6 ms·

For most assets, you can generally assume it will be close to what it currently is priced at. btc is different in that regard because holding onto it for a wee

by mrep 9y ago

For most assets, you can generally assume it will be close to what it currently is priced at. btc is different in that regard because holding onto it for a week or even a day can easily cause it's value to double or half. That's why its different because while you think you have that much money, by the time you actually get around to selling it, the price can be radically different

nihonde 9y ago
Some assets are more volitile than others. I feel that we are moving backwards here in terms of restating obvious and extremely basic principles. Anyway, I’m not at all convinced that BTC is different in kind relative to, say, normal FX trading. The spreads do tend to be higher, though. What’s far more interesting to me is BTC’s resilience as an asset in spite of massive, demonstrable (and frankly, predictable and preventable) failures like MtGox. Edit: Think about shares held in a startup. Those are insanely volitile. Does anyone need to reminded that they aren’t rich until they convert their shares into cash?
- xapata 9y ago
  Yes, people sometimes need to be reminded that illiquid assets are difficult to evaluate.
totalZero 9y ago
> For most assets, you can generally assume it will be close to what it currently is priced at. True with some caveats. This statement assumes no forward rate. If the risk-free rate is high, then the future price should generally be expected to appreciate. This statement also requires some assumptions about the probability distribution of future price changes. Let's take a common example of a multi-modal distribution: court decisions. Imagine companies XYZ and ABC are engaged in a patent dispute. Both companies profit greatly from the production and sale of doodads, and (for the sake of example) we have been told that exactly one company will need to cease doodad production as a result of the decision. The company that ceases production should trade down as a result of its lost future profits, and the other company should trade up. In this case, even though the current prices may be E[XYZ] and E[ABC], the future price is going to be markedly different for both.

by mrep 9y ago

nihonde 9y ago

Some assets are more volitile than others. I feel that we are moving backwards here in terms of restating obvious and extremely basic principles. Anyway, I’m not at all convinced that BTC is different in kind relative to, say, normal FX trading. The spreads do tend to be higher, though. What’s far more interesting to me is BTC’s resilience as an asset in spite of massive, demonstrable (and frankly, predictable and preventable) failures like MtGox. Edit: Think about shares held in a startup. Those are insanely volitile. Does anyone need to reminded that they aren’t rich until they convert their shares into cash?

xapata 9y ago
Yes, people sometimes need to be reminded that illiquid assets are difficult to evaluate.

totalZero 9y ago

> For most assets, you can generally assume it will be close to what it currently is priced at. True with some caveats. This statement assumes no forward rate. If the risk-free rate is high, then the future price should generally be expected to appreciate. This statement also requires some assumptions about the probability distribution of future price changes. Let's take a common example of a multi-modal distribution: court decisions. Imagine companies XYZ and ABC are engaged in a patent dispute. Both companies profit greatly from the production and sale of doodads, and (for the sake of example) we have been told that exactly one company will need to cease doodad production as a result of the decision. The company that ceases production should trade down as a result of its lost future profits, and the other company should trade up. In this case, even though the current prices may be E[XYZ] and E[ABC], the future price is going to be markedly different for both.