs can easily list 10 words in this single post on mine, which they don't understand, and therefore call herpderp.

[bixcoin]

Well, I'd get those puts. I think they are reasonable priced now. Still interested?

[SlipperySlope]

I have managed to increase my family wealth by 41% APR, over the course of 10 years.

Commendable - and a great example for your clients.

nobody has ever taken my puts even though they are reasonably priced.

After this bubble collapse is fully played out, I too, would like to consider writing options, but on MPOE via CoinBr. There is more liquidity on an exchange as contrasted to OTC, of course.

[SlipperySlope]

22 days after the April 10 peak



I believe that this is the second day of the first and greatest capitulation of Bitcoin Bubble 2.

$110 marks the upper limit of what I have dubbed 'The Bagholder's Ball'. Below this point, a very substantial portion of all April - May bitcoin purchases show a nominal loss. Consequently, trading bitcoin holders sell out according to their respective degrees of temporal risk acceptance - and the last ones to sell, well - they lose the most.

[rograz]

http://en.wikipedia.org/wiki/Public_holidays_in_Japan#Holidays_in_2013

All those holidays won't help with stopping the current trend either.

[Kaiji]

What surprises me is that there was no real peak before this current crash. Prices were pretty much level for a long time.

[SlipperySlope]

http://en.wikipedia.org/wiki/Public_holidays_in_Japan#Holidays_in_2013

All those holidays won't help with stopping the current trend either.

Right! Its easy, and only six confirmations away, to move bitcoin from some big-money wallet into Mt. Gox for sale. Harder and slower to get fiat in for purchase.

[rpietila]

Just remember, only about 1.5M bitcoins are in speculative (fiat-denominated) hands anyway. Even today I managed to sell about BTC150 to my clients. That is 1/10000 of all speculative position of the world combined.

I think bitcoin is going up.

[bitcon]

22 days after the April 10 peak



I believe that this is the second day of the first and greatest capitulation of Bitcoin Bubble 2.

$110 marks the upper limit of what I have dubbed 'The Bagholder's Ball'. Below this point, a very substantial portion of all April - May bitcoin purchases show a nominal loss. Consequently, trading bitcoin holders sell out according to their respective degrees of temporal risk acceptance - and the last ones to sell, well - they lose the most.

that chart has us forecast straight to $0 in 6 hrs.

[SlipperySlope]

I think bitcoin is going up.

The comparable capitulation from the first bubble was six days start-to-bottom. We are only two days into this one.

[SlipperySlope]

23 days after the April 10 peak



I believe that we are in the third day of the Great Capitulation of 2013. Recall that the corresponding capitulation back in 2011 dropped 55% from $13 to $6 during a six-day fall to the bottom of that capitulation.

The region between $110 and $60, I have dubbed the Bagholder's Ball, as nearly all the bitcoin purchases on Mt. Gox from April 1 to May 2 are nominal losers below $110 - and will be strongly motivated to sell.

[SAQ]

Why is this capitulation Great rather than just you know capitulation?

If it went from 70 to 10 in two days then you might be justified in calling it Great.

[SlipperySlope]

Why is this capitulation Great rather than just you know capitulation?

If it went from 70 to 10 in two days then you might be justified in calling it Great.

Good point. It is useful to give proper names to instance concepts that are frequently referred to, e.g everyone knows what the Great Depression, and Great Recession are. The bubble collapse of 2011 featured six selling capitulations. I named the first and most significant one the Great Capitulation of 2011.

I believe, and will not know for sure until this bubble collapse is complete, that the current capitulation will be the most significant one this time around - we have already dropped a crushing 45% in three days, and many traders now realize that the bubble is over.

Is this the Great Capitulation of 2013? I think so, and I think too that it is not over, and will not be the bottom of the bubble collapse.

[N12]

I named this bear market The Great Dollar Extraction.

Perhaps it should be called The Great Bitcoin Expansion, but it just doesn't have the same ring to it.

[ironstove]

the great doubling of my portfolio

[SlipperySlope]

the great doubling of my portfolio

+1

[rpietila]

I think bitcoin is going up.

The comparable capitulation from the first bubble was six days start-to-bottom. We are only two days into this one.

There was no bubble in April, 2013, since there was no negative month. Oh yes, and if you think we will be at $120 at the end of this month (to score a wash), you can as well sell all your bitcoins to me now 

[Babylon]

I think bitcoin is going up.

The comparable capitulation from the first bubble was six days start-to-bottom. We are only two days into this one.

There was no bubble in April, 2013, since there was no negative month. Oh yes, and if you think we will be at $120 at the end of this month (to score a wash), you can as well sell all your bitcoins to me now 

I'll sell you bitcoins for $120 now.  How many would you like?

[SlipperySlope]

There was no bubble in April, 2013, since there was no negative month.

By bubble, I mean the commonly accepted notion of speculative financial bubble as used by the press, traders, financiers and economists. I am not so much interested in your definition of bubble, but rather how you would characterize the price action from January 1 to present, and how to profit from it.

Namely, could you recognize the next bubble when it comes? And if you did, what actions would you take? If you do not accept that prices will be lower after a bitcoin bubble collapse then how can you execute a sell-high, buy-back-low trade - you would not have the preconditions to make the trade!

You believe that the underlying bitcoin economy is growing very very rapidly. I believe that it is growing very rapidly. My belief allows for bubbles.

[Rampion]

I think bitcoin is going up.

The comparable capitulation from the first bubble was six days start-to-bottom. We are only two days into this one.

There was no bubble in April, 2013, since there was no negative month. Oh yes, and if you think we will be at $120 at the end of this month (to score a wash), you can as well sell all your bitcoins to me now 

I'll sell you bitcoins for $120 now.  How many would you like?

Yeah, me too. Put your money where your mouth is. Willing to buy 500BTC at $120 in this precise moment?

[rpietila]

There was no bubble in April, 2013, since there was no negative month.

By bubble, I mean the commonly accepted notion of speculative financial bubble as used by the press, traders, financiers and economists. I am not so much interested in your definition of bubble, but rather how you would characterize the price action from January 1 to present, and how to profit from it.

Namely, could you recognize the next bubble when it comes? And if you did, what actions would you take? If you do not accept that prices will be lower after a bitcoin bubble collapse then how can you execute a sell-high, buy-back-low trade - you would not have the preconditions to make the trade!

You believe that the underlying bitcoin economy is growing very very rapidly. I believe that it is growing very rapidly. My belief allows for bubbles.

OK, but a great bubble was only in 2011, and the one that takes bitcoin to more than its long term value will be named the greatest bubble.

A bubble that is forgotten in 2 weeks is not a bubble in my vocabulary but maybe in yours, i am fine with it.

The only time I net sold bitcoin was over $200 (except some trades that I plan to buy back in max 6 hours, and some OTC trades that are wildly profitable marginwise, and I delay buyback max 72 hours; sometimes for the reason that it takes such long time to get the money to Bitstamp, other times I little bit play with my anticipation of a negative price action).

After dealer network, bubbles will be pretty much a thing of the past, so after June, no bubbles.

[zoolander]

After dealer network, bubbles will be pretty much a thing of the past, so after June, no bubbles.

LOL.

[SlipperySlope]

After dealer network, bubbles will be pretty much a thing of the past, so after June, no bubbles.

I commend your goals and I applaud your efforts. A dealer network should not only secure more bitcoin investments, it will as you say permit large-order trades in the network even if blinded by lag at Mt.Gox plus you could have robust order routing among all the exchanges. These things will help mediate the factors in the bitcoin economy that lead to price bubbles.

Most traders here have little knowledge about the size and global scope of the client-facing precious metals market, which I assume that you are actually addressing. I think that your pitch to them should be irresistible - simply a very attractive hot new financial product to add to their hard money business.

----------------------

I fear that the very infrastructure you are creating will be the foundation for the next, and order-of-magnitude larger bitcoin bubble 3. In two years, the next flood of new bitcoin adopters, merchants, users, traders and investors will be, say 10-20x more than what we have now.

[SlipperySlope]

24 days after the April 11 peak



Has the Great Capitulation of 2013 ended? Did we reach bottom at $80 two days ago?

The retracement to $115 is an impressive recovery, albeit low volume which suggests less significance within containing patterns.

My entire analysis of the price action after April 10 as recorded in this thread, depends on whether, and to what extent, bitcoin bubble 1 provides insight when viewed from the framework of speculative financial bubble theory. And by the latter, I mean mostly the common predictable behaviors that bubbles have.  And in particular, the part of the theory that pertains to my analysis is a very simple rule: From the peak of the bubble, prices decline all the way back to the underlying trend in approximately the same duration as it took for the bubble to rise to its peak.

Therefore my primary bitcoin analysis constraint - the outermost technical pattern - is that prices will very likely collapse from the peak at $266 to somewhere between $13.50, which was a price in January, and the current post-peak low of $50. The price bias is thus strongly downwards.

In the accompanying chart, the smaller blue line indicates the current retracement. The larger downtrend appears to collide with it soon, and one trend will prevail.

I believe that conditions will soon enable the initiation of another down leg to this capitulation. To me, it has not gone deep enough when compared to the corresponding capitulation from August 2011.

I humorously described on the wall thread a scenario from among those I think likely.

Let's throw random numbers and see who's gonna be right on monday then?

I'm calling $65, Monday. 8PM UTC.

OK, not actionable advice - just one of many likely instantiated scenarios. Suppose it unfolds sort of like back in August 2011 ...

Stopped by the ask wall at $70 early Monday morning in the USA. Two hour goxlag-blinded drop below $85 to reach the wall and bounce back. Mt. Gox wall-busting volume over 25000 each of those two hours.  Clark Moody ding-ding-O-Meter chatters like a jackhammer with red orders flying past and huge spreads between bid and asked.

My lowest bid got filled at $82 and my highest ask got filled at $104.

[SlipperySlope]

Evidence disputing the direct comparison of this bubble to the one in 2011.

@SlipperySlope:

You keep invoking the 2011 bubble, and how you expect a similar protracted slide downwards in this one as well. I'm not going to take the cheap shot and say "past performance is no guarantee of future results", in fact, I'm not even ruling out that you are right and that we have a correction of about 3 months ahead of us, bringing us all the way down to the 20-50 USD range, but there is one thing you seem to keep ignoring:

The smaller corrections (or capitulations) in 2011 followed a decidedly different pattern than those of the current bubble. What I drew in as "corrections" in 2011 and 2103 (see charts below) is to a degree debatable, but one trend seems to hold: the corrections of 2011 followed a very obvious, steady downward trend, each time reaching a lower high, and, more or less, going to lower lows with each correction.

The 2013 corrections so far however look quite different. True, we didn't reach a new ATH, but at the same time, the low points of the last two corrections are both higher than the lows of the first two corrections. If anything, I would say the corrections so far seem to indicate a (very cautious) consolidation pattern, trying to converge at a price somewhere between 100 and 130, while the 2011 pattern could perhaps be described as "reluctantly going downwards".

I appreciate your insights a lot, and I follow your posts closely, but I'm not buying your by-the-book comparison to the 2011 price decline, if the first month after this crash already looks so much different than the month after the crash two years ago.

To which I responded ...

Perhaps the comparisons with bubble 1 will become stronger as this collapse continues. There are plenty of falsifiable predictions I could make, and the most interesting is whether $145 or $160 will be surpassed during the remainder of the collapse. Based on bubble 1, I think not.
  

[rpietila]

If we do not breach 95, we have a bullish pattern. If we do breach it, then we will go sub-79.

If we do not breach 66, then we are heading up. If we do breach it, then we crash to 50.

If 50 holds, it is very bullish. If not, I am puzzled. 50 is the line of defence that should hold.

Conclusion: everything that can realistically happen is bullish now. Only "problem" is that if you buy at 100 and you could have bought next week at 50, you net half the amount of coins + feel stupid in the process.

[BitPirate]

If we do not breach 95, we have a bullish pattern. If we do breach it, then we will go sub-79.

If we do not breach 66, then we are heading up. If we do breach it, then we crash to 50.

If 50 holds, it is very bullish. If not, I am puzzled. 50 is the line of defence that should hold.

Conclusion: everything that can realistically happen is bullish now. Only "problem" is that if you buy at 100 and you could have bought next week at 50, you net half the amount of coins + feel stupid in the process.

We never were even going to breach $100. Banks are open again, trading will be in full swing.... And this is just Tuesday morning.

I can't even begin to imagine the stupidity of rashly selling off at these current prices at this point in the game.

[Frozenlock]

We never were even going to breach $100.

I wouldn't bet on that.

[David Rabahy]

Supply, demand.  The potential demand is staggering.

I am researching self-directed IRAs.  One trust company indicates the Bitcoins *must* be owned by them held for my benefit -- just like you can't have physical gold in a closet in your house in a self-directed IRA.  Their legal and IT departments are researching the viability and fees.  I have offered to host a virtual room to show them how to create a wallet and back it up, etc.  If/when it works out then I will report here.

If only 0.1% of the estimated $19 trillion in US retirement assets http://www.ici.org/research/stats/retirement/ret_12_q4 moved into Bitcoin that would be $19 billion and all else being equal the Bitcoin exchange rate would climb x10.

The US population is over 311,000,000 http://www.google.com/publicdata/explore?ds=kf7tgg1uo9ude_&met_y=population&idim=country:US&dl=en&hl=en&q=us%20population.  How many of them own/control that $19 trillion?  Roughly speaking there are ~1% people of each age (by year).  So, for example, there are maybe some 31,000,000 under the age of 10 years -- I bet they don't own/control much IRA yet.  Let's say at least half of the IRA money is in the hands of 30 to 60 year olds -- let's call it $10 trillion.  $10 trillion in the hands of about 100,000,000 Americans; only $100,000 each on average (so my math isn't totally off).

All, we need is 1% of them to take an interest in self-directed IRAs investing in Bitcoin.  Enough interest to move only 10% into Bitcoin and we still get x5.

Mt. Gox claims to be having 20,000 new accounts/day.  At that rate, if even just 10% bring in just $1,000 that's $700,000,000 per year and I bet we'll get close x2 with speculator amplification.

The speculators can bubble and bust Bitcoin again and again but the wave of new money coming in will fundamentally drive up the exchange rate.

[farfiman]

If we do not breach 95, we have a bullish pattern. If we do breach it, then we will go sub-79.

If we do not breach 66, then we are heading up. If we do breach it, then we crash to 50.

If 50 holds, it is very bullish. If not, I am puzzled. 50 is the line of defence that should hold.

Conclusion: everything that can realistically happen is bullish now. Only "problem" is that if you buy at 100 and you could have bought next week at 50, you net half the amount of coins + feel stupid in the process.

Who cares if  a coin will be worth 1M $ ? 

[rpietila]

If we do not breach 95, we have a bullish pattern. If we do breach it, then we will go sub-79.

If we do not breach 66, then we are heading up. If we do breach it, then we crash to 50.

If 50 holds, it is very bullish. If not, I am puzzled. 50 is the line of defence that should hold.

Conclusion: everything that can realistically happen is bullish now. Only "problem" is that if you buy at 100 and you could have bought next week at 50, you net half the amount of coins + feel stupid in the process.

Who cares if  a coin will be worth 1M $ ? 

Well, some people play percentage game and they rather have 10k coins than 5k. Cause the former means a place among the 80 wealthiest, and the latter is only a G160 ticket 

[farfiman]

If we do not breach 95, we have a bullish pattern. If we do breach it, then we will go sub-79.

If we do not breach 66, then we are heading up. If we do breach it, then we crash to 50.

If 50 holds, it is very bullish. If not, I am puzzled. 50 is the line of defence that should hold.

Conclusion: everything that can realistically happen is bullish now. Only "problem" is that if you buy at 100 and you could have bought next week at 50, you net half the amount of coins + feel stupid in the process.

Who cares if  a coin will be worth 1M $ ? 

Well, some people play percentage game and they rather have 10k coins than 5k. Cause the former means a place among the 80 wealthiest, and the latter is only a G160 ticket 

Yes I get that... although if you ( for example ) have 1000 coins,  I don't think you will care.  Thats why I don't get you playing around onthis forum about buying at 80, 86 , 95 or 120. Even at your lowest estimate of 100K per coin, who cares if one made 99,915  or 98,980 $ per coin?.   If one believes in a more moderate estimate of around 1000$, well... then there is more reason to care.

[rpietila]

Well, some people play percentage game and they rather have 10k coins than 5k. Cause the former means a place among the 80 wealthiest, and the latter is only a G160 ticket 

Yes I get that... although if you ( for example ) have 1000 coins,  I don't think you will care.  Thats why I don't get you playing around onthis forum about buying at 80, 86 , 95 or 120. Even at your lowest estimate of 100K per coin, who cares if one made 99,915  or 98,980 $ per coin?.   If one believes in a more moderate estimate of around 1000$, well... then there is more reason to care.

Don't say you get that and then prove that you don't. 

Only about 1.5M coins are in fiat-denominated hands like yours. Almost 10 million coins are in coin-denominated hands like mine. I do care if I earn 10,000BTC with skilful trading before it shoots up, but I don't care a shit whether USDBTC will go to $5M or $1M, because both will be unsustainable long term.

[farfiman]

Well, some people play percentage game and they rather have 10k coins than 5k. Cause the former means a place among the 80 wealthiest, and the latter is only a G160 ticket 

Yes I get that... although if you ( for example ) have 1000 coins,  I don't think you will care.  Thats why I don't get you playing around onthis forum about buying at 80, 86 , 95 or 120. Even at your lowest estimate of 100K per coin, who cares if one made 99,915  or 98,980 $ per coin?.   If one believes in a more moderate estimate of around 1000$, well... then there is more reason to care.

Don't say you get that and then prove that you don't. 

Only about 1.5M coins are in fiat-denominated hands like yours. Almost 10 million coins are in coin-denominated hands like mine. I do care if I earn 10,000BTC with skilful trading before it shoots up, but I don't care a shit whether USDBTC will go to $5M or $1M, because both will be unsustainable long term.

I do get it- you want to beat Carlos Slim.
Please explain "fiat denominated hands" ...

[rpietila]

Well, some people play percentage game and they rather have 10k coins than 5k. Cause the former means a place among the 80 wealthiest, and the latter is only a G160 ticket 

Yes I get that... although if you ( for example ) have 1000 coins,  I don't think you will care.  Thats why I don't get you playing around onthis forum about buying at 80, 86 , 95 or 120. Even at your lowest estimate of 100K per coin, who cares if one made 99,915  or 98,980 $ per coin?.   If one believes in a more moderate estimate of around 1000$, well... then there is more reason to care.

Don't say you get that and then prove that you don't. 

Only about 1.5M coins are in fiat-denominated hands like yours. Almost 10 million coins are in coin-denominated hands like mine. I do care if I earn 10,000BTC with skilful trading before it shoots up, but I don't care a shit whether USDBTC will go to $5M or $1M, because both will be unsustainable long term.

I do get it- you want to beat Carlos Slim.
Please explain "fiat denominated hands" ...

Sorry I have work about 2-3 hours. Get back to you..

[Hawker]

Well, some people play percentage game and they rather have 10k coins than 5k. Cause the former means a place among the 80 wealthiest, and the latter is only a G160 ticket 

Yes I get that... although if you ( for example ) have 1000 coins,  I don't think you will care.  Thats why I don't get you playing around onthis forum about buying at 80, 86 , 95 or 120. Even at your lowest estimate of 100K per coin, who cares if one made 99,915  or 98,980 $ per coin?.   If one believes in a more moderate estimate of around 1000$, well... then there is more reason to care.

Don't say you get that and then prove that you don't. 

Only about 1.5M coins are in fiat-denominated hands like yours. Almost 10 million coins are in coin-denominated hands like mine. I do care if I earn 10,000BTC with skilful trading before it shoots up, but I don't care a shit whether USDBTC will go to $5M or $1M, because both will be unsustainable long term.

I do get it- you want to beat Carlos Slim.
Please explain "fiat denominated hands" ...

He means that he counts it as a good day if he ends up with more Bitcoin than he started with even if the dollar value of his Bitcoin holding has fallen.

The logic is that Bitcoin will eventually go over $10,000 each.  Maybe in 20 years but it will happen.  So worrying about whether your Bitcoin have made a profit in dollar terms is meaningless - what you want to worry about it having as many Bitcoin as possible. 

[farfiman]

Well, some people play percentage game and they rather have 10k coins than 5k. Cause the former means a place among the 80 wealthiest, and the latter is only a G160 ticket 

Yes I get that... although if you ( for example ) have 1000 coins,  I don't think you will care.  Thats why I don't get you playing around onthis forum about buying at 80, 86 , 95 or 120. Even at your lowest estimate of 100K per coin, who cares if one made 99,915  or 98,980 $ per coin?.   If one believes in a more moderate estimate of around 1000$, well... then there is more reason to care.

Don't say you get that and then prove that you don't. 

Only about 1.5M coins are in fiat-denominated hands like yours. Almost 10 million coins are in coin-denominated hands like mine. I do care if I earn 10,000BTC with skilful trading before it shoots up, but I don't care a shit whether USDBTC will go to $5M or $1M, because both will be unsustainable long term.

I do get it- you want to beat Carlos Slim.
Please explain "fiat denominated hands" ...

He means that he counts it as a good day if he ends up with more Bitcoin than he started with even if the dollar value of his Bitcoin holding has fallen.

The logic is that Bitcoin will eventually go over $10,000 each.  Maybe in 20 years but it will happen.  So worrying about whether your Bitcoin have made a profit in dollar terms is meaningless - what you want to worry about it having as many Bitcoin as possible. 

If that explanation is right then that's great, I feel exactly the same. I much rather have cheap coins ( to buy) then the price go to  1000$ today. But that is because I don't have the quantity of coins that rpietila has ( partial reason in my sig..) and I'm not as confident as him  with his 100K and up per coin in the short term ( "end of the year...." )

Also I don't want to beat Carlos slim or any multi millionaire( or billionaire) , just want to have a reasonably comfortable life with less monetary worries...

[Rampion]

Well, some people play percentage game and they rather have 10k coins than 5k. Cause the former means a place among the 80 wealthiest, and the latter is only a G160 ticket 

Yes I get that... although if you ( for example ) have 1000 coins,  I don't think you will care.  Thats why I don't get you playing around onthis forum about buying at 80, 86 , 95 or 120. Even at your lowest estimate of 100K per coin, who cares if one made 99,915  or 98,980 $ per coin?.   If one believes in a more moderate estimate of around 1000$, well... then there is more reason to care.

Don't say you get that and then prove that you don't. 

Only about 1.5M coins are in fiat-denominated hands like yours. Almost 10 million coins are in coin-denominated hands like mine. I do care if I earn 10,000BTC with skilful trading before it shoots up, but I don't care a shit whether USDBTC will go to $5M or $1M, because both will be unsustainable long term.

I do get it- you want to beat Carlos Slim.
Please explain "fiat denominated hands" ...

He means that he counts it as a good day if he ends up with more Bitcoin than he started with even if the dollar value of his Bitcoin holding has fallen.

The logic is that Bitcoin will eventually go over $10,000 each.  Maybe in 20 years but it will happen.  So worrying about whether your Bitcoin have made a profit in dollar terms is meaningless - what you want to worry about it having as many Bitcoin as possible. 

I perfectly understand it. I care about my BTC position - I really don't care that much about USD/BTC exchange rate. I follow it just to decide when I should buy more, so I can get the best amount of BTC from my limited fiat. But at the end of the day, when I look at my BTC stash, I never say "wow, my $10,000 investment now is worth $100,000". I almost never multiply my stash of BTC x the exchange rate, I just look at the amount of BTC.

It's obvious to me that this is not the case for 99% of people, which think about their BTC stash in fiat terms.

[Hawker]

Well, some people play percentage game and they rather have 10k coins than 5k. Cause the former means a place among the 80 wealthiest, and the latter is only a G160 ticket 

Yes I get that... although if you ( for example ) have 1000 coins,  I don't think you will care.  Thats why I don't get you playing around onthis forum about buying at 80, 86 , 95 or 120. Even at your lowest estimate of 100K per coin, who cares if one made 99,915  or 98,980 $ per coin?.   If one believes in a more moderate estimate of around 1000$, well... then there is more reason to care.

Don't say you get that and then prove that you don't. 

Only about 1.5M coins are in fiat-denominated hands like yours. Almost 10 million coins are in coin-denominated hands like mine. I do care if I earn 10,000BTC with skilful trading before it shoots up, but I don't care a shit whether USDBTC will go to $5M or $1M, because both will be unsustainable long term.

I do get it- you want to beat Carlos Slim.
Please explain "fiat denominated hands" ...

He means that he counts it as a good day if he ends up with more Bitcoin than he started with even if the dollar value of his Bitcoin holding has fallen.

The logic is that Bitcoin will eventually go over $10,000 each.  Maybe in 20 years but it will happen.  So worrying about whether your Bitcoin have made a profit in dollar terms is meaningless - what you want to worry about it having as many Bitcoin as possible. 

I perfectly understand it. I care about my BTC position - I really don't care that much about USD/BTC exchange rate. I follow it just to decide when I should buy more, so I can get the best amount of BTC from my limited fiat. But at the end of the day, when I look at my BTC stash, I never say "wow, my $10,000 investment now is worth $100,000". I almost never multiply my stash of BTC x the exchange rate, I just look at the amount of BTC.

It's obvious to me that this is not the case for 99% of people, which think about their BTC stash in fiat terms.

Agreed :-)

[RationalSpeculator]

Well, some people play percentage game and they rather have 10k coins than 5k. Cause the former means a place among the 80 wealthiest, and the latter is only a G160 ticket  

Yes I get that... although if you ( for example ) have 1000 coins,  I don't think you will care.  Thats why I don't get you playing around onthis forum about buying at 80, 86 , 95 or 120. Even at your lowest estimate of 100K per coin, who cares if one made 99,915  or 98,980 $ per coin?.   If one believes in a more moderate estimate of around 1000$, well... then there is more reason to care.

Don't say you get that and then prove that you don't.  

Only about 1.5M coins are in fiat-denominated hands like yours. Almost 10 million coins are in coin-denominated hands like mine. I do care if I earn 10,000BTC with skilful trading before it shoots up, but I don't care a shit whether USDBTC will go to $5M or $1M, because both will be unsustainable long term.

I do get it- you want to beat Carlos Slim.
Please explain "fiat denominated hands" ...

He means that he counts it as a good day if he ends up with more Bitcoin than he started with even if the dollar value of his Bitcoin holding has fallen.

The logic is that Bitcoin will eventually go over $10,000 each.  Maybe in 20 years but it will happen.  So worrying about whether your Bitcoin have made a profit in dollar terms is meaningless - what you want to worry about it having as many Bitcoin as possible.  

I perfectly understand it. I care about my BTC position - I really don't care that much about USD/BTC exchange rate. I follow it just to decide when I should buy more, so I can get the best amount of BTC from my limited fiat. But at the end of the day, when I look at my BTC stash, I never say "wow, my $10,000 investment now is worth $100,000". I almost never multiply my stash of BTC x the exchange rate, I just look at the amount of BTC.

It's obvious to me that this is not the case for 99% of people, which think about their BTC stash in fiat terms.

It's poor bookkeeping to value an asset in it's own reference, and not in a common market value reference, understood my all, and pretty stable in value, ie: fiat.


bitbug: I own 1 house, 1 gold bar, 100 stocks of microsoft, and 200 bitcoins. That's my wealth!

sceptic: Sure, but what's the value?

bitbug: Well, my reference is bitcoins, so let me calculate, that would be 2000 bitcoins!

sceptic:   and what's the value of bitcoins?

bitbug: let me check, $100 dollars; so the value is $200.000

sceptic: thanks, so what has been the performance of your portfolio? Did you make good investment decisions?

bitbug: well, actually my portfolio used to be worth 10 000 bitcoins last year, and only 2000 bitcoins today, so I lost 8000 bitcoins

sceptic: I'm so sorry, such a big loss. What did you learn from your investment mistakes?

bitbug: that I should go all-in in bitcoins!

sceptic: something in your logic seems to be wrong as it leads to conclusions that make no sense from a risk management perspective.

bitbug: <please fill in> (please do not avoid the argument / claim untruths about risk / express truths about bitcoin that have no relation to the discussion)

[Awhut]

I'm sure people will start referencing their BTC to fiat once the price begins to surge. I'ts just a wild dream now, but when BTC is 6 figures the urge will be hard to curb 

[RationalSpeculator]

I'm sure people will start referencing their BTC to fiat once the price begins to surge. I'ts just a wild dream now, but when BTC is 6 figures the urge will be hard to curb  

Right

I see this happening with all bugs, goldbugs, real estate bugs, stock bugs, and bitbugs, 'what will matter is how many houses/stocks/bitcoins/gold you have'.

This kind of reasoning leads to very poor risk management, great profits in a bubble, and disastrous loses once it bursts.

I also have yet to meet the first bug that recognized his/her arguments were false, even after they lost a fortune. 

[Hawker]

I'm sure people will start referencing their BTC to fiat once the price begins to surge. I'ts just a wild dream now, but when BTC is 6 figures the urge will be hard to curb  

Right

I see this happening with all bugs, goldbugs, real estate bugs, stock bugs, and bitbugs, 'what will matter is how many houses/stocks/bitcoins/gold you have'.

This kind of reasoning leads to very poor risk management, great profits in a bubble, and disastrous loses once it bursts.

I also have yet to meet the first bug that recognized his/her arguments were false, even after they lost a fortune. 

You make a very good point.  And I say that as someone who tries to pick up a few Bitcoin every day trading.

[Awhut]

There may (read: will) be more bubbles. But if BTC crashes from the 1000s I think it will be hard-pressed to see 100 again. I think an investment now is fairly safe, and with the potential for growth I think the risk is definitely merited. A catastrophic shortcoming in BTCs framework is really the only thing that scares me now. Even a government ban could not destroy BTC (though it would certainly damage it).

I think also as more investors jump on board we are going to see a push towards less speculation. Especially if there is another crash people should realize that the long-term vitality of BTC depends on its institutionalization. Once we get out of this sort of "golden period" of cheap BTC investors are going to turn their attention away from accumulating cheap BTC to protecting that investment. I think this recent news that the CFTC is thinking about regulating BTC could help a lot with that.

As they said "it's not Monopoly money". I think that is a really telling statement right there. It's a nice silent nod towards the legitimacy and potential of BTC.

[RationalSpeculator]

I'm sure people will start referencing their BTC to fiat once the price begins to surge. I'ts just a wild dream now, but when BTC is 6 figures the urge will be hard to curb  

Right

I see this happening with all bugs, goldbugs, real estate bugs, stock bugs, and bitbugs, 'what will matter is how many houses/stocks/bitcoins/gold you have'.

This kind of reasoning leads to very poor risk management, great profits in a bubble, and disastrous loses once it bursts.

I also have yet to meet the first bug that recognized his/her arguments were false, even after they lost a fortune. 

You make a very good point.  And I say that as someone who tries to pick up a few Bitcoin every day trading.

Thanks!

[SlipperySlope]

The logic is that Bitcoin will eventually go over $10,000 each.  Maybe in 20 years but it will happen.  So worrying about whether your Bitcoin have made a profit in dollar terms is meaningless - what you want to worry about it having as many Bitcoin as possible.

+1

[Rampion]

The logic is that Bitcoin will eventually go over $10,000 each.  Maybe in 20 years but it will happen.  So worrying about whether your Bitcoin have made a profit in dollar terms is meaningless - what you want to worry about it having as many Bitcoin as possible.

+1

That's it.

[SlipperySlope]

27 days after the April 11 peak

Prices have been generally falling the last two weeks.

Here is the primary bubble collapse trendline, suggested by the peak of the retracement from $80. The trend would be significantly strengthened if a low below $80 occurs, in particular if the new low touched a roughly parallel support line that passes through $80.

[liberty90]

I do get it- you want to beat Carlos Slim.
Please explain "fiat denominated hands" ...

I suppose, that by "fiat-denominated hands" he means people who still naively believe that real value lies in fiat, not in Bitcoin.

I'm not that optimistic as Mr Pietilla, but even I agree that BTC is better than fiat.

[randrace]

27 days after the April 11 peak

Prices have been generally falling the last two weeks.

Here is the primary bubble collapse trendline, suggested by the peak of the retracement from $80. The trend would be significantly strengthened if a low below $80 occurs, in particular if the new low touched a roughly parallel support line that passes through $80.

What witchcraft is this? Your support trendline is based on one day's low.

[SlipperySlope]

27 days after the April 11 peak

Prices have been generally falling the last two weeks.

Here is the primary bubble collapse trendline, suggested by the peak of the retracement from $80. The trend would be significantly strengthened if a low below $80 occurs, in particular if the new low touched a roughly parallel support line that passes through $80.

What witchcraft is this? Your support trendline is based on one day's low.

So sorry, the support line is a hypothesis dependent upon the strength of the identified declining resistance line. I draw it to give me more data from which to place the spread of buy limit orders that get triggered if and when the bubble collapses further.

[oda.krell]

Hey, SlipperySlope, you'll let me know if my contrarian posts get on your nerves. It's your thread after all.

Okay, so I don't find the support line (hypothesis or not) particularly convincing. Doesn't fit the rising lows. How about those two converging trends instead? (I tend to use typical price, but it also works when I graph candles instead).



Not *much* evidence, I admit, 2 points of contact only. Then again, the down trend you draw looks like it has 2 solid points as well, and a third one if I squint a bit :P Anyway, I'm not the first one to point out that it could be the case that there are two trends running towards each other.

But they're getting close, so we'll see soon: anything above 120 in the next days puts your prediction into question, anything below 90 mine. Interesting times.

EDIT: Prefer a log chart, actually. After all, both the upwards trend and the correction are most likely exponential. Doesn't change much, number wise: below 90 is a problem for me, above 120 for you.

[SlipperySlope]

Does resistance trump support at $105?

Here is a larger look at the two colliding trends: red is the declining resistance trendline and green is the climbing support trendline. I believe that the resistance trend will dominate as the bubble collapses.

[Frozenlock]

If it doesn't, it's gonna explode! Kaboooom! 

[Miz4r]

I don't think the bubble is ready to collapse just yet. There's too much buzz around bitcoin going on, so many who believe in it or are curious about it. My guess is that $50 support is going to hold, $90 will be tested this week and next month we will be consolidating around 110-130. Really good news could be the spark for a new ATH, and bad news might send us towards $50, or even lower. Just my opinion, anything can happen.

[SlipperySlope]

Does resistance trump support at $105?

Here is a larger look at the two colliding trends: red is the declining resistance trendline and green is the climbing support trendline. I believe that the resistance trend will dominate as the bubble collapses.

I believe that the green climbing support line represents bargain-hunting buyers. When these two trendlines collide, perhaps that is the point at which bargain hunting buyers decide the bubble is real and that prices will go lower if they wait.

[randrace]

But my fellow bargain hunting buyers are like me, they hold their BTC. We have no fear of a drop to as low as $50 where we will buy more. We have a mid term target of selling around $140. We never panic sell. Anyone who's been trading since say March won't get jumpy unless we go under around $45.

[Frozenlock]

But my fellow bargain hunting buyers are like me, they hold their BTC.

So they don't have any money left to buy.

Sell sell sell! 

[Odalv]

Does resistance trump support at $105?

Here is a larger look at the two colliding trends: red is the declining resistance trendline and green is the climbing support trendline. I believe that the resistance trend will dominate as the bubble collapses.

I believe that the green climbing support line represents bargain-hunting buyers. When these two trendlines collide, perhaps that is the point at which bargain hunting buyers decide the bubble is real and that prices will go lower if they wait.

.. or red line is out of ammo.

[Frozenlock]

.. or red line is out of ammo.

Yeah, only 170 kBTC for sale on MtGox... 

[Odalv]

.. or red line is out of ammo.

Yeah, only 170 kBTC for sale on MtGox... 

 and of course at higher cost :-)

[Rampion]

Selling pressure still there - lots of coins on the order book. But buying pressure increasing, $18M bid sum ATM. Sort of tense equilibrium.

[SlipperySlope]

28 days after the April 10 peak

A bubble collapse should be characterized by successfully lower peaks. This is a weaker bearish claim than the current bubble collapse trendline - that might still hold if the trendline is broken to the upside for a while.

Here are the current candidates of yet unsurpassed peaks ...

• April 9 - $266
• April 23 - $166
• April 28 - $149
• May 5 - $125

The longer time passes without these peaks being surpassed, I think, the more sentiment turns away from the notion that the bubble can indeed be reinflated.

[smoothie]

Thought to quote this. Interesting...

[edited to add new posts and to reflect current events]

My principal comments regarding the short term bear case, and its potential for literally multiplying the number of bitcoins you sold to raise cash.

• Day 4 post peak - Compare two bitcoin bubbles.
• Day 5 post peak - Price dropping 10 times faster than back in 2011 bubble.
• Day 7 post peak - How many more seller capitulations before the bottom? ....[this bubble has at least one now]
• Day 11 post peak - Does the recent dramatic recovery from 50 to 136 USD/BTC negate the case for a short term bear market? ....[turned out that it did not]
• Day 12 post peak - Long term chart is awesome
• Day 13 post peak - Sucker's Rally ....[indeed it happened]
• Day 20 post peak - Resistance at $160 ....[and yet unsurpassed]
• Tickets Purchased for the Bagholder's Ball
• Day 21 post peak - 24 hours of selling ....[indeed just the beginning, starting at $145]
• Alert - Perhaps the first, and largest, capitulation is at hand     ....[this was an actionable alert]

• Day 22 post peak - Second day of the Great Capitulation ...[reached a low of $80]
• Day 23 post peak - Third day of the Great Capitulation of 2013
• Day 24 post peak - 24 hours of buying - are we past the bottom? ... [yes, on our way up past $120
• Day 27 post peak - Reversal at $120 confirms primary collapse
• Does resistance trump support at $105? ...[yes, moving higher and looks more like a trend collision within 18 hours at $115]
• Day 28 post peak - Yet unsurpassed peaks at $266, $166, $149, and $125 conform to classical bubble collapse

Here [was] the short term bear case in a nutshell ...

• There will be no more enticing and greed-inducing news stories from the media. Now the benchmark is the crash and how speculators lost so much.
• Investor sentiment, especially new investor sentiment has reversed. Impatience to buy has been replaced by caution
• What is the correct valuation of fiat/bitcoin given what we know now? Certainly while the price doubled four times from January, the bitcoin economy did not do as well in percentage growth. Correct valuation depends then mostly on just how much of the run up since January is emotion, e.g. greed.
• If the downtrend continues, then coin holders are tempted to sell coin expecting to buy back for less fiat.

It happened, so now let's discuss ...

Question 1: what is the expected duration of the down trend? My rough guess as argued here is until September 2013.

Question 2: how far down does the trend go? My rough guess looking at the price chart is that the bubble started in January at about 13.50, which gives a downside target.

Bitcoin Bubble 1 Peaked June 8, 2011





Bitcoin Bubble 2 Peaked April 10, 2013

[SlipperySlope]

Thank you Mr. Smoothie.

Folks reading this should know that I index my part of the thread from the first page. Recently I added a properly scaled comparison between the 2011 bubble and this one.

[zby]

...



...



...

The 2011 bubble broke the long-term trend on the way down.  I remember how S3052 was so sure that it would not - but it did and all hell broke lose.

[SlipperySlope]

The 2011 bubble broke the long-term trend on the way down.  I remember how S3052 was so sure that it would not - but it did and all hell broke lose.

Great point to remember. The April 2011 low was used to establish the support trendline before we reached the actual bottom - leading to great debate here at bitcointalk, but it turned out that April 2011 was part of that bubble.

[Frozenlock]

If I may, I would like to add some of my own analysis.

Many "bears" here believe the support line will break under the resistance line, pointing to the 2011
bubble and the long and excruciating crash that followed. (Both lines should collide in the next 2 days, at around $115.)
They might be right. Both charts kinda look similar.

Let's look again:



Here we see the peak, with the inevitable collapse, the rebound, the second crash... and so on.
I think we all know this chart by heart now.


Oh wait...
Wrong chart.

This is our chart:




What the hell did I just show then?

The gold "bubble" chart.

Here is how it deflated:






Now, obviously the timescales are different. But take a closer look.
Observe how the "popping" is similar. And by similar I mean frikking identical.



Everything is in log scale, so what we see really are relative changes.


Contrary to gold however, our support is ascending.
Notice how both support points occurred at almost the same places.




The full gold chart:



Disclaimer: contrary to 2011, I'm ready to drop a good chunk of my coins at a moment's notice.
I will not simply hold all of them and miss a golden opportunity like the one that arose when BTC reached $4.

[RationalSpeculator]

Great post Frozenlock!

When will you dump part of your coins?

Why not now?

[smoothie]

Yup totally different time scales. Gold went into a 20 year consolidation after it peaked.

[SlipperySlope]

If I may, I would like to add some of my own analysis.

And thank you!

[SlipperySlope]

29 days after the April 10 peak

A bubble collapse should be characterized by successively lower volume until the collapse is complete.

Here is the June 8, 2011 bubble volume chart ...



And for comparison, here is the correspond April 10, 2013 bubble chart ...



Although the recent bubble's volume is 10x higher, it diminishes from its peak in a manner very similar to that of bubble 1.

[David Rabahy]

And just about the time we've nearly perfected the technical analysis something different will come at us from the fundamental side of the house.

Is that a troll-like observation?

[ElectricMucus]

Although the recent bubble's volume is 10x higher, it diminishes from its peak in a manner very similar to that of bubble 1.

Also the gox api downtime coincides with the post "hack" shutdown period.

[RationalSpeculator]

And just about the time we've nearly perfected the technical analysis something different will come at us from the fundamental side of the house.

Is that a troll-like observation?

I would say it's an expression of hope

[SlipperySlope]

Does anyone get the feeling that the market is slowing down as we near the apex of the biggest triangle ever seen?

[RationalSpeculator]

Does anyone get the feeling that the market is slowing down as we near the apex of the biggest triangle ever seen?

You bet!  Bitcoin is so full of extremes. Sometimes volatility that I can't believe me eyes, other times, like now, the market seems almost dead.

[N12]

29 days after the April 10 peak

A bubble collapse should be characterized by successively lower volume until the collapse is complete.

Here is the June 8, 2011 bubble volume chart ...

https://i.imgur.com/Wqgpcu2.png

And for comparison, here is the correspond April 10, 2013 bubble chart ...

https://i.imgur.com/X3C2OOp.png

Although the recent bubble's volume is 10x higher, it diminishes from its peak in a manner very similar to that of bubble 1.

Good job, very clean comparison. It will be very interesting to observe if we are indeed in July 2011.

[Frozenlock]

Does anyone get the feeling that the market is slowing down as we near the apex of the biggest triangle ever seen?

Isn't that what is expected?

Volume: As the symmetrical triangle extends and the trading range contracts, volume should start to diminish. This refers to the quiet before the storm, or the tightening consolidation before the breakout.

[SlipperySlope]

Does anyone get the feeling that the market is slowing down as we near the apex of the biggest triangle ever seen?

Isn't that what is expected?

Volume: As the symmetrical triangle extends and the trading range contracts, volume should start to diminish. This refers to the quiet before the storm, or the tightening consolidation before the breakout.

Yes, it is expected but it something to actually feel it.

I now believe that the highest volume weeks of 2013 are behind us.

[Frozenlock]

Eh... more than 6 months remaining in the year... I would wait a little. 

[RationalSpeculator]

Eh... more than 6 months remaining in the year... I would wait a little.  

SlipperySlope puts lots of thought in his posts.

You can wait before recognizing that but it will likely come with a bill attached. 

[notme]

Does anyone get the feeling that the market is slowing down as we near the apex of the biggest triangle ever seen?

Isn't that what is expected?

Volume: As the symmetrical triangle extends and the trading range contracts, volume should start to diminish. This refers to the quiet before the storm, or the tightening consolidation before the breakout.

Yes, it is expected but it something to actually feel it.

I now believe that the highest volume weeks of 2013 are behind us.

Trading is certainly slowing and the range is narrowing, but you haven't seen anything until you see the volume that is traded when this triangle breaks.

[SlipperySlope]

30 days after the April 10 peak

At this important 30-day milestone, note that although at the current price of $118.78, bitcoin has fallen 55% from its peak at $266, it remains 8.8x higher than back in January, when a bitcoin was priced at $13.50.

By way of comparison, at 30 days after the June 8, 2011 peak, prices had fallen to $14.2, also a drop of 55%.

Although obviously not aligned with respect to the timing of their capitulations, they remain consistent with regard to overall pace of collapse.

Bubble 1 at 30 days ...



This bubble at 30 days ...

[SlipperySlope]

The upward movement from $97 has broken through the up-to-now primary bubble collapse trendline. This weakens the case for the bubble collapse to continue, but there is another distinguished line of resistance nearby.

[Frozenlock]

 

[notme]

 

[SlipperySlope]

32 days after the April 10 peak

Diminishing volume over the last three days is narrowing the trading range, and sideways price action is more common than earlier in the bubble collapse. There has been a slight downward trend from the recent peak at $125. By the end of this week, the illustrated support line intersects the resistance line at $120.

If the price fell through the indicated support line, e.g. below $110 by the end of this week, then that outcome would strengthen the case for continued bubble collapse. Conversely, if prices rally and comply with the indicated support, then that weakens the bear case, especially if recent peaks at $147 and $160 are surpassed.

[SlipperySlope]

33 days after the April 10 peak

Here is a closer look at the recently completed bearish wedge. The bitcoin rally significantly reversed direction at the indicated resistance trendline. This is the sort of pattern that could initiate the next leg down. Note the very high relative volume.

[Frozenlock]

Yup, down we go.

Should have shorted. 

[dandirk]

Looking at volume... not sure what to think...

My first thought is a massive sell off (I think was pumped 2-3 days ago when it hit 122)...  The volume after is so far holding the price steady so either they are already trying to buy back or everyone else is jumping on the cheap coins (I know I did, got in at the bottom 110.00010 thank you).

I don't yet see a down turn, it has been slow lately so I sort of discount the sell off... waiting for a more lasting tend to appear.

It is entirely possible though this single sell off could of broke what ever support we had the last few days.

Lets keep things into perspective... all those market sells dropped the price less then 10%.

[SlipperySlope]

There was a major post-peak support trendline breakout to the downside on news of Dwolla/Mt.Gox account seisure by DHS. Note the relatively high, bid-wall-busting volume in the last 12 hours.

To some extent the support trendline represents the trading belief that the bubble can be re-inflated. With the breakthough to the downside, that trading belief will be weakened, and belief that the bubble may have more collapsing yet ahead will, in contrast, be strengthened.

[RationalSpeculator]

SlipperySlope, how many chances in 10 do you give it that prices will hit $50 or lower for some weeks, the coming half year?

[fitty]

SlipperySlope, how many chances in 10 do you give it that prices will hit $50 or lower for some weeks, the coming half year?

What's lower then zero?

[SlipperySlope]

57 days after the April 10 peak



Nearly two months after the peak at $266, it is increasingly evident that this bubble may have completed its collapse. Price action for May was bullish/neutral - not bearish - even in the face of bad news events. The May low of $80 has not been surpassed on the downside, and the early May high at $125 was surpassed later in the month. The post-peak highs of $166 on April 23 and $149 on April 28 still stand.

The bubble collapse pattern now looks less like the June 2011 collapse and more like a damped oscillation consolidation centering on $120.

In the illustrated chart, I circled the mild August 2012 bubble-correction. Note that prices did not crash back to levels of June-July, but rather proceeded sideways and upwards.

I now believe that bitcoin prices could progress sideways for much of the rest of the year until the long term support line approaches. Observe that the long term trendline I drew suggests that bitcoin prices are generally increasing 10x every 14 months. Accordingly, I expect sharp pullbacks towards the support and slower recoveries upwards as is typical of a long term rally.

[BitSmile]

57 days after the April 10 peak
The bubble collapse pattern now looks less like the June 2011 collapse and more like a damped oscillation consolidation centering on $120.

In the illustrated chart, I circled the mild August 2012 bubble-correction. Note that prices did not crash back to levels of June-July, but rather proceeded sideways and upwards.

I now believe that bitcoin prices could progress sideways for much of the rest of the year until the long term support line approaches. Observe that the long term trendline I drew suggests that bitcoin prices are generally increasing 10x every 14 months. Accordingly, I expect sharp pullbacks towards the support and slower recoveries upwards as is typical of a long term rally.

Do you believe we could go below 100$ again in the medium term?

[SlipperySlope]

Sure, we could go below $100 as the long term support is much lower than the current price. My original analysis was that the price would decline to meet the long term support at $40-50 six months after the April 10 peak.

[oda.krell]

It has happened! The rapture has occurred before our very eyes!

SlipperySlope has turned bull (or at least non-bear)....

That can only mean one thing: Time to sell all the bitcoins!







I'm kidding, of course. As always, I appreciate your updates. Funny enough, right now I'm more sceptical than ever that we've reached the end of the slide. The low volume looks to me like biding time, as if the market is waiting for a signal that the fundamentals of bitcoin went from "promising" to "actually relevant"... and I think it'll take another year or two before that will be the case.

That said, I don't expect we'll reach a new absolute post-crash low (like lucif does, for example). The very worst I can see is approaching 50 again, and more realistically, that we'll test 100 a few more times in the coming month(s).

/gut feeling

[SlipperySlope]

It has happened! The rapture has occurred before our very eyes!

SlipperySlope has turned bull (or at least non-bear)....

That can only mean one thing: Time to sell all the bitcoins!

Indeed. Although I bought back in at $131, I have 20% still in fiat in case the bubble collapses further.

An important test will be at $104. The bear case becomes stronger should that be broken through on the downside.

[Rampion]

It has happened! The rapture has occurred before our very eyes!

SlipperySlope has turned bull (or at least non-bear)....

That can only mean one thing: Time to sell all the bitcoins!

Indeed. Although I bought back in at $131, I have 20% still in fiat in case the bubble collapses further.

An important test will be at $104. The bear case becomes stronger should that be broken through on the downside.

I think we will go through $104 like a hot knife through butter. Next real support is $80ish. If that's broken too tye the real test will be $50.

I don't think we will go below that. And in my book a bubble that bottoms at 1/5 from the top is quite good, it would be healthy signal for BTC.

If $50 is broken, I would expect despair, gloom and doom as per 2011, where we bottomed at $2 (that's 1/16 from the top).

To put things in context, a 2011 scenario translated to 2013 would mean to reach a bottom of $16ish. That would be a textbook bubble burst, but as I said earlier I doubt we will ever see again that kind of prices.

[oda.krell]

It has happened! The rapture has occurred before our very eyes!

SlipperySlope has turned bull (or at least non-bear)....

That can only mean one thing: Time to sell all the bitcoins!

Indeed. Although I bought back in at $131, I have 20% still in fiat in case the bubble collapses further.

An important test will be at $104. The bear case becomes stronger should that be broken through on the downside.

I think we will go through $104 like a hot knife through butter. Next real support is $80ish. If that's broken too tye the real test will be $50.

I don't think we will go below that. And in my book a bubble that bottoms at 1/5 from the top is quite good, it would be healthy signal for BTC.

If $50 is broken, I would expect despair, gloom and doom as per 2011, where we bottomed at $2 (that's 1/16 from the top).

To put things in context, a 2011 scenario translated to 2013 would mean to reach a bottom of $16ish. That would be a textbook bubble burst, but as I said earlier I doubt we will ever see again that kind of prices.

I agree with most of what you write, but you, as many others on this forum are just so damn... impatient.

No, I don't believe we will approach 80 during this down trend. It rarely happens that such huge drops happen anyway, and the momentum to go there in one round just isn't there.

I think testing 80 again is a real chance. But not today, or tomorrow.

[True___Blue]

Thanks for this very informative thread. As someone who is still learning basics of how markets work this has been very helpful.

[Rampion]

It has happened! The rapture has occurred before our very eyes!

SlipperySlope has turned bull (or at least non-bear)....

That can only mean one thing: Time to sell all the bitcoins!

Indeed. Although I bought back in at $131, I have 20% still in fiat in case the bubble collapses further.

An important test will be at $104. The bear case becomes stronger should that be broken through on the downside.

I think we will go through $104 like a hot knife through butter. Next real support is $80ish. If that's broken too tye the real test will be $50.

I don't think we will go below that. And in my book a bubble that bottoms at 1/5 from the top is quite good, it would be healthy signal for BTC.

If $50 is broken, I would expect despair, gloom and doom as per 2011, where we bottomed at $2 (that's 1/16 from the top).

To put things in context, a 2011 scenario translated to 2013 would mean to reach a bottom of $16ish. That would be a textbook bubble burst, but as I said earlier I doubt we will ever see again that kind of prices.

I agree with most of what you write, but you, as many others on this forum are just so damn... impatient.

No, I don't believe we will approach 80 during this down trend. It rarely happens that such huge drops happen anyway, and the momentum to go there in one round just isn't there.

I think testing 80 again is a real chance. But not today, or tomorrow.

I agree with you. It won't happen fast. There will be no huge sell outs like we had after April 10th, where we had two almost consecutive days in which 500k coins were traded.

This is one of the reasons I don't believe we will go below $50. During 2011 bubble burst, we didn't see huge, ATH volume sellouts during the decline. The huge sell out happened at the bottom. The volume we had recently around $50 was higher than ever, and we had that kind of huge ATH volume two days, not only one.

Thus, IMO panickers already did their job finding out the very bottom. Now we will slowly adjust to a lower level before the next growth period. And in order to break $266, we will need a significant improvement on infrastructure.

I speculate that by the time we break $266 (which won't happen this year IMO), MtGox will have less than 25% of market share, probably less.

[SlipperySlope]

Thanks for this very informative thread. As someone who is still learning basics of how markets work this has been very helpful.

You are welcome. I try hard to separate evidence from my opinion of it.

[richgene]

Thanks for this very informative thread. As someone who is still learning basics of how markets work this has been very helpful.

You are welcome. I try hard to separate evidence from my opinion of it.

I just caught up on this thread between yesterday and today and it was a great read. Really enjoyed it. Thanks for the work and please keep it coming!

~richgene

[rpietila]

Thank you for your effort to update this one. Pity I was too busy with my own during the time, yours would have provided insight.

[ElectricMucus]

Thank you for your effort to update this one. Pity I was too busy with my own during the time, yours would have provided insight.

Hahaha he's back!

[Crypt_Current]

Thank you for your effort to update this one. Pity I was too busy with my own during the time, yours would have provided insight.

Hahaha he's back!

Back, from doing Something.  As opposed to you, who is always here...

[ElectricMucus]

Thank you for your effort to update this one. Pity I was too busy with my own during the time, yours would have provided insight.

Hahaha he's back!

Back, from doing Something.  As opposed to you, who is always here...

Basket weaving? Ever been to a mental institution?

Something, capitalized.

[SlipperySlope]

91 days after the April 10 peak



Clearly this bubble collapse is becoming more similar to the 2011 collapse than was the case a month ago.

Speculative financial bubble theory says that a collapse takes about the same time as the speculative inflation. Initially, I believed that this bubble started in January, but another interpretation of the price chart allows for the bubble to start last October - a six month inflation. A six month collapse would end in the September - October timeframe. I drew the long term support trendline in green, and added the support line of the June 2011 peak, and drew a black trendline extrapolating the current decline.

Evidence and experience drawn from the comparison of this bubble with 2011, and bubble theory makes me believe that the bottom will occur in September or October. The price then should be above $32 and below $50. The lines intersect at approximately $40.

Assumptions include the continuation of the two year long term support rate of growth. If the bitcoin economy rate of exponential growth has decreased, the the collapse could well undershoot the target. The previous peak of $32 should provide support according to Elliot Wave Theory. Bubble theory, on the other hand, allows for prices to collapse back to pre-bubble levels, e.g. $10.

[afbitcoins]

Awesome thread! Kudos SlipperySlope, you've called this pretty well

[RationalSpeculator]

He certainly did! I admire his rational unemotional approach very much.

Thank you SlipperySlope for sharing!

[Spekulatius]

Hi,
RationalSpeculator above me just pointed me to this great thread! Most of your observations align with my own.
Here is a cross post from another thread that i think fits in here just as well, what do you think?

This could of course break out to the upside as well, triggering another rally if the price can hold above the resistance for 2 or 3 days but I think chances are higher that we go down once more to test the bottom, looking at the low volume in outbreak attempts, the percived timidity of the crowd, while some big buyers almost trade by themselves, RSI being overbought on so many scales and a much too fast recovery from recent lows to be sustainable (if you ask me). Add to that the similarity with the last chart and you got a case. What do you all think? Be warned, that we will see in a couple of days so choose your predictions wisely

[BitPirate]

Hi,
RationalSpeculator above me just pointed me to this great thread! Most of your observations align with my own.
Here is a cross post from another thread that i think fits in here just as well, what do you think?

I saw this in your other thread too: But why is your red line doing that? What are you 'connecting' with it? Looks cooked.

[Frozenlock]

Looks cooked.

It is cooked.

The trendline was broken.

[notme]

Looks cooked.

It is cooked.

The trendline was broken.

Don't worry, his will break too.

[Spekulatius]

I saw this in your other thread too: But why is your red line doing that? What are you 'connecting' with it? Looks cooked.

You can draw supports/resistances in different ways. One way is to only connect tops or bottoms of candles which gives you an outer bound of where you can expect the price to go or you draw an "internal trend line" by which you connect only closing/opening prices of candles. The second method gets rid of the variance that some outliers produce with big orders by shooting up or down only to return to the mean within the same candle.
The trend line would be considered broken if 2 or 3 full candles close outside of it.

[notme]

I saw this in your other thread too: But why is your red line doing that? What are you 'connecting' with it? Looks cooked.

You can draw supports/resistances in different ways. One way is to only connect tops or bottoms of candles which gives you an outer bound of where you can expect the price to go or you draw an "internal trend line" by which you connect only closing/opening prices of candles. The second method gets rid of the variance that some outliers produce with big orders by shooting up or down only to return to the mean within the same candle.
The trend line would be considered broken if 2 or 3 full candles close outside of it.

Agreed on eliminating outliers, but the issue is the 24/7 nature of bitcoin.  There is no open and no close, and one can easily shift the candle definition to show different bodies.

[Spekulatius]

The same can be said about any other market because you can define custom intervals everywhere. The only thin Bitcoin doesnt have is gaps between trading hours. I think this actually makes for a better representation of the market "will". Open and close prices are by definition (maybe yours if different?) the price at which a candle opens or closes (hence starts or ends).

[notme]

The same can be said about any other market because you can define custom intervals everywhere. The only thin Bitcoin doesnt have is gaps between trading hours. I think this actually makes for a better representation of the market "will". Open and close prices are by definition (maybe yours if different?) the price at which a candle opens or closes (hence starts or ends).

My point is that other markets have naturally defined gaps for their days and weeks, so it makes more sense to look at the open and close for those markets.

[molecular]

The same can be said about any other market because you can define custom intervals everywhere. The only thin Bitcoin doesnt have is gaps between trading hours. I think this actually makes for a better representation of the market "will". Open and close prices are by definition (maybe yours if different?) the price at which a candle opens or closes (hence starts or ends).

My point is that other markets have naturally defined gaps for their days and weeks, so it makes more sense to look at the open and close for those markets.

notme has a point. In traditional markets time passes and stuff happens between open and close. Using this on a 24/7 market is arbitrary (which timezone to use)?

That red line is intentionally drawn in a misleading way. Even a noob like me can see that.

[Spekulatius]

Maybe I dont understand you correctly, but gaps dont exist in a 24/7 market so they dont matter. The time zone is also irrelevant, you can pick any time zone you like!

Again, the red trend line is not misleading. It is a valid way to draw trend lines. In this case not the extremes are connected but the bodies of the candles, which gets rid of variance and produces a more RELIABLE indicator that is not influenced by intraday fluctuation. It would be considered broken if a candle closes above it and produces trading signals just as well as the other method but instead more "solid" ones.

Watch the last example on this page:
http://www.candlestickwarrior.com/candlestick-chart-patterns/5-technical-analysis-trend-lines-keep-it-simple.php

[ElectricMucus]

Candle stick bodies are arbitrary, the can start and end at any point of the wick depending on the time you choose at the cutoff. They only have meaning in relation to other candles in the form of patterns and should not be used to derive support resistance from.
What works instead is using the weighted price or to a lesser extent the median price.

[molecular]

Maybe I dont understand you correctly, but gaps dont exist in a 24/7 market so they dont matter. The time zone is also irrelevant, you can pick any time zone you like!

Again, the red trend line is not misleading. It is a valid way to draw trend lines. In this case not the extremes are connected but the bodies of the candles, which gets rid of variance and produces a more RELIABLE indicator that is not influenced by intraday fluctuation. It would be considered broken if a candle closes above it and produces trading signals just as well as the other method but instead more "solid" ones.

Watch the last example on this page:
http://www.candlestickwarrior.com/candlestick-chart-patterns/5-technical-analysis-trend-lines-keep-it-simple.php

The candlestick pattern will change depending on when exactly for example the day ends (depending on timezone). Therefore the timezone is not irrelevant. I might be misinterpreting something, but I don't think so. min/max/open/close/avg... all that will change if you move the candle boundaries.

[Spekulatius]

Candle stick bodies are arbitrary, the can start and end at any point of the wick depending on the time you choose at the cutoff. They only have meaning in relation to other candles in the form of patterns and should not be used to derive support resistance from.
What works instead is using the weighted price or to a lesser extent the median price.

By cutting off the wicks you effectively get something like a median price because you filter out a big part of noise (the wicks) and get a trendline closer to the median (center of candle body).

The candlestick pattern will change depending on when exactly for example the day ends (depending on timezone). Therefore the timezone is not irrelevant. I might be misinterpreting something, but I don't think so. min/max/open/close/avg... all that will change if you move the candle boundaries.

What you say is true for one or two candles that you can change around at will. But what you need to draw a trend line is a larger number of candles. For 10 or 20 candles the effect of changing cut off times (changing time zone) evens out.

[ElectricMucus]

Candle stick bodies are arbitrary, the can start and end at any point of the wick depending on the time you choose at the cutoff. They only have meaning in relation to other candles in the form of patterns and should not be used to derive support resistance from.
What works instead is using the weighted price or to a lesser extent the median price.

By cutting off the wicks you effectively get something like a median price because you filter out a big part of noise (the wicks) and get a trendline closer to the median (center of candle body).

That depends on how many candles you are talking about. If it is many yes they will tend towards the median price, but if they are just a few it could be anything.
It's better to just use the median price right away.

[notme]

a more RELIABLE indicator that is not influenced by intraday fluctuation

Except "day" is arbitrary here, so intraday has no real meaning.  Other markets shut down for the night/weekened, that's why it makes sense to use their open and close.

But regardless, I don't pay all that much attention to trendlines anyway.  VWAP, ADX, and a few oscillators at various timescales are what I look at primarily.

[molecular]

Candle stick bodies are arbitrary, the can start and end at any point of the wick depending on the time you choose at the cutoff. They only have meaning in relation to other candles in the form of patterns and should not be used to derive support resistance from.
What works instead is using the weighted price or to a lesser extent the median price.

By cutting off the wicks you effectively get something like a median price because you filter out a big part of noise (the wicks) and get a trendline closer to the median (center of candle body).

The candlestick pattern will change depending on when exactly for example the day ends (depending on timezone). Therefore the timezone is not irrelevant. I might be misinterpreting something, but I don't think so. min/max/open/close/avg... all that will change if you move the candle boundaries.

What you say is true for one or two candles that you can change around at will. But what you need to draw a trend line is a larger number of candles. For 10 or 20 candles the effect of changing cut off times (changing time zone) evens out.

can't believe I just did this...

what do these 2 have in common?



exactly, the same underlying data:



(just with "timezone" offset by 50% of a candle width)

EDIT: and this was just randomly drawn without even trying to maximize difference.

you don't "filter out noise", you just get "different noise"

[molecular]

do you really think if early stock market operators had had a computer storing a list of every goddamn trade that happened 24/7 they would've invented CANDLES?

[notme]

do you really think if early stock market operators had had a computer storing a list of every goddamn trade that happened 24/7 they would've invented CANDLES?

lol

[Spekulatius]

Candle stick bodies are arbitrary, the can start and end at any point of the wick depending on the time you choose at the cutoff. They only have meaning in relation to other candles in the form of patterns and should not be used to derive support resistance from.
What works instead is using the weighted price or to a lesser extent the median price.

By cutting off the wicks you effectively get something like a median price because you filter out a big part of noise (the wicks) and get a trendline closer to the median (center of candle body).

The candlestick pattern will change depending on when exactly for example the day ends (depending on timezone). Therefore the timezone is not irrelevant. I might be misinterpreting something, but I don't think so. min/max/open/close/avg... all that will change if you move the candle boundaries.

What you say is true for one or two candles that you can change around at will. But what you need to draw a trend line is a larger number of candles. For 10 or 20 candles the effect of changing cut off times (changing time zone) evens out.

can't believe I just did this...

what do these 2 have in common?



exactly, the same underlying data:



(just with "timezone" offset by 50% of a candle width)

EDIT: and this was just randomly drawn without even trying to maximize difference.

you don't "filter out noise", you just get "different noise"

Nice example If you do the same thing with more candles you will see that the trend becomes more precise by the number of candles you add.
As mentioned above, you can change around a few candles at will but cant do the same thing with many candles more. Then you WILL actually filter out some noise by cutting off the wicks and shadows that would distort your trendline other wise. An extreme example to illustrate what I mean:



Where would you draw the trendline ?

Another view using the same sample (I could have choosen a better one but Im too lazy right now):



Which of the 3 trendlines provides the earliest trend reversal indication? (remember: the internal trendline is considered broken when 1 or 2 candles close above it, depending on how much reassurance you prefer)

[molecular]

thanks for the example, Spekulatius.

You haven't changed my mind, though: I still think a weighted average is much better suited to "filter out noise" (not sure you even want that, though).

In your example, if you happen to have that extremely high point (the "outlier" (still debatable wether or not that should or should not be used, but that I cannot judge because I don't know zip about TA)) right at the open/close, you will have it in your candles, too... "unfiltered". So it's a game of chance what your candles look like and wether or not they filter the outlier.

[notme]

So it's a game of chance what your candles look like and wether or not they filter the outlier.

Exactly.  There are many methods one can use to filter out outliers, but candlestick bodies are just blind guesses.

[Spekulatius]

So it's a game of chance what your candles look like and wether or not they filter the outlier.

Exactly.  There are many methods one can use to filter out outliers, but candlestick bodies are just blind guesses.

Its a game of chance after all, thats true. But I think chance works in our favour this way because sticking to candle bodies throws out the unlikely events and make better predictions based on that element of chance.

Let me make an example:
There is an arbitrary time period, lets say: 1 hour in which price action happens during a usual day in the Bitcoin markets. 40 minutes of this hour you can expect little to no action but 9 minutes moderate price action and maybe 1 minute you will have a whale move the market quite heavily. This means there is a 40:60 chance that the hourly candle closes during little market action times which would represent the mayority of this 1 hr period, there is a 9:60 chance the candle closes during moderate price action and a chance of 1:60 that the candle closes exactly during that minute when price is at its most volatile. As you can see though, it is quite unlikely that we will have a candle closing out of the ordinary. So candlestick bodies are no "blind guesses" after all but an acurate representation of distributed chance.

@ molecular:

I think you are right in that a weighted average is the best way to filter out the noise. Im not sure which indicator provides the best signals though. Ill look further into it 

[CivilUnrest]

Nice post. Thanks!

[RationalSpeculator]

So looking forward to your next post SlipperySlope

Is there a certain activity you are waiting for to the upside and downside?

When would you change your opinion that we are still in a collapse?

[afbitcoins]

Bubble collapse finished now ??

I'm wondering if this is the start of a new up channel,



1 year log chart MtGox, bitcoins vs USD, from my blog.

[RationalSpeculator]

Bubble collapse finished now ??

I'm wondering if this is the start of a new up channel,



1 year log chart MtGox, bitcoins vs USD, from my blog.

As Slipperyslope showed in his last post your new channel would only be valid if the adoption rate would increase above the historical, already exponential, adoption curve. Chances for this are extremely low. In fact chances are higher for the adoption rate to slow down as the low hanging fruit has been harvested already and more resistence of adoption to be expected.

Even if the historical adoption curve remains constant, meaning a continuation of the exponential rate of adoption, price will stay within the channel Slipperyslope drew in his last post, and this price would still likely bottom out at $40-$50. If rate of adoption slowed it would likely bottom out lower.  

[afbitcoins]

As Slipperyslope showed in his last post your new channel would only be valid if the adoption rate would increase above the historical, already exponential, adoption curve. Chances for this are extremely low. In fact chances are higher for the adoption rate to slow down as the low hanging fruit has been harvested already and more resistence of adoption to be expected.

Even if the historical adoption curve remains constant, meaning a continuation of the exponential rate of adoption, price will stay within the channel Slipperyslope drew in his last post, and this price would still likely bottom out at $40-$50. If rate of adoption slowed it would likely bottom out lower.  

Not sure if price is so tightly correlated to adoption as that. There are other factors that govern price. If demand kicks off existing users will pay more, doesn't need new users. However if price rises enough, new users will start flooding in, in a positive feedback loop.

My channel makes me wonder if the bubble might not fully deflate but instead re-ignite (into an even bigger bubble). Unlikely perhaps, but considering the way the world economy is right now maybe not too unlikely ( western economies burdened with debt, central banks printing money, bail-ins being legislated etc ). The last bubble popped because of crapy MtGox infrastructure, maybe there is latent potential for the price to skyrocket even more ?

I'm not saying this will happen, all I'm saying is i joined some dots on the chart and spotted what looks like an upwards rising channel, which I'll be monitoring over the next weeks.. 

[afbitcoins]

or maybe it was never a bubble at all, maybe bitcoins are just slowly rising up to find their true value  !

[RationalSpeculator]

91 days after the April 10 peak



Clearly this bubble collapse is becoming more similar to the 2011 collapse than was the case a month ago.

Speculative financial bubble theory says that a collapse takes about the same time as the speculative inflation. Initially, I believed that this bubble started in January, but another interpretation of the price chart allows for the bubble to start last October - a six month inflation. A six month collapse would end in the September - October timeframe. I drew the long term support trendline in green, and added the support line of the June 2011 peak, and drew a black trendline extrapolating the current decline.

Evidence and experience drawn from the comparison of this bubble with 2011, and bubble theory makes me believe that the bottom will occur in September or October. The price then should be above $32 and below $50. The lines intersect at approximately $40.

Assumptions include the continuation of the two year long term support rate of growth. If the bitcoin economy rate of exponential growth has decreased, the the collapse could well undershoot the target. The previous peak of $32 should provide support according to Elliot Wave Theory. Bubble theory, on the other hand, allows for prices to collapse back to pre-bubble levels, e.g. $10.

The expected duration of the collapse is indeed important. Looking at bitcoin the collapse in 2011 took 5 months. How long took the exponential bubble inflation? Your chart above shows it was only 2 months in 2011, in April and June. So the collapse took considerably longer than the period of exponential rise. This seems to have been true also for the smaller bubbles. The 2011 november-december exponential rise took 2 months also, the following correction took 5 months before hitting the long term trendline again. The next exponential rise was from June till July 2012, also just 2 months, after which it corrected/flattened for 5 months too.  

What's different in the recent exponential rise is that it went up for 3 months before correcting. Which is 50% longer as the previous ones. Considering corrections took more than double the time of the rise in the past (250% longer), that would bring the current correction at 3 months x 250% =  7.5 months, or around november-december. By then however the trendline will be above $50. And since it tends to go up strongly after the bottom is reached, never to see that price again, I think it will be important to buy at such time.

Fingers crossed history repeats

[afbitcoins]

That lower trendline on slipperyslopes' chart has provided strong support several times, but even so there's nothing to say we have to fall to it in the timescales you're looking at.

Time will tell I guess.

[oda.krell]

So we're charting weekly candles now. Guess the daily charts don't look similar enough anymore...

I've been saying the same thing pretty much over and over again since about May: I don't claim to know how long the correction/bubble deflation will take eventually, maybe it will as drawn out as in 2011, but pretending the post-peak price development in 2013 is identical or nearly identical to 2011 is delusional.

There were, from day 1, substantial differences, and it didn't take a genius to see them.

Please note: that doesn't mean the correction is over. For all I know, we might go down again, to hit a new capitulation bottom. I'm not predicting the future here, I'm just stating the obvious (well, obvious to the unbiased observer): 2011 and 2013 look pretty different. How to interpret that is another matter.

Anyway, here's the updated chart. Still essentially the same, huh? /s

[afbitcoins]

Have updated SlipperySlopes's long term chart here,



The most recent bit doesn't look like its read the script to me

[Odalv]

Have updated SlipperySlopes's long term chart here,



The most recent bit doesn't look like its read the script to me

In January 2014

[Rampion]

Good call Odalv

[RationalSpeculator]

Good call Odalv

Thanks for bringing to my attention. Indeed he called the rally very well. In fact, he was even more precise.

Odalv, added your great call to my list of track records.

[Impaler]

The bubble collapse has been stalled by liquidity on Mt. Gox and the continuing distribution of ASICs.  I've said a million times now, we will not find the durable bottom until the profitability is squeezed out of mining, hashing peaks and consistent downward selling pressure of new coins can be weighed against the markets sustainable purchasing power.  Other exchanges have been moving horizontally on low volume and only move up to keep the arbitrage gap between them and Gox in the 10%-20% range.

[S3052]

You are talking about the wrong asset.
Bitcoin is not in a bubble.
Stocks and precious metals are.

[Rampion]

You are talking about the wrong asset.
Bitcoin is not in a bubble.
Stocks and precious metals are.

Where did the blue go?

[S3052]

You are talking about the wrong asset.
Bitcoin is not in a bubble.
Stocks and precious metals are.

Where did the blue go?

ran out of blue ink. Just bought some more with bitcoins :-)