Price stickiness at $5 USD/BTC?

[symbols]

So, the exchanges have been keeping a fairly tight band around $5/BTC, I'd like to hear opinions on how much you attribute this to the following factors:


1) Fundamentals: economy is growing at the same rate of the influx of coins from mining so prices stay constant
2) Price stickiness: optimal trade would occur at a different rate but either hoarding or excessive selling is keeping the price up or down
3) Price comfort: easy to think of bitcoin rate as divide USD by 5, works well with our decimal system
4) Other factors, please describe...

-s

[asdf]

So, the exchanges have been keeping a fairly tight band around $5/BTC, I'd like to hear opinions on how much you attribute this to the following factors:


1) Fundamentals: economy is growing at the same rate of the influx of coins from mining so prices stay constant
2) Price stickiness: optimal trade would occur at a different rate but either hoarding or excessive selling is keeping the price up or down
3) Price comfort: easy to think of bitcoin rate as divide USD by 5, works well with our decimal system
4) Other factors, please describe...

-s

Could be a heavily invested entity keeping the price stable to attract users?

[yogi]

And, whatever happened to the 50k walls that used to popup all the time?

[fivemileshigh]

So, the exchanges have been keeping a fairly tight band around $5/BTC, I'd like to hear opinions on how much you attribute this to the following factors:

4) Other factors, please describe...

-s

pure coincidence. I think we're going to see both $3 and $15 this year.

[jjshabadoo]

Seems very odd though we are essentially stuck at $5. It's nice to see some stability, but it's kind of weird considering difficulty has gone up close to 50% this year. BTC is not responding to supply and demand curves...lol. Although maybe we have reached an equilibrium in the speculator market.

As a miner I'd like to see the coin follow economic fundamentals more closely.

[Rothgar]

Seems very odd though we are essentially stuck at $5. It's nice to see some stability, but it's kind of weird considering difficulty has gone up close to 50% this year. BTC is not responding to supply and demand curves...lol. Although maybe we have reached an equilibrium in the speculator market.

As a miner I'd like to see the coin follow economic fundamentals more closely.

Difficulty gone up 50% while the price stays stable got you confused?  The hash rate should double every 18 months assuming a constant price due to moores law.  

https://en.wikipedia.org/wiki/Moore%27s_law

[OgNasty]

I think enough people have now stashed money in BTC that they will step up and buy to keep the price stable when it falls below $5.  This is to protect the value of their stashed funds...  Just my $0.02.

[symbols]

I think enough people have now stashed money in BTC that they will step up and buy to keep the price stable when it falls below $5.  This is to protect the value of their stashed funds...  Just my $0.02.

If that is indeed the case, it's hoarding price stickiness... and its ultimately misplaced. I believe bitcoins will increase in value, so I would buy on a fall in price. But if I think that its my purchases that keep the price up, I would be better served by gradually selling off my investment because I can't keep the market afloat on my own. I could pursue a strategy of buying just a little bit and hoping that other buyers are encouraged by the price resistance, and then sell into their demand... So I guess that last strategy is possible.

[johnyj]

One market maker is enough: Put sell order when price goes above $5.2 and buy order when price dropps below 5

Maintain the price and start to accumulate enough BTC, and try to push it towards $50, because the liquidity in BTC is so low and there is no regulation for BTC exchange, who knows what can happen...

I think the best time to push the price up is when block reward drops, we'll see...

[Technomage]

I personally think OgNasty's explanation is ridiculous. It's the same as playing poker with the mindset of trying to win back money you have previously lost. Some people do this of course but for a serious player there is an expected value and you invest based on it and what happens, happens.

Of course it can be smart to lower your average price if the entry point was really bad. For example, if someone bought bitcoins at $10+ and is still hoarding them, buying now would make sense if you want to get your average entry closer to the current price. But I just can't see how this could be a significant explanation for the sticky $5 price.

My explanation is fairly simple, I just think that Bitcoin growth rate at the moment is fairly close to the inflation of the money supply. Secondary reasons are psychological reasons and the fact that leveraged rallies have been less crazy for a number of reasons ever since we had the massive long squeeze at Bitcoinica.

[notme]

Seems very odd though we are essentially stuck at $5. It's nice to see some stability, but it's kind of weird considering difficulty has gone up close to 50% this year. BTC is not responding to supply and demand curves...lol. Although maybe we have reached an equilibrium in the speculator market.

As a miner I'd like to see the coin follow economic fundamentals more closely.

Difficulty gone up 50% while the price stays stable got you confused?  The hash rate should double every 18 months assuming a constant price due to moores law.  

https://en.wikipedia.org/wiki/Moore%27s_law

That, plus difficulty does not change the supply one bit.

[Raoul Duke]

BitInstant <--- That's what happened. They allowed for people with money to do arbitrage in a simple way, so they keep the market fairly stable.

[eleuthria]

Seems very odd though we are essentially stuck at $5. It's nice to see some stability, but it's kind of weird considering difficulty has gone up close to 50% this year. BTC is not responding to supply and demand curves...lol. Although maybe we have reached an equilibrium in the speculator market.

As a miner I'd like to see the coin follow economic fundamentals more closely.

Difficulty gone up 50% while the price stays stable got you confused?  The hash rate should double every 18 months assuming a constant price due to moores law.  

https://en.wikipedia.org/wiki/Moore%27s_law

That, plus difficulty does not change the supply one bit.

Not only does difficulty not change supply (at least not in a material way), supply has very little to do with the value of bitcoins.  Daily volume on Mt.Gox is much higher than the number of coins created each day through mining.

[ElectricBrain]

BitInstant <--- That's what happened. They allowed for people with money to do arbitrage in a simple way, so they keep the market fairly stable.

+1

[adamstgBit]

Could be a heavily invested entity keeping the price stable to attract users?

That and, alot of small hobbyist inverters who are simply never going to sell, if anything they will just use the bitcoin economy, day trade with some a % of their coins, and buy more coins! )

ironically its probably the people that bought at +5$ range that have sold off their bitcoins. Because lets face...the bubble was a bubble and when it poped we lots a lost of people, big and small investors...

and the thing is... when it was poping... "really big investors" didn't wana touch bitcoin with a 10 foot pole

the stable price will hold indefinitely, and this will make bitcoin a more attractive investment opportunity, And taken more seriously as an alternative payment system.

[Boussac]

Could be a heavily invested entity keeping the price stable to attract users?

That and, alot of small hobbyist inverters who are simply never going to sell, if anything they will just use the bitcoin economy, day trade with some a % of their coins, and buy more coins! )

ironically its probably the people that bought at +5$ range that have sold off their bitcoins. Because lets face...the bubble was a bubble and when it poped we lots a lost of people, big and small investors...

and the thing is... when it was poping... "really big investors" didn't wana touch bitcoin with a 10 foot pole

the stable price will hold indefinitely, and this will make bitcoin a more attractive investment opportunity, And taken more seriously as an alternative payment system.

+1

@Rothgar
Concerning Moore's law, could you factor in the GPU replacement cycle ?

[frograven]

What about the idea that the price seems to be hovering around or slightly above the cost of mining coins plus a modest profit (if you are in a low electricity cost area).
i.e. Mining (cost to keep the network running) at least a strong contributing factor to the rate.

[Rothgar]

I don't think that the replacement cycle will make too much of a difference.  Remember Moore's law is not set in stone. 

If there is a delay in replacing GPU's today there was the same (or similar) delay 18 months ago.

[Dalkore]

I think enough people have now stashed money in BTC that they will step up and buy to keep the price stable when it falls below $5.  This is to protect the value of their stashed funds...  Just my $0.02.

This would be very interesting if we could prove that.  The same psychology exists in the gold & sliver bullion market as well.   You see it happen when the "paper" price falls below the physical price and people go to purchase the precious metal but you can not purchase it on the spot for that amount.   It happened when sliver dipped below $10.00 an ounce (from $16-18), you could not get your hands on it for less than $16 plus premiums.

[nofuture]

The degree of "stickiness" is eerie.  Price trend has been squeezed down to a Flatline. There has been a great deal of growth and services in the past few months.  Coin demand and transaction velocity have increased significantly.   Bitcoin attracts thrilling news headlines.  Hacking, theft, and scandals make headlines daily.  

Volatility should be much higher given such high turbulence.  Yet the tape does not reflect this.  Price invariability is still a mystery.  

One cause that needs ruling out is front-running.  One example of front-running is where an insider trades on advance knowledge of pending orders.  It is parasitic in nature as these trades steal the profit from honest traders.   It can be difficult to detect when bots or algos break up larger orders into smaller orders.  Trading can be spread across a number of accounts which are controlled by one entity.  

For more on front-running see this Wikipedia article

http://en.wikipedia.org/wiki/Front_running  


The NYSE and the NASDAQ have automated surveillance programs.   They perform statistical analysis that look for abnormal trading patterns, coordination among participants, etc.  Does anyone know if we have a bot that can do this?