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

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

#141

Post by kensey » Mon, Dec 18, 2017, 9:14 AM UTC

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…

Even then, if Coca-Cola goes out of business, and the stock is delisted (so the price is effectively zero or close to it), you still own 1 millionth or whatever of the company, and the company has actual tangible and intangible assets (including its name, which in Coca-Cola’s case would be one of its most valuable) that can be liquidated to recoup value to the owners. If Bitcoin goes to zero, there’s no backing store of value to sell — you own a number whose entire value in other monetary units is based on people wanting to buy it, not on any asset or guarantee backing it.

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

#142

Post by kensey » Mon, Dec 18, 2017, 9:29 AM UTC

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…

I think a large part of the point in that part of the article is that the price gap between exchanges is much wider than it is for just about any security trading on an established stock or commodity exchange (because the time and fees involved in exploiting that gap for Bitcoin make arbitrage hard to pull off, so the gap-tightening effects of it don’t kick in). You aren’t going to see inter-exchange differences of several percentage points in the price of a share, because savvy traders/trading bots would instantly jump on it and the gap would tighten up again.

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

#143

Post by makomk » Mon, Dec 18, 2017, 9:29 AM UTC

davidgerard wrote: post #12

DennisP wrote: post #11

Earlier quoted context omitted.

Well he does argue that the infrastructure isn't as advanced and regulation isn't as mature. But you could say the same about equities in emerging markets.

They're not being pitched to suburban mums and dads in the tabloids.

I was recently looking into stocks and shares ISAs and which index funds are best, and I can safely say that emerging market funds are very definitely being pitched to suburban mums and dads in the tabloids. Meanwhile, they're running articles about Bitcoin being a bubble and a huge scam. What I'm saying is, your claim about what the tabloids are convincing people to invest in doesn't seem terribly founded.

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

#144

Post by sah2ed » Mon, Dec 18, 2017, 9:32 AM UTC

omarforgotpwd wrote: post #139

sah2ed wrote: post #135

Earlier quoted context omitted.

> if something were to happen that made holding bitcoin undesirable (such as say, a possible crack for their elliptic curve crypto implementation). A much more realistic scenario that could make bitcoin undesirable to hold would be something like all major central banks collectively viewing bitcoin as a threat then working in concert to target the weakest link of the cryptocurrency: exchanges that facilitate conversi…

Sure, definitely. There are many possible scenarios, like a major exchange like Coinbase, Bitfinex, or some chinese exchange going down / getting hacked. Wouldn’t even have to be all the worlds central banks: could just be one new regulation or rule in China.

MtGox was a major exchange and it went down but it didn't deter people from investing in bitcoins, they merely moved their business to other exchanges.

Your original comment talked about a scenario where people decide against bitcoin and such a scenario can only play out if there is too much uncertainty to make them a viable investment. Because bitcoin is decentralized, the only way major governments can try to influence it and related activities like exchanges is by acting in concert. Anything short of this will not work against it as has happened repeatedly with past attempts by individual governments like China.

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

#145

Post by makomk » Mon, Dec 18, 2017, 9:33 AM UTC

kensey wrote: post #141

cdoxsey wrote: post #53

Earlier quoted context omitted.

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…

Even then, if Coca-Cola goes out of business, and the stock is delisted (so the price is effectively zero or close to it), you still own 1 millionth or whatever of the company, and the company has actual tangible and intangible assets (including its name, which in Coca-Cola’s case would be one of its most valuable) that can be liquidated to recoup value to the owners. If Bitcoin goes to zero, there’s no backing store…

As companies become more highly leveraged, this becomes less and less true. For really highly leveraged companies, you're basically just speculating on their future growth because there will be nothing left to sell after the creditors and bondholders get in line ahead of you.

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

#146

Post by coldtea » Mon, Dec 18, 2017, 9:34 AM UTC

g09980 wrote: post #131

omarforgotpwd wrote: post #128

Earlier quoted context omitted.

I think the point he’s making is that everybody could not cash out at the listed price at once if something were to happen that made holding bitcoin undesirable (such as say, a possible crack for their elliptic curve crypto implementation). However, the same is true for banks which only keep 10% of deposits. Bank deposits are FDIC insured up to $250,000 though.

But the same would happen for any similar-functioning market. If every AAPL shareholder tried to simultaneously sell for $173.97 (current price), many would end up disappointed. Instead, the article seems like FUD that would confuse non-tech users into thinking they couldn't cash out their 0.5 BTC at the price they're seeing on their exchange (they can.)

>But the same would happen for any similar-functioning market. If every AAPL shareholder tried to simultaneously sell for $173.97 (current price), many would end up disappointed.

Yes. But if one thinks Bitcoin, with its distribution of holders, price volatility, and "quality" of trading implementations etc has the same tolerances as the regular stock market (which indeed can crash too), one is beyond deluded.

It's like saying "sure, I can crash on my custom built hot-rod made from a modified jet ski if I go into a wall, but so can someone in their Hammer". The impact, and the implications are not going to be the same...

(Heck, when the market tried to go trashing, it got a 1 trillion bailout to help it out. Who is gonna do that for bitcoin?)

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

#147

Post by coldtea » Mon, Dec 18, 2017, 9:37 AM UTC

DennisP wrote: post #11

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…

Well he does argue that the infrastructure isn't as advanced and regulation isn't as mature. But you could say the same about equities in emerging markets.

Yes, only several times worse.

A random guy that self-taught himself PHP, for example, is not usually found (or even allowed) to build one of the biggest exchanges for developing markets. For Bitcoin though, they do.

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

#148

Post by paps » Mon, Dec 18, 2017, 9:43 AM UTC

sytelus wrote: post #122

josephagoss wrote: post #102

You 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 orde…

Article author actually makes a great point and it stands regardless of your ability to cash out within 1%. Big investors on current markets can whip out huge profits for themselves by using techniques such as front running, wash trades, willybot, spoofing etc. Exchanges are not even prohibited from doing their own secret trades and using their own internal database and full knowledge of all other players. If you are…

> I think its also worth pointing out that less than 1000 entities owns 40% of the bitcoins.

This is FUD. 1000 wallets own 40% of BTC. See here https://bitinfocharts.com/top-100-richest-bitcoin-addresses....

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

#149

Post by kensey » Mon, Dec 18, 2017, 9:44 AM UTC

bufferoverflow wrote: post #125

This article is pure FUD with lies. 1) The spread is not "plus or minus $500", it's a lot less. See for yourself: http://bitcoinity.org/markets/bitstamp/USD At this particular moment the spread is $23 on Bitstamp, zero on GDAX, $11 on Bitfinex, zero on Kraken, zero on it it (where "zero" is something under a dollar, there's not enough precision to display it). 2) Yes, you can cash out, a lot. There are dozens of huge…

When article says “plus or minus $500”, it’s not talking about the bid/ask spread on a given exchange, but the price difference from one exchange to the next, which is exactly what your own second link shows.

And sure, you can cash out, and see a number in a balance statement. How hard is it to get that cash out of Bitfinex into a real bank though? (I’m not even going to address the inherent hilarity of citing Bitfinex as proof that things are A-OK in Bitcoinia.)

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

#150

Post by charlesdm » Mon, Dec 18, 2017, 9:45 AM UTC

smokeyj wrote: post #49

Alex3917 wrote: post #42

Earlier quoted context omitted.

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.

So the market cap is you. This doesn’t apply to bitcoin.

Maybe. But if an institution were to accumulate $1bn of Bitcoin through exchanges, I'm pretty sure that would drive up the market cap a lot more than $1bn.