Bitcoin

Kevin Richardson posted

Please don't call BTC a Ponzi Scheme. It is not based on fraud and/or deception. The markets are a bit susceptible to manipulation but the impact any individual can have day-to-day on market price will decrease over time

You have my apologies. I shall refrain from using such a description. Please forgive my poor choice of words.

winkyincanada posted:

Kevin Richardson posted:

Please don't call BTC a Ponzi Scheme. It is not based on fraud and/or deception. The markets are a bit susceptible to manipulation but the impact any individual can have day-to-day on market price will decrease over time.

It is a variation of a Ponzi scheme in which everyone who is playing already knows it is a Ponzi scheme. So the fraudulent nature of a "traditional" Madoff-style ponzi is arguably absent.

It’s  pretty well as much as a Ponzi Scheme as trading stocks and shares  ... especially in western markets where there is a degree of regulation... if you wish to trade stock and shares or cryptos you soon realise they are very similar... based on fundamentals, long positions, and most of all sentiment...  Severeal years back when I was studying the markets  I was genuinely surprised to learn that company stock value  is  not directly related to how well the company is performing... its actually the sentiment and perception of how well the company is performing (which are usually but not always in alignment) and whether you believe for the majority you can take a long position on the stock... not dissimilar to cryptos. And again similar to Cryptos you can take a short position if you feel the sentiment/fundamentals will sink the price in the short term. Yes there is less liquidity in most cryptos than big major stocks  so more susceptible to manipulation/volatility  whether intentional or not, but that may change over time with increasing wider adoption outside of high worth individuals, country/corporate organisations.

Neither the stock market nor cryptocurrencies are Ponzi schemes,  which by definition is a "fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading." People have come to use the term to mean anything they view as a scam, when in fact it is a very specific type of scam.

The stock market is a rigged game for insiders and their political hacks, so it has scam-like elements, but it is not a Ponzi scheme. Some (many? most?) cryptos are nothing more than a blatant scam, while others seem to be an attempt to resolve certain business problems, and are themselves legitimate attempts to change the way things are.

In fact, under the actual definition, US Social Security is actually much closer, if not a nearly a direct example, of a Ponzi scheme than either the stock market or cryptos.

The IRS has determined in its initial guidance the cryptos are to be treated as property for tax purposes, and not a currency, although by design they do have currency-like characteristics; at this stage are really too inherently unstable price-wise to actually function as currencies. Speculations and not for the rent money.

Anything that serves to pressure the utterly incompetent and corrupt central banking system can't be all bad.

Disclosure: I am not in the cryptocurrency market.

Dr Mark - informative and interesting post... and I trade in both cryptos and stocks and shares

Simon-in-Suffolk posted:

winkyincanada posted:

Kevin Richardson posted:

Please don't call BTC a Ponzi Scheme. It is not based on fraud and/or deception. The markets are a bit susceptible to manipulation but the impact any individual can have day-to-day on market price will decrease over time.

It is a variation of a Ponzi scheme in which everyone who is playing already knows it is a Ponzi scheme. So the fraudulent nature of a "traditional" Madoff-style ponzi is arguably absent.

It’s  pretty well as much as a Ponzi Scheme as trading stocks and shares  ... especially in western markets where there is a degree of regulation... if you wish to trade stock and shares or cryptos you soon realise they are very similar... based on fundamentals, long positions, and most of all sentiment...  Severeal years back when I was studying the markets  I was genuinely surprised to learn that company stock value  is  not directly related to how well the company is performing... its actually the sentiment and perception of how well the company is performing (which are usually but not always in alignment) and whether you believe for the majority you can take a long position on the stock... not dissimilar to cryptos. And again similar to Cryptos you can take a short position if you feel the sentiment/fundamentals will sink the price in the short term. Yes there is less liquidity in most cryptos than big major stocks  so more susceptible to manipulation/volatility  whether intentional or not, but that may change over time with increasing wider adoption outside of high worth individuals, country/corporate organisations.

I think it is a stretch to equate owning shares in a company making phones, cars, steel, buildings, mines, etc. with holding crypto as an "investment". You are 100% correct that the current performance of companies and their market capitalization (share price) are not directly correlated, but there is certainly a significant link for most stocks. P/E ratios and dividend yields are monitored (and many other metrics) and used for pricing the stocks. No such equivalent for crypto as the "coins" don't do anything. Some are used for real-world transactions, sure, but they are they not useful for that regardless of their nominal (non-zero) price? Their price is arguably underpinned in some sense by the cost of mining them, but to me this is a simply nonsensical arrangement. "They are fundamentally worthless, but priced at XX becasue it costs at least XX to make one". What?

There is also a large body of regulation aimed at ensuring that equity investors are truthfully informed of the performance of public companies, and of the risks. (I work in this space for minerals-industry companies and projects) It's far from perfect, of course, but there is zero analogy for this with crypto.

Bubbles, based on unrealistic expectations of performance, magnified by uninformed and emotive fear-of-missing-out, do occur in the equities markets, but these always burst. I don't know, perhaps with crypto, we have reached the perfect storm where everyone knows there is no underlying value going in, so there will be nothing that can prick the bubble. The crypto markets do appear relatively immune to news of disfunction. So there they remain with buyers giving real money to sellers, traders taking their skim, miners making a margin while using-up real resources, and on it will go. The systemic house profits of casinos hasn't led to their demise, so this might just go on forever.

The argument that some crypto will become actually useful is an interesting one. I'm yet to be convinced that this is the case, although blockchain logic/systems does seem to have many promising applications in a world where no-one trusts anyone.

winkyincanada posted:

Simon-in-Suffolk posted:

winkyincanada posted:

Kevin Richardson posted:

Please don't call BTC a Ponzi Scheme. It is not based on fraud and/or deception. The markets are a bit susceptible to manipulation but the impact any individual can have day-to-day on market price will decrease over time.

It is a variation of a Ponzi scheme in which everyone who is playing already knows it is a Ponzi scheme. So the fraudulent nature of a "traditional" Madoff-style ponzi is arguably absent.

It’s  pretty well as much as a Ponzi Scheme as trading stocks and shares  ... especially in western markets where there is a degree of regulation... if you wish to trade stock and shares or cryptos you soon realise they are very similar... based on fundamentals, long positions, and most of all sentiment...  Severeal years back when I was studying the markets  I was genuinely surprised to learn that company stock value  is  not directly related to how well the company is performing... its actually the sentiment and perception of how well the company is performing (which are usually but not always in alignment) and whether you believe for the majority you can take a long position on the stock... not dissimilar to cryptos. And again similar to Cryptos you can take a short position if you feel the sentiment/fundamentals will sink the price in the short term. Yes there is less liquidity in most cryptos than big major stocks  so more susceptible to manipulation/volatility  whether intentional or not, but that may change over time with increasing wider adoption outside of high worth individuals, country/corporate organisations.

I think it is a stretch to equate owning shares in a company making phones, cars, steel, buildings, mines, etc. with holding crypto as an "investment". You are 100% correct that the current performance of companies and their market capitalization (share price) are not directly correlated, but there is certainly a significant link for most stocks. P/E ratios and dividend yields are monitored (and many other metrics) and used for pricing the stocks. No such equivalent for crypto as the "coins" don't do anything. Some are used for real-world transactions, sure, but they are they not useful for that regardless of their nominal (non-zero) price? Their price is arguably underpinned in some sense by the cost of mining them, but to me this is a simply nonsensical arrangement. "They are fundamentally worthless, but priced at XX becasue it costs at least XX to make one". What?

There is also a large body of regulation aimed at ensuring that equity investors are truthfully informed of the performance of public companies, and of the risks. (I work in this space for minerals-industry companies and projects) It's far from perfect, of course, but there is zero analogy for this with crypto.

Bubbles, based on unrealistic expectations of performance, magnified by uninformed and emotive fear-of-missing-out, do occur in the equities markets, but these always burst. I don't know, perhaps with crypto, we have reached the perfect storm where everyone knows there is no underlying value going in, so there will be nothing that can prick the bubble. The crypto markets do appear relatively immune to news of disfunction. So there they remain with buyers giving real money to sellers, traders taking their skim, miners making a margin while using-up real resources, and on it will go. The systemic house profits of casinos hasn't led to their demise, so this might just go on forever.

The argument that some crypto will become actually useful is an interesting one. I'm yet to be convinced that this is the case, although blockchain logic/systems does seem to have many promising applications in a world where no-one trusts anyone.

BTC is closer to physical PM trading than equities. The true value is pure speculation at this point so it is somewhat similar to  micro-cap biotech stock with zero yield and negative earnings but with great intellectual property that might produce a "killer" [or life saving] product in the next decade. High risk with possible high reward. Everybody should have a small allocation with this type of risk:reward profile.

What is not really debateable is that it is not based on fraud or deception. People may jump in without knowing what they are buying but that isn't BTC fault.

winkyincanada posted:

Kevin Richardson posted:

winkyincanada posted:

Minh Nguyen posted:

 

To the fellow traders out there: I hope you have a good day at market!

No you don't. For every one who has a good day, someone else has a bad day.

What? That simply is not true. 

Where then, does the money come from?

I sell something at a price that is good for me to a person that wants what I have at a price that is good for them. No different than any other asset. Only time will show which side made the bad trade. Many people are happy to sell after a week with a 50% profit. The buyer might hold it for a year and make 10,000%.

I'd like to share another tip. Some exchanges offer their own token. Let's use Binance Coin (BNB) as an example. By the way Binance is one of the biggest exchanges and they sometimes transact billions in revenue every day. The 'purpose' of this token is to save one money on transactions fees (50% discount), however it can also be used to buy another coin that is listed on their exchange. The value of BNB went to the moon. There is an inherent 'issue' with using an exchange token to buy an alt coin (AC). 

(1) BNB has a significantly lower market cap (MC) than BTC for example: BNB currently has a MC of just under 1 billion compared to BTC which is just over 162 billion: I'm to indexing prices relative to the United States Dollar (USD). Let's pretend that one is in situation where one needs to sell one's stock quickly. If one were to use BNB to buy an AC, due to the fact that the MC is much lower than BTC or ETH for example, one could find it much more difficult to sell one's stock quickly because there are not so many people available to buy the stock: remember that BNB only has a MC of less than 1 billion compared to the 162 billion of BTC. The trading 'rooms' for BNB can be much 'slower' than the BTC rooms. In addition the variance in price can be much lower. For example, the lowest Sell Order in the BTC room could be 0.00020000 BTC and the highest Buy Order could be 0.00019999 (we're talking about fractions of a cent in the price). However, because BNB coin has a MC that is significantly lower than BTC, the variance in price is often quite large in the BNB room ie the lowest Sell Order could be 0.00012345 compared to the highest Buy Order of 0.00011000. In this situation it is not always advisable to use BNB to buy an AC.

(2) Should the value of BNB rise faster than the price of the AC, it may artificially depress the value of the AC. Remember from my previous post that if on a particular day the value of BNB is for example 0.12345678 BNB (approximately $1.15802460) and three days later it is 0.12345555 ($1.15801259) the AC has not changed in value, rather the price of BNB has gone up. This may present one with a new 'problem'. Should BNB continue to rise in value compared to an AC which is not rising in value, it is possible that one will be stuck in a situation where the AC may never gain any real value. This presents a potentially 'dangerous' situation. One could cash out back to BNB but there is no guarantee that the AC will regain any value in the long term. In this situation it may be preferable to hold the exchange token (BNB) and let it gain in value as opposed to using it to buy an AC.

Kevin Richardson posted:

winkyincanada posted:

Where then, does the money come from?

I sell something at a price that is good for me to a person that wants what I have at a price that is good for them. No different than any other asset. Only time will show which side made the bad trade. Many people are happy to sell after a week with a 50% profit. The buyer might hold it for a year and make 10,000%.

The difference is that these "assets" have no value. Value is not being created, just transferred. Value is of course also being destroyed by the mining process, so someone has to pay for that, too.

winkyincanada posted:

Kevin Richardson posted:

winkyincanada posted:

Where then, does the money come from?

I sell something at a price that is good for me to a person that wants what I have at a price that is good for them. No different than any other asset. Only time will show which side made the bad trade. Many people are happy to sell after a week with a 50% profit. The buyer might hold it for a year and make 10,000%.

The difference is that these "assets" have no value. Value is not being created, just transferred. Value is of course also being destroyed by the mining process, so someone has to pay for that, too.

So BTC no different than USD?

Some people get paid in crypto so there is some value entering the market. 

winkyincanada posted:

Kevin Richardson posted:

winkyincanada posted:

Kevin Richardson posted:

Frank Yang posted:

Today is my wife's birthday and GBTC has treated me well, I bought loads of it @ $9.60 on Feb 5th and now it is $19.99 at the close today, a jump of more than 100 % in less than 2 weeks.

My friend is range trading GBTC and has been very happy. (He actually sold at $20.20!) Personally GBTC is too risky for me since it trades at a huge premium over NAV. That premium can dissipate much faster than BTC can crash.

Anyhoo... Congratulations!

NAV? There is no underlying NAV for these things.

GBTC is an ETF that holds BTC. It currently trades at a 70% premium above the value of BTC/share. I think 1 GBTC = .001 BTC and was trading at 20.20 when BTC was around 12,000. So the NAV was only $12.

What is happening there is that what appears to be an arbitrage opportunity may, in fact, be unrealisable at an appropriate level of risk due to frictional costs and counter-party risk in the period between deal and settlement. If it is a genuine arbitrage opportunity, the market should quickly correct the pricing. If the market is inefficient, and you're sharp, yes you can can profit. But I'll reiterate that trading is a less-than-zero-sum game and any profit is, and must be, someone else's loss. This is particularly true in crypto, where the things being traded have zero fundamental value, so market-making and the correct pricing of capital is not a relevant, nor useful outcome.

I think GBTC is a close ended fund. Not a typical ETF where you can create or destroy shares on demand.

Kevin Richardson posted:

So BTC no different than USD?

Some people get paid in crypto so there is some value entering the market. 

I don't invest in USD either. Each has a an agreed price that makes it useful as a means of transaction. USD is far, far more useful for now. The "durability" of that price might also differ (it is absolutely terrible for crypto), but I don't hold significant quantities of either, so I don't really care. What's your point?

As for people being paid in crypto, I don't really see how that changes much. But if my employer wanted to pay me in crypto, I'd insist they carried all the CAD:BTC rate risk. I'd want my salary designated in CAD and the equivalent BTC calculated and transferred instantaneously on payday. I'd then sell the BTC immediately.

The bears are running the show.

Indeed, its a case a case of growing the value of your crypto against other crypto if your inclined to do so as opposed to growing value against fiat at the moment.

Today it goes up a bit as Asia wakes up on Monday morning, but  the bitcoin market is expected to go down a further 10-15 % before it can swing back,

Zzzzzzzzzzzzzzzzzzzz.............

Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz..........................

Frank Yang posted:

Today it goes up a bit as Asia wakes up on Monday morning, but  the bitcoin market is expected to go down a further 10-15 % before it can swing back,

Ahh, but in the world of crypto, it’s best not to expect anything.....it does it’s own thing...

Simon, you are 'partially' right in the world of cryto. I think there are 4 main factors (I could be wrong in this market):

1) Momentum vs volativity
2) Good news vs. bad news
3) This in turn leads to un-critical analysis, un-informed intuitive reasoning, herd's mindset of the small sardines
4) Big whales' (intraday) trading strategies

I was tracking GBTC traded on the NYSE Global OTC exchange, and my simulation model suggested a worst-case scenario of a downside of approx. 10-15 %. Today it went down at ~5 %.

No joy in the markets right now.

Serious question, if there is a notion of "winners" and "losers" amongst the different cryptos, why are the price movements so strongly correlated?

winkyincanada posted:

No joy in the markets right now.

Serious question, if there is a notion of "winners" and "losers" amongst the different cryptos, why are the price movements so strongly correlated?

Low volumes? 

winkyincanada posted:

Kevin Richardson posted:

So BTC no different than USD?

Some people get paid in crypto so there is some value entering the market. 

I don't invest in USD either. Each has a an agreed price that makes it useful as a means of transaction. USD is far, far more useful for now. The "durability" of that price might also differ (it is absolutely terrible for crypto), but I don't hold significant quantities of either, so I don't really care. What's your point?

As for people being paid in crypto, I don't really see how that changes much. But if my employer wanted to pay me in crypto, I'd insist they carried all the CAD:BTC rate risk. I'd want my salary designated in CAD and the equivalent BTC calculated and transferred instantaneously on payday. I'd then sell the BTC immediately.

If you own real estate then you are investing in local fiat. 

It looks like much of the hype and euphoria of late last year has slowly ebbed away and a degree of relative normality is returning to the Crypto world. I suspect many of those who jumped on board to get rich quick have now jumped off disillusioned and we are back to where we were 12 months ago in terms of adoption. Perhaps it demonstrates how hype, euphoria and greed are bad things.. as they allow people to be so easily taken advantage of.

Simon-in-Suffolk posted:

It looks like much of the hype and euphoria of late last year has slowly ebbed away and a degree of relative normality is returning to the Crypto world. I suspect many of those who jumped on board to get rich quick have now jumped off disillusioned and we are back to where we were 12 months ago in terms of adoption. Perhaps it demonstrates how hype, euphoria and greed are bad things.. as they allow people to be so easily taken advantage of.

Bad for the sardines, but it proves that bitcoin is resilient, a real mc coy,  not tulip as some people claim.

Simon-in-Suffolk posted:

It looks like much of the hype and euphoria of late last year has slowly ebbed away and a degree of relative normality is returning to the Crypto world. I suspect many of those who jumped on board to get rich quick have now jumped off disillusioned and we are back to where we were 12 months ago in terms of adoption. Perhaps it demonstrates how hype, euphoria and greed are bad things.. as they allow people to be so easily taken advantage of.

Crypto is a longterm bet. We may have a longterm bear market but it will comeback someday. BTC is still around $7,000 USD and that is pretty amazing considering it was $1,000 in 2017.