Bitcoin trading is a zero-sum game, each person's gain is someone else's loss.

If the ordinary money (USD,EUR,...) that you put in is less than the money you got out, consider yourself lucky; if you can make even more ordinary money by selling your bitcoins, better for you.

If the money you put in is more than you took out, then you are provisionally a loser. The only way you can avoid becoming a definitive loser is to find some other loser who is willing to take your loss by buying your bitcoins at a price that will clear your deficit (including bank and exchange fees and the interest you could have earned by investing your money elsewhere).

You may find that redeeming loser right away.  You may have to wait years for him to come up.  Or he may never come up.

The bitcoin market will crash once every sucker with money gets smart and realizes that all other suckers got smart too.

So, what you need to keep the bitcoin market from crashing is an ASIC miner that creates new suckers with money, rather than new bitcoins.

Those who make iphones want to drink wine, and those who make wine want to have iphones, and both need them today not tomorrow; that is why people will trade.  As for money, the deflation = hoarding rule hs been confirmed in many ways.

They would use old inflationary dollars to buy things, and hoard the deflationary bitcoins.   Thus if the material value of a bitcoin keeps growing, bitcoins will be used only where they are absolutely needed.  If the value keeps decreasing, the total value of bitcoins will decrease too, and soon they will not be enough for trade.  The conclusion seems to be that the value of a bitcoin must/will remain constant  It also seems that they will only account for a small fraction of all trade.

Bitstamp is dropping fast. BTC-China is dropping fast. MtGox is stuck as usual.

The bitcoin value is one aspect of the system; which includes also exchanges, regulations, distribution, usage petterns, etc.


Predictable changes, like a steady inflation or deflation, or seasonal variations. People can adapt to them. Volatility is unpredictable changes in value, and that is one thing that bothers economists: they cannot see how a commodity whose value can change 10% up or down in a day, unpredictably, could be used as a payment method (except for illegal trade where bitcoin is the only option, so profit margins can be high enough to cover such swings).   For them, volatility must be reduced before  it can be used for real trade.


That is another stumbling block for economists.  Infation encourages people to spend or invest their currency as soon as possible, thus keeping the economy in motion.  Deflation has the opposite effect, it encourages people to hoard the currency.  If bitcoins increase in value, they will be hoarded, and therfore will be less used in trade, and therefore their usefulness will be limited, and therefore their value will collapse. How will this paradox get resolved?

Granted that many journalists/economists do not understand the computing aspects, but on the other hand many computer people do not seem to understand economics. 

I have asked in the Economics board what would be the expected state of the "bitcoin network" 15 years from now.  No one knows what will be the value of a bitcoin, of course.  But people cannot even answer (with justification) the more basic question of whether the value will be stable, will grow of fall gradually with time, or will be as chaotic and unpredictable as it is now.

That's actually 3% from lowest to highest.  In a matter of minutes.

With 1000 BTC one could swing the price down ~980 USD or up to ~1050 USD (7%).

Right now, on Mt Gox, if someone decides to buy 100 BTC at the lowest possible price, the price will shoot up tp 1020 USD.  If someone decides to sell 100 BTC at the highest possible price, the price will drop to 990 USD.  That is why it is jumping about like crazy.

You all understand that bitcoin trading is just a kind of gambling, right?

Indeed, no mathematical forecasting method can possibly work.  The price of a bitcoin depends only on what the buyers and sellers think that it is worth, which in turn depends on what they think that other people may think it is worth in the future, and so on.  There is no data or thery that can bear on that, 


In the end the winners will be those who sold their bitcoins for more $$ than they paid for them (plus exchange fees, bank fees, etc.).  The losers will be those who did the opposite.

From the charts I understand that some 200,000 BTC were traded on Mt Gox while the price was above 1000 USD.  Presumably some coins were traded several times, but even so there must be atleast 20,000 bitcoins, possibly over 100,000, that were bought by their current owners at over 1000 USD.

I suppose that those people will be unwilling to sell for less than they paid for, unless they are convinced that prices are abot to crash for good.  They must be the ones setting the price now.   Relatively experienceed buyers who have open bids in Mt.Gox seem unwilling to raise their bids to meet the sellers; the market is a standoff as it was for several hourse before the last rally.   But now and then some outsider comes in determined to buy some small amount of BTC, so it bids at the lowest price that will buy him that amount.  It is these small transactions that  define the current price.

There is a docudrama out there about the rise and fall of Enron.  
http://www.youtube.com/watch?v=0zMakN-EMLg
You should check the very last scene of that.  

Yes, there are still plenty of fools down here. (Police just busted a huge Ponzi/pyramid scheme called Telexfree; many investors are now suing the government for the right to keep investing in it.)

And there are also many corrupt politicians, state officials, and other scammers who need to move money out of the country, and have realized that the usual channels through offshore banks are no longer safe from the police.

It is hard to tell, but it seems that all the transactions that pushed the price above 1000 were by new buyers that came in matching the lowest offer, rather than old buyers raising their old bids.  Note that the drops in the red lines, that eventually ate away the 1000 USD cliff and then some, are not matched by drops on the green lines.

Some buyers who were bidding between 920 USD and 950 USD appear to have raised their offers to near 1000 USD, but then pulled back.

On the buyers' side, a few small buyers who were biddiing beween 900 and 915 USD raised their bids by a few dollars.  Nothing else changed. 

In the sellers' side, around 17:10 someone offered ~250 BTC at exactly 950 USD, near the low end of the offers; but the offer was gone 10 minutes latter.  If he sold, it was not to any of the outstanding buyers.

Makes sense? 

Correction: since that was the lowest extant offer, presumably a new eager buyer came in with a bid that matched that offer, and that bid was processed immediately so it did not disturb the green plots.

I know nothing about commodity or currency trading, but this is how I interpret this chart:

• Most buyers and sellers are sticking to their positions (for severals hours now).  Compare to this chart from dec/06:
  
• On the right side there are a bunch of people who bought BTC at around 1000 USD, and ar are now stubbornly asking that amount in order to limit their losses.
• Many of them love round numbers so they area sking 1000 USD exactly.
• A few of them realize that even if the price rises to 1000 USD there will not be enough buyers for all that offer.  So they are asking 995 USD, 970 USD: they will lose a bit more but they will be in front of the line when (if) buyers raise their bids.
• A small bid at 920 USD was canceled around 15:15. Another small bid at ~950 USD was canceled around 15:57.  Since the red plots did not budge, presumably those guys either gave up, lowered their bids below 870 USD, or bought those coins outside of MtGox.
• Around 15:40, someone who was selling a few coins at ~960 removed his offer. Again, since the green plots did not change, he either raised his bid to 1050 USD or higher, gave up for now, or sold outside of Mt Gox.
• To satisfy all the sellers who are asking ~1000 USD or less one would need all the buyers who are asking ~870 or more.  Where are they going to meet?

Makes seinse?

Can we trust the data posted by those exchanges?

Are those bids and offers real? Are the transactions real, or just being simulated to sustain a price that finds no real buyers?

During the crash, when the price was down to 800$ on its way to 550$, Mt. Gox stopped reporting the real data, instead looped the last 5 minutes over and over, at least 5 times.  Was that a bug, or were they trying to hide the crash?

By now everybody who has looked into this market must have realized that, even if the bitcoin survives as a currency, its market is a pyramid schema (or, euphemistically, a zero-sum game): every profit one makes by investing in bitcoins must be the loss of someone else.  So, can we trust that operators of sites that serve a pyramid schema?

Does this mean that BTC-e is closing down: 

  http://bitcoincharts.com/markets/btceUSD_depth.html

If I read correctly, bids and asks add up to a few hundred BTC only.

Is is possible to estimate how many distinct people are actually trading bitcoins in a given day (or week, or month)?