Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[cableiso]

Right now the Jan futures have 1.6K of volume. Why would the price be arbed there? Weve never arbed to GBTC either.

Gbtc is not a contract that you can deliver on.  Buy 5btc from an exchange at 16K and sell a cboe contract at 18K.  You made 10K.  If price falls, buy cheaper btc and deliver those to the contract.  If price rises above 18K, well - your gain is fixed at 10K but people do a lot more work for less money.

This will push all exchange prices to track the futures price.  If there is a discrepancy in the cost of the real market vs the futures market, bots will arb it out.

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[bitserve]

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...

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.

[Gab0]

In a bitcoin market analysis of CME Group, they relate the bitcoin collapses to the excessive increase in transaction costs.

Transaction costs spiked from $2 to around $30 per transaction in late 2010 just before bitcoin prices suffered a 93% collapse.  As bitcoin transaction costs subsequently fell, another bull market developed.  Transaction costs edged higher in 2012 and then soared to over $80 by early 2013, which coincided with another collapse in bitcoin prices. By 2015, transaction costs eased toward $8 when another bull market began. Starting in late 2016, they began to rise again and are now nearing $60-$70 per transaction (Figure 6).  Will this limit demand growth and provoke another bitcoin crash? If so, to what level will transaction cost have to rise in order to provoke such a correction?

While we don’t know the answers to these questions, we can make the following observations:
In 2010, bitcoin prices were around $30 and the cost of transaction rose to $30.
In 2013, bitcoin prices rose to around $1,000 and transaction costs got to $80.

With the price of bitcoin now around $10,000 as of this writing, could the market sustain transaction costs of $80, $100 or more without demand and prices collapsing?

Source: http://www.cmegroup.com/education/featured-reports/bitcoin-will-stunning-rally-sustain-or-sour-in-2018.html


What do you think? Could we see $ 80 or even $ 100 in fees? Would they be related to a possible collapse and end of this bull market?

Edit: Thinking well ... is it possible? according to that table the transaction costs have been higher than the price in 2010.

[cableiso]

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.

And yes, futures are derivatives, no?

A manufacturer of soya products would want delivery in 6mo at today's price because it removes price variance risk from their accounting.

That's what futures are for, actual manufacturers.  Speculation is just added fun.

[shmadz]

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.

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.

[bitserve]

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.

And yes, futures are derivatives, no?

A manufacturer of soya products would want delivery in 6mo at today's price because it removes price variance risk from their accounting.

That's what futures are for, actual manufacturers.  Speculation is just added fun.

Yes, you are right. I covered that issue on my last post above. You can remove price variance risk with NON-deliverable futures too... and that's exactly what they are doing.

[yefi]

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.

[mymenace]

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

[d_eddie]

Right now the Jan futures have 1.6K of volume. Why would the price be arbed there? Weve never arbed to GBTC either.

Gbtc is not a contract that you can deliver on.  Buy 5btc from an exchange at 16K and sell a cboe contract at 18K.  You made 10K.  If price falls, buy cheaper btc and deliver those to the contract.  If price rises above 18K, well - your gain is fixed at 10K but people do a lot more work for less money.

This will push all exchange prices to track the futures price.  If there is a discrepancy in the cost of the real market vs the futures market, bots will arb it out.

But what if the futures market doesn't have enough liquidity?
Or if it has clamped variation?
I think any arbitrage plan can break down due to these extra factors.

[TERA2]

Right now the Jan futures have 1.6K of volume. Why would the price be arbed there? Weve never arbed to GBTC either.

Gbtc is not a contract that you can deliver on.  Buy 5btc from an exchange at 16K and sell a cboe contract at 18K.  You made 10K.  If price falls, buy cheaper btc and deliver those to the contract.  If price rises above 18K, well - your gain is fixed at 10K but people do a lot more work for less money.

This will push all exchange prices to track the futures price.  If there is a discrepancy in the cost of the real market vs the futures market, bots will arb it out.

CBOE futures are not delivered on either. They are cash settled.

[bitserve]

hope that clears things up.

Yes they could do that. I don't know if it is only in the case of BTC they are not doing it or if CBOE does the same to other commodities such as gold/soya/etc.

[TERA2]

Futures don't move the Bitcoin, Bitcoin moves the future.

[Rosewater Foundation]

And no one has any money left on Stamp to take advantage of a $400 arb. This is some bizarro shit.

[TERA2]

In 2013 there were 15% arbs all the time between btce and gox

[Rosewater Foundation]

In 2013 there were 15% arbs all the time between btce and gox

I thought we were more sophisticated now.

[shmadz]

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.

[mymenace]

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.

biggest red pill ever when it hits you, the simple yet robust code is enough to deliver a complete transparent peer to peer digital transaction service that exposes the financial system for what it is ...one big ponzi scheme...

[jojo69]

Personally, I came from a PM background so had a healthy hatred of that fiat trash already.  I also had recently read Neal Stephenson's Baroque Cycle, a monumental work of historical fiction that deals with the nature of money and cryptrography that I would strongly recommend hodlers to read.  So my response to discovering Bitcoin was more like "OMFG... ... ...an IMPLEMENTATION!!!"

[HairyMaclairy]

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.

[mymenace]

Personally, I came from a PM background so had a healthy hatred of that fiat trash already.  I also had recently read Neal Stephenson's Baroque Cycle, a monumental work of historical fiction that deals with the nature of money and cryptrography that I would strongly recommend hodlers to read.  So my response to discovering Bitcoin was more like "OMFG... ... ...an IMPLEMENTATION!!!"

If I understand his stories are based partly on isaac newtown work with the treasury

http://www.royalmintmuseum.org.uk/history/people/mint-officials/isaac-newton/index2.html

Rothschild's love Isaac
http://www.newton.ac.uk/fellowships/rothschild


and once you take the pill the rabbit hole goes deeper


https://en.wikipedia.org/wiki/Isaac_Newton%27s_occult_studies


Isaac newton the investor
https://www.cryptocoinsnews.com/bitcoin-investors-can-learn-issac-newtons-mistake/


amazing what you can find in 10 minutes