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1  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 05:05:36 AM
I think the model is broken.  And it is going to drive the price of bitcoin sky high.

The reason is the only way retail and institutional investors can get exposure to Bitcoin is through futures. So futures are being used as a substitute for an ETF.  Which is going to blow the price of futures sky high as people FOMO.  

Which means a roaring arbitrage trade will develop with the exchanges. But the cost of funds of being a shorter will spiral out of control due to constant margin calls on the shorts who will have to pour in more fiat. Which will restrict supply, driving the cost higher.   So we should expect an ever increasing divergence between the future price and the exchange price.

Every long trade needs a short counterparty. I agree this will incentivize arbitrage, but as long as the available price of the underlying is less than the price of the active futures, then there should be someone willing and able to fill that gap.

I think?

But if you are short, and the price goes up, you will have to keep topping up your margin.  Are you prepared to top up a $16k short with $20k margin?   Just trying to figure this out.

there is no limit to fiat money.

I think the people on the short side will either cut their losses or just pile money into their position hoping for a retracement before the end of the contract. the higher the price goes, the more people will be willing to take that risk and the cheaper those contracts that are so far out of the money become. I believe Nassim Taleb made his fortune betting on this same kind of "out of the money" type bet.
2  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 04:57:28 AM
I think the model is broken.  And it is going to drive the price of bitcoin sky high.

The reason is the only way retail and institutional investors can get exposure to Bitcoin is through futures. So futures are being used as a substitute for an ETF.  Which is going to blow the price of futures sky high as people FOMO.  

Which means a roaring arbitrage trade will develop with the exchanges. But the cost of funds of being a shorter will spiral out of control due to constant margin calls on the shorts who will have to pour in more fiat. Which will restrict supply, driving the cost higher.   So we should expect an ever increasing divergence between the future price and the exchange price.

Every long trade needs a short counterparty. I agree this will incentivize arbitrage, but as long as the available price of the underlying is less than the price of the active futures, then there should be someone willing and able to fill that gap.

I think?
3  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 04:36:11 AM
anyways, my point is, everyone thinks bitcoin is a scam the first time they hear about it. it isn't until you really spend some time to look into it that you realize what it really is...

I think my first response was awe and curiosity, not suspicion. And I don't know how it was for others, but that first week was like I just got unhooked from the Matrix.

yep same here

OK, OK, you old-timers... maybe it's just me, but I figured it was too good to be true and it took me a long while before I finally figured it out.
4  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 04:16:09 AM


Yeah, but getting into the logistics of delivery of assorted assets would be too complex for the exchange. So now, imagine you are a big soya distributor so you really need the soya for your business. You can still use the future markets to hedge/fix a price in advance. If soya prices are higher when you need to buy it, you get the profit of the future contracts you have at a lower price and use the extra profit to buy the soya.

Basically it works the same.

I'll quote the link that you may have declined to read or simply misunderstood.

Quote
You may wonder what happens if a trader forgets to close out a long position. If he bought live hog futures, will someone deliver 40,000 pounds worth of squealing porkers to his back door the morning after his contract expires?

Sorry, but no.

Brokerage firms watch their open accounts and know who has long or short positions in contracts nearing maturity. Prior to delivery day, they inform customers who have open long positions that they must either close out the position or prepare to take delivery and pay the full value of the underlying contract. By the same token traders with short positions are informed that they must close out their trades or prepare to deliver the underlying commodity. In this case, they must have the required quantity and quality of the deliverable commodity on hand.

On the few occasions that a buyer accepts delivery against his futures contract, he is usually not given the underlying commodity itself (except in the case of financials), but rather a receipt entitling him to fetch the hogs, wheat, or corn from warehouses or distribution points.

Food processors or manufacturers who use futures to hedge rarely take delivery because the deliverable grade on the contract may not be exactly what they need. Hence, they will close out their futures position before delivery and buy in the cash market instead.

Sometimes merchants and dealers accept delivery because they can find buyers for many grades and types of the underlying commodity.

hope that clears things up.
5  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 04:05:38 AM
This thing is totally unhinged from the underlying asset. Is that how Wall St. do?

Seems like... Maybe it'll level out in time?

I would like to see a futures market that enforced delivery. that would actually have some use for miners and others that are trying to hedge risk.

This seems like a pure derivative market adding risk instead of mitigating it...

I suppose time will tell.

They are not used to "delivery". Who in their right senses would want a fucking BUNCH of soya being delivered to them? What about logistics?

Even gold is cumbersome enough.

They are not used to an asset as easily deliverable as Bitcoin is.

Typically the brokerage that facilitates the trade will settle prior to the delivery date. http://futures.tradingcharts.com/tafm/tafm10.html

The whole point of futures was supposed to be delivery of a certain commodity at a certain date for a certain price.

Of course, as with everything else, the point has been lost over time...
6  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 03:57:29 AM
This thing is totally unhinged from the underlying asset. Is that how Wall St. do?

Seems like... Maybe it'll level out in time?

I would like to see a futures market that enforced delivery. that would actually have some use for miners and others that are trying to hedge risk.

This seems like a pure derivative market adding risk instead of mitigating it...

I suppose time will tell.750

*edit* looks like futures are over 18000 while bitstamp is still around 15750 - not sure which one will follow the other at this point?

7  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 03:46:13 AM

<snip>

But the price can change by 20% in one day. Hell, in one hour. Or minute even. So what's the deal here? They haven't done their research, or they are trying to force bitcoin to conform to their fiat norms, or what?

yeah, they have no idea what they're dealing with. They are being pressured by their clients that want exposure to the price, but they can't cover losing bets when the price moves further than their margin limits can cover.

I'm sure there is enough demand from the customers to continue futures trading, but they will need to re-think their approach: just imagine - they broke their limit in about 4.5 hours... just imagine what might happen when they close shop for the weekend?


It is said they are going to use arbitrage. They will buy and sell from a real exchange and send it to futures.

This video gives some explanation: https://www.youtube.com/watch?v=vGnH-Od1lJM



OK, first of all, don't listen to those two guys in the video. they have no clue, you will get REKT

Second, how are you going to "send it to futures" when the futures don't trade over the weekend?

Third, oh, nevermind, you are going to be REKT no matter what I say.

Best of luck trading Smiley

*edit* I immediately feel sorry for posting this. I would delete it but that would be cowardly and dishonest. I'm sorry for the hurtful words. I sincerely wish you all the best.
8  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 03:36:46 AM
NICE! they are just halting trading momentarily as the price hits certain limits...



still not sure what they're gonna do over the weekend, but for now it seems like it's "game on!"
9  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 03:30:37 AM

<snip>

But the price can change by 20% in one day. Hell, in one hour. Or minute even. So what's the deal here? They haven't done their research, or they are trying to force bitcoin to conform to their fiat norms, or what?

yeah, they have no idea what they're dealing with. They are being pressured by their clients that want exposure to the price, but they can't cover losing bets when the price moves further than their margin limits can cover.

I'm sure there is enough demand from the customers to continue futures trading, but they will need to re-think their approach: just imagine - they broke their limit in about 4.5 hours... just imagine what might happen when they close shop for the weekend?
10  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 03:18:25 AM
And Thar She Blows!!!!!!!!

11  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 03:15:10 AM
If it triggers the 20% price either up or down, do the winners automatically win and the losers automatically lose?  Right then and there?


no. the trading on the exchange just stops, see here for details: http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures/contract-specifications

Ok, so I guess the 20% is the maximum exposure then?  If starting price is $10,000 and you bet it to go up, you really can't profit if it goes higher than $12,000?

Similarly, if you bet it to go down, you can't profit even it it drops under $8,000?

So no incentive to keep pumping it up if it's at $12,000 but it really needs to be at that price at the close of trading if you bet it for 24 hours, and seems like the price opens at 6pm Eastern and closes at 4pm Eastern the following day?


it's still uncertain how this will play out. but the bets are for one month approximately and now you can see why the CEO of international brokers is hesitant to allow trading of this derivative vehicle.

On CME there is daily settlement so you will just be instarekt when trading opens the next morning and you get margin called.  At least the margin requirement exceeds the daily limit.

On CBOE I donít think thereís daily settlement so the shorts are massively exposed.  You would want to be fully hedged or be a miner.  There is no way 30% margin is adequate for a short over a month period.  Thatís a joke.  CBOE is far more a dangerous product but the risk is mostly borne by CBOE.

I think this is why the international brokers dude will not allow shorts. at least on the long side your risk has some limit. if the price goes down it can only go down so far... if you watch the video he explicitly states the risk to his firm if the price goes up. There is no limit to the upside risk. There is no limit to fiat money.
12  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 03:09:05 AM
Holy shit, I never ever thought I would see a headline in the MSM like this:

How to give the gift of bitcoin this holiday season
https://www.cnbc.com/2017/12/10/how-to-give-bitcoin-as-a-gift.html

 Cool

HAH! I tried to give away bitcoin back in Christmas 2013. I offered their choice, 0.1 bitcoin, 2 ounce silver (canadian mint wildlife series) or 50 bucks CAD. (*gifts of Christmas past, present, and future*)

no one took the bitcoin, no one took the silver, everyone took the cash.

you can lead a horse to water, but you can't make him drink

Haha, yeah no doubt. The horses don't even know what silver is worth...

https://www.youtube.com/watch?v=6gmp2IqReFQ


this accentuates the problem with gold and silver. if some guy on the street tries to sell me silver I want it to be assayed. even gold bars direct from the Canadian mint are now found to be counterfeit... At least with bitcoin you can be assured of the quality and quantity of the trade.

http://www.cbc.ca/news/canada/ottawa/fake-gold-wafer-rbc-canadian-mint-1.4368801
13  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 03:04:46 AM
If it triggers the 20% price either up or down, do the winners automatically win and the losers automatically lose?  Right then and there?


no. the trading on the exchange just stops, see here for details: http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures/contract-specifications

Ok, so I guess the 20% is the maximum exposure then?  If starting price is $10,000 and you bet it to go up, you really can't profit if it goes higher than $12,000?

Similarly, if you bet it to go down, you can't profit even it it drops under $8,000?

So no incentive to keep pumping it up if it's at $12,000 but it really needs to be at that price at the close of trading if you bet it for 24 hours, and seems like the price opens at 6pm Eastern and closes at 4pm Eastern the following day?


it's still uncertain how this will play out. but the bets are for one month approximately and now you can see why the CEO of international brokers is hesitant to allow trading of this derivative vehicle.
14  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 02:56:46 AM
Holy shit, I never ever thought I would see a headline in the MSM like this:

How to give the gift of bitcoin this holiday season
https://www.cnbc.com/2017/12/10/how-to-give-bitcoin-as-a-gift.html

 Cool

 Wow.  Is this the acceptance phase already!?
Nah a rogue scribe who snuck a fast one on the boss somehow. Won't last.

my bet is a native ad. Coinbase paid CNBC to place that story.
15  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 02:49:02 AM
Holy shit, I never ever thought I would see a headline in the MSM like this:

How to give the gift of bitcoin this holiday season
https://www.cnbc.com/2017/12/10/how-to-give-bitcoin-as-a-gift.html

 Cool

HAH! I tried to give away bitcoin back in Christmas 2013. I offered their choice, 0.1 bitcoin, 2 ounce silver (canadian mint wildlife series) or 50 bucks CAD. (*gifts of Christmas past, present, and future*)

no one took the bitcoin, no one took the silver, everyone took the cash.

you can lead a horse to water, but you can't make him drink

(*btw - this article smells of native advertising *)
16  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 02:42:03 AM
If it triggers the 20% price either up or down, do the winners automatically win and the losers automatically lose?  Right then and there?


no. the trading on the exchange just stops, see here for details: http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures/contract-specifications
17  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 02:33:38 AM
Is it going to hit the circuit breaker on the first day?

Meh, it's only halfway there and it's already been... what? like 3.5 hours? what could possibly go wrong? Wink



18  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 02:15:54 AM
https://www.cnbc.com/video/2017/12/07/father-of-high-speed-trading-to-offer-bitcoin-futures.html

it seems he knows exactly what he's getting into. he's not happy about it, but if you read between the lines, it looks like some of his "larger" clients demand the ability to trade this, and they are not upset about being limited to long orders only...

This is the second time I've heard him say that "long term bitcoin will be zero". I can't even process how he came to that conclusion, since Bitcoin has seemingly been non-zero (and climbing) for 8 years now WITHOUT a futures market.

I didn't watch it. I can't. I'd cringe too much. But even totally broken beyond repair, it would never go to zero. It's nearly impossible to imagine such a world. How does he do it?

you should watch, it's only 5 minutes and he's the CEO of one of the most successful trading sites in the world.

he's convinced this is going to zero for the same reason all of us were certain this was a scam.. at first..

I heard about bitcoin when it had no price, pretty much. There was no exchange, the only thing I could find was some bulletin board where people were trying to make trades. Then MT GOX entered the picture and we got a pretty quick glimpse into price discovery (price went from like a dollar to over 30 bucks in a couple weeks, and then they got "hacked" and the rest is history)

anyways, my point is, everyone thinks bitcoin is a scam the first time they hear about it. it isn't until you really spend some time to look into it that you realize what it really is...

This guy is running a very big, very successful business. He doesn't have the time to look at this in depth (to his own detriment)

Anyways, I think it's helpful to at least hear the views of the naysayers, especially when they are the CEO of one of the larger trading platforms on the planet.
19  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 01:56:42 AM
let's see if we can trip that circuit breaker on the first day, why don't we?



I am not sure if that would be a good thing or not. It could be interpreted as a bullish signal if it trips it on a pump on the first day.... or it could be considered as "too much volatility" to be taken seriously. It will happen soon anyways, maybe just not today.

Btw, is a 20% on the gemini price what is considered or the price of the futures themselves? I mean.... if the futures are for january'18 a flash pump/dump shouldn't affect it that much. A much smaller constant growth/decline over a few days on the other hand.....

Hey, anyone is playing with that CBOE thing? I started registering, but got bored at second form with all that profiling questions. I laughed on the fact that 100+ trades A YEAR is the higher option on the question about expected activity.
...these people have no idea what they are getting into, do they?

https://www.cnbc.com/video/2017/12/07/father-of-high-speed-trading-to-offer-bitcoin-futures.html

it seems he knows exactly what he's getting into. he's not happy about it, but if you read between the lines, it looks like some of his "larger" clients demand the ability to trade this, and they are not upset about being limited to long orders only...

*edit* - Keep in mind, there is no limit on the supply of fiat. There is a very limited amount of bitcoin available...
20  Economy / Speculation / Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion on: December 11, 2017, 01:38:23 AM
let's see if we can trip that circuit breaker on the first day, why don't we?



lol, sorry, fixed the huge image, it's been a while...
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