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.
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.
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.
> 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.
> 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.
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.
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).
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.
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.
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.
> 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".
So now it's what, only 10x what it was this time last year?
How will Bitcoin ever recover?!
I don't own any bitcoin, but I remember when it first hit $1,000 and a few months later it was back down at $200 and I thought, hah, those people who bought in at $1,000 will never make their money back.
If it drops down to $200 again, this time I might even be tempted to buy some.
I guess bitcoin is a great tool for studying human psychology related to speculation. As it is the most virtual asset one could imagine, backed by absolutely nothing real, there is nothing you can base your analysis on other than « what people think other people will do ».
Except they're the official money of a country. that is something the general people often don't understand with fiat currency. The fact that they are the official currency for a country, used to pay the salaries of state employees, and to pay taxes, as well as the central bank policy. All of this gives it an official utility, and thus an official value.
It's way more than that. Currencies vary based on the entire productive capacity of a country. When people decide that Japanese cars are reliable, that Costa Rica's beaches are lovely, or that the Russian private banking system can't be trusted, that dramatically affects the price of currencies. Currencies are a proxy for a country's whole economy not just the public sector.
You could imagine the private sector running on a different economy than the country’s one. It happens when the government has gone bankrupt ( because of war or unsustainable debt, for example). But even in that case, the money still has some value, and can’t completely disappear, even if state employees run to the bank to exchange their salary against us dollar. Their value are correlated to the trust and ability to function of a state.
The advent of regulation is a new piece of the puzzle however, and more information related to the coins' susceptibility to market manipulation without the scrutiny of regulation may make people think twice. Betting that it will rebound yet again is as much of a gamble as it ever was.
I think that's a fair guess. I'd also guess there are plenty of people who bought in at around 1k and are thinking to lock in at least some of the gains that were made over the last year.
Maybe they don't get 1,900% gains, but 1,000% gains or even 'only' 100% gains in a single year is still an impressive return on investment and so selling anywhere above 2k is going to be a viable choice for many speculators.
Do you have a source for algorithmic pumping and dumping being illegal? Any sources showing the charges laid against those involved in such pumping and dumping?
What would happen to me if I algorithmically pumped and dumped in the USA and was found guilty of it? Some community service or hard jail time?
Whether or not something is issued by a state has nothing to do with it being currency. I would challenge you to find a reputable source that says otherwise.
One description I saw said that while it's not really part of the definition of a currency, useful currencies are usually issued by a state because tax payments provide a built-in base of demand.
I guess people have different views on it, but to me it looks much more like an asset than a currency. You currently can't easily send money around without incurring massive fees.
I’m no cryptocurrency fanatic, but you can’t set up a mutually exclusive dichotomy between the terms asset and currency as the latter is a proper subset of the former: currency you own is an asset of yours, currency you owe is an asset of somebody else's (a debt).
Pedantry aside, however, I agree with you that these ‘tokens’ are cryptoassets, entities whose only saving grace is their deliberately manufactured scarcity.
That's all block chains are, really: methods of manufacturing scarcity on a distributed, open medium.
Block chains are a fundamental technological revolution which for the first time in human history provides a verifiable public accounting ledger which eliminates double spending, back dating transactions, and as you mentioned eliminates the ability to arbitrarily create more tokens.
Yup. I consider blockchains, at root, to be distributed DRM systems at heart: they ensure a consensus view of who has the exclusive right to use a given token at a precise moment in time. This is remarkable in that they build upon a P2P system that in the past was notorious for being piracy-friendly on the simple grounds that digital information is inherently infinitely duplicable. To think of blockchain technology in terms of currency replacement is a bit reductive (and, as far as my perspective of orthodox macroeconomics goes, pretty misguided). They will, however, have alternative applications of much greater import.
Them not being directly controlled by governments doesn't mean that they exist in a vacuum. At the end of the day, it's people creating/buying/selling them, so obviously they're affected by: governments, natural disasters, wars, ...
That’s true but this was a standard point of bitcoin marketing for years, and a big reason why it was popular in libertarian circles. It was never true but a lot of people wanted to believe — basically the economic equivalent of the guys who think using strong encryption on their data means that a government will give up.
Regulations will only affect organisations who have to operate within the confines of hose regulations. Bitcoin was designed specifically to operate outside of regulations. Crypto exchanges were never part of the plan. Nor was speculation by the likes of Goldman Sachs. Their involvement has been detrimental to Bitcoin and has brought with it the very worst of investment-culture. It's been the wild west for bad players for too long. That's going to stop. And that's a good thing.
Bitcoin will survive for the simple fact that as long as something somewhere is illegal, Bitcoin will have value.
Except that there are cryptocurrencies gaining traction that have far more utility in that regard.
Monero, for example, uses ring signatures to enable a greater degree of anonymity by having x% of block transactions be complete gobbledygook. Sending someone a transaction doesn't unmask your transaction activity for them to see (unlike Bitcoin), values transmitted are obscured to people browsing the blockchain (unlike Bitcoin), etc.
Bitcoin isn't the best, or even a particularly good cryptocurrency for engaging in extra-legal activities.
Okay, but I've been hearing for a decade now how cryptocurrencies are immune to regulation. That, by their very nature, they're going to prevent existing governments from being able to exercise some types of power that libertarians find objectionable.
What I haven't been able to get a straight answer on is exactly which specific types of power. Because as far as I can tell, a government could still levy taxes in BTC. They could still impose whatever financial regulations they wanted on top of BTC. They couldn't force or prevent transactions, but they could still observe them and impose fines (and, ultimately, jail time or asset seizure) on entities who didn't follow the regulations. They could still demand record keeping and reporting from any businesses they wanted, and would still be able to perform audits to ensure compliance. Given that most of the blockchain implementations allow a third party to easily reconstruct transaction histories, quite a few types of regulation seem like they would actually be easier to enforce.
As far as I can tell, the only governmental function that cryptocurrencies actually disallow is central banking. That may or may not be a good thing, but either way it doesn't feel to me like a world shaking reclaiming of some fundamental liberty from the clutching tentacles of the Leviathan, and it doesn't seem like it would fundamentally alter the day-to-day experience of participating in the economy.
So, what am I missing? What should "not controlled by the government" actually imply, specifically? Or, if that's the wrong way to express the underlying sentiment, what would be a correct statement of the idea?
The ones who continued to invest over the last couple of months, convinced the only way was up, yes. The people caught up in the boom reported by the press and who believed all the hype. Those folks.
Plus, you know, it still seems to be falling. I'm not going to make any predictions here, because that's next to impossible in a market driven almost entirely by sentiment, but it's not going to take a lot to unwind time considerably further.
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.