Topic: How deep do you expect the price to fall? - page 2. (Read 8906 times)

What the fuck... Bitfloor got hacked, there are still problems with Pirate, but the price is rising. The market is completely irrational.

gold is in a bubble!

Speculative premium, which is another way of saying it's overvalued.

There's still too much speculative premium in the bitcoin exchange rate right now for me to store money I can't afford to lose as bitcoins, or to recommend it as anything other than a means of exchange only. That will change in the future when the amount of Bitcoin-demoninated trade increases.

So how you explain the fact that gold commerce is close to zero (meaning cant buy in shops for gold) and exchange rate is pretty high?

But the future will always be just like today, but bigger.  Also the previous statement will always be true.

I only make estimations of expected exchange rates to even powers of 10 because I don't actively trade.

Based on the estimations of the amount of bitcoin-denomimated trade and the assumption that the velocity of bitcoin used for commerce is similar to the velocity in the larger economy I expect the exchange rate to be between $1 and $10 while the amount of annual bitcoin commerce is between $10 million and $100 million.

Likewise if the exchange rate ever reached the $100 and $1000 values that some people are hoping for I would consider it to be a bubble unless the bitcoin economy was supported by $1 billion and $10 billion respectively in annual commerce.

There really seem to be three futures for Bitcoin, which I think help decide the growth in terms of value vs. fiat currency:

1) Faith in the system falters, media attention causes concern, governments try to ban/outlaw it, etc. etc. - something that prevents mainstream adoption and the abandonment by all but the die-hards.  In this case, the price would drop down and stay low.
2) Mainstream adoption doesn't really happen, but people tend to continue supporting it; value vs. the U.S. dollar would meander along, but not significantly change
3) It continues to grow and be adopted further, become more popular, and basically have a good future.  This is the likely option I see - in this case, the price would (should) rise.  How much?  Well, I would say the percentage rise would be about constant long-term, rather than the dollar value rise.  IOW, if the growth is about $1 per month now (10%), when the value reaches $100 it would be up to $10/month value increase (stilll 10%).  This would mean a curve when looking at dollar value, but a line when looking at day-over-day percentage increase. 

Over short periods of time, linear is probably a good approximation.  However, a $1 change in price at $10/BTC becomes a much less significant change at $100/BTC or $1000/BTC.

As a sidenote, I had noticed a while back that if you block out the part of the all-time graph between May and November 2011, the rest of the graph forms a nice trend.  And the only reason I even consider leaving out a block like that is because of all the hype and media attention at that time (good and bad), and basically the whole system was more immature at the time.  Not that Bitcoin is old, mature or stable yet, it simply is more than at that time.  Leaving out that noisy bubble period, the linear trendline I drew a few months back wound up around $8 for the end of 2012, which we still seem on track for, and I personally believe may be realistic. 

Heh haven't noticed the pun 

You know lines on a logarithmic chart and such or curves, polynomals, etc.. They don't work

Everybody uses linear lines. That's why they work and that in turn is why everybody uses them.

Forum stats show linear growth.

Also, if you want to do exponential, switch to log charts and then draw your straight line.

Well I would think that a (very slight) curve has its place since it represents an accelerating amount of 'hard-base users'. A linear line implies growth at the same rate. In the case of Bitcoin, which is now very slowly starting to trickle into mainstream, I see the former model as more representative; snowball style.

In general I agree, most of technical analysis is BS, because it is not back-tested in a scientifically rigorous fashion.

I see technical analysis as an analogue to this problem: Take an random photograph and extend it beyond the border. And depending on what is pictured it is possible to come to a somewhat useful conclusion: If the edge of the picture contains a table you can if only an edge is missing extrapolate where that edge should be in the picture, if there is an arm you can tell that there must be a person somewhere after it. But if there is a part of a rock it could be part of a bolder or a mountain.

Your critique is consistent with the efficient market hypothesis, that is in a ideal market the price movement should be equivalent to Brownian motion (random walk). However most markets and especially bitcoin are no ideal markets, that is, by definition that not all fundamentals are available to everybody.

I don't really agree with the efficient market hypothesis either, I rather think that there are periods of unpredictable behavior, (the "picture" displays a texture like sand) and predictable behavior (there is a person in the picture which sits on a chair).

I understand that. Technical analysis always looked to me like a combination of crowd psychology and genuine bullshit. I read a lot about lines, peaks and bottoms, channels and whatnot, but nobody really explained WHY. You provided the best explanation so far.

I can't.
If you draw trendlines they usually fail in predictive power unless they are linear, the only explanation I have is crowd psychology. Other than that it seems completely random...

ya but look as bitcoin goes up and down, its bouncing higher and higher away from that trend line   "min price line"

Care to explain why the minimum price is linear according to you? I mean... why not a curve? Wouldn't a curve be more likely?

+1
I think this is probably the absolute minimum value. This is probably the growing people who use bitcoin no matter its value.  Also if you look closer, The increase line you made has the same ratio than the bitcoin slight growth during the 5$ "stability" period. 

I still think that pirate will not sell his bitcoins in the near future.

The price could tank regardless, but not as steep more like we had last year after 30, it could still accelerate at some point from panic sellers but no fractional digits crazyness. As of how low... idk, just this you can draw a linear trendline under the price from 0.9 to 2 and I don't think that would be broken.

I find myself agreeing with most of it. Timing is the greatest question mark.

I'm convinced he is priced in, but it is questionable to what extent. People still have some hope to get their investments back and I think he still holds huge number of bitcoins and waits to dump them. One thing is for sure  - Pirate will either pay out, or not pay out. My theory is, that if he pays out, many investors will sell their bitcoins, driving the price down. If he doesn't pay out, FUD will conquer the market + pirate sells bitcoins driving the price down. So according to my theory, the price is going to fall either way. The question is when.

Any thoughts on my hypothesis?