Major correction to rally coming...

[cypherdoc]

I'm going to tentatively say that we might see something interesting at 8 PM EST.  Don't be disappointed if this doesn't play out the way I expect it to, but something might happen.

Today's been an interesting day... I swear I didn't have insider knowledge xD

didn't you say something was going to happen at 8pm?  you didn't say the price was going UP!

[cypherdoc]

I hate to say I told you so. Actually, no... I love it.
Get your bitcoins out of this bucket shop now, while you still can.

you did say so.

[Shashi Yakuza]

"Curiouser and curiouser!" cried Alice...

[bitcoinBull]

A correction is coming, but it will be from closer to $10, back down towards the new support (which will be the old resistance that we are facing now: $5).

The pattern since the 20th, broke out of a symmetric triangle (itself a continuation pattern), and has formed an ascending triangle (an even stronger continuation pattern).  So the indicator is that the trend will continue, and by now its pretty obvious what the trend is.

[molecular]

If the price ever gets to parity again and there is the right market in place, I would think you would see an explosion in the use of bitcoins.

Why would the price itself (as opposed to maybe it's steadyness) have an effect on peoples decision to use bitcoin? It doesn't matter if you buy 1 BTC for $10 and then use 1 BTC to buy gardening supplies as opposed to buying 10 BTC for $10 to get the same amount of gardening supplies.

What you say sounds to me like: "we need to inflate the money supply to support a growing economy", which is total bullshit.

Any amount of money can support any size of economy as long as divisibilty of the money is given (which is clearly the case for bitcoin).

Demand for "money" (don't confuse with demand for wealth, which always exists), in the sense that people need more liquid buying power to be able to do more substantial transactions whenever they please, will automatically lead to lower price levels (of goods and services), because people will reduce their demand for goods (save some money) or even sell goods (acquire some money). This mechanism (essentially a feedback loop that regulates the price of money) allowed the gold standard (essentially limited amount of money) to be so successful in supporting a growing economy at various times and in various places throughout history.

[Gabi]

You forget the simple fact that bitcoins are limited. If price is 10$, it means a small number of ppl use bitcoin. If more ppl use it and buy them, their price MUST increase

[zhoutong]

If the price ever gets to parity again and there is the right market in place, I would think you would see an explosion in the use of bitcoins.

Why would the price itself (as opposed to maybe it's steadyness) have an effect on peoples decision to use bitcoin? It doesn't matter if you buy 1 BTC for $10 and then use 1 BTC to buy gardening supplies as opposed to buying 10 BTC for $10 to get the same amount of gardening supplies.

What you say sounds to me like: "we need to inflate the money supply to support a growing economy", which is total bullshit.

Any amount of money can support any size of economy as long as divisibilty of the money is given (which is clearly the case for bitcoin).

Demand for "money" (don't confuse with demand for wealth, which always exists), in the sense that people need more liquid buying power to be able to do more substantial transactions whenever they please, will automatically lead to lower price levels (of goods and services), because people will reduce their demand for goods (save some money) or even sell goods (acquire some money). This mechanism (essentially a feedback loop that regulates the price of money) allowed the gold standard (essentially limited amount of money) to be so successful in supporting a growing economy at various times and in various places throughout history.

Fact: Any amount of money can support any size of economy.
Fallacy: Any change in money supply can support any growth of economy.

[old_engineer]

I wouldn't be surprised at a correction down to $3 or even below in the next couple weeks, though I don't think it's likely.

Zhoutong has said that most of his users are long right now, and I presume this is on the order of tens of thousands of coins.

If there were a 30k btc dump down to $3.80, liquidation of 10-to-1 leveraged longs would start, which might drop the price to $3.50 - $3.60 range. There's very little support under $3.50, with only 5k btc between $3.21 and $3.49.  If the price does managed to break $3.60 or so, the spread would start liquidating 5-to-1 leveraged longs taken at $4.20, and would certainly drive the price to $3.00-$3.10 given the shallow support below $3.50.

There's another 70k btc in bids between $3 and $2.  If $2.50 is breached from panic selling, recently taken 2.5-to-1 long leveraged positions would start being liquidated, and would push the price close to $2.  It would be an epic mess.

For whatever it's worth, I'm mostly in USD right now, and have bids in the $2-$3 range to catch the dagger on the offchance it falls.  I hope it doesn't, but I really have no idea what's going to happen next.

[panerai]

I wouldn't be surprised at a correction down to $3 or even below in the next couple weeks, though I don't think it's likely.

Zhoutong has said that most of his users are long right now, and I presume this is on the order of tens of thousands of coins.

If there were a 30k btc dump down to $3.80, liquidation of 10-to-1 leveraged longs would start, which might drop the price to $3.50 - $3.60 range. There's very little support under $3.50, with only 5k btc between $3.21 and $3.49.  If the price does managed to break $3.60 or so, the spread would start liquidating 5-to-1 leveraged longs taken at $4.20, and would certainly drive the price to $3.00-$3.10 given the shallow support below $3.50.

There's another 70k btc in bids between $3 and $2.  If $2.50 is breached from panic selling, recently taken 2.5-to-1 long leveraged positions would start being liquidated, and would push the price close to $2.  It would be an epic mess.

For whatever it's worth, I'm mostly in USD right now, and have bids in the $2-$3 range to catch the dagger on the offchance it falls.  I hope it doesn't, but I really have no idea what's going to happen next.

[old_engineer]

I wouldn't be surprised at a correction down to $3 or even below in the next couple weeks, though I don't think it's likely.

Zhoutong has said that most of his users are long right now, and I presume this is on the order of tens of thousands of coins.

If there were a 30k btc dump down to $3.80, liquidation of 10-to-1 leveraged longs would start, which might drop the price to $3.50 - $3.60 range. There's very little support under $3.50, with only 5k btc between $3.21 and $3.49.  If the price does managed to break $3.60 or so, the spread would start liquidating 5-to-1 leveraged longs taken at $4.20, and would certainly drive the price to $3.00-$3.10 given the shallow support below $3.50.

There's another 70k btc in bids between $3 and $2.  If $2.50 is breached from panic selling, recently taken 2.5-to-1 long leveraged positions would start being liquidated, and would push the price close to $2.  It would be an epic mess.

For whatever it's worth, I'm mostly in USD right now, and have bids in the $2-$3 range to catch the dagger on the offchance it falls.  I hope it doesn't, but I really have no idea what's going to happen next.

I should add that if there were a 30k btc buy instead of a 30k btc sell, a short squeeze would drive the price straight to $5.  Basically, any big move is amplified due to rampant leveraging combined with irrational exuberance and irrational bearishness (Nagleism?).  I think it's worth keeping this fundamental in mind when placing your bet.

[bitcoinBull]

I'm glad to hear that some people cashing out and holding USD right now.  We'll have these conservative, impatient traders to thank for pushing this thing past $5 as they're chasing the rally (if we rally, that is).

[714]

Zhoutong has said that most of his users are long right now, and I presume this is on the order of tens of thousands of coins.

Based on a little correspondence with Zhoutong I have no reason to be overly critical. In fact I had a very good customer service experience with him with regard to a short liquidation that seemed overpriced. His explanation was honest and informative as were the actions he took to address the matter. I couldn't give him anything less than a grade of A on this particular situation along with hearty encouragement to keep up the good work.

However, IMO he should probably tread carefully around making statements such as the above, assuming he actually did. It would be best to either keep the pool dark and the customer's positions private, or to make systematic disclosures in a consistent fashion visible to the entire customer base through the web site. Statements like "most of his users are long right now" are not particularly helpful without quantitative grounding and worst case could certainly be construed as attempts at manipulation.

In this example, on the one hand one could conclude that there's a lot of coins long as you do. On the other hand. the net customer positions at any brokerage are nearly always going to be long, except in the specific cases of securities that are heavily shorted. The statement could therefore be entirely true and also quite devoid of useful meaning.

One of the basic principles of successfully handing out financial analysis is to always have an explanation no matter what may actually happen. If you follow the U.S. stock market you may know of a fellow named James Cramer, he's a master of this. He often has 2 or 3 explanations such that one can be dredged up to support just about any viewpoint or outcome. At the same time he's well known for a track record that has been flat over time. Since he makes his living not from investing but as a sort of entertainer/stand up comedian/raconteur this is ideal, it makes any suggestion of manipulation hard to substantiate. He's a crafty little bastard, and no one should take him seriously other than as a data point regarding a certain type of hustle 

[notme]

That his customers were long was disclosed by Zhoutong last night after bitcoinica ran out of USD.  I for one am boycotting Bitcoinica until they move away from fractional reserve and hold assets to back every position.  Regarding disclosure, I would prefer the long vs. short balance updated in real time on the site, but I will not boycott for that if they solve the backing issue.  With realtime long/short balance users would know if they were taking a position that had a large risk of being squeezed.

[trogdorjw73]

That his customers were long was disclosed by Zhoutong last night after bitcoinica ran out of USD.  I for one am boycotting Bitcoinica until they move away from fractional reserve and hold assets to back every position.  Regarding disclosure, I would prefer the long vs. short balance updated in real time on the site, but I will not boycott for that if they solve the backing issue.  With realtime long/short balance users would know if they were taking a position that had a large risk of being squeezed.

I believe even without him confirming it (though he almost had to given the "reserve error"), anyone with half a brain could guess most people on Bitcoinica were long and that was why they ran out of funds. Anyway, I'm sticking to regular MtGox trading now; my attempts at using Bitcoinica have been unsuccessful, and leverage means I lost more money than if I had just "gambled" on MtGox.

[714]

That his customers were long was disclosed by Zhoutong last night after bitcoinica ran out of USD.  I for one am boycotting Bitcoinica until they move away from fractional reserve and hold assets to back every position.  Regarding disclosure, I would prefer the long vs. short balance updated in real time on the site, but I will not boycott for that if they solve the backing issue.  With realtime long/short balance users would know if they were taking a position that had a large risk of being squeezed.

I believe even without him confirming it (though he almost had to given the "reserve error"), anyone with half a brain could guess most people on Bitcoinica were long and that was why they ran out of funds. Anyway, I'm sticking to regular MtGox trading now; my attempts at using Bitcoinica have been unsuccessful, and leverage means I lost more money than if I had just "gambled" on MtGox.

Fair enough. Here at the Church of Whatever Amuses Right Now, Bitcoinica is still the most interesting game in Bitcoinsville. Of course that can change in a New York minute. A few years ago Etrade jerked my chain the wrong way when I was stuck with a captive account there, later on it was with great pleasure I eventually took them out for a nice little drive in the country and buried the relationship in an unmarked grave, but not before I checked for harvestable gold teeth 

[zby]

That his customers were long was disclosed by Zhoutong last night after bitcoinica ran out of USD.  I for one am boycotting Bitcoinica until they move away from fractional reserve and hold assets to back every position.  Regarding disclosure, I would prefer the long vs. short balance updated in real time on the site, but I will not boycott for that if they solve the backing issue.  With realtime long/short balance users would know if they were taking a position that had a large risk of being squeezed.

Why do you think they do fractional reserve?  Zhoutong has denied this many times - is he lying?  As to the USD shortage - this is easily explained without any conspiracy - when people want to go long on Bitcoinica, Bitcoinica needs to buy BTC on MtGox with their USD funds and those funds are not unlimited - so when they are drained they refuse to let people go long.  This is a result of them not wanting to have uncovered positions - quite the opposite of what you are suggesting.

By they way I hate Bitcoinica for the volatility it produces.

[714]

By they way I hate Bitcoinica for the volatility it produces.

Thanks for the smile, please share it. Maybe you and this guy oughta leg wrestle and put it on YouTube 

Heck, I'd throw a few bitcoins to see that, this could go big, maybe even Pay-Per-View big 

https://bitcointalk.org/index.php?topic=54390.msg649199#msg649199

[mjcmurfy]

I'm glad to hear that some people cashing out and holding USD right now.  We'll have these conservative, impatient traders to thank for pushing this thing past $5 as they're chasing the rally (if we rally, that is).

Conservative, impatient traders? Isn't that a bit of an oxymoron?
To me, it seems just as likely that those who are holding btc will end up pushing the price down further when they sell into a falling market.
Oh and if we rally? What do you think has been happening for the past 30+ days?

[old_engineer]

However, IMO he should probably tread carefully around making statements such as the above, assuming he actually did. It would be best to either keep the pool dark and the customer's positions private, or to make systematic disclosures in a consistent fashion visible to the entire customer base through the web site. Statements like "most of his users are long right now" are not particularly helpful without quantitative grounding and worst case could certainly be construed as attempts at manipulation.

What he said was this:

When Bitcoinica was first built, we included a circuit breaker feature to stop trading at one direction when we are out of USD or BTC. However, it has almost never been triggered until today.

Unfortunately, we have a lot of long positions are we're currently unable to fulfill everyone's request to buy. Even though we do not want to interrupt regular market trading activity, we have no case because we don't want to be trading against our customers in this extreme situation.

Liquidation of short positions is also affected but we had no choice. Withdrawal in USD is obviously, also affected. When some more people decided to liquidate their long positions or go short, or more USD funds are deposited, we will adjust the redflag accordingly to allow buying trades.

If he'd been craftier, he may have been able to communicate that there was a temporary problem without revealed this interesting bit of market data about market longs.  But people would have, well, speculated about the reason, so it was likely fruitless to lie about the reason.

But I think you're right that his website would have been a better place for the explanation.  Then again, someone else on this forum wrote up a "How Bitcoinica Works" document for him, something that should have been written long ago & made available at bitcoinica.com, so at least he's consistent about posting info here. Alas, a number of interesting tidbits of market information are only found on this forum, or on IRC as a results of semi-random MagicalTux comments. Then again, the market is so small, it's almost like non-arms-length transactions: there's only a few dozen folks that really have their hands up in this beast.

In this example, on the one hand one could conclude that there's a lot of coins long as you do. On the other hand. the net customer positions at any brokerage are nearly always going to be long, except in the specific cases of securities that are heavily shorted. The statement could therefore be entirely true and also quite devoid of useful meaning.

As this is the first time Bitcoinica has run out of money, it appears quite meaningful.  One would hope that they've amassed some profits from their operations since their grand opening several moons ago, and that they have more capital on hand now than they've ever had before, and yet, they still ran out of cash.

One of the basic principles of successfully handing out financial analysis is to always have an explanation no matter what may actually happen. If you follow the U.S. stock market you may know of a fellow named James Cramer, he's a master of this. He often has 2 or 3 explanations such that one can be dredged up to support just about any viewpoint or outcome. At the same time he's well known for a track record that has been flat over time. Since he makes his living not from investing but as a sort of entertainer/stand up comedian/raconteur this is ideal, it makes any suggestion of manipulation hard to substantiate. He's a crafty little bastard, and no one should take him seriously other than as a data point regarding a certain type of hustle 

Ah yes, I've seen him, entertaining chap, and I don't believe a word he says.  Reminds me of how the nightly local newscast pronounces any movement of the stock market, up or down, to be the result of a single, easy to articulate reason, like "inflation fears" or "sunspots".

[ineededausername]

I wouldn't be surprised at a correction down to $3 or even below in the next couple weeks, though I don't think it's likely.

Zhoutong has said that most of his users are long right now, and I presume this is on the order of tens of thousands of coins.

If there were a 30k btc dump down to $3.80, liquidation of 10-to-1 leveraged longs would start, which might drop the price to $3.50 - $3.60 range. There's very little support under $3.50, with only 5k btc between $3.21 and $3.49.  If the price does managed to break $3.60 or so, the spread would start liquidating 5-to-1 leveraged longs taken at $4.20, and would certainly drive the price to $3.00-$3.10 given the shallow support below $3.50.

There's another 70k btc in bids between $3 and $2.  If $2.50 is breached from panic selling, recently taken 2.5-to-1 long leveraged positions would start being liquidated, and would push the price close to $2.  It would be an epic mess.

For whatever it's worth, I'm mostly in USD right now, and have bids in the $2-$3 range to catch the dagger on the offchance it falls.  I hope it doesn't, but I really have no idea what's going to happen next.

I should add that if there were a 30k btc buy instead of a 30k btc sell, a short squeeze would drive the price straight to $5.  Basically, any big move is amplified due to rampant leveraging combined with irrational exuberance and irrational bearishness (Nagleism?).  I think it's worth keeping this fundamental in mind when placing your bet.

How would you have a short squeeze when zhoutong's out of money?