SlipperySlope's Bubble Collapse Journal

[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.

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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.

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[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.