3 is the magic number, and the magic number is 3

[dree12]

My prediction: prices won't go above $4 this year. But remember months ago when 10k-30k coins would often be dropped on the market by a single sell order, crashing the market?  It seemed like a weekly occurrence back then, but I can't remember the last time that happened.  But we still have 10k-30k bitcoin buys every week or so.

You may be right that BTCUSD may hold below 4 $ for a bit more, but in the next 1-12 weeks (yes, I know it's a broad range) we will see a rise into the 6 (edit)-10 $ range.

What happened to the shortterm being down? Also, what is so convincing that bitcoin will increase 100% in value in the next twelve weeks, an average of over 0.8% a day?!

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[old_engineer]

I used the term 'damage' completely figuratively and not at all pejoratively.  Just meaning that it is of a magnitude such that it could have a noticeable impact.  I'm a fairly serious speculator as well and concur that such a class of participants could end up having a positive impact on the monetary system if it survives.

Ah, my misunderstanding.  It seems about time for things to settle down, and the ideal currency (in my mind) is a boring one that just works.

I'm with here on all fronts I think (though I'm certainly not putting up 100's of grand) and appreciate your efforts.  By happenstance I did do a recent one at $3.00, but whoever has the 20k BTC on the block at Tradehill right now is calling the tune on that exchange.  I am dying of curiosity about the story behind that block, but there are losta things we will probably never know.

Hah, that's quite the wall over at tradehill, esp. given the size of that exchange.  But what I've found is that large walls are tempting targets, and tend to get chomped up wholesale, which doesn't help reduce volatility.  It's been better to place a number of smaller, staggered orders so that large buyers have to pay a premium for a big buy, and large sellers don't get the best possible price if they sell quickly.  Again, it's been all about reducing volatility.  For big orders, people should be using #bitcoin_otc anyway rather than an exchange.

And nor am I putting up $100k, I've just had a lot of turnover on small-ish trades, and have luckily caught the market a number of times on both sides in the past month, freeing me up to continue trading.  No single trade has been over 500 btc, and no bot, either - the market has been too volatile for me to trust one.

[tvbcof]

I'm with here on all fronts I think (though I'm certainly not putting up 100's of grand) and appreciate your efforts.  By happenstance I did do a recent one at $3.00, but whoever has the 20k BTC on the block at Tradehill right now is calling the tune on that exchange.  I am dying of curiosity about the story behind that block, but there are losta things we will probably never know.

Hah, that's quite the wall over at tradehill, esp. given the size of that exchange.  But what I've found is that large walls are tempting targets, and tend to get chomped up wholesale, which doesn't help reduce volatility.  It's been better to place a number of smaller, staggered orders so that large buyers have to pay a premium for a big buy, and large sellers don't get the best possible price if they sell quickly.  Again, it's been all about reducing volatility.  For big orders, people should be using #bitcoin_otc anyway rather than an exchange.
...

Looks like he moved what's left of it (which is lots) up 10 or 15 cents just now.  I'd only see him move it down, but suspected he may move it up which is why I took a bite this morning.

I think the guy could be dark at those volumes if he wanted to be, but I cannot remember (or never knew) if that was possible on Tradehill.  My hypothesis (probably wrong) is that this is some early adopter who just wants out with limited hassle.  It is my hope that those who are taking a decent position at these post-bubble times will be more rare, and also less likely to be shaken out.  Thus, the currency base will be undergoing a healthy re-distribution.

[old_engineer]

I've been buying when under 3, and selling at over 3 for the past two weeks, and have been doing quite well while also helping to stabilize the market.

I suppose it's appropriate for a virtual currency to settle on an arbitrary whole-number barrier, but it looks to me like 3 is a stable price point: the majority of miners haven't abandoned mining, and speculators have the purchasing power to buy all of the coins sold on the exchanges.

My prediction: prices won't drop below $2 or go above $4 this year.  Instead, what I'd like to see is the bid & ask walls get steeper, so that the market is less volatile when there are large buys or sells.  But remember months ago when 10k-30k coins would often be dropped on the market by a single sell order, crashing the market?  It seemed like a weekly occurrence back then, but I can't remember the last time that happened.  But we still have 10k-30k bitcoin buys every week or so.  Now to see if we can get through the holidays without a big crash.

You may be right that BTCUSD may hold below 4 $ for a bit more, but in the next 1-12 weeks (yes, I know it's a broad range) we will see a rise into the 6 (edit)-10 $ range.

It doesn't look like you're actually disagreeing with me, seeing as how there are only 7 weeks left in the year. 

But more fundamentally, I think you're trying to analyze bitcoin as a stock, whereas I'm trying to look at it from the viewpoint of supply and demand.  If prices are higher, more miners will sell more of their mining proceeds, increasing the supply of coins on the exchanges.  Also, speculators like myself just won't participate in the market at a price above $3, reducing demand.  Finally, those speculators that do participate have less purchasing power at higher bitcoin prices.  These three effects combined effect will retard any rally.

Also, speaking for myself, if the price does approach $4, I'll liquidate my long position into the rally to dampen it.  Likewise, if the price nears $2, I'll send more cash to the exchanges to help soak up the excess coins on the market.

This looks more like the OPEC model of setting prices, not a free market price, and your graphs aren't meaningful when prices are subject to collusion.  Anyone else want to join the Organization of Bitcoin Purchasing Speculators (OBPS)?  Target price is $3 right now, and we could all agree to raise it at some point in the future, perhaps after the holidays, but I'm certainly not going to help with a run-up to $6-$10.

[RandyFolds]

I've been buying when under 3, and selling at over 3 for the past two weeks, and have been doing quite well while also helping to stabilize the market.

I suppose it's appropriate for a virtual currency to settle on an arbitrary whole-number barrier, but it looks to me like 3 is a stable price point: the majority of miners haven't abandoned mining, and speculators have the purchasing power to buy all of the coins sold on the exchanges.

My prediction: prices won't drop below $2 or go above $4 this year.  Instead, what I'd like to see is the bid & ask walls get steeper, so that the market is less volatile when there are large buys or sells.  But remember months ago when 10k-30k coins would often be dropped on the market by a single sell order, crashing the market?  It seemed like a weekly occurrence back then, but I can't remember the last time that happened.  But we still have 10k-30k bitcoin buys every week or so.  Now to see if we can get through the holidays without a big crash.

You may be right that BTCUSD may hold below 4 $ for a bit more, but in the next 1-12 weeks (yes, I know it's a broad range) we will see a rise into the 6 (edit)-10 $ range.

It doesn't look like you're actually disagreeing with me, seeing as how there are only 7 weeks left in the year. 

But more fundamentally, I think you're trying to analyze bitcoin as a stock, whereas I'm trying to look at it from the viewpoint of supply and demand.  If prices are higher, more miners will sell more of their mining proceeds, increasing the supply of coins on the exchanges.  Also, speculators like myself just won't participate in the market at a price above $3, reducing demand.  Finally, those speculators that do participate have less purchasing power at higher bitcoin prices.  These three effects combined effect will retard any rally.

Also, speaking for myself, if the price does approach $4, I'll liquidate my long position into the rally to dampen it.  Likewise, if the price nears $2, I'll send more cash to the exchanges to help soak up the excess coins on the market.

This looks more like the OPEC model of setting prices, not a free market price, and your graphs aren't meaningful when prices are subject to collusion.  Anyone else want to join the Organization of Bitcoin Purchasing Speculators (OBPS)?  Target price is $3 right now, and we could all agree to raise it at some point in the future, perhaps after the holidays, but I'm certainly not going to help with a run-up to $6-$10.

I can groove with $3 all day. I'm in. I already have an appointment to get OBPS tattooed on my neck in old english.

[Litt]

My prediction: prices won't go above $4 this year. But remember months ago when 10k-30k coins would often be dropped on the market by a single sell order, crashing the market?  It seemed like a weekly occurrence back then, but I can't remember the last time that happened.  But we still have 10k-30k bitcoin buys every week or so.

You may be right that BTCUSD may hold below 4 $ for a bit more, but in the next 1-12 weeks (yes, I know it's a broad range) we will see a rise into the 6 (edit)-10 $ range.

What happened to the shortterm being down? Also, what is so convincing that bitcoin will increase 100% in value in the next twelve weeks, an average of over 0.8% a day?!

Does your prediction leaves room within 1-12 weeks to see new price lows before we get to said $6-10 range? Or are you predicting we won't be seeing prices below $3 anymore?  For speculators who will buy the dips and sell the spikes won't care about 12 week out prediction to $10 imo. That type of statement will only get the ones that are fearful of missing the leaving trains so to speak.

But really, if bitcoins were to rise again, and I believe it will, I personally don't mind waiting until the market is showing clear rally signs until I get back in. $3-$50 or $5-50 isn't gonna break me, but $3-1.5 or $3-2 drop is if I'm holding on bitcoins. For that I am patient for now.

I'm sure more advanced traders like old engineer will simply take their profit from dips and spikes and provide liquidity when then market settles in a trading range. For that bitcoins is doing just fine now and I would even argue bot traders prefer current low price and would only like having more volume added during the "stable" periods to improve their profits.

I would also like to make a prediction. Within 12 years bitcoin will be the world reserve currency.   Oh I can only hope.

[S3052]

I've been buying when under 3, and selling at over 3 for the past two weeks, and have been doing quite well while also helping to stabilize the market.

I suppose it's appropriate for a virtual currency to settle on an arbitrary whole-number barrier, but it looks to me like 3 is a stable price point: the majority of miners haven't abandoned mining, and speculators have the purchasing power to buy all of the coins sold on the exchanges.

My prediction: prices won't drop below $2 or go above $4 this year.  Instead, what I'd like to see is the bid & ask walls get steeper, so that the market is less volatile when there are large buys or sells.  But remember months ago when 10k-30k coins would often be dropped on the market by a single sell order, crashing the market?  It seemed like a weekly occurrence back then, but I can't remember the last time that happened.  But we still have 10k-30k bitcoin buys every week or so.  Now to see if we can get through the holidays without a big crash.

You may be right that BTCUSD may hold below 4 $ for a bit more, but in the next 1-12 weeks (yes, I know it's a broad range) we will see a rise into the 6 (edit)-10 $ range.

It doesn't look like you're actually disagreeing with me, seeing as how there are only 7 weeks left in the year. 

But more fundamentally, I think you're trying to analyze bitcoin as a stock, whereas I'm trying to look at it from the viewpoint of supply and demand.  If prices are higher, more miners will sell more of their mining proceeds, increasing the supply of coins on the exchanges.  Also, speculators like myself just won't participate in the market at a price above $3, reducing demand.  Finally, those speculators that do participate have less purchasing power at higher bitcoin prices.  These three effects combined effect will retard any rally.

Also, speaking for myself, if the price does approach $4, I'll liquidate my long position into the rally to dampen it.  Likewise, if the price nears $2, I'll send more cash to the exchanges to help soak up the excess coins on the market.

This looks more like the OPEC model of setting prices, not a free market price, and your graphs aren't meaningful when prices are subject to collusion.  Anyone else want to join the Organization of Bitcoin Purchasing Speculators (OBPS)?  Target price is $3 right now, and we could all agree to raise it at some point in the future, perhaps after the holidays, but I'm certainly not going to help with a run-up to $6-$10.

If the market wants to move in a certain direction, you and a couple of others will not be able to hold it up. Bitcoin is no different to other financial markets from a technical / charting perspective.

[S3052]

My prediction: prices won't go above $4 this year. But remember months ago when 10k-30k coins would often be dropped on the market by a single sell order, crashing the market?  It seemed like a weekly occurrence back then, but I can't remember the last time that happened.  But we still have 10k-30k bitcoin buys every week or so.

You may be right that BTCUSD may hold below 4 $ for a bit more, but in the next 1-12 weeks (yes, I know it's a broad range) we will see a rise into the 6 (edit)-10 $ range.

What happened to the shortterm being down? Also, what is so convincing that bitcoin will increase 100% in value in the next twelve weeks, an average of over 0.8% a day?!

The short term picture offers two alternating views, one up and one down. you have to subscribe to find out more

[michaelmclees]

It would be interesting to see if the largest holders would get together and form a pact.  Everyone will put up a large number of BTC or USD on MtGox and create huge walls.  The mutual promises from the buyers and sellers comes with the stipulation that the bids and offers cannot be withdrawn.

Initially, the spread might be very large, like a large buy order at $2.75 and sell at $3.25.  Someone could work up some kind of algorithm to adjust the spread as appropriate....  Who knows?

[Cluster2k]

The same was said at $5 and $14.

Well, they were wrong, and I'm right - this time it's different!  

Seriously, I think the big difference is that more miners are holding rather than selling, waiting for better prices, and marginal miners have stopped mining.  Volume has been dropping, and the combination of reduced price and reduced volume is allowing speculators like myself to keep up with production.

If many miners are stilling mining yet not selling their bitcoins to cover costs, that will create a massive overhang of bitcoins to sell off should the price move higher.  Anyone waiting for prices to be significantly higher than $3 will be very disappointed.

[PatrickHarnett]

Should we have a secret handshake for the OBPS? How about instead of incrementally rising the price, we set it to follow some complicated formula to give a smooth transition to the price? Perhaps we could throw in a sin function on top of a line so people do not realize what we are doing, it will look like the natural market?

lol

Yesterday I was working on a piece about "orderly trading" and checking various regulatory functions from places like the UK FSA (market stability) and Australian ASIC for market integrity rules.  While we still have games like this, we continue to have disorderly markets.

I did note, in looking at the FSA handbook, that Bitcoin would not call under their definition of electronic money.

[RandyFolds]

I would just like to point out that you have to go back to April to find a one week period that had price swings less than 100%.

Clarify, please. There are plenty of 7-day periods where there was not a 100% swing.

[Vandroiy]

I always wanted to see some of the major players out themselves. Pleased to read from you, old_engineer.

Your trading technique is almost disturbingly similar to mine. I'm not that big, <1% of volume the last 30 days. But I could quote you on so many things. Not using a bot, mostly placing small orders to be executed on price swings, heck, "friction on price" are words I use exactly!

The only thing we disagree on is the idea of setting the price to a round number. I think this is a systematic mistake, so when I have a hunch which way the price *should* be, I prefer pushing away from round numbers, even if it appears risky on the short term. It's nonsensical to expect real BTC price to just happen to be 3.00. Within 30 cent of it, well, could be, but not exactly the magic value. PatrickHarnett's proposal of setting it to a value nobody knows won't help against the fundamental problem: we don't know the real value, and it might change with time.

[nmat]

You actually have to go back to July to find a weekly price differential less than 10%

Note that this was time when lots of topics were stating that the magic number was 14.

[quartz92]

any number is the magic number ;p

[Etlase2]

How with $0.07 do you have a small margin?  Are you using the electricity to arc weld the hashes into aluminum sheets?

At 2.0MH/W & $0.07 per kWh = $1.01 electrical cost per BTC (current difficulty).  66.7% gross margins is barely profitable?
At 2.5MH/W & $0.07 per kWh = $0.80 electrical cost per BTC.

hardware is free?

[old_engineer]

If the market wants to move in a certain direction, you and a couple of others will not be able to hold it up. Bitcoin is no different to other financial markets from a technical / charting perspective.

Imagine if Apple were selling $370 million worth of shares (0.1% of their market cap) every day, including weekends - think that might affect the price significantly?  Of course it would.  That's about 1M new shares every day, and they average 12M shares traded every day.  So far as I know, there's no financial instrument analogue with such significant and continuous inflation & dilution - right?  If so, bitcoin is clearly different in this regard.

And yes, a few people actually can hold up a market this small, if desired, if the price drops to $2.  What a few people _can't_ do is keep the market from getting irrationally exuberant and running up the price temporarily.

[PatrickHarnett]

How with $0.07 do you have a small margin?  Are you using the electricity to arc weld the hashes into aluminum sheets?

At 2.0MH/W & $0.07 per kWh = $1.01 electrical cost per BTC (current difficulty).  66.7% gross margins is barely profitable?
At 2.5MH/W & $0.07 per kWh = $0.80 electrical cost per BTC.

hardware is free?

Of course it is.  Sunk cost economics (either that, or I've been drinking and don't care about the thousands I've spent - mostly before I started mining)

[old_engineer]

Your strategy is very similar to mine. I'm OK with 3 USD/BTC, I actually have bids/asks framing that price right now. I probably have a smaller holding than you right now, but the LIF.CX shares have been selling steadily, so my position is growing.

I'm all out right now - $3.19 was the last sell I had up, which was funded with whomever fulfilled my order for 500 btc at $2.95 just minutes earlier (thanks, whoever that was).  I'm out until the price drops below $3 again, and if it never drops below $3, well, that's fine by me.

Should we have a secret handshake for the OBPS?

A secret handshake sounds great, but since when do virtual currency enthusiasts meet in person?  Maybe more apropos would be to share a secret key and have a challenge/response before you can get into an IRC channel (wait, this sounds a lot like #bitcoin_otc...)

How about instead of incrementally rising the price, we set it to follow some complicated formula to give a smooth transition to the price? Perhaps we could throw in a sin function on top of a line so people do not realize what we are doing, it will look like the natural market?

Hmm... maybe something like $0.01/day?  I'd love to see the price rise as it makes the whole market less subject to manipulation, and it keeps speculators interested.  But I think it's even more important to keep the market from dropping because that turns off vendors.

Ideally, the daily price variability should be < 2%, at which point bitcoin price risk + exchange fees (~1%) would compare favorably to credit card processing fees (3%).  That's the point at which adoption might take off.  When daily variability is 10-50%, bitcoin is just a speculators playground, and useless for actual transactions.

[old_engineer]

I always wanted to see some of the major players out themselves. Pleased to read from you, old_engineer.

Your trading technique is almost disturbingly similar to mine. I'm not that big, <1% of volume the last 30 days. But I could quote you on so many things. Not using a bot, mostly placing small orders to be executed on price swings, heck, "friction on price" are words I use exactly!

You wouldn't happen to also be an engineer dabbling in a new crypto-currency, would you?   There's room for many players, and I'm not active every day even if I were a big player (I don't think I am, really, it just happens to be a big month for me).

The only thing we disagree on is the idea of setting the price to a round number. I think this is a systematic mistake, so when I have a hunch which way the price *should* be, I prefer pushing away from round numbers, even if it appears risky on the short term. It's nonsensical to expect real BTC price to just happen to be 3.00. Within 30 cent of it, well, could be, but not exactly the magic value. PatrickHarnett's proposal of setting it to a value nobody knows won't help against the fundamental problem: we don't know the real value, and it might change with time.

Eh, it's all arbitrary, why not pick an easy to remember number?  Your strategy reminds me of avoiding the cracks when walking down a sidewalk - there seems no logical reason to me to avoid whole numbers, which people intrinsically like.

Ever hear of Benford's law? https://secure.wikimedia.org/wikipedia/en/wiki/Benford%27s_law
It's more likely for the price to end up in the $x.1y range instead of $x.9y range.  Strange but true.  And I guess this argues in favor of your desire to keep away from $3.00+-$0.06 (which would dip into the 2.9x range), and go for something like $3.06 +- $0.06.  Hmm....