Will BTCUSD break the long term trend?

[Cluster2k]

Why does the graph start in August 2010, when hardly anyone was using bitcoins and very few people even knew about them?  Why not start the graph in March or April 2011 when things really got going and bitcoins became popular?  August 2010 is an arbitrary date designed to make the long term trend look great.  Never mind that 80% fall in the middle.

Where is another graph which includes the prices in 2009?

I didn't ask about 2009. 

But after which date do you think a trend is relevant?

A trend is relevant when it contains relevant data.  To most people, data from 2010 isn't relevant as they didn't mine and didn't purchase bitcoins during that time.  There would be relatively few people with large holdings of bitcoins purchased or mined at cents per bitcoin.

You know what they say about statistics and lies.  It's possible to make almost anything look good.  I have yet to see someone quote a share's price on a log graph to show price trends.

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[phelix]

And so far the death of the long-term trend has been greatly exaggerated...  

Why does the graph start in August 2010, when hardly anyone was using bitcoins and very few people even knew about them?  Why not start the graph in March or April 2011 when things really got going and bitcoins became popular?  August 2010 is an arbitrary date designed to make the long term trend look great.  Never mind that 80% fall in the middle.

because that is when the data I have from mtgox starts

[phelix]

Um, what are we looking at here, exactly?

(BTW, I love pylab.imshow, too.  It makes beautiful pictures.  Do you like this pretty graph I made recently?)

price / volume heat map??

I like these heat maps. how did you make it?

[SlaveInDebt]

Now nominating ElectricMucus as our official manipulator.

The trend line is strong with this one. However if it's strength is broken I must agree it's possibly the last psychological barrier before absolute panic.

 *ElectricMucus I feel the same way as you and have "faith" Bitcoins long term trend won't be broken but may the USD protect us all should it fail.

[Frozenace]

I'm looking forward to the extra coinage due to the difficulty fall

[SlaveInDebt]

I'm looking forward to the extra coinage due to the difficulty fall

The whole ~15% decrease in the last ~2 months Haven't been around that long myself (and have done my best to refrain from my useless posting, not saying yours was) but I remember when a 5850 made 3 btc a day. Just 9 months ago one could mine a whole block by them self every other day on a quad core cpu. Who says btc hasn't grown rapidly?

[Frozenace]

I understand what you mean. The highest total hashing rate I remember was around 18 Thash, now it's around 12.

For me, I don't have any immediate need to cash out. Surely, there must be some people who over leveraged themselves (maybe even on credit).

I asked my wife what she would do and she would say, if you think it's worth investing in it, do it over the long run.

[Technomage]

At these prices the difficulty will continue to decrease, slowly but surely. At least for a while.

Anyway, I do think the long term is still good. The price hasn't even stabilized under $5, which would still not be a disaster. Only when the price stabilizes under $4 will I be really worried.

Now, from a long term perspective, it's a good time to buy. It's not guaranteed Bitcoin will succeed so it's a gamble, but it's a smart gamble taking into account everything Bitcoin has potential to do.

[fivebells]

I like these heat maps. how did you make it?

Looks like what you get with pylab/matplotlib, in particular the imshow function.

http://matplotlib.sourceforge.net/users/image_tutorial.html#applying-pseudocolor-schemes-to-image-plots

[grod]

Now, from a long term perspective, it's a good time to buy. It's not guaranteed Bitcoin will succeed so it's a gamble, but it's a smart gamble taking into account everything Bitcoin has potential to do.

No, it's not a smart gamble.  The far smarter gamble is to go along with the trend.  Deposit money you'd use to buy bitcoins and wait until capitulation.   We're still in denial phase of post-bubble psych, when the fear kicks in it'll be time to start looking harder at buying.   When the last bitcoin bulls start throwing in towels is when you buy with half your funds.   Sell half into the post-apocalyptic dead cat bounce, buy again a bit later and THEN hold and accumulate if there's an uptrend.

We're still at near the peaks of hashing power on deepbit.  That means most of the community is still bullish, even if some are mining at a loss vs buying.  There is little to no bear sentiment as prices decline, let alone fear.  That's exactly what you see immediately before a penny stock post-bubble panic.

"I'm in it for the long term no matter what" bagholders are few and far between when you look at successful investors and traders.  Bottom fishing is an artform, and isn't as simple as catching every knife that drops.

[Technomage]

No, it's not a smart gamble.  The far smarter gamble is to go along with the trend.  Deposit money you'd use to buy bitcoins and wait until capitulation.   We're still in denial phase of post-bubble psych, when the fear kicks in it'll be time to start looking harder at buying.   When the last bitcoin bulls start throwing in towels is when you buy with half your funds.   Sell half into the post-apocalyptic dead cat bounce, buy again a bit later and THEN hold and accumulate if there's an uptrend.

We're still at near the peaks of hashing power on deepbit.  That means most of the community is still bullish, even if some are mining at a loss vs buying.  There is little to no bear sentiment as prices decline, let alone fear.  That's exactly what you see immediately before a penny stock post-bubble panic.

"I'm in it for the long term no matter what" bagholders are few and far between when you look at successful investors and traders.  Bottom fishing is an artform, and isn't as simple as catching every knife that drops.

Well, for one I disagree that it has any relevance whatsoever how many miners are still mining, as far as the price is concerned. I mine because it's still profitable to do so. It would require at least a months worth of mining at break even and then a few weeks without profit before I'd actually stop mining. Even then I'd just put my rigs on vacation for a while and wait a month or two before actually selling them. For fiat money. The amount of BTC sold increases because of this by exactly 0 BTC.

As far as speculating on the true bottom, even if your scenario is correct I don't really care. If one is mainly a long-term investor, like me, it's entirely irrelevant if the price drops to $0.1 next week, as long as it's up eventually, even if it takes years. Of course you can argue that I could have made "so much more" by working the market, but working the market and succeeding in it is not free money. It requires time, effort and knowledge. It's not free. As a long-term investor, if I think the long-term future is good, which I still do, then I can just chill out and let it play out.

I did worry a lot more before but recently I've just thought about what Bitcoin is and figured out that it doesn't really matter what the day-to-day, week-to-week or even month-to-month price is. As long as the long term is good I'm just happy to be in, that's it. I can spend my time much more productively by developing the Bitcoin economy than working the market.

I've made a few trading moves and probably will make some in the future if I smell a really clear trend, but right now I see no clear trends and am just chilling out and letting it play out, one way or another.

[old_engineer]

I've made a few trading moves and probably will make some in the future if I smell a really clear trend, but right now I see no clear trends and am just chilling out and letting it play out, one way or another.

Agreed, I'm feeling myself chill out as I've watching bitcoin hover in the $5 range the past week. It's hard to get worked up about small price movements because it just feels like prices are at or near the bottom, and I don't want to get left behind when it does, finally, go up a $1 or $2.  So though I was tempted for like 5 seconds to sell my holdings and re-buy at $4.50, it might never go to $4.50, and so I'm holding.

[grod]

Well, for one I disagree that it has any relevance whatsoever how many miners are still mining, as far as the price is concerned.

That's your stance.  You wouldn't be mining if you expected bitcoin prices to tank, which means since you ARE mining you're bullish on bitcoins prospects.   Ditto 90% of the bitcoin community.

Also, the number of people mining DOES have an effect on the price.  Do you for a minute think $5 would be a "bottom" if difficulty hit 500k?  I know I'd be willing to sell coins for $1.50 at that point.   As soon as BTC get cheap enough that it's not profitable to mine at 1.7 million difficulty at even at 4.6c/kwhr (my rate) you won't see a 5% drop, you will see massive swings in difficulty every 2016 blocks.  500k for 3 days, 2 million for two months.  Repeat.

$6 is the new $9.  Which was the new $11.50.  Which was the new $13.  Which was the new... Well, you get the picture.

[zby]

Well, for one I disagree that it has any relevance whatsoever how many miners are still mining, as far as the price is concerned.

That's your stance.  You wouldn't be mining if you expected bitcoin prices to tank, which means since you ARE mining you're bullish on bitcoins prospects.   Ditto 90% of the bitcoin community.

Also, the number of people mining DOES have an effect on the price.  Do you for a minute think $5 would be a "bottom" if difficulty hit 500k?  I know I'd be willing to sell coins for $1.50 at that point.   As soon as BTC get cheap enough that it's not profitable to mine at 1.7 million difficulty at even at 4.6c/kwhr (my rate) you won't see a 5% drop, you will see massive swings in difficulty every 2016 blocks.  500k for 3 days, 2 million for two months.  Repeat.

$6 is the new $9.  Which was the new $11.50.  Which was the new $13.  Which was the new... Well, you get the picture.

The changes don't happen in days - with normal operation the 2000 blokcs take about two weeks, but if people stop mining - then the change will take longer.  The problem is that if the hashing power drops massively then there will be a long time during which sending bitcoins will be slow.  Not much commerce is going on in bitcoins now - so it is hard to say how much such a speed drop would affect the businesses - but it certainly would further reduce the confidence in the system.

[Technomage]

The changes don't happen in days - with normal operation the 2000 blokcs take about two weeks, but if people stop mining - then the change will take longer.  The problem is that if the hashing power drops massively then there will be a long time during which sending bitcoins will be slow.  Not much commerce is going on in bitcoins now - so it is hard to say how much such a speed drop would affect the businesses - but it certainly would further reduce the confidence in the system.

This is true but I think this scenario is very unlikely. It would require for the price to drop 50% really fast and then stay there for weeks. From the current price, that is. Because mining is still barely profitable for most, with a 50% drop it would become not profitable for most people and then we'd see massive difficulty drops and a big network slowdown. But only if the price stays there.

Much more likely is that the price drops slowly and the difficulty drops with it, and when the price starts going up again the difficulty starts going up as well.

[Technomage]

That's your stance.  You wouldn't be mining if you expected bitcoin prices to tank, which means since you ARE mining you're bullish on bitcoins prospects.   Ditto 90% of the bitcoin community.

My mining or not mining has really nothing to do with the prospects of Bitcoin, at least not right now. Mining is still profitable for me with the current price. When it is break even, then prospects come into the picture. Prospects have more to do with what BTC I sell or don't sell, be it mined coins or bought coins.

I could very well be bullish on Bitcoin long-term even if I have to stop mining. The fact that I'm bullish doesn't mean I believe that Bitcoin's price will skyrocket eventually with 100% certainty. It might not. It definitely might not. Being bullish means I think it's likely, but there's a limit on how much gamble I have in me. That's why I would eventually stop mining at least for a while and wait. Simply mining and increasing my holdings would be nice for the bull in me but there's a hard limit on how much more risk I'll take.

Also, the number of people mining DOES have an effect on the price.  Do you for a minute think $5 would be a "bottom" if difficulty hit 500k?  I know I'd be willing to sell coins for $1.50 at that point.   As soon as BTC get cheap enough that it's not profitable to mine at 1.7 million difficulty at even at 4.6c/kwhr (my rate) you won't see a 5% drop, you will see massive swings in difficulty every 2016 blocks.  500k for 3 days, 2 million for two months.  Repeat.

If difficulty hits 500k it's because the price has dropped significantly, not the other way around. Again the price doesn't increase or decrease specifically because of what miners do, miners mine the same amount of coins regardless and some sell, some don't. Price doesn't matter much regarding what they do. The price moves because the demand drops, investors and traders sell etc.

I have to make one important correction though, that might not be clear from previous posts. Many people are miners and investors at the same time. Or miners and traders. Every time a miner saves a coin for at least mid-term and doesn't sell, that coin is not regarded as a miner effect anymore in my book, that coin has been invested. Thus miners do have a significant effect in total but not nearly all of it as miners, could be as investors or traders as well.

$6 is the new $9.  Which was the new $11.50.  Which was the new $13.  Which was the new... Well, you get the picture.

I get the picture. I also get that the price drop bottoms out when demand meets supply, and the lower we go the more demand increases and supply goes down. The supply isn't going down very fast currently because there are miners like you who sell everything and are happy to sell at the current prices. And on top of that there's still no real uptrend for investors etc. But the supply is going down regardless. With the exception of panic selling, those situations can temporarily increase the supply significantly.

The demand has risen significantly after the price entered the $4-$6 range, which I anticipated. Now it might or might not be enough to stop another drop to below $4 but we'll see. Regardless, the price won't stabilize under $4 in a long time and if it does, it means Bitcoin has long-term issues. This is when I start to get worried, but not before.

Anyway, I think the much more relevant point to why this is happening is insufficient demand, not the fairly stable supply which has always been stable. Demand is the one factor that changes the most and has caused all the ups and downs in Bitcoin's price so far.

[grod]

My mining or not mining has really nothing to do with the prospects of Bitcoin, at least not right now. Mining is still profitable for me with the current price. When it is break even, then prospects come into the picture. Prospects have more to do with what BTC I sell or don't sell, be it mined coins or bought coins.

Do you sell your coins as soon as you mine them?  I think I know the answer to that one.   Like most miners you are bullish on the future prospects, being profitable (on paper) assumes price does not decline.  That's a bullish sentiment.

If difficulty hits 500k it's because the price has dropped significantly, not the other way around. Again the price doesn't increase or decrease specifically because of what miners do, miners mine the same amount of coins regardless and some sell, some don't. Price doesn't matter much regarding what they do. The price moves because the demand drops, investors and traders sell etc.

Difficulty follows price and price is affected by difficulty.  I've gone over this a million times.   When the cost to produce bitcions is 1/10th the cost of direct buying people have opted to invest in mining gear instead of buying, driving up difficulty and driving down the price.

I have to make one important correction though, that might not be clear from previous posts. Many people are miners and investors at the same time. Or miners and traders. Every time a miner saves a coin for at least mid-term and doesn't sell, that coin is not regarded as a miner effect anymore in my book, that coin has been invested. Thus miners do have a significant effect in total but not nearly all of it as miners, could be as investors or traders as well.

NOW you get it!  Miners who don't sell immediately are speculators.  That's why I try to understand the miner community mindset, it's a good proxy for the entire bitcoin mental state which is far harder to measure objectively.

Anyway, I think the much more relevant point to why this is happening is insufficient demand, not the fairly stable supply which has always been stable. Demand is the one factor that changes the most and has caused all the ups and downs in Bitcoin's price so far.

Exactly.  Bitcoin value is determined 100% by speculative sentiment.  Bitcoin does not generate any revenue directly, it's impossible to project an ROI or P/E since there ARE no earnings.  Nothing has changed since the $32 speculative bubble high, but the network does have a cost of $24,000 a day to run.  Some portion of that money does come from $ already invested and the rest comes from people "breaking even" on paper.

We are literally one 'early adopter' (read: someone who heard of bitcoins six months before I did) deciding they want a nice car or house away from shaving 50% off of bitcoin.   Going back to $10 (never mind $30) will take a lot more than that.

[zby]

Exactly.  Bitcoin value is determined 100% by speculative sentiment.  Bitcoin does not generate any revenue directly, it's impossible to project an ROI or P/E since there ARE no earnings. 

To be precise there are probably some earnings by the Silk Road folks - but I guess this is not significant in any way.

[Technomage]

NOW you get it!  Miners who don't sell immediately are speculators.  That's why I try to understand the miner community mindset, it's a good proxy for the entire bitcoin mental state which is far harder to measure objectively.

Well, I think I got it before as well. I feel this has mostly been a semantic issue.

...Nothing has changed since the $32 speculative bubble high...

A lot has changed. Bitcoin is known by a massively larger number of people than it was before the bubble. It's still fairly small but it has gotten way bigger. For the price this means that there is in general much more demand than there was before, even though the bubble from the hype was massive.

But a lot of small investors know about it at least and even some big players, which does make it very unlikely for the price to go very low (by very low I mean where it was in the beginning of this year when Bitcoin was still mostly unknown).

At the same time we've seen massive growth in the number of small businesses, especially online businesses, starting to accept Bitcoins. The list is not just slightly bigger, it is a lot bigger. All kinds of usages have come up, for example it is used in a pirate World of Warcraft server with thousands of players, as the main currency to buy stuff. We even have some physical stores accepting Bitcoin these days. A lot has changed. But this is likely to be just the beginning. One year from now and we'll see Bitcoin on another level entirely.

This is assuming that Bitcoin stays legal and the technical fundamentals stay robust. As long as this is true I'm quite sure Bitcoin will succeed at least as a niche currency. Which is fine enough for me.

[Gerken]

NOW you get it!  Miners who don't sell immediately are speculators.  That's why I try to understand the miner community mindset, it's a good proxy for the entire bitcoin mental state which is far harder to measure objectively.

Well, I think I got it before as well. I feel this has mostly been a semantic issue.

...Nothing has changed since the $32 speculative bubble high...

A lot has changed. Bitcoin is known by a massively larger number of people than it was before the bubble. It's still fairly small but it has gotten way bigger. For the price this means that there is in general much more demand than there was before, even though the bubble from the hype was massive.

But a lot of small investors know about it at least and even some big players, which does make it very unlikely for the price to go very low (by very low I mean where it was in the beginning of this year when Bitcoin was still mostly unknown).

At the same time we've seen massive growth in the number of small businesses, especially online businesses, starting to accept Bitcoins. The list is not just slightly bigger, it is a lot bigger. All kinds of usages have come up, for example it is used in a pirate World of Warcraft server with thousands of players, as the main currency to buy stuff. We even have some physical stores accepting Bitcoin these days. A lot has changed. But this is likely to be just the beginning. One year from now and we'll see Bitcoin on another level entirely.

This is assuming that Bitcoin stays legal and the technical fundamentals stay robust. As long as this is true I'm quite sure Bitcoin will succeed at least as a niche currency. Which is fine enough for me.

Weren't you the same one saying there was no way bitcoins could stay below 5 dollars for a period of time?