I Was Wrong About Bitcoin. Here’s Why
nytimes.com
nytimes.com
> I assumed that Bitcoin’s extreme volatility would be a turnoff.
Anyone who thinks these things is not paying attention to the historically low realized and implied volatility of the major market indexes and its negative effects its having on the largest market participants by volume (MM+HFT firms) who's profits are correlated to overall volatility and who's technology easily translates.
One thing I think is underappreciated with crypto is just how easy it is to setup a high-frequency trading bot on these new exchanges vs the equity exchanges. GDAX has totally free real-time non-rate limited Level 3 quote access via websocket, sub-millisecond fill rates, literally no commission for market making activities, and co-location is just a matter of picking the right AWS region and a bit of luck. That's a couple million bucks, an enormous expense in servers to handle the data volume, and a few dozen partnership agreements to get something similar for the equity or option markets.
If you have spent your career dealing with all that, even if you've been closely following the crypto industry, it may not even occur to you how different the market structure is until you spend a few days coding up a bot that can detect a signal and roundtrip a trade in < 100ms from my consumer laptop at home.
I'm not really sure what you're saying, but I totally see why people would expect volatility to be a turn-off. It was presented as a payment method, a currency. And for currencies, extremely volatility is absolutely a turn-off. Even for gold, it's a turn-off. Gold is prized for its stability. One of the selling points of Bitcoin was that it would be immune to inflation and currency manipulations.
Now it turns out that none of those promises are true, and to everybody's surprise, that turns out to be a good thing. I can totally see how people are surprised.
MM/HFT is just really saying "all high volume firms" while acknowledging that what most people are talking about when they say "high volume" is market making. Market making software is mostly independent on the market it trades, so its trivial for a market-maker in one product to switch to a similar product.
How many Americans actually own it?
It would be interesting to see if it were possible to know where they were mined. This may be an oxymoron, but more transparency may make the average joe more likely to invest in it.
BTC also has this going for them : “Fools” can go short, but the key is that shorting can’t be done properly, Taleb said.(https://www.marketwatch.com/story/nassim-black-swan-taleb-sa...)
With options you'd buy OTM puts. You could maybe even succeed purely on rising vol if they crank up the volatility even higher to 11 :-)
>To clarify: by this, Taleb means simply that there are no options on bitcoin (there aren't any, right?)
This is what he said. "Very big point. Futures that don't have deliverables require a very, very deep market. Otherwise someone long the future can push prices higher at settlement time with impunity, by "locking" profits (never having to resell a deliverable)." (https://twitter.com/nntaleb/status/939852491130396673?ref_sr...)
>Commodity Futures Trading Commission (CFTC)—the federal agency that does regulate futures trading. (https://www.sec.gov/fast-answers/answers-cftchtm.html)