Sigh. Bitcoin was an excellent investment, in hindsight - for those who bought before nov/2013 and will be smart enough to sell before it collapses.

But, in hindsight, buying lottery tickets was much better investment - for those who bought the winning tickets.

Bitcoin has been a terrible investment for those who bought in late november, or since january.

Bitcoin is still a terrible investment, because there is no reason to believe that the price will increase, and several reasons for which it may decrease.

No stock trader cares for, or even cares to know, the past history of the price of a stock. One cannot use ancient price history to justify a claim of future price increase.  Indeed, resorting to that argument only highlights the lack of any real justification for that claim.

The cause for the increase from 17$ to 1200$ is obvious: the opening of the Chinese market by BTC-China, OKCoin and Huobi.  That was basic economics: larger market, fixed supply = higher price.  What event is expected to happen that could propel the price much higher than 700$?

I do not want to change anyone's mind here.  Adults have the right to spend their money anyway they like -- investing in risky ventures like bitcoin, poker, or lottery tickets, or even throwing it away.  And they have the right to try to convince anyone to do the same -- as long as they honestly warn him of all the risks and unknowns, without fallacious arguments or unfounded promises.  Gambling with your money is OK, scamming other people is not.

Is that true? Then why would that robot sell now, at such low prices?  Why not wait for bitcoin withdrawals to restart, and sell elsewhere?

Unless the owner believes that the real worth of a "gox coin", even when expressed in "gox dollars", is still less than the current MtGOX price?

Windjc, why are so obsessed with them?

You claim that you have no assets at MtGOX. That internal trade of virtual "gox coins" for virtual "gox dollars" is isolated from the rest of the market. So why should you care?

Those guys have been trying to get their money - over 30 million dollars - out of MtGOX for months.  And now they have also to stand being  insulted?

They only made one stupid mistake, which was to leave their coins and dollars in the hands of an unofficial, unadited, unlicensed, and unregulated bank run by an amateur banker.

Just be thankful that yours are still safely kept by an unofficial, unadited, unlicensed, and unregulated bank run by an anonymous amateur banker.

I doubt that more than 3 people at MtGOX know how many bitcoins they have in their own wallets and how many dollars/yen they have in their bank.

In the classical collapses, like Enron's and Madoff's, very few people in the company were aware of the real situation, and they were all cooperating with the wrongdoings out of self-interest (or because they were chosen precisely for their "moral qualities").

In any case, that robot could be operated by one person inside MtGOX without anyone else knowing. Or by an external accomplice.


I would say the opposite: first they kept the price up 10% above market to lure people into depositing their real bitcoins in exchange for gox dollars (virtual dollars in MtGOX's internal client accounts); while stalling on dollar withdrawals (the conversion of gox dollars into real dollars).  The high price also discouraged people from changing their gox dollars into gox bitcoins (virtual bitcoins in MtGOX's internal client accounds) and withdraing them (that is, converting them to real bitcoins).

When GOX clients began to realize that dollar withdrawals weren't working, they tried to use the bitcoin route in spite of the 10% loss.  Then at first MtGOX raised the premium to 20%, and also began to stall on bitcoin withdrawals -- thanks to a providential "malelability bug"  that stalled 40,000 bitcoins over several month, but which they somehow could not figure out in all that time.

But those measures did not stop the outflow, so they just suspended all withdrawals and promised that by Monday they may provide an estimate of when they may promise something.

What is happening now, it seems, is clients converting their virtual GOX coins to virtual GOX dollars at ~40% loss, presumably because they think that if they keep the virtual coins they may lose more than 40% in the end.

I wonder who is buying those coins. Could be clients who are slightly (only slightly) more optimistic about the chances of future bitcoin withdrawals.  Could be MtGOX itself, trying to reduce the amount it owes to its captive victims. 


For a bank, fractional banking means to loan out or invest more money than its customers have deposited in their accounts.  That is a gamble, based on the hope that only a fraction of the customers will ever want to take out their money at the same time.  Sometimes a bank bank loses the gamble (and then clients usually lose some of their money).

A simple exchange like MtGOX should not be doing any fractional banking, since it is not in the business of lending or investing, whwther money or bicoins.  However, its management would have been strongly tempted to invest most of the real bitcoins that clients had deposited to earn interest on them; trusting that only a few clients would want to withdraw them at any time.  If MtGOX did that, perhaps they made a bad investment, or perhaps they sold the bitcoins when the price was 100$, and now that it is 600$ they may not have enough assets to buy all of them back.


For sure!

Lucky for you if you bought early (and if you can sell before it goes down to zero, if it will).

But also:

Since 2013-11-30: about -50%
Since 2014-02-01: about -20%

That is real too.

Should I post again the Enron and Worldcom stock price charts?

Please do not waste your time trying to convince me that bitcoin is a good investment.  I will not try to convince you it is not; probabilities are always subjective in the end.

But please be honest when you tell other people about the risks of investing in bitcoin.

Don't waste your time.  I will believe when the facts show that I was wrong.


The survival of altcoins kind of answers that, doesn't it?  

In fact we seem to be moving already away from a "bitcoin network" to a generic "cyptocoin network", whose members will devote their mining efforts to whatever cryptocoin their equipment can handle that provides the best return at that time.   In that case the "network effect" will no longer be a bitcoin advantage.


If there is no external factor to sustain the price, speculation alone may take the price anywhere -- and will eventually take it to zero.

Common stock prices can be justified in terms of expected sales and profits, hence expected dividends and/or growth of assets.  But there is no logical argument that justifies why the BTC price now should be 600$ instead of 6$ or 60,000$.

It is 600$ basically because speculators think that it may go up to 650$ sometime next week. But why would it do that? Well, because next week perhaps the speculators may think that it may go up to 700$ in the following week.  Or perhaps they won't. And so on. The price now is basically holding itself up by its bootstraps...

PS. To be precise, I will be happy if any cryptocoin succeeds in providing cheap and convenient international payments, even if the actual use will be only a tiny fraction of all international trade. 

I will be happy even if cryptocoins fail but force the banks to lower their abusive charges, by making people aware that there is no justification for them.

For bitcoin to be a good investment, of course, it would have to be bitcoin specifically, not any cryptocoin,

They would not be decentralized and disitributed.

The corporations would provide the blockchain processing and hold large stocks (maybe even infinite) of coins, using them to maintain price stability etc., and will collect fees from their use. Those corpcoins will look superficially like bitcoin in the way people will use them, but of course will not be anything like the libertarian dream.  For 99.9% of the population, that will not matter.

Or they could be issued by governments instead of corporations.

Or they could be something else entirely, who knows what governments, banks and stores may invent.


Because they void the argument "one bitcoin will be worth a small fortune one day since there are only 21 million of them and umpteen trillion dollars of e-commerce per day".

There are many things wrong with that argument, but one of them is that there is an infinite number of cryptocoins, and they all are in principle as good as bitcoin for the purpose of low-fee payments via internet.

Umpteen trillion dollars divided by infinity is equal to zero...


I will admit that I am wrong (about bitcoin being a terrible investment) when lots of people really start using bitcoins for payments, not because they want to support the cause but because they are more convenient and cheap than other methods; and demand for that usage becomes large enough to justify the current BTC price, and the yearly growth of that price is greater than that of the ROI of other investments.

And I would be very happy if only the first of these three condition becomes true (although I am pessimistic even about that).

As I see it, right now the bitcoin price is sustained mainly by speculation: by "hodlers" who will buy at even higher price if they had the money, by day traders who do not look beyond the next month or two, and by people who see it as a form of gambling.

For starters, bitcoiners would have to find a way to get rid of all altcoins, present and future. Including AppleCoin, WellsFargoCoin, WalmartCoin, ...

Perhaps they can find corrupt congressmen that will accept bribes in bitcoin and pass laws criminalizing the use of other coins? 

I don't think that the hypothetical failure of MtGOX would have any immediate effect on prices.  If they are insolvent, the virtual coins and virtual dollars that are in their cllient's accounts do not actually exist, so they will not enter or leave the market.  Traders who have their assets on other exchanges will not be surprised, and should not care.

Howeve, if the "oldest and most prestigious" exchange fails, it will probably be all over the mainstream news media, and will scare more potential investors away from bitcoin.  Since I believe that bitcoin is a terrible investment, I think that will be a good thing; but it will depress the price even further over the next few weeks.

A major news agency already sent out news that "price of bitcoin drops 50% in a few hours".  Not surprising since many chart sites still show MtGOX's price by default, or put it at the top of their menus.

If MtGOX is not insolvent, when they resume withdrawals most clients will probably take their coins to other exchanges, and move their money to safer investments.  That will probably have an immediate negative effect on the price.

PS: allowing trading between clients, while withdrawals are suspended indefinitely, is problematic also.

Gox clients who have sold their bitcoin to other Gox clients, in the hope of perhaps being able to withdraw that little money at least, have lost nearly 50% of their investment.  It will be very difficult for them to recover that loss in the courts, even though it was almost forced upon them by the suspension of bitcoin withdrawals (without notice, and retroactively).

If MtGOX itself (or someone associated with them) has been buying those cheap bitcoins from their clients, well, ...

You mean, they have stopped withdrawals without a hint of when they will allow them again.  Yes indeed.


They are still quoted in the Bitcoin media and bitcoin chart sites as "the" exchange, their manager is in the board of the Bitcoin Foundation, there are still some bitcoiners who recommend them, and they sell the cheapest bitcoins.  Enough to trick a new investor who wants to buy some bitcoin and his not aware of their recent history.

Stopping withdrawals of bitcoin without stopping the deposit of dollars makes them a scam site in my view.

MtGOX's clients apparently have decided that it is less despairing to be owed 350 US$ by Mr. Karpeles than to be owed 1 BTC by him.  I cannot blame them.

MtGOX has been withholding some 40,000 BTC that belong to their clients, worth more than 30 million US$, for months, in spite of loud protests.  Those BTC have lost 20% of their value in the past two weeks.  And MtGOX did not even bother to give an estimate as to when those BTC would be released.

Why are they holding on to their clients's property? The technical bugs are not an excuse: they could have done those withdrawals by hand, using the standard wallet apps, while they fixed the bugs on their software.

MtGOX may not be insolvent, but they are acting in all respects as if they were.  Mr. Karpeles may not be a swindler, but he is impersonating one quite well.

EDIT: owned --> owed

The MtGOX robot that buys or sells 40-60 BTC every few minutes is still working steady it seems.

I already told you that, after three months of transcribing and plotting the Fukushima reactor data released by TEPCO twice a day, it was revealed that the instruments were all broken and that all that data was meaningless.

I am beginning to feel the same with bitcoin.  We have all those nice chart sites that seem to tell us a lot about the market, but actually we do not know how much of the order book is fake, how many transactions are fake, how many accounts they reallu have, how many clients are actively trading, how many coins and dollars the clients think they have, how many coins and dollars the exchange actually owns...

God only knows what is going on inside those outfits.

Daily volumes of BTC trade to/from USD and other national currencies (in kBTC):


             !    Thu !    Fri !    Sat !    Sun !    Mon !    Tue !    Wed !    Thu !    Fri !
  EXCHANGE   !  02/06 !  02/07 !  02/08 !  02/09 !  02/10 !  02/11 !  02/12 !  02/13 !  02/14 ! Currencies considered

  MtGOX      |  21.54 |  58.89 |  26.82 |  23.48 |  50.07 |  18.70 |  25.21 |  33.85 |  79.56 | USD,EUR,GBP,AUD,JPY
  Bitstamp   |  20.65 |  42.79 |  13.50 |  15.06 |  71.86 |  40.06 |  15.51 |  28.15 |  63.38 | USD
  BitFinEx   |  21.11 |  66.36 |  11.12 |  12.07 |  41.98 |  39.54 |  12.85 |  17.17 |  53.68 | USD
  BTC-e      |   9.72 |  31.84 |  11.67 |  12.51 |  47.04 |  28.64 |   9.97 |  18.53 |  52.18 | USD,EUR,RUR
  Kraken     |   0.59 |   1.45 |   0.37 |   0.45 |   1.45 |   1.11 |   0.58 |   0.93 |   1.79 | EUR
  Bitcoin.DE |   0.61 |   1.30 |   0.37 |   0.47 |   1.54 |   0.67 |   0.51 |   0.78 |   1.63 | EUR
  CaVirtEx   |   0.39 |   1.07 |   0.57 |   0.23 |   0.77 |   0.53 |   0.29 |   0.41 |   1.16 | CAD
  CampBX     |   0.21 |   0.82 |   0.27 |   0.24 |   0.37 |   0.11 |   0.10 |   0.21 |   0.41 | USD

  SUBTOTAL   |  74.82 | 204.52 |  64.69 |  64.51 | 215.08 | 129.36 |  65.02 | 100.03 | 253.79 |

  Huobi      |  39.97 | 131.91 |  77.00 |  64.08 | 134.09 | 120.08 | 131.86 |  82.39 | 236.27 | CNY
  OKCoin     |  26.07 |  74.37 |  37.63 |  34.63 |  70.49 |  64.22 |  60.79 |  62.49 | 147.26 | CNY
  BTC-China  |   4.09 |  17.66 |   6.86 |   5.75 |  18.23 |  11.17 |  11.01 |   8.02 |  24.87 | CNY

  SUBTOTAL   |  70.13 | 223.94 | 121.49 | 104.46 | 222.81 | 195.47 | 203.66 | 152.90 | 408.40 |

  TOTAL      | 144.95 | 428.46 | 186.18 | 168.97 | 437.89 | 324.83 | 268.68 | 252.93 | 662.19 |



All numbers were collected by hand from the site http://bitcoinwisdom.com. Beware of possible errors.

For each exchange, the numbers include only the trade volume to/from the currencies listed in the rightmost column. Trade between BTC and other cryptocoins, such as LiteCoin, is NOT included.

Coinbase is said to use Bitstamp for currency conversion.

Dates on the header line are UTC. Specifically, "01/15" means "from 01/15 00:00:00 UTC to 01/15 23:59:59 UTC". (Beware that Bitcoinwisdom uses your local time, so the date may appear to be off by 1 day.  For example, if you are 2 hours west of Greenwich, it may show "01/14 22:00" when the UTC time is "01/15 00:00".)

Here are the predictions for Sat feb/15 by the Chinese Slumber Method.

Unfortunately there is still no clear trend for the prices at the Slumber Times (19:00 UTC, 03:00 am China time; the yellow dots on Huobi's chart from my previous post).  WIth the skies too cloudy to see the birds, a prudent Prophet should refuse to read the future. But the word "prudent" is not in Bitcoin's lexicon, so...

I could use the last two points and extrapolate in a straight line.  However I don't think that is sensible because:

  * it would result in an upward trend, and that seems quite unlikely at this point;
  
  * the last point was at the end of a very atypical day, with extremely high volume and extremely large and fast swings;

  * during the rally, up to and including 19:00 UTC, prices at Bitstamp were generally higher than the prices at Huobi; suggesting that this time
     it was Bitstamp, not Huobi, that drove the price up, and in particular that sustained the spike around 19:00.  So the last Slumber Price probably should not be
     indicative of Huobi's natural trend.

  * That spike occured late on Friday night, so Huobi's clients were probably drunk at the time and did not realize what they were doing.  

So, you may call me a pig-headed bear, but I will ignore todays Slumber Point and instead extrapolate again the trend of the three previous Slumber Points.

Prediction valid for: 2014-02-15 19:00--19:59 (nor before, not after)
Huobi: 3630 plus or minus 40 CNY (3620 -- 3670)
Bitstamp: 600 plus or minus 25 USD (575 -- 625)

These predicitions are ABSOLUTELY GUARANTEED to be either right or wrong.  

EDIT: date is Sat Feb/15 not Sat Feb/14, of course.

Noblesse me oblige to report on the (in)accuracy of the Chinese Slumber Method predictions for today:

Prediciton posted on 2014-02-13 23:07 UTC
Prediction valid for 2014-02-14 19:00--19:59 UTC
Huobi predicted price: 3750 plus or minus 30 CNY (3720  -- 3780)
Huobi actual price (L--H): 3991--4016 CNY
Error (difference between interval centers): 250 CNY

The prediction is the blue rectangle at the far right in the chart below, under the price bars.  The yellow dots are the mean prices at 19:00 UTC every day.


Obviously someone bought several thousand coins around that time, well over the "right" price, with the sole purpose of creating a freak spike on the charts and falsify my prediction. 

Seriously, today Huobi's volume (over 200,000 BTC) was a historical record among all exchanges, and the price went through a crash and a rally, with no obvious reason for either of them.  Huobi's clients kept trading furiously until past 2:00 am local time, and went to bed in the middle of a spike that had apparently reached its top.  Today's Slumber Point is way out of line with the previous three which had a clear descending trend.


The prediction for Bitstamp was

Bitstamp predicted price: 615 plus or minus 10 USD (605 -- 625)
Bitstamp actual price (L--H): 654--670 USD
Error (difference between interval centers): 47 USD

In the following plot, the predicition is again the rightmost blue rectangle.  The yellow dots are Huobi's pices at Slumber Times, divided by the currency factor R (6.40 for feb/07 to feb/09, 6.12 for all other days):



Note that, today at 19:00 UTC, the price at Bitstamp was comparatively higher than Huobi's, even assuming the low currency factor R = 6.12.

Rats. Huobi's clients must still bring the price down by 200 CNY in 30 minutes, but they do not even seem to care about my orders. 

Makes sense....

OK, would anyone offer an explanation for today's roller coaster?

"We believe that we have fixed the bug that caused much anguish and annoyance over the last few days" does not seem particularly bullish or bearish.

"Scientists have discovered that investing in bitcoin causes an extreme form of bipolar disorder" is my best guess so far.