Topic: rpietila Wall Observer - the Quality TA Thread ;) - page 184. (Read 907229 times)

Right.  We know MtGox was hacked on June 19, 2011.  At this point in time, the missing 850,000 BTC only represented about $15 million dollars (so it's somewhat plausible that they keys could have been sitting in a hot wallet).  If the thief had proceeded to dump these 850,000 BTC between July and November 2011, it would also explain the very severe bear market at this point in bitcoin's history.  

Mark wanted to "dig his way out" of this hole, but he couldn't.  The more bitcoins he procured to meet customer withdrawal requests, the further he pushed up the price.  He kept digging and what started as a $15 million dollar hole grew $1 billion deep.  

Yes I read it.

The main point is that when people send bitcoins or fiat to gox to trade with them, it results in:

people             gox
bitcoins, fiat ->
                  -> bitcoins, fiat.

gox then issues goxcoins in the same quantity, also goxbux.

When Willy/gox buys the goxcoins for uncovered fiat (acting as a CB), it raises the price of goxcoins, and also of bitcoins in other exchanges. But there is no effect on the real bitcoins or real fiat (which are stored in gox) until the customers withdraw.

So during the runup, when gox was still by and large operational, they pumped up the price of BTC and ran into fiat debt, covered only by their customers' fiat deposits. Then they did not pay out the fiat to stay afloat. The higher price in gox induced people to try arbitrage, to deposit coins there, which Willy bought.

At the apex of the bubble, gox had issued a lot of goxbux fraudulently and ran a ponzi with them. They were correspondingly long in goxbtc.
What happened to the real bank balances of gox (in the tune of $100 million) and the real BTC hold (1MBTC?) is still unknown. Both were stolen in some point. This is where the theft occurred - what was played in gox' system goes under other crimes.

Then in the end all the withdrawals were halted and Willy put on reverse, to dump all the goxcoins bought. I do not know if this made a small or huge loss. Also I don't know the purpose of it, because all(?) withdrawals were canceled, and there was no change happening in the actual liquidity position, except the very last deposits made by arbitrageurs of goxcoins in btc/gxc-exchanges.

What the end result seems to me, is that gox pump did raise the bitcoin price. Also gox did act fraudulently for a very long time, and without proof to the contrary, also stole its customer reserves. Who is now holding the reserves, is an important question. Either the trading was so abysmal that they were lost as trading losses (perhaps to the insiders), or Mark holds them and is willing to risk prison because afterwards he will be so rich (yes, such people do exist that can live on after causing suicides of family fathers with their actions), or the 3-letter agencies hold them and Mark has for a short or longer time been a tool, either as a result of profession, bribery, or coercion.

For now, it is a small stain in Bitcoin's reputation that another few % of them are in criminal hands. But the main effect on price has been seen long ago, including the price dips in February-April. All those who lost in gox, need to get back into the game (if they want to stay), and judging from the price action in the last months, they have not done it yet en masse.

I am grateful to the author of the blog for explanation, but I don't think there is any relevance to where Bitcoin and USDBTC are going from now on.

I think so, huge number of BTC are missing from first bublle on Gox

i have the same problem

maybe $3 pek k Satoshi is better

I am surprised that many people are assuming that Willy's purpose was to pump the price.  That is the least likely explanation in my opinion.  I believe Willy was used to procure bitcoins so that MtGox could meet BTC withdrawal requests to hide the fact that a huge number of coins had been missing for years.  Pushing the price up was an unfortunate side-effect from Mark's perspective, and a side-effect that eventually forced MtGox to recognize its insolvency.

I take it you mean $3 per mBTC; sorry I have to get used to thinking in terms of mBTC.  

Risto, have you read the willy report? you can find it here: http://willyreport.wordpress.com/

What does it mean for the price of bitcoin and your investment strategy?

I think that the worst time to sell is actually after just crossing the previous ATH. Historically rapid appreciation has always resulted. If you want to minimize the risk, just sell when it is the most overextended Otherwise you increase the risk that you are holding depreciating fiat and squander your bitcoins. My minimum sell price is $3. I can sell you CALL options with that or anything above as the strike price

Thinking that the bubbles repeat the same pattern.. if SlipperySlope would post his chart of the relative valuation - at least last time they did.


This is also possible. Therefore only sell 20-30% at your preferred sell point so that you can fire another if it goes up another 10x. Or use the SSS method to rule out human judgement. If you do, I suggest you set the first sell point in $2-$3 range.

No one  knows bitcoin's value, then how can we know it is overvalued? Bitcoin is not a stock.

Then you must also consider another option: the one where you kick yourself for selling early in fear, and it just keeps going up 2011 style.  holding balances that risk 

Actually, 234 days since the last ATH is July 20th.  So it's not out the door at all.  Rather, it's right on schedule.

Note that in the the last two bubbles, the price when the run-up crossed the trend line was very nearly equal to the price at the bottom of the subsequent slump.  
This means that if the repeating bubble pattern holds, the point at which the run-up crosses the trend line is the earliest point at which it's possible to start unwinding your long position without making yourself worse off than you would be if you adopted a permanent holding long strategy.  Some people advise holding as the most sensible approach, but as we've seen, BTC gets severely overpriced at times, so the permanent hold strategy is too conservative, and will actually increase your risk at certain times.  I think it might be a good idea to start selling small amounts as soon as we cross above the trend line.
If you have faith that this bubble will hit the same max with respect to the exponential trend as the last two bubbles did, then you can wait until Bitcoin is heavily overvalued to sell.  But the idea that we are going to have a carbon copy of the last two bubbles strikes me as a little fishy.  It's lax thinking.

I might be wrong of course.
I for one believe that despite this, there will be bubbles to come, sparked by major bullish news. Or just by adoption and panic buying surges. We'll see

Or you do. Time will tell I guess.
He did mention in the report that he waited to release it until now because he didn't want to collapse the price even more.. now that we're moving up naturally, it was safer.

We do not need them, we don't need stocks.

We don't need them here or there, we don't need them anywhere

We do not like the China Ban, We do not like them Sam I am. 

(I think I have read too many Dr. Suess books with my kids I guess! )

Agreed. Also, what a convenient timing to release that report.
I thin someone doesn't want a rally to happen this summer, for whatever reason. I think the author of this report greatly underestimates the psychology of the masses.
Attribute the two 2013 bubbles only to the Willy bot and insider fraudulent trading at Mt Gox, is a bit over the top. This guy clearly has an intention.

Since bitcoins market cap is still so low, bubbles are a NATURAL thing to happen, coming straight out of the physics of the underlying system, which in this case is the bitcoin ecosystem combined with mass psychology.

We'll have a few more BTC bubbles even without Gox Bots and fake orders
The author of that report has some wishful thinking.

hopefully. fingers crossed etc.

we don't need bots, we don't need gox.

as can seen by the charts in the article, the bot trades were just noise on the charts, they hardly affected the price, unless i interpret them wrong, the charts look more like modern art than real charts.

If people are expecting a July rally and pre-emptively buying... but there is no July rally. Down we go.

So?