This article is total trash. Liquidity is always a factor in any asset that you buy or sell, whether its a stock, a bond, a work of fine art, or a bitcoin. All prices are fictional until you execute a contract and receive payment for a sale.
Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional
101–110 of 271 posts
Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional
#102You can cash out Bitcoin and the price is actually very accurate. The money I see in my bank account is real I can assure you of that. Also I know friends that cash out six figures at a time and the price they get is within less than 1% difference to the last sell price.
The number is accurate enough for most orders under $10,000,000. Has this person actually traded Bitcoin?
You might not be able to sell a large order to the cent, but with Bitcoin you are certainly able to cash out within less than 1% of the listed price. I move orders around a lot and I see real money, so I know it's not fictional. In addition I frequently use an exchange with about 100 times less volume than the USA exchanges.
Also shares have a spread too.
The Bitcoin order book is not razor thin, unless you are trying to sell $10,000,000 in one go. Then you just need to spread out the sell over about 5 hours.
Also the issue with arbitrage isn't the Bitcoin side of the transactions, it's often the USD or AUD side.
But arbitrage does work and the price is much closer worldwide than it used to be.
These little islands that the author talks about range from $1,000,000 24 hour volume for the smallest exchanges to $200,000,000 24 hour volume for a mid - high size exchange.
TL:DR I can assure you the price is real, cashing out is easy and viable. If you want to cash in $10 million just expect your limit order to execute gradually over about 5 hours.
Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional
#103The 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…
No, it's the fact that the trading in Bitcoin is so thin. A modestly-large trade can completely swamp the markets.
The NYSE sees on the order of a billion trades per day. The high over the past year is about 1.9, the low about 0.46. The dollar trade was $16 - $107 billion/day.
I'm not finding transactional volume for bitcoin, but the dollar vollume has peaked at $2.5 billion, and until September, 2017, was under $500 million.
Before that date, roughly, more money moves through one stock exchange in a single day than all of Bitcoin in a year.
Which gets to an interesting question of just what it is price is, and represents. If you can control and regulate the supply of a good then price is something of a fiction: it's the amount demanded, relative to the supply. But for a fixed asset, the more you can restrict that supply, the higher the price goes.
There's an analogy with electric circuits that I was kicking around with Gerard some months back. Just as R = V/I, the higher the demand (V), and the lower the supply (I), the greater the price. (This ... doesn't entirely hold up, but it's an interesting parallel.)
http://www.nyxdata.com/nysedata/asp/factbook/viewer_edition....
https://blockchain.info/charts/trade-volume?timespan=1year&d...
Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional
#104For 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…
>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.
Partially true of the most largest and most liquid stocks and those that are electronically traded. Not true for those trading massive blocks of stock or those trading in 'dark pools'. Also not true for stocks, options, bonds and other financial instruments with low liquidity or those that aren't traded electronically (such as OTC stocks). Also not true in times of financial distress (you know, the times when you really want to sell) when everyone is running for the exits.
Anyone who doesn't understand the basics of how markets work (the people this article is aimed at) shouldn't be trading anything.
Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional
#105Earlier quoted context omitted.
1. the stock market, other than the IPO is a secondary market. You are not providing capital to the company but just paying another trader for his shares. 2. The majority of stocks do not provide (and will never) dividends and the majority of buyers have no voting rights. but you are right. For practical purposes, the stock market is not pure gambling. There are institutions that make it legitimate. Such as the SEC,…
This isn't entirely true. If secondary market trades increase the value of the stock then the company can sell some of their stock to get more funding, or can borrow at better terms. Similarly, buying and holding Bitcoin has a range of effects that help the network and generate real wealth. Bitcoin is a services company, a payment network, a bank, and investment vehicle, a reflection of wealth in that economy, a nota…
Almost no companies today are selling stock to grow the company. Tesla is a big exception. Somehow we have gotten to a place where there is lots of capital wanting to invest in something that will make returns, but few people/companies wanting to work with large sums of capital to try new business ideas.
Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional
#106Earlier quoted context omitted.
'approximate' is the key word as it's averaged over exchanges which is a big difference to standard market prices, as mentioned in the article: > Quoting a number like “$19699.46” to seven significant figures when your data’s got a 5% spread would get your high school physics teacher slapping you upside the head. It’s entirely deceptive. It should say something like “$19,700 plus or minus $500 depending,” and that li…
I don’t think the “average over multiple exchanges” thing really matters that much when we’re talking about the usefulness of market cap. The reason market cap isn’t a great measure of “total value at the moment” is because there certainly aren’t enough buyers willing and able to buy all Bitcoins or all Apple shares at the current market price.
True, but if someone tried to buy all the Bitcoins or Apples shares, the price would start to go up. Getting them all would cost more than the current market cap. This is why company buyout offers are always for more than the current market cap.
Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional
#107[deleted]
Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional
#108Earlier quoted context omitted.
Here's what "thin" means in practice. Imagine two different sets of digital objects: AlphaCoins and BetaCoins - they're identical in the say way physics professors say "imagine an infinite frictionless plane". Both have a 1000 in circulation. Both are worth $10 each. Both have a market cap of $10,000 US Dollars. But the market for AlphaCoins is "thin" (small changes in supply and demand make for really big price swin…
To give a real life example, the other day I bought about $2,000 worth of a crypto asset, which caused a ~20% spike in price and raised the market cap by ~$5M. I'd say what the asset is, but I can't because if literally only one other person reading this decided to buy some then I effectively wouldn't have the option to buy more of it.
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Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional
#109Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional
#110The 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…
> 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…
The market cap is still a simple calculation of the last share price * the number of shares outstanding. There's no magic there. The market cap is subject to huge swings as well if someone were to suddenly sell off a big chunk of shares.