Topic: . (Read 10754 times)
My ignorance aside that is Good to know, I'm a great fan of specialization and division of labour. I also use computers but had no idea such a program existed. 
I've been busy getting everything converted over to R.
fantastic! as a long time R user I can say: wise move
I've been busy getting everything converted over to R.
Right now I'm guessing more like $600-ish.
I'm so glad to see you here again welcome back.
R being SA Rand? Or RMB?
Is that you buying all those XBT in China?
I estimate that we are about where we were in the cycle on February 1, 2013
Welcome back, we missed you!
I estimate we are in the cycle on April 3rd.
This would result in a peak of 320$ - 380$ IMO.
I've been busy getting everything converted over to R.
Right now I'm guessing more like $600-ish.
No offense but when we will be nowhere near that numbers you will probably convert again
I estimate that we are about where we were in the cycle on February 1, 2013
Welcome back, we missed you!
I estimate we are in the cycle on April 3rd.
This would result in a peak of 320$ - 380$ IMO.
I estimate that we are about where we were in the cycle on February 1, 2013
you expect a bursting bubble around 2600,- $ around christmas or new years eve ?
You have most of it but are leaving out the massive drop in mining profitability as hash rates and difficulty rise. This breaks the miners out of their hoarding behavior gradually and the resumption of coins flowing onto the exchanges then breaks the back of the markets when they can't supply the Fiat necessary to buy the coins.
I don't think miners ever really dump large sums of coins when they stop hoarding, they merely sell a higher percentage of their daily mining output to cover electricity costs. Earlier acquired hoards probably go into cold-storage and effective become no different from other large hoards from years past which are notoriously reluctant to come back into the market even during obviously unsustainable bubbles.
I don't think miners ever really dump large sums of coins when they stop hoarding, they merely sell a higher percentage of their daily mining output to cover electricity costs. Earlier acquired hoards probably go into cold-storage and effective become no different from other large hoards from years past which are notoriously reluctant to come back into the market even during obviously unsustainable bubbles.
@Impaler
I believe you're contradicting yourself. On the one hand, you began your argument by describing the unique situation in which btc miners are able to hoard, without overhead, a deflationary commodity. Which, as you said, would eventually lead to a bubble.
On the other hand you describe the decline after the bubble as being driven by the inability of the market to cough up the USD necessary to buy new coins off the market, to keep price stable.
Those two don't go together. According to your own theory of miner's behavior, the hoarding leads to an unsustainable bubble, but I believe the deflation/correction after the bubble would actually stabilize as a result of the miner's actions: miners hoard -> price bubbles -> price becomes unsustainable -> (1) either miners continue hoarding, then price doesn't need to go down further, or (2) miners sell whatever they have to take home profits while they still can at the current price, then the price is corrected down rapidly.
I believe you're contradicting yourself. On the one hand, you began your argument by describing the unique situation in which btc miners are able to hoard, without overhead, a deflationary commodity. Which, as you said, would eventually lead to a bubble.
On the other hand you describe the decline after the bubble as being driven by the inability of the market to cough up the USD necessary to buy new coins off the market, to keep price stable.
Those two don't go together. According to your own theory of miner's behavior, the hoarding leads to an unsustainable bubble, but I believe the deflation/correction after the bubble would actually stabilize as a result of the miner's actions: miners hoard -> price bubbles -> price becomes unsustainable -> (1) either miners continue hoarding, then price doesn't need to go down further, or (2) miners sell whatever they have to take home profits while they still can at the current price, then the price is corrected down rapidly.
Your argument in the first paragraph makes some sense to me, but it falls apart at the two points I highlighted.
(1) I don't know where you get that idea from that you can simply take the peak to bottom ratio from the last cycle and apply it to the latest one. (a) the market is different now, both in numbers and composition. For all we know, the bottom could even be lower. (b) what happened to look like a 1/10 ratio, maybe in reality wasn't a simple ratio, but the result of a different formula, say, log_3(30), which, when applied to the latest peak would give an entirely different value... that example formula itself is bullshit of course, but for all the times I have seen this argument ("deflation isn't over until we reach 25-30"), I have yet to see any motivation for it other than "last time it was 1/10".
(2) Hash rate never substantially declined. In 2011, it peaked in August, then gently sloped downwards til November/December. Which nicely conincided with the price recovery after the 2011 peak. Which is probably why some people think we haven't seen the bottom until hash rate peaks again.
Problem with that argument is the same as above: it's not the same situation (for better or worse). (a) run up to the 2011 peak was much faster than in 2013, (b) hash rate increase in 2011, pre-peak, was also much sharper -- the 2011 pre-preak increase shows signs of double-exponential growth, 2013 was plain exponential, (c) situations are difficult to compare since ASIC mining lead to a drastically longer time span between investment and deployment.
That last point could mean we're seeing a super-stretched deflation, and won't see the bottom for another 6 months or so (guess that's would be your idea). Or, because of that delay, the effect is stretched too thin to actually influence what the bottom will be, i.e. it could have a mild price dampening effect, but not strong enough to counter other salient effects on the price.
(1) I don't know where you get that idea from that you can simply take the peak to bottom ratio from the last cycle and apply it to the latest one. (a) the market is different now, both in numbers and composition. For all we know, the bottom could even be lower. (b) what happened to look like a 1/10 ratio, maybe in reality wasn't a simple ratio, but the result of a different formula, say, log_3(30), which, when applied to the latest peak would give an entirely different value... that example formula itself is bullshit of course, but for all the times I have seen this argument ("deflation isn't over until we reach 25-30"), I have yet to see any motivation for it other than "last time it was 1/10".
(2) Hash rate never substantially declined. In 2011, it peaked in August, then gently sloped downwards til November/December. Which nicely conincided with the price recovery after the 2011 peak. Which is probably why some people think we haven't seen the bottom until hash rate peaks again.
Problem with that argument is the same as above: it's not the same situation (for better or worse). (a) run up to the 2011 peak was much faster than in 2013, (b) hash rate increase in 2011, pre-peak, was also much sharper -- the 2011 pre-preak increase shows signs of double-exponential growth, 2013 was plain exponential, (c) situations are difficult to compare since ASIC mining lead to a drastically longer time span between investment and deployment.
That last point could mean we're seeing a super-stretched deflation, and won't see the bottom for another 6 months or so (guess that's would be your idea). Or, because of that delay, the effect is stretched too thin to actually influence what the bottom will be, i.e. it could have a mild price dampening effect, but not strong enough to counter other salient effects on the price.
Yes I am just taking a direct 1/10th ratio from 2011 and I admit that may not hold up entirely which is why I pad it to up to $50. I think that our similarity to 2011 is close enough particularly on the phycology side of the market to see similar results. Not only has price followed a similar trajectory but so has the client download rate on SourceForge as well as to Google search trend for BTC. I believe the ultimate price at the bottom of the market is determined by how much USD the diehard supporter community can continually put into the NET purchase of new coins daily. Before the reward halving and at the $15 price that would have been $100K and I think that value has not changed significantly, the present $100 price would require $350K of new USD every day a level which I find unsustainable, in any case I have more confidence in predicting the bottom exchange rate ($30-$50) then the time period in which we reach it and how long we remain their. The bottom valuation is a product of the community size and its disposable income and the daily coin production. Timing on the other hand is a product of the hash growth rates and how long miners hold out at low or negative profitability, they must inevitable break but they could stretch bear market out for months.
Yes hash rates never substantially declined, they more crested and flatlined (really if you look at it the rate is exactly matching Moores law during most of 2012 indicating we were seeing a constant number of GPUs that were being turned over as newer models came out) with only a very small decline that ended after the exchange rate bottom reversed, I expect exactly the same thing this time. The earliest generation of BFL ASICs operate at around 5 joules per GH and will be the first ones to obsolete while some of the KNC chips will keep running at 1 joule per GH.
I don't believe the sharpness of the hash rate growth pre-peak is particularly relevant to the exchange rates. Miners are contracting supply as I described earlier but the ultimate market high is determined by how much of a buying euphoria can be generated in the public and how long the old coin holders can hold back before popping the bubble. Also 2013 was quite clearly double exponential as well. So while miner "profit-pull" may start the bubble it becomes self sustaining and self-popping shortly their after and the high profit mining bandwagon keeps rolling quite independent of it all, meanwhile the BTC market tries desperately to keep the price high, generally half the peak valuation becomes the initial line-of-defense. You see this all the time on the trading forums, people urging "keep the price up, don't sell, be strong hand", the effort at a giant collective circle-jerk of price manipulation is huge and is the reason why we can't find a stable price when the mining output is being held back from the market, with no new supply and every BTC holder trying to maximize their unrealized profits the price can go to any number, it's only limit is the collective willpower of the community. But once we see a consistent daily flow of minted coins hitting the exchanges and the 'strong hands' have to start putting their money where their mouth is and BUY not just hold, we can finally find a stable bottom.
BTW, we are still on track for a peak $126-ish.
If by that you mean "one last gasp on the way up, before starting a long slide down, like in late May", then, sure, I can see that happening.
My current thesis is that we are in a situation more like 2012 than 2011. What is so obvious to everyone who supports the 2011 thesis is some superficial similarities in the more current time-series compared to that of post-peak 2011. However, this thesis breaks down if you chunk the data by volume instead of time—you will see that we are much farther along in that cycle.
I am also trying to, "read the mind of the whales" by surmising how one would maximize profits if you could take on basically unlimited risk. The way to do this, by my reasoning is to buy slowly and consistently, just under a threshold that would trigger positive feedback effects in a positive-going price trend. Which is where my 'slippage' indicator comes in. Such a strategy could be managed by monitoring the distribution of slippage over a number of buys in order to calibrate the maximum rate at which your buys could occur under current conditions to avoid triggering positive feedbacks. The market is so tiny that someone with enough capitalization could unilaterally limit their downside risk.
The longer they forestall positive feedback in a positive-going price trend by their own discipline the higher the momentum will be once it does kick in. But where they can unilaterally limit downside risk they can not unilaterally limit upside risk, that is, until they have accumulated a sufficiently large BTC position. It is very difficult to know when a bigger fish will come along to end their current game. They only have to know that it could happen, and be prepared to profit from it.
I know your 'whale(s) managing a sustained buying program, keeping price close to an equilibrium' hypothesis. I'm not ruling it out completely, or rather: I keep it in mind, as a possible explanation.
The method to determine how far the correction has progressed by volume vs. the obvious progress by price is new. I like the idea. Care to explain the details?
I'm not in the 2011-repeat crowd. Way to many differences, visible almost right from the start. However, I also fail to see all that many similarities to the 2012 correction. It wouldn't really surprise me if this bubble and the correction simply followed its own trajectory. after all, with each hype/bubble/correction cycle, the market composition changes drastically.
I don't really have the knowledge, or intuition, to make motivated long-term predictions, so I avoid those almost entirely, instead concentrating on what I can do profitably. That said, there's one pattern I do believe shines through, and I don't think it is driven by whales: since April, the market seems to attempt to find a "comfortable" growth trend, continuining from whatever point the price is at that moment. So far, those trends always seem to become "uncomfortable" after a while, probably because fundamentals as perceived by the market don't support any capitalization beyond maybe the 100 million USD range (but almost certainly not the > 1 billion capitalization we see now). Since this market never seems to be inclined to simply trade sideways, price goes down, with force.
I could have seen the end of this pattern, with the July reversal. The way it looks now, that reversal ran out of steam pretty much completely. I'm not declaring it dead quite yet, but I can definitely see a repeat of the May situation as an option as well.
Basically, I tend to adhere to a worldview promulgated by Heraclitus, and later expounded on by Alfred North Whitehead. It includes a conception of time that is alter to the more common conception in that rather than some kind of static dimension the flow of time can be more usefully described as a process. That is, for instance, population growth can be expressed as an exponential function of time but this is not really as informative as understanding the processes which cause that growth—and decline.
So, I choose to look at the finer grained processes which actually result in price discovery. As following any time-based trend line will show you those trends do nothing to describe for you how the conditions they represent will change—except after-the-fact. I discount time almost entirely in favor of other dimensions which are closer in the hierarchy to the concepts of price development/discovery.
I agree that market structure fundamentally changes whenever we reach a new ATH. But why? Primarily, I think this has to do with a transfer of wealth. That is, there is a distribution of how many Bitcoin are held by a certain number of hands, and this changes. Since you now have a lot more Bitcoin in different hands you have to conclude that the decisions of those people are different from the decisions of the people they took them from. This difference, since it is driven by volume (the number of Bitcoin changing hands) then becomes the operative metric for the pace of market activity.
I always look forward to reading your posts -- very informative.
In terms of modelling the finer structure of the market -- I've considered doing this for some time. There's a lot of data on the Bitcoin market and social networks, and we can likely quite readily model the different classes of current participants with a few key variables per participant.
If I had infinite free time, I'd love to try setting up a large-scale Monte Carlo simulation of these participants and model how they react to external stimuli... then keep refining the models until they showed decent correlation with historical data.
The ideal result would be a meaningful forecast of price resilience to possible stimuli. Or a Bitcoin "weather forecast" if you like.
I know it would be a big undertaking, and I'm not sure if a decent correlation would even be possible. But even the process would likely yield plenty of useful insights. I can't help thinking that it would be a more useful basis than traditional TA.
No its not Demand-pull either, read what I am describing and stop trying to put it into a per-existing box in which it doesn't fit, BTC has a market dynamic which is unlike any normal good on the market. In BTC you have the unique combination of supply in-elasticity and zero cost storage. In a real commodity reduced production costs causes supply to increase and producers all sell into the market place which causes prices to fall. In BTC the miner knows that supply can not increase, only his share of production can decline, combined with the deflationary nature of BTC and their effortlessness to store leads to hoarding before product even reaches the marketplace. Outside of perhaps a few rare instances in history (maybe Dutch Tulips or livestock in which the product is also the input for future production) this can't happen in a normal market because producers must sell continually, and even in the Tulip scenarios the supply is ultimately perishable and can grow to huge amounts and then come in and glut the market.
Your point about orders of magnitude seems to imply you think that I think exchange rates are going to reach $3 again like at the bottom after 2011. This is absurd, everyone who believes we are seeing a repeat of 2011 is predicting a bottom of $30-$50 so that the ratio of drop from the peak is roughly the same aka 1/10th. Also I don't see how anyone could be advocating buy and hold at this point, buy and hold (and sell at the peak) is long past as a strategy, were in a long term bear market now and the optimum strategy would be to short this market. The difficulty is predicting when and at what point the market bottoms at and finding a counter party as shorting of BTC is a very shallow market. Obviously once the bottom is reached you can switch to a buy and hold strategy but that bottom may not be for months, at the very least it wont reach bottom until hash rates peak and decline.
Your point about orders of magnitude seems to imply you think that I think exchange rates are going to reach $3 again like at the bottom after 2011. This is absurd, everyone who believes we are seeing a repeat of 2011 is predicting a bottom of $30-$50 so that the ratio of drop from the peak is roughly the same aka 1/10th. Also I don't see how anyone could be advocating buy and hold at this point, buy and hold (and sell at the peak) is long past as a strategy, were in a long term bear market now and the optimum strategy would be to short this market. The difficulty is predicting when and at what point the market bottoms at and finding a counter party as shorting of BTC is a very shallow market. Obviously once the bottom is reached you can switch to a buy and hold strategy but that bottom may not be for months, at the very least it wont reach bottom until hash rates peak and decline.
Your argument in the first paragraph makes some sense to me, but it falls apart at the two points I highlighted.
(1) I don't know where you get that idea from that you can simply take the peak to bottom ratio from the last cycle and apply it to the latest one. (a) the market is different now, both in numbers and composition. For all we know, the bottom could even be lower. (b) what happened to look like a 1/10 ratio, maybe in reality wasn't a simple ratio, but the result of a different formula, say, log_3(30), which, when applied to the latest peak would give an entirely different value... that example formula itself is bullshit of course, but for all the times I have seen this argument ("deflation isn't over until we reach 25-30"), I have yet to see any motivation for it other than "last time it was 1/10".
(2) Hash rate never substantially declined. In 2011, it peaked in August, then gently sloped downwards til November/December. Which nicely conincided with the price recovery after the 2011 peak. Which is probably why some people think we haven't seen the bottom until hash rate peaks again.
Problem with that argument is the same as above: it's not the same situation (for better or worse). (a) run up to the 2011 peak was much faster than in 2013, (b) hash rate increase in 2011, pre-peak, was also much sharper -- the 2011 pre-preak increase shows signs of double-exponential growth, 2013 was plain exponential, (c) situations are difficult to compare since ASIC mining lead to a drastically longer time span between investment and deployment.
That last point could mean we're seeing a super-stretched deflation, and won't see the bottom for another 6 months or so (guess that's would be your idea). Or, because of that delay, the effect is stretched too thin to actually influence what the bottom will be, i.e. it could have a mild price dampening effect, but not strong enough to counter other salient effects on the price.
It is all so exciting and risky, and then to think Bitcoin is nearly perfect supply-inelastic and to realize the law of substitution, doesn't apply in creating viable alternates at this time, Bitcoin is first a protocol (the original protocol) and secondary a voluntary agreement in participation to be governed by the rules of the protocol.
I get a kick out of almost every second reply in this forum, so many people have a good grasp on what's actually happening but they draw the wrong conclusion because they hang onto a preexisting idea. I am sure I'm no exception.
I'm looking forward to events unfolding, I'm still struggling with the fundamentals like why people will volunteer to exchange wealth for an opportunity to participate.
I get a kick out of almost every second reply in this forum, so many people have a good grasp on what's actually happening but they draw the wrong conclusion because they hang onto a preexisting idea. I am sure I'm no exception.
I'm looking forward to events unfolding, I'm still struggling with the fundamentals like why people will volunteer to exchange wealth for an opportunity to participate.
No its not Demand-pull either, read what I am describing and stop trying to put it into a per-existing box in which it doesn't fit, BTC has a market dynamic which is unlike any normal good on the market. In BTC you have the unique combination of supply in-elasticity and zero cost storage. In a real commodity reduced production costs causes supply to increase and producers all sell into the market place which causes prices to fall. In BTC the miner knows that supply can not increase, only his share of production can decline, combined with the deflationary nature of BTC and their effortlessness to store leads to hoarding before product even reaches the marketplace. Outside of perhaps a few rare instances in history (maybe Dutch Tulips or livestock in which the product is also the input for future production) this can't happen in a normal market because producers must sell continually, and even in the Tulip scenarios the supply is ultimately perishable and can grow to huge amounts and then come in and glut the market.
Your point about orders of magnitude seems to imply you think that I think exchange rates are going to reach $3 again like at the bottom after 2011. This is absurd, everyone who believes we are seeing a repeat of 2011 is predicting a bottom of $30-$50 so that the ratio of drop from the peak is roughly the same aka 1/10th. Also I don't see how anyone could be advocating buy and hold at this point, buy and hold (and sell at the peak) is long past as a strategy, were in a long term bear market now and the optimum strategy would be to short this market. The difficulty is predicting when and at what point the market bottoms at and finding a counter party as shorting of BTC is a very shallow market. Obviously once the bottom is reached you can switch to a buy and hold strategy but that bottom may not be for months, at the very least it wont reach bottom until hash rates peak and decline.
Your point about orders of magnitude seems to imply you think that I think exchange rates are going to reach $3 again like at the bottom after 2011. This is absurd, everyone who believes we are seeing a repeat of 2011 is predicting a bottom of $30-$50 so that the ratio of drop from the peak is roughly the same aka 1/10th. Also I don't see how anyone could be advocating buy and hold at this point, buy and hold (and sell at the peak) is long past as a strategy, were in a long term bear market now and the optimum strategy would be to short this market. The difficulty is predicting when and at what point the market bottoms at and finding a counter party as shorting of BTC is a very shallow market. Obviously once the bottom is reached you can switch to a buy and hold strategy but that bottom may not be for months, at the very least it wont reach bottom until hash rates peak and decline.
The Cost Push Inflation model has never been a factor, which would be the operative model if mining costs/profitability had any relation to price.
I agree with you that it is nothing like 2012. But the current market is much less like 2011. Everything changed once we hit that last ATH. The amount of wealth that changed hands virtually guarantees that we have a crop of market movers who are making very different decisions than those who were moving 2011-2012.
Look too hard there for a model of what is happening now and succeed accordingly.
I agree with you that it is nothing like 2012. But the current market is much less like 2011. Everything changed once we hit that last ATH. The amount of wealth that changed hands virtually guarantees that we have a crop of market movers who are making very different decisions than those who were moving 2011-2012.
Look too hard there for a model of what is happening now and succeed accordingly.
Your own graphs show quite clearly that the two major jumps in BTC exchange value coincide with new mining technology revolutionizing the mining business. It is indeed not a cost push inflation model, that is what the naive BTCer thinks, that somehow the costs both electrical and hardware incurred by the miners 'support' the price of BTC usually through some hand waving that more cost equals more security or some other such drivel.
I am describing a radically different model that I'll call "Profit-Pull" as it is basically the inverse or the cost push model. New mining tech causes mining to become radically cheaper, but miners don't take the new profits in Dollars, they take them in BTC and actually reduce their sales of coins onto the markets. This leads to a run away price increase that only stops when new buyers run out and or coins from cold-storage jump in and break the upward trend.
In a normal market such as for precious metal, miners never speculate in their own production, they liquidate it immediately, or even soon via futures contracts. It is the irrational speculation of BTC miners that lead them into this trap, if miners would liquidate all coins immediately then the market would not go through these bubbles and miners would simply reap a large profit during these revolutions, unlike real commodities the mining equipment revolution can never actually glut the market with excessive coins.
Also I disagree that the wealth transfers of this latest bubble means this bubble can't unfold in a pattern broadly similar to the last. In 2011 we had people who mined coins very cheaply selling them to a group of naive hype driven buyers who expected them to keep rising in value forever. And now in 2013 we saw exactly the same hype driven and hopelessly naive people buying coins from people who acquired them at much lower prices. Their may be more sellers and more buyers this time around and the decimal points have moved a bit but the motivations, expectations and market knowledge of people are broadly similar. And that will lead to a broadly similar market even when the individuals are different.
If you had a million dollars at risk at $4 and sold at $8... Only to buy back in at $16.
Depends on the fraction sold at this price.
The amount of wealth that changed hands virtually guarantees that we have a crop of market movers who are making very different decisions than those who were moving 2011-2012.
Buy, sell, wait... what will it be?
BTW, we are still on track for a peak $126-ish.
If by that you mean "one last gasp on the way up, before starting a long slide down, like in late May", then, sure, I can see that happening.
My current thesis is that we are in a situation more like 2012 than 2011. What is so obvious to everyone who supports the 2011 thesis is some superficial similarities in the more current time-series compared to that of post-peak 2011. However, this thesis breaks down if you chunk the data by volume instead of time—you will see that we are much farther along in that cycle.
I am also trying to, "read the mind of the whales" by surmising how one would maximize profits if you could take on basically unlimited risk. The way to do this, by my reasoning is to buy slowly and consistently, just under a threshold that would trigger positive feedback effects in a positive-going price trend. Which is where my 'slippage' indicator comes in. Such a strategy could be managed by monitoring the distribution of slippage over a number of buys in order to calibrate the maximum rate at which your buys could occur under current conditions to avoid triggering positive feedbacks. The market is so tiny that someone with enough capitalization could unilaterally limit their downside risk.
The longer they forestall positive feedback in a positive-going price trend by their own discipline the higher the momentum will be once it does kick in. But where they can unilaterally limit downside risk they can not unilaterally limit upside risk, that is, until they have accumulated a sufficiently large BTC position. It is very difficult to know when a bigger fish will come along to end their current game. They only have to know that it could happen, and be prepared to profit from it.
I strongly disagree that our present market reflects 2012. 2012 was marked by stable hash rates which made mining a very thin margin activity and BTC exchange rates were mostly stable with a modest uptrend throughout the year that never got out of control.
Nothing could be further from that now, were seeing exponential increases in hash rates and mining is highly profitable but that profitability is collapsing fast. Exchange rates have gone through a huge bubble and are still in a Bear market despite recent rallies back to near $100, the fact that the rally ran out of steam their should in fact be taken as confirmation of the Bear market.
I see a 2011 repeat in all the places that matter, hash rates driven by new mining tech, public euphoria and media hype, the factors which have the power to really determine the market dynamics. Naturally things can not and will not unfold exactly as in 2011, the market is bigger with a lot more USD in it and it's in the hands of different people with different strategies and different opinions. Their are almost certainly whales trying to manipulate the markets but ultimately they can not resist the ocean which are the underlying factors.
One key difference were seeing is that this post-peak bear market is deflating slower then in 2011, I ascribe this to the ASIC technologies higher capital to operating cost ratio, it takes longer for the ASIC operator to reach the point were the machine can't even cover its marginal costs so the point of capitulation is further in the future. We also have the manufacturing capacity of ASICs acting as a limiting factor in the growth of hash rates, in 2011 the tech was commodity GPUs which were effectively available in unlimited supply to who ever wished to become a miner, now their is a waiting list a mile long. Both factors indicate a longer slower bubble burst then in 2011.
Basically, I tend to adhere to a worldview promulgated by Heraclitus, and later expounded on by Alfred North Whitehead. It includes a conception of time that is alter to the more common conception in that rather than some kind of static dimension the flow of time can be more usefully described as a process. That is, for instance, population growth can be expressed as an exponential function of time but this is not really as informative as understanding the processes which cause that growth—and decline.
So, I choose to look at the finer grained processes which actually result in price discovery. As following any time-based trend line will show you those trends do nothing to describe for you how the conditions they represent will change—except after-the-fact. I discount time almost entirely in favor of other dimensions which are closer in the hierarchy to the concepts of price development/discovery.
I agree that market structure fundamentally changes whenever we reach a new ATH. But why? Primarily, I think this has to do with a transfer of wealth. That is, there is a distribution of how many Bitcoin are held by a certain number of hands, and this changes. Since you now have a lot more Bitcoin in different hands you have to conclude that the decisions of those people are different from the decisions of the people they took them from. This difference, since it is driven by volume (the number of Bitcoin changing hands) then becomes the operative metric for the pace of market activity.
So, I choose to look at the finer grained processes which actually result in price discovery. As following any time-based trend line will show you those trends do nothing to describe for you how the conditions they represent will change—except after-the-fact. I discount time almost entirely in favor of other dimensions which are closer in the hierarchy to the concepts of price development/discovery.
I agree that market structure fundamentally changes whenever we reach a new ATH. But why? Primarily, I think this has to do with a transfer of wealth. That is, there is a distribution of how many Bitcoin are held by a certain number of hands, and this changes. Since you now have a lot more Bitcoin in different hands you have to conclude that the decisions of those people are different from the decisions of the people they took them from. This difference, since it is driven by volume (the number of Bitcoin changing hands) then becomes the operative metric for the pace of market activity.
Nothing wrong with post hoc analysis, as long as you can learn something from it.
Also, your paragraph on time sounds a bit like saying "I want to make some predictions regarding the height of people in some group, but I'd rather not use the normal distribution to draw any conclusions."
Your desire to find the underlying causes for market behavior is laudable, but whatever pattern exists, does so irrespective of me knowing its cause.
The main problem I have with your hypothesised buying program is that it seems needlessly complicated and error prone for a whale buyer to consider using it. Say he has some target USD that he wants to invest in bitcoin. Why wouldn't he simply make use of a much simpler program summarized as 'widely spread buying, concentrated selling'. He could spend a week or two buying, at a slow enough pace not to start a substantial rally, then sell 1/2? 1/3? of the newly acquired coins in one or two large dumps. Ideally probably during a time of market indecision. (add some randomization of course to avoid the pattern to become too obvious)
tl;dr The entire equilibrium angle seems too convoluted.
BTW, we are still on track for a peak $126-ish.
If by that you mean "one last gasp on the way up, before starting a long slide down, like in late May", then, sure, I can see that happening.
My current thesis is that we are in a situation more like 2012 than 2011. What is so obvious to everyone who supports the 2011 thesis is some superficial similarities in the more current time-series compared to that of post-peak 2011. However, this thesis breaks down if you chunk the data by volume instead of time—you will see that we are much farther along in that cycle.
I am also trying to, "read the mind of the whales" by surmising how one would maximize profits if you could take on basically unlimited risk. The way to do this, by my reasoning is to buy slowly and consistently, just under a threshold that would trigger positive feedback effects in a positive-going price trend. Which is where my 'slippage' indicator comes in. Such a strategy could be managed by monitoring the distribution of slippage over a number of buys in order to calibrate the maximum rate at which your buys could occur under current conditions to avoid triggering positive feedbacks. The market is so tiny that someone with enough capitalization could unilaterally limit their downside risk.
The longer they forestall positive feedback in a positive-going price trend by their own discipline the higher the momentum will be once it does kick in. But where they can unilaterally limit downside risk they can not unilaterally limit upside risk, that is, until they have accumulated a sufficiently large BTC position. It is very difficult to know when a bigger fish will come along to end their current game. They only have to know that it could happen, and be prepared to profit from it.
I know your 'whale(s) managing a sustained buying program, keeping price close to an equilibrium' hypothesis. I'm not ruling it out completely, or rather: I keep it in mind, as a possible explanation.
The method to determine how far the correction has progressed by volume vs. the obvious progress by price is new. I like the idea. Care to explain the details?
I'm not in the 2011-repeat crowd. Way to many differences, visible almost right from the start. However, I also fail to see all that many similarities to the 2012 correction. It wouldn't really surprise me if this bubble and the correction simply followed its own trajectory. after all, with each hype/bubble/correction cycle, the market composition changes drastically.
I don't really have the knowledge, or intuition, to make motivated long-term predictions, so I avoid those almost entirely, instead concentrating on what I can do profitably. That said, there's one pattern I do believe shines through, and I don't think it is driven by whales: since April, the market seems to attempt to find a "comfortable" growth trend, continuining from whatever point the price is at that moment. So far, those trends always seem to become "uncomfortable" after a while, probably because fundamentals as perceived by the market don't support any capitalization beyond maybe the 100 million USD range (but almost certainly not the > 1 billion capitalization we see now). Since this market never seems to be inclined to simply trade sideways, price goes down, with force.
I could have seen the end of this pattern, with the July reversal. The way it looks now, that reversal ran out of steam pretty much completely. I'm not declaring it dead quite yet, but I can definitely see a repeat of the May situation as an option as well.
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