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Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional
- holtalanm 9y agoThis is pretty much spot-on. Almost all of the 'value' that Bitcoin currently has is hype and insane over-inflation. I weep for those that won't be able to cash out on the exchanges when the price crashes, and they lose all their money.
- hndamien 9y agoI'm not sure if it is an illusion of safety, because the infrastructure around Bitcoin (which itself seems safe) is remarkably better now than it was 5 or 6 years ago. This is nothing like how wild it was then, so in comparison, it seems like it is almost regulated.
- Jasper_ 9y agoSays who? Most of the popular exchanges don't trade in USD, they trade in Tethers, which only have a promise, not a basic audit, that they are backed by actual USD.
- hndamien 9y agoEverybody knows Tethers are worthless, and "backed" by a flimsy promise that they are not backed by anything. I would say that this is remarkably transparent that the Emporer has no clothes. Compared to Mt Gox, which I suspected was insolvent from their actions only while the world kept on believing. This is a major improvement.
- bagacrap 9y agoWhy is the fact that arbitrage is harder with btc a disadvantage? And the fact that the "price" reflects recent sales rather than future sales seems, well, obvious, and identical to other securities/commodities.
- davidgerard 9y agoIt makes the price stupidly volatile, and the thin per-exchange order books make it much more manipulable.
- dragonwriter 9y ago> Why is the fact that arbitrage is harder with btc a disadvantage Arbitrage is the method by which segregated markets are aggregated into a single market with a common price; if that is harder you have segregated markets. > And the fact that the "price" reflects recent sales rather than future sales seems, well, obvious, and identical to other securities/commodities. The same issue is raised with commodity/security markets in general, but it's practically more significant when the market(s) for a product have significant liquidity issues.
- user5994461 9y agoArbitrage involves moving large amount of volume and transactions. Arbitrage is not effective on bitcoins because there is too much risk with trading bitcoins. To reply to your question. The problem is that the bitcoin market is plagued with deep issues. Arbitrage is hard in such an environment, that's the consequence, not a cause. To make an analogy. Think of a sea, a sea always have fishes. If there are no fishes at all in a sea, the problem is unlikely to be the fishes. Fishes are simple animals living day to day (just like arbitragers). Most likely, the problem is with the sea, maybe it's super polluted and killed all the fishes?
- baddox 9y agoDon’t all of the complaints about exchange rate and market cap apply to virtually any other item that is traded? Spread exists in forex and stock markets. Market cap is extremely commonly cited for stock markets. Sure, the effects may be stronger in Bitcoin due to its higher volatility, lower volume, etc., but that should be the author’s argument, instead of “if you don’t know the basic Finance 101 definitions of some common terms, then you might get confused.”
- fellellor 9y agoI'm a newbie to the world of crypto currencies. What concerned me more is the bit about "wash trades". I can accept the spread, but there is truth in the article when it comes to trading practices that probably would be largely mitigated in the presence of a regulator.
- justboxing 9y agoYeah, I would be concerned about 'wash trading' too. And the Crypto trading space seems like the Wild West in int 1880s in how some crypto trading sites and exchanges are screening for this kind of illegal activities while others aren't. > PSA: The Bitfinex trade engine ALLOWS for WASH TRADING > The trade engine on Bitfinex will allow you to buy and sell to your own orders, the procedures to do it are as follows (which will likely be ‘fixed’, or partially fixed after this post…) Source: Wash Trading Bitcoin: How Bitfinex benefits from fraudulent trading => https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitfinex-benefits-from-fraudulent-trading-8bd66be73215 https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitf...
- dehrmann 9y ago> Don’t all of the complaints about exchange rate and market cap apply to virtually any other item that is traded? > Market cap is extremely commonly cited for stock markets. Yes. Spreads usually depend on volume--high-volume securities tend to have a lower spread because there's a lot of market participants. More established markets often have market makers (entities with simultaneous bids and asks) and arbitrageurs who make money off spreads between different exchanges. I usually look at this spread and arbitrage (which I'll get hit with when I buy or sell) as the price of having a liquid asset. For stocks, it tends to cost relatively little. Market cap for Bitcoin is complicated because it's not known how many Bitcoins have been lost. Ever since people stopped storing stock certificates in safe deposit boxes, this hasn't been an issue for equities. Even then, companies kept a ledger with ownership.
- nerdponx 9y agoFortunately, USD balances on GDAX are FDIC insured for US citizens [0]. I accept that I might not be able to cash out of cryptos in an emergency, due to liquidity or transaction times or something else, but I sure as hell will be able to get out any USD I might have in GDAX, which is a big confidence boost to me. They claim that all crypto deposits are "fully insured" as well, by a "syndicate of insurers through Lloyd's of London". [0]: https://support.gdax.com/customer/en/portal/articles/2689803-how-deposits-are-insured-on-gdax https://support.gdax.com/customer/en/portal/articles/2689803...
- tehlike 9y agoBlack-swan events sounds less rare in digital world. I am also doubting if FDIC insurance is for the full amount, or the 250K that's often cited for banks.
- canoebuilder 9y agoCan we all take a moment to appreciate the irony here? You're enthused about dealing with cryptocurrencies for reasons of being insured by a centralized, third-party, who you've placed your trust in.
- nerdponx 9y agoIt's ironic, but I don't feel too bad about it. 1. For all of the things we mistrust the US government for, the FDIC is, as far as anyone can tell, rock-solid. If, by some catastrophe, the FDIC were no longer able to ensure deposits, we would likely all have much bigger problems than trying to get your cash out of GDAX. 2. It spreads risk. GDAX itself is a centralized authority. Instead of putting all my trust in one entity, I now only need one of GDAX or the SEC or the FDIC to be functional. 3. It brings legitimacy. For better or worse, your average person is not a crypto cyber hippie, and neither are executives at most traditional companies. If we are to start seeing crypto currency actually become useful as currency in the USA, rather than just the speculation instrument, we need adoption by both average people and business executives. When they see that one of the top exchanges is based in the USA, and is fully certified and regulated by the US government, it ought to help allay some fears about the safety and usefulness of digital currency. 4. Some things I don't trust the US government for any further than I can throw it. Other things, I trust it pretty thoroughly. This falls in the latter category.
- andr 9y agoWhat the article dances around is the Efficient Market Hypothesis, which, in short, claims that there is one true price for every financial asset. No market is truly efficient, but some are more efficient than others. Low spreads and lack of arbitrage opportunities (the ability to buy an asset on one exchange and immediately sell it on another for a profit) are signs of a more efficient market. Bitcoin, clearly, is far from an efficient market. Everybody knows that. A lot of people are profiting from that, although there is a significant risk involved from the shoddy state of most exchanges. As a nitpick, smart order routing is not something stock and futures exchanges give you, it's a layer you can buy or build on top of the available exchanges.
- nabla9 9y agoYou are confusing terms. Efficient Market Hypothesis and Market Efficiency are not relevant here. Operational efficiency in the investment market (trading exchanges) is the issue. Transaction costs, manipulation, spreads, unfairness etc. add cost for doing transactions.
- davidgerard 9y ago(author here) I originally submitted this with just the second part of the title, 'cos Part 1 doesn't deliver on "why you can't cash out". I expect two or three more parts, that answer the question: KYC/AML, oddly-convenient ineptitude, and hoo boy Tethers.
- 6nf 9y agoThis article is completely overblown and full of made up nonsense. It's super easy to sell BTC and on a decent exchange like GDAX you can sell a million dollars via market order right now with less than $100 slippage. That's 0.5%. They will then send it to your bank account in 24 hours no problem whatsoever. I don't know where you are seeing a 5% spread but certainly not on the major exchanges. Spoofing and all that nonsense doesn't prevent anyone from selling at a decent price, I know this for a fact cause I've done it multiple times in the last few weeks. You should buy and sell some BTC on a big exchange before you make these nonsense claims.
- josephagoss 9y agoTethers are total crap, please do an article about them.
- aedron 9y agoThe article does read mostly like sour grapes. "T-T... They're never gonna get that money anyway!" Some examples are plain false (calling "thin" volume when several exchanges see a billion dollars a day). If the point was that banks will not let you transfer out of the exchange, the exchange will hose you, or your tethers will prove worthless, then the article should have just made that point. BTW the first two are false, obviously no experience actually dealing with big money crypto. WRT to tethers they look like a fraud but only represent one inferior exchange.
- neinnein 9y agodamn u dumb
- icedchai 9y agoI'm cashing out a little bit every month. I already made back more than 10x my investment, so it's free money going forward.
- deleted 9y ago[deleted]
- matte_black 9y agoDon’t most of the massive cash outs happen off-exchange between two parties agreeing on a price?
- cortic 9y agoyes and no, exchanges like Coin Floor let you pick an amount and price, then auto match buy offers with sale offers. so its technically on the exchange and between two parties.
- matte_black 9y agoWhat about selling a hardware wallet with something like an OpenDime?
- erubin 9y agoWhy can't another service provider provide best-effort execution? Suppose you had a reserve of btc and trading accounts on the various exchanges. Couldn't a customer come to you, ask for some btc, and you could quote them the best price + fees?
- rlpb 9y ago> The delays — ten minutes to over an hour — and fees add enough friction to generate the spread between exchanges, even if you assume everyone’s using trading bots as quickly as possible. Can an arbitrager not simply hold both BTC and cash on multiple exchanges at once? When a price difference swings one way, sell on one exchange and buy on the other, without worrying about transferring anything between exchanges. When the price difference swings the other way, do it the other way round. If price differences average in both directions over time, you shouldn't run short of either BTC or cash but you will make a profit. If price difference average in one particular direction, you can notice that trend and transfer across in advance. An initial investment is required, but that is true of any arbitraging activity. I had assumed that this is what arbitragers have always done.
- physguy1123 9y agoThis isn't done, as evidenced by the very different prices on each exchange. It's considered unwise to keep bitcoins on the exchange, and certain exchanges have a 'trustworthiness' premium that they charge. Presumably there's not enough capital willing to take this risk to move the markets. People might start taking advantage of the futures market to go short btc, so exchange exposure is only limited to the time it takes to immediately move coin off exchange. Time will tell if that allows enough capital to arb the difference.
- rgoldade 9y agoYou could do that. It's not really zero risk though because the coin could drop in value. Usually (real) traders who find arbs on (real) exchanges will submit simultaneous bid/ask orders without holding the actual product. They can clear the trades later.
- rgoldade 9y agoOf course.. if you could take a short position against the coin, you could hedge and eliminate your risk.
- JumpCrisscross 9y ago
- aecorredor 9y agoThis is a pretty appropiate video for this post: https://youtu.be/hAQA_29Htts https://youtu.be/hAQA_29Htts fugazi?
- kentt 9y agoedit: removing because I don't enjoy getting into internet arguments. All the best to you.
- greglindahl 9y ago"replace bitcoin with gold" and you'd have a different article. One of the two has a many-thousand-year history of liquidity, and a lot more market demand and trading (on regulated exchanges) today.
- alpatters 9y agoI don't think the history of gold changes the argument here. As a store of capital gold has also been stolen by corrupt governments in history.
- kentt 9y agoedit: removing because I don't enjoy getting into internet arguments. All the best to you.
- rrggrr 9y agosource?
- curiousgal 9y agoWhich exchange?
- zeep 9y agois that why Bitcoin's value dropped something like 5%?
- jmtame 9y agoFYI OP claims $400mm USD was withdrawn to make a counterpoint about liquidity, but did not specify the exchange. Not sure why this would generate an argument? In addition, how can anyone infer that a sell indicates liquidity? A sell on an exchange only indicates one asset was exchanged for another. FWIW I saw several large buys on the GDAX history today at the $18.4k price point. One was for 36 bitcoins, and I've never seen a purchase over 5. I shortly after saw another for 18.
- marsrover 9y agoI completely agree that it is the wild west and given certain scenarios you would not be able to reliably cash out. However, I have had no issues cashing out so far.
- thisisit 9y agoI am not going to defend bitcoin's thin markets but here are couple of things I noted: First, Quoting a number like “$19699.46” to seven significant figures when your data’s got a 5% spread would get your high school physics teacher slapping you upside the head. It’s entirely deceptive. It should say something like “$19,700 plus or minus $500 depending,” and that line graph should be a thick grey bar. The question is does the 5% spread change my buying price? I need to buy a bitcoin. Will coinbase honor the price when order is placed ie if it shows $19700 then will it let me buy 0.1 BTC at this price? Similarly, will it allow me to sell them back at whatever price they show on screen? If yes, how does it matter? Sure, if coinbase cannot honor the price and let's in a huge slippage [1], then that is a concern. Though in most cases where they see markets moving too fast for them, they have routinely shut down trading. Second, in stock markets it is not about smart order routing but NBBO or nation best bid and offer. Brokers need to route orders to best price available else they are liable for damages. There are no such rules in bitcoin. And as the article notes, there are issues in getting the best price available due to transaction times. In which case, coinbase can set whatever price they want. But if they honor it, there is not much to talk about. [1] https://www.investopedia.com/terms/s/slippage.asp https://www.investopedia.com/terms/s/slippage.asp
- cosarara97 9y ago> Will coinbase honor the price when order is placed ie if it shows $19700 then will it let me buy 0.1 BTC at this price? No, neither the price at which they actually allow you to buy or sell BTC matches the price they display. They set the price for you, which is different in both operations (and on top they charge a fee). GDAX on the other hand (same company as coinbase, different service) is an actual market where you can place orders at whatever price you want, and somebody will take them if your price matches theirs.
- thisisit 9y agoIt seems you misunderstood the point. So let me re-phrase as per what you said: > They set the price for you >> Will coinbase honor the price they set when order is placed ie if it is set $19700 then will it let me buy 0.1 BTC at this price? In which case, the spread question is only about whether there is a huge spread between the display (average) price and their set price.
- alasdair_ 9y agoThe article states "The singular “price” of Bitcoin doesn’t exist — it’s a made-up number." This is the same for every stock traded on any stock exchange in the world. The "singular price" is, in most cases, just the mean of the closest bid and offer listed on the exchange and is thus a "made-up number" On top of this, it obviously doesn't take into account everything from transaction costs to the fact that attempts to purchase substantial volume at this price would not be possible.
- jsmeaton 9y agoIsn't the difference that a stock is only traded on a single exchange? If stocks were traded on multiple exchanges, and the value was reported as the average across all of them, then that number would be just as made up.
- patd 9y agoA lot of stocks are trading on multiple exchanges. Unilever and Shell trade on the NY, London and Amsterdam stock exchanges. People typically use the one closer to them geographically or from a currency point of view. And things like gold or oil barrels also have multiple exchanges.
- tantalor 9y agoUnilever is actually 2 companies: https://en.wikipedia.org/wiki/Unilever#Legal_structure https://en.wikipedia.org/wiki/Unilever#Legal_structure Unilever plc and Unilever N.V. ...operate as nearly as practicable as a single economic entity, whilst remaining separate legal entities with different shareholders and separate stock exchange listings
- barnabee 9y agoStocks are also traded on many different order books [1], each of which will have different prices, so the quoted price is just as made up (although usually by ignoring all but one venue rather than averaging across them). Also worth noting that for both stocks and cryptocurrencies, the price that is shown is almost always the last traded price not a quote for a price you could trade at anyway. [1] in the US, for example: https://www.sec.gov/foia/docs/atslist.htm https://www.sec.gov/foia/docs/atslist.htm
- sathackr 9y agoimo this is basic supply and demand. Bitcoin comes into this world at a fixed supply rate. Demand is currently exceeding supply, so the price goes up. With bitcoin so far, the higher the price, the more press is generated, which increases demand, so we have a feedback loop. The only difference is, demand can change very quickly, causing drastic swings in price. Which then generates press, which generates demand. Most every crypto currency will follow the same model. As long as enough demand outpaces supply, the price will rise.
- gizmo686 9y ago>With bitcoin so far, the higher the price, the more press is generated, which increases demand, so we have a feedback loop. The technical term for this feedback loop is "bubble".
- grandalf 9y agoAny price is just the amount someone is willing to pay. This is why prices change even for things that do have intrinsic value like food commodities, oil, etc. More specifically, price is a function of supply and demand. Bitcoin was created with a very specific bootstrapping plan baked into the design. What people are missing is that the bootstrapping plan is well known and obvious to investors, and is meant to incentivize a speculative motivation for mining, which it has done successfully. But think about it this way, the price of a currency is only loosely linked to supply and demand. Nobody really knows how many dollars exist, yet the currency has characteristics that make it trustworthy. Bitcoin is the same phenomenon. The price is based on the success of the governance model and the appealing characteristics of the ecosystem. Based on these appealing characteristics, there is the widespread expectation that Bitcoin will win market share from other currencies over the long term. We know there will be a finite number of Bitcoin mined, what we don't know is how much market share Bitcoin will have in comparison to other currencies. Market share is not a function of money supply as much as it is a function of the holders of the currency that rely on the currency because of its governance mechanism, fungibility, etc. Many countries hold USD in reserve because they find the governance characteristics of the USD appealing. Bitcoin is just a novel way of doing currency governance. For all uses of currency other than holding inventory, the governance mechanism matters very little, since there is little risk exposure to price fluctuations or the risks associated with bad governance. Critiques of Bitcoin get mired in an imprecise understanding of all of the above, but the most notable blind spot is that Bitcoin is a governance mechanism first and a currency second, and investors are pleased because the governance mechanism has been tested a few times and has (thus far) performed admirably.
- deleted 9y ago[deleted]
- anonu 9y agoFrom the article: “Market cap” [...] is a bogus number that’s not actually applicable to anything — it’s not money that was put into the crypto, it’s not a realisable value like a company market cap. I am not sure what the author means by "realizable". If their intention is to say, "Ok, let's liquidate every single coin for fiat currency... and we expect to have the market-cap equivalent in that currency" Well, whats going to happen is the price is going to collapse. The same thing would happen with the value of any publicly traded company. The market cap of Apple is $900bn - but you can't just tell every shareholder to sell their stock for cash... you would never be able to realize anywhere near that amount. Article reads a bit weird. Here are my 2 cents - markets are a voting machine. They are also about perception. If people perceive that there is value - then they will vote with their dollars. If people lose faith in the system, the market collapses. This is true in any market dynamic, including the one that fiat currency operates in.
- JohnnyConatus 9y agoExcept Apple would still exist as one of the world's most profitable company. That's the underlying value.
- syllogism 9y agoWhat would you pay to own every single bitcoin? The answer should be nothing --- if you owned all of them, they'd be completely worthless. What would someone pay for all of Apple's stock? Suffice to say, a lot --- because Apple has actual value.
- empath75 9y agoI think there’s actually a real risk in bitcoin of a few people controlling all of the wealth which makes it a not very fun game to play for anyone else, and makes it hard to justify it as a payments platform.
- anonu 9y agoThat's an interesting point - but how is that not unlike our current capitalist system? There was a tweet (posted on HN the other day) that 50% of wealth in Europe is inherited...
- gruez 9y ago>If you look at the spreads between exchanges — the different prices for one interchangeable bitcoin — you’ll see spreads of hundreds of dollars, and in volatile moments it can be in the thousands. that's plainly false. i'm not sure what exchange he was checking, but spreads for gdax (the biggest exchange) at the moment is 1 cent. https://i.imgur.com/JCQfmkc.png https://i.imgur.com/JCQfmkc.png
- cantrip 9y ago>spreads between exchanges
- anonu 9y agoFrom the article: In normal securities trading, if a share is listed on multiple exchanges, orders will often be applied via smart order routing — so that a given buy or sell order is in the context of all the order books for that stock. This avoids liquidity fragmentation By definition, if you have multiple exchanges - your liquidity is already fragmented. In the US Equity Market - you're also not obligated to route to dark pools - only exchanges have order protection. And maybe 30%+ of volume trades on the dark pools. The bitcoin exchanges do publish market data - so its up to arbitrageurs to step in and bring markets in line. We're still in the early stages - and I expect bitcoin futures and wider adoption of new concepts (like continuous swaps) to alleviate some of the price differences.
- boh 9y agoThat's one of the main caveats of the entire cryptocurrency effort: the exchanges. Unfortunately for investors, the prices don't reflect the actual projects (and honestly why would you expect them to), and for the developers they have to operate under these expectations of performance for what are essentially experiments that need time to mature. What these projects are trying to do and the things they've already achieved is just amazing and really exciting. When you actually use this stuff instead of just HODling it, you realize why it has value. Should these crytpocurrencies actually cost this much at this point? Would bitcoin be any less useful if it was worth $5 instead of $20k? Probably not and definitely not. These things aren't the sort of assets we're used to. It's not like an equity share of the company that makes the car--it is the car. We need to actually start driving for it to be worth anything in the long term.
- fernly 9y agoFor all those posting variants of "It's no different from stocks", this is answered in TFA but even more clearly in the Paulo Santos article linked from it[1]. Editing it down a bit, > ...overwhelmingly, bitcoin is traded on bitcoin exchanges... So here's the thing: Each of these markets does not communicate with the others. [That] ... means that buyers/sellers on each exchange are reliant on bids/asks exclusively from other members trading on the very same exchange. > Now, that doesn't seem all that different from what happens with stocks in countries like the U.S., with all kinds of markets and ECNs, does it? But it really is massively different... because with stocks, a broker can quickly reroute his orders from one exchange to the other. The depositary/custodian of his stockholdings is not the exchange. With bitcoin, it's different. The exchange is also the depositary of one's bitcoin holdings ...[describes the difficulty and delay of moving BTC from one exchange to another, also discussed at length in TFA] ... The result of this highly inefficient market structure is that the same asset (Bitcoin) trades at significantly different prices from exchange to exchange... So with stocks, if you want to buy or sell shares of AAPL, the price will be essentially the same whether you talk to Schwab or to eTrade, and if it isn't the same to within a penny, a script somewhere will take advantage of the difference to make money by buying from one and selling at the other _in seconds_ -- arbitrage which is not possible with bitcoin exchanges owing to the transaction delay and fee. TFA also makes the important point that there is no regulation whatever of bitcoin exchanges, and that also makes them very different from the likes of Schwab. [1] https://seekingalpha.com/article/4130380-bitcoin-series-addendum-market-structure https://seekingalpha.com/article/4130380-bitcoin-series-adde...
- beaner 9y agoIs this meant to be scary though? From my perspective, it's obvious that bitcoin markets aren't as developed as traditional stock / forex markets... but it literally got added to CBOE one week ago. It seems there's nothing categorically preventing it from developing in time. So while this is interesting it doesn't seem particularly important right now.
- StanislavPetrov 9y ago>So with stocks, if you want to buy or sell shares of AAPL, the price will be essentially the same whether you talk to Schwab or to eTrade, and if it isn't the same to within a penny, a script somewhere will take advantage of the difference to make money by buying from one and selling at the other _in seconds_ -- arbitrage which is not possible with bitcoin exchanges owing to the transaction delay and fee. Partially true of the most largest and most liquid stocks and those that are electronically traded. Not true for those trading massive blocks of stock or those trading in 'dark pools'. Also not true for stocks, options, bonds and other financial instruments with low liquidity or those that aren't traded electronically (such as OTC stocks). Also not true in times of financial distress (you know, the times when you really want to sell) when everyone is running for the exits. Anyone who doesn't understand the basics of how markets work (the people this article is aimed at) shouldn't be trading anything.
- StanislavPetrov 9y agoThis article is total trash. Liquidity is always a factor in any asset that you buy or sell, whether its a stock, a bond, a work of fine art, or a bitcoin. All prices are fictional until you execute a contract and receive payment for a sale.
- josephagoss 9y agoYou can cash out Bitcoin and the price is actually very accurate. The money I see in my bank account is real I can assure you of that. Also I know friends that cash out six figures at a time and the price they get is within less than 1% difference to the last sell price. The number is accurate enough for most orders under $10,000,000. Has this person actually traded Bitcoin? You might not be able to sell a large order to the cent, but with Bitcoin you are certainly able to cash out within less than 1% of the listed price. I move orders around a lot and I see real money, so I know it's not fictional. In addition I frequently use an exchange with about 100 times less volume than the USA exchanges. Also shares have a spread too. The Bitcoin order book is not razor thin, unless you are trying to sell $10,000,000 in one go. Then you just need to spread out the sell over about 5 hours. Also the issue with arbitrage isn't the Bitcoin side of the transactions, it's often the USD or AUD side. But arbitrage does work and the price is much closer worldwide than it used to be. These little islands that the author talks about range from $1,000,000 24 hour volume for the smallest exchanges to $200,000,000 24 hour volume for a mid - high size exchange. TL:DR I can assure you the price is real, cashing out is easy and viable. If you want to cash in $10 million just expect your limit order to execute gradually over about 5 hours.
- sytelus 9y agoArticle author actually makes a great point and it stands regardless of your ability to cash out within 1%. Big investors on current markets can whip out huge profits for themselves by using techniques such as front running, wash trades, willybot, spoofing etc. Exchanges are not even prohibited from doing their own secret trades and using their own internal database and full knowledge of all other players. If you are a trader with deep pockets, you should immediately realize all above established techniques (which is illegal on stock market) can generate you huge profits in no time in crypto market. Big players would literally have all the strings to play the market according to their will. Currently prices are 100X higher and 1% difference seems irrelevant but in mature markets 1% move is news worthy event. I think its also worth pointing out that less than 1000 entities owns 40% of the bitcoins. I wouldn't be surprised if set of entities are willing to burn short term cash to inflate the prices just to attract other large scale investors in the game. This is like burning tinder to start the fire. The end game usually is massive cash outs as soon as fire has started. Typically this would kill the fire but in some cases it may keep going. In any case, the bad news to small investors is that expect to get killed at any point in time when your big brother decides to cash out. Until then, party on.
- deleted 9y ago[deleted]
- aryehof 9y agoA normal corporate stock price and hence market capitalization, is entirely a function of its actual book value (assets minus liabilities) and a factor representing expectations of future profits. Bitcoins price and hence market capitalization, is entirely based on speculative buying and selling. It has no value if there are no speculative buyers, and that day will come. What really saddens me is that the noble aspirations of Bitcoin being a decentralized, transparent medium of exchange and store of value, have been so totally crushed in the face of crazy bubble scale speculation.
- bufferoverflow 9y agoThis article is pure FUD with lies. 1) The spread is not "plus or minus $500", it's a lot less. See for yourself: http://bitcoinity.org/markets/bitstamp/USD http://bitcoinity.org/markets/bitstamp/USD At this particular moment the spread is $23 on Bitstamp, zero on GDAX, $11 on Bitfinex, zero on Kraken, zero on it it (where "zero" is something under a dollar, there's not enough precision to display it). 2) Yes, you can cash out, a lot. There are dozens of huge exchanges where the daily volume is in billions. https://coinmarketcap.com/currencies/bitcoin/#markets https://coinmarketcap.com/currencies/bitcoin/#markets For instance, Bitfinex USD/BTC 24-hr volume is $1.2 billion. And that's just one currency pair on one exchange.
- kensey 9y agoWhen article says “plus or minus $500”, it’s not talking about the bid/ask spread on a given exchange, but the price difference from one exchange to the next, which is exactly what your own second link shows. And sure, you can cash out, and see a number in a balance statement. How hard is it to get that cash out of Bitfinex into a real bank though? (I’m not even going to address the inherent hilarity of citing Bitfinex as proof that things are A-OK in Bitcoinia.)
- empath75 9y agoYou can’t get dollars out of bitfinex.
- davidgerard 9y agoI had a commenter on the original post claiming he'd gotten millions of dollars out of Bitfinex two months ago! I pointed out this was actually news, and asked who the sending bank was.
- JohnJamesRambo 9y agoSALT Lending has an interesting take on this that is actually healthy for crypto. They say never cash out and lose your crypto. It's hard to argue with that point. Remember there were people that cashed out Bitcoin at $100.
- Iv 9y agoOk, I'll put my theory here. We have seen weird spikes in the past that looked like a speculation bubble and it has taken us a few days or weeks to understand their cause. They usually crash a bit but stay at relatively high levels compared to where they started. One was caused by Russians discovering they could evade sanctions that way. Another one was caused by people hiding money in Cyprus discovering that it could be seized by the government. For the current rise, my money is on the anti-corruption operation happening in Saudi Arabia. Whatever you think about the crown prince's true goals, the move is not just theater. Hundreds of billions of dollars are changing hands. I suspect that what we see is half of the royal family's wealth being shuffled around in a hope to escape being seized.
- jaimeporras 9y agoDear Mr. Gerard, Please make immediate arrangements to return to your paper ware planet. You are obviously out of your depth on this one. Thanks.
- alpatters 9y agoI think the comparison of bitcoin with gold is a better one than stocks. The value of gold today is not tied to the underlying precious metal any more. Gold is kept in vaults likely never to be looked at or touched. It might as well be a digital number. Instead gold is a place to store capital with a value agreed between buyers and sellers. It is limited in quantity and is very difficult to copy. Bitcoin is quite similar is many respects. It also doesn't have to be stored and corrupt governments cant easily steal it.
- dsr_ 9y ago"The important thing about securities regulations is that every single one is there because someone ripped a lot of people off that way." Yup. You can argue about how to apply them in any given situation, but if you want a fair exchange, you will spend lots of time re-creating most of the regulatory environment.
- edem 9y agoThis is just FUD. As others have stated I can cash out any time I want. I have USDT, localbitcoins.com and BTC ATMs at my disposal.
- neuro_imager 9y agoFrom a post from r/ethereum: TLDR version: The author is a giant tool and his opinion in this space is basically worthless. David Gerard is a cryptocurrency antagonist and even a frequent contributor to /r/Buttcoin/. Outside of wiki, he writes satirical articles and snark-laden comments dismissing first Bitcoin as a libertarian scam and now Ethereum because I guess Bitcoin wore him out. He sees cryptocurrencies and their adherents as a monolith comprised of economically ignorant libertarians that need to be educated. He's been doing it for 5 years straight. I don't know that there is anything that can be done when someone uses Wikipedia as a channel for their own political purposes. His monolithic vision that hasn't updated since 2011 (http://intelligentdesigns.net/insert-bitcoin/ http://intelligentdesigns.net/insert-bitcoin/): "I wouldn’t attribute malice because I know a lot of Bitcoin advocates, and they’re painfully sincere people, and mostly libertarian through lack of appreciation of their personal privilege rather than any actual decision." Again in 2011 (https://slashdot.org/comments.pl?sid=2251220&cid=36493852 https://slashdot.org/comments.pl?sid=2251220&cid=36493852): "One good thing about Bitcoin threads on Slashdot: plenty of opportunity to beat Econ 101 into the heads of libertoonians who think they've got the perfect zinger for every situation." In 2013 (http://discussion.fsfeurope.narkive.com/hl42sXq7/petition-official-currency-code-for-bitcoin-btc http://discussion.fsfeurope.narkive.com/hl42sXq7/petition-of...): "Bitcoin would love an FSF-related imprimatur (and FSFE counts); feeding the vested interests of the early Bitcoin adopters and their wish to con people into buying their coins may not be in FSFE's best interests." In 2013, with wikimedia about accepting Bitcoin donations (!) (http://www.gossamer-threads.com/lists/engine?do=post_view_flat;post=414433;page=1;sb=post_latest_reply;so=ASC;mh=25;list=wiki http://www.gossamer-threads.com/lists/engine?do=post_view_fl...): "It's completely wrong to call these things Ponzi schemes. Technically, they're pump-and-dumps."" In 2016 (https://www.reddit.com/r/Buttcoin/comments/4b1u2n/what_would_have_to_happen_for_buttcoiners_to/d15km3s https://www.reddit.com/r/Buttcoin/comments/4b1u2n/what_would...): "[–]dgerard 12 points 1 day ago 'a consequence of the the bitcoin community not only not understanding how money works, but also not understanding how bitcoin works.' The Bitcoin space, summarised." He's likely a painfully sincere person, who lacks appreciation of new evidence and has a firm grasp on neither fintech nor finance. One example: the mere fact that large vetting institutions like banks and investment firms have invested billions in Bitcoin and separately blockchain tech changes the probability that Bitcoin is doomed to fail and a pump'n'dump scheme. But what does a bank know about money, I guess, could be the reply? So as times have changed and as we've all learned more about Bitcoin and blockchain tech's existential issues, his view of Bitcoin and crypto remains the same -- that it is a pump & dump scheme doomed to fail. And it's his mission to educate people and control the damage. He has basically staked ownership of the Ethereum wiki. He's referred to Ethereum as vapourware and a "pump'n'dump bubble" (at $3). He doesn't seem to grasp the details or the point of anything about it, other than as a pump & dump. For awhile, this was one of the few featured things he allowed on the Ethereum wiki. It's so out of context as to be incredibly biased and it leads to making the article confused for any person new to Ethereum -- "The documentation notes that computation on the EVM is "very expensive" and that "you will not be able to do anything on the EVM that you cannot do on a smartphone from 1999."[13]" It's a bummer. I'd feel equally disturbed if someone wrote things that weren't true or out of context to make Ethereum look better on wiki. If you have a bunch of biases about something and are in a situation where you are asked to be objective on it, you should recuse yourself. It's basic ethics. I would encourage people NOT to go over there and try and edit unless you are going to be extremely conservative and respectful of Wikipedia's rules and expectations. Even then, I would advise against it. It won't accomplish anything. Honestly, that page will be what it will be until he recuses himself. The Foundation as well as third parties that follow Ethereum can make sure that their sites contain accurate high level information for when people go to Wiki, leave too confused to even form a cogent opinion AGAINST Ethereum, and need further help understanding Ethereum. This sub will also serve that purpose. Time will weed out what's true. Samples of David Gerard's work http://newstechnica.com/2011/06/18/bitcoin-to-revolutionise-the-economy/ http://newstechnica.com/2011/06/18/bitcoin-to-revolutionise-... https://slashdot.org/comments.pl?sid=2251220&cid=36493852 https://slashdot.org/comments.pl?sid=2251220&cid=36493852 http://rationalwiki.org/wiki/Bitcoin http://rationalwiki.org/wiki/Bitcoin http://insidebitcoins.com/news/the-surprising-and-blatantly-obvious-risk-of-the-winklevoss-bitcoin-etf/28489#comment-1818708800 http://insidebitcoins.com/news/the-surprising-and-blatantly-... http://www.gossamer-threads.com/lists/engine?do=post_view_flat;post=414433;page=1;sb=post_latest_reply;so=ASC;mh=25;list=wiki http://www.gossamer-threads.com/lists/engine?do=post_view_fl... http://rocknerd.co.uk/2015/07/23/putting-the-record-industry-on-bitcoin-why-this-wont-work/ http://rocknerd.co.uk/2015/07/23/putting-the-record-industry... https://www.reddit.com/r/Buttcoin/comments/2npmjc/rational_wikis_write_up_on_buttcoin_is_pretty_good/ https://www.reddit.com/r/Buttcoin/comments/2npmjc/rational_w... http://discussion.fsfeurope.narkive.com/hl42sXq7/petition-official-currency-code-for-bitcoin-btc http://discussion.fsfeurope.narkive.com/hl42sXq7/petition-of... Added: http://news.bbc.co.uk/2/hi/programmes/newsnight/8222397.stm http://news.bbc.co.uk/2/hi/programmes/newsnight/8222397.stm -- Here he advocates locking pages on living people and new entities because it's so easy for people ("the world has a certain number of idiots in it") to misuse Wiki in those instances to shape the narrative.
- gjem97 9y agoCan someone weigh in on the relatively large difference in prices between various exchanges. I have always mentally chalked it up to friction--caused by the fees of converting from fiat to bitcoin--eating up all the edge in the arb. Is that all it is? [1] https://www.cryptocompare.com/coins/btc/markets/USD https://www.cryptocompare.com/coins/btc/markets/USD
- sharemywin 9y agothe exchanges I looked at with the lowest prices didn't have a way to buy/sell with USD.
- dandare 9y agoI don't know nearly enough to comment on the article but at this point I started to think Bitcoin is an abomination that will ultimately hurt everyone - not just the people who invested in it. I think Bitcoin is an abomination because after 9 years of idealistic search for meaningful use case it is almost evident there is none. Instead, Bitcoin becomes this no-face monster swallowing more and more speculative investments. "If something cannot go on forever, it will stop". Bitcoin investors know this and they all hope they will be the ones to withdraw before the bubble bursts and that their gains will be paid by the misfortune of those who are not as "smart" as them. If pyramid scheme is all we want from cryptocurrencies, we could have done it without the invention of the blockchain.
- kemonocode 9y agoYou can indeed cash out Bitcoin and the number is reasonably accurate... up to a certain amount. $100? Sure. $1000? Yeah. $10k? That's alright too. $100k and upwards is when your order might actually start having an effect on your exchange to shift the price upwards or downwards.
- mikeschmatz 9y agoBitcoin is just a dressed up pyramid scheme to enrich ones at the top. The lack of oversight and regulation is pretty much a welcome sign for every scammer in the world.
- SippinLean 9y agoWe don't need to make this general comment on every specific Bitcoin thread. A pyramid scheme requires a central actor to run the scheme, Bitcoin has none. This article is specifically about the author's opinion of what "price" and "market cap" mean in the context of Bitcoin.
- mikeschmatz 9y ago> A pyramid scheme requires a central actor to run the scheme, Bitcoin has none. No, once put in motion, a pyramid scheme doesn't require a central actor. > We don't need to make this general comment on every specific Bitcoin thread. OK, I'll check with you next time before commenting here.
- SippinLean 9y agoYes they do, they require operators and recruiters, which have a specific meaning and do not exist in Bitcoin in any sense other than an abstract one. Your comment would not be out of place on a post titled "Is Bitcoin a pyramid scheme?" but it is a generic re-hashed comment that has little to do with the specific content here.
- davidgerard 9y agoIt can reasonably be called a headless ponzi, I think. https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/ https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/
- SippinLean 9y agoA Ponzi scheme's definition relies even more on a central actor, meaning Bitcoin by definition, is not one. The author of the article you linked to makes this clear, and goes on to make false claims. >it promises insane investment returns Nothing in the Bitcoin spec promises insane investment returns, internet comments saying "buy bitcoin!" are not part of the Bitcoin spec. This is vastly different than a Ponzi and hard to link to Bitcoin itself, even abstractly. Again, the author relies on many false truths and abstract concepts: >turning every victim of the scheme into a new principal as they talk up their books for the purpose of recruiting new investors to subsidize their exits If 1 person has bought Bitcoin or suggested another buy it for any reason other than driving up the price, this is instantly false. In pyramid and Ponzi schemes, the scheme is not abstract, it is run by actual people. The endlessly rehashed argument that Bitcoin is a Ponzi scheme relies on these actors being represented by abstract notions, like comments on a message board.
- odammit 9y agoI’ve been very happy doing my bitcoin trading through ETFs and equities in Charles Schwab. Not sure if the upside is as strong but it’s definitely skyrocketed multiples times in the past few weeks without any of the “hassle” of bitcoin trading.
- ainiriand 9y agoAll of the bitcoin craze comes down to this: Do you know what's behind a fiat currency? A country What is behind bitcoin? Thin air. Yes, it is working really good for some people, but the logic behind it is flawed.
- firatsarlar 9y agoIt's getting more upset, day by day, to see that how intelligent people's mind tricked by talking about the energy cost of a trading tool. Same goes for "follow the money,... if you can't; force people to make their money be traceable".. 1.Why don't we try to find new energy sources. ( If I start to travel at light speed, will you still blame me -us, whoever- to use a lot of energy. ) Or should we stand in a state ,we curve dots on the rock, to keep track of our beloved money. 2.Why can't we find another way to fight with crime -or generally bad ,evil whatever you want to define -. If one of -ancient- way of fight fails. Does constant observation of the subject, is a scientific method to control environment, that you responsible to keep at a peaceful state. Will you blame god -or some other exterior source of what you believe to make that happen (luck,... )? If you lose one of your eyes, or ear -which is an interface -tool- to collect information around -what ever you believe exterior, external...) Or continue with other -what you have currently- to continue operating in a healthy state.
- sjg007 9y agoThe best long term failure of bitcoin argument I've heard is that when bitcoins stop minting, that transaction fees won't be enough to maintain the "mining" pools and you might get 51% attacks.
- mvkel 9y agoI'm not sure the headline is at all connected to the article. The article points out very real concerns with exchanges. But there is such a thing as a "strike price" when converting BTC to fiat, just like there is in the stock market. When you sell (or buy) your coins on Coinbase, it gives you a strike price that updates periodically. But when you hit the submit button, that transaction is locked in, so you know exactly the amount that will be transferred to (or from) your traditional bank account. There are very real flaws in the current exchanges, but "price being fictional" isn't any more real than it is on the traditional stock market.