Bitcoin is NOT a Currency - Etsy Labs, Brooklyn - May 14th

[cypherdoc]

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in conclusion:  Broberg's arguments are a straw man and can be viewed in the context of the known problem of Central Banks (esp the Fed) creating moral hazard.

  Wow excellent post, got to handed to you! And I see you have a crystal clear picture of what's going on which is the same picture I see.

One question though:

but i still wouldn't bet against UST's just yet b/c there is now significant evidence the worldwide economy will be heading into the tank as i have been predicting for a couple of months now.  foreign sovereign bonds are failing and provide a hint of what is to come.

Why not? What use will the nominal gains have once the bubble pops and the FED steps in to reinflate it destroying the purchasing power of the dollar in the process? Unless you believe they can reinflate and not destroy the dollar??

well, first of all b/c of this:



the purple line is TLT, the 20 yr UST bond price.  it's hard to see but it's just broken over the top of the Dec 2011 high.  if you short here, you'd be betting against a breakout.  i wouldn't want to bet against that train esp. if we're going into a recession and the same dynamic plays out as in 2008 where UST's and the USD ramped up as a safe haven play.  OTOH, i've seen plenty of false breakouts as well so we'll just have to see.  i do know the Japanese bond floor is littered with the bodies of the bond vigilantes who've tried to take the JGB down unsuccessfully.

the other line is the $DXY which is the USD index.  it's been ramping too b/c of all the debt liquidation.  now with the recent downturn in the stock mkt we're going to see it go even higher over the long term as all the leverage in stocks gets liquidated as well.  which is why i question whether gold/silver can get off the mat and go higher after a 12 yr bull which i think is long in the tooth.  yeah, please spare me all the hate on that one; i get enough over in my gold thread in the Spec Forum.

and yeah, i am a Bitcoin bull vs. a gold/silver bull.  i defected last year.

[hazek]

So you don't think there's going to be QE3, QE4, ect?

[cypherdoc]

So you don't think there's going to be QE3, QE4, ect?

maybe, maybe not.  what i think is, it won't matter.  in fact, i think it will make things worse.  deep down market participants know this is a self defeating strategy in the end.

[hazek]

So you don't think there's going to be QE3, QE4, ect?

maybe, maybe not.  what i think is, it won't matter.  in fact, i think it will make things worse.  deep down market participants know this is a self defeating strategy in the end.

And there you go, my bet isn't as much on PM's and Bitcoin as it is on politicians and central bankers doing what they do best and I guess you on the other hand are either undecided or leaning the other way.

Time will tell which of us made a better bet.

[molecular]

hey cypher, awesome huge post of yours (https://bitcointalk.org/index.php?topic=81642.msg910908#msg910908)

one remark:

4.  so with that background what is this that Bromberg is talking about with the deposit market, UST's, investment vehicles?

I'm not sure, he says this (http://www.youtube.com/watch?feature=player_detailpage&v=NULPfp0Zu5g#t=1666s)

...very very useful for your fx risk. So it turns out that the cost for the currency forward is determined mathematically from the deposit rates. [...] there is a mathematical relationship between deposit rates and the cost of a forward like that. [...] so the deposit market is really really important for an international corporation, because that's really gonna speak to how much their future costs are gonna be and how easy it's gonna be for them to hedge. So there's this really tripartite relationship between those concepts: hedging, forwards, deposits.

this part hasn't left my mind since I watched the vid a while ago (last night? the night before), because I can't quite figure it out. First of all, I don't know what a deposit market is... (looks at TyGrrr-Bank, the pirate stuff,... where one can deposit bitcoins and receive interest payment (while accepting risk of loss)... is that a deposit market?).

Is he implying that bitcoin has no (sufficiently insured) deposit market and therefore big corps wont enter the bitcoin sphere because they just can't hedge (efficiently enough) the exchange risk?

EDIT: a bit later on he says:

so, in order to have a deposit market, you need investment vehicles; you need someplace you can put your money, that will make more of that money. Unless you have investment vehicles, you don't have a deposit market, which means you can't have forwards, which means you can't have hedging, which means you don't have institutional investors getting involved in that currency...

and directly after that:

which is not gonna happen, because there's no regulators on the thing.

now wtf. those are 2 different arguments. While the first one might be valid (I can neither judge the argument itself nor wether or not sufficient deposit markets exist for bitcoin), the second one doesn't seem to be well thought-out and he doesn't explain it further, only says "volatility is too high". It seems the possibility of hedging should be able to deal with that, using his own argument.

Quite frankly, I've come to think his argument that bitcoin is not a currency is crap.

[Serge]

GLBSE is an investment vehicle and it's just beginning to grow

[molecular]

The central plank of his criticism was that there is no deposit market in Bitcoin, which means institutional investors cannot park money in it, sell futures, or hedge volatility.

This is false as demonstrated by BTC lending threads on this forum. The market for Bitcoin deposits is very new but it will only grow in time.

omfg, why didn't I read to the end of the thread, I could've avoided writing that longish post I just wrote.

Thanks for that, BitcoinTtraderIE

[molecular]

The central plank of his criticism was that there is no deposit market in Bitcoin, which means institutional investors cannot park money in it, sell futures, or hedge volatility.

This is false as demonstrated by BTC lending threads on this forum. The market for Bitcoin deposits is very new but it will only grow in time.

Yes, and they're options too, in mpex. As you say, everything may be really brand new, and not yet completely established, but everyday new things are emerging.

but, but "it's so volatile and there's no regulation on the thing"

[cypherdoc]

hey cypher, awesome huge post of yours (https://bitcointalk.org/index.php?topic=81642.msg910908#msg910908)

one remark:

4.  so with that background what is this that Bromberg is talking about with the deposit market, UST's, investment vehicles?

I'm not sure, he says this (http://www.youtube.com/watch?feature=player_detailpage&v=NULPfp0Zu5g#t=1666s)

...very very useful for your fx risk. So it turns out that the cost for the currency forward is determined mathematically from the deposit rates. [...] there is a mathematical relationship between deposit rates and the cost of a forward like that. [...] so the deposit market is really really important for an international corporation, because that's really gonna speak to how much their future costs are gonna be and how easy it's gonna be for them to hedge. So there's this really tripartite relationship between those concepts: hedging, forwards, deposits.

as i said in my post, i think he's talking about money markets.  i remember when these vehicles came into vogue in the 1980's as a tool from Wall St to lure money away from commercial banks.  they offered higher yields for savers by investing in what used to be low risk securities, namely sovereign bonds.  well, those are no longer considered safe now are they?  esp. the ones in Europe.  and we've seen a ton of money taken out of them beg. back in 2008 when they first broke the buck and more recently when it was discovered many were taking excessive risk reaching for yield by buying PIGS sovereigns.

yes they pay interest but they have risk and the currency forwards IMO are just a derivative to try and offset this risk.  yes, of course the institutions like to play in this market but that's only b/c they believe the Fed and other CB's will be there to bail them out if their sovereign bond investments go sour.  well, the bond vigilantes have awakened and are reeking havoc in Europe.  the real question is does it come here and when?

this part hasn't left my mind since I watched the vid a while ago (last night? the night before), because I can't quite figure it out. First of all, I don't know what a deposit market is... (looks at TyGrrr-Bank, the pirate stuff,... where one can deposit bitcoins and receive interest payment (while accepting risk of loss)... is that a deposit market?).

Is he implying that bitcoin has no (sufficiently insured) deposit market and therefore big corps wont enter the bitcoin sphere because they just can't hedge (efficiently enough) the exchange risk?

while Bitcoin doesn't have a deposit market what it does have is the potential to have price appreciation.  a significant potential.  which is all it needs for them to eventually come to papa.  the reason big institutions haven't entered Bitcoin yet is they want to keep their bailout game going for as long as possible.  if and when they sense that game is finished then they will come storming into a currency which has a fixed supply like Bitcoin.  Bitcoin not only has the potential for some of that $4-7 T currency market to come storming in but also fiat from the gold/silver markets which i think have topped.

EDIT: a bit later on he says:

so, in order to have a deposit market, you need investment vehicles; you need someplace you can put your money, that will make more of that money. Unless you have investment vehicles, you don't have a deposit market, which means you can't have forwards, which means you can't have hedging, which means you don't have institutional investors getting involved in that currency...

again, i just view the currency markets along with their hedging vehicles and money markets as another gambling asset class along with stocks, commodities, junk bonds, gold, silver.

and directly after that:

which is not gonna happen, because there's no regulators on the thing.

now wtf. those are 2 different arguments. While the first one might be valid (I can neither judge the argument itself nor wether or not sufficient deposit markets exist for bitcoin), the second one doesn't seem to be well thought-out and he doesn't explain it further, only says "volatility is too high". It seems the possibility of hedging should be able to deal with that, using his own argument.

Quite frankly, I've come to think his argument that bitcoin is not a currency is crap.

no regulators?  isn't that a positive?

[tvbcof]

while Bitcoin doesn't have a deposit market what it does have is the potential to have price appreciation.  a significant potential.  which is all it needs for them to eventually come to papa.  the reason big institutions haven't entered Bitcoin yet is they want to keep their bailout game going for as long as possible.  if and when they sense that game is finished then they will come storming into a currency which has a fixed supply like Bitcoin.  Bitcoin not only has the potential for some of that $4-7 T currency market to come storming in but also fiat from the gold/silver markets which i think have topped.

Bitcoin does not even qualify as a sideshow in the global economy show.  At best it is an informal crap game out in the parking lot.

I would say that Bitcoin has a 'potentially significant' upside (which differs notably from 'significant potential' for a meaningful upside) if it even manages to sneak a peek over the fence.  Were that to happen I don't have much doubt that the security personnel would show up quite quickly and beat the shit out of us transgressors.

[molecular]

while Bitcoin doesn't have a deposit market what it does have is the potential to have price appreciation.  a significant potential.  which is all it needs for them to eventually come to papa.  the reason big institutions haven't entered Bitcoin yet is they want to keep their bailout game going for as long as possible.  if and when they sense that game is finished then they will come storming into a currency which has a fixed supply like Bitcoin.  Bitcoin not only has the potential for some of that $4-7 T currency market to come storming in but also fiat from the gold/silver markets which i think have topped.

Bitcoin does not even qualify as a sideshow in the global economy show.  At best it is an informal crap game out in the parking lot.

I would say that Bitcoin has a 'potentially significant' upside (which differs notably from 'significant potential' for a meaningful upside) if it even manages to sneak a peek over the fence.  Were that to happen I don't have much doubt that the security personnel would show up quite quickly and beat the shit out of us transgressors.

to be honest: I personally don't give a damn when/if institutional investors will "come to papa". I'm content when/if Bitcoin will be the "transgressive currency" for all kinds of black (and other free) markets.

I'll just do my business out in the parking lot where the sun is shining, security personell watching enviously while burning fiat currency to keep warm inside their rotten complex.

[tvbcof]

Bitcoin does not even qualify as a sideshow in the global economy show.  At best it is an informal crap game out in the parking lot.

I would say that Bitcoin has a 'potentially significant' upside (which differs notably from 'significant potential' for a meaningful upside) if it even manages to sneak a peek over the fence.  Were that to happen I don't have much doubt that the security personnel would show up quite quickly and beat the shit out of us transgressors.

to be honest: I personally don't give a damn when/if institutional investors will "come to papa". I'm content when/if Bitcoin will be the "transgressive currency" for all kinds of black (and other free) markets.

I'll just do my business out in the parking lot where the sun is shining, security personell watching enviously while burning fiat currency to keep warm inside their rotten complex.

Agree and concur.

My main concern is that it is human nature to become particularly unpleasant when envy (and threat) enter the picture.