My goodness, what a flurry of schadenfreude and self-congratulations! To be serious, though, anybody calling this correction as "The Great Bitcoin Crash" is going to be a bit disappointed.
Apart from the fact that it's already regained 50% of the lost ground (currently trading at nearly $900), this drop was totally expected by anyone who's even slightly following bitcoin price trends.
Have a look at this chart which is a logarithmic plot of the bitcoin prices since it was widely and transparently traded in 2010 until now:
If you draw a straight line through that, you get the exponential trend line. (Why is the line exponential? Because bitcoin is a new technology that's growing to fill its ecological niche in the same way that the population of an introduced species grows). This line intersects the current date at about $300-$500. Anything above that is an overbought condition - hence the correction.
The graph also indicates that the current 'bubble' and 'crash' is a bit of a baby compared with past events - e.g. between April and June in 2011, the price rose by 40-fold (the current rise was only about 8-fold), crashed almost immediately to half its value then went on a 6-month bear run to just a couple of dollars. Lots of people were calling the "Death of Bitcoin" during this period.
One thing to notice, though, is that volatility has been decreasing as bitcoin has matured (although it is still very volatile). So lets look at the question: why is bitcoin so volatile? This one is simple - bitcoin is volatile because its traded markets are still in their early phase and are inefficient.
Mature markets have big and sophisticated players who ruthlessly arbitrage price differences out (using a variety of derivatives). Bitcoin markets don't really have such big players or the depth of derivatives yet. E.g. there are only a couple of (not very well trusted) exchanges where you can even short on margin. With growing maturity and more exchanges, bitcoin will become less volatile.
Where does the price go from here? In my view, it's still a bit overbought and we could see another correction. My current position is long but my bots are always searching for sell signals in order to take a short position.
Let's respond to a few of these recent posts where I detect some old myths and misconceptions rising up again:
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| Bitcoin is being shredded by the chinese government and by the french banque de france. If you have any, sell! | |
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Apart from the fact that this was terrible advice at the time that you posted (the price had already come off the low of $576 and has risen ever since), it's not true to say that either the Chinese or the French had 'shredded' bitcoin. The French news was "hey it's volatile, be careful out there!". The Chinese news was more serious in that there was an explicit ban on Chinese banks trading and Chinese companies pricing goods in bitcoin, but there was also an explicit allowance for private citizens to trade bitcoins as a 'digital commodity'. (This is where all the growth has been happening in China and in my view is a surprisingly liberal stance). The Chinese news certainly helped push the correction (no surprise to anybody monitoring news and social media feeds).
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| I hate to say I told you so ( see my earlier post | |
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What earlier post? What prediction did you make exactly?
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| Seriously Guys, Look at the people on this thread who told you to buy and figure out who were the ones who sold the Bitcoin at its peak just before it crashed. | |
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I haven't seen any posters in this thread telling or advising people to buy bitcoins. Can you please quote the relevant posts in case I missed them?
I never advise anyone to buy bitcoins unless I'm sure that they have the technical knowledge to secure them against loss or theft. That's far more important than concerns about volatility (a simple small-scale buy-and-hold strategy has been very successful so far in bitcoins).
I certainly increased my trading position (essentially doubled it) in this correction. I run (self-written) trading bots which sold at $1100 and bought back at $600. But even without automation, this correction was so telegraphed (the Chinese news, trade depth, trending EMAs, even a bloody classic technical analysis 'double top') that you'd have to be dead from the neck up to have missed it.
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| Bitcoin is based on Nothing, it is just a speculation "tool". | |
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You keep saying that bitcoin is based on nothing, but it's simply not true. Even if we just look at the 'physical layer' of bitcoin and ignore the utility of the system, we can come up with a figure of about $1B for the replacement value of the specialized computers which do the mining and secure the network. This means that a company which wanted to offer exactly the same service as bitcoin (and it makes sense to actually think of bitcoin as a company), it would need a market capitalization of at least one billion dollars.
If we divide that figure by 'issued shares' (12 million BTC), this gives a per-bitcoin value of about $100. (Not actually that far off the figure given by looking at the exponential trendline).
And, of course, some serious players are looking at bitcoin valuation. The Bank of America Merrill Lynch report (
https://www.documentcloud.org/docume...n-bitcoin.html) makes interesting reading. Their conclusion is a future value of $1300 based on bitcoin's utility as a means of exchange and store of value.
We believe Bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money transfer providers. As a medium of exchange, Bitcoin has clear potential for growth, in our view. | Quote: | |  | |
| Nope- everyone was wondering and trying to work it out. Only Phil MCR- who seemed fascinated by it but said short term speculation- and Slaphead- who like m said Ponzi and I hate to say it but Shorrick was skeptical- but then he is skeptical about everything except JCBshare- which eventually made good.. But no-one but Slaphead called it. | |
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I've already done the 'Ponzi' explanation, but here goes again: Bitcoin is
not a Ponzi scheme. I've noticed in your previous posts that you're coming from an academic environment, so here's a quick lesson:
nomenclature matters. If you don't attach the accepted meaning to terms you can't really have any kind of academic discourse.
A Ponzi scheme is a deliberate fraud where the controlling entity (often a single person) promises a return on investment that's (usually) way beyond what you can expect elsewhere. This return actually comes from new capital from fresh investors rather than whatever the promised mechanism is. The essence of Ponzi scheme is
disguised cash flows. i.e. one set of cash flows (new capital) pretends to be another (investment returns).
There are no such disguised cash flows in bitcoin or even a controlling entity. Everybody knows exactly how many bitcoins there are, what their returns are and can trade them in transparent markets.
What you could say is that bitcoin is a 'bubble'. This is where the traded value of an asset outstrips its intrinsic value and goes into a feedback loop of ever-higher prices until a crash. In order to determine this, you have to have an idea of what the intrinsic value of one bitcoin is. If you read above, then I've given figures from between $100 and $1300. Do you have any other ideas on what this value could be?