Derivatives like futures will be great for bitcoin, before they destroy it

[Victorycoin]

What makes bitcoin so much better than all other alt coins that it warrants a 100+ billion market cap? Why can’t I just create a new coin any one I want, that has all the good qualities that make bitcoin useful?

Belief. Belief (on a collective, mass scale) is what separates one thing of value from another similar thing that has less or none of that same value.

What separates Gold's value from that of "fools gold"? Belief, further reinforced by it's attributes. That eventually becomes a self-reinforcing feedback loop that grows to a mass scale. That's it.

How did Gold get it's value as money and store of value in the first place? The first 100 people that started using Gold as a barter/money first believed in it, when no one else around them did. And then the discovery of Gold's attributes further validated that belief. And then the belief spread to 1000, then 10,000, then 100,000 people. Then around the world.

Belief is not what gives value to gold or anything else. Gold has value because of its intrinsic properties and rarity. It is useful for making jewelry, among other purposes in different industries. Fool’s gold does not have this value and it is far more common.

Can you really hear yourself, your rhetoric? Same set of jewelry can as well come from copper, Aluminium, platinum and gold, it is the people's belief that set the prices. That is why companies spend tirelessly on advertisement - to put their products everywhere for people to see and accept.

This feedback loop that you described is 100% real in many assets, including bitcoin. You are spot on in your description of how it works, but you failed to mention that if price is driven up simply by demand (or “belief”) and not by intrinsic value, then that is how bubbles form (and eventually, inevitably pop).

If you're looking for intrinsic values, but can't find them in this much Torque had put before you, then stop bothering, you will never recognize one even when it's right in front of you.

That's not the only thing that gives Bitcoin its value. Its potential as a deflationary store of value is another. Doesn't have to be completely stable for that function to work either, look at Gold and Silver. Look at real estate, collectables, art, etc. Also, Bitcoin is decentralized, permissionless, trustless, borderless, censorship-resistant, no-middleman transactions, etc. the list of other attributes that give it value goes on and on.

All the attributes highlighted above are what makes Bitcoin thick and because we have not had any other financial asset that offers even half as much, Bitcoin will know no upper bound.

The introduction of Futures contracts will plummet the price of Bitcoin? Yes.

Most hodlers are going to become rich?  Quite obvious.

A crash would likely follow? That would be nice, another excellent opportunity to start a profitable venture again after maximizing and taking profit from the former. I can't wait!

[ktabb]

What makes bitcoin so much better than all other alt coins that it warrants a 100+ billion market cap? Why can’t I just create a new coin any one I want, that has all the good qualities that make bitcoin useful?

Belief. Belief (on a collective, mass scale) is what separates one thing of value from another similar thing that has less or none of that same value.

What separates Gold's value from that of "fools gold"? Belief, further reinforced by it's attributes. That eventually becomes a self-reinforcing feedback loop that grows to a mass scale. That's it.

How did Gold get it's value as money and store of value in the first place? The first 100 people that started using Gold as a barter/money first believed in it, when no one else around them did. And then the discovery of Gold's attributes further validated that belief. And then the belief spread to 1000, then 10,000, then 100,000 people. Then around the world.

Belief is not what gives value to gold or anything else. Gold has value because of its intrinsic properties and rarity. It is useful for making jewelry, among other purposes in different industries. Fool’s gold does not have this value and it is far more common.

Can you really hear yourself, your rhetoric? Same set of jewelry can as well come from copper, Aluminium, platinum and gold, it is the people's belief that set the prices. That is why companies spend tirelessly on advertisement - to put their products everywhere for people to see and accept.

This feedback loop that you described is 100% real in many assets, including bitcoin. You are spot on in your description of how it works, but you failed to mention that if price is driven up simply by demand (or “belief”) and not by intrinsic value, then that is how bubbles form (and eventually, inevitably pop).

If you're looking for intrinsic values, but can't find them in this much Torque had put before you, then stop bothering, you will never recognize one even when it's right in front of you.

That's not the only thing that gives Bitcoin its value. Its potential as a deflationary store of value is another. Doesn't have to be completely stable for that function to work either, look at Gold and Silver. Look at real estate, collectables, art, etc. Also, Bitcoin is decentralized, permissionless, trustless, borderless, censorship-resistant, no-middleman transactions, etc. the list of other attributes that give it value goes on and on.

All the attributes highlighted above are what makes Bitcoin thick and because we have not had any other financial asset that offers even half as much, Bitcoin will know no upper bound.

The introduction of Futures contracts will plummet the price of Bitcoin? Yes.

Most hodlers are going to become rich?  Quite obvious.

A crash would likely follow? That would be nice, another excellent opportunity to start a profitable venture again after maximizing and taking profit from the former. I can't wait!

1. You clearly know nothing about jewelry. There is a reason gold and platinum jewelry is more expensive than silver, and copper jewelry is just garbage. It's because those materials are more rare and inherently superior for jewelry. They are heavier, better looking, and in the case of platinum, much more durable. Why do you think a wooden guitar is more expensive than a plastic one? Because people believe it is worth more? No, because it sounds better... its properties make it better, just like gold and platinum have properties that make them valuable.

2. Almost every other cryptocurrency offers all of the listed properties, so your statement that no other financial asset offers even half is just flat out wrong. Furthermore, it is trivial for anybody to go out there and make another cryptocurrency that has all of those properties, and people are constantly doing this. This is ironically where crypto falls short of government-backed currency - USD inflation is controlled, whereas crypto inflation is completely uncontrollable as anybody and everybody issues more and more ICOs.

3. The fact that you think you would be able to pick out the peak and sell before a crash shows that you know nothing about investing, and honestly you are probably very new to bitcoin. I'm guessing you weren't around for the 2013 bubble and it sounds like bitcoin is the only financial asset you are familiar with. It is practically impossible to pick out the peak of a bubble. Anybody who does is doing so out of pure luck.

[TheQuin]

This thread certainly reads a lot better with the OP on ignore. I didn’t know there was a separate ignore list for PMs so judging by the irrelevant nonsense I received before finding it I guess the OP is still busy deluding themselves that the fact their interpretation of the word derivative differs from what professional derivative traders consider to be a derivative is somehow relevant or worth debating.

His analogy and therefore his argument falls down when you understand that Bitcoin will be the underlying asset to Bitcoin futures contracts and the value can be easily and quickly realised. CDOs, on the other hand, are a collection of loans secured on property assets and it is not easy or quick to call those loans in or sell the underlying property.

Anyone who stumbled across this thread because they are actually interested in what effect CME’s new futures contract will have might find the following article interesting.

https://www.coindesk.com/fud-sides-defense-cmes-bitcoin-futures-plan/

A margin clerk's dream

Here's what I wrote to Lothian (a former employee at the futures brokerage I ran), and maybe it will help you with your bitcoin futures doubters:

"Hey John, it's Junior from your old FADC [First American Discount Corporation] days and I’ll be glad to help you understand bitcoin.

"But first – recall how you used to try to collect margin money by first asking the customer to provide a contact at his bank who could confirm that he had sufficient funds in his account and that he had initiated the wire. Why did we have you do that? Because we knew we wouldn’t get the money until the next day; his bank, while debiting his account immediately, would wait until the end of the day to wire us the money (unless he stopped the wire) and our bank wouldn’t credit us until mid-morning the next day, at the earliest.

"Now, imagine, instead of that 24-hour headache, your under-margined customer simply waved his cell phone at our FADC QR code and we got the money within 10 minutes, or at most a few hours. Bitcoin is a margin clerk's dream come true: near-instant peer-to-peer value transfer! It's easy to see why Jamie Dimon doesn’t like it, but a former margin clerk? You should be loving this technology and cheering for its adoption!       

Also, the CME has published details of the contract specifications.

http://www.cmegroup.com/trading/equity-index/us-index/bitcoin_contract_specifications.html

5 BTC per contract, $5 tick size so $25 per contract.
Circuit breakers:

Special price fluctuation limits equal to 7% above and below prior settlement price and 13% above and below prior settlement price and a price limit of 20% above or below the previous settlement price. Trading will not be permitted outside the 20% above and below prior settlement price.

i.e. The same as for existing equity and currency futures contracts.

[ktabb]

This thread certainly reads a lot better with the OP on ignore. I didn’t know there was a separate ignore list for PMs so judging by the irrelevant nonsense I received before finding it I guess the OP is still busy deluding themselves that the fact their interpretation of the word derivative differs from what professional derivative traders consider to be a derivative is somehow relevant or worth debating.

His analogy and therefore his argument falls down when you understand that Bitcoin will be the underlying asset to Bitcoin futures contracts and the value can be easily and quickly realised. CDOs, on the other hand, are a collection of loans secured on property assets and it is not easy or quick to call those loans in or sell the underlying property.

Except that Quin doesn't realize that CDOs are not derivatives and were able to be liquidated just as easily as any other security by simply selling them to another bank or institution. Mortgages are not derivatives. CDOs are mortgages. A CDO is to mortgages as a mutual fund is to stocks.

This whole argument just stems from an objectively incorrect understanding of what a CDO and derivative is.