BitCoin - Intellectual Fraud or a Stunning Idea??

So, what really is BitCoin???

  • stunning, refreshing, extremely innovative idea

    Votes: 38 49.4%

  • intellectual, mathematical and computational masturbation

    Votes: 13 16.9%

  • media to waste electricity and computing power

    Votes: 5 6.5%

  • Only aim of idea is to make profits for innovators

    Votes: 17 22.1%

  • No wonder only a Japanese can come up with such an imaginary, illusionary, delusionary, grandeur ide

    Votes: 4 5.2%
  • Total voters
    77
Quote from Pekelo:

I meant to post on Friday that the hourly chart is showing an ascending triangle and a breakout is very likely to the upside. (Horizontal line was around $145.)
It sure broke out, now at $155. Nice to know that TA also works on Bitcoin.

A TA site for Bitcoin:

http://btctrading.wordpress.com/

"What is doing now bitcoin is a good example of a parabolic rise in an early stage, using last 10 weeks i derived the formula of the current parabolic that bitcoin is following:

y = 1.81 * x2 – 11* x + 35 where x2 is x to the power of 2

As i explained many times i think that normally a swing can last up to 25-30 bars, in this case weeks, extrapolating the above formula i can compute a target (you can do the same just substitute “x” with the number of weeks).

With 25 weeks i’ve a target of 890$, using 20 weeks i’ve a reasonable 540$ target; i think that a long term top beetween 500$ and 1000$ is likely to happen, all depends if bitcoin will reach the wall street crooks or not:)"
More...

Pekelo, there isn't enough data to support what you're saying.


Also, quadratic equations of securities shouldn't ever be used as a predictor.
 
Warning: little trading conspiracy stuff regarding the future

I was toying with the "big pocket guy playing the BTC market" idea. Let's run 2 scenarios.

1. What if the GOVERNMENT decides to discredit/devalue BTC using completely legal means? What if they start to play the BTC market with their huge (pretty much unlimited) pocket and make the market so volatile, that users abandon it?
They could even do it in a way that could eventually cost them nothing.
Let's say they put 10 agents/traders with 10 million bucks each on the case and they start to buy BTC, trying to do it slowly so not to push the price up to much.(actually, if they want they could just go for it buying it quickly, since the point of the action is to cause a crash later on, so higher the price, bigger the crash, more the loss to people)
So let's say they started at 100$, they spent all their money by $200 BTC with an average price of $150. In their strategy the starting of the crash should occur 20-30% of their average price. Why? Well, because if their action doesn't work, if nothing else, they made a little money. So positions established, time to move the market, they have 100mill/150$=666666 coins. I know, evil.

As I showed earlier, there are only 3 or so million coins in active circulation, so if you start to dump 0.666 million coins in that market, price will drop. (in case the price wouldn't, then they just made a nice return) So they dump and price falls. Now if I am in control of the operation, I don't dump everything at once, I just make the market move. It is possible that once the initial dump scares people the panic selling continues on its own. But let's say after every 20-30 bucks drop, newcomers jump in and start to buy. Then the agents dump again. They should stop dumping at $150, the goal is to make BTC volatile, not to lose a lot.
Let's say BTC recover at 130$ (mind you, a 35% loss from peak) and reaches again $150. Then the agents dump again. Rinse and repeat. If the BTC market is real strong and lots of newcomers are still buying, if nothing else the agents could establish a price ceiling and make money while doing so. In best case scenario the BTC market plunges (big horders finally get scared out of their holding position) and maybe takes years if ever to recover.
And it was done completely legally.

2. In this scenario, the same thing happens, but instead of the government, a HEDGEFUND plays the BTC market for the simple goal of making profits.
The scenario pretty much the same. HF boss decides that instead of buying a new Picasso, he is going to play with bitcoins. He follows the strategy described above, except buy more agressively (price should go up) and sell less obviously. In case the market does panic, and falls a lot, they can switch sides and start buying again.
The point here is that the BTC market is so illiquid and rather small right now (3 million floating coins) that a player with signifficant pockets can easily move it in both directions, doesn't matter if their goal is profit making or crashing BTC.

The only real question is, just how big an account is needed to make the big play in bitcoins???
 
Quote from Pekelo:

Warning: little trading conspiracy stuff regarding the future

I was toying with the "big pocket guy playing the BTC market" idea. Let's run 2 scenarios.

1. What if the GOVERNMENT decides to discredit/devalue BTC using completely legal means? What if they start to play the BTC market with their huge (pretty much unlimited) pocket and make the market so volatile, that users abandon it?
They could even do it in a way that could eventually cost them nothing.
Let's say they put 10 agents/traders with 10 million bucks each on the case and they start to buy BTC, trying to do it slowly so not to push the price up to much.(actually, if they want they could just go for it buying it quickly, since the point of the action is to cause a crash later on, so higher the price, bigger the crash, more the loss to people)
So let's say they started at 100$, they spent all their money by $200 BTC with an average price of $150. In their strategy the starting of the crash should occur 20-30% of their average price. Why? Well, because if their action doesn't work, if nothing else, they made a little money. So positions established, time to move the market, they have 100mill/150$=666666 coins. I know, evil.

As I showed earlier, there are only 3 or so million coins in active circulation, so if you start to dump 0.666 million coins in that market, price will drop. (in case the price wouldn't, then they just made a nice return) So they dump and price falls. Now if I am in control of the operation, I don't dump everything at once, I just make the market move. It is possible that once the initial dump scares people the panic selling continues on its own. But let's say after every 20-30 bucks drop, newcomers jump in and start to buy. Then the agents dump again. They should stop dumping at $150, the goal is to make BTC volatile, not to lose a lot.
Let's say BTC recover at 130$ (mind you, a 35% loss from peak) and reaches again $150. Then the agents dump again. Rinse and repeat. If the BTC market is real strong and lots of newcomers are still buying, if nothing else the agents could establish a price ceiling and make money while doing so. In best case scenario the BTC market plunges (big horders finally get scared out of their holding position) and maybe takes years if ever to recover.
And it was done completely legally.

2. In this scenario, the same thing happens, but instead of the government, a HEDGEFUND plays the BTC market for the simple goal of making profits.
The scenario pretty much the same. HF boss decides that instead of buying a new Picasso, he is going to play with bitcoins. He follows the strategy described above, except buy more agressively (price should go up) and sell less obviously. In case the market does panic, and falls a lot, they can switch sides and start buying again.
The point here is that the BTC market is so illiquid and rather small right now (3 million floating coins) that a player with signifficant pockets can easily move it in both directions, doesn't matter if their goal is profit making or crashing BTC.

The only real question is, just how big an account is needed to make the big play in bitcoins???
More...

How do you figure there are only 3 million coins in circulation? Besides the lost coins, all 11 million are in circulation.

Yes, someone could slam the price with 200,000 coins. Yeah, real smart, just a little bit of slippage there. These thoughts have been gone over ad infinitum, while someone could make that choice, it would be a very dumb decision. Then the coins just get distributed to more wallets. Because, I can promise, I will be buying a boatload more.

Why are you going on about this government secretly being in bitcoins? They aren't.
 
Here is another scenario from Reddit (I love this guy, must be a trader) where the Fed kills Bitcoin by removing liquidity:

"So this is just something I drew up while watching screens

Recall that the Fed's current policy of "printing money" doesn't involve directly adjusting the value of every dollar on the book; they monetize debt. They create more money supply to buy UST and effectively lower rates. The key word here is "buy": the "OMO" in "POMO" stands for Open Market Operations. They're not doing anything you or I couldn't theoretically do (anybody can buy UST) but they have as much money as they want to create to buy with.

In the same way they monetize debt, they can demonetize any commodity, including BTC. The fundamental rule of market manipulation is that if you don't care about how much you spend, you can do anything to any price.

In my scenario: JPMorgan accumulates a large BTC position. This can be done using minimal impact algos (VWAP is the one I picked) without too much notice. Goldman does the same.

JPM gets free insurance on that in the form of a swap with the Fed. This means that any future increase in the exchange rate will be paid in dollars by the Fed to JPM.

Why?

The Fed enters into a repo deal with JPM, lending USD in exchange for JPM's BTC as collateral. This means that JPM will buy the BTC back at market rate tomorrow.

The Fed writes a free At the Money put to Goldman, giving GS insurance on their position.

Fed takes JPM's BTC and hits every fucking bid it can get to -- massive vol, prices shatter, panic selling etc. Depending on the size of the position, it could be an absolutely deadly blow, especially if they hit it in waves.

Goldman sees prices fall, exercises its put and sells BTC at the strike price.

Fed pays a lot of money for the now mortally wounded BTC; they don't care, they have a printing press.

Fed takes those BTC and sells them back to JPM tomorrow to settle the repo deal. Depending on mark-to-market procedures (lots of fuckery about this on repo desks...), they might be overpaying drastically, and that's why the Fed does them the free swap - this puts loss limits on JPM and Goldman makes a profit, ensuring participation (most important part).

Realistically, JPM and Goldman (or whatever two firms) will want a more even handed split on their short BTC deltas"

http://www.reddit.com/r/Bitcoin/comments/1bv8tl/hypothetical_fed_action/
 
Pekelo - Great commentary all around. I am enjoying it. Lots of good points you are putting forward. Keep it coming.
 
HOW CAN ANYONE "INVEST" IN SOMETHING THEY DON'T FULLY UNDERSTAND (COMPLICATED MATH ALGO...)??

AND WHAT WILL HAPPEN THE DAY THE THING STARTS GOING SOUTH, WHEN NOBODY UNDERSTANDS WHY??.. =>>> BIG KRACH, THAT WILL BE....
 
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