I think we all know how options work.
Thats what I thought too.. at first... |
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I'm not a trader, I don't try and trade charts, but I watch them a lot and there are definitely patterns to how BTC price moves. The problem is that the patterns themselves rarely give you an idea of direction... or timing!
if true HFT comes then I think the patterns will dissolve, but for now the action seems relatively unsophisticated, within a larger framework of 'nothing like this has ver existed before'!
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I guessed it was pseudonymous?
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I give it merit. The more people buy in, the more people want to sell for profit. Hence the asks swelling.
The bid side, I think is mostly people looking to pick up coins on big selloffs. The real buying action has been hoovering up asks at market price. imho.
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The charts would have you beleive this wedge is gonna be broken out of one way or another.
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As I understand it options are (as the name might suggest) optional, once the contract expires the potential profit/loss can be calculated and the parties involved are credited/debited accordingly. Without ant BTC necessarily changing hands.
The 'option' part is that with the gains or losses, you can optionally trade the underlying equity involved with the gain (buy) or less (sell).
So BTC options are likely to happen whether you like it or not.
But what if the holder of the option wants to take delivery, not cash settlement? With physical objects it makes sense to settle to cash so as not to incur transport costs, but with Bitcoin there is no advantage. So again, what happens if most options buyers use them as a way to buy "cheaper" bitcoins further out instead of trying to guess the price differential for paper profits? Then they can take delivery. Every option has a buyer/seller. When an option is excercised there is a winner and a loser. The loser's account is debited, instead of the dollars being delivered to the winner, they are used to buy BTC. It's really just a matter of timing as to whether the dollars are converted to BTC at the point of option exercise, or later (or indeed as is likely the case in the real world, at the point the option was written by the broker facilitating the option, who then profits from the spread and is hedged). Not true for all options, pork, orange juice, oil, indexes, etc. you cannot really take delivery of 1000 barrels of oil. BUT with Bitcoin you can always easily take delivery. So the real question is will these options be like options on stock (you can take delivery) or more like options on stock indexes (cant really take delivery of the entire dow, it is just a side bet). The big word that is being ignored here is option. They got there name because delivery is optional. The abstractions are so deeply ingrained though, that the options themselves have become what people trade. So if every trade is backed by the goods to perform the trade, it can't control the market price. In order for the market price to be controlled by futures, they must dwarf the overall market in value by several orders of magnitude - Can't do that when all your trades require actual backing because most people choose to take delivery rather than convert to USD.
That's the trick to manipulating markets, you've got to be big BIG or have a group of medium-big players all acting as one.
To address the point of *every* option being backed, it isn't. Lets say the broker sells a call options. When it does so it becomes the counterparty, and must hedge its risk. (Whether they do is a different matter). The perfect hedge is to trade the equity and collect the spread. (small guaranteed profit, you never go broke) Another person comes along and wishes to sell a call, the broker will buy it. At this point the broker is no longer counterparty to anybody, as it can offset the one customer against the other. (and collects the spread doing so). Now an option exists. It is not backed by goods. At option expiry the broker debits the loser and credits the winner. Delivery is just a case of whether the winner wants paying in dollars or to have his dollars converted to BTC. |
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Buying up or mining a significant amount the coins would not necessarily cripple the Bitcoin economy.
People would simply use what is left in circulation.
We sort of already have that situation now with lots of the coins from the original miners being forgotten or lost.
I doubt the central banks *want* a crippled economy, what they want is not to lose their position as your lord and master! What do you think the point of this game is? It isn't to make everybody love bitcoin  You seem to be prescribing motives to players that don't really match their actions - Do you not think the Gold and Silver markets are manipulated to keep the price from running away and causing a panic into the "safe haven"? I think the gold/silver markets are likely manipulated, for no less a nefarious reason than the money being made on derivatives based on the market far outweighs the cost of moving the price. However, this does not necessarily lead to that, bitcoin is not metal. It is not subject to the same laws that govern its control. I am not aware of any actions that have been taken by the central banks with regard to bitcoin. The only motives I assign to the bank is the betterment of its own position in the game. As for the point of the game - I think we have different games in mind. I have the broader goal of how the central banks might serve their own best interests through the mechanism of bitcoin, whereas you seem to be specifically focused on how best to discredit bitcoin, based on the assumption that this *is* the optimum strategy. I don't agree with the premise that discrediting BTC is the best action for the banks to take. I think we even agreed that you can't *kill* it you can only mess with it. If it can't be killed, then maybe it can be controlled. The more I think on the more the 'own the network' plan seems to make sense for the banks. I'd be glad to hear counter arguments to that, as it has me a little worried. I'm really hoping they are stubborn/stupid enough not to. |
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Buying up or mining a significant amount the coins would not necessarily cripple the Bitcoin economy.
People would simply use what is left in circulation.
We sort of already have that situation now with lots of the coins from the original miners being forgotten or lost.
I doubt the central banks *want* a crippled economy, what they want is not to lose their position as your lord and master! |
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From the other thread so, this "central bank pump and dump scenario" that is being proposed: will the dump kill every single last participant's interest? if it doesn't will they try it again? if they try it again you think it will work the second time? ... the third? I think when you think about those questions it becomes clear, that the issue is not how does one stop this from happening, but "so what if it does". The biggest hole in this scheme, is that this whole plan seems to be aimed at destroying bitcoin's legitimacy as a means of increasing relative wealth, by creating unpredictable boom/bust scenarios. Whilst BTC is to each, for his own, I was under the impression that this was not the primary 'goal' of bitcoin. It's use as a means of value transfer remain largely unaffected. In particular there is little counterparty risk at this time to merchants using bitpay. The volatility does not seem to have hindered its use on silk road. As 'money' it is performing reasonably well. As a store of value not so much. (There was a time when it didnt just go up ) The point is it can't be killed by discrediting only one of its functions. Those that need it for what it does, well why would they stop using it because somebody was messing around with the exchange rate. BTC works whether it is worth $1m a coin, or $1 coin. Now, if the central bank destroys any value as a speculative investment, then the exchange rate may drop, but it will only ever go as low as its utility value. This floor is some function of the amount of wealth that needs to be exchanged, and the number of 'circulating' coins. Of course at that point it doesn't matter how good of a job was done destroying BTC as an investment. They will be so cheap that people are bound to gamble. It may be that billions were lost last time around, but im sure that millions were made. Human psychology is such that there are always going to be people that want to take a shot at that.
So what is left?
You can't make it go away, and you can't argue with its superior features, but you can scare people who don't understand either of those advantages away from it by causing them to lose money.
The new people who don't know anything are exactly the people who the central bank has the ability and means to impact, once they come to appreciate Bitcoin for its many and varied advantages they can no longer be scared out with this.
It is a means to limit the overall pool of users, if they successfully pull this trick with more than 80% of a population over any number of repetitions they can probably stave off the loss of functional reserve status. Technically legal tender laws would still apply, so people setting prices only in bitcoin with floating dollar amounts would be in violation. But once we're there the battle is over, Dollar is functionally replaced with Bitcoin as the reserve.
And for the central bank, that is game over - I lose the majority of my power to impact and implement monetary policy since continued issuance of currency no longer has an implied buyer no matter the amount.
Does that help?I think they can, as seems to be their specialty, kick the can further down the road. It seems to me though that they cannot stop the tide. I think their best bet would be to try and capture as much of the bitcoinmarket as possible. Buying up coins now is the short term method. The real key though, I think, is to invest in hashing power (whilst their dollars are still worth something). In the medium term you then capture most of the mined transactions. In the long term you start to ream in the transaction fees. In this endgame, nobody has enough BTC to buy up hashing power to compete. Transacation fees become the new 'tax'. Welcome to the future! It's the same as before  |
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Now, if the central bank destroys any value as a speculative investment, then the exchange rate may drop, but it will only ever go as low as its utility value. This floor is some function of the amount of wealth that needs to be exchanged, and the number of 'circulating' coins.
Of course at that point it doesn't matter how good of a job was done destroying BTC as an investment. They will be so cheap that people are bound to gamble. It may be that billions were lost last time around, but im sure that millions were made. Human psychology is such that there are always going to be people that want to take a shot at that.
See, this thing that 'the exchange rate may drop', is key. For example. If I were a business accepting payment in Bitcoin today for example. At some point, I may have received a $1500 order, paid for in Bitcoin, so ~ 10 Btc. Now however, that I need to turn my Bitcoin into money, that 10 Btc is only worth $1150. My profit on the order was only $250, so I am working to be down $100! This is a fkn crazy way to conduct business, and simply not viable. If I am prepared to put up with this kind of risk in the running of the business which provides my daily bread, I may as well just sell up, go down the casino, and put everything on red! With sort of volatility we are seeing in Bitcoin, it is strangling real world transactions on the way up, but will destroy the real Bitcoin economy on the down. Yes, there will always be people looking to buy back in, and the market places that rely upon its use will also seek to rearrange themselves after the dust settles, but as mindtomatter describes, in this manner, Bitcoin can be held in its place as a fringe asset, popular with high risk tolerant speculators, and online drug customers. It will bring a few people exceedingly large profits, but leave the majority with a disgusting taste in their mouths. Thats the purpose of using someone like bitpay, you have the option to do instant conversion to fiat at the point the buyer pays, so if you want zero exchange risk, that's the one for you. The risk remains for the buyer, but I think the buyer (one hopes) is well aware of the risks of holding bitcoin! |
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So when's the crash? If there was anyone who could tell you, they'd be a millionaire wizard. All we can do is watch, and plan for both the unknown hour when it shall arrive, and the possible - though unlikely - future where this is all solid and the crash never comes. SANITY ON MY FORUMS?!?!? |
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Originally posted at RedditPlaying Devil's Advocate here....Let's play a game: I'll be the Central Bank with say, 10 billion USD to devote to the "problem" of bitcoin. You try to think of why my plan won't succeed. - I win when I can cause situations that scare users away from using Bitcoins.
- I lose when non-technical users successfully and satisfactorily use any currency that's not controlled by a central bank.
Both the win and loss aren't well defined outcomes. More importantly, I think they are misdirection. see https://bitcointalk.org/index.php?topic=154907.msg1734674#msg1734674 for explanation of what I think the real failing of this plan is |
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so, this "central bank pump and dump scenario" that is being proposed: will the dump kill every single last participant's interest? if it doesn't will they try it again? if they try it again you think it will work the second time? ... the third? I think when you think about those questions it becomes clear, that the issue is not how does one stop this from happening, but "so what if it does". The biggest hole in this scheme, is that this whole plan seems to be aimed at destroying bitcoin's legitimacy as a means of increasing relative wealth, by creating unpredictable boom/bust scenarios. Whilst BTC is to each, for his own, I was under the impression that this was not the primary 'goal' of bitcoin. It's use as a means of value transfer remain largely unaffected. In particular there is little counterparty risk at this time to merchants using bitpay. The volatility does not seem to have hindered its use on silk road. As 'money' it is performing reasonably well. As a store of value not so much. (There was a time when it didnt just go up ) The point is it can't be killed by discrediting only one of its functions. Those that need it for what it does, well why would they stop using it because somebody was messing around with the exchange rate. BTC works whether it is worth $1m a coin, or $1 coin. Now, if the central bank destroys any value as a speculative investment, then the exchange rate may drop, but it will only ever go as low as its utility value. This floor is some function of the amount of wealth that needs to be exchanged, and the number of 'circulating' coins. Of course at that point it doesn't matter how good of a job was done destroying BTC as an investment. They will be so cheap that people are bound to gamble. It may be that billions were lost last time around, but im sure that millions were made. Human psychology is such that there are always going to be people that want to take a shot at that. |
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oblig xkcd...  ...im thinking it will be like primer. |
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They seem pretty thinly traded too, eg when I sell in eur it takes a little while before the EUR rate catches up with dollar moves.
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EARTH HAS 4 CORNER
SIMULTANEOUS 4-DAY
TIME CUBE
WITHIN SINGLE ROTATION.
4 CORNER DAYS PROVES 1
DAY 1 GOD IS TAUGHT EVIL. |
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That all depends if they gambled it yesterday, last week ,last month or last year |
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As I understand it options are (as the name might suggest) optional, once the contract expires the potential profit/loss can be calculated and the parties involved are credited/debited accordingly. Without ant BTC necessarily changing hands.
The 'option' part is that with the gains or losses, you can optionally trade the underlying equity involved with the gain (buy) or less (sell).
So BTC options are likely to happen whether you like it or not.
But what if the holder of the option wants to take delivery, not cash settlement? With physical objects it makes sense to settle to cash so as not to incur transport costs, but with Bitcoin there is no advantage. So again, what happens if most options buyers use them as a way to buy "cheaper" bitcoins further out instead of trying to guess the price differential for paper profits? Then they can take delivery. Every option has a buyer/seller. When an option is excercised there is a winner and a loser. The loser's account is debited, instead of the dollars being delivered to the winner, they are used to buy BTC. It's really just a matter of timing as to whether the dollars are converted to BTC at the point of option exercise, or later (or indeed as is likely the case in the real world, at the point the option was written by the broker facilitating the option, who then profits from the spread and is hedged). |
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