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Author Topic: Long, slow slide  (Read 9337 times)
Edward50
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July 22, 2011, 02:53:10 PM
 #41

From what I can determine by watching the price is that there are not many buyers who want to really pay over $13 and not many sellers who want to sell under $13. It seems that most of the selling are done by people with big bitcoin boldings, maybe early adapters. I have noticed that bidwalls of over 5,000 bitcoins are routinely sold into by someone. Seems like someone with lots of bitcoins wants to cash out and get his millions. Think about that guy who got hacked with over 400,000 bitcoins. Even if he sells for around $13, he will have over 5million dollars.

So what we have here is someone with lots of bitcoins wanting to sell out and not shoot the market down too far. So he will sell into bidwalls. He will usually wait to the price gets close to a bidwall. Think about selling 5K bitcoins and only moving the price down .05 cents, that will not really tank the market.

What we have on the buy side is what looks to be someone trying to stabalize the market by putting up bidwalls.

This is what seems to be going on from watching the market. Only a few big players here. I think the average person does not really buy many bitcoins and only mines really, probably holding on to most of the bitcoins thinking they will be worth $100 or more in a month.

Once the early adapters sell their bitcoins, and all you have left is the market manipulators, it will be interesting to watch the price.

On one hand the market manipulators will be buying most of the mined bitcoins. I do not know how long this will go on. They will try and promote scacarity by not selling, but at one point will they want to cash out of their large bitcoin holdings? When they do this how much will it tank the market?

How long will miners keep hording their bitcoins before they sell?






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netrin
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July 22, 2011, 04:11:29 PM
 #42

This is what seems to be going on from watching the market. Only a few big players here. I think the average person does not really buy many bitcoins and only mines really, probably holding on to most of the bitcoins thinking they will be worth $100 or more in a month.

Interesting theory. If I'm not mistaken Mt. Gox claimed $7 million transactions in June or roughly 500 000 btc. Volume may have been higher then. And I'm not sure if that's input and withdrawls or internal trades. But none the less, there are over 200 000 btc generated per month. So I think it's entirely possible there is more trading per month than mining.

On the other hand, Mt. Gox's number could include both $ and btc i/o, but I have to assume with stable prices, it's an even rate. Anyone have better numbers?

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istar
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July 22, 2011, 04:53:57 PM
 #43

Just a thought.

If there is say 2 million bitcoins produced this year and most of them are sold.
Bitcoin needs to get a 28 million dollar in investment each year to hold a price of $14 for each coin plus you also have a couple of million bitcoins that others want to sell. Say the double $50 million in new money could perhaps be enough, since not all mined bitcoins will get sold.

If there are 100.000 each investing in avarage $500 the price could perhaps be kept.

I wonder how many miners vs investors/speculators there are allready today.











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piramida
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July 22, 2011, 05:30:53 PM
 #44

Just a thought.

If there is say 2 million bitcoins produced this year and most of them are sold.
Bitcoin needs to get a 28 million dollar in investment each year to hold a price of $14 for each coin plus you also have a couple of million bitcoins that others want to sell. Say the double $50 million in new money could perhaps be enough, since not all mined bitcoins will get sold.

That is incorrect. You are considering that all bitcoins which are sold are sold to new money, but it is of course not so. There are people on the market that hold BTCs and people that hold USDs, and they change commodities when they feel the price is right. So even 13$ of total new money can buy your 2million BTCs, theoretically, just going round and round from buyer to buyer, and you have two million people with 1BTC each in the end. So the actual amount of money in the market at the moment is unknown, and estimations of new money to keep market afloat make no sense, too. Only in the simplified world where there are BTC producers vs new BTC buyers would it make sense. Most common people are both.

Judging by the speed at which rally to 30 unfolded, there's quite a lot of spare USD holders in the exchanges, waiting for a time to exchange into BTCs. Can you estimate how much exactly? No, unless you hack MTGox.

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istar
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July 22, 2011, 06:34:44 PM
 #45

Yes it was kind of a what if and thats why I was wondering how many miners vs investors/speculators there are allready today.
And how many new, if any are required. But fact is that there needs to be probably atleast $14x 2 million more in capital over the year.
 

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July 22, 2011, 06:39:34 PM
 #46

istar, no, absolutely not so, because BTC end up in someone's wallet who already might have money from selling BTC earlier. and then that money can be reused again and again and again.

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July 22, 2011, 06:45:31 PM
 #47

istar, no, absolutely not so, because BTC end up in someone's wallet who already might have money from selling BTC earlier. and then that money can be reused again and again and again.

Your logic is flawed because new coins are constantly being introduced.  As the money supply increases, new capital must be injected.  Yes, you can reinvest to a certain degree but to sustain or increase price when supply is going up requires additional capital.  There is no way around that unless you believe all new supply is being hoarded, which is never going to be the case.

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July 22, 2011, 07:39:33 PM
 #48

There is no way around that unless you believe all new supply is being hoarded, which is never going to be the case.

No you can sell it to me and I'll buy from you again using money I got selling your coins earlier. Money go around. The only real way to determine how much money is in the system, is sum up all incoming and outgoing wire transfers. Everything else is theories with no sound basis, it could be 10 times off and you would not know.

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July 22, 2011, 07:40:32 PM
 #49

istar, no, absolutely not so, because BTC end up in someone's wallet who already might have money from selling BTC earlier. and then that money can be reused again and again and again.

Your logic is flawed because new coins are constantly being introduced.  As the money supply increases, new capital must be injected.  Yes, you can reinvest to a certain degree but to sustain or increase price when supply is going up requires additional capital.  There is no way around that unless you believe all new supply is being hoarded, which is never going to be the case.

So CurbsideProphet, strictly by your logic, if let's say, oh I don't know, the Federal Reserve Bank convinced the treasury to print say 4x more dollars than has ever existed in a single year, the value of a dollar would be immediately reduced to 1/4? Holy $h!t:


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July 22, 2011, 07:45:34 PM
 #50

So CurbsideProphet, strictly by your logic, if let's say, oh I don't know, the Federal Reserve Bank convinced the treasury to print say 4x more dollars than has ever existed in a single year, the value of a dollar would be immediately reduced to 25%? Holy $h!t:

We're talking about Bitcoins but thanks for the strawman.


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July 22, 2011, 07:50:04 PM
 #51

What's special about bitcoin that you logic applies to it, but not the dollar? I don't necessarily disagree with you, but I think netrin has a point.

https://www.bitcoin.org/bitcoin.pdf
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July 22, 2011, 07:52:18 PM
 #52

So CurbsideProphet, strictly by your logic, if let's say, oh I don't know, the Federal Reserve Bank convinced the treasury to print say 4x more dollars than has ever existed in a single year, the value of a dollar would be immediately reduced to 25%? Holy $h!t:

We're talking about Bitcoins but thanks for the strawman.

Critique accepted. While I presented an extreme economic example, it is to point out the fallacy of your claim that M0 bitcoins are immediately equal to all bitcoin economic value which is not true, even if it is almost true. Well that and to point out a contrast with our immortal beloved.


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CurbsideProphet
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July 22, 2011, 07:57:07 PM
 #53

What's special about bitcoin that you logic applies to it, but not the dollar? I don't necessarily disagree with you, but I think netrin has a point.

They're apples to orange comparisons.  An inflationary (dollars) to deflationary (bitcoin) model for one. 

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July 22, 2011, 08:01:28 PM
 #54

There is no way around that unless you believe all new supply is being hoarded, which is never going to be the case.

No you can sell it to me and I'll buy from you again using money I got selling your coins earlier. Money go around. The only real way to determine how much money is in the system, is sum up all incoming and outgoing wire transfers. Everything else is theories with no sound basis, it could be 10 times off and you would not know.

If you buy the new supply from me, from selling your coins earlier, those "old" coins would have to be purchased by someone else.  You cannot follow that chain into perpetuity without an injection of capital.  At some point new money needs to enter the system to support the price.

We already know supply of Bitcoins is increasing.  If supply increases and demand remains constant, price will decline. 

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July 22, 2011, 08:31:24 PM
 #55

What's special about bitcoin that you logic applies to it, but not the dollar? I don't necessarily disagree with you, but I think netrin has a point.

They're apples to orange comparisons.  An inflationary (dollars) to deflationary (bitcoin) model for one. 

Except the supply of bitcoins is inflating even faster than dollars.  The deflationary aspect of bitcoins only applies when the merchant and manufacturing economy grows rapidly, or when the inflation tapers off many years in the future.  Right now they are both apples.

https://www.bitcoin.org/bitcoin.pdf
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July 22, 2011, 08:39:32 PM
 #56

What's special about bitcoin that you logic applies to it, but not the dollar? I don't necessarily disagree with you, but I think netrin has a point.

They're apples to orange comparisons.  An inflationary (dollars) to deflationary (bitcoin) model for one. 

Except the supply of bitcoins is inflating even faster than dollars.  The deflationary aspect of bitcoins only applies when the merchant and manufacturing economy grows rapidly, or when the inflation tapers off many years in the future.  Right now they are both apples.
That's true to some extent, but keep in mind, nearly 1/3 of the coins have been minted now (2.5 weeks until we hit 7M).  So that means, at max, bitcoin will only inflate an additional 200%.  It's still kind of orangish since people expect that deflation to happen in the future, so that extra bit of future value is built in to today's value.  Similarly, the future and expected devaluation of the dollar is built in to today's value of the dollar.
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July 22, 2011, 10:14:58 PM
 #57


If you buy the new supply from me, from selling your coins earlier, those "old" coins would have to be purchased by someone else.  You cannot follow that chain into perpetuity without an injection of capital.  At some point new money needs to enter the system to support the price.

We already know supply of Bitcoins is increasing.  If supply increases and demand remains constant, price will decline. 

But that's what I'm saying, you can follow this chain infinitely. Say, there are 100k USD in MtGox now, that means 100k worth of coins can be purchased right now, but if money stays in the exchange, tomorrow that same dollars could be used to buy another 100k of BTCs. So no, you don't need any more money in the exchange every day. You need the sum of incoming wires to be greater than sum of outgoing wires, and that has nothing to do with BTCs. You are calculating how much BTCs are minted, but the amount of USD that is added to the system daily is in no way tied to this number - only to the sum of daily withdrawals. Of course, for a successful rally there should be some fiat money accumulated in MtGox waiting for a bottom to BUY, and that's exactly what is happening during that slow periods. But there is no "amount of new money needed daily to keep price current" - price would stay current even if there's 0$ worth of trades.

So your logic is flawed, and I hope you can see it now. If you can't, well then, you can estimate that MtGox needs daily influx of enough USD to buy 2mil BTC, also Smiley

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July 22, 2011, 10:47:52 PM
 #58

But that's what I'm saying, you can follow this chain infinitely. Say, there are 100k USD in MtGox now, that means 100k worth of coins can be purchased right now, but if money stays in the exchange, tomorrow that same dollars could be used to buy another 100k of BTCs. So no, you don't need any more money in the exchange every day. You need the sum of incoming wires to be greater than sum of outgoing wires, and that has nothing to do with BTCs. You are calculating how much BTCs are minted, but the amount of USD that is added to the system daily is in no way tied to this number - only to the sum of daily withdrawals. Of course, for a successful rally there should be some fiat money accumulated in MtGox waiting for a bottom to BUY, and that's exactly what is happening during that slow periods. But there is no "amount of new money needed daily to keep price current" - price would stay current even if there's 0$ worth of trades.

So your logic is flawed, and I hope you can see it now. If you can't, well then, you can estimate that MtGox needs daily influx of enough USD to buy 2mil BTC, also Smiley

You're talking about the exchange, I'm talking about the market.  Also when you say:

Quote
You need the sum of incoming wires to be greater than sum of outgoing wires, and that has nothing to do with BTCs.

You're making my point.  If the sum of incoming wires is greater than the sum of outgoing, that's new money!

Quote
You are calculating how much BTCs are minted, but the amount of USD that is added to the system daily is in no way tied to this number

I'm not saying the amounts need to mirror each other.  A coin minted today may not be sold today.  You're looking short term.  All I'm saying is, as supply increases, in order for price to remain constant or increase, money needs to enter the MARKET.  I don't care about the exchange and what's sitting on the side.  There's really no argument here.

If I mint 100k of new coins and put it up for bid, how do you buy those new coins without adding capital to the market and without the price of BTC falling?

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July 22, 2011, 10:47:56 PM
 #59

If I mint 100k of new coins and put it up for bid, how do you buy those new coins without adding capital to the market and without the price of BTC falling?

You are making two assertions here - that all minted money are sold and that all fiat money obtained from selling them are no longer used in the MARKET but stashed away in some bank account. They are both false.

It does not matter if I'm talking exchange or global market - right now, with percentages of MtGox, it's almost equivalent. Amount of money that should enter the global Market in no way is tied to the amount of produced BTCs, and that's all I'm saying again and again. Because a. not all btcs are sold and b. people reuse old money; and unless you know A and B percentages (hint: you don't) you can't try to estimate how much *new* money the system needs, it will look foolish. That's what I pointed out in original *istar*'s post.

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July 22, 2011, 11:56:48 PM
 #60

I never tried to estimate the amount of new money needed.  I only stated that a certain amount of new money is needed, but I never tried to quantify that.

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