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Author Topic: Why does it keep falling ?  (Read 8661 times)
grod
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July 13, 2011, 02:05:11 AM
 #41

It is a little amusing how one of the adages of successful trading is "Never add to a losing position."  In effect that's what miners do when hoarding instead of selling as prices decline.

Back to the OP: $30/btc caused lots and lots and lots of people to buy mining gear.  5 series ATI cards pretty much sold out world over and we're looking at over a tripling of difficulty over a month -- 2/3 of the current mining capacity is less than a month old.

Now the people with a 20% credit card loans for the hardware (judging from mining forum posts many of the new rigs were built very inefficiently) and power bills to pay are sweating blood and selling everything they mine at 15% of their original profit calculations.  I am wagering a much higher portion of mined bitcoins is being sold rather than hoarded today vs a month ago.

Plus people with a large amount of bitcoins would be foolish not to sell a portion at these levels and diversify and/or reinvest.

Oh, and finally: everyone is still very bullish while prices decline.  Many people expect a $100 price by end of year.  We're nowhere near a capitulation/bottom/stability.
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July 13, 2011, 02:17:29 AM
 #42

It is a little amusing how one of the adages of successful trading is "Never add to a losing position."  In effect that's what miners do when hoarding instead of selling as prices decline.
Right. If you're mining and not selling, you're speculating.
Jaime Frontero
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July 13, 2011, 06:26:02 PM
 #43

For the last two weeks every larger fall in value has been followed by an equivalent rise in value after it, only a bit slower (taking hours instead of minutes). I figured it was boomerang-like with a reasonable chance, and therefore safe to invest in.
Now the bitcoin has fallen from ~17 to about ~16.5 and it looks like it's slowly falling further instead of rising ? What do you figure is going on and why, and when will it be back to 17+ ? And should those who have BTC sell out in expectance of an even greater fall or wait for it to rise ?

i've emphasized your problem right there...

aside from the fact that nothing is ever safe to invest in, you're just looking at things in a far too short-sighted fashion.  if you're not in Bitcoin for the long term, you're going to lose your shirt.  and if you're not participating in the economy (i.e., buying stuff from merchants), that's what you've earned.

now... go to http://bitcoincharts.com/charts/ .  set it to log scale, one year.  look at the first couple weeks of june, this year.  look at what happened before, and at what has happened since.  got it?

now... take a look at the first couple weeks of november 2010.  and at the befores and afters.  see any similarities?

it's a long term play, Houdini.  if you got no patience, get out.
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July 15, 2011, 12:28:09 AM
 #44

It is a little amusing how one of the adages of successful trading is "Never add to a losing position."  In effect that's what miners do when hoarding instead of selling as prices decline.
Right. If you're mining and not selling, you're speculating.

You're speculating either way. If you sell immediately, you're speculating that the price won't go up.  If you bought gear specifically for mining, you're speculating with your capital also. Even if you're mining with equipment you already owned, you're speculating with your time and your electricity.

You're speculating if you buy, hold or sell dollars.  Nothing is without risk. You have to judge the risk/reward ratio, your risk tolerance, and your time window.  It's all relative.



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grod
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July 15, 2011, 12:34:03 AM
 #45

You're speculating either way. If you sell immediately, you're speculating that the price won't go up.  If you bought gear specifically for mining, you're speculating with your capital also. Even if you're mining with equipment you already owned, you're speculating with your time and your electricity.

I (and many others) define speculation as exchanging an accepted currency for some commodity at some price hoping for a larger amount of the original (or equivalent) currency in the future.  The key point here being: miners are increasing their speculative position when they hoard.  Adding to a losing position.
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July 15, 2011, 01:29:01 AM
 #46

You're speculating either way. If you sell immediately, you're speculating that the price won't go up.  If you bought gear specifically for mining, you're speculating with your capital also. Even if you're mining with equipment you already owned, you're speculating with your time and your electricity.

I (and many others) define speculation as exchanging an accepted currency for some commodity at some price hoping for a larger amount of the original (or equivalent) currency in the future.  The key point here being: miners are increasing their speculative position when they hoard.  Adding to a losing position.

it's not a losing position unless your electricity costs now more than you can get for your coins now.  There's a reason why we account for capital costs and expenses separately.

insert coin here:
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Shinobi
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July 15, 2011, 02:10:39 AM
 #47


But hey, don't mind me. 


Trust me when I say - I don't.

Got to keep your troll quota up, eh?

So are you saying that trolls are folks who are able to shut your argument down completely and elegantly? That "troll" left a boot mark on your forehead when he stomped you.

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TraderTimm
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July 15, 2011, 11:55:13 AM
 #48


So are you saying that trolls are folks who are able to shut your argument down completely and elegantly? That "troll" left a boot mark on your forehead when he stomped you.


Oh? I like how you summarized it - since it was so elegant. I thought 'elegant' ideas would be easily expressed?

Oops, I see, you're just treading in someone's footsteps, like an annoying toy dog. Here rover, fetch!

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Shinobi
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July 15, 2011, 04:42:41 PM
 #49

Wow. Another stalwart among the Bitcoin die hards. You guys are a smart bunch. If I was the Fed, I'd be very afraid.



So are you saying that trolls are folks who are able to shut your argument down completely and elegantly? That "troll" left a boot mark on your forehead when he stomped you.


Oh? I like how you summarized it - since it was so elegant. I thought 'elegant' ideas would be easily expressed?

Oops, I see, you're just treading in someone's footsteps, like an annoying toy dog. Here rover, fetch!


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billyjoeallen
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July 15, 2011, 07:56:38 PM
 #50

Wow. Another stalwart among the Bitcoin die hards. You guys are a smart bunch. If I was the Fed, I'd be very afraid.

The same way we're afraid of you?  Loser. 

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TraderTimm
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July 16, 2011, 05:59:52 PM
 #51

Wow. Another stalwart among the Bitcoin die hards. You guys are a smart bunch. If I was the Fed, I'd be very afraid.


We accept your apology.



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makomk
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July 16, 2011, 07:35:37 PM
 #52

it's not a losing position unless your electricity costs now more than you can get for your coins now.  There's a reason why we account for capital costs and expenses separately.
I think you might be suffering from a misconception. The amount miners are risking by holding onto their bitcoins isn't their electricity costs, it's how much they could make if they sold immediately because that's the amount they potentially lose out on. (This is a fairly common fallacy; from an economic perspective it's irrational and no-one should act this way, but people don't act the way economists think they should.)

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Nagle
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July 16, 2011, 09:24:08 PM
 #53

The amount miners are risking by holding onto their bitcoins isn't their electricity costs, it's how much they could make if they sold immediately because that's the amount they potentially lose out on. (This is a fairly common fallacy; from an economic perspective it's irrational and no-one should act this way, but people don't act the way economists think they should.)
Right. If you're mining, but not selling, you're speculating.
billyjoeallen
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July 17, 2011, 01:29:28 AM
 #54

it's not a losing position unless your electricity costs now more than you can get for your coins now.  There's a reason why we account for capital costs and expenses separately.
I think you might be suffering from a misconception. The amount miners are risking by holding onto their bitcoins isn't their electricity costs, it's how much they could make if they sold immediately because that's the amount they potentially lose out on. (This is a fairly common fallacy; from an economic perspective it's irrational and no-one should act this way, but people don't act the way economists think they should.)

Well, hells bells. Imagine how much they are missing out on by non buying the lottery ticket with the winning number. Opportunity cost is what you lose by not doing the next best thing. What makes you think you know what the next best thing is?

If you don't want to add to a losing position, then why the hell would you want dollars?  They've lost 96% value in the last hundred years.


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PatrickHarnett
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July 17, 2011, 08:48:18 AM
 #55

If you're mining, but not selling, you're speculating.

If I work at paid employment for dollars (mining), and save some of my net income to spend later (not selling), therefore I am speculating dollars following the above logic.  Better go and tell the savings industry they are rampant speculators Smiley 
Cluster2k
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July 17, 2011, 09:22:22 AM
 #56

Now the bitcoin has fallen from ~17 to about ~16.5 and it looks like it's slowly falling further instead of rising ? What do you figure is going on and why, and when will it be back to 17+ ? And should those who have BTC sell out in expectance of an even greater fall or wait for it to rise ?

As I write this, bitcoin's value is struggling to stay above US$13.  If you're wondering why bitcoin's value is slowly but surely deflating you only need to ask these questions:

1. What can I do with bitcoins?  What can I buy?
2. What can I buy that's easier with bitcoins than using a credit card?
3. How does the general public view bitcoins?  Do they see it as a get-rich-quick scheme?

The answer to all three questions does not bode well for bitcoin's short term value.

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realnowhereman
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July 17, 2011, 09:44:55 AM
 #57

1. What can I do with bitcoins?  What can I buy?
2. What can I buy that's easier with bitcoins than using a credit card?
3. How does the general public view bitcoins?  Do they see it as a get-rich-quick scheme?

The answer to all three questions does not bode well for bitcoin's short term value.

I don't disagree with your point; but it's not as bleak as you say.

A friend of mine was trying to organize an event in Las Vegas from the UK.  He (I personally think unwisely) used paypal for transferring money internationally.  Paypal suddenly decided to semi freeze the account, with the organisation money already transferred in.  There was no way to get it out (i.e. to return to the initial state) and no way to pay for the things they wanted to pay for.  Note: there was no scam going on, this was someone trying to pay for things with his own money.  Paypal wrecked a planned Las Vegas event because they happen to be the man in the middle.

While being told that story I couldn't help thinking that Bitcoin has already won; PayPal are hated, and they keep doing things that make them more hated.  Even if Bitcoin had nothing for sale other than national currencies it would be incredibly useful.

So.. in answer to your questions (1) I can transfer value anywhere in the world, close to instantaneously and reliably.  Regardless of the current exchange rate -- there just has to be enough volume.  (2) Easier than with a credit card?  Well, it's easier to perform these transfers without having 2.5% gouged from you.

(3) I admit, it's not quite everday, general-public types of use, but those will come in time.

I, and another friend are already using bitcoins to settle those minor between-friends debts that friends often have.  "Lend me 20 quid would you, I haven't been to a cash machine yet."  "No need to lend, here's a couple of BTC (tip, tap, tip tap on smartphone) and we're even."  "You get the cinema tickets", etc, etc.  If I can just persuade my friend the landlord at the local pub to take bitcoins that will be 99% of my weekly cash needs replaced with bitcoin.

I actually think that the bitcoin community obsesses a bit much about there not yet being lots of vendors that we can point at.  Bitcoin is already better than cash/card for a great many purposes that don't have anything to do with buying products.

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makomk
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July 18, 2011, 06:00:52 PM
 #58

Well, hells bells. Imagine how much they are missing out on by non buying the lottery ticket with the winning number. Opportunity cost is what you lose by not doing the next best thing. What makes you think you know what the next best thing is?
You can't know whether the lottery ticket you're thinking of buying is going to be the winning one, in much the same way as you have no idea how much your bitcoins will be worth in a few months' time. Choosing to buy a lottery ticket is actually more analagous to leaving bitcoins from mining unconverted than to converting them to USD.

If you don't want to add to a losing position, then why the hell would you want dollars?  They've lost 96% value in the last hundred years.
You'll be dead in a hundred years' time. More importantly, no-one just stuffs dollars under their mattress and just leaves them there for a century, and while the dollar may be losing value it's at a slow and consistent rate. If the dollar was losing its value at the rate bitcoins have been lately there'd be mass panic.

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walidzohair
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July 18, 2011, 08:46:13 PM
 #59

I think you missed the real reason why they are falling.

The reason is!!!!



Satoshi Namamoto (AMD/ATI Marketing CEO) have announced a successful end to his marketing project with all the 5XXX and 6xxx cards sold out and new 7XXX ones that are different in design. and they are closing the bitcoin project!
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July 25, 2011, 02:51:07 AM
 #60

Well, hells bells. Imagine how much they are missing out on by non buying the lottery ticket with the winning number. Opportunity cost is what you lose by not doing the next best thing. What makes you think you know what the next best thing is?
You can't know whether the lottery ticket you're thinking of buying is going to be the winning one, in much the same way as you have no idea how much your bitcoins will be worth in a few months' time. Choosing to buy a lottery ticket is actually more analagous to leaving bitcoins from mining unconverted than to converting them to USD.

A lottery ticket is a poor analogy. We can accurately guess the odds - perhaps they are even published - and we know that the odds are against us. But unless collecting bitcoin for their utility, a rational holder must believe the (chance of loss times)(amount lost) < (chance of gains)(amount gained). A lotto investor throws rational risk tolerance to the wind but a bitcoin junkie is an existentialist who believes he knows better than the market. Because the odds are not published, we can not say whether he is right until after he sells.

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