The first circled section is the Chinese new Year's week, Jan/31--Feb/06, when banks were closed in China. The drop on Feb/07 may be people needing cash to pay bills.   

In the Chinese exchanges, that drop was only ~5%.  It was followed by an ~8% drop on Feb/10, apparently right after Mark's "bug in bitcoin" announcement.

Curiously on Bitstamp the drop on Feb/07 was deeper than in China, about ~8%, and there was no drop on Feb/10.  Perhaps because the West misinterpreted the Feb/07 Chinese drop as being some bad news from MtGOX, but laughed at Mark's claim on Feb/10?

In the second circled area, the drop on Mar/27 was clearly due to the Caixin leak about the PBoC "strenghtening" circular.

The small drop on May/11, after the third circled area, may have been the announcement by FXBTC that they were closing down.

Theories for this week's spurts:

(1) @walsoraj suggested (seriously or not) that some large exchange may soon block CNY withdrawals without prior notice.  Traders who got that info are buying BTC now because they expect the price in that exchange to go throught the roof once that happens.  presumably they are privileged clients with a way to take the CNY out in the end.

(2) The Chinese exchanges are about to open offshore sections.  Chinese clients who can trade there are buying BTC in order to move their money to those exchanges without paying the bank fees and limits to convert from CNY to CNH or whatever currency they use there.

(3) Some people claim that SecondMarket's BIT fund only buys bitcoins for its investors on Thursdays.  Perhaps they got extra investors this week and/or their off-market sources were not enough.  (Their minimum investment is 25'000 USD = 50 BTC.)

(4) Someone offered to exchange a large pile of altcoins for BTC, and interested parties scrambled to buy the BTC.

(5) Someone got insider news of some significant positive development in the West.

What else?

To me, the spurts of the last two days look like insider trading; each separate jump being another tradr or group of traders getting some significant news.  That would rule out (3), maybe (2) too.

EDIT: typos.

Right, it must be all that infrastructure and adoption that has caused the price to drop from 800$ to 450$ over the last 3 months. 

Let's see what effect that will have on price when (if?) China drops out of the picture.  At present I cannot see any, there is that elephant blocking the view. 

There were also many negative developments in the West since November, to counter those positive ones.  Such as the IRS interpretation, the continuing arrests from the SilkRoad case, the MtGOX heist and the dozens of other similar "accidents", the Neo&Bee fiasco, the Fortress embarassment, the bank account closures in Australia and the US, ...


I never claimed that.  Surely the price went up in Oct-Nov because the Chinese traders bought a lot of the coins that were in the Western market.  How many, I have no idea; but it must have been a large fraction, in order to lift the price from ~120$ to ~1200$.  It could have been 90% of the coins, why not?  In any case, if price went up from 120$ when they came buying into the market, we can expect it to go down to 120$ if (when?) they cash out and leave the market.

Also Leon Li claimed to have 10'000 active clients; discounting the hype factor, it seems reasonable to guess 10'000 active traders for all the Chinese exchanges combined.  How many coins does the average trader own?  How many traders are active in the Western exchanges, and how many coins do they own?

Do you have any estimate of those numbers?


I do not ignore that, quite the opposite! It is those who cry "fake" who ignore that.

If you prefer to put it that way:  Bitcoin was confined to a tiny section of the market; with China it got another small section,  now it may lose that and go back to the tiny section it had before.  To get a new and 10x bigger rally it needs to find another small section, that is 10 times less small than the Chinese one was.

It is bizarre to see those "experienced bitcoin traders" scoffing at me when they cannot even tell whether the current buying sprees are coming from China or from the West.   

In early 2013 Bobby Lee joined tiny Shanghai-based BTC-China: http://en.wikipedia.org/wiki/BTC_China  With experience from other large companies, he apparently improved their marketing and operations.  That seems to have coincided with the start of the early 2013 rally.

Shanghai is a special economic zone of China; I don't know whether that was a limiting factor for further expansion of BTC-China in the rest of the coutry.  In any case, Huobi and OKCoin later opened in Beijing, offering zero-fee trading.  Again, the time of their opening (second half of 2013) seems to coincide with the start of the October-November rally, whose first signs are detectable in late September.  (Looking at the daily volumes, it seems that they stole most of BTC-China's customers.)  

A couple of months ago, China had about 95% of the worlds trade volume.  People have claimed that most of their volume was fake, but I have not seen any sign of that.  (On the other hand, a large fraction of the volume in Western exchanges must be merely arbitrage with China.)  And, even if half of the Chinese volume was fake, the other half would still  be 90% of the world's total.

As I just posted, until last month the Chinese traders were obviously setting the price, and the rest of the world was just following the,.  (That may still be the case now, not clear yet.)

Then how do you explain that the price crashed after the Chinese government decree of Dec/14, that it has reacted (amost?) exclusively to events and rumors that were relevant only to the Chinese market, and has not reacted to events that were relevant only to the Western market?

 

Indeed, and that is the problem:  many external factors are sudden and unpredictable, and the magnitude of their effect is largely unpredictable as weel.  But, in retrospect ,the causal connections are very clear. 

One cannot predict, from price analysis or any other way, whether and when there will be further moves against bitcoin by the Chinese government.  One can say however that if that happens then the price will probably fall by tens or dollars or more, depending on the severity of the move.  And if the PBoC reverses its policy about banks x exchanges, then the price may shoot up by hundreds of dollars.  On the other hand one can predict that if another store chain accepts bitcoin through BitPay, then the price will hardly twitch.

Since the last rally was due to the opening of the Chinese market, another rally to 10'000$ would require opening another market even bigger than the Chinese one.  Perhaps some big regulatory change would attract big investors in the US or Europe; but who can predict that?

It is not rational to expect that new markets will continue to open at regular intervals, each 10x bigger than the previous one, just because there were three such events before with roughly similar spacing. 

One cannot compute a p value for that "inevitability".  He must be using linear regression analysis on the log price since back then, correct?

I see.  I definitely do not share your faith in blind extrapolation.

I basically agree with your euro estimate; not because of past price history, but because there are very large players who are supposed to keep its price stable, apart from a little inflation, and have at least some reason to want to do that.

There are no such entities for bitcoin (that is one thing that the charts do prove).  There is no capital or dividends, so its value is entirely based on short-term speculation and the hope of it being adopted as medium of exchange.  Speculation is holding itself in mid-air by its bootstraps, and its price may jump up or down unpredictably by external events, that are clearly not tied to the price history.   Adoption may well not happen, and if it happens no one can tell how much or how soon.  So the bitcoin price of a meal in May 2015 can be anything.

That article is a bit outdated. It says "in her apartment", but actually her body was found "on the parapet above the refuse dump" of a nearby 24-story apartment building.  It may have been suicide (she lived in a 2-story house), but I haven't seen any guess at what the reasons could be.  Other theories are possible of course.  Who knows...

http://nypost.com/2014/03/06/bitcoin-firm-ceo-jumped-to-her-death-neighbor/
http://news.asiaone.com/news/singapore/cleaning-supervisor-who-found-body-dead-ceo-there-was-foul-smell

How much do you expect to pay for your lunch a year from now: in euros, and in bitcoin? 

Most of the large moves in the past year had very obvious and plausible explanations.  The closing of SilkRoad, the opening of the Chinese market, the Chinese decrees and workarounds, the MtGOX "bug" announement, the Caixin leak and the workarounds, etc..  Scratching the head not only seems to work, but I can't see how one could expect to predict price moves and trends without trying to predict such external causes (which unfortunately are largely unpredictable).

It is obvious that the true believers have run out of money, for otherwise they would buy every bitcoin in sight, at any price.  Those traders offering bitcoins for sale at 550$, or buying only at 450$, obviously do not believe that it will be worth 2000$ by the end of the year, or 1'000'000$ in ten years.  They are implicitly assuming much less than one chance in 2000 of the latter happening.

Arbitrage trading keeps price in sync across all exchanges, with delays under one minute usually.  Because of arbitrage, a single large move at one exchange momentarily reversed there and duplicated it at the other exchanges, almost at the same time.

Well, please write for the other readers then.  "Never underestimate the pleasure people feel when being told something that they already know."  (That was Fermi's IIRC.)

I don't believe in the EMH (and can't even imagine how it could be applied to an insubstantial asset like bitcoin).

Also I do not believe that price is a random process (certainly not for large-scale motions like these).  The large drops in the past, and most of the rallies, all had obvious external causes.  The Brownian model (with variable variance) is merely the only "technical analysis" model (i.e. model that does not have external factors as inputs) that seems to be validated in practice.  Which means that, indeed, I do not see any reason to believe in TA.

In all the markets these spurts seem to come out of nowhere, as if one investor or a small group of investors suddenly decided to buy, not caring for slippage (or, on purpose, trying to lift the price).  The rest of the market then just accepted the new price (except for the last spurt to 524 USD/3195 CNY, which was soon undone).

Reminds me of the Mar/03 jump, for which I still know of no explanation.  That one apparently started with a couple of large buys on bitstamp.

On the other hand, in all markets that I can see these recent spurts are spread over 10-15 minutes, which suggests that they are not local, but are being carried over from some other market by arbitrage.  But which is the "source" market then?  On Coinbase the spurts seem to be "sharper" than the others, is that the source?

There is another fund, IIRC called Pantera Bitcoin Partners (PBP).

Fortress had invested in bitcoins, and got a red stain for that in their quarterly report.  So they gave the botcoins to Pantera in exchange for shares of Pantera Management, the company that manages the PBP.  Like SecondMarket, Pantera Management will make some money from fees, no matter what happens to the BTC price.  That's what I recall.

I just asked for the NF at the shops for the reason that I explained, and certainly did not imagine that it would cause that reaction.  In fact it took us a while to realize that we were the "tax inspectors". 

It must have been the whole street, people obviously did not know who or where those "tax inspectors" were, and did not wait to find out.

Not quite "proud" but you must agree that it was a quite memorable experience.

There is one idea in crypto-currency that is unquestionably good, but most parts of the bitcoin protocol are "good" only if one subscribes to the libertarian dogma that banks and governments are evils to be removed.

I have nothing against cash. I pay most of my meals and small expenses with cash, some with credit card. About 200 USD/week, which I get from ATMs on campus.  My wife manages the rest of my salary, not quite sure how.

As for being an NF fan -- no, I don't usually care to ask for it in my private purchases. Most stores do provide it anyway. Often it is just a common cash register receipt, but printed by a special printer that also prints the tax audit copy in a continuous roll.

(Although I should be an NF fan, because the budget of our university  comes specifically from the São Paulo State sales tax revenue, and stores who do not issue NFs are evading that tax.)

The offline generation of address/key pairs and the use of asymmetric cryptography to "sign" digital cheques are undoubtly better than centrally-stored passwords/PINs and "safety codes".  But it is only those features that make bitcoin (allegedly) safer than current credit cards against point-of-sale theft.  All the other "features" of the bitcoin protocol address other goals, and can be viewed as defects by those who do not see the goals desirabe or worth the cost.

As for your troubles here in Brazil, many of them were due to the lack or unreliability of ATMs, not to the fact that the ATMs were from banks rather than from a bitcoin company.

Send me private messages, if needed we can discuss in the Portuguese language forum.

There is a big world outside of bitcoinland, you know.  In that world "Fiat" is a car maker, and "crypto-nazi" is someone who secretly espouses nazi views (such as extreme racism) but hides them to avoid public reproach etc..

It has been around for a while, but used to trade in Hong Kong dollars:
http://bitcoincharts.com/charts/anxhkHKD#rg180zigDailyztgOzm1g10zm2g25zv

That quoted list is quite incomplete, it omits OKCoin (more volume than Huobi) and several other Chinese exchanges, as well as LakeBTC which handles USD and is comparable to Bitstamp.
http://bitcoincharts.com/charts/lakeUSD#rg180zigDailyztgOzm1g10zm2g25zv