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Author Topic: Why does everyone keep calling this panic a bubble?  (Read 2159 times)
Larynth
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April 13, 2013, 03:36:33 PM
 #1

Over the last three days I have heard "bubble" so many times I swear I think MtGox must have the best damage control PR team in the world. This was a panic plain and simple. It was caused by MtGox and their inability (giving them the benefit of the doubt by assuming it's not more nefarious than simple incompetence) to address constant trade lag on their API. Nor have they done as they should and at least added stop-loss orders to protect their users. So when the lemmings saw a major sale and a massive change in the market depth they assumed this must be that bubble everyone is talking about.

A bubble suggests that this was caused simply by speculative trading gone wild. To the contrary I don't think that the price of $260 comes close to matching the true value of a bitcoin as a tool for international transfer of wealth or as a store of wealth. Unfortunately though the Pundits who have to sensationalize everything to get a sound-byte or a headline keep shouting PONZI, PYRAMID, or LOOK OUT FOR THE BUBBLE. Sad fact is that people in this world refuse to research and make their own decisions based in logic, so long as they have "educated" men to tell them what to think.

This wasn't a correction, at least not in the classic sense. Were people questioning if the trend was driven by media hype and speculation? Certainly. Did the market settle in at approximately where it would have been without the "bubble"? Sure. But saying that makes this event either a correction or a bubble is making the facts fit your conclusion. The lack of faith in the trading price's validity was a key factor in the panic, and what price it equalized at is a matter of cooler heads taking advantage and doing some shrewd buying.

What we need is to educate people away from using trading engines that are not designed for speculative trading in that manner. The exchanges we have are for actually trading fiat for bitcoin or vice versa one way at a time. At least until someone who has a clue how to design and manage a FOREX site gets one up and running the speculative trading is just silly and will end up costing the community a great number of people who will become jaded and blame it on bitcoin instead of their own ignorance.
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April 13, 2013, 04:43:34 PM
 #2

You should get an award for this post.  Thank you- it needed to be said.

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QuantPlus
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April 13, 2013, 05:57:36 PM
 #3

A bubble suggests that this was caused simply by speculative trading gone wild.

You defined pretty much what's happening... then you ignore it.

It's actually worse than a garden variety "bubble".

Because trading and pricing is controlled by a Central Authority = GOX...
And there is no meaningful liquidity or velocity of BTC...
It's actually a *** highly manipulated bubble *** with no rules.

You actually think it's a "coincidence" that GOX and Bitcoin24...
Had a co-ordinated shut down during a selloff?

I've been a market maker for 15 years...
Your "exchanges" are deliberately creating maximum volatility...
*** All market makers make a fortune from volatility ***...
It's like taking candy from babies.

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April 13, 2013, 06:01:36 PM
 #4

It is just the easiest way to describe something like this and everbody believes it.

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April 13, 2013, 09:46:40 PM
 #5

In future, we will have this kind of emission https://bitcointalk.org/index.php?topic=172805.msg1798031#msg1798031 from time to time, be prepared  Cheesy


qbits
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April 13, 2013, 10:03:51 PM
 #6

Your "exchanges" are deliberately creating maximum volatility...
It's like taking candy from babies.

 Wink 100% correct
notig
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April 13, 2013, 10:54:10 PM
 #7

I believe we are experiencing a technological problem and not an economic one. If you think gox is doing any of this on purpose you'd have to be joking. Incompetent ... it seems. But if bitcoin continued on an upward price trajectory gox would be firmly planted in the seat of a new multi billion or trillion dollar market. Do you think they would jeopardize that to make some quick cash by somehow driving the price down?
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April 14, 2013, 06:58:02 AM
 #8

I believe we are experiencing a technological problem and not an economic one. If you think gox is doing any of this on purpose you'd have to be joking. Incompetent ... it seems. But if bitcoin continued on an upward price trajectory gox would be firmly planted in the seat of a new multi billion or trillion dollar market. Do you think they would jeopardize that to make some quick cash by somehow driving the price down?

I'm more swayed towards Quantplus' argument here actually there needs to be some transparency and democracy in the actions of the exchanges otherwise who is to say he is actually wrong? You can't just believe in the best intentions if gox as they control so much interest

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April 14, 2013, 08:39:03 AM
 #9

Quote
To the contrary I don't think that the price of $260 comes close to matching the true value of a bitcoin as a tool for international transfer of wealth or as a store of wealth.

That's why most people here stay interested in Bitcoin.

                                 
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April 14, 2013, 08:53:38 AM
 #10

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To the contrary I don't think that the price of $260 comes close to matching the true value of a bitcoin as a tool for international transfer of wealth or as a store of wealth.

That's why most people here stay interested in Bitcoin.

Question is what is it value now, and what is resonable price for now with that as a long long term expectation. And some of us think it's not that valuable yet and the price rise was too fast and drastic.

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April 14, 2013, 10:22:34 AM
 #11

Value is not without risk.... I don't have a problem with the current price and wouldn't have either with a price at $0.50. The concept of Bitcoin, that's what keeps me interested.

                                 
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April 14, 2013, 09:11:57 PM
 #12

A friend of mine gave me this image:

http://i.imgur.com/loA7HCF.png

As you can see, the bottom chart shows the usual phases seen in any asset bubble. The upper chart shows the price of Bitcoins over the past few days with bubble phases used to describe them

To anyone with any financial experience, this whole situation does look like typical bubble behavior, especially given that the USD price of Bitcoins seems to have stabilized between $90 to $100, ie "the return to mean".

So if you're anyone in the mainstream media or who works in business and finance, your natural inclination is to call it a bubble. It's just force of habit.
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April 14, 2013, 09:15:09 PM
 #13

You really gotta love how all these charts are less than one month... Why don't people look at any longer term trends? Or is there confirmation bias in the working?

12pA5nZB5AoXZaaEeoxh5bNqUGXwUUp3Uv
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April 14, 2013, 09:15:29 PM
 #14

Sorry that I keep on spamming my own chart, but who will tell what the correct version will be (with hindsight)?


                                 
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Bitmeat
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April 15, 2013, 12:02:58 AM
 #15

You really gotta love how all these charts are less than one month... Why don't people look at any longer term trends? Or is there confirmation bias in the working?

Shh, if you look at long term charts it shows the mean is somewhere around $20. You need to maniputate the data to show 100 is the new normal
Larynth
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April 15, 2013, 04:05:23 PM
 #16

Question is what is it value now, and what is resonable price for now with that as a long long term expectation. And some of us think it's not that valuable yet and the price rise was too fast and drastic.

I think that the primary cause for the dichotomy in perceived value in bitcoin comes down to the most basic of dividers in perception. Most people want a currency or commodity to be something tangible with a need driven by consumption. The true value of bitcoin can only be seen as real and tangible by those who view value strictly as where the demand curve intersects the supply curve and have no need to add tangibility to the equation. I think once we can get small businesses in say 20% of the local markets to accept bitcoin payments (this could be achieved with 10% if they were high demand merchants like fine dining or boutique clothing) then it will stop being hoarded so much and we will see closer to 50% of the bitcoins currently in circulation getting in motion. That will be the take off point for this currency I assure you what looked like a "bubble" over the last few days won't even be a pimple in the long run. I'm not sure if I agree with the potential for bitcoin to trade at more than $10,000 USD in the near future simply because it would have to capture such a large percentage of consumer driven trade worldwide to get there. That said, $1,000 isn't an unrealistic exchange-rate if you can spend them directly without a middleman exchange.
pretendo
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April 15, 2013, 04:20:08 PM
 #17

if you dont believe a bubble followed by a correction occurred, you are delusional. The price was inflated by people buying just because the price was increasing. This is what a bubble is. Then it corrected. It was not just because a DDoS or exchange failure, the price was far too high

My attempt at adding to the bitcoin-using marketplace: https://bitcointalk.org/index.php?topic=171843.0
Like online video games? Check it out! I'm selling at a big discount
Bitmeat
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April 15, 2013, 11:06:16 PM
 #18

if you dont believe a bubble followed by a correction occurred, you are delusional. The price was inflated by people buying just because the price was increasing. This is what a bubble is. Then it corrected. It was not just because a DDoS or exchange failure, the price was far too high

If you believe the bubble is over and the correction is finished, you're slightly less delusional!
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