Danger in Betting against the bitcoin MOVEMENT

mrees999
By mrees999 on Mon, Dec 2, 2013 - 5:45am

Betting and investing in MOVEMENTS

It is funny how people who still don’t understand bitcoin and digital currencies still try to apply old paradigms to this new phenomenon that has no equal. Take a moment to realize that I take the time to back up my reasoning with references so you can see the background I use to make my determinations and allow you to verify for yourselves rather than just throw out unsubstantiated opinion or “gut feelings” based on nothing put non-applicable past history.

To put you in the correct frame of mind and give you the correct lens to view this realm, let me quote Gandhi.

First they ignore you, then they laugh at you, then they fight you, then you win.
 

I submit two references for my research for you to read for yourself and feel free to analyze my interpretation.  People commonly mistake bitcoin as just another investment – but to most of the people who own it, it’s a MOVEMENT. They don’t care to trade it. They don’t care what the media says – they scoff at the idea that they will dump it. If you’re waiting for a crash to say “I told you so” – good luck with that.

A fairly recent poll and look into the kind of person owns  bitcoin was done and is referenced here:

http://simulacrum.cc/2013/03/04/the-demographics-of-bitcoin-part-1-updated/

I’ll highlight a couple of key points,

The average person is Male (92%). 32.1 years old. Libetarian. Anrcho-capitalist. full-time job. A huge percentage is in the twenties.  Does this sound like your average “stock trader”?  I am part of the community. Let me give you some insight to what we talk about and how we view the world.

The so-called experts you might find on CNBC, Forbes Magazine, Financial times, Wall Street Journal have completely missed the boat.  Do you think if they had known it would return 8000% so far this year that they would have told everybody they know to BUY! BUY! BUY! (Jim Cramer).  They missed maybe the biggest opportunity to gain riches they’ve been a part of?   If they are so smart how did they miss this biggest story of the year? More to the point, why were they making fun of it?  Because bitcoin isn’t a company that pays their advertising revenues or give kickback stock options? Are you taking their current talk any more serious than you did a year ago?  Have they proved themselves a reliable source yet? If it’s not the “end of bitcoin” called twice already – it’s “the biggest bubble ever waiting to pop”.  You can imagine what they would be reporting when the Wright brothers were making experimental flights at Kittyhawk. The “Establishment” doesn’t like it when innovation comes from the outside.

Between 2009 and 2010 – They ignored you – Just as Gandhi said they would. But the very smart technical people that also witnessed the banking crisis then sowed the seeds that became the genesis for the experimentation that began.  These kids set up $3,000 mining machines and LOST money in electricity and equipment cost for years never knowing if the units that were given the initial value of ¼ of a penny would ever amount to anything for sure – just a vision and being part of a MOVEMENT. You know THOSE kids – you know the ones that were visionary enough to ignore the critics and invest their time and energy into a technology that people would ridicule them for? The same sour grapes are complaining about that them being millionaires for nothing and hording their riches. The nerve of them!  Obviously they didn’t get the memo that they are supposed to clear their new ideas with CNBC before they are allowed to take off. It’s like they don’t understand corporate banking elite infrastructures or something.

Being mostly Libetarian – these rebels don’t trust government and know economics well enough to know money was being printed out of thin air with reckless abandon since this started. So ask yourself “what has changed in the world today for them to change their mind now? Do they actually think they are part of some “MOVEMENT” or something???

Our digital currency community knew, like many on this website, about the benefits of gold and silver. The program itself was written to mimic gold intentionally.  The difference being  this particular group of techies became a community with the vision of the internet age. They weren’t bound by old dogma and hierarchy. They realized the potential to own limited supply number of units and be able to transfer and conduct business electronically using the internet without a third part\bank to need to be trusted. They saw the world burned by the banking system and get off Scott-free. What has changed? Do you think they now suddenly want to give up their new currency for that hyper-inflated cash system controlled by crooked monetary policy and a cartel of banksters?  We are very much smarter than your average person.(Said as humbly as possible).

If this were about money, and not principles – why haven’t they spent their millions yet?  Those bitcoins are stubbornly still sitting there…lonely in the block chain. Still in their original genesis. Are they waiting to become billionaires instead? What was their motivating factor to begin with – was it to become rich? Or – are they more aligned to a cause?  Was it worldly goods, or principles of an idea?  Governments know it is much easier to buy off a money motivated person, but much, much harder to kill off an idea steeped in principles.

This community considers themselves to almost be insiders to a club. They’ve been made fun of and harassed since the beginning. Misunderstanding about the technology and myths and misinformation make up 95% of the talk about bitcoin in the media.  Yet you don’t see them selling out of embarrassment, all the negative talk only solidifies their commitment and causes self-justification. It only creates a “band of brothers” more loyal to the cause. All the talk of “bubble” hasn’t made them itchy or nervous their fate as well as ours whether you realize it or not, is with MOVEMENT.

 We watch attentively as the velocity of money flying out of fiat currencies only picks up speed. The weight of which only creates more density and increasingly worthless paper money all flies toward the gravity. We watch this happen in real time silently watching blockchain.info and  fiatleak.

http://fiatleak.com/

We already know what most of the world doesn’t. The flight to safety has begun. The race to the bottom in world currency devaluation is creating a black hole of money flying towards it that will never be returned.  The bitcoin conductor’s name is MATH. It never lies. Its destiny was set in motion in 2009. It only knows true and false: One or Zero.  It doesn’t care who you are or who you know. It doesn’t care how many people like it or doesn’t. There are no elections for it run. There are no photo ops.  And it grows more powerful every day.  It can’t be manipulated or counterfeit or inflated. The law of self-interest works in its favor and its supporters by natural law become more powerful and wealthy.  Its very nature will cause the unwise and dishonest to  be rooted out and discovered in time, because you can’t hide from the blockchain. Because of its unalterable wisdom it will become the guiding lite the world will learn to trust. The blockchain will be seen as a “seeing stone” of all transactions. It has no allies, it has no enemies.

As more people see this and understand it, the movement grows.

They fear what they don’t understand. Media coverage is most likely to mention the ability to buy drugs\weapons in the mysterious “silk road” type web-sites. When do they get to the part about giving to charity and donations make up almost four times the amount of those that engage in illegal purchases. How often is that reported in the news?  The first three years of  media coverage about the internet-  was most often reported as only used for porn and getting instructions to make bombs. By far the most distinguishing factor for bitcoin owners was it was intellectually rewarding.  Not the money. Those late to this party might only care about money…at least at first. The bitcoin conductor doesn’t care. It just is.  The facts will speak for themselves in obvious ways in due time. As the world adjusts, sometimes uncomfortably. The most stubborn among us will wait the longest and have the least to show for it. Money, power and influence come in time.  Those with good math skills they will understand. .

Take another look at http://fiatleak.com/ . See those transactions of value leaving fiat and being baptized as digital currency?  Do you wonder how many of those money conversions are coming from people good at math?  Does it make you wonder how good your own math skills are? Do you yet wonder how much of the 12 million bitcoin pie will come your way? Do you really think most of the early years of mining the first six million bits to people in the movement are coming free? Keep looking.  It’s almost hypnotizing isn’t it? Our generation has never had to deal with a deflationary currency before.  Why do deflationary currencies wield so much more power?  Is this what the early stages of a movement look like? Are we still in Gandhi’s identified 2nd stage of a movement of being ridiculed? We are the movement. Don’t bet against a movement.

21 Comments

mrees999's picture
mrees999
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Thanks

smiley

 

mrees999's picture
mrees999
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Bitcoin tip jar

If you enjoyed this summary, and you've had your "a-ha" moment, here is my bitcoin and litecoin wallets donation. Donations welcome, I'll keep this group up to date for a collection if any. Hopefully I've helped you see the light and join the movement.

Bitcoin:

1MMJa4Q9YrsqzUwDc4sVS6xGh2vxWq2god

 

Litecoin wallet:

LiJxp9oswZGJX5f113ok4iCH6UBYgjrQvZ

 

 

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Time2help
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Danger in Betting against the bitcoin MOVEMENT

Danger!  What, more danger? 

Zzzzzzzzzzzzzz....wake me when something real happens. 

T2H

davefairtex's picture
davefairtex
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bitcoin TA - 2012-12-05

Looks like BTC longs treated the breakdown on Dec 1 as "BTC on sale" and have bid the price right back up to the 1245 resistance level.  A breakout above 1245 selling pressure and setting new all time highs would be bullish likely would lead to more "fear of missing out" - given the uptrend in place, that's my "more likely than not" call, although that extremely heavy sell-side volume on the red candles is disturbing to me.  I'd love to know exactly who is selling during those high-volume "red candles."  Are they early BTC miners or ... someone else?

Not recommending a BTC buy, I have no position and so I'm just an interested spectator.

mrees999's picture
mrees999
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Bitcoin Wallet donation for Dave

Hey Dave, I've enjoyed your TA and have learned a lot from you. I've even took your advice a time or two and have been rewarded for it with some timed movements.  I would like to show you my thanks by sending you a "tip". If you haven't already done so, please consider starting a bitcoin wallet and send me the public id so I can deposit some bitcoin there for you to have - experiment with or whatever (cash it out?) - One place you can do it is bockchain.info but there are dozens or hundreds of places, or you can download and install the wallet software on your own pc if you'd rather.

 

As bitcoin can be a bit tricky and time-consuming to get into quickly, you might want to plan ahead by a few days to get things set up and ready to go. The bank linking usually takes four or five business days if you haven't already begun that process.

The little bit of bitcoin I send you won't count as declaring you now have a position in bitcoin - but it might buy you lunch at McDonalds :-)

 

 

davefairtex's picture
davefairtex
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bitcoin TA - 2012-12-05

Looks like the failure to move above 1240 led to a big selloff.  Volume is really massive.

My guess: there are some big players out there.  It would be fascinating to find out who they are.

If 950 support fails to hold, the double (triple) top pattern could lead to a further selloff...although there is likely to be support at 800, a previous high.

 

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TAMWO37101
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China news=bitcoin sell-off

Hi Dave,  Looks like the sell off was due to news that China banned financial institutions from handling bitcoin.  Both good news/bad news for bitcoin? http://www.coindesk.com/price-crashes-china-outlaws-bitcoin-financial-institutions/.  Thank you again for taking time to post bitcoin TA's.  I look forward to reading your analysis and like you, enjoy watching the 'show'.  Curious to see how this all plays out over next few weeks, months....or years.

TAM

davefairtex's picture
davefairtex
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bitcoin TA - 2013-12-06

The bounce off 950 support appears to have ended at 1150.  After the double top, that's a dangerous sign - its called a lower high, which is a sign of a trend change.  The more likely path (IMO) is a re-test of 950 support, and a possible failure of that support.  Although the spike down to 850 was bought, there weren't enough excited bulls to push BTC any higher than 2/3s of the original drop.  No doubt there are a bunch of new longs that bought at or above 1150; they may be regretting their two chances to sell at 1240, and are now just looking to get out and are selling any rallies.  "Oh crap, China made BTC illegal!  Sell!!"

Well, China didn't make BTC illegal, but it is never the news itself that matters, its the market's reaction to it.  And the reaction wasn't bullish.

mrees999's picture
mrees999
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Fun Rollercoaster

It seems like FOREVER that I was able to buy bitcoin for only $850.  Other than that blink you had to be awake for at 3:30 in the morning on Dec 1 - It was ALL THE WAY BACK to mid November.  That seams like a year ago in the world of bitcoin.  So I bought a bit more. Hoping it goes to $500 so I can back up the truck and load up... or - back up my "something", as bitcoin doesn't exactly weigh much.  I guess I'll backup my digital wallet!  :-)

 

 

davefairtex's picture
davefairtex
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bitcoin TA 2013-12-07

So here's the thing about trading.  Trading is easy and forgiving during an uptrend.  The paradigm is simple: buy the (freaking) dips.  New traders may start to think, "hey, its easy to make money doing this, what's the big deal?"  [Gold 2009-2011 anyone?]

Once the uptrend is over, things become more complicated.  If a downtrend starts, buying the dips will kill you on average - instead, you need to sell the rallies, to get out of whatever position you are in with minimal losses.  (Everyone else is doing this too - that's why its a downtrend).  [Gold 2013]

As we have seen in the gold (and miner) market, in a downtrend "cheap bitcoin" gets to be "even cheaper bitcoin" followed by "really, really cheap bitcoin" once a downtrend is in place.  Why not wait for the market to show you that the downtrend is over before jumping back in?  You may think you know what cheap bitcoin is - but the market is the thing that really knows.  If you wait for the market tell you, you'll end up accumulating the most bitcoins for your money.  Which is the purpose of the exercise, no?

You can also get a clue as to where things are going by the shape of the price candles.  In an uptrend you'll see lots of little cup formations with breakouts, while in a downtrend you will see the cups inverted with breakdowns, forming a waterfall like pattern of lower highs and lower lows.  Like we are seeing now.

To complicate matters more, sometimes the market becomes trend-less.  It is range-bound.  Once that becomes obvious, the strategy is buy the lows and sell the highs.  Of course everyone will start doing that, so that will stop working too at some point, and the market will break out in one direction or another.

Moral of the story: know what kind of trend you are in before executing your trading strategy or else...you'll get an expensive lesson in why this is important!

800 looks to be strong support - I'd expect a bounce, perhaps back to 900-1000, followed by another move down.  But 800 might not hold...depends on the level of bearish feeling.  BTC market moves really fast; it could end up at 500 in a day or two if those Chinese really want out.

bowskill's picture
bowskill
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Thanks Dave

This is very useful.

davefairtex's picture
davefairtex
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btc 2013-12-07 #2

Wow, BTC sure is volatile.  And here I thought it might take two days ... instead, its about 6 hours.

800 Support: failed.  Low at 650: failed.  Next stop: 500?

[Note: its fascinating to me how "round numbers" support seems to work relatively often for BTC.]

There is a trader saying: in an uptrend, its an escalator, while in a downtrend, it's an elevator.  Things go down a whole lot faster than they go up.  Generally speaking.

So how do we identify a reversal?

#1 most important - you need to see a higher high, and a higher low.  That may - not will, but may - act to stop the selling, and turn the "fear of losing everything" into the "greed of not wanting to miss out on the next bull move."

So far, no luck.  But - wait six hours.  Who knows what could happen.

This whole thing reminds me of those old high school biology "fruit fly" experiments.  Everything is incredibly sped up...

mrees999's picture
mrees999
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BitcoinWisdom

Thanks for helping me make sense of the charts. I see a lot of people have been using "bitcoinwisdom.com" for some of the extra tools a specialties that effect the digital currency (it includes support for litecoin as well). I'd be interested to know what you thought.

 

 

davefairtex's picture
davefairtex
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bitcoin wisdom

Yes that's a better site.  It even has level 2 quotes - which shows the bid/ask stack as well as time & sales.

And its even more wild to see the wide variance between the different exchanges.  One would expect some arbitrage to occur between exchanges.  Selling BTC in china and buying them from the other (cheaper) exchanges would seem like free money, especially with a $50 differential.

I also just figured out who makes the money.  At a 0.2% - 0.6% commission per trade...wow.  That's real money.  Its a good reminder - often the riches aren't in digging the gold out of the ground, it is about selling the picks & shovels to the miners.

mrees999's picture
mrees999
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Exchange arbitrage

A bit reason you see differences between exchange sites it that only the Chinese are allowed to trade at BTCChina.  Non-Chinse nationals can't. And because of China's capital controls, I understand they are not allowed to participate in exchanges outside of China.

 

And you may or may not have experienced this yet, put it's kind of pain to get set up on the exchanges.  I've been set up on bitstamp, kraken, btc-e, Mtgox, and cryptsy, and vircurex. In addition to bitpay and coinbase  banks to onramp funds.  It involves having to send in pictures of your license, a current utlity bill, some detailed questions they create by looking at your credit report and other various sources all in an effort to comply with "know your customer" laws for anti-money laundering.  Now that many of them have introduced litecoin, I've experimented with buying bitcoin on the cheaper exchange (btc-e is usually the cheapest) - transfer over the money doing wallet-to-wallet transfers to sell at the higher priced exchange. But they've worked it in such a manner so far between the equivalent spreads that I've never figured out a good way to do it and make a profit.

 

I bet of lot of people also tried this but failed which is the reason you continue to see price differences. But if you try and experiment with it and find the key that make it possible, I'd like to know how.  You have to wonder how btc-china get's their supply to be able to sell. The net buyers in China have  been tremendous...far over the supply of sellers bringing it back to market. 

 

Interesting.

 

 

 

 

 

davefairtex's picture
davefairtex
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latest bitcoin charts - 2012-12-15

It appears that BTC is headed below 800 once again, the rally attempt failing at 1000 making a new "lower high" on the daily chart.  A close below 542 and we could see mid-300s for bitcoin.  I believe the downtrend off the double top remains in play.

I figured out a way to short bitcoin.  Borrow your bitcoins from your friend (hi mrees!) and sell them, with the promise to return an equal number of bitcoins at some later date.  :-)   Presumably, you could pay your friend interest (in bitcoins, of course) for every month you have borrowings outstanding.

I think BTC is an high probability short here, FWIW.

mrees999's picture
mrees999
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Good Call

Ya, after the news in China today (or rumors) I felt there was going to be a big shock that might take the market back to the point before the crazy buying from China rocketed the rise. I sold a bunch at $700 with the expectation I'd buy back in the $300s if I'm lucky.  My trading skills never seem to work out so I'll probably regret it.  There is a lot of movement in the US with Silicon Valley angle investors putting a lot money into what they view as "the next big thing".  And Bitcoin certainly needs companies to make it more simple and safe.  It's where the internet was before the first browsers came out. 

 

I think in the long run these are just little bumps when viewed from the long term perspective. I wish I would have seen your post a little earlier though. :-)

 

davefairtex's picture
davefairtex
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selling rallies

Mrees -

Prices move in waves.  They don't just go from high to low in one massive move.  Waves are caused by alternating hope (its rallying!) and fear (its crashing!) among the participants.

So the general idea in a downtrend is sell rallies - rather than the downdrafts.  Otherwise you will start to get whipsawed emotionally.  Now for instance BTC price is back to above 700, and you may be wondering "did I sell too soon, is it gonna rally on me now?" and that's a lot of emotional angst to go through.

The way these things go, price could bounce from here as high as 800 before being sold off again, assuming this rally fails the same way that the last one failed at 1000.

I pick 800 because of the theory "former support becomes resistance" - in this case, 800 was former support, and now its acting as a barrier on the way back up, and in a downtrend, a perfect place to sell, assuming it gets that high.

I did a bunch of reading on BTC arbitrage (even downloaded some python code) and noticed that MtGOX had a bunch of issues actually paying people, which is why its quoted price for BTC is higher than elsewhere.  Right now people cannot get their money out of MtGOX so there's no way an arb can sell BTC at the MtGOX price, transfer the money, and buy at a different exchange where the ask is lower.

Basically, my conclusion was, it's still the wild west!

mrees999's picture
mrees999
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Mt Gox

Yes, I've got some money in most if not all of the major exchanges. Mt Gox was the first. But you can't get dollars back out so it's a one way trip. That's why it stays in its own bubble. You can withdraw bitcoin through wallets though, so I did move it out - but that kills any arbitrage.

 

It looks like the China news has now been made official and there's a new rock down.  I'll be surprised if every bitcoin doesn't get bought up by silicon valley and tech entrepreneurs.  You're right though, when it started lifting comfortably into the 700s I was confused why it wasn't still dropping full speed down as I suspected it would. There are extremely wild emotions attached to this when (over half) of the people I talk to are suspicious because it is unlike anything they've seen before...or wildly optimistic that the revolution is here and we are out front early adopters millionaires in waiting. There seems to be very little room in the middle for this one. But man, if I were a trader - the swings this wild would make one very rich when played correctly.  If you are becoming a little more interested - here's a great website I check daily to get the latest headlines including the warnings and trends as they are happening. http://www.coindesk.com/

I think it was you who mentioned you would take it more seriously when you saw people buying and selling cars and houses with bitcoin. I've seen articles there now for a eight million dollar home in Las Vegas only being sold in bitcoin, and a Tesla and other high-end vehicles being sold in bitcoin, It's likely that these people accepting them are taking a long term investment approach as well as the short term drops would give them a heart attack.

But you know you've arrived when you get your first "infomercial" :-) 

 

 

 

davefairtex's picture
davefairtex
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fear & greed

So BTC is like every other market - there really is nothing new under the sun here.

Its all about fear and greed.  Your "millionaires in waiting" summarize greed, while those who used to feel that way and see news about bitcoin being made illegal (after buying at 1100, or 1000, or 900, only to see it drop to 500 in the space of a week) turn into fear-based sellers.

And there's also people who take a position, and then instantly regret it.  My friend calls it, "the cat is always on the wrong side of the door" - first buying on the rallies afraid to miss out, then selling on the dips, afraid to get hit with a big loss.  Large price movements exacerbate this effect.

For all those who imagine BTC is something new - as long as its something that is traded, with a price attached, it will always be about fear & greed because ultimately, markets are humanity, and that's just how we seem to work.

Its interesting to see BTC China at 360, while the other exchanges are literally $100 more expensive up at 460.  China buyers seem to be panicking out.

And the last 4 hours definitely seems to be seeing some real capitulation.  Too soon to say yet where the bottom is; there is some support at mid-300s as well as some better support at 200, but its best to let the market show us where that might be.

We can imagine that "silicon valley investors" are buying all the bitcoins being sold right now - or not.  Perhaps these "investors" are waiting for it to hit 200 before they back up the truck.  At some point, a downtrend has a force all its own, and even iron-willed people who started the week thinking that BTC 500 is cheap might start to imagine they might want to wait if they see prices dropping further and further.  "Perhaps I'll just wait until it drops to 250...I still love bitcoin, but I love it EVEN MORE at 250 than I do right now - I can get twice as many for the same price."

And then when it hits 250, they think..."perhaps 200" and then as it drops further...

You get the idea.

 

SPAM_seanwilliam1988's picture
SPAM_seanwilliam1988
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Very interesting read! And

Very interesting read! And you’re right; people should understand first what bitcoin is all about before doing any drastic action against it. Anyway, you might find some helpful articles at bitcoindaily.com for your references.

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