What is going on with China? The btincoin price swings are crazy! - from the perspective of one China resident.

mrees999
By mrees999 on Sat, Dec 7, 2013 - 4:28am

People new to bitcoin has seen the price rise from $150 to $1200 in just a few months. Most of this rocket in price was started when the Chinese market exchanges opened for business. It seems they were flooding at the gate at this untapped market. A title wave of interest was pent up demand waiting for a release.

Because China tends to keep close guard on their currency, money flowing out of the government control is frowned on. So when the technical savvy portion of the country - fresh with new money burning a hole in their pocket, they were chomping at the bit for a chance to ride the block-chain train.

Here is a link to a conversation post from somebody in China to help make sense of this.  Here is a link in his own words and perspective of what is happening.  Remember, us bitcoin 'old-timers' are used to this market action and believe it or not most of us just consider this "noise" as usual. With the perspective of market cap being measured in Trillions at one point, a few billion in any direction is tiny bumps in the road when seeing the big picture 10+ year view.

Hopefully, this will help you put it in perspective.  Remember, nobody has gone wrong with a "buy and hold" strategy...excepting the last few days of course. ;-)

 

http://www.quora.com/China/What-is-the-situation-regarding-Bitcoin-from-the-perspective-of-someone-in-China

 

 

8 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
nobody has gone wrong...

mrees-

Remember, nobody has gone wrong with a "buy and hold" strategy...excepting the last few days of course. ;-)

One's experience of BTC buy & hold depends on what the buy point is.

Among the people whose buy point was 40...I'm sure you have a rousing chorus of agreement.

But how about all the trapped longs that bought BTC at > 900?  Or 1100?  How's that "buy and hold" working for them?

Buying at the bottom of the pyramid usually works out pretty well.  Its just the last batch of fools (er, I mean investors) that buy at the point of maximum hype that end up seriously hosed.

Not that BTC is hype, mind you.  :-)

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 372
When does a "hold" become a "hold"?

Dave-

That's a good point you bring up. As we've only been in a down period from where we are ~$1000 for a few days, I'm not sure that qualifies as a "hold". If fact, if they sold into the panic that pretty well defines them as a trader. Do you really count one week as a "hold" strategy?  Or is it two weeks?  As I said in my comment that everybody that has held on has proven as winning hand - but I made the exception for those buying in the last few days. It will take a few more days (just kidding...sort of) to catch back up.

When I think of "hold" I'm thinking in years not days or even weeks. However that brings up the conundrum of bitcoin. It's not a stock, or a commodity - It's a currency, and its value is divined from its ability to conduct commerce and be spent. Its additional value is that its got qualities other currencies don't have, like being able to conduct business outside of regular banking channels and (so far)  -neutral regulation among others. As its not "owned" by any country, it will be interesting to see one or more try to regulate it without carving themselves out of the future trading pie, with the trade, commerce, prosperity, and jobs that go with it.

When people save (or hoard as it is also referred to) too much it can be dangerous and lose its ability to function adequately as a currency. At some point there is equilibrium and those holding it too long will spend it (cash out). This complicates the matter.  If it was a stock, the act of holding it does the stock no harm. In commodities, if it is a necessary commodity and scarce, the value could rise as you continued to hold it. But we've seen resource-back currencies value rise and fall too much based on the current need or perceived value of the commodity.

That's one reason it is so intriguing to me. It's neither fish, nor fowl. It seems to be its own asset class and I doubt will correlate to any other markets that I can think of. Perhaps it will trade on the fear and uncertainty people will have once the currency debasements become obvious to the regular populations.  I want my cake but I want to eat it too. I want to help the bitcoin businesses and network effect grow - so it can't be held by a small amount of people if it's going to succeed. So my plan is to spend it on businesses that are brave enough to take it, but then quickly replace what I just spent by purchasing more (converting cash back to bitcoin) so quickly that there would be little chance for gain or loss by making that transaction. If I do this, I (in theory) help the community and my chances at appreciation because my net change in bitcoin owned is zero. Does that make me both a "trader" and a "Holder" at the same time?

Is there another asset class that sounds like this?

So, coming from me - who is terrible at trading especially in the hyper fast speed of digital currencies, I don't count any money bought after it's price went over $150 at the very earliest to be considered "buy and holders".  But that's just my definition - I'm curious to how you as a trader would define that line in the sand that separate the short-term trade function - to what you would consider the long time holder?  I was a little surprised you mentioned somebody who might have bought last week counting as the "holder" strategy.

I guess we'll see how it plays out in the coming weeks and months if I'm proven wrong for those people...of which I include myself as I bought some over $1000. But I like to side with the proven visionaries that see these disrupted technologies before most. One of which was partly responsible for getting Facebook \ Twitter \ ICQ and a lot more off the ground is named Chamath Palihapitiya. But there are many more. Do some google\youtube lookup of Chamatch and his expectations for bitcoin to get the flavor of what is coming.

It's important to remember what was in mid April after it took a serious crash (loosing 78% of it's value in one day). They didn't have the benefit of hindsight, but the people that bought at $250 and then seeing it crash to $60 must have felt devastated.  What do you think happened to those people?  If they held onto it - they were made whole as it was just a paper loss anyway.  To those than panicked and sold at the bottom took a significant loss...only to see it rise to astronomical highs again. What emotions do you think they had as the rush went up far further than the first time? Do you think they would make that same mistake twice?  This time it was for the Chinese to discover. They are the "newbies" this time. They are going to school now for this new asset class.

If it rises again - far past their panic sell points, do you think it will be "lesson learned" and will they make that mistake again? Each big drop shakes out the weak hands, but it does something more powerful..it builds momentum for the next one that the more experienced will wait out and watch the newbies panic. And again it will have to climb a wall of worry, and there will be new people want to join the club- and it will get mantic again. Just like it did went it rose to historic highs at .30 cents...then at $3.00, then at $30, and at $260. This drop in percentage was nothing at only less than 50% at its worst comparing it to the previous three big drops.  I think we'll bring in the new year again over $1000 - maybe a lot more. And when it goes to its next manic phase (up to $3000?) the people behind a lot of those red candles you saw in the last few days won't be joining them (unless they are very, very skilled). It takes surviving a couple of those experiences to put some hair on your chest. Think of them as your initiation fee to be included in "the club". Here it is 15 minutes later from the point I started this post and it's already closing in on $800.  Put a week's perspective about the drop - one week in bitcoin time is like a year in the real world.

:-)

 

 

 

 

 

 

 

gillbilly's picture
gillbilly
Status: Gold Member (Offline)
Joined: Oct 22 2012
Posts: 423
A matter of perspective

Mrees, the problem with definitions of terms like asset, stock, commodity, and currency is that they describe a relation within the context of human behavior. Therefore these relations are maleable and can take on characteristics of an alternate definition depending on the context. Currencies can easily change into commodities depending on the relational context. Btc is a human construct that can be used for many things, just like PM or paper currencies. So to say it's in an asset class by itself is not really true, since the relationship to it matters. I have this debate pretty often with those in science and technology. Many make the failed assumption that things are somehow fixed in relational contexts (it's usually a part of their personality and their longing for clean and precise systems). For instance, they will argue that the number 3 is a representation of the quantity 3 and nothing more. It will always be 3. And then I point out that the you can't even comprehend the number 3 unless you understand its relationship to all other numbers (and let's not even discuss imaginary numbers). Physics moved beyond the fixed position long ago with the advent of quantum theory. So, at times btc will act like a commodity, or a stock, or a currency depending on the relationship with the owner(s). A stock being held long term can absolutely effect the relationship between the stock representation and the owner as the value fluctuates in relationship to all other owners.

I'm just trying to provide overarching context to your post since it all speaks to relational context. I do find btc fascinating, and I appreciate your posts.

Peace!

bowskill's picture
bowskill
Status: Bronze Member (Offline)
Joined: Mar 16 2012
Posts: 78
Most are holding

mrees - it would be really interesting to look at the stats for the major exchanges over the weekend. I saw a headline that MtGox had traded 50,000 btc in 24 hrs after the news about Baidu. If they have 30% market share then that means not much more than about 1% btc were shaken out of their tree to create such market havoc. Most are holding unless my math is way out.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
exchange stats, volume

Its super easy to see volume - below find links to the major exchanges, select the "daily" chart, and you can see the daily volume at the bottom.  It is perhaps 50k per exchange per day for 2 days following the news, followed by 100k per exchange yesterday.  So thats...50x4x2 + 100x4 = 800k bitcoins sold over 3 days, or 6.6%.  So, if 6% bail out, price drops by 50%.

http://bitcoinwisdom.com/markets/mtgox/btcusd
http://bitcoinwisdom.com/markets/bitstamp/btcusd

http://bitcoinwisdom.com/markets/btce/btcusd

http://bitcoinwisdom.com/markets/btcchina/btccny

 

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
more BTC - 2013-12-09

This is using the charts pointed to me by mrees at bitcoinwisdom.com

Note that we might be back on the horse again here on a break above 860.  And some exchanges have already seen a breakout.  (This multiple exchange thing that exists without arbitrage is...very odd to me, smacking of serious inefficiency and/or market friction; but it will fixed in time, I suspect)

Of course, if the breakout doesn't happen...buyers weren't strong enough, and we are still in a spot of danger.

The good news is we got a strong, high volume bounce off 576, and there looks to be decent support at 650-700.  You can see waves of selling that overwhelmed the buyers up until that bounce off 576, when (most likely) the sellers were done - anyone who wanted to panic out had already done so.  This looks like great news for the bulls.

One note of caution however - resumption of the previous trend isn't quite as easy, since we now have a number of trapped longs above our current levels who might just be looking to bail out "if I get back to even", so a move higher will require chewing through all their selling pressure.

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 372
The bitcoin report

Although I really appreciate DaveF perspective and what his posts daily lately, I also subscribe to the youtube channel "The Bitcoin Report".  He does 15 minutes videos on most days and explains the news and how it affects the bitcoin charts. He's been following it closely for three years and has a bit of a 6th sense about it. He also explains what real-word events that creates the price movement.  He reviews the important news and alerts to possible fraud "alt coins" and shines lights on the so called "experts" from those who really know and understand the network to put it all in perspective.

He actually predicted the correction to bottom out and test $400 during this last downturn so it turns out the overall market remains much more bullish going forward.

Tell me what you think:

 

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
bitcoin report

Yeah that guy seems to know what he's doing.  And if he's been following BTC for a while, he'll definitely have a better feel for how it behaves.  It takes time to get to know a market well.

 

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