Equities and Bonds collapsing. Bitcoin UP.

[nicoin]

Calling today June 20th 2013 the official start of the all-mighty 2013 meltdown. A series of events might be about to unfold which could propel BTC to insane levels. It will mostly suck for everyone in the real world. It starts in China and with the bubble of all bubbles, and Feds mentionning the possible easing of QE which they can only delay for so long. To be expected in some chaotic order:

- China Bubble pop (how shocking, are you saying these figures are not to be trusted? And you borrowed half GDP in a single year?)
- Stocks crash back to fundamentals (oh, I thought higher p/e ratio was better?)
- US real estate crash (why are all these empty houses not for sale?)
- US student debt crash (how would you like to work for the government for say 30 years to pay this back?)
- Sovereign bond haircuts and defaults (cheer up, at least we might pay something back and still better than penny socks)
- Bank bail-ins (don't worry just like cyprus)
- Pension funds meltdown (it's gone? but you told me I had the 'cautious' plan?)
And a lot more...

The spark:
http://www.zerohedge.com/contributed/2013-02-22/why-china-crash-may-be-imminent
http://www.zerohedge.com/news/2013-06-19/china-interbank-market-freezes-overnight-repo-explodes-25
http://www.reuters.com/article/2013/06/20/us-markets-global-idUSBRE88901C20130620

Even mainstream investors bracing for impact:
http://www.marketwatch.com/story/doomsday-poll-87-risk-of-stock-crash-by-year-end-2013-06-05

Please cheer me up and tell me I am wrong and everything will be rosy this year

[cypherdoc]

Nice title.

[farfiman]

I totally agree with this, although it might not be as fast as you think. These criminals have
been dragging this out for years and still might be able to for a while longer. A year? two?
I personally would rather hit the fan now and lets start to rebuild.

[Aedius]

You do realize that what is bad for equities and bonds is bad for Bitcoin, right?

[fr33d0miz3r]

American crisis will be in 2016, right before elections of a new president.

[nicoin]

You do realize that what is bad for equities and bonds is bad for Bitcoin, right?

Interesting - what makes you think that?

I see it as an hedge against inflation and central bank QE similar to gold, but very liquid and without the mass market manipulation which both currency and commodities suffer. When times are tight, people might also use it just to save 3 or 4% card charges - essentially a universal and private tax on shoppers worldwide. There is also the prospect of fiat savings being confiscated a la cyprus of course which makes btc savings account more interesting. Companies will still run, produce things and people will buy them, but perhaps they will realise the bills in their wallet do not have a 'guaranteed' value and turn to bitcoin has a more transparent and reliable currency.

bitcoin (and other cryptocoins) is a great currency to use in a fairer economy (ie not manipulated and/or taxed arbitrarily), and I really hope that's what we will see at the end of this tunnel.

[phoenix1]

You do realize that what is bad for equities and bonds is bad for Bitcoin, right?

Interesting - what makes you think that?

I see it as an hedge against inflation and central bank QE similar to gold, but very liquid and without the mass market manipulation which both currency and commodities suffer. When times are tight, people might also use it just to save 3 or 4% card charges - essentially a universal and private tax on shoppers worldwide. There is also the prospect of fiat savings being confiscated a la cyprus of course which makes btc savings account more interesting. Companies will still run, produce things and people will buy them, but perhaps they will realise the bills in their wallet do not have a 'guaranteed' value and turn to bitcoin has a more transparent and reliable currency.

bitcoin (and other cryptocoins) is a great currency to use in a fairer economy (ie not manipulated and/or taxed arbitrarily), and I really hope that's what we will see at the end of this tunnel.

Very liquid and without mass market manipulation - you're joking right ?

[cypherdoc]

You do realize that what is bad for equities and bonds is bad for Bitcoin, right?

Interesting - what makes you think that?

I see it as an hedge against inflation and central bank QE similar to gold, but very liquid and without the mass market manipulation which both currency and commodities suffer. When times are tight, people might also use it just to save 3 or 4% card charges - essentially a universal and private tax on shoppers worldwide. There is also the prospect of fiat savings being confiscated a la cyprus of course which makes btc savings account more interesting. Companies will still run, produce things and people will buy them, but perhaps they will realise the bills in their wallet do not have a 'guaranteed' value and turn to bitcoin has a more transparent and reliable currency.

bitcoin (and other cryptocoins) is a great currency to use in a fairer economy (ie not manipulated and/or taxed arbitrarily), and I really hope that's what we will see at the end of this tunnel.

Very liquid and without mass market manipulation - you're joking right ?

Well do you see Bitcoin dropping?

I don't.

[Miz4r]

You do realize that what is bad for equities and bonds is bad for Bitcoin, right?

Interesting - what makes you think that?

I see it as an hedge against inflation and central bank QE similar to gold, but very liquid and without the mass market manipulation which both currency and commodities suffer. When times are tight, people might also use it just to save 3 or 4% card charges - essentially a universal and private tax on shoppers worldwide. There is also the prospect of fiat savings being confiscated a la cyprus of course which makes btc savings account more interesting. Companies will still run, produce things and people will buy them, but perhaps they will realise the bills in their wallet do not have a 'guaranteed' value and turn to bitcoin has a more transparent and reliable currency.

bitcoin (and other cryptocoins) is a great currency to use in a fairer economy (ie not manipulated and/or taxed arbitrarily), and I really hope that's what we will see at the end of this tunnel.

In potential, yes. But I think it's still too early for that, the collapse has to be postponed for another 3 years or so and then I see bitcoin having a real chance in the economy. The infrastructure is just not there yet, too many obstacles at the moment. This will change, but it needs time. Time it might not get if things get sour too soon in the world economy.

[phoenix1]

You do realize that what is bad for equities and bonds is bad for Bitcoin, right?

Interesting - what makes you think that?

I see it as an hedge against inflation and central bank QE similar to gold, but very liquid and without the mass market manipulation which both currency and commodities suffer. When times are tight, people might also use it just to save 3 or 4% card charges - essentially a universal and private tax on shoppers worldwide. There is also the prospect of fiat savings being confiscated a la cyprus of course which makes btc savings account more interesting. Companies will still run, produce things and people will buy them, but perhaps they will realise the bills in their wallet do not have a 'guaranteed' value and turn to bitcoin has a more transparent and reliable currency.

bitcoin (and other cryptocoins) is a great currency to use in a fairer economy (ie not manipulated and/or taxed arbitrarily), and I really hope that's what we will see at the end of this tunnel.

In potential, yes. But I think it's still too early for that, the collapse has to be postponed for another 3 years or so and then I see bitcoin having a real chance in the economy. The infrastructure is just not there yet, too many obstacles at the moment. This will change, but it needs time. Time it might not get if things get sour too soon in the world economy.

^^ this

[nicoin]

Touche - some element if wishful thinking from my part

And you are right at the moment liquidity is not great with markets shutting down left and right, that is probably the biggest risk.

But... there is a difference between agressive trading and manipulation also called cheating. I can't call a banker friend and set the BTC exchange rate, as we have seen in the libor, and seems to be happening with gold and forex. If I have a lot of coins I can try a big dump, small trades to influence price, etc. But it's all in plain sight and anyone doing so takes risk. So I think I meant 'central' manipulation. The equivalent in BTC world would be someone setting up a trojan in the bitcoin source code to skew the algorithms for private gain. Highly unlikely given open source nature.

The only thing I fear is HFT - I hope the community finds a way to ban or control it. Perhaps exchanges should enforce a minimum time between transactions (but very fast transaction execution), or offer a separate exchange with no limitation for the battle of the trading bots. Otherwise bot become a transaction tax as they work on both sides of the spread.


[/quote]
Very liquid and without mass market manipulation - you're joking right ?
[/quote]

[BitcoinAshley]

Next thread will be titled:
Everything collapsing. Bitcoin up uP UP.

[nicoin]

Totally agree that BTC is not ready, far from that. I don't think we have 3 years to get there.

Not sure the US or any other country will be able to delay the inevitable much longer. Cyprus was a tiny bubble compared to what we are discussing here, and you saw the effect. All it will take imho is one sizable bubble to burst (china growth, tech stocks, property, bonds, etc), and trigger a chain reaction thanks to the castle of cards which is shadow banking. A single govt or CB will not be able to isolate their market and currency.

pop. pop. pop.
http://www.globalresearch.ca/the-multi-trillion-dollar-derivative-bubble-deutsche-bank-the-biggest-derivative-exposure-in-the-world/5333472
http://www.businessinsider.com/9-banks-combine-for-over-200-trillion-derivatives-exposure-2012-4

But yes it's musical chairs and no one wants the music to stop. Could go on for a little while, or not. Better get ready, and no I don't mean buying guns and gold and moving to an isolated ranch.

[/quote]
In potential, yes. But I think it's still too early for that, the collapse has to be postponed for another 3 years or so and then I see bitcoin having a real chance in the economy. The infrastructure is just not there yet, too many obstacles at the moment. This will change, but it needs time. Time it might not get if things get sour too soon in the world economy.
[/quote]

[notme]

Touche - some element if wishful thinking from my part

And you are right at the moment liquidity is not great with markets shutting down left and right, that is probably the biggest risk.

But... there is a difference between agressive trading and manipulation also called cheating. I can't call a banker friend and set the BTC exchange rate, as we have seen in the libor, and seems to be happening with gold and forex. If I have a lot of coins I can try a big dump, small trades to influence price, etc. But it's all in plain sight and anyone doing so takes risk. So I think I meant 'central' manipulation. The equivalent in BTC world would be someone setting up a trojan in the bitcoin source code to skew the algorithms for private gain. Highly unlikely given open source nature.

The only thing I fear is HFT - I hope the community finds a way to ban or control it. Perhaps exchanges should enforce a minimum time between transactions (but very fast transaction execution), or offer a separate exchange with no limitation for the battle of the trading bots. Otherwise bot become a transaction tax as they work on both sides of the spread.

Very liquid and without mass market manipulation - you're joking right ?

No need to fear bots.  HFT in traditional markets has two components that make it nasty:
1.  Algorithms are allowed to place orders with no intention to allow them to fill.  In fact, if an order comes in that would fill them, they are given time to pull the order.  As a human, it is illegal to place an order without the intention to allow it to fill.  This is possible because of:
2.  Algorithms have direct access to the actual orderbook, whereas retail traders only have access to a order queue.  These orders will eventually hit the market, but the algorithms get to peak at them ahead of time and even make trades before they hit.

I don't yet see either of these problems in bitcoin.  Nobody but the exchanges has access to orders before they hit the book, and any order placed is capital at risk.  Playing both sides is what traditional human market makers have done for centuries and is certainly not without risk (consider what happens when the market trends in one direction).  However, it is these players that provide the liquidity you so clearly desire.

[Ivanhoe]

Nikkei opens not good this morning, already 2.17% down. Are things turning ugly today? We shall see.

[No 1]

Panic and Print will be their mantra just like last time.. Or was it print and buy?

[nicoin]

http://finviz.com/publish/062013/world_large1658.png
http://moneyover55.about.com/od/howtoinvest/tp/marketmaps.htm

[VeeMiner]

interesting, thanks for the info

[nicoin]

Hey notme, thanks for clear explanation, I didn't realize this. Quite unbelieveable this is allowed to go on! Do you have some links with more details? That really eases my worries about HFT and BTC, it will really be down on exchanges to make sure this does not happen, and if they don't their customers can move elsewhere.

No need to fear bots.  HFT in traditional markets has two components that make it nasty:
1.  Algorithms are allowed to place orders with no intention to allow them to fill.  In fact, if an order comes in that would fill them, they are given time to pull the order.  As a human, it is illegal to place an order without the intention to allow it to fill.  This is possible because of:
2.  Algorithms have direct access to the actual orderbook, whereas retail traders only have access to a order queue.  These orders will eventually hit the market, but the algorithms get to peak at them ahead of time and even make trades before they hit.

I don't yet see either of these problems in bitcoin.  Nobody but the exchanges has access to orders before they hit the book, and any order placed is capital at risk.  Playing both sides is what traditional human market makers have done for centuries and is certainly not without risk (consider what happens when the market trends in one direction).  However, it is these players that provide the liquidity you so clearly desire.

BTW
#Day 2, and it's not looking pretty.

"Dive! Take cover! Or, at least, hold on to your pants in the scramble. The Chinese bubble has just burst. It looks like the world is going to have egg on its face and elsewhere as Chinese banks are scrambling to get the hands on cash."
http://www.zerohedge.com/contributed/2013-06-21/chinese-banks-ready-go-bust

[notme]

Hey notme, thanks for clear explanation, I didn't realize this. Quite unbelieveable this is allowed to go on! Do you have some links with more details? That really eases my worries about HFT and BTC, it will really be down on exchanges to make sure this does not happen, and if they don't their customers can move elsewhere.

No need to fear bots.  HFT in traditional markets has two components that make it nasty:
1.  Algorithms are allowed to place orders with no intention to allow them to fill.  In fact, if an order comes in that would fill them, they are given time to pull the order.  As a human, it is illegal to place an order without the intention to allow it to fill.  This is possible because of:
2.  Algorithms have direct access to the actual orderbook, whereas retail traders only have access to a order queue.  These orders will eventually hit the market, but the algorithms get to peak at them ahead of time and even make trades before they hit.

I don't yet see either of these problems in bitcoin.  Nobody but the exchanges has access to orders before they hit the book, and any order placed is capital at risk.  Playing both sides is what traditional human market makers have done for centuries and is certainly not without risk (consider what happens when the market trends in one direction).  However, it is these players that provide the liquidity you so clearly desire.

BTW
#Day 2, and it's not looking pretty.

"Dive! Take cover! Or, at least, hold on to your pants in the scramble. The Chinese bubble has just burst. It looks like the world is going to have egg on its face and elsewhere as Chinese banks are scrambling to get the hands on cash."
http://www.zerohedge.com/contributed/2013-06-21/chinese-banks-ready-go-bust

There is a really good article that specifically addresses two points I mentioned, but I can't seem to find it now.  I did find another article [1], which looks to hit those points and a few other nuances.  It also includes quite a bit of introduction to the generic market concepts you need to know if you need to brush up on that.  Overall, it seems to be fairly negative on HFT, but keep in mind they talking about the status quo where the algorithms are allowed to do things that are illegal for humans to do and they are given access to a priority order queue as well as early knowledge of retail trades.  Take away these advantages, and you put the risk/reward back where it belongs, IMO.

1. http://www.demos.org/publication/cracks-pipeline-part-two-high-frequency-trading