Bitcoins: State of the Markets

General ramblings regarding bitcoins, the various markets, with focus on MtGox, Tradehill as well as the Canadian Virtual Exchange.

August 11. Pushing bits?

Markets are rather stable… last 48 hours has seen the price of bitcoins stay put between 9.60 and 12.10 $USD on the major exchanges.  This seems rather stable if taking the last few weeks in consideration. 

I almost miss the free fall times. I managed to make quite a bit of coins during the last week, my overall trading portfolio growth went from 10% to 50% since August 5.  Not a bad week.

Now, in other news. Apparently one of the web’s first e-wallets (a place to keep your bitcoins, online rather than your hard drive,) https://www.mybitcoin.com/ is now in receivership (bankruptcy.)  This has been credited with the major sell-offs that occurred earlier this week, pushing down the price of bitcoins to single digits.

Seems that the website was the victim of theft, due to their own programming… they allowed transactions (deposits) to be considered valid after only one (1) confirmation by an auditor (miner.)  This lead to a trickle of small thefts over a few days, amounting to a not-insignificant amount of bitcoins.

Bitcoin itself, the actual clients, require 8 confirmations to consider a transaction secure.  This 1 confirmation implementation was more than likely intentionally put in place to “speed up” mybitcoin, and thus giving it an advantage over other clients. At the risk of being abused.  Got what you asked for!

Which leads to the most exciting piece of news in the last few weeks.

http://www.tribbleagency.com/?p=8140

Flexcoin, the first bitcoin bank has gone public.  http://www.flexcoin.com/

I’ve managed to register and setup my account, with my first name as a user id.  It’s a short 3 letter name, and it’s mine.   I bet there’s a lot of people who share my name who’d wished they’d signed up first. 

Benefits…

1) Flexcoin users can transfer bitcoins between themselves, with zero fees, instantaneously using flexcoins internal transaction servers. 

2) Bitcoin to Flexcoin users is also free.

3) Flexcoin is owned by an Actual real life corporation that has been in existence for a decade or so.  Finally.

4) Apparently, they’ve had their security setup audited by professionals.

5) Bitcoin / Flexcoin wallet now accessible through any web enabled device. (Mobile phone (android, iOS, other,) tablets, laptops.)

6) Flexcoin users can pay each other by USER ID instead of bitcoin address.

So, you walk up to a convenience store that accepts bitcoins via flexcoins. You whip out your cellphone, open the flexcoin website, sign in, find the name of the convenience store, transfer the x.xx bitcoins to that merchant’s user ID in flexcoin. Transaction is processed instantly, and securely within Flexcoin, no fees at all.

That my friends, is a game changer.

August 9. The storm subsides.

Interesting thing watching these Bitcoin markets.

After my last post, some pretty enormous sell offs occurred, pushing the prices of bitcoins down to 8$ USD across all the exchanges.  Since then, bargain hunters have stepped in, floating the price of bitcoins back to 10$ USD, give or take a dollar.

I am happy with that. The bitcoin economy did not annihilate itself, and the professional non-believers have nothing to write about.  At least not yet. Like this guy, who wrote at the start of this BTC price dive, 4 days ago.

http://blogs.forbes.com/timothylee/2011/08/07/the-bitcoin-crash/

Interestingly, a few hours after his article, the price was arleady rebounding from it’s VERY brief stint at 6$.

In today’s Bitcoin related news…

http://www.theatlantic.com/technology/archive/2011/08/the-bitcoin-economy-is-collapsing-with-no-sign-of-recovery/243253/

This guy’s take is that Bitcoins are doomed to fail because they are “intangible.” Admittedly, it’s not the first time I’ve heard that word used in a sentence with bitcoins.   However, I’d like to think of bitcoins as another form of payment, exactly that, which is something the world needs to keep the Paypal’s, Visa’s and Mastercard’s of the world on their toes.  There are alternatives now, and there’s no reason my paypal fee’s should be higher than what I can manage with Bitcoin.

If you’ve ever wired funds via banks, interact, or even certified check via snail mail, you KNOW how much they take, and you probably have a good impression of why banks are making billions in profit every year.

And honestly, how many times have i seen “illegal drugs” being brought up as the main purpose of bitcoins? Let’s look at that.  There is (was?) a website called Silk Road.  They sold drugs online and ONLY took payment in bitcoins.    Two US senators made public comments about banning bitcoins.   (BTW, United States Senators have also made statements regarding the invasion of Canada. So we’ve established that they TALK much more than they act.)

So let’s just look at the basic facts here… bitcoins on silk road… vs real cash on any street corner (same benefits here really, non-traceable, etc.) and I’ll let you, the reader, try to determine which is used more often to buy drugs.

August 4.

After a couple harrowing days on the bitcoin markets, some level of stability has indeed taken shape.  Coins are trading for 11 $USD on MtGox currently. The Buyer vs. Seller ratio appears back to normal on MtGox, however I’ve noticed that the statistics from their own website now omit any open orders more than a few dollars outside the latest price.  Why? I dunno. Speed up the already slow chart drawing process on MtGox, or I suppose this could make the exchange look more balanced.  I know for certain that there are many many many BTC Buy orders for over 13.2 $USD but those are no longer listed. If they were, we’d be much more nervous about the gigantic volume of bitcoins on sale, and the relatively few buyers.

On a serious note, I would have finished this post much sooner, but had to wait for MtGox’s Depth Table to load. Seriously.   I know there’s a faster way to render a graph, other exchange use them, the prettiest of which I will discuss in an upcoming post.  I’m referring to the CampBX exchange.  It looks pretty damn good, but I want to get a few trades in and see what it’s like under the covers.

In other news, I’m beginning to wonder if this arcticle, contributed to the mass sell off of BTC we witnessed yesterday.

http://www.f-secure.com/weblog/archives/00002207.html

Apparently F-secure has “seen examples” of botnets used for mining bitcoins.

I’m less than certain that this method of mining is actually being used successfully… Some questions I have…. is the miner bot called by the malware a GPU miner?  or strictly CPU?  and what about it’s ability to join a mining pool? 

Surely, if this were interpreted by readers as a full bore no-holds-barred mining client, then yes, I’d suspect people would be a little nervous about bitcoins being generated by 20,000 host botnets.

I must investigoogle this.

May the coins be with you.

August 3.

Quick update for today…(not too much to talk about since www.bitcoincharts.com is down for maintenance.)

Bitcoin prices down down down.

MtGox has dipped as low as 8.40 $USD per BTC. (Relatively speaking, it’s lost just about 50% of it’s value since the well documented and published MtGox hack.)

If I had to speculate, which is why I’m typing this for you today, I’d guestimate that the miners are far more successful at generating bitcoins than businesses and consumers are at actually utilizing bitcoins.   There’s just too many on sale, and not enough buyers on the exchanges.  Eventually the mining difficulty will increase and make the previous statement untrue, but where is the bitcoin’s value going to be when that happens.  

If current market conditions persist, the end result will be worthless bitcoins.  I’ll still trade them on the odd chance that one day they’ll be worth much more than I traded for them.  But, having seen the market’s performance since I started paying attention three weeks ago, there’s been one general direction and only the occasional spike in price due to large buy orders to give me hope that this currency experiment isn’t buying the proverbial farm. 

Here’s to hope.

Interested in hearing what you guys and gals think.   Leave a comment!

While we’re at it.

If you found ANY of that interesting, or have questions, leave a comment!

If you have extra bitcoins and don’t want them, i take donations at the following address : 1BZvFSNu8Tx7YfXAmr1hxjM5Wjcr2PezZW

August 2. Intro and a little about today.

Good Afternoon.

I’ve been a Bitcoin miner for almost a full month now.  I know. Some of you have been doing this for a year.  I only found out about Bitcoins about 20 minutes before setting up a miner.

Bitcoins, for the uninitiated, is an internet based commodity, to be used as a currency, without the need for an issuing authority. The website www.weusecoins.com has a very short and simple video explaining the who / what and where of bitcoins. 

As for Why? I haven’t heard a convincing argument as to Why the world needs another currency.   Nevertheless, I mine bitcoins, for the sole purpose of trading them on a few of the bitcoin exchanges. 

Well, simply trading can be a lonely task… Monitoring reports, charts, volumes and volumes of data.  All to accomplish a simple goal of buying low and selling high.

So far, I’m doing alright, I’m in the black.  But today, I’ve noticed some disturbing trends.   And with that, let’s look at the market outlook for today.

MtGox (www.mtgox.com)

By far the most volume of any of the exchanges.  Today has seen a large, as high as i have seen it, volume of trades.  At it’s peak, over 10 thousand Bitcoins (BTC) have been traded per hour.  Unfortunately, this has resulted in a severe drop in the BTC value, with the hourly median price dropping as low as 12.18 $USD.  Prices have since stabilized, at 12.25 +/- 0.05 cents $USD.  

Prices have trended downwards on MtGox pretty much since I started trading 3 weeks ago.  I attribute this to the overly large gap between Bids / Asks. 

As it is right now, there are a total of 15,252 BTC in Buy orders, vs. 56,557 BTC in sell orders. As there are almost 5 times as many sellers as there are buyers, they will end up driving down the average cost of a bitcoin as they compete to sell their coins.  In the next few days, I foresee this pricing trend continuing DOWN on MtGox.  

TradeHill (www.tradehill.com)

Whilst the TradeHill exchange has a much lower volume than MtGox, it’s interface is much more refined, and I’ve found trading on this exchange much more enjoyable.  The Dashboard is a feature that MtGox better be planning on adding, simply because it lists everything I need to know in one page, instead of checking a few different pages on MtGox.  I’m specifically speaking of Adding / Withdrawing fund requests and current open buy/sell orders.

Market fundamentals remain the same on TradeHill, with some downward pressure on the price of BTC, however, a much more balanced buyers vs sellers number would seem to indicate that the price may be much more stable on this exchange. 

Having said that, I have no doubt in my mind that arbitrageurs are keenly influencing this market, buying bitcoins at a slightly cheaper rate and withdrawing them to be sold on MtGox.   The two exchanges have a history of following each others price history.   Market forces at their best.

BTC on Tradehill are currently moving down in price, a few cents $USD lower than MtGox.

Canadian Virtual Exchange (www.cavirtex.com)

This Exchange was of great interest to me, since it offered the ability to direct deposit into my bank account.   Over the last few days, this has been made null by the fact that the other two exchanges listed above have made arrangements with Paxum (using pre-paid mastercard accounts furnished by Paxum directly) making the process of withdrawing funds a non-issue, even from other non-local exchanges.   I could trade in Euro’s and still withdraw those funds onto a Paxum card. 

Well, i think, the market has figured that out. I’m not optimistic about volumes really ever increasing on this exchange.

Today has seen a tremendous price drop on the CAVIRTEX.   Prices plummeted. The buyers to sellers ratio was horrendous to start with, it’s even worst now, with buyers looking for ~600 BTC, and sell orders stocked with over 1400 BTC. 

This market opened at near 12 $CAD, and saw at least one order execute as low as 1.1 $CAD. The market has since rebounded slightly, spurred by a flurry of lower priced buy orders pushing the price back up over the 10$CAD mark.

This however creates a ginormagantuan arbitrage opportunity, buying bitcoins here for cheap (4 $CAD) and moving those bitcoins to another exchange and selling for at least twice that. 

If the price stays right, that is.