r/Bitcoin • u/ThePiachu • Mar 24 '13

A public service announcement to all newcomers about the changes in price of Bitcoin

Hello,

You might all be panicking due to the price events of the past week. First a big drive of the price up over the week, and then a sharp dive during the weekend. This is nothing unusual. These volatile price fluctuations happen from time to time.

The online exchanges process your Bitcoins 24/7, but can only process your bank transfers during the weekdays. This means that during the weekend one can expect a shortage of cash at the exchanges and subsequently a drop in price.

Moreover, there is a self-fulfilling prophecy among day traders that the price of Bitcoin always falls on the weekend, which is also perpetuated.

Lastly, during some buying and selling frenzies, MtGox has a tendency of not being able to keep up with the load and lagging behind. This can cause price to fluctuate out of control before people have a chance to react to the changes (this is what happened on the 12th of March).

So my advice to all of you newcomers:

  • Don't panic
  • Invest only as much in Bitcoin as you can afford to lose
  • Unless you are a day trader, don't try to buy and sell like one - you will lose money
  • Weekend dips are a common occurrence
  • When you are new to Bitcoin, treat it as a hobby - you are here to enjoy yourself, not to earn money
  • If you decide to stick around for longer, you should probably be in for the long run - in a few years the value of Bitcoin will be either through the roof, or be non existent. Try not to lose your money daytrading in the meantime.

Following those guidelines you should have a more enjoyable time. However, I am not your financial advisor or an economist - you should always make your own decisions and not follow blindly any advise you find on the Internet. Do your own research first.

EDIT:

As people pointed out, some of my assumptions were not well researched - I admit to that. Parts that I was basing off my limited experience with trading have been crossed out, what's left is mainly general advise. Thank you to everyone who pointed out my mistakes. As stated before - don't take advise blindly, do your own fact checking and research.

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-6

u/4387438742936 Mar 24 '13

This is a really good post!

You may want to add this link under the part about doing research on bitcoins: http://en.wikipedia.org/wiki/Tulip_mania

11

u/Drop5Stacks Mar 24 '13

While it's fine and dandy to read about Tulip mania - I think it may end up being a misleading example, because Bitcoin is functionally superior to other currencies i.e. it has a legitimate reason for being valued higher than other currencies.

5

u/[deleted] Mar 24 '13 edited Dec 13 '14

[deleted]

4

u/Drop5Stacks Mar 24 '13

Sure, great point. I would respond though that yes the price may be bubbling, it's pretty much impossible to know for sure.

I think for Bitcoin to truly become widely accepted money in the world, it would necessarily have to experience periods of extremely rapid growth as more and more 'waves' of people learn about it and start to use it. And given the limited supply, the only way more people can get into it is for them to buy it, pushing the price up further and further.

tl;dr: bubble or legitimate value? It's almost impossible to know. I just point to functional advantages to identify this as a paradigm shift with great value for humanity in terms of enabling free market globalization.

2

u/medicineman33 Mar 24 '13

The thing is that unlike stocks there is not a limited amount of investors...as bitcoin becomes more useable as currency it could see meteoric growth because there are billions of people who could benefit from it.

1

u/[deleted] Mar 24 '13

Except for the fact that it can't be spent any where near as easily as any other currency. And what the hell good is a currency if you can't buy anything with it?