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Author Topic: Wall Observer - MtGoxUSD wall movement tracker  (Read 1649323 times)
cypherdoc
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February 02, 2013, 04:50:38 PM
 #9321

Showing off my best bottom catching this year:



that IS good.
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cypherdoc
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February 02, 2013, 04:52:25 PM
 #9322

Bitcoin mining is the opposite of fiat inflation.
How is this the case?  Mining generates new Bitcoin.  Printing FRNs (or creating FRN denominated loans electronically) creates new fiat.  How is that 'the opposite'?

If my theory holds, the market cap isn't the cause of any trading, it's an effect, but it does tend to prove that bitcoin mining increases the value of each bitcoin – that wouldn't happen if mining were the same as fiat inflation.
I fear you are ascribing causality here where there is none.  I have seen nothing to suggest mining (i.e creating new currency) 'increases the value of each bitcoin'.  Indirectly of course the process of mining; the fact there is a mining network is what gives bitcoin value therefore it is fair to say without the process of mining the existing bitcoin would be of no value but that is not the same.  The usd value of bitcoin is determined by the balance of supply and demand.  Nothing else.  If it's going up it's because demand is outstripping supply.  Increasing coin production by more mining (if that were not restricted by the process) would increase supply and usd value would decrease.

As I said above Bitcoin is currently out-inflating USD and most other currencies and the only reason that isn't putting people off Bitcoin is that we can know with full certainty it will eventually be a deflationary currency.  It is far from one for the few years ahead.  If the FRB were to find a way of encoding a promise to do the same (halve the introduction of new currency every x years) into the way they create new dollar Bitcoin would lose a substantial part of its advantage.  However, apart from the logistical implications of that I can't see them or the US (or any other) government ever agreeing to yield the monetary control they currently wield.

Increased mining does increase the value of each bitcoin since it makes it more expensive to attack the network.  Sure, it's still supply and demand, but this effects the supply(willingness to hold from more security decreases supply) and demand(willingness to hold increases demand).  The fact that the mining process automatically adjusts to keep the generation rate constant keeps the added security from increasing the supply other than the very short term.

this is correct.  the way to think of this is that it doesn't matter if fiat is flowing into mining or buying Bitcoin itself; what's matters is that its flowing into the Bitcoin economy as a whole.
thoughtfan
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February 02, 2013, 05:00:20 PM
 #9323

Increased mining does increase the value of each bitcoin since it makes it more expensive to attack the network.  Sure, it's still supply and demand, but this effects the supply(willingness to hold from more security decreases supply) and demand(willingness to hold increases demand).  The fact that the mining process automatically adjusts to keep the generation rate constant keeps the added security from increasing the supply other than the very short term.

Although I didn't specifically name increased security I believe I covered that indirect, network-supporting aspect of mining.

I fear you are ascribing causality here where there is none.  I have seen nothing to suggest mining (i.e creating new currency) 'increases the value of each bitcoin'.  Indirectly of course the process of mining; the fact there is a mining network is what gives bitcoin value therefore it is fair to say without the process of mining the existing bitcoin would be of no value but that is not the same.  The usd value of bitcoin is determined by the balance of supply and demand.  Nothing else.  If it's going up it's because demand is outstripping supply.  Increasing coin production by more mining (if that were not restricted by the process) would increase supply and usd value would decrease.

 It was my reading of what sounds was saying that he was referring to the creation of coins aspect of mining.  I may have been mistaken.  sounds?

If you have a machine on 24/7 why not have a full Bitcoin client running on it to support the network?
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February 02, 2013, 05:32:01 PM
 #9324

thefiniteidea
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February 02, 2013, 05:42:58 PM
 #9325

Whan speaking of bitcoin, is deflation a more appropriate term ?  IMO, Bitcoin are in deflation, not inflation !  I'm I wrong ?  if yes,, why ?

...BTC market cap, in USD = BTC value adjusted for BTC rate of inflation, in USD

Whan speaking of bitcoin, is deflation a more appropriate term ?  IMO, Bitcoin are in deflation, not inflation !  I'm I wrong ?  if yes,, why ?
It's not that it's a more or less 'appropriate term'.  Correct me if I'm wrong but I think you're thinking of 'inflation' in the way it's used by politicians and the papers rather than as an economic technical term.  There are two distinct meanings.  The more common usage is measured relatively to what can be purchased with a currency. e.g. a how much a set 'typical grocery basket'  costs to buy a year apart.  In that sense of course Bitcoin is deflationary.  But the technical use is to do with supply money supply.  Bitcoin is only deflationary from a technical perspective if more coin is being lost than is being introduced which is very unlikely to be the case.  In terms of 'market cap' measured in USD it can only be higher with Bitcoin at $20 than it was at $30 if there are > 50% more Bitcoin in existence i.e. its supply has inflated by 50%, which is how thefiniteidea is using it above.

For fun I posited in another thread that relative to total supply even the rate at which Bernanke's extreme USD inflationary policy is being implemented, as a monthly rate he's only introducing approximately half as much new currency as Bitcoin is.  Of course this doesn't tell the whole story because for BTC we know from Day 1 how the monetary supply will pan out but despite the popular notion otherwise, for the next few years the rate at which new coin is introduced makes Bitcoin a heavily inflationary currency Smiley

thoughtfan has hit the nail on the head, doomdumas.



Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease, because the value of Bitcoin goes up.

Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.

So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!

Why does the price of Bitcoin go up and down? The price of BTC goes up and down based on the exchange rate, or market price, which is set by buyers and sellers, or traders. They directly trade the Bitcoin currency with all sorts of other currency, and even some with gold; the most popular being the USD (US dollar). They set the price when executing orders to buy or sell. I will get into the actual reason of why the price fluctuates in the last section.



Now that we've gone over PRICE Inflation and Deflation (which honestly, to me, is a term made by Keynesian's to hide the real facts, as price inflation/deflation is simply the market exchange rate, reflective of the money supply into Bitcoin from itself and other currencies), let's go over the real inflation/deflation of a currency.

MoneySupply-Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases. In our current state, this is at a generation rate of 25 BTC every 10 minutes.

MoneySupply-Deflation will essentially never occur. It is when the value of Bitcoin increases when the total supply of Bitcoin decreases. This may happen, say, when someone loses their private key and all the BTC associated with it are lost. This effectively "makes the rest of us richer". That being said, there is a SET DECREASE in the generation rate of BTC, so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate.

When all 21 million coins are produced, the MoneySupply will be neutral, and the value will continue to increase (prices will decrease, consequently), as long as people continue to exchange in BTC.

This leads me to the last section.



What determines the PRICE of Bitcoin? The VALUE of Bitcoin at a particular moment.

What determines the VALUE of Bitcoin? The SUPPLY and DEMAND of Bitcoin in the economy.

What determines the SUPPLY of Bitcoin? Currently, the MoneySupply-Inflation rate of 25 BTC every 10 minutes, and traders willing to SELL Bitcoin to BUYERS in exchange for other supplies of money (currencies).

What determines the DEMAND of Bitcoin? Traders willing to BUY Bitcoin from SELLERS in exchange for other currencies.


Therefore: BUYERS, SELLERS, and MONEYSUPPLY-INFLATION (miners) determine the VALUE of Bitcoin, which determines the PRICE of BTC as BUYERS and SELLERS trade based on that VALUE (or supply and demand) of Bitcoin.


We don't exactly know the totality of the supply and demand. Sure, we could try and aggregate data from all the exchanges, but we will never be accurate as there are exchanges which can not be accounted for (OTC). The cool thing is that we DO know the MoneySupply rate, and we DO know the exchange rate. From this, we can determine a real value of bitcoin when simply multiplying the two factors. This is the "Market Capitalization".

Effectively, the quantitative analysis of supply and demand is really what the currency exchange traders attempt to accurately determine which is conveyed through buying and selling of Bitcoin, setting a VALUE via the PRICED exchange rate of the currency. On a side note, most of the big Market Makers (FX Traders) use this price movement as a way to make a profitable living, as well. Especially when price fluctuations are a consequence of hype or fear (bubbles, cliffs), not factual supply/demand data, and are wildly out of the real price range.

Thus, if you analyze the proper macroeconomic data in an attempt to forecast future DEMAND for more Bitcoin (price increase), you will realize some very interesting things, and have a more accurate picture of where the price is going...

Happy trading!  Wink

CurbsideProphet
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February 02, 2013, 06:41:25 PM
 #9326

Showing off my best bottom catching this year:



I caught the bottom at $15.41, so much so that my order didn't even get to fill entirely  Angry

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thoughtfan
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February 02, 2013, 06:46:24 PM
 #9327


...

Price-Inflation ...

...

MoneySupply-Inflation...

...
Happy trading!  Wink
Thanks thefiniteidea for the clarification between the two.  it is useful to be able to differentiate with clear terminology of what is meant rather than my more vague notions.

Also your presentation of price, value, supply, demand and the relationship between them in relation to market analysis is educational.  Appreciated Smiley

If you have a machine on 24/7 why not have a full Bitcoin client running on it to support the network?
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February 02, 2013, 07:00:36 PM
 #9328

Showing off my best bottom catching this year:




Donations: 1JVhKjUKSjBd7fPXQJsBs5P3Yphk38AqPr - TIPS
the hacks, the hacks, secure your bits!
thefiniteidea
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February 02, 2013, 07:00:51 PM
 #9329

Thanks thefiniteidea for the clarification between the two.  it is useful to be able to differentiate with clear terminology of what is meant rather than my more vague notions.

Also your presentation of price, value, supply, demand and the relationship between them in relation to market analysis is educational.  Appreciated Smiley

Thanks man, absolutely agree. You were spot on earlier, just been feeling a need for some time to go in-depth on this one Cheesy

may even re-post as a topic to bring the whole community even further down this rabbit-hole...

hazek
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February 02, 2013, 07:52:21 PM
 #9330

Thanks thefiniteidea for the clarification between the two.  it is useful to be able to differentiate with clear terminology of what is meant rather than my more vague notions.

Also your presentation of price, value, supply, demand and the relationship between them in relation to market analysis is educational.  Appreciated Smiley

Thanks man, absolutely agree. You were spot on earlier, just been feeling a need for some time to go in-depth on this one Cheesy

may even re-post as a topic to bring the whole community even further down this rabbit-hole...

Feel free to make a new thread out of that excellent post in the main economics section Wink

My personality type: INTJ - please forgive my weaknesses (Not naturally in tune with others feelings; may be insensitive at times, tend to respond to conflict with logic and reason, tend to believe I'm always right)

If however you enjoyed my post: 15j781DjuJeVsZgYbDVt2NZsGrWKRWFHpp
Bitcoinpro
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February 03, 2013, 12:15:39 AM
 #9331

dose no one see the price is being blatantly manipulated up Huh

epic crash in 5...

can you provide the links and reasons please ?

If you watched http://bitcoin.clarkmoody.com/ like me and adam you shoulda been able to see it

its seems fine now can you explain to us what you saw?

www.cryptocurrencycentralbank.com 

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lebing
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February 03, 2013, 12:40:21 AM
 #9332

dose no one see the price is being blatantly manipulated up Huh

epic crash in 5...

can you provide the links and reasons please ?

If you watched http://bitcoin.clarkmoody.com/ like me and adam you shoulda been able to see it

its seems fine now can you explain to us what you saw?

He saw more bitcoins in his pocket.

Bro, do you even blockchain?
-E Voorhees
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February 03, 2013, 12:43:53 AM
 #9333

dose no one see the price is being blatantly manipulated up Huh

epic crash in 5...

can you provide the links and reasons please ?

If you watched http://bitcoin.clarkmoody.com/ like me and adam you shoulda been able to see it

its seems fine now can you explain to us what you saw?

i see what i want to see

I see epic crash in 5 4...  Grin

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February 03, 2013, 12:45:05 AM
 #9334

wow we dipped to 18 while i was gone, damn i missed the fun... oh well more to come!

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February 03, 2013, 01:16:31 AM
 #9335


1keewee2vRp63UWvPBynT55ZYw6SUCKDB
cypherdoc
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February 03, 2013, 01:16:51 AM
 #9336

keewee
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February 03, 2013, 01:19:07 AM
 #9337


Hmmm... buys a pile then a wall appears at $20....

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adamstgBit
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February 03, 2013, 01:20:54 AM
 #9338

The Top Of The Bubble 2011

and then it dropped to 2$  Cheesy

cypherdoc
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February 03, 2013, 01:24:35 AM
 #9339

steamboat
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February 03, 2013, 01:28:10 AM
 #9340


This occurred due to someone putting in an such a large order for xx.xx btc that it wasn't fully filled, leaving the remainder showing up as a wall, yes?

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