For Those Wondering Why The Current Rally

[sunnankar]

Just want to draw everyone's attention to a post I made on 9 June 2012. Keep in mind that with the latest rally the 50dma is now at $6.46 and 200dma at $5.546. While bitcoins are moving into extremely strong hands right now; I would caution others not to overpay for bitcoins.

I think you would be surprised at just how forward thinking, creative and risk taking some people are.

Today I had lunch with two of my friends who are both estate planning attorneys for high-net worth individuals. The topic of conversation centered on political risk, expatriation, second citizenships, FACTA, tax implications and how they could use BitCoin as part of their client's asset protection and estate plan. They found the alienable nature of BitCoin extremely attractive.

The bulk of their client's, at least in the $5-10m net worth range, are first generation creative entrepreneur's who made their wealth solving some market need. If just a fraction of the 80,000 HNWIs in the United States alone moved less than 0.10% of their net worth into BitCoin then it would send the price through the roof. Keep in mind, in the US alone there is $10T+ in money market type funds yielding 0%.

I have had a few HNWIs and UHNWIs whose only reservation with moving $500k or $1m into BitCoin is the lack of liquidity and scalability of investment so they settle with puny amounts like $25k or $50k, etc.

In my opinion, there is huge pent up market demand for the type of utility BitCoin offers and the longer it stays around the more confidence it will garner resulting in more people allocating capital towards it.

FYI, one of the attorneys has extensive experience in securitization and mentioned he would like to do some BitCoin securitizations. So if anyone is looking at a way to use their portfolio of cars, houses, airplanes, etc. as collateral for BitCoin related loans or offerings then I can put you in touch with him.

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[cypherdoc]

I would caution others not to overpay for bitcoins.

just what is this supposed to mean?  how do you define overpay?  i don't think we're anywhere near the true market value of one Bitcoin but mine is just an educated opinion based on a year and a half's in depth experience with Bitcoin and an abundance of overall market experience.  i've already put my money where my mouth is.

[adamstgBit]

I would caution others not to overpay for bitcoins.

just what is this supposed to mean?  how do you define overpay?  i don't think we're anywhere near the true market value of one Bitcoin but mine is just an educated opinion based on a year and a half's in depth experience with Bitcoin and an abundance of overall market experience.  i've already put my money where my mouth is.

over pay for bitcoin

as in

do not buy coins right after a rally from 8 to 9,  wait till we hit 10 and there's no doubt in your mind its going to keep on going up   

[John (John K.)]

I would caution others not to overpay for bitcoins.

just what is this supposed to mean?  how do you define overpay?  i don't think we're anywhere near the true market value of one Bitcoin but mine is just an educated opinion based on a year and a half's in depth experience with Bitcoin and an abundance of overall market experience.  i've already put my money where my mouth is.

Shh, he's trying to get more coins.  

[vokain]

I would caution others not to overpay for bitcoins.

just what is this supposed to mean?  how do you define overpay?  i don't think we're anywhere near the true market value of one Bitcoin but mine is just an educated opinion based on a year and a half's in depth experience with Bitcoin and an abundance of overall market experience.  i've already put my money where my mouth is.

Shh, he's trying to get more coins.  

I think we just found the real manipulator

[Vandroiy]

From market movements, this sounds credible. From motivation, given the current political chaos, it also sounds credible.

The rallies from 5.6 looked like they got some support from few, fairly large buyers moving in. It was often big orders, slightly above market price, placed such to get filled quickly but not spike the price too much. Sane, but determined buying.

Of course, this doesn't mean it must be true. But it is a viable explanation to the rally going as fast and steadily as it did.

[Technomage]

This does support my general thoughts on Bitcoin's situation. There is very likely a lot of rich people who have heard of Bitcoin last year and this year. Some of them are surely interested. The main problem is the liquidity of the market and our puny market cap.

It is likely that increases in liquidity will be met by more liquidity later.

[SaintFlow]

It is likely that increases in liquidity will be met by more liquidity later.

+1

This is basically the wisdom of the ages. As the bitcoiners themself get more wealthy they cannot help
but attract more wealth from arround them.

[jimbobway]

I remember when casascius told me when $2.99 was too expensive and told me not to buy.

[casascius]

I remember when casascius told me when $2.99 was too expensive and told me not to buy.

That served me well - I just needed that much longer to get my money in!

Now $9 is really expensive!  Sell, sell, sell!

[TraderTimm]

It is a common trading mistake to let price level influence buying and selling decisions. I look at the relative move - if we have a exponential blowoff-top, I'd do something differently than a steady fill-and-grind upward.

Recent price action looks like a breakout scenario to me, with near-term support at 8.60's and and another around 7.80's, which is the defining upward trendline of the channel we were in the last 12 days before it broke out.

Again, if I repeat this analysis at price levels of 10's for support and 12's for recent action, the level really doesn't matter - just the market action.

[ElectricMucus]

ction looks like a breakout scenario to me, with near-term support at 8.60's and and another around 7.80's, which is the defining upward trendline of the channel we were in the last 12 days before it broke out.

Breakout suggest breaking out of something. What did we break out of?

There certainly wasn't a present downtrend.

[notme]

ction looks like a breakout scenario to me, with near-term support at 8.60's and and another around 7.80's, which is the defining upward trendline of the channel we were in the last 12 days before it broke out.

Breakout suggest breaking out of something. What did we break out of?

There certainly wasn't a present downtrend.

We broke out of the slow and steady uptrend channel.  Now we're in crazy batshit insane uptrend mode.

[ElectricMucus]

ction looks like a breakout scenario to me, with near-term support at 8.60's and and another around 7.80's, which is the defining upward trendline of the channel we were in the last 12 days before it broke out.

Breakout suggest breaking out of something. What did we break out of?

There certainly wasn't a present downtrend.

We broke out of the slow and steady uptrend channel.  Now we're in crazy batshit insane uptrend mode.

So in other words you too think this is not sustainable?

[notme]

ction looks like a breakout scenario to me, with near-term support at 8.60's and and another around 7.80's, which is the defining upward trendline of the channel we were in the last 12 days before it broke out.

Breakout suggest breaking out of something. What did we break out of?

There certainly wasn't a present downtrend.

We broke out of the slow and steady uptrend channel.  Now we're in crazy batshit insane uptrend mode.

So in other words you too think this is not sustainable?

It could go on for a long time, but not forever.  As that bastard Keynes said "Markets can remain irrational longer than you can remain solvent.".

[casascius]

What I think we broke out of was many people's indifference to owning bitcoins and their fear that it was just a fad that would soon fail.

Most of these people don't have the expertise with cryptography and computer systems to know for themselves just by reading the whitepaper and playing with the coins.

Months of price stability, the lack of a total crash to zero, and a general understanding that you don't keep your bitcoins online if you want to keep them safe are all major contributors to why the same people who left it for dead are now taking another hard look.

Many more are on the sidelines.

The people who think Bitcoin is a hot technology and who want to own a few BTC's for their own personal understanding and trading are far more valuable than the ones who want to flip some BTC, and I expect more people from the first group are now coming out of the woodwork.

[thezerg]

I also think that a lot of you old timers mis-estimate the time and effort it takes for a noobie to bootstrap.  It goes something like this:

1. Read about it, overcome the negative stigma that comes with SR, gambling, etc.
2. Make a small investment using bitinstant
3. Learn a ton about the banking system, chargebacks, how FED creates $.
4. Ask all the noobie questions "why can't someone just [print more bitcoins, steal your wallet, turn off the network, make it illegal]".  What's it backed by anyway? :-)
5. Read enough about it to stress about all the scammers hacked wallets and failed exchanges, etc.
6. Start the KYC process with an exchange that has about 5000 totally obscure and difficult to use ways to deposit money.
7. Tortuously move small chunks of fiat into the exchange
8. start buying
9. freak out about failed exchanges, possibility of USB stick failure, etc
10. start looking at paper/brain wallets
11. Get your head around the idea of actually holding your own money somewhere
12. Create isolated new install VM to make a paper wallet.  You can't outsource this to some client-side web script (if you really want a secure wallet)!
13. TEST the paper wallet concept (requires an entire blockchain sync from scratch).
14. KYC finally comes through!
15. DAMMIT price has doubled :-)

This was my path anyway...

For HNWIs its got to happen with both them AND their advisor (who's gonna do all the work).

So people who might have gotten interested in bitcoin during the Euro financial uncertainty may just now be starting to move from a few hundred BTC trial investment to an actual acquisition strategy.

[BrightAnarchist]

I just buy some coins every month, regsrdless of the price. It's too much stress worrying abousomething you cannot predict, so that's why I'm slowly dollr cost averaging. I'm getting for the long haul with bitcoin, for all of its stated benefits, not for the price potential (although that would be nice too.)

Speaking on that point, someone told me that if the illegal drug trade moved to btc exclusively, then each coins would be $15000. I didn't check his math or sources thougl but it sounds believable.

(blame my ipad for the typos)

[Raize]

I can't speak on the black market number because most measurements of the black market are very difficult to verify. However we can measure worldwide GDP and the supply and demand for currencies presently, and can represent them in USD.

If all 21 million Bitcoins were in circulation (which they are not, and over a million may simply be "lost") today, and only 1% of the World's GDP transferred through Bitcoin, the value of a single Bitcoin would be ~$2200/coin. These are using all the most conservative estimates, because we're obviously not at 21 million Bitcoin, and we're probably still a long way from 1% World GDP, but I do think that target is attainable in the next year, and, given the success of Silk Road, could be attainable within one year, we just can't measure it as legitimate world trade.

[proudhon]

I can't speak on the black market number because most measurements of the black market are very difficult to verify. However we can measure worldwide GDP and the supply and demand for currencies presently, and can represent them in USD.

If all 21 million Bitcoins were in circulation (which they are not, and over a million may simply be "lost") today, and only 1% of the World's GDP transferred through Bitcoin, the value of a single Bitcoin would be ~$2200/coin. These are using all the most conservative estimates, because we're obviously not at 21 million Bitcoin, and we're probably still a long way from 1% World GDP, but I do think that target is attainable in the next year, and, given the success of Silk Road, could be attainable within one year, we just can't measure it as legitimate world trade.

Wow.  If you sincerely believe that's attainable and likely, then I hope you're the one buying lots of bitcoins right now.  Also, I'll sell you all my bitcoins right now for $100/BTC so you can still make an absurd profit.