Quote from: oda.krell on August 31, 2014, 12:56:14 PM

Quote from: Wary on August 31, 2014, 01:17:48 AM

Quote from: oda.krell on August 30, 2014, 10:18:46 PM

Quote from: Newbie1022 on August 30, 2014, 10:08:21 PM

What is driving the market, right now. During the last downturn it was pretty clear that a mixture of fear and TA were spot on. However, TA doesn't seem to be so applicable outside of a rout. So, what the hell is really driving the price, here. Is there some bad news we don't know about because there seems to not only be good news coming out, but less than priced in good news.

What was "driving the market" between end of 2011 and end of 2012?

Mostly price stagnation, and when there's finally a decent rally (to $16), it gets dumped back to half of that. And keep in mind, at that point, the "ATH" was $32, by that time about 1.5 years in the past.

Sorry, but "stagnation" sounds more like description, rather than explanation

What was driving the stagnation? Would it be too tinfoil to suggest that it was coins, stolen from MtGox, sold gradually?

Not sure I agree. I understand the desire to read the market in more fundamental ways, to understand "reasons" for price movements, but most of the time, that line of reasoning goes back to fundamentals and news - and that, in my experience and opinion, misses a big part of what actually drives the market more than half the time.

Anyway, I'm sure there is a narrative for the stagnation period of 2012 that is slightly more explanatory. In essence: necessary consolidation after an extremely volatile period ($1 -> $32 -> $2), together with the fact that no "real world" events took place that were strong enough to overcome that market sentiment (like: Argentinians decide big time to use btc as an inflation hedge).

As for a possible (partial) explanation of the current stagnation, see my point below...

Quote from: Wary on August 31, 2014, 01:17:48 AM

Quote from: oda.krell on August 30, 2014, 10:18:46 PM

Plus, while I don't have the tools to test this hypothesis, I consider it completely possible that a price suppression regimen is in place, by large accumulating entities (i.e. buying off-exchange at roughly market price, selling a portion on-exchange to suppress market price, repeat). I know it's what I would do if I would plan to buy in to the tune of 100k coins now.

I suspect it can't be done for long. OTC market, just like exchange market, has its own depth chart, it's just invisible. Big OTC purchases would drive OTC price up. OTC market would run out of cheap coins. And miners would start arbitraging: Sell 100K coins off-exchange to suppressors for $550, bought them back from them on-exchange for 500$, rinse, repeat

I don't claim I believe with certainty that this is going on, I am submitting that, if a large enough entity (or several) would plan to buy large amounts of coins, and have some patience, this would probably a scenario worth exploring. In terms of tax efficiency, waiting for the ETF would probably be the better choice, but in terms of price control, the method I described would in principle beat a fund that is, ultimately, positive feedback linked to the markets.

I disagree that miners would prevent this taking place. No disrespect to miners, they're the backbone of the network, but amateur miners seem to be not necessarily the most economically rational actors. Go look around in this forum how often the fall for the fallacy: 'It's sunk cost anyway, I'll let my outdated miners run as long as they produce coins', and how often more economically minded users need to tell them that the actual calculation needs to be based on total cost of future production of coins (mainly: energy costs) vs. number of coins bought at market for the same costs.

Larger mining operations are undoubtedly much more economically savvy, but I've argued over and over again that I believe that, with the increasing "professionalization" of Bitcoin and Bitcoin mining, short-term profit opportunity will probably outclass long-term speculative investment. In other words: large miners sell more than they hold, especially considering that we are currently nowhere near a new uncontested bull market (which means the ratio of sold vs. held coins can change if the market sentiment changes, and miners might hold more than they sell if they feel it's a sure thing price will go up.)

Finally, we have plenty of evidence that public market price as determined by on exchange trading is a major reference point for off exchange transactions (just one example: the SR coin auction, where every party that spoke on it refered to "the market price" as if it were the obvious metric). Binding a large mining operation to you in a mid to long-term contract, maybe even offering a premium (although, from hearsay, I've only heard of large holders being made sub market offers, off exchange), then using some fraction of the coins to strategically depress price, would seem like a very good strategy to me, and relatively risk free: if it works, market price stays low, and accumulation proceeds at a low cost. If it fails, and price refuses to be depressed, the account value of coins gained so far appreciates, which is a sweet little consolation price.

Arbitrage by miners could throw a spanner in the works of this mechanism, but profits would be comparably marginal: the goal of the accumulator is not to destroy the on-exchange price, just to keep a lid on it. For the arbitreur miner, the reward is small (sold his coins at market price, is able to buy them back slightly below perhaps), and more importantly: for the large operations, the initial problem would re-appear - what to do with a large amount of coins, when you in reality prefer to hold USD (by my assumption that professional mining operations are short-term opportunistic, and not long-term married to Bitcoin success).

It's a tragedy of the commons style scenario: presumably, miners would be better off selling directly on the exchanges, since the higher volume generated there would ultimately drive up price, but individually, they fear the risk of lower profits because of increased selling pressure on exchange, so they seek arrangements off exchange.

I'll say it one more time: The above is (motivated, I think) speculation. I make no claim this is necessarily happening. I only point out that I believe it is a possible, maybe even probable, mechanism taking place, accounting - at least partially - for the current stagnation period.

Thanks for the interesting discussion.

I agree that even in long-term scale only half of reasons for BTC price are "external" ones. The second half is caused by mass psychology machinery. One example is rally - positive feedback loop aka self-fulfilling prophesy: nobody sells because nobody sells. Now you gave us the second example of the same self-fulfilling prophecy: miners sell because miners sell.

I have to agree with you: currently it makes sense for miners to sell most of mined coins immediately after mining, to speedup capital turnaround. And it's better to sell OTC, to avoid slippage. But by the same reason, it would make sense for them to include a clause in the contract: "do not sell the purchased coins (below XXX$)". The clause would be very easy to control, thanks to the blockchain.

Which makes the price suppression hypothesis a bit less likely one.

As for 2012, I still suspect the MtGox coins. 750K bitcoins is a huge amount, we can be 95% sure they were stolen and 80% sure most of them were sold in the following months. Such amount cannot be sold without a trace and I believe the trace is either the slide from $32 to $2, or the following one-year stagnation. Without this dumping the magnitude of the slide and the stagnation would be much smaller.

P.S. It would be interesting to see the moment when miners will switch to "don't sell" mode.