A few thoughts - Monday, June 2, 2014
Posted: Mon Jun 02, 2014 1:21 pm
A few thoughts for today:
Wall St traders risk being too late
There are some people who believe that Wall St traders are waiting for licensed, registered exchanges before beginning trading in bitcoins. While there are certainly some traders who are waiting, the smart traders are figuring out ways to get bitcoins now.
Traders who wait until there are New York exchanges are going to be too late, and therefore won't make any money during this cycle. They are professional traders, and they know how to make money better than any of us do. The first rule of making money is that by the time other people can do what you can do, they've already done it ahead of you. This also applies, for example, to news. By the time the news is published, all the trading is done by the people who found out first.
Many of these guys employ questionable tactics in manipulating markets of other stocks, so while some will be hamstrung by regulations, others are just going to buy, as the bitcoin investment trust has been doing for months.
Remember, if this bubble doesn't peak on July 24, it is far more likely to be early than late. I don't agree with posts stating that this time the bubble will be delayed.
Bubbles always start before things are ready
Each of the last bubbles has started just before the infrastructure was ready for a bubble. If the bitcoin economy was ready for the bubbles, then the bubbles would not have crashed.
There was that April runup with Mt Gox, for example, but Mt Gox crashed under heavy load, which caused a collapse. The November bubble had all sorts of expectations of adoption, but adoption didn't really start to occur until January with the two large Internet companies.
Similarly, this bubble won't wait for the exchanges to be at the next level, and that's why it will crash. If bubbles formed after the infrastructure was ready for them, then they probably wouldn't become bubbles.
Dogecoins were yesterday's winner
I said that dogecoins would recover yesterday morning, but few would have predicted that they would start that recovery a few hours later. If you were a good trader and purchased dogecoins on Sunday and held for a few hours, you could have made about 30%. The price of dogecoins rose about 25%, and bitcoins themselves, which dogecoins are traded in, rose by 10%.
If you're wrong, say so and move on
What differentiates the good news websites about cryptocurrencies from the bad ones is how they treat their predictions and their readers. Coindesk, for example, seems to have its act together, publishing informative articles. The Genesis Block generally ignores reader feedback. There are some sites that simply republish content from other sites, condensed into a few paragraphs.
I've criticized Cryptocoinsnews for a while now, and I'll continue by saying that they now simply pretend as if they never had predicted that bitcoins would be worth $120 in mid-May. First, they made that prediction, then later they changed to saying that bitcoins would fall to $260, possibly, and that they had never actually predicted a date. Now, they simply forget to mention that their predictions were completely off and make new predictions as if they never made any mistake.
I had a discussion with /u/emocmo yesterday about ethics, which I want to continue at some point in one of these posts. One of the hallmarks of an ethical person is not lying, and being 100% open about past and future behavior. If you make a mistake, that's fine. Apologize, and do better next time. Don't lie and pretend it never happened.
The faster the rise, the quicker the fall
I edited this post to add the other point I've been wanting to make for the past several days, but never had time to write. I was getting worried yesterday, as I was working on my mining pool and I check back at noon and the price was skyrocketing.
Look at /u/moral_agent's bubble charts. The bubbles that have risen the quickest have also had a sharper crash and a lower peak. It can be inferred that if the bubble begins before 234 days, as could happen, then the peak of the bubble will be lower and people should sell sooner. On the contrary, in the less likely event that the next bubble waits until September, then expect it to be higher than a bubble that started earlier.
This is a great place to manipulate markets
Imagine the following scenario.
If I were a person with a lot of money, and I wanted to manipulate the markets, I might make a post in /r/bitcoinmarkets stating that there will be a huge crash on June 8, after which a huge rise will occur. Then, I sell a relatively small portion of my portfolio to cause the crash, and people who see my prediction buy up bitcoins, making the rest of my money more valuable than if I had just done nothing.
I've already said that /r/bitcoinmarkets is quickly becoming the best place on the Internet to have informed discussion about bitcoins, even about things other than price. There are Wall St traders reading these posts right now, whether you like it or not.
Other
Wall St traders risk being too late
There are some people who believe that Wall St traders are waiting for licensed, registered exchanges before beginning trading in bitcoins. While there are certainly some traders who are waiting, the smart traders are figuring out ways to get bitcoins now.
Traders who wait until there are New York exchanges are going to be too late, and therefore won't make any money during this cycle. They are professional traders, and they know how to make money better than any of us do. The first rule of making money is that by the time other people can do what you can do, they've already done it ahead of you. This also applies, for example, to news. By the time the news is published, all the trading is done by the people who found out first.
Many of these guys employ questionable tactics in manipulating markets of other stocks, so while some will be hamstrung by regulations, others are just going to buy, as the bitcoin investment trust has been doing for months.
Remember, if this bubble doesn't peak on July 24, it is far more likely to be early than late. I don't agree with posts stating that this time the bubble will be delayed.
Bubbles always start before things are ready
Each of the last bubbles has started just before the infrastructure was ready for a bubble. If the bitcoin economy was ready for the bubbles, then the bubbles would not have crashed.
There was that April runup with Mt Gox, for example, but Mt Gox crashed under heavy load, which caused a collapse. The November bubble had all sorts of expectations of adoption, but adoption didn't really start to occur until January with the two large Internet companies.
Similarly, this bubble won't wait for the exchanges to be at the next level, and that's why it will crash. If bubbles formed after the infrastructure was ready for them, then they probably wouldn't become bubbles.
Dogecoins were yesterday's winner
I said that dogecoins would recover yesterday morning, but few would have predicted that they would start that recovery a few hours later. If you were a good trader and purchased dogecoins on Sunday and held for a few hours, you could have made about 30%. The price of dogecoins rose about 25%, and bitcoins themselves, which dogecoins are traded in, rose by 10%.
If you're wrong, say so and move on
What differentiates the good news websites about cryptocurrencies from the bad ones is how they treat their predictions and their readers. Coindesk, for example, seems to have its act together, publishing informative articles. The Genesis Block generally ignores reader feedback. There are some sites that simply republish content from other sites, condensed into a few paragraphs.
I've criticized Cryptocoinsnews for a while now, and I'll continue by saying that they now simply pretend as if they never had predicted that bitcoins would be worth $120 in mid-May. First, they made that prediction, then later they changed to saying that bitcoins would fall to $260, possibly, and that they had never actually predicted a date. Now, they simply forget to mention that their predictions were completely off and make new predictions as if they never made any mistake.
I had a discussion with /u/emocmo yesterday about ethics, which I want to continue at some point in one of these posts. One of the hallmarks of an ethical person is not lying, and being 100% open about past and future behavior. If you make a mistake, that's fine. Apologize, and do better next time. Don't lie and pretend it never happened.
The faster the rise, the quicker the fall
I edited this post to add the other point I've been wanting to make for the past several days, but never had time to write. I was getting worried yesterday, as I was working on my mining pool and I check back at noon and the price was skyrocketing.
Look at /u/moral_agent's bubble charts. The bubbles that have risen the quickest have also had a sharper crash and a lower peak. It can be inferred that if the bubble begins before 234 days, as could happen, then the peak of the bubble will be lower and people should sell sooner. On the contrary, in the less likely event that the next bubble waits until September, then expect it to be higher than a bubble that started earlier.
This is a great place to manipulate markets
Imagine the following scenario.
If I were a person with a lot of money, and I wanted to manipulate the markets, I might make a post in /r/bitcoinmarkets stating that there will be a huge crash on June 8, after which a huge rise will occur. Then, I sell a relatively small portion of my portfolio to cause the crash, and people who see my prediction buy up bitcoins, making the rest of my money more valuable than if I had just done nothing.
I've already said that /r/bitcoinmarkets is quickly becoming the best place on the Internet to have informed discussion about bitcoins, even about things other than price. There are Wall St traders reading these posts right now, whether you like it or not.
Other
- While I wouldn't make a prediction if I thought I was wrong, there's a part of me that still hopes against hope that this next bubble will be delayed. When you operate an export business, as an altcoin mining pool essentially is, you want the currency you are paid in to be worthless, so that you gain more of it. Then, when your home currency goes up, you make more money. If the bubble happens sooner, instead of making 3 bitcoins per day, I might only make 0.3. Even if that's the same amount of money at the time, in the future those will be a big difference.
- Days until July 24: 52