Professional Traders Show Interest in Bitcoin • Hacker News Board

Re: Professional Traders Show Interest in Bitcoin

#81

Post by Estragon » Mon, Apr 02, 2012, 7:21 PM UTC

kylebrown wrote: post #77

MrMan wrote: post #74

Earlier quoted context omitted.

No - seriously - bitcoin has nothing to recommend it! How many times must people who know what they are talking about poke holes in the bitcoin fantasy? Why are self-identified "tech" people clinging to bitcoin? If one is really hell-bent on designing an alternative currency learn from the problems that bitcoin has, and move on to something else. Ignoring the analyses offered by experienced traders, economists, and t…

There's no other decentralized e-currency. This means bitcoin is the only electronic payments and storage system where your funds are not subject to seizure by a central authority. You won't wake up one day and find your account frozen (cf paypal, bitcoins are safe in the blockchain as long as you have your wallet) or be totally helpless if the domain name of some fly-by-night startup goes down (cf e-gold, bitcoins a…

There's actually a bunch of copycats. The libcoin library has actually made it very easy to make your own.

Re: Professional Traders Show Interest in Bitcoin

#82

Post by skylan_q » Mon, Apr 02, 2012, 7:30 PM UTC

Animus7 wrote: post #48

skylan_q wrote: post #23

Earlier quoted context omitted.

"If the rewards go down over time, eventually it won't be profitable to mine bitcoin." Yes. The idea is the following: If the amount that can be mined per unit of computation is decreased, then fewer will be created. And if there are less of them being created and more of them demanded, then their value increases. So this balances out. Also, computational power gets cheaper with the passage of time. The largest cavea…

I detect confusion here, and I'd recommend you take some time on the bitcoin wiki to clarify: > "If the rewards go down over time, eventually it won't be profitable to mine bitcoin." > Yes. No. Because the other part of mining is that you get transaction fees for it. Mining isn't a luxury, it's necessary for the network to function (otherwise double-spending isn't prevented). So as time goes on and less coins can be…

My points were purely economic. The OP was just asking a simple economic question, and I gave a simple answer. It doesn't need to be explained in the mechanisms employed by the design of bitcoin.

"Not a problem. This is solved because bitcoins are infinitely divisible"

I detect confusion here.

I'm not talking about lack of divisibility, but a lack of demand. Increased divisibility doesn't facilitate demand. It's just a nice feature of something that could be money or commodity.

Water is infinitely divisible but that doesn't get it demand. If people don't exercise demand for bitcoin, (as in, they don't want it) divisibility doesn't solve the problem.

Re: Professional Traders Show Interest in Bitcoin

#83

Post by moldbug » Mon, Apr 02, 2012, 8:05 PM UTC

JumpCrisscross wrote: post #59

gfodor wrote: post #5

It would be interesting to hear a real quants take on the utility of having bitcoin as a (small) asset class in your portfolio. How much correlation does bitcoin have to any other asset class? I'd wager very, very little, making it a strong candidate for diversification. That said, it's overall volatility might offset the reduced expected volatility you'd see in your portfolio by holding some.

I was a quant prop derivatives trader at an investment bank. The correlation between MtGox/USD [1] and GLD daily returns over 12 April 2011 - 30 March 2012 is 0.02; a linear regression produces a 0.151 beta (GLD daily returns independent) with a coefficient of determination of 0.0004. GLD had a period return of 14% with an average daily return (standard deviation) of 1.4% (0.1 percentage points); MtGox/USD had 531% w…

BS.

How do you "corner and squeeze" a market that can't be shorted? You can manipulate GLD down by issuing naked shorts (essentially counterfeited against collateral). But you can't counterfeit Bitcoin. If you want to drop the market price of Bitcoin, you have to sell actual BC that you had before and don't have now.

Then, to actually profit, you have to find a way to buy those BC back for less than you sold for. This isn't going to happen unless your smart algo finds an equal and opposite stupid algo that it can rape. Who gets raped and why?

(If you ask me, it's BC that's a well-designed market and Wall Street that's a funky, broken anachronism. A lot of stupid pointless volatility would go away if we eliminated synthetic securities and lenders of last resort, and replaced the ancient order-matching system with a central limit-order book. Then, you'd have to actually add information to the system in order to profit - rather than profiting by raping other algos, and more plausibly retail traders, with "sharktooth and band-burst.")

Re: Professional Traders Show Interest in Bitcoin

#84

Post by moldbug » Mon, Apr 02, 2012, 8:10 PM UTC

morsch wrote: post #57

jerguismi wrote: post #55

Earlier quoted context omitted.

> even though these currencies are much more likely than bitcoin to be around in 5 years. How so? As bitcoin is a p2p network, it is likely to be around whatever happens. The only thing that could happen would be that internet breaks down - pretty unlikely, I think. Even when internet breaks in several pieces, each "local internet" will just use their own bitcoin - the block chain will be split in to several. After t…

BTC will be around but a fluid market for BTCUSD or BTCEUR -- ie. a plentiful amount of people interested in buying or selling bitcoin for other currencies -- won't necessarily be.

Upvoted.

When the USG starts shutting down the exchanges, which will happen any minute now, Bitcoin will go to zero and stay there. Everyone who thought their BTC was worth USG will want out - and find that the doors are now locked. The BTC price won't even be epsilon. It'll be zero.

The monetary design of Bitcoin is sound. The political design, not so.

Re: Professional Traders Show Interest in Bitcoin

#85

Post by kylebrown » Mon, Apr 02, 2012, 8:39 PM UTC

Estragon wrote: post #81

kylebrown wrote: post #77

Earlier quoted context omitted.

There's no other decentralized e-currency. This means bitcoin is the only electronic payments and storage system where your funds are not subject to seizure by a central authority. You won't wake up one day and find your account frozen (cf paypal, bitcoins are safe in the blockchain as long as you have your wallet) or be totally helpless if the domain name of some fly-by-night startup goes down (cf e-gold, bitcoins a…

There's actually a bunch of copycats. The libcoin library has actually made it very easy to make your own.

Right, so bitcoin (and its alternative blockchains). But the fact that there's already plenty of alt-chains that the market values at neglible fractions of a bitcoin shows that copycat crypto-currencies won't easily disrupt the "network effect" of bitcoin and dilute its value, as many detractors used to argue.

Re: Professional Traders Show Interest in Bitcoin

#86

Post by kylebrown » Mon, Apr 02, 2012, 8:54 PM UTC

moldbug wrote: post #84

morsch wrote: post #57

Earlier quoted context omitted.

BTC will be around but a fluid market for BTCUSD or BTCEUR -- ie. a plentiful amount of people interested in buying or selling bitcoin for other currencies -- won't necessarily be.

Upvoted. When the USG starts shutting down the exchanges, which will happen any minute now, Bitcoin will go to zero and stay there. Everyone who thought their BTC was worth USG will want out - and find that the doors are now locked. The BTC price won't even be epsilon. It'll be zero. The monetary design of Bitcoin is sound. The political design, not so.

Most exchanges are outside the USG's jurisdiction. Even if the USG tries to crack down, there will always be workarounds. The USG has been cracking down on online poker and gambling sites fir years, but that has never stopped the growth of the online-poker market in the US (to this day, online poker sites continue to sponsor poker tournaments that are aired on ESPN).

The USG has been successful killing payment companies before (eg e-gold, epassporte, neteller), but those were of course centralized systems. Bitcoin is decentralized, which is why its supporters believe that it is here to stay regardless of the actions of any particular government.

Re: Professional Traders Show Interest in Bitcoin

#87

Post by jarek » Mon, Apr 02, 2012, 8:55 PM UTC

icebraining wrote: post #63

jarek wrote: post #52

Earlier quoted context omitted.

It's possible to print notes not easily detected as counterfeit in the field with a lot of today's currencies. It's not very practical on a large scale in the long term because the government is intent on preventing introduction of meaningfully large amounts of fakes and has teams tracking these bills. So bitcoin can't be devalued by "printing" fake "bills." That's a good prerequisite, but it's not a practical improv…

How many of your tax dollars are spent preventing counterfeits, that could be used in your benefit otherwise?

Roughly on the order of $1 a year. I'm not going to lose sleep over that.

http://www.fin.gc.ca/budget06/bp/bpc3d-eng.asp names the amount for National Counterfeit Enforcement Strategy in 2006 as $9 million. I don't think these are the total expenses on preventing counterfeits, but it's within an order of magnitude. The official population count in the 2006 census was 31,612,897, so let's say the number of people who have paid any tax that year is around 30 million. Corporate taxes would complicate the "per taxpayer" calculation a little bit, but they would only make the amount smaller.

Re: Professional Traders Show Interest in Bitcoin

#88

Post by jarek » Mon, Apr 02, 2012, 9:04 PM UTC

ewillbefull wrote: post #80

soup10 wrote: post #79

Earlier quoted context omitted.

> If this is the standard by which you deem a currency insecure, you may want to be more specific. Physical goods are also susceptible to theft. Theft and loss of bitcoin is much much more common than theft and loss of any normal currency. Insecure. Bitcoins are data, and data is very easily lost. What if the hard drive with your wallet on it fails? When a hard drive fails at a bank your money is still secure. Storin…

> Theft and loss of bitcoin is much much more common than theft and loss of any normal currency. Insecure. That's a pretty big conclusion to jump to. People using the currency have more of a burden to protect their bitcoins from hackers, I'll admit, but it is not fair to blanket describe the currency as insecure because of the practices of some lousy companies. > Bitcoins are data, and data is very easily lost. What…

> What you described applies to pretty much any currency in its infancy.

Nitpicking here, but what is described applies to non-government-mandated currency or payment methods. Infant currencies can indeed very quickly gain widespread acceptance if introduced and mandated by government, as recently demonstrated by the euro.

Re: Professional Traders Show Interest in Bitcoin

#89

Post by jarek » Mon, Apr 02, 2012, 9:25 PM UTC

kylebrown wrote: post #77

MrMan wrote: post #74

Earlier quoted context omitted.

No - seriously - bitcoin has nothing to recommend it! How many times must people who know what they are talking about poke holes in the bitcoin fantasy? Why are self-identified "tech" people clinging to bitcoin? If one is really hell-bent on designing an alternative currency learn from the problems that bitcoin has, and move on to something else. Ignoring the analyses offered by experienced traders, economists, and t…

There's no other decentralized e-currency. This means bitcoin is the only electronic payments and storage system where your funds are not subject to seizure by a central authority. You won't wake up one day and find your account frozen (cf paypal, bitcoins are safe in the blockchain as long as you have your wallet) or be totally helpless if the domain name of some fly-by-night startup goes down (cf e-gold, bitcoins a…

> This means bitcoin is the only electronic payments and storage system where your funds are not subject to seizure by a central authority.

Unfortunately, Bitcoin is not "men with guns entering your house or server location and taking your drive" proof.

Re: Professional Traders Show Interest in Bitcoin

#90

Post by SonicSoul » Mon, Apr 02, 2012, 9:50 PM UTC

JumpCrisscross wrote: post #59

gfodor wrote: post #5

It would be interesting to hear a real quants take on the utility of having bitcoin as a (small) asset class in your portfolio. How much correlation does bitcoin have to any other asset class? I'd wager very, very little, making it a strong candidate for diversification. That said, it's overall volatility might offset the reduced expected volatility you'd see in your portfolio by holding some.

I was a quant prop derivatives trader at an investment bank. The correlation between MtGox/USD [1] and GLD daily returns over 12 April 2011 - 30 March 2012 is 0.02; a linear regression produces a 0.151 beta (GLD daily returns independent) with a coefficient of determination of 0.0004. GLD had a period return of 14% with an average daily return (standard deviation) of 1.4% (0.1 percentage points); MtGox/USD had 531% w…

Interesting post.

wouldn't it be difficult to cause such HFT havoc on a currency that is not that frequently traded (relative to big exchanges)? After all, someone has to be on the other side of all those HF trades. Also, since it's heavily decentralized wouldn't that make it more difficult to execute trades in high quantities?