Author Topic: Do you think Bitcoin is a safe store of value?  (Read 123561 times)

John Hjorth

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Re: Do you think Bitcoin is a safe store of value?
« Reply #510 on: December 17, 2017, 08:13:03 AM »
So if I buy up all the cryptocurrency in the world for say $500b then what do get out of them?  Nothing.

I use my bribe, extortion, AML/ATF, and despot money to buy the untraceable token; then find a willing banker to make a collateral backed loan to a number of little old ladies. Who withdraw the money in cash to pay for a trip somewhere - creating untraceable wealth assembly, and near to untraceable distribution ;)

SD

lol. I have always liked your posts here on CoBF, SharperDingaan.

First time, you got me really puzzled was when you were playing the dice with Deutsche Bank. And now Bitcoin. However, I must say, that I do not any longer believe, that you have devoted your [full] time and energy to the rollout of blockchain worldwide.
ĒIn the race of excellence Ö there is no finish line.Ē
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai


SharperDingaan

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Re: Do you think Bitcoin is a safe store of value?
« Reply #511 on: December 17, 2017, 08:27:51 AM »
So if I buy up all the cryptocurrency in the world for say $500b then what do get out of them?  Nothing.

I use my bribe, extortion, AML/ATF, and despot money to buy the untraceable token; then find a willing banker to make a collateral backed loan to a number of little old ladies. Who withdraw the money in cash to pay for a trip somewhere - creating untraceable wealth assembly, and near to untraceable distribution ;)

SD

lol. I have always liked your posts here on CoBF, SharperDingaan.

First time, you got me really puzzled was when you were playing the dice with Deutsche Bank. And now Bitcoin. However, I must say, that I do not any longer believe, that you have devoted your [full] time and energy to the rollout of blockchain worldwide.

Just an updated learning from interesting conversations of many years ago.
As they say - always try to learn from the very good.

SD

SharperDingaan

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Re: Do you think Bitcoin is a safe store of value?
« Reply #512 on: December 18, 2017, 08:15:47 AM »
We sold the remaining 25% of our Bitcoin this morning.
A little under 3 token at an average price of USD 18,810. 

The sale was to capture the run-up from the CME opening for business. 

Our view is that there is little reason for a market maker to be long Bitcoin at anything near current levels. The holding can now be widely replicated through either futures or options with built in margin, a much lower regulatory capital requirement, and perhaps even a lower carry cost as well. RAROC favors investment via derivatives - not via a long position in Bitcoin.

The presence of CME/Cboe derivatives has now made Bitcoin investment 'scaleable'. Institutions can now trade in/out, with liquidity, without materially impacting the price of Bitcoin itself. The result is that the only natural buyers of Bitcoin are now 1) those that actually need it, and 2) investors who can't use a derivative.

To get USD18,000+/Bitcoin, existing owners have to hold back their Bitcoin in anticipation of higher prices - much less likely now.
But any small increase in supply will rapidly accelerate as price starts collapsing; with circuit breakers and global trading actually helping the process by damning up prospective sales as word gets out around the world. Global waves of selling feeding a brush fire until the fuel eventually burns out - is a harsh but desirable outcome, and the earlier it is - the better for everyone.

At USD5,000+/Bitcoin, it's much easier for a market maker to justify holding a few Bitcoin directly - but until then; the market maker has to justify that high price/high maintenance holding daily, to an increasingly nervous senior management. Career risk suggests that there are real limits as to how long this can go on for.

If we're right, we do very well. If we're wrong, we don't think we're giving up much.
We live in interesting times.

SD

     
« Last Edit: December 18, 2017, 08:20:39 AM by SharperDingaan »

LongHaul

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Re: Do you think Bitcoin is a safe store of value?
« Reply #513 on: December 18, 2017, 09:43:36 AM »
So if I buy up all the cryptocurrency in the world for say $500b then what do get out of them?  Nothing.

A guy in a basement will create a new one  a couple days later.

If you think about it, mining for gold isnít very productive either, thatís one reason why the gold standard isnít really feasible. It makes no sense to couple wealth with the amount of gold that can be mined, or just as much sense than mining for a artificial limited number of crypto keys.

Itís quite easy to create a new crypto currency, much easier than finding and building a new gold mine though.

Very true about creating newer coins (and possibly better ones)

Funny kitty comment Jurgis!

mattee2264

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Re: Do you think Bitcoin is a safe store of value?
« Reply #514 on: December 18, 2017, 01:20:08 PM »

 SharperDingaam not sure I fully understand your argument.

  If the only natural buyers remain retail investors without access to derivatives then the status quo is unchanged and so long as there are more people wanting to buy than there are people wanting to sell then the price will go up even if some existing owners decide to cash in. Of course this dynamic works in reverse and a rush to the exits en masse would be a scary thing with or without derivatives although derivatives can of course magnify things.

 
 
 

 

SharperDingaan

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Re: Do you think Bitcoin is a safe store of value?
« Reply #515 on: December 18, 2017, 02:40:24 PM »

 SharperDingaam not sure I fully understand your argument.

  If the only natural buyers remain retail investors without access to derivatives then the status quo is unchanged and so long as there are more people wanting to buy than there are people wanting to sell then the price will go up even if some existing owners decide to cash in. Of course this dynamic works in reverse and a rush to the exits en masse would be a scary thing with or without derivatives although derivatives can of course magnify things.


The Cboe brought in a lot of one-time institutional demand; paying up for the underlying Bitcoin, & financing it in-house, with a short term acceptance of the adverse risk capital impacts. With the Cboe/CME open it is now much more practical, and way more efficient on risk capital, to hold the Bitcoin via derivative - which has created a pool of sophisticated, and natural sellers of underlying Bitcoin (comprised mostly of those initial Cboe opening related purchases).

Joe Public has been a manic buyer, but for the most part has to put up cash to buy a Bitcoin. Credit isn't as easy for Joe, we know Joe hasn't been prudent, and that there are a lot fewer Joe's who can afford Bitcoin at 18,000, than there are when Bitcoin is at 5,000. It's basic Econ 101 that as price goes up, demand goes down. The underworld is the only natural buyer of Bitcoin, and the price of Bitcoin is essentially a non-issue relative to its other benefits (long term view).

Point is that there are few Joe's remaining, & a lot of sophisticated sellers piling up. We also have CB's raising rates - which implies that 'moral hazard' is back in play, and that CB's will drag their feet putting out a fire. It isn't looking good for Joe; and if we can see this - the clock has to be ticking ...

....  it will also take very little selling to start an avalanche.

SD

     
« Last Edit: December 18, 2017, 02:51:36 PM by SharperDingaan »

mattee2264

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Re: Do you think Bitcoin is a safe store of value?
« Reply #516 on: December 18, 2017, 03:48:58 PM »

  The first paragraph lost me. I thought the futures exchange is cash settled so why would that bring any institutional demand? I thought it is just a medium to bet on the price via derivative contracts.

 Can't you buy fractions of bitcoins on these coin exchanges? And I think some people are using their credit cards to buy. And you can get personal loans at very cheap interest rates.  And while bitcoin has been very popular with the younger generations the price rise and media attention is probably drawing in older and wealthier retail investors wanting a piece of the action. And as we know in financial markets people love to buy high and sell low.

 And I think a lot of hedge funds have been getting on board because it is the hottest thing in town and they arent as constrained in what they do so lack of regulation isnt such a big deal for them. Although I guess they could flip if they figured the easier money was made shorting.

 But is your prediction that these more recent entrants will use the futures exchanges to start a "little short" or simply sell the big blocks they've amassed sending the market into freefall?

 
 

 
 

Gregmal

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Re: Do you think Bitcoin is a safe store of value?
« Reply #517 on: December 18, 2017, 05:47:29 PM »
Frankly I don't think the technology element is important enough to matter at this stage of the game. It's simply too complex and I'd gander 90% of the people buying this don't have much of an idea how it works.

Otherwise, an exercise I have typically found helpful when evaluating something is looking to build a case contrary to the consensus. Consensus is that this is obviously a bubble and therefor, a short(if one is able to). However, I've come up with quite the list of things that to me would indicate this can and will go on for quite a while.

-Obviously, consensus is negative
-Is it really much different than something like gold? Many people investing in gold do not actually own physical gold. And gold itself is essentially just a shiny pebble. It's use is being a store of value. In that sense, to me, it is not much different than BTC except for the fact that you can make jewelry out of it. Than again I've never been a huge fan of gold so maybe I'm biased.
-while it isnt "hard" to buy it, it is still supposedly a bit restricted in terms of amounts the newer BTC buyer can purchase at first.
-you can buy it with credit cards readily available to the poorest of retail investors
-the "major rally" really has only encompassed the past couple months. Maybe you could say the past year, tops. It really hasnt been that long.
-Hardly everyone and their mother is rich from BTC. My understanding from studying most bubbles is that many people typically get rich, at least on paper before losing it all
-no institutional investments
-barely any acceptance from the big financial institutions(although this seems to be changing)
-Such an obvious short that IMO we are seeing the next step of the bubble, mechanisms that allow for one to express a short position; the setup for what could be a massive short squeeze. Institutions have gotten this market sooo wrong(TSLA, NFLX, AMZN, heck even the SPY) it seems to me almost a given they will get their asses kicked with BTC before it implodes
-How do you define an IV? Its totally ambiguous, just like many of the things that tend to make insane moves. There is no possible way to set a "value" parameter on this. Thus, any price can be justified.


Then I look at what stops it, and... maybe government intervention or a major concentrated holder dumping? That's really about it. As any value investor knows, valuation alone is not a reason to short something, and at this stage in the game, thats the only case

Libs

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Re: Do you think Bitcoin is a safe store of value?
« Reply #518 on: December 19, 2017, 09:08:13 AM »
Frankly I don't think the technology element is important enough to matter at this stage of the game. It's simply too complex and I'd gander 90% of the people buying this don't have much of an idea how it works.

Otherwise, an exercise I have typically found helpful when evaluating something is looking to build a case contrary to the consensus. Consensus is that this is obviously a bubble and therefor, a short(if one is able to). However, I've come up with quite the list of things that to me would indicate this can and will go on for quite a while.

-Obviously, consensus is negative
-Is it really much different than something like gold? Many people investing in gold do not actually own physical gold. And gold itself is essentially just a shiny pebble. It's use is being a store of value. In that sense, to me, it is not much different than BTC except for the fact that you can make jewelry out of it. Than again I've never been a huge fan of gold so maybe I'm biased.
-while it isnt "hard" to buy it, it is still supposedly a bit restricted in terms of amounts the newer BTC buyer can purchase at first.
-you can buy it with credit cards readily available to the poorest of retail investors
-the "major rally" really has only encompassed the past couple months. Maybe you could say the past year, tops. It really hasnt been that long.
-Hardly everyone and their mother is rich from BTC. My understanding from studying most bubbles is that many people typically get rich, at least on paper before losing it all
-no institutional investments
-barely any acceptance from the big financial institutions(although this seems to be changing)
-Such an obvious short that IMO we are seeing the next step of the bubble, mechanisms that allow for one to express a short position; the setup for what could be a massive short squeeze. Institutions have gotten this market sooo wrong(TSLA, NFLX, AMZN, heck even the SPY) it seems to me almost a given they will get their asses kicked with BTC before it implodes
-How do you define an IV? Its totally ambiguous, just like many of the things that tend to make insane moves. There is no possible way to set a "value" parameter on this. Thus, any price can be justified.


Then I look at what stops it, and... maybe government intervention or a major concentrated holder dumping? That's really about it. As any value investor knows, valuation alone is not a reason to short something, and at this stage in the game, thats the only case


Nice post.

I would add, I think there's a lot of over-thinking going on in this thread, with all due respect. I think there's a real chance Bitcoin has staying power ( periodic plunges aside). 

It could be as simple as this:

https://www.nytimes.com/2017/12/18/opinion/bitcoin-boom-technology-trust.html?_r=0


My username is not a political statement.....and I'm too lazy to change it.

rkbabang

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Re: Do you think Bitcoin is a safe store of value?
« Reply #519 on: December 19, 2017, 09:27:04 AM »
Frankly I don't think the technology element is important enough to matter at this stage of the game. It's simply too complex and I'd gander 90% of the people buying this don't have much of an idea how it works.

Otherwise, an exercise I have typically found helpful when evaluating something is looking to build a case contrary to the consensus. Consensus is that this is obviously a bubble and therefor, a short(if one is able to). However, I've come up with quite the list of things that to me would indicate this can and will go on for quite a while.

-Obviously, consensus is negative
-Is it really much different than something like gold? Many people investing in gold do not actually own physical gold. And gold itself is essentially just a shiny pebble. It's use is being a store of value. In that sense, to me, it is not much different than BTC except for the fact that you can make jewelry out of it. Than again I've never been a huge fan of gold so maybe I'm biased.
-while it isnt "hard" to buy it, it is still supposedly a bit restricted in terms of amounts the newer BTC buyer can purchase at first.
-you can buy it with credit cards readily available to the poorest of retail investors
-the "major rally" really has only encompassed the past couple months. Maybe you could say the past year, tops. It really hasnt been that long.
-Hardly everyone and their mother is rich from BTC. My understanding from studying most bubbles is that many people typically get rich, at least on paper before losing it all
-no institutional investments
-barely any acceptance from the big financial institutions(although this seems to be changing)
-Such an obvious short that IMO we are seeing the next step of the bubble, mechanisms that allow for one to express a short position; the setup for what could be a massive short squeeze. Institutions have gotten this market sooo wrong(TSLA, NFLX, AMZN, heck even the SPY) it seems to me almost a given they will get their asses kicked with BTC before it implodes
-How do you define an IV? Its totally ambiguous, just like many of the things that tend to make insane moves. There is no possible way to set a "value" parameter on this. Thus, any price can be justified.


Then I look at what stops it, and... maybe government intervention or a major concentrated holder dumping? That's really about it. As any value investor knows, valuation alone is not a reason to short something, and at this stage in the game, thats the only case


Nice post.

I would add, I think there's a lot of over-thinking going on in this thread, with all due respect. I think there's a real chance Bitcoin has staying power ( periodic plunges aside). 

It could be as simple as this:

https://www.nytimes.com/2017/12/18/opinion/bitcoin-boom-technology-trust.html?_r=0


Thank you for posting this.  I think the author nailed it. Right down to his last statement saying that Bitcoin could be the Netscape of this generation.  In the end it might not be Bitcoin itself that survives, but something out of this class of technology (or its descendants) is going to change the world, of that I'm sure.