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I Was Wrong About Bitcoin. Here’s Why

37 points by tysone 9y ago

bob_theslob646 9y ago
>I assumed that Bitcoin’s extreme volatility would be a turnoff. How many Americans actually own it? It would be interesting to see if it were possible to know where they were mined. This may be an oxymoron, but more transparency may make the average joe more likely to invest in it. BTC also has this going for them : “Fools” can go short, but the key is that shorting can’t be done properly, Taleb said.(https://www.marketwatch.com/story/nassim-black-swan-taleb-says-bitcoin-cant-be-shorted-properly-as-futures-debut-2017-12-11 https://www.marketwatch.com/story/nassim-black-swan-taleb-sa...)
- unknown_apostle 9y ago
  To clarify: by this, Taleb means simply that there are no options on bitcoin (there aren't any, right?) With options you'd buy OTM puts. You could maybe even succeed purely on rising vol if they crank up the volatility even higher to 11 :-)
  - bob_theslob646 9y ago
    The vol of bitcoin is way higher than 11. >To clarify: by this, Taleb means simply that there are no options on bitcoin (there aren't any, right?) This is what he said. "Very big point. Futures that don't have deliverables require a very, very deep market. Otherwise someone long the future can push prices higher at settlement time with impunity, by "locking" profits (never having to resell a deliverable)." (https://twitter.com/nntaleb/status/939852491130396673?ref_src=twsrc%5Etfw&ref_url=http%3A%2F%2Fwww.marketwatch.com%2Fstory%2Fnassim-black-swan-taleb-says-bitcoin-cant-be-shorted-properly-as-futures-debut-2017-12-11 https://twitter.com/nntaleb/status/939852491130396673?ref_sr...)
    - unknown_apostle 9y ago
      Yes I mean 11 as in Spinal Tap 11.
    - tcbawo 9y ago
      Not sure about Bitcoin futures, but there are also options on futures. Although similar principles apply. Just wait until people start manipulating the market to push the futures and options around. There is a lot of bad behavior that is monitored and punished by the SEC. I'm not sure which domestic regulatory body will assert itself over cryptocurrencies.
      - bob_theslob646 9y ago
        SEC does not regulate futures. >Commodity Futures Trading Commission (CFTC)—the federal agency that does regulate futures trading. (https://www.sec.gov/fast-answers/answers-cftchtm.html https://www.sec.gov/fast-answers/answers-cftchtm.html)
hawktheslayer 9y ago
It would be funny if some of these trends reverse in a few years and he writes another article titled "I Was Wrong About Being Wrong About Bitcoin".
deleted 9y ago
[deleted]
flembat 9y ago
If it was meant to be a currency it seems to have failed. You want the value of currency to be less unpredictable.
philipodonnell 9y ago
> I assumed that Wall Street would stay away. > I assumed that Bitcoin’s extreme volatility would be a turnoff. Anyone who thinks these things is not paying attention to the historically low realized and implied volatility of the major market indexes and its negative effects its having on the largest market participants by volume (MM+HFT firms) who's profits are correlated to overall volatility and who's technology easily translates. One thing I think is underappreciated with crypto is just how easy it is to setup a high-frequency trading bot on these new exchanges vs the equity exchanges. GDAX has totally free real-time non-rate limited Level 3 quote access via websocket, sub-millisecond fill rates, literally no commission for market making activities, and co-location is just a matter of picking the right AWS region and a bit of luck. That's a couple million bucks, an enormous expense in servers to handle the data volume, and a few dozen partnership agreements to get something similar for the equity or option markets. If you have spent your career dealing with all that, even if you've been closely following the crypto industry, it may not even occur to you how different the market structure is until you spend a few days coding up a bot that can detect a signal and roundtrip a trade in < 100ms from my consumer laptop at home.
- tCfD 9y ago
  Isn't the very definition of a bubble is that the speed at which the market gets wise is always outrun by the speed at which it gets greedy?
- mlevental 9y ago
  what's the definition of market making activity here? my understanding of "market making" is simply "high volume" trade (creating order depth)
  - philipodonnell 9y ago
    All market makers are HFTs. Most (but not all) HFTs are market makers. MM/HFT is just really saying "all high volume firms" while acknowledging that what most people are talking about when they say "high volume" is market making. Market making software is mostly independent on the market it trades, so its trivial for a market-maker in one product to switch to a similar product.

37 points by tysone 9y ago

>I assumed that Bitcoin’s extreme volatility would be a turnoff. How many Americans actually own it? It would be interesting to see if it were possible to know where they were mined. This may be an oxymoron, but more transparency may make the average joe more likely to invest in it. BTC also has this going for them : “Fools” can go short, but the key is that shorting can’t be done properly, Taleb said.(https://www.marketwatch.com/story/nassim-black-swan-taleb-says-bitcoin-cant-be-shorted-properly-as-futures-debut-2017-12-11 https://www.marketwatch.com/story/nassim-black-swan-taleb-sa...)

unknown_apostle 9y ago
To clarify: by this, Taleb means simply that there are no options on bitcoin (there aren't any, right?) With options you'd buy OTM puts. You could maybe even succeed purely on rising vol if they crank up the volatility even higher to 11 :-)
- bob_theslob646 9y ago
  The vol of bitcoin is way higher than 11. >To clarify: by this, Taleb means simply that there are no options on bitcoin (there aren't any, right?) This is what he said. "Very big point. Futures that don't have deliverables require a very, very deep market. Otherwise someone long the future can push prices higher at settlement time with impunity, by "locking" profits (never having to resell a deliverable)." (https://twitter.com/nntaleb/status/939852491130396673?ref_src=twsrc%5Etfw&ref_url=http%3A%2F%2Fwww.marketwatch.com%2Fstory%2Fnassim-black-swan-taleb-says-bitcoin-cant-be-shorted-properly-as-futures-debut-2017-12-11 https://twitter.com/nntaleb/status/939852491130396673?ref_sr...)
  - unknown_apostle 9y ago
    Yes I mean 11 as in Spinal Tap 11.
  - tcbawo 9y ago
    Not sure about Bitcoin futures, but there are also options on futures. Although similar principles apply. Just wait until people start manipulating the market to push the futures and options around. There is a lot of bad behavior that is monitored and punished by the SEC. I'm not sure which domestic regulatory body will assert itself over cryptocurrencies.
    - bob_theslob646 9y ago
      SEC does not regulate futures. >Commodity Futures Trading Commission (CFTC)—the federal agency that does regulate futures trading. (https://www.sec.gov/fast-answers/answers-cftchtm.html https://www.sec.gov/fast-answers/answers-cftchtm.html)

hawktheslayer 9y ago

It would be funny if some of these trends reverse in a few years and he writes another article titled "I Was Wrong About Being Wrong About Bitcoin".

deleted 9y ago

[deleted]

flembat 9y ago

If it was meant to be a currency it seems to have failed. You want the value of currency to be less unpredictable.

philipodonnell 9y ago

> I assumed that Wall Street would stay away. > I assumed that Bitcoin’s extreme volatility would be a turnoff. Anyone who thinks these things is not paying attention to the historically low realized and implied volatility of the major market indexes and its negative effects its having on the largest market participants by volume (MM+HFT firms) who's profits are correlated to overall volatility and who's technology easily translates. One thing I think is underappreciated with crypto is just how easy it is to setup a high-frequency trading bot on these new exchanges vs the equity exchanges. GDAX has totally free real-time non-rate limited Level 3 quote access via websocket, sub-millisecond fill rates, literally no commission for market making activities, and co-location is just a matter of picking the right AWS region and a bit of luck. That's a couple million bucks, an enormous expense in servers to handle the data volume, and a few dozen partnership agreements to get something similar for the equity or option markets. If you have spent your career dealing with all that, even if you've been closely following the crypto industry, it may not even occur to you how different the market structure is until you spend a few days coding up a bot that can detect a signal and roundtrip a trade in < 100ms from my consumer laptop at home.

tCfD 9y ago
Isn't the very definition of a bubble is that the speed at which the market gets wise is always outrun by the speed at which it gets greedy?
mlevental 9y ago
what's the definition of market making activity here? my understanding of "market making" is simply "high volume" trade (creating order depth)
- philipodonnell 9y ago
  All market makers are HFTs. Most (but not all) HFTs are market makers. MM/HFT is just really saying "all high volume firms" while acknowledging that what most people are talking about when they say "high volume" is market making. Market making software is mostly independent on the market it trades, so its trivial for a market-maker in one product to switch to a similar product.