Topic: Bubble not yet popped (Read 3306 times)

Are you sure? $0.90 is bottom?  Please reconsider your decision of dumping at $2. 

I don't think it's worth the effort trying to time the bottom or even getting back into Bitcoin at all.  To get back in, I'll need to see some signs of future growth and I just don't see that.  The risk/reward is just not there.  You can still make money given its a deflationary currency, but I'd rather put my money in higher-growth investments.

A 75% drop in hashpower is different in what way from a 75% drop in BTC price? Its essentially the same thing, and a completely arbitrary number compared to a completely arbitrary baseline. But whatever strategy works for you I guess...

Grod, there is a reason people are unable to grasp your argument. They don't understand the first thing about the relevant calculations for profitability. A large part of this is combined ignorance and hubris; I am almost tired of being infuriated by the obscene lack of basic understanding of profitability. The other part is just plain hubris. They may understand, but they want to believe so badly, they'll happily ignore reality for it.

Technomage, I've seen you write great stuff, in terms of technical understanding. But you're cherry-picking to suit your desires.

This is the traditional shape of a bubble. Exponential climb to peak -> correction, which dips below market value -> return to fair market value. As it turns out, homeostasis is a useful concept outside of biology class too

hash rates right now I believe are inaccurate; there's more dossing going on.  Deepbit, btcguild, and mining.bitcoin.cz are all flaky right now... quite irritating...

I have no better barometer of bitcoin community sentiment than hash rates, so I will use that.  Here is what looks to be happening:  hash rates on deepbit are now below a terahash.  In the coming days this will be reflected in slower transaction rates and rapidly dropping next difficulty estimate.

The same miners who can't cash out will decide to shut down knowing they'll be mining those coins at  < 800k difficulty if they take a break.   We've seen this with alt chains -- when it looks like the next difficulty adjustment is severe enough there is a negative feedback loop in computing power.  The ones left (free power miners) mine at a disadvantage for a disproportionately long time.

The risk for bitcoin price is a larger % of miners may decide to sell some knowing they'll mine back more coins, cheaper.  Going from 15-20% of miners selling their stash to even 30% would be horrific.  If I estimate my cost basis to make a bitcoin just went from $2.80 to $.90 I'll have no problems dumping at $2.

If I see a 75% drop in hashing power that'd be my confirmation of a bottom.   I will at that point switch strategy from bear to neutral and ready to go bull.

I said its delayed. If you've invested heavily in a mining farm, or even just a few cards, you are not instantly going to sell your hardware if profitability drops. Getting it back may cost you a lot. And even if you would make that decision instantly, you likely wouldnt find buyers overnight. Some are continuing to run their miners until they are sold.  Many wont make the decision to pull the plug until the utility bill comes it.  Some will continue running their rig for the heck of it, or to mine private anonymous coins. Some have free electricity. Some are even still profitable today. But  thats not the same as being bullish. Im still mining, but Im not bullish. People were bullish back in may and june, but hash rate still lagged price by quite a bit. The same is happening during this decline, and probably during the next bubble/rise.

Looking at hash rate is about as useful as looking at the exchange rate of one or two months ago.

When price fell to the point where even at 4.6c/kwhr it was stupid to mine but hash rate did not fall I knew one thing -- 80% of the people who got into mining bitcoins in June are still mining, which means they are BULLISH.  They expect prices to go up, not down.  If they expected further down movement they'd shut off their machines and sell cards on ebay.

So when I saw price declining for months but hash rate mostly unchanged I knew there was lots and lots of downside to go.  Even at $6 it looked like we got nothing but bulls, so I was convinced the worst is not over.


Except that hash rate did NOT go down appreciably over the months since we were at $15.  Hence it's a valid indicator of broad sentiment (bullish) in an obviously down trending market.  People were talking bull, producing, but NOT buying.
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Up until that line I agreed with everything you said. But hashrate is no indicator of sentiment. Its a delayed indicator of price. Ignoring transaction fees for now, its simple, if price goes down, hashrate goes down and vice versa. Through difficulty, and assuming stable cost/MH, the relationship is linear; for all the reasons you listed above, in general miners will pull the plug if they cant make a profit, regardless of their sentiment, and if there is money to be made mining, it wont take long for people to figure it out. So what deepbit is showing is simply that bitcoin price tumbled. Nothing else. And unless price goes up sharply, hashrate will continue to decline for a while, and it wont go up because of sentiment or wall street journal front page ads; it will only go up after BTC price has gone up and more miners can run their rigs profitably.

It never works like this.  Nobody "worries" about missing a "bottom" any more than they "worry" about missing a "top."  People generally follow the prevailing trend.  Once there's an uptrend, people will start getting concerned about missing out on the ride up.  Brownian motion near support and resistance levels doesn't matter.

I get a good laugh about you being concerned about revealing your positions.  Nobody cares.  And I can guess -- you mined and didn't sell, so are now long a few bitcoins at a buy in price of around $3 (factoring in hardware depreciation).

Even with free power there's the opportunity cost of not selling your mining hardware to buy bitcoins with it.  Even now my 2x5830s, if sold for $80 each on ebay, would buy more bitcoins than they'll profitably mine at current levels.   Expecting higher profits in the future is speculating and can be done through direct buy more efficiently.  There's replacement cost for hardware failure.  You may judge deepbit an invalid indicator of community sentiment but it's served me well so far.

+1

Good point, if there is a panic sell of some sort the price certainly could spike below $1.

There seems to be a real disconnect in this community between those who MINED all their Bitcoins, and those who actually BOUGHT their Bitcoins using traditional "fiat" currency. 

I've have plenty of fiat on mt.gox - once we have a trend that looks promising I'll be back in the game.

hopefully with the price drop hackers will have less incentive to steal coins and in result finally stabilize the market.

That's what worries me. I suspect a LOT of people are sick of buying while Bitcoin drops but remain interested. If the price bottoms out and starts going up for a couple days, everyone pushes their "buy" button. Hopefully those holding coins won't be so insanely bullish this time... I know I won't be. It's going to oscillate, but will it get more or less unstable from this point?

i think it could easily go under $1 because the market always overshoots. So even if a sustained 'bottom' is supposedly $1.x... it'll still spike down briefly and pop back up.

A thought.

We're at the price range where I first bought Bitcoins. But at that time it was way harder for non-US people to buy than it's now.

I've been buying more on MtGox now that they accept EUR bank transfers and have a separate EUR denominated market.

There might have been a bubble forming at that time. But should a rally occur now, there would be much fewer hindrances for many of those who might want to enter the market.

So, any uptrend we'd have might be surprisingly strong. And we might just be on the way to another bubble.

Pre-gawker volume means whatever the price is when the volume retreats to those levels.  There is some deflation and a wider bitcoin economy since Gawker so I would expect a higher absolute price as the bottom.  Volume levels are still inflated, though.

What the bottom will be is a good question and it's an important question for many. We're reaching the stage where most of the bears are slowly starting to think about actually missing the bottom which means the bottom will undoubtedly be higher than what the majority of bears think it will be.

Now, my personal bet is that it'll be somewhere around $1.x, that's as detailed as I can be because otherwise I would reveal my positions. But it's possible that if everyone thinks it'll be at $1.5, maybe then $2 never breaks. This is why it's smart to use multiple buy-in points while buying back because you simply can't know what will happen.

If enough people use gradual buy-in points starting from around $2, there will be quite heavy support at $2 already. And to be honest, selling is more and more unattractive the lower we go. I recently talked to some of my friends who didn't sell at $4 and are now in a difficult position, none of them are about to sell any coins and will hold as long as it's needed.

This will be the thought pattern for many because everyone knows Bitcoin doesn't go to 0 and is actually quite unlikely to go below $1 due to the fact that even small players can buy serious amounts of coins at that price and we definitely have a large amount of small players willing to buy at that point.

Regardless, the lower it goes the more stupid selling feels for any bag holders. But it's interesting to see what happens.

Capitulation based on indicators grod is describing will never happen. There are many reasons for this. Just like Cluster2k said, some of us don't really pay for electricity so it's still profitable even with the current price.

Second and more importantly, there is always a significant delay. Miners are not only expecting changes in prices but changes in difficulty! They don't need to expect a rise in price, I'm pretty sure most people don't at the moment, but what they can expect is a significant drop in difficulty during the next two adjustments.

That's why the change will always be gradual. Nothing drastic is going to happen to the hash rate because of price changes, it's gradual. What can affect the hash rate much more is pools getting dossed etc.

I don't think mining profits are important here. We didn't have a buying force strong enough to sustain the price at higher levels so what we need to find out is how many people are actually buying bitcoins because they need it and not because of the "curiosity bubble". These people will keep the price from crashing for months to come (until the next press hit shows up).

Everyone said the same thing at the $16 price level, the $11, $7, $5, and $3 level.  I don't hold out too much hope of mining profitability in the near future.

Of course, given that I heat with straight up electric coils, I'll be using miners come winter weather.  It wouldn't make sense not to, no matter what the price is.

While that might be true, it isnt driving hash rate unless ALL of them have free electricity or dont care. The miners that do have free electricity (or dont care about the price and act irrationally) will drive out the miners that dont have it and hash rate will still plummet.

What you are seeing is more likely a delayed response. Price plummets, miners reevaluate but dont instantly pull the plug or sell their gear. It takes time to convince them the price is going to stay that low, it takes time for electricity bills to arrive, it takes time to find buyers for their equipment. Hash rate will lag bitcoin price, but in the long run, will always correlate as long as there is a single rational miner left that actually pays for his electricity.

That's what we all want to know. Pre-gawker volumes mean price under $1, but I think that is too low. My bet goes to $1.5/$2.

Question is: Where is the bottom?

I've just shut down my (deepbit) miner for another day, as 'free' power from my solar PV array has finished for today.  I wouldn't discount the possibility that a large proportion of miners on deepbit have 'free' power (solar PV, or stealing it from someone else), are on fixed power contracts (which will go up long after they finish mining due to the lag effect), or have some of the cheapest power on Earth and don't mind having hundreds of dollars in hardware producing cents per day.

Then there are the optimists, who see the current crash as temporary.

No, it's a good proxy for overall bitcoin ecosystem sentiment.  They're bullish and expecting BTC to go up, not down.  Anyone expecting lower BTC prices (like me) has already shut down.

Peak hashing power was 5.4 gigahash on deepbit.   Currently at 3.1.  Looking like about 60% of us are still bullish.

That's backwards. Those are the people putting Bitcoins into the system. Not the ones who are putting in dollars.

My indicator is hashing power on deepbit.   While 60%+ of the bitcoin community are still bullish on bitcoin it's not a bottom.

Sorry to the optimists, but you're still going to have to wait for the bottom.  Bitcoin is going to at least halve before any rebound.  Once volume gets back to pre-Gawker levels, I'm going to call a bottom.