Topic: November 2013 Bubble Analysis (Read 11424 times)

I wonder how the doubling time will look at the next bubble?

I find it entertaining the way negative commentators breathlessly describe "the massive crash."   Those who have been around long enough know that this thing is growing at an incredible rate and this is just a sign of a effervescent and highly functional market.   Each crash has set a new floor and in many cases the new floor is higher and higher.   We must be in a mega bubble if anything .   Up and down by $1000 makes less of a difference when you have something worth $40,000.

I sorted a figured we would see a price crash with then a stabilization around $700 and it looks like I was right, at least so far.

Thing I wanted to point out though:  I don't even know if we can this a bubble and call this a crash of said bubble.

If you consider 30 days ago we were at less than $200 and now (at least currently) have stablized at around $700 then that isn't so much a bubble and crash in my opinion. More than tripling in price for something in 30 days is more of an adoption curve or a success story than it is bubble and a crash IMHO. 

If the price dropped to $300 bucks or less then you could call it a bubble. IMHO November was an awesome month for Bitcoin and neither a bubble or a crash terms really apply here.

Hmmm, finding the bottom. As with finding the top, those smarter and more experienced than I would say it is impossible. If we take that on face value, three things occur to me, though you may find them obvious or of little use.

1) Dispersing coins from miners and current holders to future (or new) holders is evidenced in the adoption spikes on the S-curve. Namely, getting the coins from fewer to greater numbers of people *is* the process of adoption, it occurs rather violently, and which has historically popped-and-dropped the price, typically to a higher point than the previous ATH, like Rampion smartly noticed. To use a crude analogy, more water in the bathtub makes waves at first, but ultimately acts as the proverbial rising tide that lifts all vessels.

2) We are in a downtrend. The price seeks to settle at the new plateau, the price of which could probably be charted with the numbers of users and price data before and after each prior parabolic spike (or what we all mistakenly, or casually call 'bubbles'). Most of us believe 266 to be the floor, and my hunch is between 325 and 450, but for no thoughtful reason.

3) Most interestingly, if you look at the log charts, you can see that in each of the adoption surges (bubbles), the retracements to the new lows (post 'bubble' settling points) took longer to find than did reaching the top! What this suggests is that for this current surge, which arguably began at the outset of October, if we have crested its peak, which seems reasonable, then we are looking to, at least, 2 more months to 'find' the new 'bottom'. [Perhaps another upswing could preclude the price from finding its new equilibrium, as we continue to witness shorter periods between blast-offs, but that should be easy enough to detect by volume if it occurs.]

Conclusion: It is easy to spot the parabolic surges on volume on a longer chart (1D), and easy enough to see how that would yield 5-10x if realized anywhere near the crest. I will leave it up to your imagination to envision the potential yield from buying each settled low, and selling the relative peak of each parabolic surge (from 90 this summer to 729 today would work out fine, for ex.). And, how about if we participate in several more of these uplifts before reaching the vertical edges of the S-curve? I will, however, draw a straight line that suggests heeding this curious novelty might greatly reduce stress, free up time to spend on other things, and, mention that I have begun to plot my own course to do as much. Wishing you all the very best in wealth creation.  

[P.S. Is the strategy outlined above not the middle path, where the slow play would be the very successful buy-and-hold, and the fast play would be the very dangerous, fast and loose trading?]

Indeed. In any case BTC "bubbles" seem to be shorter and more contained, both in the way up and in subsequent deflation. It also looks like the time between them is getting shorter and shorter.

Honest question: should we consider what happened in 2011 and in early 2013 "bubbles"? I don't know if multiple rallies and "pops" that end up higher than when the rally started fit the traditional bubble definition.

In 2011 the rally started at $0.8 and the bottom was $1.98 - that's hardly "going bust"
In early 2013, the rally started at $12 and the bottom (just 4 months later) was $50 - again, that's hardly "going bust" in my book.

The current early December 2013 pattern would fit much better a "first sell off" in the traditional bubble chart - don't you think so? But again, hardly to see other bubbles that had such an immense appreciation in different phases. Let's remember that the famous "south sea bubble" saw on appreciation of only 10x - really nothing compared to BTC.

Finally, I do believe that there is a good chance of BTC going to near-zero at some point. But I cannot imagine that process being a slow and painful decline - I imagine it as heavy stone dropping extremely fast (probably fueled by heavily leveraged shorting, something still impossible in BTC) - as bubble pops usually are.

I concur, a further drop to 450 where a support line is coming up from the early stages of the bubble would be within the realm of a correction, although of an unusually strong one. Pre bubble levels wouldnt be reached before 200$/BTC. It could be argued that lasting value has been created since this bubble started by raised public awareness, official recognition in the US senate and in the far east as well as in some places in the EU. Furthermore have many more businesses started to accept BTC during the bubble and the second market fund has provably raised a lot of money and attention from bigger investors. Summing the forementioned up I argue that it would be improbable for the price to settle at pre bubble levels where all those values have not yet existed. It should soon find a support line to follow which exists somewhere north of the 200$ mark, pricing in all those events that happened during the bubble period. My guess would therefore be the mentioned support around 450$ not withstanding the always looming possibility of a quickly recovered overshooting to lower levels.

I am hesitant to predict a bottom, rather I observe that the low of 576 on MtGox is not as severe a drop as the low from the April 10 peak. The price action so far is more typical of a correction than a bubble collapse.

I bought at 710 yesterday and am anticipating the dead cat bounce to around 1000 atm. But this only on a side note, the most important question right now: Where is the bottom?
Going with your earlier estimation of a 70% retraction it would put the bottom somewhere around 360$. After some time has passed, if you reassess your prediction, where would you put the target at present?

I agree with your interpretation of the top.

My timing of bubble peaks depends upon an unsustainable ever-increasing rate of price growth. After the November 18 peak and correction, it looked to most of us that another greater peak would form to fully collapse this bubble. However, the recent China bank/bitcoin regulation news removed the speculative fever from the market.

I continue to assume that the collapse of this November bubble will be similar in technical shape to the April 2013 bubble, with the peak price followed within a few days with the low price, then a damped oscillation of prices centered about halfway between the high and low price.

Following a buy-some-more and hold strategy, I bought at 753 earlier today.

Just noticed something VERY interesting, each Bubble is preceded by ~6 months by a large trading volume spike which may or may not be a significant bubble in itself.  I wonder whats up with that?

These thoughts and estimates seem to give healthy weighting to the balance of arguments-- thank you for pointing out the concerns around adoption across different industries & applications.

We should consider, too, that there are other industries for which cryptos will fill a need, that have not yet been discovered/invented.

And, we should recognize that other cryptos themselves make compete for part of Bitcoins presumed future market presence, if they provide better solutions for myriad reasons, may those be regulation, locality, etc. 

I can pray to my baby Jesus (no offense to anyone) that we have 1-3 years to 50% adoption. 

I think it's a slow decline from here, and my subscription for my charting has run out, so can't see *my own* trendline drawings, but any line on the log would highlight the breakout, as early as down from about 1160, until 1000, unless 750 is the support for this trend (where we are right now); if that's the case, then maybe this spike does run, I could only guess.

The core of the idea here, to me, is that the spreading of Bitcoin *has* happened, we've witnessed another spurt of adoption, the surge is through. There is, ostensibly, no continued momentum, so from where would a correlative price increase arise? As we drift, we will retouch the 'ground', which will be raised, now, to accommodate the new growth (perhaps 266-450).

Am I talking crazy town?

PS While I type we've dropped to 699.

Facebook has around 1 Billion users.
Given that there are people with dozens of accounts and kids, teenagers on facebook. I would say anywhere from 100 Million to 50 Million are financially sophisticated enough to be the market for Bitcoin.
The current user base estimated from various threads on this forum is around 1 Million for Bitcoin. So, I would put that around 1 to 2% of the entire market, which is the Early innovators stage.

However, in an alternate scenario, where Bitcoin does not fully mature to it's potential it dominates a few niches like international remitances, offshore asset protection, grey market etc... but does not take hold as a payment network (due to complexity, technology risk, govt regulation etc...) In that case we can estimate the total market to be 10 Million users. In which case we would be around 10%, which is the early adopters stage.

In either scenario, irrespective of what happens to the price right now. The final peak price is at least 1 to 3 years away at around 50% user adoption. (At what might be a valuation of 10 to 100x current price).

Any updates?

Are we getting a rounded (double)top instead of the anticipated (at least on my part) sharp parabolic increase kind of needle tipped top?

I honestly don't know how one can argue that we are anywhere further along the adoption curve than the first signs of the early adopter phase. Before I go further, I should really make clear that I am referencing the Roberts Adoption/Innovation Curve with its 5 constituencies as follows:

** Early Innovators (2.5%),
** Early Adopters (13.5%),
** Early Majority (34%)
** Late Majority (34%)
** Laggards (16%)

There are some larger sums of money getting moved with Bitcoin, and while most of that is speculation (still valid movement), the number of actual people who are using the protocol or currency is bordering on miniscule. I suggest you consider how far down the rabbit hole, and out of main stream, this conversation is being had. I think that the type of person that comes to Bitcoin *this* early might tend to understand concepts and abstraction more readily and deeply than the average person. There is no precedent to Bitcoin, the math is *scary*, it's new, requires a good deal of thinking to grasp, overthrows/improves the status quo, etc. The idea that Bitcoin has more than 1 out 10 people in *any* group (cryptocurrency experts aside) utilizing its benefits is patently false. The infrastructure is not even available to use it for but a small fraction of its potential.

My guess it that given the media uptick, it seems like Bitcoin is everywhere. Perhaps confirmation bias is at play? Certainly the facts seem to indicate that only about 500,000 private keys with over 0.1 BTC exist, and there are about 150k users on Bitcointalk. While it may happen very fast, Bitcoin adoption still has a long way to ubiquity.

The chasm with regard to the population of early adopter bitcoin speculators and early majority bitcoin speculators, as I understand your terms, was the period in 2011 when the  trustworthiness and utility of bitcoin exchanges was very much in doubt. During the early adoption period exchanges were non existent or not somewhere that I felt really safe storing coins. According, I put June 2011 at the trough of the chasm for adopting bitcoin speculators.

The chasm with regard to the underlying economy may be upon us. As informed speculators we can envision the replacement of legacy financial infrastructure with bitcoin. I see very impressive transaction volume reported by coinometrics.

I misspoke, the 'chasm' is between the early adopters and early majority, and given that, perhaps you are right-- I don't think so, I tend to think we are just crossing into the early adopter stage, only. That's how the infrastructure is getting rolled out for the 1 or 2 out of 100 to be able to use it. Even at early adopter stage, the usability must be pretty decent, and it's just now coming-of-age at the most basic levels. Even those are lacking-- the best example is the exchanges, and some merchant services-- still no remittances, micropayments, escrow, et al. While at early innovator stages, it was really only a very tiny subset that was able to fit the requirements for usage.

If you subscribe to the ideas of 'Crossing the Chasm', then what might the chasm represent? Would it be the question of how does a regular Joe use bitcoin? I think that's a reasonable place holder, and one for which Bitoin still has a long way to go. Remember, early adopters are some 13% of the market. There is no way we have made large inroads to that group. We are probably still well under 1% adoption, though the media is covering this realm.

I agree, whole heartedly, but I don't know when would be the Great Alt Boom? I thought I would have time to buy LTC as a hedge and pair with BTC while it was under 1$ (and I should have), but now am convinced of it's status as the silver of cryptos, and with that territory come those who want a cheaper asset class-- not to mention the fundamental differences with proof-of-state/work and the flexible mining hardware requirements. It's actually shot up 20x very quickly, so, I wonder if it will be more volatile or is later in starting its adoption curve, so the 'doublings' are still larger. I wasn't sure it would make the grade, so to speak, so that's an interesting observation you're making. The legitimization of the second alt paves the way for a broad market of virtual currencies and services around those.

Personally, I am working to gain the skills to automate trading as part of a career change into computer programming. Having a market of currencies (that are viable) will allow me to explore this work in a more robust setting. I apologize if trading virtual currencies seems a vampiric tax on the innovation, one devoid of rendering service to the world; but, it does interest me, and this horse needs a carrot.

Oh, and happy Thanksgiving to other 'mericuns.  

I agree with most of your post, but I think we are well into the early adopter phase, if not through it already -- actually this timing is what worries me the most.

Great, thanks!

The self-imposed lock out on selling makes sense-- I'm finally grokking that the coins are casually worth 100k each, given the dynamics at play (forward looking several years) while this disruptive technology gains adoption. My cavalier behavior with my own coins is nearly heartbreaking, but I'm trying to keep up-- the trading has lost me many fortunes, already. I'm glad you said something about store of value.

It's funny you also mentioned volume, as I just realized, this morning, that Gox volume (IMO) was too thin to accomplish the  breakout we witnessed from the horizontal channel, and it dawned on me that I needed to find aggregate volume data. I posted something about it on the Gox Wall Thread and found coinorama, so that was a relief.

I do realize that the sigmoid curve is a macro view of the adoption path, and we haven't even approached the 'chasm' (that divides early innovation with early adopters) so to speak, but the sentiment on the bit-street continues to try and identify it; US regulation, blockchain size limits, off-blockchain transactions, etc. are all moving place-holders as we scramble for infrastructure demands.