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Author Topic: Why bitcoin is currently (Jan 16th) crashing and why it may continue  (Read 5307 times)
Zotia
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January 16, 2012, 04:22:57 PM
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As you probably know, the "Bitcoin for Dummies" episode was a huge success.  Many people are searching for bitcoin and many people are buying bitcoin.   Because of this, many people are trying to buy on Bitcoinica.  Too many people are trying to buy, so Bitcoinica ran out of reserve.


The way Bitcoinica works when it is in no reserve mode is this:
-if you are neutral (not short, not long), you can ONLY sell
-if you are long, you can ONLY sell
-if you are short, you can buy and sell


This leads to the strange paradox that when so many people are trying to buy, the price will fall.


This is new.

When we went from 2 to 7, Bitcoina did not allow people who were shorting to close their position (by buying), so we had the opposite problem -- when so many people wanted to buy, the price rose EVEN FASTER.  This was because people who had short positions had no choice but to be liquidated, forcing the price up.



Despite there being so much support for Bitcoin right now, we may actually see prices drop faster and faster.
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January 16, 2012, 04:25:40 PM
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Would be interesting to know what kind of money this guy has got as a reserve given it is widely believed he is a teenager.

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January 16, 2012, 04:27:41 PM
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As you probably know, the "Bitcoin for Dummies" episode was a huge success.  Many people are searching for bitcoin and many people are buying bitcoin.   Because of this, many people are trying to buy on Bitcoinica.  Too many people are trying to buy, so Bitcoinica ran out of reserve.


The way Bitcoinica works when it is in no reserve mode is this:
-if you are neutral (not short, not long), you can ONLY sell
-if you are long, you can ONLY sell
-if you are short, you can buy and sell


This leads to the strange paradox that when so many people are trying to buy, the price will fall.


This is new.

When we went from 2 to 7, Bitcoina did not allow people who were shorting to close their position (by buying), so we had the opposite problem -- when so many people wanted to buy, the price rose EVEN FASTER.  This was because people who had short positions had no choice but to be liquidated, forcing the price up.



Despite there being so much support for Bitcoin right now, we may actually see prices drop faster and faster.

As soon as some of the longs are liquidated, those of us who still have some margin held back will catch the knife... I've still got a small long, but I dropped quite a few above 7 so I'll happily stock back up.

https://www.bitcoin.org/bitcoin.pdf
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zhoutong
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January 16, 2012, 04:30:04 PM
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Would be interesting to know what kind of money this guy has got as a reserve given it is widely believed he is a teenager.

Usually 6 digits in USD and 5 digits in Bitcoin.

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January 16, 2012, 04:31:30 PM
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Would be interesting to know what kind of money this guy has got as a reserve given it is widely believed he is a teenager.

Usually 6 digits in USD and 5 digits in Bitcoin.

but not now, huh? Wink
now you have 0 digits in USD probably.

(BFL)^2 < 0
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January 16, 2012, 04:33:11 PM
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Would be interesting to know what kind of money this guy has got as a reserve given it is widely believed he is a teenager.

Usually 6 digits in USD and 5 digits in Bitcoin.

but not now, huh? Wink
now you have 0 digits in USD probably.

We have one digit - zero.


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January 16, 2012, 04:34:00 PM
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This is just spread making and has not got much of anything to do with an actual crash and we all know who makes a buck from spreads  Wink

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January 16, 2012, 04:37:14 PM
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Um, "crashing" ?  Cheesy

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January 16, 2012, 04:41:24 PM
 #9

There is no crash and the consolidation above 6.5 could be a great and one of the last buying opportunites before a breakout.

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January 16, 2012, 04:43:11 PM
 #10

There is no crash and the consolidation above 6.5 could be a great and one of the last buying opportunites before a breakout.

I just wish I could rebuy the coins I dropped above 7 in anticipation of the correction... Bitcoinica sure sucks at times.  Oh well, I'm still long.

If I get lucky, we'll drop enough to liquidate a few longs so I can get back in hard.

https://www.bitcoin.org/bitcoin.pdf
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January 16, 2012, 04:43:45 PM
 #11

You mean it's not because the "Good Wife" writers are now liquidating their positions?

Zotia
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January 16, 2012, 04:45:38 PM
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As soon as some of the longs are liquidated, those of us who still have some margin held back will catch the knife...

That is exactly the problem.

Since so many people want to buy, Bitcoinca will not have reserve until there are less people wanting to buy.

Since there will CONTINUE to be no reserve (because people are trying to catch the knife), this problem will get worse.


When a few more people start shorting, the people who are longing will be liquidated and/or panic.




We already dropped from 7.18 to 6.55 and we still have no reserve.


This problem is only getting worse.

There is no crash and the consolidation above 6.5 could be a great and one of the last buying opportunites before a breakout.
It's not a buying opportunity if there is no reserve.
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January 16, 2012, 04:47:32 PM
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The solution is to get USD directly to MtGox and wait there for some cheap bitcoins when this Bitcoinica "earthshake" appears.

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January 16, 2012, 04:48:35 PM
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As soon as some of the longs are liquidated, those of us who still have some margin held back will catch the knife...

That is exactly the problem.

Since so many people want to buy, Bitcoinca will not have reserve until there are less people wanting to buy.

Since there will CONTINUE to be no reserve (because people are trying to catch the knife), this problem will get worse.


When a few more people start shorting, the people who are longing will be liquidated and/or panic.




We already dropped from 7.18 to 6.55 and we still have no reserve.


This problem is only getting worse.

There is no crash and the consolidation above 6.5 could be a great and one of the last buying opportunites before a breakout.
It's not a buying opportunity if there is no reserve.

I disagree that Bitcoinica is the main source of buying pressure.

https://www.bitcoin.org/bitcoin.pdf
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January 16, 2012, 04:48:46 PM
 #15

I love when people with 40 posts try to educate the rest of us who have been around for months...

I respect the fact that Bitcoinica can have "reserve" issues, but I'm not sure it if will completely cause a "crash."

There are plenty of other exchanges to get bitcoins, and plenty of people with money elsewhere who will continue to level the price out where ever it lands.

CampBX for buying BTCs, Coinbase for selling BTCs or Vircurex or Cryptsy for trading alternate cryptocurrencies like DOGEs

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January 16, 2012, 04:50:31 PM
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Quote
The solution is to get USD directly to MtGox and wait there for some cheap bitcoins when this Bitcoinica "earthshake" appears.


+1 I just wish that their verification process would be a bit faster  Undecided

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January 16, 2012, 04:54:00 PM
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As soon as some of the longs are liquidated, those of us who still have some margin held back will catch the knife...

That is exactly the problem.

Since so many people want to buy, Bitcoinca will not have reserve until there are less people wanting to buy.

Since there will CONTINUE to be no reserve (because people are trying to catch the knife), this problem will get worse.


When a few more people start shorting, the people who are longing will be liquidated and/or panic.




We already dropped from 7.18 to 6.55 and we still have no reserve.


This problem is only getting worse.

There is no crash and the consolidation above 6.5 could be a great and one of the last buying opportunites before a breakout.
It's not a buying opportunity if there is no reserve.

I disagree that Bitcoinica is the main source of buying pressure.

Generally I would have disagreed too. But this time is different. From 6.3-7.0, Bitcoinica was running a spread-free promotion and the hedging volume was over 80% of Mt. Gox's over the same period. Even though I didn't look through trading logs, I'm pretty sure that Bitcoinica was the buying pressure.

But for the crash, I have no comment about it. Again, I reached the conclusion from the data available to you all.

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January 16, 2012, 05:03:44 PM
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I love when people with 40 posts try to educate the rest of us who have been around for months...

I respect the fact that Bitcoinica can have "reserve" issues, but I'm not sure it if will completely cause a "crash."

There are plenty of other exchanges to get bitcoins, and plenty of people with money elsewhere who will continue to level the price out where ever it lands.

Post count != Intelligence
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January 16, 2012, 05:10:53 PM
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I love when people with 40 posts try to educate the rest of us who have been around for months...

I respect the fact that Bitcoinica can have "reserve" issues, but I'm not sure it if will completely cause a "crash."

There are plenty of other exchanges to get bitcoins, and plenty of people with money elsewhere who will continue to level the price out where ever it lands.

Post count != Intelligence

Darn... and here I was thinking I was the 4th smartest person in this thread.

https://www.bitcoin.org/bitcoin.pdf
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Zotia
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January 16, 2012, 05:14:31 PM
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I love when people with 40 posts try to educate the rest of us who have been around for months...
This is new.  During the rally from 2 to 7, Bitcoinica didn't allow people who were shorting to close their positions.  This meant it was VERY risky to attempt to short when there was no reserve.  Now, it is the other way around.


Being around for months doesn't necessarily help you adapt to new situations.
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