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...you do realize that most of the world's money supply exists in the form of derivatives, right? A single-digit percentage is actual cash. You're committing a

by z3c0 5y ago

...you do realize that most of the world's money supply exists in the form of derivatives, right? A single-digit percentage is actual cash. You're committing a strawman. They didn't say anything about how the proportionality of crypto's use breaks down - they simply stated that it has achieved the basic use it set out to. And they're 100% correct - I use crypto to buy things quite regularly (email, VPN, etc), and will continue to. Really, the only thing preventing me from doing so more often is hard-headed people refusing to support it, because it's "mostly speculative." Here's an infographic: https://www.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization-2020/ https://www.visualcapitalist.com/all-of-the-worlds-money-and...

diamondhandle 5y ago
Someone is going to make a chart comparing crypto to the already-ridiculous crypto derivatives market, and you’ll realize your point is totally irrelevant. Companies don’t transact in Bitcoin because nobody wants to hold it. Except for companies getting a valuation boost from retail investors.
- z3c0 5y ago
  No, my point isn't irrelevant, and you thinking it is means you almost certainly missed it. Most of the world's value is speculative in nature (derivatives, credit, real estate, you name it), so I couldn't care less about the crypto derivatives market, or the "normal" derivatives either. Neither are preventing me from using crypto as a store of value. At the end of the day, people speculating the value of crypto does nothing to detract from its core function as a decentralized ledger. I know this to be fact, because I have and continue to use it as money, and no amount of smug pseudo-intellectual retorts can change that. The briefest of cursory internet searches will disprove your idea that companies don't want to hold crypto - there's been massive buy in from very significant companies. Eg Sotheby's, a company that has existed since the 1700s. But they must be fools who don't know what they're doing, right?
  - throwaway2037 5y ago
    You wrote: <<internet searches will disprove your idea that companies don't want to hold crypto - there's been massive buy in from very significant companies. Eg Sotheby's>> I looked into this claim, and I disagree. Google search for <<sotheby's cryptocurrency>>. The first two results for me were: https://www.sothebys.com/en/articles/cryptocurrency-payment-information https://www.sothebys.com/en/articles/cryptocurrency-payment-... https://www.sothebys.com/en/buy-sell/cryptocurrency-faq https://www.sothebys.com/en/buy-sell/cryptocurrency-faq They are allowing partial cryptocurrency payment for a single Banksy painting. From the FAQ: << Which part of the transaction is payable in cryptocurrency? Sotheby's will accept cryptocurrency for the hammer price of the lot. The buyer’s premium and overhead premium, as well as any taxes, must be paid in USD. >> Sotheby's is simply facilitating the transaction as an auction house. They have zero exposure to cryptocurrency. I assume the cryptocurrency will be transferred to the seller after the auction is paid-in-full. The buyer must pay all non-hammer-price costs in USD to Sotheby's. (As I understand, these fees can be significant.) Like some other posts mentioned, the seller could agree to receive seashells instead of cryptocurrency. All said, this seems like a very good publicity stunt by Sotheby's.
throwaway2037 5y ago
You wrote: "most of the world's money supply exists in the form of derivatives". I also looked at the infographic. So silly. Clearly, they are just summing the notional of outstanding derivatives contracts. Summing PV (present value) would be more useful. If I buy (open long) 100 WTC Oil futures contracts, then sell (open short) 100 WTC Oil futures contracts, my delta risk is zero. However, the total notional will be 200 WTC Oil futures contracts. This article might help to explain more: https://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp https://www.investopedia.com/ask/answers/052715/how-big-deri...
- z3c0 5y ago
  The notational value of derivatives is the whole point of derivatives. They wouldn't be traded at all if they were priced solely by the value of their underlying asset.
  - throwaway2037 5y ago
    I disagree. For the largest derivatives markets -- a: interest rate swaps, b: FX swaps, and c: credit default swaps, they formed (and grew) because market participants wanted to express a particular view, but could not easily find enough of the required "cash product" -- a:gov't bonds, b:spot FX (or simultaneous, dual currency, short-term LIBOR lending), c:corporate bonds. For (a) and more so (c), it is difficult to short, even for large/institutional clients. Synthetic equivalents (interest rate swaps are _effectively_ synthetic gov't bonds) 1:can be created upon demand, specific to a client's needs, and 2:can be trivially shorted. When a client is buying or selling a derivative, they don't care about the notional -- they care about the delta (or gamma/other greek). You just turn the dial for notional to achieve the target delta/gamma. Your second sentence does not make sense with respect to single name equity options. (I pick a simple product as a counterpoint.) I doubt anyone is losing sleep in 2021 over 'rho' (interest rate sensitivity) in their options trading book for any floating currency with short term rates below 1%. Thus, everything about the underlying price (including expected future divs and its historical volatility) drives the prices of single name equity options. (If you are referring to delta one derivatives, that is a whole different discussion. And yes, they trade -- equity swaps, because you can get implied leverage through financing.)

by z3c0 5y ago

diamondhandle 5y ago

Someone is going to make a chart comparing crypto to the already-ridiculous crypto derivatives market, and you’ll realize your point is totally irrelevant. Companies don’t transact in Bitcoin because nobody wants to hold it. Except for companies getting a valuation boost from retail investors.

z3c0 5y ago
No, my point isn't irrelevant, and you thinking it is means you almost certainly missed it. Most of the world's value is speculative in nature (derivatives, credit, real estate, you name it), so I couldn't care less about the crypto derivatives market, or the "normal" derivatives either. Neither are preventing me from using crypto as a store of value. At the end of the day, people speculating the value of crypto does nothing to detract from its core function as a decentralized ledger. I know this to be fact, because I have and continue to use it as money, and no amount of smug pseudo-intellectual retorts can change that. The briefest of cursory internet searches will disprove your idea that companies don't want to hold crypto - there's been massive buy in from very significant companies. Eg Sotheby's, a company that has existed since the 1700s. But they must be fools who don't know what they're doing, right?
- throwaway2037 5y ago
  You wrote: <<internet searches will disprove your idea that companies don't want to hold crypto - there's been massive buy in from very significant companies. Eg Sotheby's>> I looked into this claim, and I disagree. Google search for <<sotheby's cryptocurrency>>. The first two results for me were: https://www.sothebys.com/en/articles/cryptocurrency-payment-information https://www.sothebys.com/en/articles/cryptocurrency-payment-... https://www.sothebys.com/en/buy-sell/cryptocurrency-faq https://www.sothebys.com/en/buy-sell/cryptocurrency-faq They are allowing partial cryptocurrency payment for a single Banksy painting. From the FAQ: << Which part of the transaction is payable in cryptocurrency? Sotheby's will accept cryptocurrency for the hammer price of the lot. The buyer’s premium and overhead premium, as well as any taxes, must be paid in USD. >> Sotheby's is simply facilitating the transaction as an auction house. They have zero exposure to cryptocurrency. I assume the cryptocurrency will be transferred to the seller after the auction is paid-in-full. The buyer must pay all non-hammer-price costs in USD to Sotheby's. (As I understand, these fees can be significant.) Like some other posts mentioned, the seller could agree to receive seashells instead of cryptocurrency. All said, this seems like a very good publicity stunt by Sotheby's.

throwaway2037 5y ago

You wrote: "most of the world's money supply exists in the form of derivatives". I also looked at the infographic. So silly. Clearly, they are just summing the notional of outstanding derivatives contracts. Summing PV (present value) would be more useful. If I buy (open long) 100 WTC Oil futures contracts, then sell (open short) 100 WTC Oil futures contracts, my delta risk is zero. However, the total notional will be 200 WTC Oil futures contracts. This article might help to explain more: https://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp https://www.investopedia.com/ask/answers/052715/how-big-deri...

z3c0 5y ago
The notational value of derivatives is the whole point of derivatives. They wouldn't be traded at all if they were priced solely by the value of their underlying asset.
- throwaway2037 5y ago
  I disagree. For the largest derivatives markets -- a: interest rate swaps, b: FX swaps, and c: credit default swaps, they formed (and grew) because market participants wanted to express a particular view, but could not easily find enough of the required "cash product" -- a:gov't bonds, b:spot FX (or simultaneous, dual currency, short-term LIBOR lending), c:corporate bonds. For (a) and more so (c), it is difficult to short, even for large/institutional clients. Synthetic equivalents (interest rate swaps are _effectively_ synthetic gov't bonds) 1:can be created upon demand, specific to a client's needs, and 2:can be trivially shorted. When a client is buying or selling a derivative, they don't care about the notional -- they care about the delta (or gamma/other greek). You just turn the dial for notional to achieve the target delta/gamma. Your second sentence does not make sense with respect to single name equity options. (I pick a simple product as a counterpoint.) I doubt anyone is losing sleep in 2021 over 'rho' (interest rate sensitivity) in their options trading book for any floating currency with short term rates below 1%. Thus, everything about the underlying price (including expected future divs and its historical volatility) drives the prices of single name equity options. (If you are referring to delta one derivatives, that is a whole different discussion. And yes, they trade -- equity swaps, because you can get implied leverage through financing.)