Discussion
Behemoth said:
WindyCommon said:
7 hours ahead of the SEC announcement the price spiked up by 11% in a matter of minutes. The next few minutes saw the price fall by a similar amount. I'm sure there's a rational/legal/honest explanation....
Whilst crypto-currencies may well have a long term future, price action like this shows that BTC is still miles away from being a properly tradeable asset for anyone other than insiders. It is a blind punt, interesting only as a result of the volatility it exhibits. As such, entirely unsuited to being packaged for retail investment. Pretty much what the SEC said.
IMHO of course....
I totally agree. Moreover, that holds true for day trading generally, particularly forex. You can't hope to beat high frequency trading bots exploiting volatility and the markets are dominated by them. Add in highly leveraged market manipulation attempts like that monumental spike and you've a recipe for disaster if you think you can punt this up & down for a few extra quid. BTC is a long term hold.Whilst crypto-currencies may well have a long term future, price action like this shows that BTC is still miles away from being a properly tradeable asset for anyone other than insiders. It is a blind punt, interesting only as a result of the volatility it exhibits. As such, entirely unsuited to being packaged for retail investment. Pretty much what the SEC said.
IMHO of course....
It is far from clear that Bitcoin is a currency. David Yermack, writing for the NBER, perhaps summarises this effectively:
David Yermack said:
"A bona fide currency functions as a medium of exchange, a store of value, and a unit of account, but bitcoin largely fails to satisfy these criteria. Bitcoin has achieved only scant consumer transaction volume, with an average well below one daily transaction for the few merchants who accept it. Its volatility is greatly higher than the volatilities of widely used currencies, imposing large short-term risk upon users. Bitcoin’s daily exchange rates exhibit virtually zero correlation with widely used currencies and with gold, making bitcoin useless for risk management and exceedingly difficult for its owners to hedge. Bitcoin prices of consumer goods require many decimal places with leading zeros, which is disconcerting to retail market participants. Bitcoin faces daily hacking and theft risks, lacks access to a banking system with deposit insurance, and it is not used to denominate consumer credit or loan contracts. Bitcoin appears to behave more like a speculative investment than a currency."
Viewed as an investable asset, Bitcoin has few attractive characteristics. There is neither a yield or an intrinsic return. Even gold (as it can be turned into jewellery) has the latter! The case for holding BTC rests on the idea that someone else will pay you more for it at some point in the future. This is supported by a complex system for creating scarcity. But scarcity is not a indicator of enduring value in itself. My 7&9 year olds are somewhat obsessed with Pokemon cards. To them, a Super-Mega-Rayquaza (or whatever) is hugely valuable; you can pay £50 for one on eBay! But fast-forward 12months and I somehow doubt that will be the case. Bitcoin's value rests solely on acceptance of the "greater fool" hypothesis - as did the value of tulips, the South Sea Company, pets.com etc. etc. etc. There's really nothing new here, other than perhaps an ownership component motivated by libertarian/"financial collapse" beliefs.The processes of trading and owning BTC are fraught with danger. Transactions do not take place on regulated exchanges. If the price spike discussed above had occurred in a traded equity regulators would have requisitioned exchange trading records to determine who was trading in advance of such an important announcement and whether or not they had inside information. Investigations and prosecutions might have followed. No such risk exists for those who stand to benefit by manipulating BTC pricing and liquidity.
The FT summed this up well recently:
Isabel Kaminsky said:
"We all remember the days when commodity markets were over-the-counter rogue, right?
These were fun days. Amazing days. Fondly remembered by the great and the good of the commodity trading world. Why? Because it was like the wild west. If you knew how to work the system, you could score big. Huge! These were great days. And how it worked was simple. If you weren’t prepared to be the manipulator, you would be the manipulated. Cornering, banging-the-close, futures abuse, secret trading cliques, trading research propaganda – you name it. All were viable strategies in the hunt for profit. Fundamentals? Meh. Fundamentals were for losers. Sad losers. The strong didn’t need to predict the price, they just needed to make the price. But by 2008 the saloon party was coming to an end. The real users of commodities — the manufacturing industry, the consumers, and even the pension funds — had had enough of always drawing the short-straw. They called in the sheriff. And the sheriff cleaned up town. Position limits. AML-KYC. Central counterparty clearing. And Dodd-Frank. It was a new world. A new world not quite as profitable as the last. A new world which called for new tactics, New tactics which were soon enough publicised and shamed anyway. Things were looking bleak.
And then, as if from nowhere, came a saving grace. A new, wholly unregulated, OTC market which was as good if not better than the commodity market of before. It was called bitcoin.
And it was amazing. AMAZING. It offered volatility. OTC fragmentation. Anonymity. And more. So much opportunity for expert traders from commodities to reapply their skills. And it was going to stay that way forever…"
With regard to custody/ownership, about 600,000 Bitcoins were simply "lost" when Mt Gox disappeared, a further 120,000 through Bitfinex. There seems to be no effective way to assess and manage couterparty risk, and little chance of enforcing recovery in the event of malfeasance.These were fun days. Amazing days. Fondly remembered by the great and the good of the commodity trading world. Why? Because it was like the wild west. If you knew how to work the system, you could score big. Huge! These were great days. And how it worked was simple. If you weren’t prepared to be the manipulator, you would be the manipulated. Cornering, banging-the-close, futures abuse, secret trading cliques, trading research propaganda – you name it. All were viable strategies in the hunt for profit. Fundamentals? Meh. Fundamentals were for losers. Sad losers. The strong didn’t need to predict the price, they just needed to make the price. But by 2008 the saloon party was coming to an end. The real users of commodities — the manufacturing industry, the consumers, and even the pension funds — had had enough of always drawing the short-straw. They called in the sheriff. And the sheriff cleaned up town. Position limits. AML-KYC. Central counterparty clearing. And Dodd-Frank. It was a new world. A new world not quite as profitable as the last. A new world which called for new tactics, New tactics which were soon enough publicised and shamed anyway. Things were looking bleak.
And then, as if from nowhere, came a saving grace. A new, wholly unregulated, OTC market which was as good if not better than the commodity market of before. It was called bitcoin.
And it was amazing. AMAZING. It offered volatility. OTC fragmentation. Anonymity. And more. So much opportunity for expert traders from commodities to reapply their skills. And it was going to stay that way forever…"
My considered view of Bitcoin therefore is that it has neither the valuable characteristics of a currency nor an investable asset. And in any case, the processes of acquiring and owning it are fraught with danger. Whilst some people will make money along the way, it is ultimately a misallocation of capital to a non-productive end. As a result value will inevitably be destroyed. Holders will all need to make sure they are not holding the parcel when the music stops!
I'm afraid that the attempt by the Winkelvoss twins (who I have met) to deliver access to Bitcoins in ETF form is a classic case of lipstick on a pig. The ETF veneer can only serve to obscure the underlying issues. I am glad that the SEC have seen through it.
All IMHO of course, and I would welcome a counter-case in response!
Edited by WindyCommon on Saturday 11th March 16:17
WindyCommon said:
It is far from clear that Bitcoin is a currency.
Bitcoin is still just a few years old and cannot yet be expected to meet the criteria stated in the same way as any mass adopted currency or asset. It is in an early formative phase. There is a factual error in your quoted report. Bitcoin does not suffer daily hacking. The infrastructures exchanging bitcoin have been hacked. That is a fundamentally different thing, the difference between the pound coin being robbed vs a bank being hacked or robbed (the latter, of course, happens daily btw).WindyCommon said:
My 7&9 year olds are somewhat obsessed with Pokemon cards. To them, a Super-Mega-Rayquaza (or whatever) is hugely valuable; you can pay £50 for one on eBay! But fast-forward 12months and I somehow doubt that will be the case. Bitcoin's value rests solely on acceptance of the "greater fool" hypothesis - as did the value of tulips, the South Sea Company, pets.com etc. etc. etc. There's really nothing new here
That's a naive and cliched critique. Bitcoin has nothing to do with these scams and collectables. It is a viable invention that has worldwide application. I'm not sure you have a clear understanding of this.WindyCommon said:
The processes of trading and owning BTC are fraught with danger. Transactions do not take place on regulated exchanges. If the price spike discussed above had occurred in a traded equity regulators would have requisitioned exchange trading records to determine who was trading in advance of such an important announcement and whether or not they had inside information. Investigations and prosecutions might have followed. No such risk exists for those who stand to benefit by manipulating BTC pricing and liquidity.
Owning BTC cannot be called risky (apart from its inherent volatility at this early stage). You can hold BTC in safe storage very easily. Much more so than cash, gold etc. You will need a modicum of technical competence and that's an early adopter barrier, for sure. Remember. it was tricky getting onto the WWW in 1995, too.I totally agree that trading bitcoin is fraught with danger. However the regulation is progressing apace, for example with KYC & AML being instituted widely. The SEC's denial of the ETF was absolutely appropriate and will encourage the industry. There was no criticism of Bitcoin itself by the SEC, only its exchange infrastructure.
WindyCommon said:
My considered view of Bitcoin therefore is that it has neither the valuable characteristics of a currency nor an investable asset. And in any case, the processes of acquiring and owning it are fraught with danger. Whilst some people will make money along the way, it is ultimately a misallocation of capital to a non-productive end. As a result value will inevitably be destroyed.
Your considered view appears to have come from a couple of contrarian articles in the financial media. BTC has characteristics of both a currency and an asset. The process of acquiring and owning has almost zero danger for anyone possessing the patience and competence to read through & apply the simple due process recommended by reading one of many freely available guides to this. I'm very curious why you think Bitcoin is not a productive innovation.
i think because people don;t understand it they dismiss it. maybe the future world is based on intangible assets. i think these times are volatile and they are trying to find a use, but the numbers are there. looking at some alt coins in the space of 10 months have increased 10 fold, and not just 1 a few and continue to do so.
the trading market runs 24/7 over multiple continents.
Market Cap: $23,347,169,375 / 24h Vol: $411,184,462 for last 24hours, yes it is the wild west but something will come out of it.
the trading market runs 24/7 over multiple continents.
Market Cap: $23,347,169,375 / 24h Vol: $411,184,462 for last 24hours, yes it is the wild west but something will come out of it.
WindyCommon said:
Holders will all need to make sure they are not holding the parcel when the music stops!
That seems the inevitable end point for imaginary money.IMO it will only become worth the risk if and when someone or something with real substance stands behind it - either a substantial government or substantial corporation.
rockin said:
That seems the inevitable end point for imaginary money.
IMO it will only become worth the risk if and when someone or something with real substance stands behind it - either a substantial government or substantial corporation.
Microsoft, Mizuho Capital, SMBC Venture Capital,Mitsubishi, Hitachi, IBM, Bank of Tokyo , Mitsubishi UFJ, J.P. Morgan Chase, Royal Bank of Scotland, intel, Winklevoss brothers own about 1.5% of total bitcoins, plus loads moreIMO it will only become worth the risk if and when someone or something with real substance stands behind it - either a substantial government or substantial corporation.
all invested significant sums in crypto coins.
Behemoth said:
...Bitcoin does not suffer daily hacking. The infrastructures exchanging bitcoin have been hacked. That is a fundamentally different thing, the difference between the pound coin being robbed vs a bank being hacked or robbed (the latter, of course, happens daily btw).
...Owning BTC cannot be called risky (apart from its inherent volatility at this early stage). You can hold BTC in safe storage very easily. Much more so than cash, gold etc. You will need a modicum of technical competence and that's an early adopter barrier, for sure. Remember. it was tricky getting onto the WWW in 1995, too.
The critical difference is that when their security fails, banks reimburse customers who have lost money from their accounts. MtGox customers have yet to recover their investments more than three years after it closed following a hack. All Bitfinex customers lost 36% of the assets they had on the platform as they were involuntarily "bailed in" to pay for the losses of the hacked accounts....Owning BTC cannot be called risky (apart from its inherent volatility at this early stage). You can hold BTC in safe storage very easily. Much more so than cash, gold etc. You will need a modicum of technical competence and that's an early adopter barrier, for sure. Remember. it was tricky getting onto the WWW in 1995, too.
Behemoth said:
I'm very curious why you think Bitcoin is not a productive innovation.
Crypto-currencies may be a productive innovation in time. At present however their utility as currency is entirely undermined by the practical problems of trading and owning them, and their utility as investable assets by the absence of intrinsic value. The currency related problems may be addressed in time through improvements in governance and infrastructure.It is harder to see how the intrinsic value issue can be overcome. A poster above refers to someone "standing behind" Bitcoin. US bonds (for example) have value because the coupons they pay are supported by the ability of the US government to tax the the productive capacity of the US economy.
WindyCommon said:
It is harder to see how the intrinsic value issue can be overcome. A poster above refers to someone "standing behind" Bitcoin. US bonds (for example) have value because the coupons they pay are supported by the ability of the US government to tax the the productive capacity of the US economy.
Why sweat it. Leave it to those who are happy to take crazy risks. I don't think we'll know yet what Bitcoin will end up as. Currency is the least likely outcome IMO. Some form of store of value/value transfer feels more appropriate with the way it's currently set up.
Unlike gold, it's instantly verifiable and can be teleported or transported across the world by remembering a few words.
Edited by bloomen on Sunday 12th March 19:10
WindyCommon said:
The critical difference is that when their security fails, banks reimburse customers who have lost money from their accounts. MtGox customers have yet to recover their investments more than three years after it closed following a hack. All Bitfinex customers lost 36% of the assets they had on the platform as they were involuntarily "bailed in" to pay for the losses of the hacked accounts.
The critical thing you are not picking up here is that it is downright foolish to store Bitcoin with a third party of any sort, especially at this stage in its development. It is cash that you do not need to store at any sort of bank or exchange. You take personal responsibility for its security and manage it in your own encrypted cold storage. Treated in this way, as originally intended, it is very safe indeed.Behemoth said:
The critical thing you are not picking up here is that it is downright foolish to store Bitcoin with a third party of any sort, especially at this stage in its development.
Bitfinex is not regulated. Their ownership is murky. They don't seem to have a physical location. They've had a lengthy history of crapping out at vital moments. Anyone putting money there should've known this and I've never understood why Bitcoin fans are so desperately keen to trust anonymous strangers with their irreversible money but there you go.
Dollar holders didn't lose out in the hack and they seem to be slowly repaying the losses. It is rather pathetic that somewhere of that nature is still the biggest exchange after all that's gone down.
p1stonhead said:
I feel bad for the guy who bought two large pizzas a few years ago for 10,000 bitcoin 
He's probably still got plenty. Spare bigger tears for Newport landfill man, BTC on that chucked laptop is now worth >£7.5mln. http://www.geek.com/news/6-5-million-in-bitcoins-a...Any theories on why the price didn't crash with the decisions made in the last few days regarding the Winkies ideas.
I was expecting a major crash, yes it dropped but anyone whose been in crypto for more than ten minutes would regard a mere 20% nothing more than a minor hindrance.
I was tempted to sell a chunk and am glad I didn't now. But is it just delayed, or was it just not such a big deal for Bitcoin.
I was expecting a major crash, yes it dropped but anyone whose been in crypto for more than ten minutes would regard a mere 20% nothing more than a minor hindrance.
I was tempted to sell a chunk and am glad I didn't now. But is it just delayed, or was it just not such a big deal for Bitcoin.
most predicted a 15 percent crash, so nothing unusual. i think the crash this time was bot related not people actually selling. people have a lot of faith in bitcoin as shown.
the biggest thing thou is the rise of the alts, bitcoin has lost about 1% of the market share from this, so it has bought new money but not to bitcoin, at the moment. there could a chance demand actually fails as they move to other alts, but most alts are bought via bitcoin. ethereum is a good contender to take its place.
the biggest thing thou is the rise of the alts, bitcoin has lost about 1% of the market share from this, so it has bought new money but not to bitcoin, at the moment. there could a chance demand actually fails as they move to other alts, but most alts are bought via bitcoin. ethereum is a good contender to take its place.
rufusgti said:
Any theories on why the price didn't crash
I think it's because the ETF rejection was not critical of the currency itself. It was critical of the trading exchange infrastructure. Thus, once the exchange infrastructure achieves a satisfactory regulatory standard, there seems to be no substantial barrier to an ETF being approved.The Spruce goose said:
bitcoins biggest issue now is the potential hard fork to B unlimited and bitcoin.
It isn't a big deal. All good software should hard fork from time to time & it's a natural process of software evolution. All passionate software developers will defend their opinions vigorously. Whether BU is the right path to take is an entirely different issue. Bear in mind there are many competing Bitcoin code versions angling for prominence (Core, XT, Classic, BU, bitcore, btcd & a host of tiny others). BU has only come to the fore because it has developed a larger following. And so be it. The consensus approach to realising a fork is a very well thought through process.What won't happen with a Bitcoin fork is the omnishambles that occurred with the Ethereum hard fork. That's the difference between Bitcoin and these bedroom-project alts run by genius solo tech-heads. And it's predominantly the alt-coin supporters that are screaming panic about forks because it suits their own narrative.
The Spruce goose said:
as i am new to this but why has DASH, MONERO, ETHEREUM all increased from 10 -20 times in very short times with no significant increase in usage.
Good question; usually there's a bit of an inverse correlation between BTC & ETH but not this week. It's entirely speculation, of that there's no doubt. Probably partly looking for an alternative to BTC for dirty cash as BTC legitimises and partly a bullish sentiment for all leading crypto as the media noise hit peaks and thus new speculators joined without deep technical knowledge. It takes ~ 1 week for fiat cash to reach a crypto exchange, so maybe these newbies were scared off BTC & headed straight for the alt market instead.
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