Bitcoin Market Update 3/21

Hi Everyone,

This weeks markets fell from the $630-$640/BTC range to around $570/BTC.  The sell-off started earlier this week on the Chinese exchanges amidst rumors that the government would be banning all bitcoin transactions.  It turns out the rumor was false and the subsequent headline was removed from the news site.  Instead, the Chinese central bank will be issuing new regulation on bitcoin which, although better than a ban, is still negative news for the short-term.  Hopefully, the markets can rebound within a few days.

In other news, close to 200k of gox's bitcoins have apparently been "found".  Some believe that gox always had those coins.  Even before the announcement, through blockchain analysis, some internet sleuths found sizable bitcoin holdings in an address known to belong to gox.  I mentioned in my 3/7 update, a bifurcated pattern emerged from this address produced by a 60-40 recursive splitting function coinciding with leaked gox code.  It's likely that gox withheld the "finding" of this wallet for two weeks before making a public announcement.  Why?  There's a lot of interesting theories which you can read about on reddit or bitcointalk if you are interested.

In any case, finding these some 200k coins is certainly good for those who lost coins on gox but the actualization (as opposed to remaining probabilistic) of this supply shock can also explain the recent dip in price as 200k "new" coins will enter the market sometime in the future.

Following Warren Buffet's scathing comments about bitcoin, someone has made a 1000 BTC bet on bitbet that BTC will outperform Berkshire Hathaway over the next year:  A few things to note here.  Bitbet functions on a parimutuel system (like in horse racing) whereby all bets are pooled together and then the odds are determined based on the proportion of those betting "yes" versus those betting "no".  Contrast this with the fixed-odds betting you might find with a Vegas sports bookie.  Parimutuel systems protect the bookkeeper from having to make the market on the odds of a bet by letting the market make it for him.  The downside for the bookie is that he will likely not get as much action since there is little incentive to bet until the last minute.  Bookies can correct for this incentive problem by giving earlier bets more weight in the payoff and later bets less.  Still, in total, action is shallower when a parimutuel system is used instead of a fixed-odds type system even with a time-weighted incentive structure.  Ultimately, parimutuel systems are used only when the book keeper has little to no idea where the true odds lie.  In horse racing, parimutuel systems are used because the bets are not boolean in the sense that there are multiple horses.  While it might be possible for a bookie to give odds on two-horse or three-horse race, multiple horses make the odds difficult to lay.  Since the bookie takes no risk in a parimutuel system, the "juice" (also called vigorish) or premium to the bookie is usually smaller.  Compare 10-20% juice for a fixed-odds bet versus 4% juice for a parimutuel bet.

Kevin & Team Buttercoin
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