Topic: 3 is the magic number, and the magic number is 3 - page 4. (Read 8095 times)

Not exactly.  When you're market-making you don't focus on where you bought in.  You keep repricing your orders to keep them at your preferred point above the spread, regardless of how much you originally paid for your BTCs.  My algorithm sells at more aggressive prices when the market's headed down to try to reduce my losses, but it never places market orders to liquidate my position.  That would be foolish!  I'd lose all my inventory and therefore my ability to capitalize on the next uptick.  (Note, right now I actually have liquidated and I'm not market-making, for unrelated reasons.)  Doing it right, the profits you're making on volatility outweigh your losses due to price shifts.

If conditions are too bearish (like now), hedge your positions!  Sell short to cover your average BTC inventory.  A faster SMA reduces currency risk; a slower one reduces your excess trades and improves your profits.  Pick the level of risk you enjoy and go back to trading the spread!

Just something to think about:  as long as the price is at $3, we're paying $21,600 per day to miners.  Do the fundamentals support that price?  If not, the OBPS will have to shoulder a large portion of that $21,600/day in order to keep the price propped up.

Price manipulation takes more than collusion: it also requires money.

Trading on volatility is all fine and good, until the market leaves you behind.



In July, 14 might have been a good place to play volatility, until you bought at 13.5 with it never to return. In September, 5 could have been the new 14, until you bought in at 4.5 with the price never to return. At a certain point you have to "margin call" yourself and take a loss on a downturn to get liquid again if you still want a tenth of a point every day. Most people don't mind a position of being all-in dollars, but being all-in BTC (or any foreign currency market) doesn't help pay the rent.

You wouldn't happen to also be an engineer dabbling in a new crypto-currency, would you?   There's room for many players, and I'm not active every day even if I were a big player (I don't think I am, really, it just happens to be a big month for me).

Eh, it's all arbitrary, why not pick an easy to remember number?  Your strategy reminds me of avoiding the cracks when walking down a sidewalk - there seems no logical reason to me to avoid whole numbers, which people intrinsically like.

Ever hear of Benford's law? https://secure.wikimedia.org/wikipedia/en/wiki/Benford%27s_law
It's more likely for the price to end up in the $x.1y range instead of $x.9y range.  Strange but true.  And I guess this argues in favor of your desire to keep away from $3.00+-$0.06 (which would dip into the 2.9x range), and go for something like $3.06 +- $0.06.  Hmm....

I'm all out right now - $3.19 was the last sell I had up, which was funded with whomever fulfilled my order for 500 btc at $2.95 just minutes earlier (thanks, whoever that was).  I'm out until the price drops below $3 again, and if it never drops below $3, well, that's fine by me.

A secret handshake sounds great, but since when do virtual currency enthusiasts meet in person?  Maybe more apropos would be to share a secret key and have a challenge/response before you can get into an IRC channel (wait, this sounds a lot like #bitcoin_otc...)


Hmm... maybe something like $0.01/day?  I'd love to see the price rise as it makes the whole market less subject to manipulation, and it keeps speculators interested.  But I think it's even more important to keep the market from dropping because that turns off vendors.

Ideally, the daily price variability should be < 2%, at which point bitcoin price risk + exchange fees (~1%) would compare favorably to credit card processing fees (3%).  That's the point at which adoption might take off.  When daily variability is 10-50%, bitcoin is just a speculators playground, and useless for actual transactions.

Of course it is.  Sunk cost economics (either that, or I've been drinking and don't care about the thousands I've spent - mostly before I started mining)

Imagine if Apple were selling $370 million worth of shares (0.1% of their market cap) every day, including weekends - think that might affect the price significantly?  Of course it would.  That's about 1M new shares every day, and they average 12M shares traded every day.  So far as I know, there's no financial instrument analogue with such significant and continuous inflation & dilution - right?  If so, bitcoin is clearly different in this regard.

And yes, a few people actually can hold up a market this small, if desired, if the price drops to $2.  What a few people _can't_ do is keep the market from getting irrationally exuberant and running up the price temporarily.

hardware is free?

any number is the magic number ;p

Note that this was time when lots of topics were stating that the magic number was 14.

I always wanted to see some of the major players out themselves. Pleased to read from you, old_engineer.

Your trading technique is almost disturbingly similar to mine. I'm not that big, <1% of volume the last 30 days. But I could quote you on so many things. Not using a bot, mostly placing small orders to be executed on price swings, heck, "friction on price" are words I use exactly!

The only thing we disagree on is the idea of setting the price to a round number. I think this is a systematic mistake, so when I have a hunch which way the price *should* be, I prefer pushing away from round numbers, even if it appears risky on the short term. It's nonsensical to expect real BTC price to just happen to be 3.00. Within 30 cent of it, well, could be, but not exactly the magic value. PatrickHarnett's proposal of setting it to a value nobody knows won't help against the fundamental problem: we don't know the real value, and it might change with time.

Clarify, please. There are plenty of 7-day periods where there was not a 100% swing.

lol

Yesterday I was working on a piece about "orderly trading" and checking various regulatory functions from places like the UK FSA (market stability) and Australian ASIC for market integrity rules.  While we still have games like this, we continue to have disorderly markets.

I did note, in looking at the FSA handbook, that Bitcoin would not call under their definition of electronic money.

If many miners are stilling mining yet not selling their bitcoins to cover costs, that will create a massive overhang of bitcoins to sell off should the price move higher.  Anyone waiting for prices to be significantly higher than $3 will be very disappointed.

It would be interesting to see if the largest holders would get together and form a pact.  Everyone will put up a large number of BTC or USD on MtGox and create huge walls.  The mutual promises from the buyers and sellers comes with the stipulation that the bids and offers cannot be withdrawn.

Initially, the spread might be very large, like a large buy order at $2.75 and sell at $3.25.  Someone could work up some kind of algorithm to adjust the spread as appropriate....  Who knows?

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If the market wants to move in a certain direction, you and a couple of others will not be able to hold it up. Bitcoin is no different to other financial markets from a technical / charting perspective.

Does your prediction leaves room within 1-12 weeks to see new price lows before we get to said $6-10 range? Or are you predicting we won't be seeing prices below $3 anymore?  For speculators who will buy the dips and sell the spikes won't care about 12 week out prediction to $10 imo. That type of statement will only get the ones that are fearful of missing the leaving trains so to speak.

But really, if bitcoins were to rise again, and I believe it will, I personally don't mind waiting until the market is showing clear rally signs until I get back in. $3-$50 or $5-50 isn't gonna break me, but $3-1.5 or $3-2 drop is if I'm holding on bitcoins. For that I am patient for now.

I'm sure more advanced traders like old engineer will simply take their profit from dips and spikes and provide liquidity when then market settles in a trading range. For that bitcoins is doing just fine now and I would even argue bot traders prefer current low price and would only like having more volume added during the "stable" periods to improve their profits.

I would also like to make a prediction. Within 12 years bitcoin will be the world reserve currency.   Oh I can only hope.

I can groove with $3 all day. I'm in. I already have an appointment to get OBPS tattooed on my neck in old english.

It doesn't look like you're actually disagreeing with me, seeing as how there are only 7 weeks left in the year. 

But more fundamentally, I think you're trying to analyze bitcoin as a stock, whereas I'm trying to look at it from the viewpoint of supply and demand.  If prices are higher, more miners will sell more of their mining proceeds, increasing the supply of coins on the exchanges.  Also, speculators like myself just won't participate in the market at a price above $3, reducing demand.  Finally, those speculators that do participate have less purchasing power at higher bitcoin prices.  These three effects combined effect will retard any rally.

Also, speaking for myself, if the price does approach $4, I'll liquidate my long position into the rally to dampen it.  Likewise, if the price nears $2, I'll send more cash to the exchanges to help soak up the excess coins on the market.

This looks more like the OPEC model of setting prices, not a free market price, and your graphs aren't meaningful when prices are subject to collusion.  Anyone else want to join the Organization of Bitcoin Purchasing Speculators (OBPS)?  Target price is $3 right now, and we could all agree to raise it at some point in the future, perhaps after the holidays, but I'm certainly not going to help with a run-up to $6-$10.