The Bitcoin Saga

This is an extremely valid concern, and one I see raised more and more.

The amount of resources/energy that go into the GPU manufacturing process is several times more than you could ever hope to achieve by bitcoin mining or playing games. The statistics are probably worse for laptops and smartphones, since they are ostensibly low power devices.

That doesn’t really negate the point if these GPUs are being bought, and hence built, for the purpose of mining. Sure, if there’s a vast existing surplus of GPUs that the miners are just taking out of storage, not as big a deal. But that’s not the case.

I’m still extremely wary of it all, though. There is no regulation of bitcoin trading, at all. I’d also add that currently there (supposedly) isn’t tracking of it for tax reasons. When the hammer drops on that latter point, there are going to be a lot of cockroaches scurrying to get out of the light.

It’s already dropped

I agree with you, I don’t mean to make the fact that ‘real’ futures exchanges are listing contracts as any kind of proof that BTC is not a ton of tulips. At least tulips are nice to look at.

It is a major distinction that they cash settle based on an index price so no one using the CBOE/CME market is actually required to hold real bitcoins or deliver them. When the future expiration date hits they just settle up on the cash difference between the index price at that time and the price agreed to earlier. This also means that the liquidity on these markets is decoupled from the transaction processing time on the blockchain and that it is not directly tied to the actual amount of liquid bitcoins available on the btc markets now.

Now, clearly people will arb futures positions in and out of actual BTC so there will be an impact at the BTC exchanges themselves. In particular, a single contract at the CME is 5 BTC based. Something like 200k BTC average is trading a day on the various larger exchanges combined. That’s like 40k CME contracts. The CME has something like 15-20 million contracts trade a day across the various products. Obviously that’s spread out around a lot of different things, but it will be interesting to see if the existing BTC exchanges will handle the kind of liquidity and order flow demands that real institutional day trading could cause as firms trading on the futures market look to offload/offset positions into actual bitcoins.

Also, the exchanges have very conservative views of both daily price movement limits and real time price movements where they will halt trading around large swings to let the market settle. Right now the CME is setting those similar to the S&P and bitcoin is clown shoes volatile. What kind of margin calls are the exchange/clearing firms going to have to have on days like today?

The fact that my bank account is insured by the US government is a major thing. Money in your bank account isn’t just gonna “go away.” Even if the bank is hacked or robbed.

Bitcoins? Not so much.

That’s a vastly misleading study. 99% of the time GPU/CPU in a regular device are in very low power state waiting for somebody to touch a screen/keyboard/click a mouse. In contrast, 99% of the time GPU is used for coin mining it is operating near maximum power consumption.

I work in the banking industry… I’m more of a coder, not an accountant, but it seems to me this bitcoin crap is propped up with bad money with an eye to money laundering.

That’s crazy, bought $300 a few days ago and it’s already worth $517 as of this moment.

This is pretty funny

So, here is what I think is going on with Bitcoins. Some people are willing to do transactions with them. Steam until recently, for example. HOWEVER, they are using bitcoin as a transaction, not as a currency. Company A would accept $30 of bitcoins as payment, and then immediately sell the bitcoins for cash money. Consumer B wanting to avoid government regulation would buy the $30 of bitcoins before sending them over. Hence, neither side really cares about the value of a single bitcoin, since they can apparently be divided out as much as needed. The important thing is they have “$30” worth of bitcoin pieces, not that bitcoins are changing value.

So, now that planned and touted deflation is kicking in hard, the speculators and the believers are hoarding their bitcoins. Meaning, even as transactions become more common, there are less bitcoins. Once again, those doing the transactions in theory do not care (fees and volatility means they do, but in theory they do not). So, while it appears the price is going up, it really is just the marginal price of the bitcoins in circulation. Right now, the amount of money looking to buy bitcoins is notably bigger than amount of bitcoins looking to “cash out.”

You do not need me to tell you where this ends. At some point, the speculators will decide its time to make some money and sell. OK, that’s happening now, but there will be a tipping point when there isn’t enough real money to maintain the marginal price. Then, pop.

More on the difficulty of converting large amounts of crypto into dollars. Even an ostensibly pegged currency.

https://www.coindesk.com/bulgarian-government-sitting-3-billion-bitcoin/

Another cashing out horror story. To be fair, this guy does seem to be making it a bit more arduous than necessary, but the point stands.

The big hurdles to selling are where you’ve stored your cryptocurrency and the requirements that (legitimate) wallet services have to follow to stay on the proper side of money laundering laws and regulations.

Sketchy wallet services either don’t have the cash to actually cash you out or they don’t have access to link back to any sort of actual bank account you might use to cash out. In those cases, it seems to be recommended that you transfer your cryptocurrency from that vendor to one with a much more robust list of services, but again, the transfer is a form of cashing out, so it can take time and effort to do so.

Coinbase and Kraken are two very big. legitimate cryptocurrency vaults that will transfer funds directly to your banking institution on cash out. Of course, in order to follow federal banking regulation, they will ask you for all the same personal information as a bank would, including uploading a copy of your ID (usually drivers license). In this age of rampant identity theft, this one thing alone scares many people away from cryptocurrency altogether.

Full disclosure : I stopped short of buying into the coin craze last month precisely because of the amount of information I would have needed to give a wallet vendor. Kraken seems to be the most versatile and secure of all the services, and it’s a Silicon Valley startup that opened Day One with the intent to be a secure coin vault/exchange. Even knowing that, I still balked at the trust level I’d have to put in their systems (and people). Kicking myself today though, as I was all set to buy Litecoin at $100…and it reached $320 the other day before correcting back to the $250 range.

That’s some strange maths to me. If you think the risk of identity (and coin?) theft is material, then missing out on a 150% gain is nothing. Either you put a small amount in and risk losing everything (or at least having your life ruined) when your identity is stolen for a small absolute gain, or you put lots in and risk losing it all when it gets stolen/hacked/confiscated.

I don’t get the FOMO unless either the gains are astronomical (eg bitcoin over the last few months) or you don’t think the risk is material.

It’s risk vs. reward. Since I am only looking to play around with small amounts, $100 here, $250 there, even with tripling or quadrupling my initial investment I’m still only looking at $1000 or so tops. While a site like Kraken may be completely legit and secure and the chance for identity theft fairly small, I’m not willing to risk yet another iteration of my personal information out on some servers somewhere for a mere $1000 possible gain. If I had more money I was comfortable playing with, so that the possible returns were in the 5 figures or greater, then I’d be willing to roll the dice in the same way I do with my banks, financial services firm, car dealerships, etc…

Ah, I guess I’m reading too much into “kicking myself”. Sounded like you regretted the decision.