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I wonder how the press is so sure that "fears of regulatory crackdown" are the reason for the drop. Did they talk to big sellers? What is the source? The story

I wonder how the press is so sure that "fears of regulatory crackdown" are the reason for the drop. Did they talk to big sellers? What is the source? The story seems just as speculative as the BTC price itself. Personally, I think it's just as likely that some big bitcoin players are having their fun with the suckers who bought BTC futures. If I would have lots of BTC I would have shorted those futures, as much as possible, and then right before those futures expire (jan 18?) would dump lots of real BTC, crashing the price and making money on those shorted futures. Then, after the expiration, I'd start to buy back BTC at the lower price, using the futures profits. Extra profit for buying futures for the next expiration date (feb 18?) during the crash... I don't understand how cash-settled futures are meant to provide price stability to a market. They just seem to do the opposite to me.

branchless 9y ago
No it's because no jurisdiction requires tax to be paid in bitcoin therefore it lacks the fundamental that drives the need for fiat currency that gives value.
jacques_chester 9y ago
> I wonder how the press is so sure that "fears of regulatory crackdown" are the reason for the drop. You'll notice that this is true of all race-calling journalism. "The market was down on news that the Fed ..." "China's announcement caused the market to ..." "Iron ore prices rose again after production figures from BHP and Rio Tinto showed ..." They're not performing exact science. They're hitting the daily quota and moving on. Something that makes for a good, plausible story is usually the limit of what you'll get from a journo in a hurry.
- sjcsjc 9y ago
  I once saw this headline on the screen on the trading floor of a bank I was working at. "Copper prices fall on fears copper prices too high".
whatok 9y ago
There's barely any volume in futures right now.
- andirk 9y ago
  How do I look btc futures volume?
imron 9y ago
> I wonder how the press is so sure that "fears of regulatory crackdown" are the reason for the drop They don't. I imagine it's mostly 'bitter coiners' who didn't buy in when the price was low and who are happy to see any drop because it lessens the amount they feel they lost out by (and I say this as a bitter coiner myself who could have mined bitcoin back when it was possible on a typical desktop but decided it wasn't worth the hassle). I imagine this drop is caused by people who bought in early last year, saw the price drop from $19,000 to $15,000 and then think "I'm happy to lock in 1,500% gains" and sold, causing others to think "hmmm, the price is dropping, I'm happy to lock in 1,400% gains" and selling, and so on all the way down to the current $10,000, and it will likely keep dropping until you run out of people looking to lock in at least some of the gains from last year. That's when you'll get a whole bunch of people thinking "wow the price of bitcoin is low right now, time to buy, buy, buy".
shawnee_ 9y ago
> I don't understand how cash-settled futures are meant to provide price stability to a market. Interestingly, thrash and volatility provide stability (and profit) to the entities that take a cut of every transaction with a transaction cost. Think about brokers of any sort (real estate, stocks, insurance); they do not care whether the price momentums are going up or down, only that they can extract the maximum "equity" out of each and every transaction. Since fear-based selling (or fear-based buying by folks with fear of "losing out" on the next big thing) tends to increase overall thrash and volatility (and thus overall volume of selling), it is kind of the perfect scheme for them. News and momentum of any sort can be exploited by insiders with information.
nopriorarrests 9y ago
Good plan, but it requires a counterparty who will happily assume a long BTC position when you are shorting the hell out of futures around 17-19K USD per btc. Normally, in commodities world, players who are on the other side of speculators are real producers or consumers locking into some price which suits them. Think airlines buying a lot of oil futures at suitable price to know what they will pay for fuel next quarter. Or farmers selling their future crop. In BTC world, no such players exist.
fanzhang 9y ago
This doesn't seem very likely because the bitcoin calendar future curve is in contango: http://www.cmegroup.com/trading/equity-index/us-index/bitcoin.html http://www.cmegroup.com/trading/equity-index/us-index/bitcoi... . In other words, further out futures dates are trading higher, so short investors in bitcoin are making money by rolling forward their short contracts. If long players were "trying to trap the short futures traders" they're definitely not succeeding. I think two forces are at work here. First is that a lot of people who held on the way up realize finally a lot of their savings are tied up in a super volatile asset. As they see how much of their wealth can be wiped away in day, they're moving some amount of their savings out. (Now to have gotten to here in the first place, these long term holders are not intrinsically against risk since mathematical volatility equal / higher in the past; they just don't like this volatility when half their wealth is in it!) Second is that people are still finding out about cryptocurrency. Crypto represents still less than 1% of the total real asset holdings of the world, so this would drive the price up. But this process is slow moving.
ebbv 9y ago
Honestly I think stories going with this angle are trying to rationalize the price tumble in some way which makes it less scary than the reality which is crypto valuations aren't tied to anything rational.
- vasilipupkin 9y ago
  I agree regarding bitcoin but I disagree regarding Ethereum. Proof of stake, if it happens, will tie the value of the coin to fees earned by the network.
JumpCrisscross 9y ago
> the reason for the drop My experience with race-calling journalism is the reasons are often useless. Couple years ago, I was on an exotic derivatives trading team. We purchased a portfolio of correlation trades from a French bank. (We thought we could unwind their portfolio for more than what we paid plus expected losses.) Correlation trades are complex structures designed to profit from the correlation of two assets. For example, if you buy correlation on Apple and Microsoft, and both stocks go up or down, you make money. If one goes up far more than the other, you make less money. If one goes up and one goes down, you lose money. (Vastly oversimplifying.) Just as with any market phenomenon, buying correlation itself drives correlation. (In the same way buying an asset pushes up its "price" a bit.) Conversely, unwinding a correlation trade drives anti-correlation. I handed what I thought was a simple unwinding to a junior colleague. They proceeded to fuck it up. Anti-correlation in the system spiked, we lost some money and Mike was temporarily switched to bagel duty. Few moments later, we start seeing CNBC articles about Iranian military activity in the Gulf causing Brent and WTI to diverge, why this company is outperforming that company, and even a political article commending a small Central European country for outperforming a neighbor. The price movements reported were correct, but the reads were crap. Went well with my whitefish salad bagel.
charlesdm 9y ago
Shocking news attracts people and sells newspapers. BITCOIN CRASH will attract more readers than CRYPTO HAS HAD YET ANOTHER CORRECTION (BUT STILL UP 400% SINCE LAST TIME).

branchless 9y ago

No it's because no jurisdiction requires tax to be paid in bitcoin therefore it lacks the fundamental that drives the need for fiat currency that gives value.

jacques_chester 9y ago

> I wonder how the press is so sure that "fears of regulatory crackdown" are the reason for the drop. You'll notice that this is true of all race-calling journalism. "The market was down on news that the Fed ..." "China's announcement caused the market to ..." "Iron ore prices rose again after production figures from BHP and Rio Tinto showed ..." They're not performing exact science. They're hitting the daily quota and moving on. Something that makes for a good, plausible story is usually the limit of what you'll get from a journo in a hurry.

sjcsjc 9y ago
I once saw this headline on the screen on the trading floor of a bank I was working at. "Copper prices fall on fears copper prices too high".

whatok 9y ago

There's barely any volume in futures right now.

andirk 9y ago
How do I look btc futures volume?

imron 9y ago

> I wonder how the press is so sure that "fears of regulatory crackdown" are the reason for the drop They don't. I imagine it's mostly 'bitter coiners' who didn't buy in when the price was low and who are happy to see any drop because it lessens the amount they feel they lost out by (and I say this as a bitter coiner myself who could have mined bitcoin back when it was possible on a typical desktop but decided it wasn't worth the hassle). I imagine this drop is caused by people who bought in early last year, saw the price drop from $19,000 to $15,000 and then think "I'm happy to lock in 1,500% gains" and sold, causing others to think "hmmm, the price is dropping, I'm happy to lock in 1,400% gains" and selling, and so on all the way down to the current $10,000, and it will likely keep dropping until you run out of people looking to lock in at least some of the gains from last year. That's when you'll get a whole bunch of people thinking "wow the price of bitcoin is low right now, time to buy, buy, buy".

shawnee_ 9y ago

> I don't understand how cash-settled futures are meant to provide price stability to a market. Interestingly, thrash and volatility provide stability (and profit) to the entities that take a cut of every transaction with a transaction cost. Think about brokers of any sort (real estate, stocks, insurance); they do not care whether the price momentums are going up or down, only that they can extract the maximum "equity" out of each and every transaction. Since fear-based selling (or fear-based buying by folks with fear of "losing out" on the next big thing) tends to increase overall thrash and volatility (and thus overall volume of selling), it is kind of the perfect scheme for them. News and momentum of any sort can be exploited by insiders with information.

nopriorarrests 9y ago

Good plan, but it requires a counterparty who will happily assume a long BTC position when you are shorting the hell out of futures around 17-19K USD per btc. Normally, in commodities world, players who are on the other side of speculators are real producers or consumers locking into some price which suits them. Think airlines buying a lot of oil futures at suitable price to know what they will pay for fuel next quarter. Or farmers selling their future crop. In BTC world, no such players exist.

fanzhang 9y ago

This doesn't seem very likely because the bitcoin calendar future curve is in contango: http://www.cmegroup.com/trading/equity-index/us-index/bitcoin.html http://www.cmegroup.com/trading/equity-index/us-index/bitcoi... . In other words, further out futures dates are trading higher, so short investors in bitcoin are making money by rolling forward their short contracts. If long players were "trying to trap the short futures traders" they're definitely not succeeding. I think two forces are at work here. First is that a lot of people who held on the way up realize finally a lot of their savings are tied up in a super volatile asset. As they see how much of their wealth can be wiped away in day, they're moving some amount of their savings out. (Now to have gotten to here in the first place, these long term holders are not intrinsically against risk since mathematical volatility equal / higher in the past; they just don't like this volatility when half their wealth is in it!) Second is that people are still finding out about cryptocurrency. Crypto represents still less than 1% of the total real asset holdings of the world, so this would drive the price up. But this process is slow moving.

ebbv 9y ago

Honestly I think stories going with this angle are trying to rationalize the price tumble in some way which makes it less scary than the reality which is crypto valuations aren't tied to anything rational.

vasilipupkin 9y ago
I agree regarding bitcoin but I disagree regarding Ethereum. Proof of stake, if it happens, will tie the value of the coin to fees earned by the network.

JumpCrisscross 9y ago

> the reason for the drop My experience with race-calling journalism is the reasons are often useless. Couple years ago, I was on an exotic derivatives trading team. We purchased a portfolio of correlation trades from a French bank. (We thought we could unwind their portfolio for more than what we paid plus expected losses.) Correlation trades are complex structures designed to profit from the correlation of two assets. For example, if you buy correlation on Apple and Microsoft, and both stocks go up or down, you make money. If one goes up far more than the other, you make less money. If one goes up and one goes down, you lose money. (Vastly oversimplifying.) Just as with any market phenomenon, buying correlation itself drives correlation. (In the same way buying an asset pushes up its "price" a bit.) Conversely, unwinding a correlation trade drives anti-correlation. I handed what I thought was a simple unwinding to a junior colleague. They proceeded to fuck it up. Anti-correlation in the system spiked, we lost some money and Mike was temporarily switched to bagel duty. Few moments later, we start seeing CNBC articles about Iranian military activity in the Gulf causing Brent and WTI to diverge, why this company is outperforming that company, and even a political article commending a small Central European country for outperforming a neighbor. The price movements reported were correct, but the reads were crap. Went well with my whitefish salad bagel.

charlesdm 9y ago

Shocking news attracts people and sells newspapers. BITCOIN CRASH will attract more readers than CRYPTO HAS HAD YET ANOTHER CORRECTION (BUT STILL UP 400% SINCE LAST TIME).