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

davidgerard.co.uk

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

#71

Post by jmtame »

kentt wrote: post #30

edit: removing because I don't enjoy getting into internet arguments. All the best to you.

FYI OP claims $400mm USD was withdrawn to make a counterpoint about liquidity, but did not specify the exchange. Not sure why this would generate an argument? In addition, how can anyone infer that a sell indicates liquidity? A sell on an exchange only indicates one asset was exchanged for another.

FWIW I saw several large buys on the GDAX history today at the $18.4k price point. One was for 36 bitcoins, and I've never seen a purchase over 5. I shortly after saw another for 18.

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

#72

Post by gizmo686 »

sathackr wrote: post #66

imo this is basic supply and demand. Bitcoin comes into this world at a fixed supply rate. Demand is currently exceeding supply, so the price goes up. With bitcoin so far, the higher the price, the more press is generated, which increases demand, so we have a feedback loop. The only difference is, demand can change very quickly, causing drastic swings in price. Which then generates press, which generates demand. Most…

>With bitcoin so far, the higher the price, the more press is generated, which increases demand, so we have a feedback loop.

The technical term for this feedback loop is "bubble".

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

#73

Post by aorloff »

twelve40 wrote: post #17
davidgerard wrote: post #10

Earlier quoted context omitted.

(author here) This is targeted to the general public, who do actually need Finance 101, because they really don't know what they're getting lured into by the mindlessly positive articles and headlines in the mainstream press. Mostly written by people who don't understand either. I actually consider it seriously unethical to market cryptos as an investment to retail investors - they just do not understand the insane l…

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…

Because of inter-exchange protocols (FIX / FAST) to share the order book, that isn't happening with bitcoin, hence the spreads (between exchanges) and associated arbitrage opportunity.

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

#74

Post by prawn »

davidgerard wrote: post #10
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…

(author here) This is targeted to the general public, who do actually need Finance 101, because they really don't know what they're getting lured into by the mindlessly positive articles and headlines in the mainstream press. Mostly written by people who don't understand either. I actually consider it seriously unethical to market cryptos as an investment to retail investors - they just do not understand the insane l…

All the headlines I see in mainstream media talk about Bitcoin being a risk, the likelihood of it bursting at any moment, etc. I can't remember a single mainstream article I would say is mindlessly positive.

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

#75

Post by adventured »

smokeyj wrote: post #52
dehrmann wrote: post #7

Earlier quoted context omitted.

> Don’t all of the complaints about exchange rate and market cap apply to virtually any other item that is traded? > Market cap is extremely commonly cited for stock markets. Yes. Spreads usually depend on volume--high-volume securities tend to have a lower spread because there's a lot of market participants. More established markets often have market makers (entities with simultaneous bids and asks) and arbitrageurs…

Is it a solved issue for equities? How do you know the shares you purchased are valid?

It's solved to an extraordinarily high degree. 99.999% or greater. There are fringe cases that pop up from time to time and make headlines; the reason they make headlines, is because trillions of dollars in equities trade hands every year in the US, and such cases are very rare.

It's because there's an established system of trust, liability, responsibility, regulation and oversight in the network, assuming you're using any number of several dozen popular brokers (and that you're a common investor). Microsoft has a vested interest in knowing how many shares it actually has outstanding and who owns them; there's a chain that follows, that includes the CEO, CFO, board, other large powerful investors, regulators, common investors, and so on and so forth.

The scale and solved nature of it is roughly 100x that of Bitcoin in contrast.

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

#76

Post by thisisit »

cosarara97 wrote: post #64
thisisit wrote: post #58

I am not going to defend bitcoin's thin markets but here are couple of things I noted: First, 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 line graph should be a thick grey bar. The question is…

> Will coinbase honor the price when order is placed ie if it shows $19700 then will it let me buy 0.1 BTC at this price? No, neither the price at which they actually allow you to buy or sell BTC matches the price they display. They set the price for you, which is different in both operations (and on top they charge a fee). GDAX on the other hand (same company as coinbase, different service) is an actual market where…

It seems you misunderstood the point. So let me re-phrase as per what you said:

> They set the price for you

>> Will coinbase honor the price they set when order is placed ie if it is set $19700 then will it let me buy 0.1 BTC at this price?

In which case, the spread question is only about whether there is a huge spread between the display (average) price and their set price.

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

#77

Post by anonu »

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 going to happen is the price is going to collapse. The same thing would happen with the value of any publicly traded company. The market cap of Apple is $900bn - but you can't just tell every shareholder to sell their stock for cash... you would never be able to realize anywhere near that amount.

Article reads a bit weird. Here are my 2 cents - markets are a voting machine. They are also about perception. If people perceive that there is value - then they will vote with their dollars. If people lose faith in the system, the market collapses. This is true in any market dynamic, including the one that fiat currency operates in.

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

#78

Post by JohnnyConatus »

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…

Except Apple would still exist as one of the world's most profitable company. That's the underlying value.

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

#79

Post by mycall »

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?

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

#80

Post by jsmeaton »

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.
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