Silk Road forums
Discussion => Security => Topic started by: Leech on April 09, 2013, 10:55 am
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BTC is a limited commodity with an infinite spectrum of value in contrast with the fiat currency.
Now it means that there are extremely large amount of people holding onto BTC without selling off, thus the high price?
Also a question is. let say a person who holds a large amount of BTC is deceased, so the BTC would be forever lost, right? Say no one has access to his wallet, what will happen to his BTC?
Why do you think the value is increasing so much? Do you think the Federals are at play in conspiracy?
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BTC is a limited commodity with an infinite spectrum of value in contrast with the fiat currency.
Now it means that there are extremely large amount of people holding onto BTC without selling off, thus the high price?
The price is increasing because of increased interest in bitcoin and thus demand. The more interesting question is why has interest increased so dramatically, see below.
let say a person who holds a large amount of BTC is deceased, so the BTC would be forever lost, right? Say no one has access to his wallet, what will happen to his BTC?
This has come up in discussions before. Some have suggested storing the password to your wallet in a safe... at a bank of all places, haha.
Why do you think the value is increasing so much? Do you think the Federals are at play in conspiracy?
I'll let entrepreneur, visionary and all around scammer Erik Voorhees answer that:
This morning, a family member of mine asked me to write up my opinion of the Bitcoin price movement recently. For those who don't know me, I've been heavily involved in Bitcoin since May 2011. It is my full time life, my career, and my passion. The price in 2013 has been wild, and here's what I wrote to my family member.
Unfortunately, while I'm certainly an insider, not even I know if the price will rise or fall tomorrow, or next week, or next month, or next year. Guessing short term price movements is a fool's game.
My sentiment is the same today as it was a year or two years ago: either Bitcoin is worth zero, or is worth thousands of dollars each. It will take years for the market to figure out which it is. If you believe in the Bitcoin story, that it may revolutionize the world of finance, then it's a good idea to hold on to some Bitcoins. If you think it's just too risky, or are unconvinced of the narrative, then it's best to sell. As stated many times, Bitcoins are incredibly risky and volatile. The whole thing is one grand experiment. Don't ever hold more money in Bitcoin than you can afford to lose, and in general you should assume the whole thing will go to zero.
Now, if you're curious why this price may be going crazy right now, it's a few factors:
1) A handful of "respectable" online merchants are now accepting Bitcoin, this proves that real businesses see the value in it. It's likely that others will follow.
2) Cyprus scared the hell out of everyone (and rightly so). While a few Cypriots may have bought some Bitcoin, the bigger influence is a world of onlookers who are all thinking, "well that could happen to US!" and "look how Bitcoin solves the problem of trusting banks." It's not so much that Cypriots are buying bitcoins now, but rather that the world realizes that as this euro (and soon dollar...) crisis continues unfolding, a greater number of people will seek some degree of refuge in Bitcoin. Speculators, seeing this possibility, are buying up Bitcoins.
3) Venture capital (and private investor) money is moving into Bitcoin. A handful of VC firms putting in a handful of money would explain the current price rise.
4) An increasingly wide swath of the libertarian/gold & silver "hard money" types are buying into Bitcoin. They were very skeptical at first, but are coming around. There are probably a few hundred thousand people like this in America who are deciding to put a few grand into Bitcoin.
5) The FinCEN ruling clarified the government's stance on Bitcoin about 3 weeks ago. The good news is Bitcoin is very much legal, and will be treated basically like money. People don't need to worry that the government will come down on it any time soon.
6) The press attention gained from all of the above real-world events is fueling a huge amount of hype (justified or not).
7) Ignorant, foolish people are buying bitcoins simply because the price is going up and they think (consciously or unconsciously) that this means it'll go up tomorrow. Maybe 1% of the buying interest is from people like this, or maybe 99%. Such people may get really lucky, or impoverish themselves, but either way they're in it for the wrong reason.
All of the above have combined over the past couple months to cause this price rally. It may well be a bubble, and could fall back down to $20/coin. Or, it could be the "new normal" and a new stable price between $100-$300 will be found. Or, it could be the start of a mega bubble that drives prices over $1000 before they come crashing down somewhere and cause widespread misery and chaos. The price right now could be the highest Bitcoin will ever be from now on, or the lowest. Nobody knows!
My advice... don't obsess over the fluctuating price on any given day. The market will figure out the value of these coins, and there ain't a damn thing anyone can do to prevent this from playing out.
But certainly, Bitcoin is the most important thing happening on the planet right now... and it has nothing to do with the price.
-Erik
http://www.reddit.com/r/Bitcoin/comments/1bxcm4/an_insiders_opinion_on_the_crazy_bitcoin_market/
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The BTC price isn't real, it's artificial and the price is kept high by controlling the liquidity and availability of BTC by hoarding.
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Thanks for the post Astor, interesting read :)
Ps. And thanks to DPR for the hedging system
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I completely understand what Erik V writes. To sum up his bullet points down to a simple phrase, it's supply and demand. This is what drives every market, including BTC price change.
One thing I have looked for, but have not seen, are admission of who is buying. In any market, it is hard to keep a secret. Even when bitcoins are involved, people always talk, especially when they are on the right side of a trade. People have to do the buying in the bitcoin market. Either buying for their own accounts, for a fund's account, for an exhanger's account. Yet, on this forum, and on bitcointalk, I rarely find anyone talking about being a big buyer of BTC. Every once in a while you find someone bragging about their own personal account. But where are the big buyers? Who are the big buyers? Are they so good at keeping silent because BTC started as a cryptography experiment, and therefore the players in this market are actually different from the humans in the stock market, or the forex market? I doubt it. Humans will talk, especially when they have found success. So who are the folks who have been buying BTC up? Who are the institutional guys in the market? Well, except for DPR's trader. I'm pretty sure he's got the biggest piece of wood in the BTC market.
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love reading astor's post .. always has something helpful or informative..
idk what i fall under tho.. i mean am i fool because i bought bitcoins to buy drugs? then the price went up and i figured i would let it sit for another 2 weeks.. and have already made over 2 grand?
does that make me ignorant? no.. i dont think so.. i can go and buy drugs and cash out whenever i want..
call me a investor an opportunist but an ignorant fool? idk about that comment.. that kinda pisses me off actually..
i know one thing .. im a drug dealer.. and im making all the right connections..
ill be making 5 times my investment from just letting the money sit here and then buying drugs and selling them..
that makes me a fool then fuck it.. IM GETTING MONNNEEEYYYY YEEEEAAAHHH
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Yeah, I don't know who they are. Watching the trades scroll by, I occasionally see some that are over 100 BTC. I just saw one for 228 BTC @ $225. Somebody dropped $53,500 on bitcoins. I don't know who has that kind of money, but Voorhees suggested that venture capitalists (and perhaps investment firms) are climbing on board. I read somewhere that a MtGox employee revealed that their ticker API gets hits from known IP addresses at investment firms, banks, and governments. So, there's clearly interest in those groups.
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I doubt the investment firm theory. This is based on experience. Most registered investment firms must specifically state in their prospectus the types of products they will trade. I do not know of any registered funds (VC, HF, MF) that has publicly stated they are in the BTC market. I know of one Russian fund headquartered in Malta, don't know their name. But I think they are small under $5 mil AUM. And they take BTC in order to trade in FX, and equity markets. Not direct traders in BTC. Private funds and individuals can trade in the BTC market without disclosure. But there aren't that many family funds that has expressed interest in BTC and has the firepower. Maybe there are and we don't know it since these funds are by definition private. Now that I think about the firepower question, I have to rethink my position in regards to private funds. BTC is still fairly small, about $2.15 B market cap? There are many private funds with a few hundred mil that can be consistent 1K BTC daily buyers. But look at the buying patterns. To me, it looks more like commercial buyers than speculators. Who are the big commercial buyers in the market? I know coinbase has hired a guy that used to trade FX at Goldman. Perhaps Bitpay has a similar trader? Any others?
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oh and Astor, never listen to anything an exchange employee ever has to say about the markets. This goes for MTGOX or NYSE. Their job is based on the old saying "pump up the volume." They will say whatever it takes to get people to trade more because they get paid on volume, not price change.
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Interesting thread and thanks for the contribution astor, nicely defined.
Has anyone considered what would happen if an entire country decided to back bitcoin, even an indebted nation could anonymously pump a ton of money and overnight could change the wealth of it's entire country. It would also make us super rich if a country decided to trade in btc
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Yeah, I agree, it's hearsay anyway. :)
Y Combinator invested in Coinbase, although that's a company that trades in BTC. I have no evidence that VCs are simply buying up BTC.
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That leaves the question unanswered, who is dropping $50,000 on bitcoins in a single order? They are either incredibly rich and can afford to lose it, incredibly stupid, or this dog and pony show will climb to the top of Thousand Mountain, and they are geniuses.
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Damn, as I wrote that, an order came in for 351 BTC @ $239. That's $115,000...
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There is no longer any way to deny the power coinbase has in this market. It is no coincidence that the time coinbase started making direct conversions from US bank accounts to BTC coincided with the start of the current rally. Coinbase made it much easier for non techies to get into btc. Just like SR opened this whole drugs on the internet thing to the mass market, coinbase opened up BTC to the mass market. If you believe what they say, they are exchanging $1 mil per month. That's not an insignificant portion of the volume on MTGOX. Although it's impossible to nail down all the big players, I'm sure coinbase, and other similar large commercial exchangers, are the guys waking up everyday and buying from start to finish.
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Interesting reading.
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Damn, as I wrote that, an order came in for 351 BTC @ $239. That's $115,000...
oh that was me. I meant to hit 3.51 BTC. oh well I'll just hold onto my mistake and double my money in 24 hrs :) j/k
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If you believe what they say, they are exchanging $1 mil per month.
I believe that number was from February, too. It was announced some time in March. They could be doing 5 times that now.
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If you believe what they say, they are exchanging $1 mil per month.
I believe that number was from February, too. It was announced some time in March. They could be doing 5 times that now.
10X that volume as the rate has increased 10X since Feb.
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I bought roughly $1100 of BTC at $80, than it went down to $60 and I was bummed out, then the next day it goes to $80 and I get another $1110. Now it's roughly $240, and I bought another $1100 at $211. I wish I had the courage to buy at $60, because that was the last time it was anywhere near there.
I certainly DO NOT have a lot of money, but I bet that there are lots of people around the world in my situation. Genius or idiot? Time will tell. I do think that the volume from SR is going to continue to grow, 'we' are bigger than Atlantis and BMR. I haven't used any drugs in years (other than the ones my doctor prescribed) and I've changed completely in that respect. Again, I bet there are lot's of people like me in the world. I was 'talking' to a guy here a few days ago who bought a thousand or two BTC at $92, and was bummed that it was around $80. I said 'you may be happy you only paid $92 in a few days'-I guess I was right! (that time)
I wouldn't die if BTC crashed, but I'd feel pretty stupid. I've never managed to make any money in the stock market. My very uneducated opinion is that everybody sees it going up, and people think that whatever is happening, is going to continue to happen. I saw the same thing in 2000, and the same things were said 'it's different now'. They had a zillion books out, remember the 'motley fool' website? They were selling info on the 'momentum' stocks. Applied Materials Devices, Cisco, Amazon, Network Appliance, Juniper etc. these stocks were at stratospheric levels.
Then the stocks started going down, and I thought (lots of others too) that these were just buying opportunities. Well, that didn't work out too well for me. There were lots of paper millionaires who didn't cash out, and when it was over (I watched it go down for a year, it wasn't a overnight event) they weren't rich anymore. Then the money started going into property, and everybody and their brother was buying houses. I had a friend who set tile (and granite and glass brick and all that pretty stuff) and he was making money 'hand over fist'. He was making over $250,000 a year, and paying maybe $5000 a year in taxes, he'd get his customers to pay him back for the tile he bought and then he would claim that he used part of the profits of the work to buy tile. It was pretty fool proof. He was buying 3 houses at once and was putting $5000-$10,000 a month into paying off his home loans early. We kind of fell out together, so I don't know exactly how it ended for him, but eventually property dried up too.
'This too shall pass', is a old saying (in the bible somewhere)
So it's exciting while it's happening and I guess it helps to be ultimately pessimistic, cause everything seems to end (including life of course)
The internet IMO also kind of enhances these things, everybody knows (well not about BTC yet, but it's happening, I saw BTC mentioned in Bloomburg and Fast Company and Forbes, etc.)
Something that would be interesting to read (or read again) is 'Reminiscences of a Stock Operator' by Edwin Lefevre. It seems to maybe apply to the BTC 'boom'.
Everybody looks like genius's while it's going up, and fools afterwards (if they didn't sell near the peak or hoped it was a temporary setback)
But as the character said in 'Reminiscences'-'You know it's a bull market, right?'
Some 'momentum' traders set 'limit' orders, or 'stop loss' orders (they are different, but I don't know how) to about 15%. So if a volatile stock drops 15% it will automatically sell. But BTC (IMO) is much more volatile that any stock, maybe it would be prudent to set it to 25% or something. Also sometimes 'limit' orders and the like can't be missed 'executing' because the stock moves so quickly. At least I heard this, I'd be interested in learning more.
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FTR Eric Vorhees isn't a bitcoin developer but he is the owner of SatoshiDice. He didn't actually develop SatoshiDice but bought it from another Reddit user.
SatoshiDice has made 72947.99 btc in profit since it opened in mid-2012.
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I wonder if that guy, Vorhees, cashed out his BTC as he got it. If he did, I bet that he wishes he didn't now.
73,000 BTC is some SERIOUS money now.
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***CLEARNET WARNING***
If you haven't, check out www.listentobitcoin.com. Bubbles float up your screen and play chimes as btc transactions are added to the blockchain... The bigger the transaction, the lower the chime and larger the bubble. Its pretty neat. Just saw one for BTC1000. And yesterday there was on for almost 30000...That's like 6 million bux!!!!
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FTR Eric Vorhees isn't a bitcoin developer but he is the owner of SatoshiDice. He didn't actually develop SatoshiDice but bought it from another Reddit user.
SatoshiDice has made 72947.99 btc in profit since it opened in mid-2012.
I stand corrected.
Didn't he also kill a bunch of people in the 80s?
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FTR Eric Vorhees isn't a bitcoin developer but he is the owner of SatoshiDice. He didn't actually develop SatoshiDice but bought it from another Reddit user.
SatoshiDice has made 72947.99 btc in profit since it opened in mid-2012.
I stand corrected.
Didn't he also kill a bunch of people in the 80s?
if you ever check out Eric V picture on the bitinstant website, you'll know that your question about him being a serial killer isn't far from the truth.
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I bought roughly $1100 of BTC at $80, than it went down to $60 and I was bummed out, then the next day it goes to $80 and I get another $1110. Now it's roughly $240, and I bought another $1100 at $211. I wish I had the courage to buy at $60, because that was the last time it was anywhere near there.
I certainly DO NOT have a lot of money, but I bet that there are lots of people around the world in my situation. Genius or idiot? Time will tell. I do think that the volume from SR is going to continue to grow, 'we' are bigger than Atlantis and BMR. I haven't used any drugs in years (other than the ones my doctor prescribed) and I've changed completely in that respect. Again, I bet there are lot's of people like me in the world. I was 'talking' to a guy here a few days ago who bought a thousand or two BTC at $92, and was bummed that it was around $80. I said 'you may be happy you only paid $92 in a few days'-I guess I was right! (that time)
I wouldn't die if BTC crashed, but I'd feel pretty stupid. I've never managed to make any money in the stock market. My very uneducated opinion is that everybody sees it going up, and people think that whatever is happening, is going to continue to happen. I saw the same thing in 2000, and the same things were said 'it's different now'. They had a zillion books out, remember the 'motley fool' website? They were selling info on the 'momentum' stocks. Applied Materials Devices, Cisco, Amazon, Network Appliance, Juniper etc. these stocks were at stratospheric levels.
Then the stocks started going down, and I thought (lots of others too) that these were just buying opportunities. Well, that didn't work out too well for me. There were lots of paper millionaires who didn't cash out, and when it was over (I watched it go down for a year, it wasn't a overnight event) they weren't rich anymore. Then the money started going into property, and everybody and their brother was buying houses. I had a friend who set tile (and granite and glass brick and all that pretty stuff) and he was making money 'hand over fist'. He was making over $250,000 a year, and paying maybe $5000 a year in taxes, he'd get his customers to pay him back for the tile he bought and then he would claim that he used part of the profits of the work to buy tile. It was pretty fool proof. He was buying 3 houses at once and was putting $5000-$10,000 a month into paying off his home loans early. We kind of fell out together, so I don't know exactly how it ended for him, but eventually property dried up too.
'This too shall pass', is a old saying (in the bible somewhere)
So it's exciting while it's happening and I guess it helps to be ultimately pessimistic, cause everything seems to end (including life of course)
The internet IMO also kind of enhances these things, everybody knows (well not about BTC yet, but it's happening, I saw BTC mentioned in Bloomburg and Fast Company and Forbes, etc.)
Something that would be interesting to read (or read again) is 'Reminiscences of a Stock Operator' by Edwin Lefevre. It seems to maybe apply to the BTC 'boom'.
Everybody looks like genius's while it's going up, and fools afterwards (if they didn't sell near the peak or hoped it was a temporary setback)
But as the character said in 'Reminiscences'-'You know it's a bull market, right?'
Some 'momentum' traders set 'limit' orders, or 'stop loss' orders (they are different, but I don't know how) to about 15%. So if a volatile stock drops 15% it will automatically sell. But BTC (IMO) is much more volatile that any stock, maybe it would be prudent to set it to 25% or something. Also sometimes 'limit' orders and the like can't be missed 'executing' because the stock moves so quickly. At least I heard this, I'd be interested in learning more.
If you're interested in learning more, learn by doing. Start trading BTC, stocks, women's underwear, anything. But keep it small. Never trade big size. Size is dependent on perspective. $100 might be a fortune to trade to a kid in India and $1 bil might be pennies to lose for a hedge fund manager. Never trade more than you can afford to lose. Of course it's easy to say these things but no one ever listens. That's why markets will go up and down and people will make and lose money and the world will continue to turn and burn.
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They only way to do this proper is to play Bitcoin like the stock exchange. Wait until a decline starts to happen then sell. Wait till the price drops to its lowest point and buy buy buy. I find it hard to believe that absolutely no one in the banking or investing system has their hands in BTC trading. And even if they didn't the PR BitCoin gains is enough for some financial analysts to pay attention. In my strongest opinion, anything that makes lucrative amounts of money generally tends to stick around. The legitimacy of BTC doesn't seem to affect its price yet. But as people have stated, you can't predict BTC's volatility. If your smart, you'll pay close attention to the news and move your money appropriately when you feel the risk is too high. ;D
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I think that the answer that it could just be a handful of venture capitalists is probably reasonable, and it makes sense given that news stories keep coming out. I think (I'm not sure) that I heard about Bitcoin (and SR) a year or so ago, but didn't really clue into it until a news release near xmas last. Good thing, because the BTC I bought then are now worth an order of magnitude more.
My strategy has been to buy a set amount (in my fiat currency) at regular intervals, and to try not to pay attention to the price. I'll probably buy fewer if it starts going down, but my bet is that that won't happen at least until the end of summer in the northern hemisphere. Periodically, I may sell enough to recoup the money that was put in, just to make sure the risk doesn't get out of hand. The rest is either yum-yum drug money or, if I sit on it for a while, even more yum-yum drug money!
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They only way to do this proper is to play Bitcoin like the stock exchange. Wait until a decline starts to happen then sell. Wait till the price drops to its lowest point and buy buy buy. I find it hard to believe that absolutely no one in the banking or investing system has their hands in BTC trading. And even if they didn't the PR BitCoin gains is enough for some financial analysts to pay attention. In my strongest opinion, anything that makes lucrative amounts of money generally tends to stick around. The legitimacy of BTC doesn't seem to affect its price yet. But as people have stated, you can't predict BTC's volatility. If your smart, you'll pay close attention to the news and move your money appropriately when you feel the risk is too high. ;D
Until I see evidence to the contrary, I still say no financial professionals are involved in BTC trading currently. Professionals are not gamblers. They find a system that works, and they work the system. Buying BTC at $10 and holding on for dear life is not a system. It's gambling and it's luck. Professionals don't work that way. If someone told me that there was a backdoor way to either manipulate the price of BTC or there was a way for professionals to have insider knowledge of who AND when the buyers come into the market, then I would say the financial professionals would be jumping all over it. Until then, this market is really just a bunch of techies standing at the craps table hoping the dice doesn't land on them.
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love reading astor's post .. always has something helpful or informative..
idk what i fall under tho.. i mean am i fool because i bought bitcoins to buy drugs? then the price went up and i figured i would let it sit for another 2 weeks.. and have already made over 2 grand?
does that make me ignorant? no.. i dont think so.. i can go and buy drugs and cash out whenever i want..
call me a investor an opportunist but an ignorant fool? idk about that comment.. that kinda pisses me off actually..
i know one thing .. im a drug dealer.. and im making all the right connections..
ill be making 5 times my investment from just letting the money sit here and then buying drugs and selling them..
that makes me a fool then fuck it.. IM GETTING MONNNEEEYYYY YEEEEAAAHHH
+1 and a standing ovation. Ok not actually standing but yea...
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Interesting thread and thanks for the contribution astor, nicely defined.
Has anyone considered what would happen if an entire country decided to back bitcoin, even an indebted nation could anonymously pump a ton of money and overnight could change the wealth of it's entire country. It would also make us super rich if a country decided to trade in btc
pump n dump! :)
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I think the statement that financial professionals are not gamblers is a bit generous. Many studies on the physiological state of traders in a bull market would indicate otherwise... they do respond like gamblers in many ways. An old friend worked for a bank on Wall St for a while before the crash (he was selling structured debt), and from all that he says (and all that's available from other sources) it does sound like there are a lot of professional financers and traders with a healthy appetite for a gamble. The only question is whether they can trade in BTC according to the rules of their institution and the amount of funds they have discretionary control over. I would certainly suspect that there is a good deal of hedging going on, if anyone does dip their toe in the BTC pool.
Probably what's due is another study of where the BTC are and how concentrated, etc.. I remember reading a warning once that there is a flaw in the Bitcoin system that emerges if any one party has a large enough share of the hashing power of the network. It is reasonable to think that, with all the research going into mining tech now, that it might be possible for someone to actually attempt this and throw the market around.
I think that probably it's just the news, and the fact that there is, at this point in history, a large pool of users who would be interested in something like Bitcoin. I think that most of the gains so far this year are going to hang on for at least a while.
They only way to do this proper is to play Bitcoin like the stock exchange. Wait until a decline starts to happen then sell. Wait till the price drops to its lowest point and buy buy buy. I find it hard to believe that absolutely no one in the banking or investing system has their hands in BTC trading. And even if they didn't the PR BitCoin gains is enough for some financial analysts to pay attention. In my strongest opinion, anything that makes lucrative amounts of money generally tends to stick around. The legitimacy of BTC doesn't seem to affect its price yet. But as people have stated, you can't predict BTC's volatility. If your smart, you'll pay close attention to the news and move your money appropriately when you feel the risk is too high. ;D
Until I see evidence to the contrary, I still say no financial professionals are involved in BTC trading currently. Professionals are not gamblers. They find a system that works, and they work the system. Buying BTC at $10 and holding on for dear life is not a system. It's gambling and it's luck. Professionals don't work that way. If someone told me that there was a backdoor way to either manipulate the price of BTC or there was a way for professionals to have insider knowledge of who AND when the buyers come into the market, then I would say the financial professionals would be jumping all over it. Until then, this market is really just a bunch of techies standing at the craps table hoping the dice doesn't land on them.