Bitcoin on the rise

[distracted_at_work]

Anyone on this rocket ship?

[Kriegsspiel]

Nah.

[bryan]

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).

I asked what allocation folks were thinking, but everyone said 0%, lol. 5% allocation that I've suggested in the past looks like at least a 50% allocation about right now, if you never re-balanced.. if you were in that spot, maybe a 10% allocation would be better. If you had 0% I would still suggest something like 5%. The macros still look good for BTC, but overall it is more risky than it was a year ago.

[distracted_at_work]

I agree with you Bryan, that a 5% allocation would be good to have. Thoughts on using a cryptocurrency in exchange for gold? In other words, instead of holding gold in a portfolio holding a crypto? I see both having similar uses, although bitcoin may become widespread in day-to-day transactions in the future.

My research has also led me to realize that the options for buying BTC (or LTC or ETH) are atrocious for Canadians. Just funding trading account would cost me 2-5% depending on the methods. And then I'd be bounced around certain exchanges to ever get back Canadian dollars. That's too steep a fee for me (even considering a theoretical 1000% gain).

[bryan]

Kraken doesn't work for Canadians? It's a reputable one based in SF that seems pretty accessible worldwide. Their website says:
> CAD Wire Deposit (Free)

If you took a portfolio allocation that had gold/commodities, I would take that allocation and make ~20% of that BTC/ETH/etc. It could also fit in the bucket that you reserve for high risk/reward bets e.g. angel investing.

[distracted_at_work]

That's true it's free on Krakens side. The wire transfer itself is the killer. At the moment for me to complete a wire transfer I'd need to open a bank account with one of our big 4 banks and then pay $30 - $80 flat + variable fees (?) to that institution. I've read forum stories (at work earlier today - will try to link to it tomorrow) where the total fee being taken out was $333 of a $2K transfer! Apparently an intermediary institution took a cut? On further research the best solution would appear to be ordering a bank draft and then going through Coinsquare, a Canadian exchange. $10 + 0.25%. Withdrawals are 1%. Trading is 0.1% if you are the maker.

I really hate fees... wish I could invest in these exchanges! They must be cleaning up.

Edit: Fees may be worse than I thought relevant reddit post.

[BRUTE]

who cares about 2-5% fees when daily RoI is 10%?

also: definitely not a bubble.

[frihet]

I'm on, wow have never seen a speculative market like this. Forced myself to rebalance into gold yesterday. Even though the last rebalancing became expensive in hindsight. Have about 20% each now gold and crypto.

Kind of like this allocation. If crypto goes to zero gold have always been valuable. Doubt crypto will disappear however. But who will be the final king of crypto? Made the bad decision of switching my Bitcoin Cash to Bitcoin Legacy just before BCC took off. Aknowledge that I'm not nerdy enough to have any idea. Just one more reason to diversify/hedge between cryptos and into gold.

[frihet]

Wrote this in my journal. How does other's with a big and growing crypto allocation resonate?

"With the volatility of crypto and difficulty of using it in the day to day life. How much can I trust this portion of my portfolio value towards the SWR?

No answer but something to think about. Neither to see crypto rising dramatically surpassing my target or falling steeply taking me further away would surprise me. Or worst taking me beyond my target, me quitting work and to then see my portfolio value crashing."

Leaning more towards seeing this portion as the becoming wealthy ticket and not the trusting future ERE life part.

[BRUTE]

extreme volatility means extreme potential gains, but also extreme risk. crypto is therefore currently a great option for building capital, but a terrible option for conserving wealth.

brute has quite a high % of his assets in crypto, because he's still in the building capital phase. if he were to quit his job and live off his capital, he'd probably sell off some of the crypto until about 20% of his assets. still enough for a big upside, but not a wipe out if it all goes to zero. this is assuming crypto is still as volatile when brute goes FI.

[jacob]

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).

SPUs et al (equity) is also cash settled. To me that seems like a good thing. If bitcoin liquidity is limited, then settling in bitcoin would make it, perhaps too, easy to corner the market (see https://en.wikipedia.org/wiki/Silver_Thursday for historic example). Since futures accounts are balanced at EOD, they require much less margin posted. IIRC, equity requires something like 3-4% margin to post (although this may vary by firm). This means you control $100 of product with $4 down.

Another thing to keep in mind is that with futures, for each long position, someone else has a short position (and the open position count change accordingly). IOW, it's a zero-sum game. If someone made a tick, someone else always lost it. To see how active markets are, compare the size of the open positions. S&P is huge. Natgas for delivery many months from now are tiny (or at least they were back in my days).

The question is what will arbers do to capitalize if the possibly very liquid future gets out of whack with the possibly not so liquid underlying? Equity is easy because both markets are deep and superliquid and settle in cash. Natgas is an example of huge spreads that are volatile but settle in product, so ...

I dunno ...

[Mister Imperceptible]

I have zero bitcoin, but my friend just sold off 75% of his BTC after it hit $10k. If you put any stock in George Soros’s Theory of Reflexivity, this is the part where the swings get wild, right before a crash. My argument was that bitcoin has no intrinsic value. My frequent statement to my friend was “You’re right to ignore me, until the moment you’re wrong.” Because if people start to panic sell, there’s no underlying value to stop it from going all the way down to zero. Why not pick any other crypto? It’s a popularity contest and a zero sum game. Someone can say they made money, but it’s only at the expense of someone else.

This is making me consider buying gold. Perhaps the next pure momentum opportunity, with the added potential to benefit from mass fear. Not the same upside as buying bitcoin for 3 cents, but bitcoin is only one of many cryptos. Gold is the only gold there is. Also, I would be terrified that someone much more tech-savvy could hack and steal my bitcoin.

[distracted_at_work]

This is making me consider buying gold. Perhaps the next pure momentum opportunity, with the added potential to benefit from mass fear. Not the same upside as buying bitcoin for 3 cents, but bitcoin is only one of many cryptos. Gold is the only gold there is.

How is gold any different from Bitcoin in the modern age? Both have no underlying value, correct? I can't build anything "usable" out of a soft metal like gold. Bitcoin is just a code on a computer. I'm trying to understand why gold but not bitcoin? Is it the history behind the metal?

You can secure your bitcoin by literally printing it off and storing it in your home btw.

Disclosure: I own neither.

[bryan]

@jacob, arbers across exchanges have certainly been making a healthy % profit recently. In the US the exchange for coinbase (GDAX*) is good and has the majority of users placing market buys/sells in the US. There are otherwise exchanges operating across the world 24/7; nice if you have international bank accounts, presence, and automate trades w/ some oversight. Not as many signals from the real world to consider, compared to basically all other assets except maybe forex (of course you should watch for some stuff like exchanges getting hacked or committing fraud)? The CME price is determined by some combination of the price at: bitstamp, GDAX, itBit, and kraken. Interesting to see how Bitcoin price will look once last Friday of the month(s) approaches..

My theory about the price crashing once CME starts is essentially that big money wants to short bitcoin, but has not yet because shorting on exchanges today is not a high enough reward for the risk. They also want to rig the game to ensure they won't lose money. Pretty straight-forward plan to then buy Bitcoins now in the hope of spurring mob buying ("We expect $40k in 2018") and then arrange your futures so that you can dump the Bitcoins on exchanges that give you bang for your buck before the CME reference rate gets locked. Currently you can dump $2M BTC on kraken to drop the price by 3.75% (who knows if arbs will arb or algs will buy/sell or humans will human or exchanges will halt trading).

Your point is taken about two sides to a trade.. but it just feels like the majority of the big money wants to short BTC (especially if it threatens their own business's profits), at least the first month or two? And where else is the price rise from the last month or two coming from (other than some newbs)?

Cornering the market in BTC is interesting, but it seems the worst someone could do that has a ton of BTC is the same as someone that has a ton of USD (i.e. US government, China?): cause booms and busts (and reminder, Bitcoin production is set and (probably) can't be changed). While on the flip side cornering the market means everyone else's coins are worth more and more people want to experience the boom? Otherwise it's not like people can't just use fewer Bitcoin for the same purposes they used more Bitcoin previously (afaik not many things are priced/locked to BTC amounts as opposed to USD), or less likely the hive-mind shifts to use ETH/LTC instead.. There is the bust to consider, but that devalues the person's holdings that cornered the market? I just don't get why you would want a monopoly on a commodity like Bitcoin that isn't actually needed for anything, basically (unless you are trying to kill BTC i.e. you are a bank, insurance, or government..). Of course I am not a finance engineer.

All of these thoughts penned, and what goes through my head when re-reading, just does not bode well for Bitcoin, I think. An ETF would be much preferred!! Banks just seem primed to manipulate the Bitcoin price.

If the BTC price collapses, where is the floor? I think without any significant information, today it is around $5k or $7k. Truly bad would be $2k. When would I personally buy more BTC? Well knowing that the market can be too volatile, I might make a purchase around $5k or $3k if it is a flash crash, with the expectation to make an easy 30-50%. Fundamentally, the value floor feels closer to $2k at the moment; of course the future price still feels very high...

Gold is the only gold there is. Also, I would be terrified that someone much more tech-savvy could hack and steal my bitcoin.

And Bitcoin is the only Bitcoin there is. (I mean, what do you mean?) A lot of people are shifting in their thinking to realize that maybe this Bitcoin stuff is really a great (digital version of) gold. The arguments haven't changed since 2010, the only thing that is changing is more people buying into the idea. BTC is getting easier to secure by the month. But good point, if you are your own bank you are in charge of your own security. I said the week after I heard about Bitcoin that it would have the effect of improving computer/digital security across the industries (which improves the likelihood of digital assets in general being in your control, as opposed to controlled by a big corporation e.g. Tesla, BoA, Vanguard, State Farm, UnitedHealth, governments).

[*] edit: https://www.cnbc.com/2017/11/27/bitcoin ... chwab.html Circle was the other on-ramp for noobs to Bitcoin.. they screwed up, lol.

[Mister Imperceptible]

Gold has a long history as a store of wealth. Bitcoin does not have a patent on blockchain technology. Russia is already implementing a cryptoruble (PUTINCOIN!). There is nothing to stop the establishment from appropriating the technology for their own system.

If you feel comfortable with cryptos, be my guest. Like my friend, there is a chance it can rapidly increase your wealth. It can also rapidly wipe out your investment. The cryptomarket may be as susceptible to manipulation by ubernerds as fiat currency is by central bankers. At least I can hold gold in my hand, and it does not rely on massive infrastructure and energy for its very existence, as Bitcoin does.

Disclaimer: I own no gold (yet).

[frihet]

sell off some of the crypto until about 20% of his assets. still enough for a big upside, but not a wipe out if it all goes to zero. this is assuming crypto is still as volatile when brute goes FI.

Sounds like a good plan. Also bold to be in so much crypto until FI. Wish you the best of luck!

Also interesting to see the speculation that futures will be used to manipulate the market. Without understanding the details for sure when the big boys enter it is to pray on us small ones.

As for gold I believe 5000 year of human history speak for it self, no need to outsmart that.

If you see bitcoin as a bet against the fiat money system for millennials. It makes sense to hedge that bet with gold's history as money.

[7Wannabe5]

If you see bitcoin as a bet against the fiat money system for millennials. It makes sense to hedge that bet with gold's history as money.

Also, 3 female and 1 male breeding age meat rabbits. Tulips reproduce almost as fast, but are only nominally edible. A sturdy rabbit cage with a cryptographic kryptonite padlock is also generally likely to maintain value, but I think maybe only if somebody has some rabbits to put in it.

[frihet]

In today's episode of macro voices around the 17min mark Erik discusses the implication of futures on the Bitcoin market.

https://www.macrovoices.com/330-jonatha ... arian-long

Connecting it to the gold topic as well and the age old debate of how the futures market supposedly surpress the gold price.

Coming up with the idea for anyone studying finance and looking for a thesis. Who could write a paper on how bitcoin's value changes with the invention of bitcoin futures and adding that to the gold and futures debate.

Interesting!

[frihet]

but I think maybe only if somebody has some rabbits to put in it.

7wannabe5 are you giving me a zen koan? Or am I just too autistic to understand your point quite possible.

I surely hope I don't see a future where rabbits breeding in a cage is needed to produce value. But who knows? I've read it was popular during the war here in Sweden.

Reading a Swedish thriller, Höstsol written by a "peak oiler" named Lars Wilderäng at the moment. Brilliantly blending facts with fiction about a future conflict in the Baltic Sea with the Russians. So your rabbit cage might be needed sooner than later.

[jacob]

Some crash scenarios: https://www.bloomberg.com/news/articles ... his-bubble