Ding Dong! The Bubble-burst is done! $90-95 is the new normal

[solex]

I am calling the 2013 bubble-burst completed. This is based upon the observation that the 2013 bubble was structurally more similar to the August 2012 event than the 2011 one.

March 28 to April 1st - pre-2013 peak. Stability in low 90s.
April 18/19 - same during period of large oscillations.
July 19-23 ongoing - more stability in the 90s.

I also believe that the reward halving at the end of Nov 2012 was the key driver in the appreciation of the BTC fxrate to a new level. Markets always discount known data with a future effect. So for four years the market lived with the information that the 21 million cap probably would be effective. The reward halving proved that it will be effective. This is an important distinction, and a successful reward halving paradigm is now properly priced in.

The repricing likely coincided with large acquisitions (such as the Winklevoss holding being accumulated), coupled with news-frenzy and feedback from the telegenic but BTC-irrelevant Cypriot bank crisis, likely caused over-compensation, so the fxrate ran 150% higher than the fundamentals warranted.

That 150% surge has now dissipated.

Any takers on this reading?

[BitChick]

If the "bubble-burst" is done, any speculation on where we go from here?  Will it be a gradual climb or a crazy spike or series of spikes?  I suppose a nice gradual climb would be more stable and perhaps "better" or with less risk of another "bubble" to burst.

[BitPirate]

I think we saw strong buying sentiment in the $60s which suggests it was either the bottom or close to it. I don't know if comparing to 2011 or 2012 is particularly valuable -- the Bitcoin market has grown so fast that the market looks utterly different with each passing year. The sell-offs were no less rash than the bubble inflation, and each took roughly the same time. The market has a long memory though -- we're still a fair way off from sustained panic buying.

(By my own calculations, BTC can't depreciate much further than mid double-digits appreciable amount of time, if the available BTC is to have sufficient carrying value for buying goods and services, so I've always disagreed with the 'single digits' folks)

There is a risk of going down again -- but it strikes me as less risky to buy below $100 rather than sell -- I am sure the next peak will be higher than the last.

Right now I see a big mess though. Why buy on Gox when you can buy on BitStamp for $7 cheaper? But if you arbitrage and sell on Gox, BitStamp price follows the Gox price direction and depreciates further. Without putting too fine a point on it -- it's fucked.

[worldinacoin]

We have billions of such threads, I beat $1 trillion - $10 trillion as the new norm!

[Wagner2014]

You lost me here:

March 28 to April 1st - pre-2013 peak. Stability in low 90s.
April 18/19 - same during period of large oscillations.
July 19-23 ongoing - more stability in the 90s.

So you are saying that because BTC was priced in the low 90s for 12 days in the past 4 months, that that price is the new norm?

That's quite a stretch.

Second, I can't even find the so-called stability you mention on the dates cited. Take a look at the chart and point me to the "stability" in the low 90s at the end of March? It looks more to me as it was just zipping past that price point on its way to $240.

Third, again, look at the chart! There is no indication yet that a bottom has formed. You only know that after the bottom is formed once you move to a new trend with higher highs and higher lows.

[bitcoinator]

I think I saw threads like "$X is the new $Y" for almost any values of X and Y 

[smoothie]

Numbers seem to put a psychological attachment to what the price of something should be. It is amazing that when we were at $7 that was the "NEW NORM". Now a year later and $90 is the "NEW NORM".

Next year $1200 will be the "NEW NORM"?  lol...just saying

[Tzupy]

Nope, it looks like a bull trap to me. Small spike to (maybe) 95, then a massive drop to 70 or lower.

[tutkarz]

Third, again, look at the chart! There is no indication yet that a bottom has formed. You only know that after the bottom is formed once you move to a new trend with higher highs and higher lows.

When you realise this, it will be too late to buy back without losing 30%-50% of what you could have by buying now (or at 60's that are long gone).

I am buying every bitcoin i can below $100 and i don't think i will regret this.

[hgmichna]

Yet another "permanently high plateau" prediction. It is bound to fail.

The simple truth is that the current bitcoin price is supported less than 10% by traders, who actually use bitcoin to pay for goods and services, and over 90% by speculators, most of them of the get-rich-quick kind, the trend followers, their girl-friends and mothers. They buy bitcoin because they believe its price will rise.

As the price is now falling, we are seeing a sawtooth pattern of upward trend-following and downward panic-selling, a sequence of bigger and smaller bull traps. This will continue through the rest of the year and quite possibly deep into the next.

So where is the bottom? It will be reached when all short-term get-rich-quick speculators have lost their "investment" and only traders and long-term speculators still hold bitcoin. My guess is $20. But since the bottom price depends on factors we do not know yet and is anyway difficult to predict with any precision, I will be surprised neither at $30, nor at a single-digit price.

What may also happen is that the bitcoin market widens, and new, stupid "speculators" start the third bubble. But this will most likely not happen this year, but perhaps later in the next.

[solex]

Third, again, look at the chart! There is no indication yet that a bottom has formed. You only know that after the bottom is formed once you move to a new trend with higher highs and higher lows.

When you realise this, it will be too late to buy back without losing 30%-50% of what you could have by buying now (or at 60's that are long gone).

I am buying every bitcoin i can below $100 and i don't think i will regret this.

Exactly. By the time the higher highs are obvious to everyone the edge for traders has gone. I agree that selling at this level is riskier than staying in.

If the "bubble-burst" is done, any speculation on where we go from here?  Will it be a gradual climb or a crazy spike or series of spikes?  I suppose a nice gradual climb would be more stable and perhaps "better" or with less risk of another "bubble" to burst.

Assuming $90-95 is a medium-term level like $12-13 was then an occasional visit to $85 or $100 at least is expected. But news will trump stability. I am still concerned that MtGox is seriously wounded by its USD problems and that a "run on the bank" may occur with a temporary spike to 130 or even 150 if people want to convert to BTC and exit at once. The retrace after that will not be pretty.

Wagner. A whole year squished into a chart is always going to show the big picture, but it eliminates seeing the smaller clues which the market leaves behind. Unless one subscribes to the random walk, and TA is meaningless - then there has to be useful information at smaller scales. Please zoom into the 4-hour views. Yes, it has been stable elsewhere, like $47, but the market has shown no appetite for a repeat of that level.

[codesuela]

Nope, it looks like a bull trap to me. Small spike to (maybe) 95, then a massive drop to 70 or lower.

this is my belief as well

[billington.mark]

Nope, it looks like a bull trap to me. Small spike to (maybe) 95, then a massive drop to 70 or lower.

this is my belief as well

I have to admit, this is what im planning for aswell.
maybe not a drop to the 70's but more than likely low 80's, then a gradual climb back upto 100

[grovestr]

Nah.

http://oi40.tinypic.com/2a9wklv.jpg

[codesuela]

Nope, it looks like a bull trap to me. Small spike to (maybe) 95, then a massive drop to 70 or lower.

this is my belief as well

I have to admit, this is what im planning for aswell.
maybe not a drop to the 70's but more than likely low 80's, then a gradual climb back upto 100

heh, I'd guess the bottom will be 60

[solex]

Nah.

Look at your data more closely. Everyone says final capitulation in a bubble should be on high-volume. The high volume in 2011 was at the end, in 2013 it was at the start, when it got to the 50s. Even allowing for more coins in 2013 the April volume was absolutely huge, dwarfing all but the very last days of the 2011 dip when it is arguably comparable.  Is anyone expecting a million coin trading day soon?

[Impaler]

If coins go down in price then the same amount of USD trading volume could indeed move around more BTC.  But I think the dynamic to watch for is the hash rate, the bubble isn't over until the hash rates 'capitulate' and miners realize they have over built mining capacity and the ones with the highest electric cost need to shut down.  In 2011 this hash peak preceded the market bottom by about 3 months and I'd project a similar pattern here because the capitulation of miners creates relentless downward pressure on prices.

[domob]

If coins go down in price then the same amount of USD trading volume could indeed move around more BTC.  But I think the dynamic to watch for is the hash rate, the bubble isn't over until the hash rates 'capitulate' and miners realize they have over built mining capacity and the ones with the highest electric cost need to shut down.  In 2011 this hash peak preceded the market bottom by about 3 months and I'd project a similar pattern here because the capitulation of miners creates relentless downward pressure on prices.

I don't feel confident to comment on trading or economics, but regarding the hash rate I believe the situation is very different now than it was in 2011.  Namely with the ASICs now in use, electricity cost is only a small fraction of the actual mining costs, since the balance has shifted heavily towards the initial investment capital cost.  Before someone who bought an ASIC is going to stop mining because it is unprofitable from the electricity cost, the difficulty will have to go much, much higher still and I'm not sure whether we reacht his point soon.  (Although on the other hand it is already probably unprofitable to mine with some ASIC devices if you still have to buy them because ROI is not likely to be ever reached.  But that will only slow the hash rate growth but not lead to a drop.)

[semaforo]

The key difference between this recent price spike and the previous spike, is that in the case of the recent spike, there has been a similar situation in the past and bitcoin survived. The human mind looks for patterns, and everyone can see a pattern forming here.

Remember in school? 1,3,5,7, which number comes next? In this case it is 1,30,5,260,??? the logical answer is 25, 2000.

    These are linear patterns. Bitcoin will not behave linearly for the following reasons
1) demand for drugs
2) fear of regulation
3) the believers

    These are elements that exist in no other investment vehicle. There is no way to gauge how many iron willed believers are hokding bitcoin. Many have been steeled by the previous price drop against the jitters in this price drop. There is no telling how many believers with piles of cash are out there who have not yet heard about it or are thinking about it.
   There is no telling how much volume will be generated as more and more people start buying their regulated medications with bitcoin and street dealers become less available.
     There is no telling what regulatory events or geopolitical events will influence price. There is no chance of bitcoin being killed by regulation, firstly because Russia will never outlaw it as long as it is taking market share from the dollar, and secondly because poorer governments will stand to profit hugely by becoming bitcoin havens.

       Sometimes when watching the price I think, a watched pot never boils, but I tested that, and it does. Just the perception of time dilates... so here I am on this forum.

[JimboToronto]

I'll believe it when it hits 120.

At 100 it was so shaky that all it took was news of the Satoshi Dice sale to drop it by a sawbuck. It's still recovering from that.

When It's galloping up as it was in March, even a fork in the blockchain only caused a dip that lasted a few hours.

It's a little early to declare victory, but it's certainly looking better.