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bitcoiners in 2012: "Bitcoin will eliminate the wall street banksters!" Bitcoiners right now: "OMG Goldman is getting in, who's ready for their moon rocket?"

by tCfD 9y ago

mirimir 9y ago
Expectations are rather more mixed than that.[0] Sure, the price could spike even higher after futures go on sale. But volatility will increase dramatically. And you can't count on exchanges, if the price collapses. 0) https://www.coindesk.com/bitcoin-futures-make-way-new-kind-whale/ https://www.coindesk.com/bitcoin-futures-make-way-new-kind-w...
- CryptoPunk 9y ago
  Futures markets reduce volatility.
  - mirimir 9y ago
    As I understand it, that's true only if there's a balance of buy-side and sell-side hedgers. Owners and miners are sell-side hedgers. Who are the buy-side hedgers?
  - lbotos 9y ago
    Can you do an "Explain it like I'm 5" of this? I don't doubt you but I'm struggling to make the connection. Will futures affect the pricing of the underlying asset? (I don't think so?) I think you are saying "futures reduce volatility for the trader" but I'm not sure.
    - cm2187 9y ago
      It allows participants to short and therefore should allow more balanced flows. However one needs some pretty steel-made cojones to short a bubble....
      - jjxw 9y ago
        More specifically, it allows one to short with limited downside. There are some exchanges that provide naked short positions in Bitcoin, but those have theoretic infinite downside and your broker will force you to liquidate at a loss at a certain point. With futures, however, you can put together positions that will provide a known limit on your downside for short positions. This provides a more appealing avenue for shorts to get in with much less risk.
        cm2187 9y ago
        I am not sure I get how the risk is limited with a future. If the price goes to $1m when you traded at $16,000, you will have to make a $984,000 margin call payment (+margin).
        kgwgk 9y ago
        With a short position using futures you will also be forced to liquidate at a loss at a certain point. It’s not really different from shorting BTC.
    - sdljfslkjfdsj 9y ago
      Also the CME & CBOE bitcoin contracts like many other futures commodities allow "spread" trading across duration. This has a dampening affect as well. In a lot of commodities spread trading volume exceeds that of the outright.
    - CryptoPunk 9y ago
      It helps price in future price shocks, and adds liquidity, which has a known dampening effect on volatility. With respect to the latter, my own personal theory for why this is is that more liquidity means more individuals actively trading the asset, and that translates to more non-correlating factors affecting the price. This makes it less likely that a shock somewhere in the economy will have a significant impact on the price. Modern economic scholarship properly offers a better explanation.
- cm2187 9y ago
  And that volatility should make this asset class (if it is one) unsuitable to trade for most banks and many institutional investors, who have VaR limits. The VaR of bitcoin is off the charts.
firethief 9y ago
Bitcoin eliminating the banksters doesn't mean bitcoin will kill them and then become popular. Bitcoin becoming popular comes first; while that's happening there's a period of coexistence before it makes them redundant. Not necessarily my POV that it'll happen, I'm just arguing that those two views aren't contradictory. (Even if they were, it is not unusual for a community of humans to hold diverse, and even incompatible, views.)

bitcoiners in 2012: "Bitcoin will eliminate the wall street banksters!" Bitcoiners right now: "OMG Goldman is getting in, who's ready for their moon rocket?"

by tCfD 9y ago

bitcoiners in 2012: "Bitcoin will eliminate the wall street banksters!" Bitcoiners right now: "OMG Goldman is getting in, who's ready for their moon rocket?"

mirimir 9y ago

Expectations are rather more mixed than that.[0] Sure, the price could spike even higher after futures go on sale. But volatility will increase dramatically. And you can't count on exchanges, if the price collapses. 0) https://www.coindesk.com/bitcoin-futures-make-way-new-kind-whale/ https://www.coindesk.com/bitcoin-futures-make-way-new-kind-w...

CryptoPunk 9y ago
Futures markets reduce volatility.
- mirimir 9y ago
  As I understand it, that's true only if there's a balance of buy-side and sell-side hedgers. Owners and miners are sell-side hedgers. Who are the buy-side hedgers?
- lbotos 9y ago
  Can you do an "Explain it like I'm 5" of this? I don't doubt you but I'm struggling to make the connection. Will futures affect the pricing of the underlying asset? (I don't think so?) I think you are saying "futures reduce volatility for the trader" but I'm not sure.
  - cm2187 9y ago
    It allows participants to short and therefore should allow more balanced flows. However one needs some pretty steel-made cojones to short a bubble....
    - jjxw 9y ago
      More specifically, it allows one to short with limited downside. There are some exchanges that provide naked short positions in Bitcoin, but those have theoretic infinite downside and your broker will force you to liquidate at a loss at a certain point. With futures, however, you can put together positions that will provide a known limit on your downside for short positions. This provides a more appealing avenue for shorts to get in with much less risk.
      - cm2187 9y ago
        I am not sure I get how the risk is limited with a future. If the price goes to $1m when you traded at $16,000, you will have to make a $984,000 margin call payment (+margin).
      - kgwgk 9y ago
        With a short position using futures you will also be forced to liquidate at a loss at a certain point. It’s not really different from shorting BTC.
  - sdljfslkjfdsj 9y ago
    Also the CME & CBOE bitcoin contracts like many other futures commodities allow "spread" trading across duration. This has a dampening affect as well. In a lot of commodities spread trading volume exceeds that of the outright.
  - CryptoPunk 9y ago
    It helps price in future price shocks, and adds liquidity, which has a known dampening effect on volatility. With respect to the latter, my own personal theory for why this is is that more liquidity means more individuals actively trading the asset, and that translates to more non-correlating factors affecting the price. This makes it less likely that a shock somewhere in the economy will have a significant impact on the price. Modern economic scholarship properly offers a better explanation.
cm2187 9y ago
And that volatility should make this asset class (if it is one) unsuitable to trade for most banks and many institutional investors, who have VaR limits. The VaR of bitcoin is off the charts.

firethief 9y ago

Bitcoin eliminating the banksters doesn't mean bitcoin will kill them and then become popular. Bitcoin becoming popular comes first; while that's happening there's a period of coexistence before it makes them redundant. Not necessarily my POV that it'll happen, I'm just arguing that those two views aren't contradictory. (Even if they were, it is not unusual for a community of humans to hold diverse, and even incompatible, views.)