Everything is getting propped up for a crash if transaction volume continues to lag
I mentioned on Monday how the VCs are pouring money into bitcoins like they did during the early days of the Internet, and are doing so well ahead of the technology. I concluded that there would be a crash where VCs would go under for overinvesting in bitcoin companies that have too much competition and get too far ahead of the market.
Now, the big news in /r/bitcoinmarkets is that the number of people buying on margin is skyrocketing, setting up the market for panic liquidations. Am I the only one who can't see what these people are looking at? While bitcoins have a bright future, there is absolutely nothing on the horizon to suggest that a significant rise is coming any time soon. There aren't any new breakthrough products, the development team isn't becoming more organized, and the Wall Street investors aren't appearing any time soon. In the technical indicators, the bubble model has broken, and people keep having to look to longer-term moving averages to see any green. Meanwhile, there are dark clouds hanging over the space like the New York regulations.
With both the VCs and these margin buyers on the wrong side of the price, it's easy to see a situation where a panic sale takes over very quickly. If transaction volume remains stagnant, it's not long before people start to bail out and get margin called.
Final review of past predictions
Two weeks ago, I stated that I would review past predictions when the time frame for some of the most significant predictions I made had passed, on Friday. I thought I would do it a few days earlier. The goal here is to make a comprehensive evaluation of some of these predictions, and then to direct users to this post in the future if questions come up. Having reviewed the status of the predictions one final time, we can then move discussion forward to other things.
This chart was deleted because /u/wfxiey posted it in nicer formatting in a comment. See below.
Reviewing the predictions selected above, it appears that there was one where I was simply wrong, several where I was correct well in advance, and a few where there isn't enough information yet to evaluate the outcome. There may be other predictions that were missed, but I tried to include the most important and significant ones.
Ridiculous Fed report in /r/bitcoin
There's a report in /r/bitcoin that somehow has 500 comments, suggesting that the user was employed at the Federal Reserve and produced a classified document about bitcoins. The sensational report claims that the Fed is worried that bitcoins will take over the world in 2021 and they fired the user for not taking it seriously.
I don't understand how such a ridiculous story received so many upvotes. People who handle classified information don't post overviews of their work on reddit. Not only that, there is no evidence whatsoever to support anything the user is saying. There is no document, no credentials, no news reports, or anything else.
The reason why I see this story as ridiculous is because it was posted in bad faith. I've talked before about how important it is to assume good faith on the Internet. A professional and ethical person would not make such a post because it isn't helpful to anyone. Without the actual document, the post doesn't provide any actionable information that can be used for bitcoin development or investing or any other purpose. Someone acting in good faith to help the community would include the source data.
Assume that the data is forthcoming tomorrow, which isn't proven. Even if it were, why would the person make a post that states the data is coming tomorrow? Just make a single post with the data tomorrow. There's no need to clutter up /r/bitcoin with two posts.
Transaction volume on the uptick
Those who are smart watch the less common indicators to view trends in bitcoin adoption. The transaction volume (https://blockchain.info/charts/n-transa ... 0&address=) has suddenly had an uptick recently. However, without further analysis, it is unknown whether the extra transactions are mostly dust spam or whether they represent actual economic activity.
A note about opportunity cost
Some people were shocked on Monday at how I could arrive at an opportunity cost for purchasing that domain that is far higher than the actual cost. With many business decisions, the opportunity cost is a far more significant economic factor than the out-of-pocket cost.
I've spent 4 weeks of half days at work attempting to figure out a program written by an employee who quit two months ago. While other software I work with uses things like Java and MySQL, this software is written in non-standard languages like coffeescript, node.js, redis, express, brunch, jugglingdb, jade, and about 10 others. I had never programmed in any of these languages before I started this task, had never used any of these tools, the person who quit still had not tested the software yet, and there is no documentation.
Industry estimates suggest that the cost of a professional or managerial employee leaving is about twice annual salary. Given that I have yet to make any changes to this code, it will probably take another month before I fix the first bug, three more before I understand enough to add new features, and six months before I know all the languages well enough to program effectively. It cost a lot of time to hire someone to replace the guy who quit, and since the department is a man short, it has lost revenue for three months during the search. Not only do I have to learn his code, but the new guy replacing him has to learn another project's code for several months. The new guy needs to go through the training process, attend hiring orientations, and undergo police background checks and drug tests, which are expensive. Assuming that nobody else leaves in the next year, the division will get at least six months less work done in the course of the next year.
Hidden costs like these are much more important than the pricetag. If your car gets a flat tire, the cost isn't just a tire repair, it's the value of what you could make in the time required to change the spare, to drive to the dealership, and to get the tire fixed. It's also the cost of the fuel, mileage, and increase risk of accidents required to drive the extra distance to have the tire repaired. Finally, there is also a cost in that the tire is now more likely to fail a second time. Together, these other costs are greater than the cost of the repair itself.
Other
- Days until the end of the comment period: 33