Coping: Bitcoins and Wave Counts, Part II

The other day – Tuesday being the other day in question – I had a little heart-to-heart with you about using a disciplined approach to bitcoins and how the use of charts, and Elliott Wave projections in particular – was a particularly good way to “bound” expectations about the future.  It doesn’t always work, but it beats two tokes and a dart a lot of the time.

imageSo here we are three trading days later and I think we can safely revise our thinking now because the two bullish cases being presented have warrants out for “failure to appears” to put it in legalese.

The two choices before us are the stasis/decline (lower) under which the price of bitcoins drops back down to the baseline price region.  Or, under the Elliott thinking, the decline is turning into a third wave down and this morning’s data is just the start of The Bitcoin Uglies.

First the Good News:  Under the stasis model (I was asleep when I drew the charts, so ignore the misspelling), the first outcome to consider is that the decline now underway will take bitcoins down to about the Wave 1 down low.  The problem is?  That’s going to vary, depending on which bitcoin clearing outfit you want to look at when you go quoting prices.

And there’s good debate here:  Some coiners are likely to quote Mt. Gox but others will “go with the flow” [failing to notice that’s the flow of hype] and will use (for their purposes of citing the bullish case) to the highest prices quoted.  Beware those who change data sources when they don’t like the numbers!  That’s like quoting the Dow on the way up and the NASDAQ on the way down:  Intellectual dishonesty is a bitch.

Unfortunately, coiners may simply be recreating how the (already corrupt) world of nominal/real currencies works:  They ought to all be buying all the coins they can from Mt. Gox (where they are cheap) and then selling them for a good spread on higher priced coin clearing operations where the prices are higher.

Welcome to the world of intermarket arbitrage.   Under this model, the Bitcoin price would have to fall to about $550 (bitstampUSD basis).

imageExcept, (putting on my Lt. Columbo voice (you do own the series on DVD, right?)  “Ders diss one ting dat bothers me, Sir…”

If bitcoins were going to stop at the $550 level, they ought to do it, more or less, across all bitcoin houses.  And they haven’t stopped….which gets us to the next (and seemingly more likely) scenario:

Third waves are generally bigger than first waves.  Under Elliott, the third wave must be at least as large as the first wave down which means, depending on which chart you look at, things could get worse – of far worse – depending on how much mental rigor you apply.  And if you skipped your meds this morning.

OK, stopping at $550 is the extremely optimistic (under Elliott) decline scenario.  Most often, however, the Wave 3 declines are in the area of 1.5 to 1.618 times Wave 1 down.

Two charts will help us range the outcome.,  These are both available at www.bitcoincharts.com./

The first chart to consider is the 6-month average price quote “bitstampUSD”.  In  this chart, it looks like Wave 1 down was from about $1,150 down to around $550.  That’s a $600 dollar decline decline.

Given that the Wave 2 rally was up to $925, this suggests that a minimum $325 may be in the works.

However,  remember that the more typical declines are in that 1.618 times area.  So a 600 decline becomes (at 1.618 times Wave 1)  a $970 decline.

And, given that the top of wave two was 925, this suggests that there’s a chance the value of crypto currencies (at least on some exchanges) could go to zero, since Wave 2’s high ($925) minus the possible decline ($970) leaves us a negative number which would mean the end of bitcoins.

Not that it would be unexpected.

Thus, within a month, or three, we might see reports of various bitcoin clearing operations going bankrupt or shutting down.  Others may survive.

Ures truly has been consistently warning, in the face of much derision, that there are no barriers to entry into creating new digital currencies.  In fact, when I read about Max Keiser’s plans for a “Max Coin” I laughed at some length and began to gin up an UrbanSurvival currency to be named in honor of my editor in chief Zeus the Cat.   I was going to call ‘em ZeusCoins.

ZeusCoins would have as much inherent values as any other cryptocurrency, or maybe more, since instead of “making up  “work”” to do on the internet, I was going to set up an International Dead Mouse Exchange (a take off on carbon credit trading) and make a shit-load more money than coiners. We even had a plan for dog owners to participate by buying rat terriers and sending them out to “mine” their local neighborhoods.  Made as much sense as sending a PC to do stuff on the Internet, I figured.  But I digress. 

(Though I want to go on about the virtues of mouse tails, which can’t be copies with computers, and we were working with all the major 3D meat printer companies to ensure no one could scan and 3D print faux mouse tails as a hack.  In fact, our anti-mouse tail scanning code is already deployed, so go ahead, try and 3D print a mousetail and I’m sure you’re find our micro encrypted serial numbers.  Just like when you color scan a dollar bill.  Seriously!  [Or  nearly so…])

Alt. Outcome:  You need to go over to the Mt. Gox trading charts (thankyou again BitCoinCharts) and see how Mt. Gox overnight 6-month charts look and see how a recent quote on Bitcoins there was down to $378.5.

Again, lesson in Elliott basis the Mt. Gox data:  High around $1,180 – high for Wave 1 up.

Then a decline to $580, or so for the bottom of Wave 1 down. 

That ($1,180-$580) is our $600 decline.

Now, the Wave 2 high (the bounce) was up to about $1,050, call it. 

So the expectation table would pencil out something like this:

100% of Wave 1 decline = $450.   <— off the table, we blew through that]

150% of Wave 1 decline = $150   (a 50-50 chance of this?)

161.8% of Wave 1 decline = $79.50 (25% chance of this?)

The rest of the odds?  Well, sometimes, declines go 2.5 or 2.618 times and even more rarely 3.5+ times the original price decline.  In which case, we should be reading about our first digital currency collapse in short order (3-6 months, say).

Or, the $79.50 level might be reached (or the $150 level), concurrent with the announcement of a major bitcoin clearing operation declaring bankruptcy.  In a way, this is really the preferred option, because it would leave the concept intact, sort of like Iraqi Dinars are still around waiting for the next run-up.  ZeusCoins would be back on the table and MaxCoins might take over from Federal Reserve Notes, yet.  But I’m not exactly holding my breath.  Know why?

The guiding case for all this is the long wave economics study of Tulip Mania, which peaked in Holland in the 1630’s.  Then, a single stinking tulip bulb was trading for the price of a home.  Yeah, “How could people be so stupid?” you’re wondering…

Look around, dammit:  See who’s in office?  See the world we live in?  Have you thought about treatment options?

Open Ure eyes, get a little more disciplined in your approach to reality; vape less, discipline the brain more, and let the numbers rule. They will, whether you agree, or not.  There ain’t no bullshitting human nature…it’s the same now as it was in Holland back when.  Ain’t no free lunch.  There’s markets, there’s bubbles.  Housing?  Internet?  Now Bitcoins….seeing a pattern?

It’ll be no comfort to me or my friends in coming weeks if our grim outlook for bitcoins comes to pass, but George Santayana said it best:

“Those who do not remember the past, are condemned to repeat it.”

Don’t be too hard on yourself, though.  A tradesman in Tulipmania times made about 300 guilders per year.  Prices of bulbs back then peaked well over 4,500 guilders – ten years wages for a working man.

That’s just how bubbles work.  Pat, present, and future.

Global Warming Follow-Up

Reader Curtis is da man….has the right thinking on how to approach this global warming question:

Hey George, I’ve got an idea you might enjoy.

Instead of just running random personal accounts and the occasional big data perspectives, set up a table and let everybody post potential evidence one way or the other.

For example:

Pro: USDA Horticultural Zones have been moving last frost dates north for a while now.

Con: non-existent sun spots

Pro: Polar ice cap melting

Con: Cold ass winters in unusual places

I love it that you keep pointing out solar influence, and a few newsletters back you said something like ‘we might have gotten really lucky on this one’, meaning that if we were in a global warming phase the sun may have saved us.

That scientist you quoted today about 20% more CO2 in the atmosphere at different times in the earth’s past. OK. But what was the weather like? And would he want to breathe it? The question just kinda pops into my mind, what little there may be of it. Reckon I’ll go read it for myself. So I skimmed through it, waiting for the internet to go out, and I get that there’s two different questions here—is the planet warming or cooling? And is the cause man made or natural?

Perhaps a third question might rationally be: And, no matter what the answers are, what can we as humans do to be better prepared to deal with whichever changes may be happening

And people have first-time weather experiences (like ice-storms) aside I’ve got friends whining and complaining that they’ve never seen anything like this before, and sure, you know, they’ve lot’s of things like this before. Ice storms, weeks of snow once a week, two 2-foot snow storms in a month. They’ve just forgotten—repressed the horrible memories, I’m sure.

One more thought: Isn’t it true that when you add more heat to a system you get more chaos? And when you get more chaos you get less stability and less predictability? Like more severe storms in some unusual places, and worse droughts in some other places, until the system finds some new equilibrium?

Not a scientist, and I know data is shit in/shit out. With memory failure. Maybe it’s not a government conspiracy—maybe all the sensors are out of calibration (every one!) and nobody can read a thermometer anymore either. Too much like a sliderule…

And I’m doing a pretty good job breaking even these days. Some of that’s due to reading you.

If you’d send that last sentence you wrote to, oh 1.6 million friends, I’d appreciate it.

And yes, that’s a fine approach.  And it’s not that you get more chaos when you add heat, you just get it faster.  Which is why cold coffee drinks slower than hot coffee.  Or something like that.

Stock Tip: High Fiber Living

No, this isn’t about diets, it’s about lambdas…

George:

One of the Companies I used to work for, RUST Engineering in Birmingham, AL, now deceased, was the preferred engineer for Dow Corning’s’ Fiber technology plants.  They did the engineering and construction for Dow back in the 1990’s.

This was going to go gangbusters and fiber was being installed everywhere, but then QUALCOMM developed the CDMA chip. This made the available bandwidth of the already installed fiber so overcapacity that Dow seriously curtailed operations both in manufacturing and in construction of further plant for making fiber.

The story was that the CDMA added so much bandwidth that it would be 20 years before the excess bandwidth was filled and required more fiber installation.

Of course that was late nineties, and the cable and other comm companies are both expanding to new areas and are consolidating as the news today shows.

But if you want to see if fiber communications is reaching a choke point, don’t look at the IPs or phone companies, look at Dow-Corning.

Another day, another 10-K as they say…

Thanks to Dave

imageOff in North Carolina, Dave’s sent me an email going around honoring the electric linemen who are working like hell today trying to get the power back on so Valentines dinners (and whatevers…ahem…) can happen and so there will be a flurry of childbirth come Thanksgiving (the timing of the two holidays always seemed, you know…odd…).

Now that I’m nearly a senior citizen, speaking of Valentines day, I keep wanting to ask my doc if Viagra is covered by Medicare?

Not that I need it yet…just planning ahead for when I hit 90, or so. I hear they drop blood pressure…maybe I could weasel ‘em that way…

Meantime the I-Ching Inbox just delivered this:

{SPAM} Your guide to potty-training basics, including when to start and what to do.

Doesn’t make sense, to me…guess it DEPENDS on what they’re getting at, I s’pose.  Don’t these spammer/jerks ever consider age when pressing “send?”

Movie Review

I don’t do this very often, but was the ending of Gravity about the weakest, lamest ending to an otherwise engaging movie, of all time?

OK, only three more working days until Monday…hop to it…

George george@ure.net

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