Bitcoin on the rise

[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

[vexed87]

Not that this isn't obvious or anything, but it strikes me that there's a distinct possibility that if bitcoin takes off, central planners the world over could be blaming their inability to stop the next big crash on a flight to bitcoin. There will be interesting consequences.

[7Wannabe5]

@frihet:

Oh, I don't really know what I am trying to say myself. Just regurgitating a hairball from my brain based on mix-up of conversation about bitcoin I had with my super-successful investor friend and a book I am reading on the topic of the history of Chicago within its ecosystem. I think the reason why bitcoin might crash has something to do with the initial purpose of commodities futures and the definition of a reserve/anchor currency, but I can't figure it out. Also, what the article Jacob linked said about no easy current mechanism for shorting.

[bryan]

@Mister Imperceptible, OK. I see where you are coming from. I've understood all that (except the bit about it being manipulated by ubernerds.. it's purely capitalistic with a sect of technocrats that wield some control over portions of the field, for now) within a month of getting into Bitcoin.

Disclaimer: I own a range of cryptos, mostly BTC, and a range of dense metals.

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.

It may be more of a failure to re-balance than anything, probably? I started with a modest bet.. Today's pop looks like it could cover any capital gains taxes one would have faced yesterday.

There is a small part of me that thinks the big boys might notice they have a bigger upside with BTC appreciating than shorting it. For sure they will manipulate prices to their profit, but what exactly will that mean? Will banks fight each other? Plan their own game theory strategies to capture wealth from each other instead of all cooperatively shorting xor longing it?

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

"Functions of government to create currency"

Sorry to blow your mind but.. welcome to the 21st century.

"Doesn't serve any social useful function."

lol what? Maybe he means something specifically which he doesn't expand upon?

Then he immediately shills for a FedCoin: "digital mediums of exchange are great, we should have those." Sorry my man, been tried since the dawn of the Internet but Bitcoin was the first to make it possible. Can others take a blockchain technology and roll their own? Sure. It's just that governments no longer have a monopoly on currency.

"Bitcoins value comes from its ability for circumvention.. so we should regulate it."
Slightly contradictory? lol. How do you regulate and control something that is strong at circumvention? I mean sure you can make it more costly to get in/out of Bitcoin, but Bitcoin network itself? Big ask. Bitcoin is resilient but I imagine a task force at e.g. the NSA/CIA/motivated competitor could muck things up.

"Marxist theory of value.. value of exchange, smoke and mirrors.. "

huh?

"value of BTC today is expectations of value tomorrow.. government can outlaw any moment and it collapses."

This is how prices are set, my man! For everything! It's just that Bitcoin doesn't have many components that you can use to subjectively value it.. Ideally you do have something that is more stable, like an IMF Store of Value Index or something industry specific, but we are instead mostly left with speculative pricing aka predictive pricing aka market value.

I feel like an idiot thinking that I know better than a Nobel Economist..

> Knifed by a Fork

Forks are actually like dividends or weird stock splits. So far a good thing (none of them actually threaten the Bitcoin acceptance at merchants), free money for Bitcoin holders since the arithmetic has so far always worked by increasing the total combined value (I would love to read some economist thinking of why this happens).

Though, they also mention ETH, which is not a fork, which is a bit of a different risk. This (FedCoin, AppleCoin, EUCoin, LiteCoin, etc) is a legitimate risk, obviously.

> Strangled by Regulators

Sure it could cause a price crash. But it would not kill Bitcoin unless there is some major global conspiracy, attacks, (Bitcoin treatment in USA is not as good as in Japan, others). Bitcoin is resilient but I imagine a task force at e.g. the NSA/CIA could fubar things.

> Hacked to Pieces

They don't mean Bitcoin of course, but the peripheral. Indeed, if some major hack or fraud happened at e.g. an exchange, it would likely crash the price.

> A Short Demise

I am worried about this, immediately. It's not a sure thing but I do think the volatility will increase.

> Pass Away on Profit-Taking

LOL, what?

> Death by ¯\_(ツ)_/¯ "It’s been a puzzle to explain why bitcoin’s gone parabolic. Why would we expect the way down to be any different?"

LOL, what?

"Perhaps it could end like the dot-com bubble -- with investors who have no clue how to value high-flying assets fleeing for the exit en masse."

Fair enough, but last I checked a lot of tech companies are doing fine post-bust.

[Mister Imperceptible]

> Death by ¯\_(ツ)_/¯ "It’s been a puzzle to explain why bitcoin’s gone parabolic. Why would we expect the way down to be any different?"

LOL, what?

"Perhaps it could end like the dot-com bubble -- with investors who have no clue how to value high-flying assets fleeing for the exit en masse."

Fair enough, but last I checked a lot of tech companies are doing fine post-bust.

Microsoft and Cisco are dominant in the software and hardware markets for businesses everywhere. Will businesses (more importantly, the finance sector) buy BTC, or will they develop their own blockchain?

[batbatmanne]

So what does everybody think about the fundamental premise of cryptocurrency operating as money, which conventionally means that it operates as a store of wealth, a medium of exchange and as a unit of account? Bitcoin seems to only have the first quality so far, functioning as a kind of digital gold that is very volatile right now because it is functioning primarily as a speculative instrument. There do seem to be some foolish fanatics on the internet that are investing everything into bitcoin right now because they think it is future money and that it will therefore make them rich to get in early (boy will they get hit hard when the bubble pops), but most of the big money looking at bitcoin right now recognizes that it is speculative and doesn't trust the fundamentals.

It currently sucks as a medium of exchange since transfers take a while and there are high fees, so it couldn't be used to purchase a cup of coffee right now. People are convinced that this is a solvable problem but I'm not knowledgeable enough to evaluate this claim. It also sucks as a unit of account, since bitcoin trades have everything to do with its trade value in fiat money. That being said, perhaps bitcoin's original intention of being currency was simply a mistake and it should instead continue to be considered a kind of digital gold.

The biggest draw of alt-coins is that they attempt to do something different from bitcoin but they have to go against the first-mover and popularity advantage of bitcoin. It strikes me that if a cryptocurrency ever did gain traction as money then its fundamentals would be pretty important for long term adoption. The one that strikes me as most interesting is Monero (XMR), which is completely anonymous by default and is therefore fungible. It is also disinflationary rather than deflationary like bitcoin. It seems to be the only cryptocurrency out there that actually has a use case: the black market. If big money is going to flow into crypto then I am pretty well convinced that they will not be satisfied with their accounts and transactions being completely transparent on the blockchain. However, this kind of use case might make it even more vulnerable to the risk that governments will simply outlaw it.

[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/

[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]

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]

@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]

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]

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..

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]

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]

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

[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]

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.