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Author Topic: If you're not out, get out.  (Read 24689 times)
mobodick
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October 17, 2011, 12:16:34 PM
 #101

no more enthusiasms but increasing zynical shortselling and making profit with killing the only real quality alternative currency having potential to change world economy. great job! hope you greed makes you happy.

If you think that bitcoin is a quality currency that has potential to change the world then you are seriously delusioned.
..just saying.
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fivebells
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October 17, 2011, 12:19:35 PM
 #102

I've been talking fundamentals for a while, and here's my formula:

A = USD-value of goods and services purchased per day in BTC
B = Number of days buyers and sellers hold the coins before and after a transaction
C = Number of coins in circulation
D = Number of coins hoarded by (speculators/early adopters/whatever)

Fundamental price = A * B / (C - D)
  Totally agree with your reasoning on a conceptual level, but could you explain the product A*B in a little more detail?
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October 17, 2011, 01:11:31 PM
 #103

some one go panic sell on virwox! :O i want to make more money!

ZOMG Moo!
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October 17, 2011, 02:04:41 PM
 #104

Totally agree with your reasoning on a conceptual level, but could you explain the product A*B in a little more detail?

Sure.

I'm starting with the assumption that Bitcoin is used for transactions, not as a long-term value store (though the formula allows a transition to a value store - B increases).  I think that's an accurate description of people who currently want to use Bitcoin for purchases - they trade fiat in, go shopping, buy their product, and the seller trades back to fiat.  The duration of "go shopping" is B, and the sum of everyone's daily "buy their product" is A.

A * B is the total value that needs to be stored in Bitcoins for this to occur.  It's somewhat related to the market cap.



An example in a highly stable, steady-state market:

Let's say that someone is selling paper clips for USD$1-equivalent, and they sell 3 per day, and that's the entire BTC economy.  A = $3 .  The average buyer obtains coins, shops for two days, spends, the seller holds them for one day, sells back to fiat on an exchange.  B = 3.  There are 30 total BTC that have been mined.  C = 30.  There are 12 BTC out of active circulation: some are lost, some are hoarded, whatever; they're not in use.  D = 12.

Each day you will see:

Buyer1 buys 6BTC at USD$0.50 (total USD$3.00)
Buyer2 holds 6BTC.
Buyer3 buys 3 paper clips for 6BTC.
Seller goes from 6BTC to 12BTC, then dumps 6BTC (yesterday's paperclip revenue) on the market for USD$0.50/BTC = USD$3.00.
Hoarder holds their 12BTC, same as always.

At the end of the day you have 12BTC between Buyer1 and Buyer2; Seller has 6 BTC, having sold his other 6 to Buyer1; Hoarder has 12 BTC; total 30 BTC.  The price holds steady at $0.50/BTC, as predicted by the formula: ($3 * 3) / (30 - 12) = ($9 stored value) / (18 coins) = $0.50 per BTC.  The cycle repeats each day.



So what happens if the numbers start changing?  

Let's drop the price to $0.25/BTC.  Seller raises his price to 4BTC/paperclip.  Buyer3 still wants his paperclips today, and Buyer2 knows he wants some soon, so they go back to the market and bid against Buyer1 to get some more BTCs to complete their purchase.  The price gets run up until it hits equilibrium again.

Let's raise the price to $1/BTC.  Seller lowers his price to 1BTC/paperclip.  If Seller is still dumping yesterday's revenues on the market, the price drops - more BTCs available, and buyers don't need as many, so supply+demand does its thing.  If Seller instead decides to hold, B increases, and the price stabilizes higher.  If he doesn't think it's stable long-term, he gradually trades out faster than his revenues come in - IE, B gradually decreases - and the market price gradually falls (along with his gradually raising his price BTC/paperclip).

Let's say there's a run on paperclips: Buyers now want 10BTC to buy 5 paperclips each (A=$5).  The BTC are not available on the exchange, so the USD/BTC (and BTC/paperclip) runs up until the market stores enough value for the buyers.  Assuming B remains at 3, the total value store required (A * B) is USD$15.  Thus the fundamental price goes to ($5 * 3) / (30-12) = USD$0.83/BTC.



So what do I want?  More A; that's your economy!  And more B - with stable value people will hold their BTC longer before cycling them back to fiat, perhaps even going through several product purchases between exchanges to fiat.

D is currently large, but shrinking due to capitulation; the rate of shrink directly forces the market down.  Fortunately there's a limited supply of D, and it will gradually become less of a factor.

My argument about the very low fundamental price comes down to B.  With current volatility, buyers don't want to hold their coins very long at all.  We just want to buy paperclips and leave the currency risk to the speculators.  B is extremely short (days at best), and that's going to seriously limit the price floor.



Want to try some real numbers?

A = USD$10,000 per day
B = 3 days
C = 7,500,000
D = 90% (generous!) = 6,750,000

Pf = (10,000 * 3) / (7,500,000 - 6,750,000) = $0.04

Ouch.  We won't actually hit that price, but figuring for a 10x cushion, $0.40 is completely plausible.  On the other hand it'll go lower if merchants don't adopt Bitcoin and A goes down.

Work on A, people, and stop fantasizing about bouncebacks and rockets to the moon.  It's not happening until the fundamentals improve.

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Bitcoin is the Devil's way of teaching geeks economics.  --Revalin 165YUuQUWhBz3d27iXKxRiazQnjEtJNG9g
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October 17, 2011, 02:36:16 PM
 #105


Bitcoin is over. If you're not out, get out. The last ones to leave will be the worst off.


Yes, get out. I want to buy 6 Million @ 0.1

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October 17, 2011, 02:38:47 PM
 #106

I really like your formula, it makes sense. But is there any way to know the values of these numbers? How do you even estimate them?

There's no accurate way to measure them, but I can make some educated guesses.

A - How much money is going to BiddingPond, alpaca socks, Bit-Pay, TSR, donations to WikiLeaks, etc?  The auctions we can get a good estimate on (I haven't tried other than looking at them in an unscientific way), but the others are hard.   I'm guessing $300k/month = $10k/day, but perhaps that's a little conservative.  Does anyone think that there's more than $1M of purchase volume per month?

B - 3 days is based on my own use - I want to trade in, then spend my BTC ASAP.  However inconvenience (people buying BTC for cash in person, etc) means that they tend to be held longer.  The 1% friction is negligible in a market that sees 20% intraday volatility.

C - Known.  7,482,000 and slowly rising.

D - The best metric of velocity is Bitcoin Days Destroyed (https://en.bitcoin.it/wiki/Bitcoin_Days_Destroyed), and we know what Gox's volume is, but that's still an incomplete picture: we can't tell how much of that is sold from Disillusioned Hoarders and Capitulating Speculators, or how much is bought by Buyers vs New Suckers; there aren't even clean lines between these archetypes, since we all have mixed goals.  I'm guessing that 90% of BTC is held for speculation for whatever reason, rather than to be spent purchasing goods and services.

You can push these numbers around some, but it's hard to make a realistic scenario for a sky-high Pf.

      War is God's way of teaching Americans geography.  --Ambrose Bierce
Bitcoin is the Devil's way of teaching geeks economics.  --Revalin 165YUuQUWhBz3d27iXKxRiazQnjEtJNG9g
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October 17, 2011, 06:49:23 PM
 #107


Bitcoin/USD, last 4 months. Any questions?

I'm the original poster in this topic. I called the collapse of Bitcoin on June 11, 2011.  I wrote "Bitcoin, the new "digital currency", looks like a Ponzi scheme. Only Ponzi schemes chart like that. When Ponzi schemes crash, they crash fast, and they crash all the way." "There's no revenue model here. All growth comes only from new investors. This is a bubble in its pure form."

It's been all downhill since then. The price was $17 then. It's dropped $4 per month for the last four months.  It's at $2.52 now.

Our criterion for "Dead" on Downside was when the price was off 90% from the high. Bitcoin is now dead.

We warned you. You didn't listen.

If you have substantial cash in an exchange, get it out now. We're going to find out quite soon which exchanges have all the customer's cash and which don't.
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October 17, 2011, 07:04:35 PM
 #108

... Bitcoin is now dead.
...

Does this mean you are done posting now?

After all, why beat a dead horse?

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October 17, 2011, 07:16:50 PM
 #109

... Bitcoin is now dead.
...

Does this mean you are done posting now?

After all, why beat a dead horse?

+1

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fivebells
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October 17, 2011, 07:17:38 PM
 #110

...the sum of everyone's daily "buy their product" is A.
Thanks; that was the part I was missing.
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October 17, 2011, 07:30:54 PM
 #111

NAGLE: YOU ARE THE MAN!!  I ALSO TRIED WARNING THESE CHUMPS A FEW MONTHS AGO.  THEY DIDN'T LISTEN.

TO THE REST OF YOU DENIERS: HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH
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October 17, 2011, 07:57:09 PM
 #112

NAGLE: YOU ARE THE MAN!!  I ALSO TRIED WARNING THESE CHUMPS A FEW MONTHS AGO.  THEY DIDN'T LISTEN.

TO THE REST OF YOU DENIERS: HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH

Of course... if either Nagle or Foo was confident in their predictive ability, they would've shorted btc at 5:1 leverage on Bitcoinica and made a fortune. They can still short if they're confident. But I'm guessing they prefer to make predictions without backing them.

Enjoy your euphemism. The rest of us are building stuff.
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October 17, 2011, 08:29:24 PM
 #113

I think Bitcoin is reborn when people like Nagle simply stop posting and forget about it.

In reality it is as far from dead it has ever been.

Maybe now a larger percentage of Bitcoin users will use it instead of thinking it's a good investment vehicle.

Change of hands is good for the long term.

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October 17, 2011, 08:37:54 PM
 #114

What is funny is that I recall when btc dropped from $20ish to around $14, there were tools on the #bitcoin irc chat room telling everyone that the price would hit $75 by the end of the year.

They've all gone a bit quiet lately......

Mother of no children. Part-time idiot. Full-time douche.
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October 17, 2011, 08:39:52 PM
 #115

You honestly shouldn't trust what anyone says
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October 17, 2011, 08:59:28 PM
 #116

Well, to be fair, they could be partially right. It's entirely possible that BTC will hit $75 some day in the future, but it definitely won't be this year. The funny thing with all the laughing at losers is that the iron stomach holders could eventually be the big winners, we simply don't know. You've only lost if you sell with a loss and don't buy back.

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October 17, 2011, 09:39:46 PM
 #117

You have to keep in mind that the Bitcoin supply is expanding at 35% per year (7200 BTC generated every day with a current BTC supply of 7.5 million). This fact pushes the prices down, but it will not be for long. By 2013, the expansion of Bitcoin money supply will be reduced to around 10%. Most importantly, you can be sure that Bitcoins will be a scarce commodity.

The Bitcoin network has been designed in the elegant way of being self-sustainable. If the BTC/US$ rate goes down, difficulty adjusts accordingly and miners will keep the system alive at a rate for which they are satisfied to mine.

The Bitcoin protocol adjusts itself to the ups and downs of the exchange rate, so I am confident that Bitcoin will prevail, and I believe it may definitely be a really sound investment in the long term.

Once Bitcoin is understood, the consequences of a bank-only system are evident: your wallet is your national identity card and all private keys are handed to the government
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October 17, 2011, 09:47:30 PM
 #118

NAGLE: YOU ARE THE MAN!!  I ALSO TRIED WARNING THESE CHUMPS A FEW MONTHS AGO.  THEY DIDN'T LISTEN.

TO THE REST OF YOU DENIERS: HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH HA AAHAH HA HA HA HAHAHAHAHHA HAHAHAH

I am with you also, just read my previous posts, you will see I have been warning people since the $30 dollar mark. Had many threads specifically about warning people. So I am enjoying the drop full heart-idly. This makes my day so happy watching the price drop to nothing. All the hate I got for simply just trying to help people and save them money, was it really warranted?

We were right about bitcoin, they were wrong.

Now we can enjoy these chumps losing all their money.

 

Empty your mind, be formless, shapeless — like water. Now you put water in a cup, it becomes the cup; You put water into a bottle it becomes the bottle; You put it in a teapot it becomes the teapot. Now water can flow or it can crash. Be water, my friend.
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October 17, 2011, 09:51:10 PM
 #119

I wrote my bubble post back on June 3, 2011: 
http://www.campusactivism.org/blog/node/351

I'm currently up 50% on my (very small) investment in bitcoinica.


Don't day trade.
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October 18, 2011, 12:41:44 AM
 #120

A*B / (C-D)
I think this formula has a feedback loop. As bitcoin value halves, A will also half - causing the fundamental value to half, and so it's like a moving floor. Am I missing anything here?
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