ELI5.. Why are people guessing the auctioned coins sold for so much?

protokol

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Quoting myself from another thread:

Quote from: protokol on June 20, 2014, 05:07:23 AM

Personally I'm pretty sure most, if not all, batches of FBI coins will sell for a premium. Not because the coins are "clean" or "collectible", but because the investors would happily pay more to avoid slippage.

Think about this hypothetical situation:

20 individuals bid on the coins. I think most investors would bid for more than 1 batch of coins, with a number of bids below market and a number above market price. You only need half of the individuals to make a single bid over market price for all the coins to sell at a premium.

In other words, if you think ALL of the coins will sell at a discount, then that means that NOT A SINGLE BIDDER will bid over market. Pretty unlikely I would say.

The actual number of bids was 63, go figure.

maker88

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Quote from: elebit on July 01, 2014, 10:19:34 AM

If the bitcoins sold at a large discount (perhaps because very few people could put in eligible bids in time), there is a risk that whoever bought them would would try to make a quick buck by dumping them at the nearest exchange.

This is one of the reasons that the price dipped in anticipation of the auction. The fact that this does not seem to have been the case have driven prices (almost) back up again.

that risk was never realistic, they would not make a quick buck, they would lose millions, best case scenario. a lot of people are stupid though, and didn't understand that, so they panic sold, and by the time their tiny brains came around to the real world, the price was already going back up and they had to buy back in at a loss. its called a bear trap. on with the show

Tzupy

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OP, the answer to your question is: because those people are over-leveraged long, and fear a long squeeze that would wipe out their trading funds.

Torque

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OP, I'll give you an even simpler explanation. Maybe the simplest one of all.

It's called an auction. An auction is an event where bidders try to outbid each other in order to win something, as opposed to underbid each other. Wink

auc·tion
ˈôkSHən/
noun
noun: auction; plural noun: auctions

1.
a public sale in which goods or property are sold to the highest bidder.

elebit

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If the bitcoins sold at a large discount (perhaps because very few people could put in eligible bids in time), there is a risk that whoever bought them would would try to make a quick buck by dumping them at the nearest exchange.

This is one of the reasons that the price dipped in anticipation of the auction. The fact that this does not seem to have been the case have driven prices (almost) back up again.

Oddball1221

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Let's say that you're a company that wants to buy 30k bitcoins. As you know, if you start buying bitcoins, then you are creating demand and as you buy bitcoins, the price of bitcoins increase. This is because more people are offering to sell them at higher prices (so they can profit from the sale).

Let's say that bitcoins cost $600. At $600 there are 0 people selling, at $610 there at 10 people selling, at $620 there are 100 people selling and I assume you got the pattern (the graph below is the actual current version of this from bitcoinity). Instead of buying bitcoins and watching the price fluctuate in response to a 30k buy, these large companies are better off paying a flat rate premium to acquire all those bitcoins without influencing the market too much or overpaying (because by the time they get to their last bitcoin, it would cost a fortune).

https://i.imgur.com/y83epTy.png

Also, if you've noticed the logarithmic curve flattening out, I would like to remind you that that means for every new bitcoin, the price will increase a lot more than in the beginning of the graph, but if there is some meteoric rise then there will be more people willing to sell which would correct the flattening out.

DieJohnny

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because if you bought a bunch of bitcoins and you paid more than they now are worth, any possible chance that your coins might actually be worth more than they are today is embraced with the zeal of David Koresh

chesthing

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Quote from: data55 on June 30, 2014, 09:35:29 PM

Ok, so im reading here and a few people keep coming and and saying how we were dumb for thinking they would go under market value.. But i don't understand that. I guess i'm too small minded to understand the concept of not getting a discount when buying in bulk... As i thought that was the whole point of buying bulk? Is there something different about buying bulk BTC's that i'm missing? I understand it would take awhile to get that many coins through exchanges, but even then, i can't see them paying that much over market price when they could just create a script/bot to buy coins at much better prices from many different exchanges. I just don't understand.

Edit:
**I have not read any hard data, just same stuff on the web as everyone else.**

1 year from now you will understand how great of a deal the winning bidder got.

gimme_bottles

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Also you can be pretty sure you won't get screwed by some shady exchange. I wouldn't feel too good sending $2m to a foreign bank account. But I can't how much people are willing to pay for that...

kingscrown

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http://fuk.io - check it out!

Quote from: pungopete468 on June 30, 2014, 11:11:26 PM

It's simple really...

There are people and groups who wish to invest large sums of money wisely, and some view Bitcoin as a wise investment. Buying those coins above spot price can still net a discount when you consider they are investing X amount of USD in exchange for Y amount of Bitcoin.

The cost to buy 30,000 Bitcoins on exchange would be greater than buying them in this auction. This was an opportunity to grab more Bitcoins for the same dollar amount invested.

The party who won the bid wanted more Bitcoins, and buying on exchanges is expensive and the market is fickle... They likely intended to invest a certain amount of money while maximizing the coin count.

Bottom line is that by buying in bulk, they did get a discount on what they otherwise would have spent to acquire that amount of Bitcoin...

Exactly + this peole have influence and money, if the thought its good to buy overpriced [vs markets today] it means they will have powers to make it raise even more.
Surely nobody who bought so much was stupid - they knew what they are doing!

pungopete468

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It's simple really...

There are people and groups who wish to invest large sums of money wisely, and some view Bitcoin as a wise investment. Buying those coins above spot price can still net a discount when you consider they are investing X amount of USD in exchange for Y amount of Bitcoin.

The cost to buy 30,000 Bitcoins on exchange would be greater than buying them in this auction. This was an opportunity to grab more Bitcoins for the same dollar amount invested.

The party who won the bid wanted more Bitcoins, and buying on exchanges is expensive and the market is fickle... They likely intended to invest a certain amount of money while maximizing the coin count.

Bottom line is that by buying in bulk, they did get a discount on what they otherwise would have spent to acquire that amount of Bitcoin...

data55

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Quote from: spiderbrain on June 30, 2014, 09:58:59 PM

If you buy in bulk from a factory, it can always be matched by increased production, so the price is cheap because it reduces handelling/logistics costs. Bitcoin is being produced at a fairly inflexible rate, so if people buy at a rate lower than miners want to sell, prices go down, and if people want to buy bitcoin faster than that, prices rise. This is a familiar pattern across all stock markets (i.e. the number of shares in a company is usually fixed, so buying too many, too fast drives the price up, such as during takeover bids)

This make sense to me, but it doesn't explain why people who have been around much longer than me are speculating bids in the $700's.. I feel like if someone wanted a few thousand coins they would be better off getting it from the exchanges. I read also someone mentioning something about maybe business wanting to buy BTC but having all the legal stuff, tax, etc handled and that buying from the Gov. would make this process easier. Any legitimacy in that?

twiifm

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Quote from: ?? on ??

Quote from: twiifm on June 30, 2014, 09:55:43 PM

Quote from: data55 on June 30, 2014, 09:35:29 PM

Ok, so im reading here and a few people keep coming and and saying how we were dumb for thinking they would go under market value.. But i don't understand that. I guess i'm too small minded to understand the concept of not getting a discount when buying in bulk... As i thought that was the whole point of buying bulk? Is there something different about buying bulk BTC's that i'm missing? I understand it would take awhile to get that many coins through exchanges, but even then, i can't see them paying that much over market price when they could just create a script/bot to buy coins at much better prices from many different exchanges. I just don't understand.

Because bit coiners don't understand economics. LOL

I saw a post here claiming a bid for $900. LOL WUT? No smart money ever became rich from overpaying. Only dumb money overpay

"bit coiners"

"WUT"

Geniuses like you make me hard. You wanna fuck? You're the bottom. I only let guys smarter than me top me.

Get the Boy Butter, faggot.

Sure twink I'll fuck you. You like bears? Bring your mom along and I'll fuck her too

twiifm

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Quote from: spiderbrain on June 30, 2014, 09:58:59 PM

If you buy in bulk from a factory, it can always be matched by increased production, so the price is cheap because it reduces handelling/logistics costs. Bitcoin is being produced at a fairly inflexible rate, so if people buy at a rate lower than miners want to sell, prices go down, and if people want to buy bitcoin faster than that, prices rise. This is a familiar pattern across all stock markets (i.e. the number of shares in a company is usually fixed, so buying too many, too fast drives the price up, such as during takeover bids)

Bitcoin is purely speculative and can't be compared to products.

Look at the other side. If someone wanted to dump 30K coins on the market would the market pay more or less than current price?

spiderbrain

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If you buy in bulk from a factory, it can always be matched by increased production, so the price is cheap because it reduces handelling/logistics costs. Bitcoin is being produced at a fairly inflexible rate, so if people buy at a rate lower than miners want to sell, prices go down, and if people want to buy bitcoin faster than that, prices rise. This is a familiar pattern across all stock markets (i.e. the number of shares in a company is usually fixed, so buying too many, too fast drives the price up, such as during takeover bids)

twiifm

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Quote from: data55 on June 30, 2014, 09:35:29 PM

Ok, so im reading here and a few people keep coming and and saying how we were dumb for thinking they would go under market value.. But i don't understand that. I guess i'm too small minded to understand the concept of not getting a discount when buying in bulk... As i thought that was the whole point of buying bulk? Is there something different about buying bulk BTC's that i'm missing? I understand it would take awhile to get that many coins through exchanges, but even then, i can't see them paying that much over market price when they could just create a script/bot to buy coins at much better prices from many different exchanges. I just don't understand.

Because bit coiners don't understand economics. LOL

I saw a post here claiming a bid for $900. LOL WUT? No smart money ever became rich from overpaying. Only dumb money overpay

Gargulan

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I don't think the final price of the auction is released.

Where do you get the data?

data55

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Ok, so im reading here and a few people keep coming and and saying how we were dumb for thinking they would go under market value.. But i don't understand that. I guess i'm too small minded to understand the concept of not getting a discount when buying in bulk... As i thought that was the whole point of buying bulk? Is there something different about buying bulk BTC's that i'm missing? I understand it would take awhile to get that many coins through exchanges, but even then, i can't see them paying that much over market price when they could just create a script/bot to buy coins at much better prices from many different exchanges. I just don't understand.

Edit:
**I have not read any hard data, just same stuff on the web as everyone else.**

Topic: ELI5.. Why are people guessing the auctioned coins sold for so much? (Read 1737 times)