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

[tvbcof]

Over the years I've found the most reliable indicator of price direction to be the imbalance of bids/asks on the Mt. Gox charts.  Such an imbalance (bid heavy) has formed fairly rapidly of late.  I know (or suspect) that there are various manipulation schemes which can color this indicator, but as I say 'I've found', and I'm not interested in TA much beyond such a primitive structure...in Bitcoin at this time.  It'll be personally interesting to see if this portends a leg up, or better yet, the start of the next bubble-like thingie.  If there is a next one.

[molecular]

Over the years I've found the most reliable indicator of price direction to be the imbalance of bids/asks on the Mt. Gox charts.  Such an imbalance (bid heavy) has formed fairly rapidly of late.  I know (or suspect) that there are various manipulation schemes which can color this indicator, but as I say 'I've found', and I'm not interested in TA much beyond such a primitive structure...in Bitcoin at this time.  It'll be personally interesting to see if this portends a leg up, or better yet, the start of the next bubble-like thingie.  If there is a next one.

I'm pretty sure there is a next one. It's too early for steady growth and complete failure seems unlikely to me in the medium term.

[vokain]

hopefully i can  pass the test and pick the top of that one.

[molecular]

hopefully i can  pass the test and pick the top of that one.

picking the tops of those irrational bubbles is inherently hard.

[tvbcof]

Over the years I've found the most reliable indicator of price direction to be the imbalance of bids/asks on the Mt. Gox charts.  Such an imbalance (bid heavy) has formed fairly rapidly of late.  I know (or suspect) that there are various manipulation schemes which can color this indicator, but as I say 'I've found', and I'm not interested in TA much beyond such a primitive structure...in Bitcoin at this time.  It'll be personally interesting to see if this portends a leg up, or better yet, the start of the next bubble-like thingie.  If there is a next one.

I'm pretty sure there is a next one. It's too early for steady growth and complete failure seems unlikely to me in the medium term.

I've been waiting for a nearly universal loss of hope to mark the bottom.  Like last time.  As far as I can see we are not anywhere near such a marker.  Maybe I'm simply wrong that such a signal will portend a turn-around.  Time will tell.

[hgmichna]

hopefully i can  pass the test and pick the top of that one.

picking the tops of those irrational bubbles is inherently hard.

Very true. The best strategy is to sell early, because it may be impossible to sell into a bursting bubble. We know how Mt. Gox becomes unreachable or stops trading in such situations.

But what we currently see is not yet a new bubble. It is merely a bull trap. Prices will go a lot lower this year and probably next.

[vokain]

hopefully i can  pass the test and pick the top of that one.

picking the tops of those irrational bubbles is inherently hard.

Very true. The best strategy is to sell early, because it may be impossible to sell into a bursting bubble. We know how Mt. Gox becomes unreachable or stops trading in such situations.

But what we currently see is not yet a new bubble. It is merely a bull trap. Prices will go a lot lower this year and probably next.

On a bigger scale, I guess we can consider this too

Wave 1 ended ~ $32, wave 2 ended at ~ $2, wave 3 ended at ~ $266, Wave 4 ended at $65.  We are beginning wave 5.

[hgmichna]

Wave 1 ended ~ $32, wave 2 ended at ~ $2, wave 3 ended at ~ $266, Wave 4 ended at $65.  We are beginning wave 5.

No, if we want to use this strange nomenclature, we are still in the middle of Wave 4.

[vokain]

so we're going lower than 65?

[hgmichna]

so we're going lower than 65?

Yes. It is difficult to guess exactly how low we will go, but my best guess is $20. I would be surprised neither about $30, nor about single-digit prices though.

What we are seeing now is caused by the get-rich-quick pseudo-speculators. They still believe that the price can only go up, even though they have just seen the opposite. But every time the price goes down, some more of them go into panic-selling mode.

This will continue until the price hits bottom. It does that when only long-term speculators and actual bitcoin users, i.e. those who pay for goods and services, are left in the market. And these two groups do not support a price of $65.

We will only get new get-rich-quick pseudo-speculators back into the market after the price has hit bottom, and they will start the third bubble. The price will hit bottom late this year or some time next year.

You can still make some money through short-term speculation, but it is difficult to profit from a falling market by buying. Short-selling would be easier, but there is no reliable way to do that these days. So you have to be careful and be content with a 10% gain between each buy-sell pair of transactions.

[vokain]

so we're going lower than 65?

Yes. It is difficult to guess exactly how low we will go, but my best guess is $20. I would be surprised neither about $30, nor about single-digit prices though.

What we are seeing now is caused by the get-rich-quick pseudo-speculators. They still believe that the price can only go up, even though they have just seen the opposite. But every time the price goes down, some more of them go into panic-selling mode.

This will continue until the price hits bottom. It does that when only long-term speculators and actual bitcoin users, i.e. those who pay for goods and services, are left in the market. And these two groups do not support a price of $65.

We will only get new get-rich-quick pseudo-speculators back into the market after the price has hit bottom, and they will start the third bubble. The price will hit bottom late this year or some time next year.

You can still make some money through short-term speculation, but it is difficult to profit from a falling market by buying. Short-selling would be easier, but there is no reliable way to do that these days. So you have to be careful and be content with a 10% gain between each buy-sell pair of transactions.

I do know we have a decent chunk of lost, hoarded, or Satoshi's coins that are not going to be sold at $200 let alone $20. Considering that, the supply of coins actually being actively speculated upon is likely somewhere from 0.5m to ~6m, which really isn't much at all, especially if the amount of people wanting to hoard forever is even ever slightly increasing at a minuscule rate.

i guess the order books can still be crashed though

[anu]

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.

You mean speculators as stupid as we are?

[phelix]

hopefully i can  pass the test and pick the top of that one.

picking the tops of those irrational bubbles is inherently hard.

Very true. The best strategy is to sell early, because it may be impossible to sell into a bursting bubble. We know how Mt. Gox becomes unreachable or stops trading in such situations.

But what we currently see is not yet a new bubble. It is merely a bull trap. Prices will go a lot lower this year and probably next.

Selling early can end up bad, too. Some people sold everything at 30 (in the second bubble) - they are still weeping. At least it is smart to hold on to half your coins for 10 years or so.

So far the Bitcoin price increased by a factor of 10 (+900%) per year on average.

The supply of new speculators is still high.

[Hfleer]

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?

This sounds good to me.  What would you guess the peak over the next 6-8 months?

[solex]

What would you guess the peak over the next 6-8 months?

The best I can offer is this chart which I have updated as of today. It indicates that $200 is a reasonable expectation within 6 months. I am being a bit more conservative and consider that $130-150 is a top range within that time. The current $102 is close to trend.

An observation which I just noticed is that after the $266 peak the double-bottom (measured by daily average) was first at $68.30 in April and the secondly at $68.50 in July. Both very close in value. The market does not want to go lower than $68 anymore.

[oda.krell]

You're a quality poster, solex, so don't take this as criticism, but what is your method for the above projection? Doesn't look like you used points of contact to draw the line, so that would leave us with (linear) regression (on a log scale). I remember that [statistical modeling guy who's name I can't remember] did that, and got a substantially lower value, but he was "massaging" the data quite a bit, so that could explain the difference :P

EDIT: or, of course, the line is drawn "by intuition" alone. nothing wrong with that, but would be good to know.

[phelix]

Not so different from my fit curve... (orange dotted line)



"The fit curve is an exponential percentual to the chart least squares fit - in other words: I played around until it looked good."

[MAbtc]

I think hgmichna is pretty much spot on here. Still tinkering with my projections for the bottom, but I doubt it is 65.

[solex]

You're a quality poster, solex, so don't take this as criticism, but what is your method for the above projection? Doesn't look like you used points of contact to draw the line, so that would leave us with (linear) regression (on a log scale). I remember that [statistical modeling guy who's name I can't remember] did that, and got a substantially lower value, but he was "massaging" the data quite a bit, so that could explain the difference

EDIT: or, of course, the line is drawn "by intuition" alone. nothing wrong with that, but would be good to know.

oda.krell, thanks for the feedback!

Yes it is simple linear regression (least squares fit). 1100 datapoints with slope projected 300 more. The data is presented raw (from bitcoincharts.com with no massaging).

I don't take this as gospel, just a rough guide. We are in the speculation forum and the best we can do in speculating is to make use of the data we have. There is no doubt that Bitcoin is on an exponential adoption phase, which has been seen with other technologies such as the take-up of mobile telephony. It will plateau at some point and skew level on charts such as the one I posted. We can have confidence that the regression line has short-term future relevance because of inertia within the Bitcoin ecosystem which is building all the time as more money and people get involved in many different countries.

Not so different from my fit curve... (orange dotted line)
"The fit curve is an exponential percentual to the chart least squares fit - in other words: I played around until it looked good."

I'm not seeing your image...

[phelix]

Not so different from my fit curve... (orange dotted line)
"The fit curve is an exponential percentual to the chart least squares fit - in other words: I played around until it looked good."

I'm not seeing your image...

Should work now....  it's the same as on http://blockchained.com