How would a bitcoin crash look like? Any far reaching consequences? Can one safely ignore bitcoin and remain ignorant?
Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker
61–70 of 220 posts
Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker
#62Earlier quoted context omitted.
Bitcoin is limited at 21 million coins. After that, no more btc, and people will trade in btc divisions such as satoshis. But there are hundrerds of bitcoin alternatives now, some very interesting.
If there's no more miners / mining, who verifies the transactions? (iirc that's what miners did, but correct me if I'm wrong and miners only generate currency and don't verify transactions)
There is no more BTC created after 21 million coins, but the mining continues. This just means that each block no longer comes with a fixed reward, but the miners will still make money from transaction fees.
Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker
#63So what happens when the entire earth's energy production is required to produce the next bitcoin and there is therefore no further bitcoin mining?
Lightning Network significantly reduces transaction revenue, so there will be dramatically fewer miners.
I don't think there will fewer miners. I think it's more likely that the price of Bitcoin would increase.
There a lot of very large mining operations that cannot afford to scale down, and they won't sell their mined Bitcoin at a loss. If there are fewer transaction fees, this smaller amount of BTC would have to pay for all of the electricity that was used to mine a block.
Maybe everything would change if the mining operations started to run their own power plants that use free and renewable energy. They could buy some land next to a river and set up a hydroelectric power generator. That would just be a capital cost, and if you do it right, then it could cost very little to maintain. The operational cost would be maintenance, the internet bill, and fixing/replacing broken miners. Even if the mining doesn't work out, I've just been reading about some people who do this and sell excess power to their power company.
Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker
#64Earlier quoted context omitted.
(I am not a professional investor) Why is there a gap of 11% between the CBOE Future contract price and the BTC Spot price? Should they not be closer in a perfect market? Maybe the gap will be the same on the contract expiry date? Is this because the arbitragers still need to integrate the CBOE Futures into their system? Even between bitcoin exchanges, the bitcoin price varies. $17240 on cex and $16310 on bitstamp.
Futures contract has TIME value, so they are usually higher than the SPOT price, please check this link for detailed explanation . https://www.investopedia.com/terms/f/futurescontract.asp Thought it is not exactly same, but similar case is Where you pay Premium with Stock Options to have the right RIGHT to buy the stock one month from now. Regarding cex & bitstamp they are exchange out side of USA, each of them have…
Is 11% not a huge time value premium for something that expires in a month? Can we compare the time premium with the interest rate? I have traded options, but never futures. With options there several components that increase the premium besides just the time component.
According to [0] futures shouldn't have a time premium because both parties are obligated to to fulfill the contract.
As you stated in the OP, the 11% spread should be a "riskless" arbitrage. If so, I suspect that this spread will decrease.
[0] https://money.stackexchange.com/questions/12359/do-futures-h...
Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker
#65So what happens when the entire earth's energy production is required to produce the next bitcoin and there is therefore no further bitcoin mining?
It should be noted that Bitcoin doesn't actually need much energy to process the transactions; I believe you could run the whole thing in a single computer. It only burns a lot of energy to avoid malicious miners from subverting the process. More mining means more energy must be burnt, but it can be scaled up or down, and doesn't affect the transaction rate.
Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker
#66Earlier quoted context omitted.
To me, the Lightning network looks like a terrible idea. It achieves nothing that an increased blocksize would not have done on-chain yet wraps a faster-layer around the slower, deliberately crippled (1MB) blockchain and does require multi-hop liquidity that must be provided by interested parties. My understanding would be that the slower layer (like TCP) would be stacked on the faster layer (like IP). The lightning…
> It achieves nothing that an increased blocksize would not have done on-chain It lets one party in a channel send arbitrarily large numbers of payments ("arbitrary" subject to the total payment value being capped to the channel capacity, as well as to the Bitcoin divisibility) to another without increasing the UTXO set as you would on-chain.
> It lets one party in a channel send arbitrarily large numbers of payments ("arbitrary" subject to the total payment value being capped to the channel capacity, as well as to the Bitcoin divisibility) to another without increasing the UTXO set as you would on-chain.
No that is not true. Each Lightning Channel needs UTXOs to be created before it can be used at all.
Its goal is rather to do trustless multi-hop off-chain payments on pre-opened channels.
Notice that Satoshi himself implemented simple payment channels in Bitcoin. (Without the multi-hop part)
It is all but clear that the much more complex LN contraption will help in the real world.
Furthermore, a case can be made that this going closer to decoupling Bitcoin from the economy on top. The "gold standard" argument hinted at above might be a too close historical parallel, really.
Because, eventually, the gold standard got abolished.
Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker
#67So what happens when the entire earth's energy production is required to produce the next bitcoin and there is therefore no further bitcoin mining?
This cannot happen. Bitcoin difficulty adjusts to match current mining power so it can't get out of control like that.
So why does it take so long to make a transaction these days? Is the difficulty scaling outpacing the actual network?
Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker
#68I am trying to understand risks with arbitrage for professional traders with BTC spot (at Coinbase gdax) and CBOE Futures contract. Let us say, some professional trader "Short sell CBOE Future contract & Buy BTC Spot at Coinbase simultaneously" At the time of this writing, Futures contract short sell @ $18700 and BTC Spot buy @ $16700 simultaneously. http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures you wait…
When you buy base and simultaneously sell future contract, you effectively lend your money to other counterparty. In ideal market this should be equal to interest on loan (as you mentioned).
There are two possibilities of what is really going on: - either there are not enough arbitragers yet - or you should factor in commissions, fees, ease of transferring money between exchanges, etc
Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker
#69Earlier quoted context omitted.
You can't, on purpose. The idea is that there are two kinds of investors: Sophisticated ones who can look out for themselves, and regular joes, who are protected against being ripped off by extra regulations and extra paperwork. Bitcoin futures aren't the kind of product for which anyone will go though those regulations and do that paperwork. Now, how do you become a sophisticated investor? First of all, have a spare…
I can imagine bitcoin will one day become tightly regulated and only available to sophisticated traders; the network only supports 15 transactions per second, limiting who can do trades is one way to deal with it. NYSE can do about 11K a second (based on https://www.quora.com/What-is-the-average-total-number-of-tr... )
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Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker
#70How would a bitcoin crash look like? Any far reaching consequences? Can one safely ignore bitcoin and remain ignorant?
if you want to hedge against a significant rise, you might wanna hold an amount you are comfortable losing.