SlipperySlope's Bubble Collapse Journal

[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).

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[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.