Wall Observer

[Zangelbert Bingledack]

Looks like we took one of the Fib retraces that was in the cards. Should be just temporary if the rally is to continue. The main trigger appears to be the yuan outlook, possibly exacerbated by the exchange oddities:
Look for a quick recovery in the next few days if the exponential growth is to remain on course. Otherwise that trend is over for now due to a change in central bank policy, and we may meander around here while waiting for further yuan issues. I don't think we will be going lower than $800 unless the central bank action is more deep-cutting than I thought.

If we do, and stay there for a while, it will probably mean we go to a more news-controlled price situation where Bitcoin rises primarily on monetary policy and capital control news - which is a great development long term as it means Bitcoin is acting like the new gold, but short term it buzzkills the kind of clean post-halving exponential growth logic I've been outlining above, if only because it breaks the psychology-based trend. (However, within all this we still have the halving effect, which should bias everything toward UP.)

 

[Mengerian]

My Bitcoins are only worth what they were worth last week!

Traders are being conditioned to sell into rapid rises.

Could reduce bubbliness short term. But also increases the chance they miss out on a large exponential move down the line.

 

[adamstgbit]

loving how the liquidity is laid out.

 

[AdrianX]

https://bitco.in/forum/posts/32820

looks crazy

 

[Zangelbert Bingledack]

The 2013-style fast exponential rally of the last few weeks is now technically broken. My guess is that we'll find support along the slower exponential trendline that started at the bottom in mid/late-2015, whether we start a new fast exponential run-up soon or just grind higher on this slower exponential path. Here are some rough possibilities for the slower path:

[Click to enlarge]

• The blue line is around the average price of the exponential trend. This says, "We are legitimately out of the triple digits as of now." It has the price doubling about every six months.
• The orange line seems like the most bearish estimate, in which we could be under $1000 until the summer, but also unlikely to go under like $750. This has the price doubling every 9 months or so, eyeballing it. If we do fall down into the lower hundreds, all bets are off and I will have to say I have no idea what's going on.
• The purple line seems like support. It suggests a double-bottom at ~$850, then a bounce up a bit, followed by some consolidation before heading decisively over $1000 in 2-3 months. That trendline looks very solid, doesn't it? Especially in the past few months. Take a close look. This has the price doubling at a rate of perhaps every 7.5 months, eyeballing it ("the Vinny Lingham trendline"?).

My reason for remaining ultra-bullish over the >3 month timescale is that we are still scraping the very bottom of the long-term exponential trend, which Bitcoin has spent much of its time being an order of magnitude or so above:

Also the halving. Also the fact that this dump was probably triggered by news about yuan strength, which is likely to reverse.

Another bullish picture is if that entire bowl from Nov. 2013 to a few days ago is a giant cup, and we are now creating the handle.

 

[Zangelbert Bingledack]

Looks to me like we bounced pretty cleanly off the "Vinny Lingham trendline" (purple line above) and technically broke out of the crash downtrend. I mentioned a bottom at ~$850 for the purple-line scenario and it is a pretty rough set of lines I drew so I think $820, or whatever the actual bottom was, counts (not sure if it is technically a double bottom though, since the second bottom is lower).

Going any lower than today's bottom (especially lower than $780) would be a really bad sign. My guess is we wander around 900 for a bit (or maybe for a "while" - weeks, possibly months) before going higher again at a rapid pace.

The logic of "rapid pace" is, "We can't really go below the trendline (hopefully) so we have to break $1000 fairly soon anyway, even if slowly, after which people will have to be like, 'Looks like the rally really is continuing'." See, the trendline kind of wedges us into breaking back into quadruple digits and a few weeks/months later the all-time high, which seems to revive/restart the fast rally. More reason why I disagree with Lingham about 2-3x/year steady gains.

The trigger may well look like news, though (and conversely any really bad news could break us below the purple/orange line, which could mean going much lower, though only for a while I assume if the news isn't really dire).

 

[Mengerian]

My guess is that we'll find support along the slower exponential trendline that started at the bottom in mid/late-2015, whether we start a new fast exponential run-up soon or just grind higher on this slower exponential path.

Yeah, the recent bottom in the low 800s lines up with the multi-month "smooth growth" trend from Aug to mid Dec. Will be interesting to see if that holds.

The market for the last little while (~1.5 years at least) has been pretty consistently alternating between periods of diminishing volatility, punctuated by bursts of volatility. The last period of high volatility June-July timeframe, gradually shifted to ever smaller price jumps, which eventually resolved into a smooth upward trend to the high 700s.

Will be interesting to see if the pattern repeats. If so, we could see volatile jumps between ~820 - 1100, with gradually diminishing moves, and price converging on some value around 950-1000 in a couple months. Then it would shift back into smooth "slow exponential" mode again, eventually leading into "fast rally" again.

I also kind-of hypothesize there are many significant psychological levels coming up, like $1000, ATH, Gold price. I like to imagine the market as a kind of Hayekian knowledge exploring process, where the price has to jump around in various ways, and try out various price points, to stimulate traders to reveal their value preferences to the market. So I wouldn't be surprised to see lots of activity in the 900s and lower 1000s for a while. We have just had one exploratory price gambit around $1000 and Chinese ATH, wouldn't be surprised to see more moves back and forth through these levels and others like USD ATH and Gold parity.

 

[Mengerian]

New volatility chart I just found: http://charts.woobull.com/bitcoin-volatility/

And the old one: http://bitcoinstability.github.io/bitcoinstability/#/stability

Note: the scales are inverted between the two sites.

 

[Zangelbert Bingledack]

Big dump, seems news-driven (PBOC investigating Chinese exchanges). In danger of breaking support line in the west and has already slightly broken support line in China. "The next few days are critical."™ I still think we bounce back up, but short-term the news controls the price. A week of inspections, then Chinese New Year.

Longer term, the fundamentals should push the price into the quadruple digits where it belongs, but for now the short-term momentum is in question.

 

[Mengerian]

Mr. Bitcoin always likes the unexpected it seems!

Going any lower than today's bottom (especially lower than $780) would be a really bad sign.

Just cracked below $780, will be interesting to see how low it goes.

I don't trade much, but this crash annoyed me, so I put in some small bids in the 700s. Let's see if they fill.

 

[AdrianX]

https://bitco.in/forum/posts/33022

Wow look at that. If this was the situation a month ago I'd be all in. China looking a lot more hectic.

I solid a little at the previous top and again now if it goes below 600 I'm all in again otherwise I'm grabbing some popcorn and enjoying the show.

I don't trade much anymore for what that's worth. But can't help it sometimes.

 

[Zangelbert Bingledack]

Blood in the streets...

 

[Mengerian]

Blood in the streets...

Indeed, that was some impressive downward pressure.

For some reason, this makes me think we'll be in the 800s for a while..

 

[chriswilmer]

It's not random or mysterious that Bitcoin doesn't spend a lot of time in the 800s or 900s. That's just Benford's law , which you would expect to apply to Bitcoin in its growth phase.

 

[79b79aa8]

@chriswilmer that is extremely interesting! did not know. thanks.

 

[Mengerian]

@chriswilmer good point, that makes perfect sense.

This provides good context for Lingham's "Oracle" prediction about the 800s.

 

[AdrianX]

It's not random or mysterious that Bitcoin doesn't spend a lot of time in the 800s or 900s. That's just Benford's law , which you would expect to apply to Bitcoin in its growth phase.

I'd respect then we'll be spending a lot of time in the 1000's

 

[bluemoon]

I'd respect then we'll be spending a lot of time in the 1000's

And the 10,000s !

 

[Zangelbert Bingledack]

Interesting that they say there is no full derivation of Benford's Law, but for anything that grows exponentially it's right there in the log chart. See how the time spent between each of the horizontal lines will be increasingly small as we get to higher leading digits?

 

[79b79aa8]

interesting, but is price (y axis) scale invariant? (suppose the chart were expressed in yuan, would price stick around longer around bands led by the same digits?). the law says this phenomenon will tend to happen, irrespective of measurement unit, with datasets that cover several orders of magnitude: "To be sure of approximate agreement with Benford's Law, the data has to be approximately invariant when scaled up by any factor up to 10. A lognormally distributed data set with wide dispersion has this approximate property." i am not sure we have such a dataset (certainly not for that rainbow graph).

it's all well and good but as we all know, bitcoin could stay glued at $800 for six months.

or not.