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Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

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Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#91

Post by sho »

hndamien wrote: post #86
ebbv wrote: post #85

Earlier quoted context omitted.

> This is the same for every stock traded on any stock exchange in the world. While we do live in an age where stocks seem increasingly untethered from reality, that's still not remotely true. Stocks are, in theory, based on the value of the company. Which is something you can calculate based on its assets and revenue. Granted the math doesn't add up for a lot of companies right now, but that's an indication we're in…

It is more of an indication that QE made cash worthless.

> QE made cash worthless

Really? All your cash is worthless? Well that sucks but tell you what, I'll help hedge your losses by swapping it all for a big mac meal (which I assume I'll have to barter for, but I'll do that for you).

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#92

Post by syllogism »

anonu wrote: post #77

From the article: “Market cap” [...] is a bogus number that’s not actually applicable to anything — it’s not money that was put into the crypto, it’s not a realisable value like a company market cap. I am not sure what the author means by "realizable". If their intention is to say, "Ok, let's liquidate every single coin for fiat currency... and we expect to have the market-cap equivalent in that currency" Well, whats…

What would you pay to own every single bitcoin? The answer should be nothing --- if you owned all of them, they'd be completely worthless.

What would someone pay for all of Apple's stock? Suffice to say, a lot --- because Apple has actual value.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#93

Post by canoebuilder »

nerdponx wrote: post #9

Fortunately, USD balances on GDAX are FDIC insured for US citizens [0]. I accept that I might not be able to cash out of cryptos in an emergency, due to liquidity or transaction times or something else, but I sure as hell will be able to get out any USD I might have in GDAX, which is a big confidence boost to me. They claim that all crypto deposits are "fully insured" as well, by a "syndicate of insurers through Lloy…

Can we all take a moment to appreciate the irony here?

You're enthused about dealing with cryptocurrencies for reasons of being insured by a centralized, third-party, who you've placed your trust in.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#94

Post by gizmo686 »

mycall wrote: post #79
baddox wrote: post #5

Don’t all of the complaints about exchange rate and market cap apply to virtually any other item that is traded? Spread exists in forex and stock markets. Market cap is extremely commonly cited for stock markets. Sure, the effects may be stronger in Bitcoin due to its higher volatility, lower volume, etc., but that should be the author’s argument, instead of “if you don’t know the basic Finance 101 definitions of som…

Why does bitcoin even need market cap? Since it is a blockchain, you can calculate how much fiat/worth it currently has, by adding up all of the transactions. No?

You can calculate how many bitcoins are theoretically in existance by simply counting the number of blocks and refferencing issuance schedule. The blockchain will not tell you what these bitcoins are worth in any other currency; nor will it tell you how many of these bitcoins are spendable by anyone (eg. did the owner loose the key).

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#95

Post by patd »

jsmeaton wrote: post #80
alasdair_ wrote: post #65

The article states "The singular “price” of Bitcoin doesn’t exist — it’s a made-up number." This is the same for every stock traded on any stock exchange in the world. The "singular price" is, in most cases, just the mean of the closest bid and offer listed on the exchange and is thus a "made-up number" On top of this, it obviously doesn't take into account everything from transaction costs to the fact that attempts…

Isn't the difference that a stock is only traded on a single exchange? If stocks were traded on multiple exchanges, and the value was reported as the average across all of them, then that number would be just as made up.

A lot of stocks are trading on multiple exchanges. Unilever and Shell trade on the NY, London and Amsterdam stock exchanges. People typically use the one closer to them geographically or from a currency point of view.

And things like gold or oil barrels also have multiple exchanges.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#96

Post by fernly »

For all those posting variants of "It's no different from stocks", this is answered in TFA but even more clearly in the Paulo Santos article linked from it[1]. Editing it down a bit,

> ...overwhelmingly, bitcoin is traded on bitcoin exchanges... So here's the thing: Each of these markets does not communicate with the others. [That] ... means that buyers/sellers on each exchange are reliant on bids/asks exclusively from other members trading on the very same exchange.

> Now, that doesn't seem all that different from what happens with stocks in countries like the U.S., with all kinds of markets and ECNs, does it? But it really is massively different... because with stocks, a broker can quickly reroute his orders from one exchange to the other. The depositary/custodian of his stockholdings is not the exchange. With bitcoin, it's different. The exchange is also the depositary of one's bitcoin holdings ...[describes the difficulty and delay of moving BTC from one exchange to another, also discussed at length in TFA] ... The result of this highly inefficient market structure is that the same asset (Bitcoin) trades at significantly different prices from exchange to exchange...

So with stocks, if you want to buy or sell shares of AAPL, the price will be essentially the same whether you talk to Schwab or to eTrade, and if it isn't the same to within a penny, a script somewhere will take advantage of the difference to make money by buying from one and selling at the other _in seconds_ -- arbitrage which is not possible with bitcoin exchanges owing to the transaction delay and fee.

TFA also makes the important point that there is no regulation whatever of bitcoin exchanges, and that also makes them very different from the likes of Schwab.

[1] https://seekingalpha.com/article/4130380-bitcoin-series-adde...

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#97

Post by cobookman »

rlpb wrote: post #23

> The delays — ten minutes to over an hour — and fees add enough friction to generate the spread between exchanges, even if you assume everyone’s using trading bots as quickly as possible. Can an arbitrager not simply hold both BTC and cash on multiple exchanges at once? When a price difference swings one way, sell on one exchange and buy on the other, without worrying about transferring anything between exchanges. W…

You can however gdax limits you to 10k/day of withdrawls from the exchange (be it usd or btc). And gdax has a 3-6 day wire transfer delay.

You end up making more by simply hodling

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#98

Post by beaner »

fernly wrote: post #96

For all those posting variants of "It's no different from stocks", this is answered in TFA but even more clearly in the Paulo Santos article linked from it[1]. Editing it down a bit, > ...overwhelmingly, bitcoin is traded on bitcoin exchanges... So here's the thing: Each of these markets does not communicate with the others. [That] ... means that buyers/sellers on each exchange are reliant on bids/asks exclusively fr…

Is this meant to be scary though? From my perspective, it's obvious that bitcoin markets aren't as developed as traditional stock / forex markets... but it literally got added to CBOE one week ago. It seems there's nothing categorically preventing it from developing in time. So while this is interesting it doesn't seem particularly important right now.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#99

Post by baddox »

cdoxsey wrote: post #53
twelve40 wrote: post #17

Earlier quoted context omitted.

But at the end of the day, how is it different from the current equities market? (aside from immature tools and imperfect infrastructure that is just shaping up). Stock market can tank 50% like it did in 2009 (together with the real estate market) and your average investor will be screwed just the same. Even tech and fundamental analysis gurus cannot explain the endless bull market we're on, how is getting lured into…

Investing actually achieves something. When I make an investment in a company I'm providing capital that that company can use in various ways. In return I become an (very small) owner of the company. I get a say in how it's run (voting rights), and I get a share of the profit (in dividends). If you hold on to a stock like coca cola for 30 years, never looking at the stock price, and never sell, you'll actually make m…

Not to challenge your argument itself, and I know you’re not the author who commented above, but I really dislike this kind of “argument-swapping.” I see it a lot, for a lot of issues, but especially for issues that are complex and not deeply understood by most people, like Bitcoin, corporate finance, etc.

It starts with an easily-digestible and shareable argument, like “Bitcoin prices and market cap are a lie.” Then someone points out that, yes, perhaps many people misunderstand basic concepts in finance like spread and market cap, but that applies to any asset or currency or security.

Then someone else joins in with a completely unrelated argument, like “yeah, but Bitcoins don’t actually do or represent anything, whereas stocks do.” Even assuming this is a valid argument, it doesn’t change the invalidity of the first argument. But I fear that all too often people see the entire exchange as if it’s a sequence of related claims, and thus feel inclined to believe and share the initial talking point as if it was somehow corroborated by the later unrelated argument.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#100

Post by justboxing »

fellellor wrote: post #6
baddox wrote: post #5

Don’t all of the complaints about exchange rate and market cap apply to virtually any other item that is traded? Spread exists in forex and stock markets. Market cap is extremely commonly cited for stock markets. Sure, the effects may be stronger in Bitcoin due to its higher volatility, lower volume, etc., but that should be the author’s argument, instead of “if you don’t know the basic Finance 101 definitions of som…

I'm a newbie to the world of crypto currencies. What concerned me more is the bit about "wash trades". I can accept the spread, but there is truth in the article when it comes to trading practices that probably would be largely mitigated in the presence of a regulator.

Yeah, I would be concerned about 'wash trading' too. And the Crypto trading space seems like the Wild West in int 1880s in how some crypto trading sites and exchanges are screening for this kind of illegal activities while others aren't.

> PSA: The Bitfinex trade engine ALLOWS for WASH TRADING

> The trade engine on Bitfinex will allow you to buy and sell to your own orders, the procedures to do it are as follows (which will likely be ‘fixed’, or partially fixed after this post…)

Source: Wash Trading Bitcoin: How Bitfinex benefits from fraudulent trading => https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitf...

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