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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,206
I like reading zerohedge, but they are so negative about everything - the world is always about to come to an end. As such I've tempered my reading considerably.
This was (as usual) a very interesting read. I think crypto's probably have a very bright future, but this article more than any other highlights how Bitcoin could be Tulip Mania all over again.
Just tuned in to this thread to see what it was all about.
I remember the housing bubble, and made some (smallish) money in it too. (And got out early, by luck, and stayed out.) I was not convinced it was in a bubble at any point until everything had already started going down. I imagine no one ever is.
For what it is worth, and I think it's worth a lot, @wldman has some comments on crypto-currencies in general over on his thread:
To just add my own 2 cents, these currencies only exist as creations within computers, which has opened opportunities for some really major hacks. And once they are hacked, the money is just gone.
(I expect that after each incident, precautions were taken to prevent a recurrence, but the incidents keep on coming.)
Or, you can just enter these search terms into Google and browse the results:
bitcoin loses millions
bitcoin hackers
etc.
That's how I found the Guardian story. But I was really looking for the Mt. Gox collapse, a major Bitcoin exchange that collapsed when 460 million dollars worth of Bitcoins disappeared in 2014 due to a security breach:
This is a lot of money to simply disappear, and at current prices the loss would have been much greater in dollar terms. How well would markets absorb this?
Regular currencies are part of real national economies and a global banking system. There are real reasons, tied to commerce and real-world conditions, for them to fluctuate relative to each other. If they move in value, someone needs to get into or out of them for some reason other than pure speculation (usually, at least .)
Banks can be hacked, too. But somehow you don't see headlines of "Huge cache of Euros lost forever in computer hack, exchange collapses."
This post has gone on for too long, but I wanted to get down some of my misgivings about the whole thing, in case they will help someone either pass on it, or better understand the risks if they decide to try it. I will be passing, myself.
On the other side of the question: might Bitcoins or something similar end up eventually being actually economically useful, and also a good trade, if things settle down? Sure, they might. But you have to know that the reason anyone wants to get in right now is because they think they will keep climbing and make them rich, rich, rich, and right now, too. That's where the danger is.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,206
I agree that if your trading bitcoin almost anywhere other than CBOE/CME then you have considerable counterparty risk, I'll also agree with @wldman that it's the greatest it's ever been - but is that because the risk is highest, or just because the market cap is the greatest its ever been?
With regards to @bobwest's comments, maybe I'm misinterpreting but when Bitcoin gets hacked they don't go away, they don't get deleted, they get stolen. It's wealth transfer - just illegitimately. They still exist, just somebody else has them. It might not happen as often, but this does also happen to conventional banks. Somebody hacked the swift system and stole $100 million from an Indian Bank last year.
On a related note. as we all know there's been many large cyber hacks of personal information. How does that rank in comparison to the Bitcoin hacks?
That's right, and I should have said it that way more clearly. My point was that when the Bitcoin "disappeared" it was kind of like when a bank gets robbed and the money "disappears" -- it really is someplace, it's just not where the bank wants it to be.
That's the incentive for the attack, of course: for the hackers to get their hands on it.
This can be a problem for the institution that was holding it, and for the individuals who don't own it anymore. It could also be a big problem for an exchange that was trading it. How big, and how (and whether) CME would be vulnerable, I don't know -- but I expect it could be large.
My only point was that, aside from the potential issues of a probably over-heated market, there are computer-related vulnerabilities as well. And sure, the same thing can happen for conventional banks too, but there have been a lot more instances of Bitcoins being absconded with. Frankly, I don't understand enough about the technical details of these currencies to know how high the risk is, but it's another thing I have noticed with them that is not seen in the same degree with regular ones.
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