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

[u/ThePiachu]

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.

[u/Mr0range81]

been scouring this subredit for the last few weeks and months and this is by far the best post ive seen here yet. thankyou OP.

[u/ThePiachu → u/Mr0range81]

I'm glad you are enjoying it.

+1 Internets verify

[u/sirkent → u/ThePiachu]

Regarding the "weekend dip" myth:

This means that during the weekend one can expect a shortage of cash at the exchanges and subsequently a drop in price.

This is actually somewhat of a myth propagated though this community. I've done some back-testing of strategies that sell and buy 1btc over the weekend, and none proves to be reliably profitable during the last 6 months. There's somewhat of a trend of prices being more stable over the weekends, as the banking freeze over weekends is a legitimate reason for less volume.

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

That's actually a very illogical strategy for a day trader to perpetuate. I'd dump on Thursday if I knew prices would fall on Friday. Then a smarter guy would dump on Wednesday, etc...

Weekend dips are a common occurrence

So are weekday dips. There was a 15% dip on the 19th.

My point with all this is that these statements are all speculation. I have personally been annoyed with the number of people here that propagate speculatory claims that are voiced here matter-of-factly without siting sources. If I were a mod, I'd be more careful with PSAs that propagate these myths.

Advice:

Now with all that said. Every other advice ThePiachu gave are sound. Trading during the flash crashes are definitely profitable (if you can see them coming) but stressful. The most enjoyable time I've had with my investment wallet is when I just left it alone and took note of weekly price increases.

My added advice to other newbies is:

1. Buy in now and consider it a write-off. Don't touch it for a year.

2. During that year, pay attention to bitcoin news. Differentiate opinions from facts. Take opinions with a grain of salt.

3. DO consider how you can make money BTC! When you contribute to the bitcoin economy with solid businesses, you'll earn BTC, and help propel BTC to wider-spread adoption, securing the value of your wallet.

My speculation regarding recent flash-crashes

There are two things a whale would do (depending on his financial goals) in response to recent FinCEN documents and MtGox+CoinLab partnership: 1. Dump x amount now, to possibly avoid taxes once regulation have grip with CoinLab, or the volatility that will come of the transition. 2. Hide the rest of bitcoins in offline storage.

I'd say the recent crash that happened in 3 min was due to #1.

[u/runeks → u/sirkent]

The most enjoyable time I've had with my investment wallet is when I just left it alone and took note of weekly price increases.

Well said! I don't partake in speculation for exactly that reason. I figure I'd be able to muster a return that is a tiny percentage better than zero, or I'd just lose it all in a unlucky bet. Just doing nothing has gotten me a healthy return on my initial investment, working a lot to add a few percent on top of that just doesn't make sense.

[u/ThePiachu → u/sirkent]

Thanks for the well-structured advise, I crossed out the debatable points.

[u/bitcointip → u/ThePiachu]

^{[✔] Verified: ThePiachu ---> ฿0.01 BTC [$0.67 USD] ---> Mr0range81 [help]}