Crypto Currency Thread
Discussion
It is true - retail speculation on crypto is very much there for the financial benefit of the platforms, not the trader.
Also worth remembering the scale of hypothecation that goes on in markets today: this means that retail speculation is so far removed from the actual asset that the trader believes she is speculating on, that she never actually has any real claim to the asset. It is merely a bet on the price that her broker assigns to it's symbol for that asset. The distance she is from actually having that asset in her possession is huge and the gap can never be bridged.
Even in the gold markets, unless you actually have physical in your possession, you probably can't actually translate your retail speculation on "gold" into actually having the physical metal it in your hand. Multiply that by a big, big, big number when thinking of crypto: unless you have the private keys and the coins in cold storage in your possession, you don't have the coins and your broker will only ever settle your bet in fiat / credit to your account.
That's fine if you want to try to make money from the volatility of the price, but do not ever confuse it with actually dealing with the underlying asset. Because you aren't.
Also worth remembering the scale of hypothecation that goes on in markets today: this means that retail speculation is so far removed from the actual asset that the trader believes she is speculating on, that she never actually has any real claim to the asset. It is merely a bet on the price that her broker assigns to it's symbol for that asset. The distance she is from actually having that asset in her possession is huge and the gap can never be bridged.
Even in the gold markets, unless you actually have physical in your possession, you probably can't actually translate your retail speculation on "gold" into actually having the physical metal it in your hand. Multiply that by a big, big, big number when thinking of crypto: unless you have the private keys and the coins in cold storage in your possession, you don't have the coins and your broker will only ever settle your bet in fiat / credit to your account.
That's fine if you want to try to make money from the volatility of the price, but do not ever confuse it with actually dealing with the underlying asset. Because you aren't.
JPJPJP said:
It is true - retail speculation on crypto is very much there for the financial benefit of the platforms, not the trader.
Also worth remembering the scale of hypothecation that goes on in markets today: this means that retail speculation is so far removed from the actual asset that the trader believes she is speculating on, that she never actually has any real claim to the asset. It is merely a bet on the price that her broker assigns to it's symbol for that asset. The distance she is from actually having that asset in her possession is huge and the gap can never be bridged.
Even in the gold markets, unless you actually have physical in your possession, you probably can't actually translate your retail speculation on "gold" into actually having the physical metal it in your hand. Multiply that by a big, big, big number when thinking of crypto: unless you have the private keys and the coins in cold storage in your possession, you don't have the coins and your broker will only ever settle your bet in fiat / credit to your account.
That's fine if you want to try to make money from the volatility of the price, but do not ever confuse it with actually dealing with the underlying asset. Because you aren't.
The actual problem is that it is a sAlso worth remembering the scale of hypothecation that goes on in markets today: this means that retail speculation is so far removed from the actual asset that the trader believes she is speculating on, that she never actually has any real claim to the asset. It is merely a bet on the price that her broker assigns to it's symbol for that asset. The distance she is from actually having that asset in her possession is huge and the gap can never be bridged.
Even in the gold markets, unless you actually have physical in your possession, you probably can't actually translate your retail speculation on "gold" into actually having the physical metal it in your hand. Multiply that by a big, big, big number when thinking of crypto: unless you have the private keys and the coins in cold storage in your possession, you don't have the coins and your broker will only ever settle your bet in fiat / credit to your account.
That's fine if you want to try to make money from the volatility of the price, but do not ever confuse it with actually dealing with the underlying asset. Because you aren't.
t market for OTC trading but customers demand it. The cost of hedging is very high and you have to hedge because of the volatility. It’s one of those markets where the end consumer has a tendency to automatically assume that it is the broker that is s
t as opposed to how the end product must be hedged, cleared and executed or that the product already contains so much volatility that it simply isn’t sane to add any leverage. We’ve already seen in this thread, people blaming the OTC broker while not appreciating how the actual product works.
You can bring that cost down by disconnecting from the regulatory requirement but then obviously the default risk goes much higher so it’s really not much change for the end trader. For example, if you are offering 100x leverage how do you hedge that exposure risk? What if you are supplying the hedge yourself using other customers’ physical? And on and on. It’s those sort of risks that saw a lot of people wanting to use an FCA OTC firm but you have to turn that business away as it can’t be hedged and you do that by elevating the funding so that it forces out anyone not deterred by the spread or margin.
DonkeyApple said:
The actual problem is that it is a st market for OTC trading but customers demand it. The cost of hedging is very high and you have to hedge because of the volatility.
It’s one of those markets where the end consumer has a tendency to automatically assume that it is the broker that is st as opposed to how the end product must be hedged, cleared and executed or that the product already contains so much volatility that it simply isn’t sane to add any leverage.
We’ve already seen in this thread, people blaming the OTC broker while not appreciating how the actual product works.
You can bring that cost down by disconnecting from the regulatory requirement but then obviously the default risk goes much higher so it’s really not much change for the end trader. For example, if you are offering 100x leverage how do you hedge that exposure risk? What if you are supplying the hedge yourself using other customers’ physical? And on and on. It’s those sort of risks that saw a lot of people wanting to use an FCA OTC firm but you have to turn that business away as it can’t be hedged and you do that by elevating the funding so that it forces out anyone not deterred by the spread or margin.
You could be talking about slot machines.t market for OTC trading but customers demand it. The cost of hedging is very high and you have to hedge because of the volatility. It’s one of those markets where the end consumer has a tendency to automatically assume that it is the broker that is s
t as opposed to how the end product must be hedged, cleared and executed or that the product already contains so much volatility that it simply isn’t sane to add any leverage. We’ve already seen in this thread, people blaming the OTC broker while not appreciating how the actual product works.
You can bring that cost down by disconnecting from the regulatory requirement but then obviously the default risk goes much higher so it’s really not much change for the end trader. For example, if you are offering 100x leverage how do you hedge that exposure risk? What if you are supplying the hedge yourself using other customers’ physical? And on and on. It’s those sort of risks that saw a lot of people wanting to use an FCA OTC firm but you have to turn that business away as it can’t be hedged and you do that by elevating the funding so that it forces out anyone not deterred by the spread or margin.
JPJPJP said:
It is true - retail speculation on crypto is very much there for the financial benefit of the platforms, not the trader.
Also worth remembering the scale of hypothecation that goes on in markets today: this means that retail speculation is so far removed from the actual asset that the trader believes she is speculating on, that she never actually has any real claim to the asset. It is merely a bet on the price that her broker assigns to it's symbol for that asset. The distance she is from actually having that asset in her possession is huge and the gap can never be bridged.
Even in the gold markets, unless you actually have physical in your possession, you probably can't actually translate your retail speculation on "gold" into actually having the physical metal it in your hand. Multiply that by a big, big, big number when thinking of crypto: unless you have the private keys and the coins in cold storage in your possession, you don't have the coins and your broker will only ever settle your bet in fiat / credit to your account.
That's fine if you want to try to make money from the volatility of the price, but do not ever confuse it with actually dealing with the underlying asset. Because you aren't.
Yup but with regulated retail OTC that is what they want. They want the broker to carry the asset risk whereas offshore they chose to carry it themselves. Hence the enormous cost differential. Also worth remembering the scale of hypothecation that goes on in markets today: this means that retail speculation is so far removed from the actual asset that the trader believes she is speculating on, that she never actually has any real claim to the asset. It is merely a bet on the price that her broker assigns to it's symbol for that asset. The distance she is from actually having that asset in her possession is huge and the gap can never be bridged.
Even in the gold markets, unless you actually have physical in your possession, you probably can't actually translate your retail speculation on "gold" into actually having the physical metal it in your hand. Multiply that by a big, big, big number when thinking of crypto: unless you have the private keys and the coins in cold storage in your possession, you don't have the coins and your broker will only ever settle your bet in fiat / credit to your account.
That's fine if you want to try to make money from the volatility of the price, but do not ever confuse it with actually dealing with the underlying asset. Because you aren't.
Also, under MIFID you can’t offer an unleveraged product and if you could you can’t use retail funds for the hedge anyway.
And on a totally separate issue, such volatile instruments simply aren’t appropriate for leverage as the risk/reward becomes far too skewed to ever make any logical sense.
Bitcoin is the best performing asset in all history. It is the hedge & you don't need an intermediary. All you need to do is get off zero and hold it, preferably as originally intended with private keys to your patch on its blockchain.
The traditional financial world doesn't like it because it doesn't understand it and there isn't much room to skim a living from it within the confines of their domain. Conflating bitcoin with crypto is the first red flag of many that indicate a lack of comprehension.
The traditional financial world doesn't like it because it doesn't understand it and there isn't much room to skim a living from it within the confines of their domain. Conflating bitcoin with crypto is the first red flag of many that indicate a lack of comprehension.
dimots said:
You could be talking about slot machines.
Same customer demographics at the bottom end of the trading industry. There’s nothing wrong with slot machines, most gamblers understand that ones located in the UK have a different level of regulation protecting them over the ones located in other markets and most gamblers know they can’t really win but are doing it for fun.
The separation occurs upwards, away from the bottom end of the market where clients of OTC firms use the product to enhance returns but that’s the break between investors and gamblers and ultimately they are two wholly separate groups with no discernible crossover.
Behemoth said:
Bitcoin is the best performing asset in all history. It is the hedge & you don't need an intermediary. All you need to do is get off zero and hold it, preferably as originally intended with private keys to your patch on its blockchain.
The traditional financial world doesn't like it because it doesn't understand it and there isn't much room to skim a living from it within the confines of their domain. Conflating bitcoin with crypto is the first red flag of many that indicate a lack of comprehension.
No. That’s tinfoil thinking. The financial world will use whatever works to make money. That doesn’t exclude BTC as clearly seen by all the financial institutions that offer it and the thousands of new financial firms that have been built entirely around it. The traditional financial world doesn't like it because it doesn't understand it and there isn't much room to skim a living from it within the confines of their domain. Conflating bitcoin with crypto is the first red flag of many that indicate a lack of comprehension.
Yes, it's a new financial world that is making money. Not tinfoil at all.
Here's a great pod from a macro guy talking to a VC guy. Covers bitcoin, covid & wider economic implications. A bit of swearing, so not one for the kids to overhear.
https://lindzanity.libsyn.com/panic-with-friends-3...
Here's a great pod from a macro guy talking to a VC guy. Covers bitcoin, covid & wider economic implications. A bit of swearing, so not one for the kids to overhear.
https://lindzanity.libsyn.com/panic-with-friends-3...
Behemoth said:
Yes, it's a new financial world that is making money. Not tinfoil at all.
Here's a great pod from a macro guy talking to a VC guy. Covers bitcoin, covid & wider economic implications. A bit of swearing, so not one for the kids to overhear.
https://lindzanity.libsyn.com/panic-with-friends-3...
I’m not sure you understand how financial markets evolve. Or rather, it doesn’t suite your book to not imagine that the financial industry is fixed at a point in time. Here's a great pod from a macro guy talking to a VC guy. Covers bitcoin, covid & wider economic implications. A bit of swearing, so not one for the kids to overhear.
https://lindzanity.libsyn.com/panic-with-friends-3...
Here’s the thing: BTC is part of the financial industry. It is not some mystical thing that sits in a wholly separate dimension.
. It is merely a corner of the financial industry. A corner which happens to have enormous cross over with retail tin foil gamblers and ‘they’re out to get us!’ people. 
And because it currently resides mostly in that area of the financial industry it currently remains rife with fraud, deception, tinfoil and plain stupidity. As do all the financial products that sit outside mainstream regulation for the most part.
DonkeyApple said:
Here’s the thing: BTC is part of the financial industry.
No it isn't.DonkeyApple said:
It is not some mystical thing that sits in a wholly separate dimension. .
Yes it is..DonkeyApple said:
It is merely a corner of the financial industry.
No it isn't.DonkeyApple said:
A corner which happens to have enormous cross over with retail tin foil gamblers and ‘they’re out to get us!’ people.
You're talking about a corner of the financial industry dedicated to high volatility trading of cryptocurrencies now, not bitcoin the protocol that enables secure peer to peer payments between networked anonymous entities.DonkeyApple said:
And because it currently resides mostly in that area of the financial industry it currently remains rife with fraud, deception, tinfoil and plain stupidity. As do all the financial products that sit outside mainstream regulation for the most part.
Yes I agree the financial industry currently remains rife with fraud, deception, tinfoil and plain stupidity.I'm not as naive as you'd like to think
All markets evolve over time and all contain a few participants who are ahead of the curve and very many who sit substantially behind it. Those behind only wake up when their chosen media or their bosses tell them to. Those ahead either convince their company to run with it or get frustrated & start something new.
Of those ahead of the curve, many will make the wrong call with both legitimate reasoning and, for sure, sheer stupidity. We saw all this in the dotcom era. That's fine. It's how markets work.
In the end, traditional finance will eventually embrace new technology and become the new traditional before the next innovation comes along.
All markets evolve over time and all contain a few participants who are ahead of the curve and very many who sit substantially behind it. Those behind only wake up when their chosen media or their bosses tell them to. Those ahead either convince their company to run with it or get frustrated & start something new.
Of those ahead of the curve, many will make the wrong call with both legitimate reasoning and, for sure, sheer stupidity. We saw all this in the dotcom era. That's fine. It's how markets work.
In the end, traditional finance will eventually embrace new technology and become the new traditional before the next innovation comes along.
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