Bitcoin on the rise

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Optimal_Solution
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Re: Bitcoin on the rise

Post by Optimal_Solution »

People have spent over $1M buying virtual cats on the Ethereum blockchain.

It's beanie babies all over again.

https://techcrunch.com/2017/12/03/peopl ... lockchain/

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Mister Imperceptible
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Re: Bitcoin on the rise

Post by Mister Imperceptible »

Yes but is there a finite number of CRYPTOKITTIES that can exist? If the last cryptokitty is bred in the year 2573 CE, their value can only go up and we have to buy now!

7Wannabe5
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Re: Bitcoin on the rise

Post by 7Wannabe5 »

In the middle of the 19th century, the invention of the steam-powered grain elevator rendered the previous system of grain being transported and sold in sacks clearly labeled with the name of the farmer who grew it became obsolete. The Chicago Board of Trade, still in its infancy, created uniform grading standards for agricultural products, and grain elevator receipts became the "currency" of exchange.

Then the telegraph was invented.

"A New Yorker could simply check telegraph quotations from the floor of 'Change and wire back an order when the price seemed right, without having to examine a sample of the grain in advance.

Telegraphic orders of this sort encouraged a sharp rise in what traders called "to arrive" contracts for grain. Under these contracts, a seller promised to deliver grains to its buyer by some specified date in the future. Like the telegraph, "to arrive" contracts significantly diminished the risks of trading grain.-"Nature's Metropolis: Chicago and the Great West"- William Cronon"

So, if the internet=the telegraph, the crypto-technology=steam-grain-elevator-technology, and the bitcoin=grain elevator receipt, then what= the grain?

Related question would be does the fact that the fiat currency of the United States is well-accepted as anchor have nothing to do with the control the U.S. government has over grain production and pricing?

jacob
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Re: Bitcoin on the rise

Post by jacob »

@7 - Reminds me of Joe Siegel and his "green lumber" trading: https://www.farnamstreetblog.com/2016/1 ... r-fallacy/

For many traders(*), the grain is just numbers on a computer. When I went into finance in 2011, some people made the [derogatory?] comment that I would just be flipping digits. I dismissed it, but that's in a sense what it is. Modern finance has a concept, I've discussed before, but recently learned has an actual name for it: "Stratospheric money" ... think of all the money that went into QE and made wealthy people (like us, here) much wealthier w/o having much of any effect on the rest of the economy. If 10% of people own 90% of the wealth---let's say 10 put own $90 out of $100 indexed----then quadrupling their money in the stratosphere ($400) is not necessarily going to bring it down to earth to be spent [at 4x the market's P/S] because those 10% can only increase their consumption so much. Instead the money remains in the stratosphere.

(*) But grain futures (aka "cornflakes" in lingo) do deliver in product. If you forgot to close out a future at expiry, you are now either responsible for showing up at a certain place at a certain time to take away or deliver X tonnes of Y quality. So the connection to reality does exist and is enforced by contract.

Not so for bitcoin or stocks. Of course, this can be done in theory, but people making the connection by living off of income they pull out of the stratosphere are somewhat rare in practice. Even SS retirees are just pay-as-go shuffling money from taxpayers to themselves down on the ground level. Essentially, what this does is to create a rentier-class ... kinda like an aristocracy.

LookingInward
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Re: Bitcoin on the rise

Post by LookingInward »

I am saving this website for future reference on bitcoin and decided to share with the forum: https://seekingalpha.com/article/412149 ... ics?page=6

You can tell a lot of work went into making it. Hope it's interesting for you guys

bryan
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Re: Bitcoin on the rise

Post by bryan »

bryan wrote:
Thu Nov 02, 2017 2:41 pm
Surprised none of y'all have posted in this thread in the last 24 hours! Up ~20% on the week, 60% on the month.

Big moves in price usually means big news coming out soon. If no big news, then it just means a lot more capital coming in (either main street or wall street, I would guess the later).

Curious what % others think is "too much" for a BTC/crypto-currency allocation in a portfolio? I have usually suggested people to have ~5% (which might look like 15-50% today if no re-balancing has been done.. how often to re-balance such a volatile (mostly upwards so far..) asset?).
Since the quoted post ("BTC is up 60% on the month"), BTC is up an additional 130%. Cool.

Still not much news to explain why the price was rising a month+ ago.. so I imagine it is just a bunch of money coming in. The current price boom is probably the hype cycle. It's hitting the hardest in Korea, where they are going manic; not sure about the Japanese. If you had a Korean/Japanese+US/EU bank account and funds, you could have been making a 20% arbitrage. Now the delta is back down to about 10%, which probably reflects the cost of that particular arbitrage.

That 5% allocation proved to be a nice bet.. anyone taking the Larry Swedroe approach (i.e. reducing the risk of black swans) is smiling, at least for now: (my point is still) when to re-balance such a portfolio? I haven't read his book so I'm not sure.. @Tyler9000's charts do annually..
bryan wrote:
Wed Nov 29, 2017 6:26 pm
CME being cash settled kind of freaks me out a little. I would bet that the effect of CME starting BTC trading would start with BTC crashing a bit (my theory is that firms have bought BTC leading up to CME market opening with the plan to short it then sell it).

...
The macros still look good for BTC, but overall it is more risky than it was a year ago.
CME pushed back a week. Hopefully that calms the markets a bit?

There is the theory that this is just efficient market finding their price (e.g. a hedge fund guy buying BTC personally with his millions, with the knowledge that his fund will be going long through futures when they open). However, I still like my theory (upcoming short and in general a plan for market manipulation since you can bet on exactly what you can control: BTC Reference Rate) better. He with the most capital (ideally colluding with other market actors), wins. It would be great if the large capital interests are inadvertently pitted against each other (bank v bank; hopefully not bank v retirement funds) instead of cooperating right out of the gate.. Will futures dictate the price? I would much prefer someone bet $1M on a BTC future, because bubble, but not also have a plan to manipulate the price on the exchanges in the contracts favor.. How will the arbs approach the apparent latent demand to short BTC? Will they try to squeeze the shorts (not so much a squeeze since cash settled... damn it!) and cause the price to go to Mars?. Again, choice to go cash settled is intriguing and I don't quite understand, other than the "Big Dollar" conspiracy angle of driving BTC price (i.e. a lot of the attraction) to the ground.

Posted a short update to my current dealings w/ Bitcoin in my journal (tl;dr divesting some risk), feel free to quote anything from there here.

And on another note, it does bother me a bit with everyone negging Bitcoin (explicitly calling it a ponzi or bubble or "missed the bus" or basically having a hot take on the thing yet they probably couldn't describe Bitcoin to a five year old).. I mean, I somewhat agree the price gain is "not warranted" (I mean, other than it being self-evident that it is warranted.. so what do I mean? I guess that not much has changed from a few months ago* other than influx of capital..), but people are talking about it as if this isn't exactly what it would do if it really were "digital gold.." Just a waiting game now..

[*] well actually, this current Bitcoin mania is stress testing the Bitcoin network throughput.. and it's not looking good^H^H^H^H cheap.
(i.e. working as intended according to many.. this has been a cause of strife for years now..)

BRUTE
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Re: Bitcoin on the rise

Post by BRUTE »

1MB transaction/block is pretty limiting, and BTC has been exceeding that limit regularly for months or a year now. this is simply a technical limitation that is being solved by some (Bitcoin Cash, Ethereum, pretty much any other coin than classic BTC). should this ever become an actual problem, enough to cause humans large pain, humans will switch to those alternatives.

Kriegsspiel
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Re: Bitcoin on the rise

Post by Kriegsspiel »

Why should anyone trust any one cryptocurrency, when others can spring up willy nilly?

bryan
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Re: Bitcoin on the rise

Post by bryan »

Why indeed Krieg, why indeed. Lesson for the reader?

@BRUTE, you say it like it's a solved problem. Ethereum has hit the wall more often than Bitcoin has. Bitcoin Cash is pretty close to a farce. Though there are those who've thought that it's OK for many app coins to exist and it's a free market. I tend to agree here, but the security model is not so easy under typical expectations of about launching a new app coin. If many app coins existed, there would be a demand for a crypto-currency index token...

BlueNote
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Re: Bitcoin on the rise

Post by BlueNote »

A relative of mine bought 1.3 bit coins a long while back. I do this persons taxes and they didn't tell me about this until recently :?

This person did engage me in advance for my advice and I explained crypto investing was akin to gambling. Dog shit has more intrinsic value than bitcoin but I digress to the vast network of individuals who are placing (or misplacing) their trust in the almighty bitcoin. It's interesting technology for sure and I see many uses for blockchain and how it can revolutionize many processes. I can make my own crypto currency almost out of thin air that has the same or better qualities than bitcoin. I guess momentum is the thing propelling this market upwards, greater fool upon greater fool until you hit the greatest fool and then it will be interesting to see what happens.

I told my relative to keep a record of all of their crypto related transactions, which I hope is happening. Turns out they made a bunch of little trades here and there trading one crypto currency for another which creates a headache for me trying to figure out how the Canadian tax authorities would interpret those transactions. I have been researching crypto in advance of their 2017 tax return so I'll have to do a bit more research.

I told them that they'd have to pay tax on any gains and they were doubtful at first. There seems to be some utterly asinine notion out there in crypto-investor-land that cryptocurrency transactions are immune from regulation. You have to convert the crypto to some non-crypto currency to buy almost anything. As soon as you do that you'll likely create a transaction that is trackable by your government. Canada has various systems and processes in place to flag large cash flows and will likely prosecute a bunch of these crypto gamblers who think the rules don't apply to them. If businesses actually start widely accepting crypto-currency instead of normal government issued currency than the government could just monitor those businesses alternative transactions to achieve the same tax revenue objectives. They could also ban the use of crypto currencies for any transactions other than between normal currency and crypto.

halfmoon
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Re: Bitcoin on the rise

Post by halfmoon »

BlueNote, you have my utmost sympathy. I prepare my family's tax returns; it's frustrating. It does, however, give me notice (though not advance) of any ill-judged moves on their part. I live in dread of discovering that any of them have "invested" in bitcoin. These relatives are all older than I and lacking spare play money for this sort of gambling.

I like your greater fool/greatest fool point. A lot.

bryan
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Re: Bitcoin on the rise

Post by bryan »

2017 will probably be my most complex tax year (and planning for 2018) yet. Uncle Sam will be quite happy. Ideally everything in BTC remains calm next year and I can stay in the 0% LTCG bracket..

Being in the Bitcoin space for years, it's really interesting seeing the fundamental stuff being built up and around and under Bitcoin. It mostly seems like porting or re-discovering stuff from finance/markets/etc history. Cool to see how the plumbing works. Weird to see how our current day's psychology, in regards to those domains, may have evolved from scratch.

The current run up in price is following the start of futures trading at CBOE. I find it kind of funny (the BTC +20% 24hrs, atm), because the initial trading was likely only a few very well-off Bitcoin people pumping the futures and lo-and-behold the spot prices immediately follow.. Currently the CBOE volume is 2425 BTC (the initial jump was just from a few BTC..), which has caused much more volume than that in the real markets*.. kind of pitiful** considering most people in the real markets probably have no idea how the CBOE BTC price is calculated: the daily auction at Gemini (historically, very low volume compared to other exchanges).

[*] unless there is some other reason for volume.. maybe Asia just really felt like buying BTC Monday morning?
edit: [**] then again the futures are at $18.8k now and no one on the exchanges actually wants to touch that sell wall at $17k... maybe it is futures market buyers putting up the sell wall hoping that the newspapers on Monday morning report "BTC stable at $19k!" and then everyone who downloaded Coinbase will check and see $17k and buy? Or maybe pull their sell orders? Who knows.

I expressed worry earlier about CME futures. I still have that worry (especially after seeing how this pump is working well). However, yesterday I was looking more into CBOE (since I had completely forgotten about it..). My conclusion last night was that CBOE would actually have a positive effect on the BTC price leading into the CME launch, due to most people (that want to "short") probably waiting for CME whereas people that are "long" Bitcoin (especially the Winklevoss who run Gemini which is used for CBOE..) have more to gain by pumping the price in the small volume Gemini auction and letting the rest of the liquid market fall in line. Anyone that really needs to hedge against bitcoin prices doesn't mind another week for CME to open for more liquidity and they certainly don't mind another week of price bumps. Any really bad news for Bitcoin (mainly thinking of all the Tether stuff.. but also any exchange news in general) is being saved until sizable futures can be traded.

I plan on moving some coins to Gemini, if they finish verifying me, to take advantage of what I think will be market manipulation (up). Basically I think Gemini spot price (or rather the final daily auction price) will end up being the highest BTC price in the US (previously GDAX thanks to Coinbase). I may sell more BTC than I want to, in the hope of a crash after CME to buy at a higher cost basis.. not sure on that yet.

Funny thing in response to BTC going up thanks to futures trading: https://www.youtube.com/watch?v=2LTkeBqiRJQ

It's also been interesting to see how restrictive the banking industry is these last few years. I'm starting to come around to the opinion that even though Bitcoin has really fallen short from being a digital cash, it has so far proven to be a powerful money (network/system). I'm starting to come around to the idea that Big Banking may not mind Bitcoin that much, now that it doesn't really work well for consumers.

> Turns out they made a bunch of little trades here and there trading one crypto currency for another which creates a headache for me trying to figure out how the Canadian tax authorities would interpret those transactions.

If they avoided dollars, it's debatable whether or not it is a taxable event. Basically, how would you treat that Craigslist guy that turned a paper clip into a house? Though, that's not even a good analogy since it's more like how do you treat swapping physical bearer stock? Or maybe it is a US forex trader who never touches USD? Not sure.
Last edited by bryan on Mon Dec 11, 2017 6:41 pm, edited 1 time in total.

halfmoon
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Re: Bitcoin on the rise

Post by halfmoon »

Regarding taxability of cryptocurrency trades: the IRS (don't know about Canada) is pretty definite that anything realizing a gain is taxable. The only real question is whether it's a capital gain or ordinary income. I anticipate a lot of extra business for tax preparers over this. ;)

https://www.irs.gov/pub/irs-drop/n-14-21.pdf

distracted_at_work
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Re: Bitcoin on the rise

Post by distracted_at_work »

A couple links I found helpful when researching cryptocurrency in Canada:
https://www.canada.ca/en/financial-cons ... rency.html
https://www.canada.ca/en/revenue-agency ... rency.html

I applied to a Canadian exchange 7 days ago and have yet to be approved to fund my account. People continue to rush into it. Haven't decided if I will add a position or "spend" my bitcoin money on new mountain gear yet haha.

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fiby41
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Re: Bitcoin on the rise

Post by fiby41 »

I rank this article next to gandk's podcast for a reasonable take
Is It A Bubble? Is It An Asset?

jacob
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Re: Bitcoin on the rise

Post by jacob »


ThisDinosaur
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Re: Bitcoin on the rise

Post by ThisDinosaur »

Anybody shorting this yet? What would be your criteria to do so?

Also, how do you think a mass exit from bitcoin would affect other asset class prices?

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Seppia
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Re: Bitcoin on the rise

Post by Seppia »

No, I would personally not own bitcoin (I don't), but I'd never short it either.
This thing went up 20x in a year, it could go to zero in a month or triple for all we know.

bryan
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Re: Bitcoin on the rise

Post by bryan »

I love reading a lot of these hot takes and articles (so many are so off-base..). I'm not a huge fan of Bitcoin this last year for various reasons (i.e. it is riskier than ever; 2013+ was a clear BUY where if someone disagrees I just respond "ha, yeah don't if you don't want to.." (multiple friends have now expressed that they wish I had tried to convince them harder..)), so I am always looking for news for why I shouldn't keep at least some Bitcoin et al as part of my portfolio. Very surprised that there are no new arguments to be read..

Let me re-iterate.. I don't really know if it will go up or down from here. I've had all the same concerns since 2015 (some have not come to pass yet while some have played out in exactly the bad way).. yet the price has risen. A lot of people had the same concerns and decided to exit Bitcoin after failing to address said issues. Too smart for their own sake?

Maybe this run-up is just the built up energy from behind the scenes in wall street being released? Are big BTC investors exiting their positions as we speak? Is this the BTC IPO (I would have said that would be an ETF...)? Main reason I've held onto a chunck of BTC even after doubting it the past two years or so is because it still looks like a great hedge against economic/financial/capital crises like 2008 or civil wars. We haven't really seen that tested yet, other than Cyprus.

I do think Bitcoin as-it-is-today will not be the dominant one in five, ten years. Short term, there are only a few alternatives, but I expect some superior choices to arise, eventually. I just hope they have the same sort of emphasis on decentralization, censor resistance as Bitcoin did.

> I plan on moving some coins to Gemini ... to take advantage of what I think will be market manipulation (up). Basically I think Gemini spot price (or rather the final daily auction price) will end up being the highest BTC price in the US (previously GDAX thanks to Coinbase).

Welp, first day was a fail as my (out of the money, as it were) auction order did not get matched.

> "We've seen mortgages being taken out to buy bitcoin"

I remember the guy on reddit that bet it all on BTC (a year or two ago?). He was terminally ill and a BTC fan and had the appetite for the risk. Anyone doing that today is taking an even larger risk, imo. Though I suppose it's safer than taking a mortgage to _short_ Bitcoin :lol:

> Anybody shorting this yet? What would be your criteria to do so?

Still can't really go short on it unless you are directly tied into CBOE, I think. I would short it if I had some information that others did not (e.g. such and such exchange stopped processing BTC withdrawal and I got early news that the CEO took the billions of BTC worth and ran.. or I found early news of a signature signed by Satoshi (the implication being a shit ton of supply just came back from the dead)). One nice thing about futures vs BTC is the speed at which you can enter/exit. If your BTC is not on an exchange, you can't sell it. It takes >1 hour to transfer to an exchange.

> Also, how do you think a mass exit from bitcoin would affect other asset class prices?

Related to above, the big money would get theirs and the little players would be looking at a 90% loss. Probably would do absolutely nothing to other asset prices; BTC is far too small for that (well, I suppose it would be interesting to see if people go into BTC alternatives..).

Solvent
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Re: Bitcoin on the rise

Post by Solvent »

Heh, I'm feeling smart right now... I saw the price rising fast at around 8,000 and felt damn near 100% sure that once it hit 10,000, the subsequent media storm would cause the price to punch hard through that benchmark. It's nice to be right. I already took out an amount equal to 25% of my initial stake, wondering when I should pull the rest... It was only a three-figure amount, we're not talking sheep stations here. For those of you with substantial sums floating around in bitcoin-space, I really don't know how you deal with the volatility. It doesn't suit my temperament. I wouldn't be able to put the price fluctuations out of my mind.

I've been following bitcoin news only a little bit since around 2012, but never actually bought any until just recently. I remember telling my more risk-happy friends to be very cautious in this space, but hey, I guess a few of them made reasonable money over the past five years, while I just went into equities. I think the concept is fascinating, but that's not to say I think the current value is justified. I'm certainly hoping I can pick an appropriate time to sell to a greater fool, but we'll see.

I 'diversified' (whatever that term is worth in this space) across a few coins and on a whim put more into Litecoin than Bitcoin. Lucky me, that actually tripled compared to BTC's roughly 60% rise.

Not claiming to be an expert in any way on this subject, but I do know more about it than my colleagues and find myself trying to explain it to them. From what I read about transaction times and fees, I think Bitcoin is starting to look like a bit of a MySpace - it's a massive groundbreaking thing, but it will be supplanted at some point.

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