How fast will bitcoin recover?

[bittenbob]

I think the calm of the market the last 24 hours has been very strange to say the least. There has been very little actiivty in the way of up or down but we have slowly been trending upwards. The rapid swings of the previous week are much easier to make more bitcoins on lol. Either way I am expecting something big to happen in the next 24 hours.

[Bigpiggy01]

Insert Quote
I think the calm of the market the last 24 hours has been very strange to say the least. There has been very little actiivty in the way of up or down but we have slowly been trending upwards. The rapid swings of the previous week are much easier to make more bitcoins on lol. Either way I am expecting something big to happen in the next 24 hours.

Agreed the main thing is just to wait and see which direction it's going to take. The only thing that has been fairly consistent about bitcoin is that quiet periods lead up to something nice and wild.

[BadBear]

I think the calm of the market the last 24 hours has been very strange to say the least. There has been very little actiivty in the way of up or down but we have slowly been trending upwards. The rapid swings of the previous week are much easier to make more bitcoins on lol. Either way I am expecting something big to happen in the next 24 hours.

There are always periods of stagnancy after big drops.  Then it's usually followed by another big drop. 

[FreeMoney]

Insert Quote
I think the calm of the market the last 24 hours has been very strange to say the least. There has been very little actiivty in the way of up or down but we have slowly been trending upwards. The rapid swings of the previous week are much easier to make more bitcoins on lol. Either way I am expecting something big to happen in the next 24 hours.

Agreed the main thing is just to wait and see which direction it's going to take. The only thing that has been fairly consistent about bitcoin is that quiet periods lead up to something nice and wild.

Crazy huh? Never any storms between storms either.

[Edward50]

I think the calm of the market the last 24 hours has been very strange to say the least. There has been very little actiivty in the way of up or down but we have slowly been trending upwards. The rapid swings of the previous week are much easier to make more bitcoins on lol. Either way I am expecting something big to happen in the next 24 hours.

There are always periods of stagnancy after big drops.  Then it's usually followed by another big drop. 

Exactly, I was going to say the same. This is typical slow up before the next drop. 3 was the last resistance, now we are down to 2.3. One thing you can count on is bitcoin value dropping. It has never let me down since the drop from $30. No matter how much I even thought it would rise.

YOu guys still fail to understand the weak fundamentals of bitcoin if you think we will rise. The only thing keeping a total collapse is the manipulator setting up his huge walls.

[Jonathan Ryan Owens]

I think the calm of the market the last 24 hours has been very strange to say the least. There has been very little actiivty in the way of up or down but we have slowly been trending upwards. The rapid swings of the previous week are much easier to make more bitcoins on lol. Either way I am expecting something big to happen in the next 24 hours.

There are always periods of stagnancy after big drops.  Then it's usually followed by another big drop.  

Exactly, I was going to say the same. This is typical slow up before the next drop. 3 was the last resistance, now we are down to 2.3. One thing you can count on is bitcoin value dropping. It has never let me down since the drop from $30. No matter how much I even thought it would rise.

YOu guys still fail to understand the weak fundamentals of bitcoin if you think we will rise. The only thing keeping a total collapse is the manipulator setting up his huge walls.

If for no other reason than the $14k per day of electricity wasted, I agree.

Bitcoin needs a 'reset' point, where purpose built, structured ASICs are the bulk of network power. There seems to be a very large divergence between Speculators and Miners, and it clearly hasn't dawned on many of you bulls that, the higher the price of Bitcoin, the more you're spending to generate each block.

With no common use, you're just speculating on an abstraction. IN fact, for many of you it would be just as easy to bet back and forth using a completely fictitious currency that you never take delivery of. Virtually none of you actually use Bitcoin as a medium of exchange to purchase goods an services. Instead, you applaud new market entries, products and services available for Bitcoin, but virtually all of you fail to bother to support the very currency that you're so fixated on.

Do you hear that huge sucking sound? That's the outflow of dollars every single day from Miners liquidating 6000+ coins just to cover their massive electric bills. Every day the long term potential of Bitcoin goes down. There are way too many GPUs block mining. If you believe that the network will be less secure at 50% or even 30% of current network power, you need to do more research.

Bitcoin needs to go to $0.5, or possibly lower, and the vast majority of GPU miners need to be pushed out. With a reset point, and FPGA + Structured ASIC development, at least there's a point where, even at $0.5 - $1 or higher that NEWER (non GPU) miners can expect some return, and the outflow of cash from the network to pay utility bills will be 1/40th of what it is today.

GPU mining is one of the reasons we're in this situation. Push the price lower, and bankrupt the majority of miners. It has to happen.

[SaintFlow]

I think the calm of the market the last 24 hours has been very strange to say the least. There has been very little actiivty in the way of up or down but we have slowly been trending upwards. The rapid swings of the previous week are much easier to make more bitcoins on lol. Either way I am expecting something big to happen in the next 24 hours.

There are always periods of stagnancy after big drops.  Then it's usually followed by another big drop.  

Exactly, I was going to say the same. This is typical slow up before the next drop. 3 was the last resistance, now we are down to 2.3. One thing you can count on is bitcoin value dropping. It has never let me down since the drop from $30. No matter how much I even thought it would rise.

YOu guys still fail to understand the weak fundamentals of bitcoin if you think we will rise. The only thing keeping a total collapse is the manipulator setting up his huge walls.
'

If for no other reason than the $14k per day of electricity wasted, I agree.

Bitcoin needs a 'reset' point, where purpose built, structured ASICs are the bulk of network power. There seems to be a very large divergence between Speculators and Miners, and it clearly hasn't dawned on many of you bulls that, the higher the price of Bitcoin, the more you're spending to generate each block.

With no common use, you're just speculating on an abstraction. IN fact, for many of you it would be just as easy to bet back and forth using a completely fictitious currency that you never take delivery of. Virtually none of you actually use Bitcoin as a medium of exchange to purchase goods an services. Instead, you applaud new market entries, products and services available for Bitcoin, but virtually all of you fail to bother to support the very currency that you're so fixated on.

Do you hear that huge sucking sound? That's the outflow of dollars every single day from Miners liquidating 6000+ coins just to cover their massive electric bills. Every day the long term potential of Bitcoin goes down. There are way too many GPUs block mining. If you believe that the network will be less secure at 50% or even 30% of current network power, you need to do more research.

Bitcoin needs to go to $0.5, or possibly lower, and the vast majority of GPU miners need to be pushed out. With a reset point, and FPGA + Structured ASIC development, at least there's a point where, even at $0.5 - $1 or higher that NEWER (non GPU) miners can expect some return, and the outflow of cash from the network to pay utility bills will be 1/40th of what it is today.

GPU mining is one of the reasons we're in this situation. Push the price lower, and bankrupt the majority of miners. It has to happen.

Oh yes yes bankrupt the miners - oh wait I mine.

I agree with the rest of the post.

[Cluster2k]

With no common use, you're just speculating on an abstraction. IN fact, for many of you it would be just as easy to bet back and forth using a completely fictitious currency that you never take delivery of. Virtually none of you actually use Bitcoin as a medium of exchange to purchase goods an services. Instead, you applaud new market entries, products and services available for Bitcoin, but virtually all of you fail to bother to support the very currency that you're so fixated on.

Nailed it in one.  I use bitcoins as a convenient tool for speculation in a completely unregulated market.  It's kinda fun, sometimes.  I don't buy narcotics so haven't availed myself of Silk Road, the one commerce area where bitcoins are clearly superior to other forms of payments.  I don't transfer money internationally either, which is another area where bitcoins can be useful.  As long as the recipient wants bitcoins.  If they want their local currency then the receiver has to go to an exchange to get the cash, introducing delays and fees, and defeating the purpose of the exercise.
[/quote]

GPU mining is one of the reasons we're in this situation. Push the price lower, and bankrupt the majority of miners. It has to happen.

Push too many people out and the whole thing can be killed off.  Bitcoin right now is built on hope: hope that it will become popular and widely used.  Hope that the price will retrace some of its previous highs.

[Jonathan Ryan Owens]

With no common use, you're just speculating on an abstraction. IN fact, for many of you it would be just as easy to bet back and forth using a completely fictitious currency that you never take delivery of. Virtually none of you actually use Bitcoin as a medium of exchange to purchase goods an services. Instead, you applaud new market entries, products and services available for Bitcoin, but virtually all of you fail to bother to support the very currency that you're so fixated on.

Nailed it in one.  I use bitcoins as a convenient tool for speculation in a completely unregulated market.  It's kinda fun, sometimes.  I don't buy narcotics so haven't availed myself of Silk Road, the one commerce area where bitcoins are clearly superior to other forms of payments.  I don't transfer money internationally either, which is another area where bitcoins can be useful.  As long as the recipient wants bitcoins.  If they want their local currency then the receiver has to go to an exchange to get the cash, introducing delays and fees, and defeating the purpose of the exercise.

GPU mining is one of the reasons we're in this situation. Push the price lower, and bankrupt the majority of miners. It has to happen.

Push too many people out and the whole thing can be killed off.  Bitcoin right now is built on hope: hope that it will become popular and widely used.  Hope that the price will retrace some of its previous highs.

Any business/project built on hope without acknowledgement of economic realities is doomed to fail.

I look forward to 70% of miners falling off the cliff, because I acknowledge the reality, and I actually want Bitcoin to succeed. Unlike many speculators and vile libertarian blowhards, there's a few of us who actually understand both the economic and technical underpinnings of Bitcoin, and see the current state of affairs as an incredibly illogical race to the bottom. Too many speculators, FAR too many miners and virtually none of you supporting businesses accepting Bitcoin, unless they're helping you to speculate, or move your money for speculation.

I give Bitcoin a 25% chance of succeeding past 3 months if there aren't real structural changes in the way this community operates.

That huge sucking sound you hear? It's also 80% of this forum.

[Vandroiy]

If for no other reason than the $14k per day of electricity wasted, I agree.

Bitcoin needs a 'reset' point, where purpose built, structured ASICs are the bulk of network power. There seems to be a very large divergence between Speculators and Miners, and it clearly hasn't dawned on many of you bulls that, the higher the price of Bitcoin, the more you're spending to generate each block.

(... two more paragraphs on mining, ASIC, asdf...)

GPU mining is one of the reasons we're in this situation. Push the price lower, and bankrupt the majority of miners. It has to happen.

When will people understand that a speculator does not care whom he buys his coins from? The details of mining are irrelevant to the valuation of Bitcoin. There are 21M BTC maximum, that is all we need to know. For whatever reason Mr. whoever sells them at 200% loss or 10000% profit is a question of the past which, aside from psychological details, has negligible effect on the future. If anything, volatility can increase if the ones holding are bad speculators, but that's a good thing for people wanting to speculate.

The "price follows difficulty" nonsense does not get any better when fuzzy extras are added. This should be common knowledge, or at least obvious.

I give Bitcoin a 25% chance of succeeding past 3 months if there aren't real structural changes in the way this community operates.

And I, as one aggressive bull, never admitted to giving Bitcoin a >25% success chance over all scenarios. Depending on how you estimate a success scenario's market size, the quoted statement is quite bullish -- you give Bitcoin 25% without real structural changes? Now that's one positive attitude. I bought BTC and still find that statement too optimistic. The chances of structural change are not that low, if that gives another 20%, we'd end up at >45% success probability. Enormous! At an expectation value 80% above current, which assumes a factor 3 in a 45% long-term success (2-4 year) case and total loss on the 55%, a Kelly Bet on that would mean buying in with 25% of your speculation money right now! And you know a factor three isn't the limit for Bitcoin, eh?

inb4 "But I only give it a 5% chance of succeeding past 4 months" -- I hope that wasn't the point of the post.

I mainly bet on the chance of some digital market on the planet being cornered and evading into Bitcoin at some point, and the fact that other speculators will pay for infrastructure the moment they find enough seeds of such markets. It's the old investor's tactic; nobody knows which, but one of them is likely to sprout.

[Technomage]

Good post Vandroiy. I find it absolutely hilarious that Jonathan Ryan Owens claims he's one of the few chosen ones who understand the economics of Bitcoin. Yet what he's saying is absolute nonsense. It's obvious for everyone that there are way too many miners for the current price/difficulty. Pretty much the only way mining is directly profitable right now is if you pay static electricity bills which means that either everyone has that benefit or many miners are waiting for the price to increase, eventually.

That much is obvious. What apparently isn't obvious to everyone is that the amount of miners there are has no effect on price. Let me repeat that, it has zero, zilch, nada, no effect. The amount of new Bitcoins is always the same and doesn't depend on the amount of miners. Now one could claim that the miners sell more when the market mindset is something, and less when it's something else etc. but that's just speculation. My opinion on this is that miners actually don't sell a lot right now in addition to what they have to sell for costs.

This opinion is based on the fact that I'm a miner myself and I know a lot of miners who have different mindsets related to what's happening with Bitcoin's price and future development. But what they have in common is that most of them are holding a lot right now because they see selling as very unattractive and it's not going to get more attractive if the price goes to $1.x, that's for sure. I've personally followed a 50/50 plan of some sort from the start, but right now I'm actually for the first time following a 100% hold plan for the coins I mine. This is because I don't need to sell to cover any costs at the moment and because I value BTC more than fiat, at least with this price.

[Technomage]

Unlike the amount of miners, terms such as speculative demand and trade demand are very relevant as far as Bitcoin economics are concerned. It's obvious to almost everyone that the price of one Bitcoin is still mostly supported by speculative demand, because the real trade demand is small. But as long as Bitcoin is alive and well, there is not going to be a situation where the speculative demand is at 0. This means that the price will never be even close to the value that's only supported by trade demand.

If we assume that the real trade demand could support a price in the range between $0.1 and $0.5, which I think is a realistic assumption, it's easy to see how much stronger the support becomes at $2, compared to $4 or an even higher price. What we're seeing now is the bottom, or if not the bottom, something close to the bottom. Speculative demand is not going to 0 unless Bitcoin fundamentals get broken somehow.

My only expectation and hope for Bitcoin right now is that it finds a bottom which holds. A currency isn't very useful if it's effectively in hyperinflation. But I know we're very close to this point right now. I don't count miniscule overshoots in one exchange as a real break, which means that $2 has held for three times now. Anytime the price goes to $2 it seems the sellers lose interest, which means that the selling pressure has mostly been speculative and has very little to do with people actually wanting to quit Bitcoin.

It's still possible that $2 breaks and if it breaks decisively, we might see another major drop in speculative demand (and consequently an increase in speculative selling) which could drop the price to $1.5 or even lower. But right now triple bottom is more probable in my opinion, simply because it has already been very hard to break $2 and now there are pretty much the biggest bid walls we have ever seen, fake or not.

[BadBear]

Not sure why you think miners holding is a good thing, because as soon as there is any rally of some sort, they are going to start selling, and as soon as the price starts dropping everyone will want to cash out before the next drop.  Most miners I know ride the waves and sell when they can. 

And it's hard for me to take Technomages posts seriously when talking about bottoms/how it can't go any lower, because he said the same thing so many times on the way down. 

[Jonathan Ryan Owens]

[/flash]

Good post Vandroiy. I find it absolutely hilarious that Jonathan Ryan Owens claims he's one of the few chosen ones who understand the economics of Bitcoin. Yet what he's saying is absolute nonsense. It's obvious for everyone that there are way too many miners for the current price/difficulty. Pretty much the only way mining is directly profitable right now is if you pay static electricity bills which means that either everyone has that benefit or many miners are waiting for the price to increase, eventually.

That much is obvious. What apparently isn't obvious to everyone is that the amount of miners there are has no effect on price. Let me repeat that, it has zero, zilch, nada, no effect. The amount of new Bitcoins is always the same and doesn't depend on the amount of miners. Now one could claim that the miners sell more when the market mindset is something, and less when it's something else etc. but that's just speculation. My opinion on this is that miners actually don't sell a lot right now in addition to what they have to sell for costs.

This opinion is based on the fact that I'm a miner myself and I know a lot of miners who have different mindsets related to what's happening with Bitcoin's price and future development. But what they have in common is that most of them are holding a lot right now because they see selling as very unattractive and it's not going to get more attractive if the price goes to $1.x, that's for sure. I've personally followed a 50/50 plan of some sort from the start, but right now I'm actually for the first time following a 100% hold plan for the coins I mine. This is because I don't need to sell to cover any costs at the moment and because I value BTC more than fiat, at least with this price.

What apparently isn't obvious to everyone is that the amount of miners there are has no effect on price. Let me repeat that, it has zero, zilch, nada, no effect.

You insult me with your petulance, but I will reply to you as an adult.

To me, it seems that you demonstrate a lack of grasp on reality, sir, and/or you have completely misunderstood WHY mining power has a direct correlation on price. I fully expect that you'll disregard this reply, but there are many rational people on these boards. I'm answering to your statement for their benefit. You're already a lost cause. Sorry that you've got sunk costs that you'll never get back.

Currently $18k per day is spent on electricity to power the Bitcoin network. The VAST majority of miners are underwater, and running at a loss, or stealing electricity. Bitcoin can not succeed on Mom and Dads power bill.

You want Bitcoin to be at a higher price ONLY because out of the $2.30 that each bitcoin is worth, you and other miners spend $2.8 on electricity for every Bitcoin that is produced. If the cost to generate a bitcoin was $0.5, and the fair market value of bitcoin (established by REAL USE) was $1, you wouldn't be complaining about the price at all.

So, you truly believe that the pressure to pay $500k + in electric bills per month has no effect on the price?

Think about your words again, and consider this:

MOST miners have to sell at least part (if not all) of their bitcoin to cover their bills. This is an outflow of ~$500k / mo. that does nothing to enrich the miners, and saps wealth and value from bitcoin directly through the CONSTANT selling of small amounts of coins on the exchanges.

Period.

Please, prove me wrong. There is no broad utility to Bitcoin at the moment, and if no new coins were generated for the next 2 years, we'd still have too many. Speculators have been subsidizing the cost of the network now for over 6 months, while the vast majority of bitcoin utility is inside of exchanges, where the network itself has little to no use. Your job as a miner is to validate transactions and when you find a block, include the valid transactions into that block. 40 transactions on average per block is pathetic, frankly, and tells me that a price of $2.3 is far too high.

I dunno, I guess we'll probably just have to agree to disagree. I'm sorry you didn't get rich mining, Technomage.

Take care.

-Jonathan

[Technomage]

I have to address a third issue as well which is an insult to people who are actually using Bitcoin and trying to develop the Bitcoin economy, which happens to be the only way we can have true growth, true trade demand. I call bullshit on any claims that the "Bitcoin community is flawed and full of people who care about nothing other than speculation". That is crap. If one uses this particular sub-forum as an indicator, this might make sense, but this sub-forum is not a representation of the Bitcoin community.

The real community is out there developing software, building businesses, arranging conferences and using Bitcoin when they can. Everyone needs to look in the mirror and if the only thing they do for Bitcoin is speculate on the short term, they are actually doing harm to Bitcoin. The more people we have that simply try to buy low and sell high in the short term, the more unstable the price is. I don't want a massive price bubble to form again where at least 95% of demand is speculative, I want the trade demand to grow and speculative demand to remain at reasonable levels.

Step one is a solid bottom, which for now seems to be at $2. If that fails, there will be a solid bottom eventually. After that I don't really want a new bubble mode, much better would be that people focus on growing the economy which is a much more healthy way to raise the price. What I want doesn't matter much though, I fear we're in for another bubble next year.

Regardless, my personal focus related to Bitcoin is less on speculation and more on actual development. I'm well on my way to starting a company that's focused on Bitcoin, the plan right now is to start in February. I see 2012 as the year of Bitcoin, it's going to be one hell of a ride. It'll decide the future of Bitcoin in many ways. I have it as a 99,99% event that Bitcoin survives the next 3 months, nothing can kill it except a serious issue in the underlying technology. Even if we have government crackdown on Bitcoin, it'll still survive. That is not death but it's the death of any mainstream potential. My hopes are that we can work with the governments to keep Bitcoin legal, though.

[kjlimo]

oh that was fast:

http://bitcoincharts.com/charts/bitmarketEUR#rg60zvztgSzm1g10zm2g25

 

Does this mean people actually paid 20 Euros for bitcoins?  wtf... I need to get in the Euro market... heh

[Technomage]

Not sure why you think miners holding is a good thing, because as soon as there is any rally of some sort, they are going to start selling, and as soon as the price starts dropping everyone will want to cash out before the next drop.  Most miners I know ride the waves and sell when they can.

I didn't say it's a good thing. In fact I said the opposite, because miners holding only to sell once the price rises a little is exactly the same as speculators buying and then selling when the price rises. It's just as harmful. But for people like my it's not like that. Once I find a good enough long position I'm not going to sell for small gains. I would sell eventually if there is a massive bubble again but I also have the option of not selling at all and simply using the investments as savings and using them when I need them.

And it's hard for me to take Technomages posts seriously when talking about bottoms/how it can't go any lower, because he said the same thing so many times on the way down.

Let's just say that I've learned a lot along the way and my mistakes have taught me many things. These days I'm more conservative in my predictions. It's so difficult to know anything for sure, that's why I now prefer to use percentages. For example, I feel that a triple bottom is actually the most likely scenario right now, but I don't want to be caught by a surprise if the walls at $2 melt and we take a deep plunge again.

[BadBear]

I can respect that, takes a man to recognize where he went wrong and learn lessons from it. 

[Vandroiy]

It sounds like everyone believes price will drop if miners catch a rally. Why? They'd just stop rising. Dropping to new lows only happens when people sell at a massive loss compared to the last half year, which I hardly find a sane move.

Normally, there is no reason to shoot the other way just because a trend stops. People who follow trends will soon be negligible, because they burn their money against a trivial "buy low, sell high" bot or sane speculators, and any upward correction now would ignite that process on a much larger scale than before.


@Jonathan on Technomage:

The point is that a miner who deliberately does not sell or spend is actually a speculator. It's unlikely that someone lays out a plan to mine and sell at a loss to cover the electricity bill for mining. People who sell at a loss will shut down their mining rigs, not keep them running to crash the market. Nobody wants to continuously pay money to be able to make BTC price drop.

There's a simpler model to the whole thing. Just assume every miner sells eventually. Then, you can just cut out all details about mining and miners from the analysis, and assume a fixed BTC inflow of currently 50 BTC per block. From that perspective, it is completely irrelevant what miners do as long as they don't form a lobby and do a massive move all at once.

[Technomage]

To me, it seems that you demonstrate a lack of grasp on reality, sir, and/or you have completely misunderstood WHY mining power has a direct correlation on price. I fully expect that you'll disregard this reply, but there are many rational people on these boards. I'm answering to your statement for their benefit. You're already a lost cause.

I won't disregard your post because I have valid counters. And I don't think you're a lost cause, not yet at least.

Currently $18k per day is spent on electricity to power the Bitcoin network. The VAST majority of miners are underwater, and running at a loss, or stealing electricity. Bitcoin can not succeed on Mom and Dads power bill.

I understand this and I already said so in my previous post. This is the obvious part, that there are way too many miners for the current price/difficulty.

You want Bitcoin to be at a higher price ONLY because out of the $2.30 that each bitcoin is worth, you and other miners spend $2.8 on electricity for every Bitcoin that is produced. If the cost to generate a bitcoin was $0.5, and the fair market value of bitcoin (established by REAL USE) was $1, you wouldn't be complaining about the price at all.

I'm one of the lucky who actually pay a static electricity bill (it's part of the rent) so my thinking process is a bit different. If I had to pay for electricity per usage, I would have probably stopped mining already.

So, you truly believe that the pressure to pay $500k + in electric bills per month has no effect on the price?

Of course it has an effect, but again there are only so many Bitcoins they can sell. The amount they can sell is the same regardless of the electric bill. It's important to understand that most miners are not running a professional mining business with massive electricity costs. Majority of mining power in the network come from small miners who can easily pay their electric bills from other income without selling a single Bitcoin, if they believe in Bitcoin and want to hold them.

MOST miners have to sell at least part (if not all) of their bitcoin to cover their bills. This is an outflow of ~$500k / mo. that does nothing to enrich the miners, and saps wealth and value from bitcoin directly through the CONSTANT selling of small amounts of coins on the exchanges.

Well, if someone out there is using all of their Bitcoin to cover the electricity costs, then that person is an idiot. No one in that situation should be running their mining rigs anymore, not for one second (with one exception, if the person gets enough heating from the rigs to make it profitable). The only justification to mine with a loss is that you pay the electricity with other income and save the Bitcoins with the expectation of future price increase. I don't personally even want another price bubble so if I were mining with a loss I would just stop, period.

Please, prove me wrong. There is no broad utility to Bitcoin at the moment, and if no new coins were generated for the next 2 years, we'd still have too many. Speculators have been subsidizing the cost of the network now for over 6 months, while the vast majority of bitcoin utility is inside of exchanges, where the network itself has little to no use. Your job as a miner is to validate transactions and when you find a block, include the valid transactions into that block. 40 transactions on average per block is pathetic, frankly, and tells me that a price of $2.3 is far too high.

I will try. For instance, there is an important graph which shows the mining cost per transaction. Based on this graph, it looks like we're currently at or near the bottom. http://blockchain.info/charts/cost-per-transaction

From the weekly average chart it's even more clear: http://blockchain.info/charts/cost-per-transaction?showDataPoints=false&timespan=&daysAverageString=7&scale=0

It certainly looks like we've returned to the pre-bubble era of Bitcoin as far as mining is concerned. The bubble has deflated. And there is no reason to believe it's going to go below pre-bubble levels.

Now the second issue you talk about is transactions. This can be quite easily countered looking at the daily transactions graphs: http://www.blockchain.info/charts/n-transactions & http://www.blockchain.info/charts/n-transactions?showDataPoints=false&timespan=&daysAverageString=7&scale=0

These graphs actually have a fairly decent correlation with the price. The transaction bottom for now seems to be 5000 per day and there's even been a small uptrend recently. But looking at the past correlation for 5000 transactions, we are near or at the bottom in price as well. This is all I got for now, hopefully someone else can expand this discussion.