Topic: SlipperySlope's Bubble Collapse Journal - page 12. (Read 24795 times)

@slipperyslope:

Did you factor in the fact that a large proportion of fiat have been accumulated (on sold btc) in accounts at mtgox, expecting a crash and waiting to buy back 'cheaper', hence creating pressure on the bid sums and eventually reducing possible crash to corrections.

Interesting.

How do I know you are good for your money?

I assume that $13.50 back in January was a fair price at the time, and that the underlying price growth trend is on the order of 4-5x per year yields an expected 2013 year end value of $50-60 - without the bubble.

On the wall thread you said ...


What you say about demand is still consistent with speculative financial bubble theory to the extent that it takes a decline of approximately the same duration as the run-up to completely unwind the bullish enthusiasm that created the bubble.

In terms of logical argumentation, my falsifiable hypothesis, derived from theory, is that a price retracement to the underlying trend will occur before a new all time high.

I regard this "risk" of never going down as so large - I am willing to write you $115 puts for surprisingly cheap!

This would allow you to buy in to bitcoins with much larger percentage of your fiat stash now, since you would only lose the premium if the price goes up. (In your scenario, you are fully exposed if sudden upward moves happen.)

If it goes down to $50, you get to sell your bitcoins to me for $115, and buy back a much larger number at $50.

All you will lose if anything happens, is the premium. If you are willing to "go short" with bitcoin (i.e. being long-term bullish but willing to invest less than 100% of the position at any particular time), would this not be a great improvement?

Great analyses. Thank you so much for sharing Slipperyslope. I read all your posts and admire your rational and kind state of mind. I share your opinion that chances are much higher for serious correction taking months. As to deal with your fear of missing the bottom, I think your system of gradually moving in is a very good way, though you do have a small risk to be left behind if the price would not go below $50 or even $100. It's a small risk, but a risk. You can solve that by having a small exposure nonetheless, and raising that exposure as the price goes down. It's a small loss if the price goes down, but you don't have to worry to be left behind.

Just to show how ignorant I am sometimes, I bought MPOe pass-through bonds at the Bitfunder exchange for March. I took an 8% loss instead of the gain I expected. I likewise have a position in the April MPOe bonds that I will liquidate this week at settlement. I did not realize that MPOe bonds are not conventional bonds, but rather a way to share in the profits and losses from MPOe's option writing bot - whose pricing algorithm is not disclosed. I can only hope the the March volatility got fully priced into the April option premiums. From what I recall from IRC or a post here by MPOE-PR, that MPOe will reconfigure their financing arrangements, probably to make it less likely for the owner to suffer another big loss.

Thanks for the put option information. You might present your terms in the Securities forum, or additionally in your own thread.

I have a steady flow of bitcoins going out daily since I sell them. If it hits $50, people will be lining to buy them. So I am not risking too much if I write such puts, I just get cheap bitcoins effortlessly. Of course in the event it goes to $20, I may have to sell them at a slight loss to my buy price of $50, but you would be surprised to know that I can charge 25% premium OTC if the market is "crazy" (which I decide).

Any hit to $20 is extremely improbable short-term event, you need to be lucky if you want to sell unto such a slim chance...

So this is a legit hedge, I include all such diligently into my position spreadsheet, and I have 16 years of stock etc. trading experience. I can hedge if I want (this one can be hedged eg. against the markup of future sales). So by betting against me, you will be either insignificant or hedged. I will keep my 75-110% net long position anyway, just rake in +EV (free money) from my counterparties.

It's called market making. Some day I make $1k, another $10k, as I posted in my thread.

I think MPOE is playing a dangerous game (if they don't have the weekly fluctuation on their grips, I mean). It may still fold this month if too much underwater from insider swing trades. Dunno, at least they do reporting.

Now you have me curious, not really interested yet - just curious.

What are the terms of these puts? Are you writing them or connected with MPOe?  I know that option writers expect to make money and that option pricing factors in the strike price and the volatility of the underlying security and the duration of the option. I imagine the premium on a six month put @ $60 would be considerable.

What sort of bear is not buying almost free puts at $30-$50   

Don't you realize it's the only way you ever get your money out of bitcoins when they inevitably collapse!?

Here is my most recent chart ...


No, I do not think bitcoin goes to zero - not now, and if you get those super nodes running, not ever. I am very content to patiently wait for the bubble to collapse back to the underlying trend line. No need for puts, thank you! I am foolish enough already.
 

I think you are late. It is already breaking to the upside, just like I said it would in 80/20 prob.

If you realistically think it could go to zero, $30, $50 or even $100 ever any more, I am glad to write puts. (The last one is still a chance so don't expect cheap, but the others I can safely just give away. PM. BTC1k min.

12 days after the April 10 peak



Yes the long term trend is up and its awesome.

Short term, I believe is the collapse of bubble 2. Below is a chart that illustrates the resistance around 125.

That certainly happened on April 10.

I think this is a good assessment.

It really doesn't take much to change a lot of people's minds on what a bitcoin is worth.  Seems to me very unlikely we've seen sub-100 for the last time, and there is probably a reasonably good chance we'll see sub-50 again eventually.  Of course it could hit 1000 first.

I've got buy orders in from 80 all the way down to 17.  I think bitcoins are ultimately worth thousands of dollars each, but that is irrelevant if you want to know the best time to buy.  What matters is what everyone else thinks.  And what everyone thinks can change in the blink of an eye.

Precisely my motivation during this bubble. There is no faster way and maybe no safer way to multiply bitcoin holdings other than selling near the top of a bitcoin bubble and waiting a few months to buy back - in my opinion. I recall June 8, 2011. A limit order could have sold above $20. Three months later, even waiting for prices to trend upwards from the bottom, bitcoins could be purchased for $4. That is a 5x increase in bitcoins in 3 months with no additional fiat invested.

I vowed last time not to miss the next bubble. I successfully gauged the day of the April 10 peak according to my bubble-experienced appraisal of the market mood. One of my preset limit orders filled at $255 and I am completely satisfied with the sell part of the plan. The buy back part is the issue - especially will prices drop like last time?

There is not an easy way to gauge the bottom as there was for the top. So I will buy some back at 2x, 3x, 4x and so forth and wait for a sustained recovery, e.g. a week of increases before buying back with the remainder of my fiat at the exchange.

What I am concerned about is being left behind should prices soar for some reason. Back in the summer of 2011 that concern was a manifest fear, and kept me in bitcoins during the majority of the collapse; I sold everything at 15 and bought back at 14. I increased my holdings slightly if at all - because of fear. This time around I am controlling my fear by persuading myself that prices must go down and that I will not be left behind when it comes time to buy back.

So you are playing software architect now? That's a new role.  
Nevermind the fact that we have a subforum and a mailing list for project development. Oh I forgot you are not a nerd, hmm?

As sergio points out in another thread, Satoshi was operating the only supernode back in 2009 (and got 1M coins in compensation )

At that point, you could be classified as a supernode if you could afford to run your computer 24/7, amend some bugs that might occur in the software, and pump your product. Satoshi did have the first two, but almost failed in the third one. I got it that he was almost quitting in late 2009 as there were no other supernodes entering the game, just some hop-on, hop-off nodes.

Today the resources in the Bitcoin network are vastly higher and several bright people are entering in. Prior to 2013, you had to be lucky to find out about Bitcoin. If you were smart, but did not possess integrity, you would turn to scamming 10,000s of bitcoins from the other users. Many did this, so the development of the social and power network (and price) were anemic in 2012.

2013 will be the year for legitimate bitcoin businesses, entrepreneurs that possess organizational, financial, legal etc. muscle, which far exceeds anything seen before. I watch with amusement, the number of coins traded in the exchanges at every minor dip just as this month. These are important in transfering the coins to the hands of the new supernodes. But don't sell your coins for too cheap. If you are not in a hurry to cash out, your BTC100 will enable your retirement in luxury after 2-3 short years. Or you can develop your own organization and become a supernode now for even as little as BTC100. More will come quickly, if you set yourself to increase the stash, instead of timing a fiat cashout, which will any way turn out to be your biggest regret after 10 years 

I applaud the super node concept. I posted some questions about the concept on your thread.

The price can fall in accordance with the theory and experience of speculative financial bubbles, if the establishment of supernodes is delayed, or otherwise limited such that total investor demand continues to drop as predicted by theory. Or it might be that potential buyers will be strongly motivated to wait out the bubble collapse no matter how reassurred they are about the infrastructure.

I don't think you should act in haste. But seriously, how can the price fall if this is what is happening, no matter what you or I think, duh?

I agree that the post-peak price action of bitcoin bubble 2 has deviated from the pattern set by bubble 1.

Technical evidence that would cause me to reconsider my  hypothesis would be a sustained uptrend that broke to new highs, in particular a new all time high, or an absence of the periodic capitulations that characterized the bubble 1 collapse, or maybe simply sustained volatility when stable decline is predicted. Fundamental evidence that would cause reconsideration would be a significant increase in bitcoin demand, such as a flood of new investors with reignited enthusiasm.

Technical evidence that would strengthen my hypothesis would be a multiple-months-long exponential, channel-bound decline to a bottom lower than most expect. If that indeed occurs, then there should also be periodic capitulations. Suppose that prices sink on average 1% a day - 20 days from now the price is at 100. Subsequently, e.g. 10 days later, the roughly 300K bitcoin purchased on April 19 at 100 will be loss positions prompting a capitulation.

Fundamental evidence that would strengthen my case would be majority investor sentiment that the bubble is indeed collapsing, e.g. back in 2011 in this forum there were frequent posts on when the bottom would be reached and what that low price might be. Or evidence that some indicator of the underlying bitcoin economy is retracing back towards a pre-bubble level, e.g. disgruntled speculators reducing their previously enthusiastic bitcoin transactions due to lack of interest.