
Bitcoin Takes Bigger Wall Street Stage with Smooth CME Debut - rbanffy
https://www.bloomberg.com/news/articles/2017-12-17/bitcoin-heads-to-bigger-wall-street-stage-as-cme-debuts-futures
======
chollida1
Just to give someone who doesn't live in these markets some idea of how
volatile they are

> Goldman Sachs Group Inc. demanded some clients set aside collateral equal to
> 100 percent of the value of their trades, people familiar with the
> investments said last week. The guidelines are inclusive of other margin
> requirements such as Options Clearing Corp.’s 44 percent, required to clear
> contracts traded at Cboe, and the 47 percent CME is demanding.

> Interactive Brokers Group Inc., which has said it handled 53 percent of the
> first day’s trading in Cboe’s bitcoin futures, will require a margin of 50
> percent for long investments, and about 240 percent for short selling, based
> on current rates

For a more typical futures contract like say wheat, its common to have to put
up 5 to 15% margin. SO there isn't alot of leverage that you can get from
these, which is almost certainly a good thing:)

------
samnwa
The odd part to me is that people forget how much you _get_ for the measly 2%
or so in fees you pay to a bank annually. You get FDIC insurance, protection
against fraud, someone you can call for assistance, relative stability,
ability to pay for things anywhere. With btc you get none of that, plus risk
of losing your assets due to a user negligence, ignorance, hacks,
sophisticated scams, or other culprits.

~~~
dmichulke
Assuming 2% inflation (and 0 fees and interest), you also get 81 ct purchasing
power back on the dollar after 10 years.

For some people that amounts to fraud.

~~~
dsacco
_> For some people that amounts to fraud._

But it very clearly isn’t. That’s an egregious abuse of the word, “fraud” by
any commonly accepted definition.

~~~
ashark
There's a certain family of oft-posted-about-online economic/political
ideologies that, as best I can tell, spread primarily by abusing language in
this way, hoping the reader does not catch them sliding in a metaphorical,
colloquial, or simply not-quite-right terms, then trying to leverage those
terms' stricter and more correct definitions when drawing conclusions. Later
the converted reader will happily and confidently spread the same message,
_e.g._ "taxation IS theft!"

~~~
jerkstate
we should coin a term for this, but I can't think of a good one - "licentious
language" doesn't quite have the same ring as "fake news!"

~~~
SilasX
In Less Wrong/Slate Star Codex circles, it's called the Non-Central Fallacy
(basically, trying to assert that a technically-valid edge case of X should be
treated as if it's a typical example of X):

[http://lesswrong.com/lw/e95/the_noncentral_fallacy_the_worst...](http://lesswrong.com/lw/e95/the_noncentral_fallacy_the_worst_argument_in_the/)

------
wakkaflokka
This is going to sound completely ridiculous but I'm going to posit this
anyway.

Avoiding the debate of whether there are any widespread real-world usage for
cryptocurrencies, is it possible that cryptocurrency is valuable (and has
long-term staying power) simply because the ecosystem surrounding it is so
much fun for a non-negligible swath of people?

I know this sounds ridiculous. But hear me out. The entire process of setting
up exchange accounts, reading about alternative coins, jumping into the drama,
worrying about massive gains or losses, buying hardware wallets, chatting with
others doing the same thing, thinking about complex systems and new coins,
etc. is a lot of fun.

Could it be that cryptocurrencies are somewhat of a 'simulation currency
trading market' that just so happens to allow you to cash in and cash out with
fiat currency?

I have little doubt that the current value of BTC and other coins will blow up
in the future, and if you've got anything more than disposable income invested
in it, you'll probably get burnt really bad. I think it's almost a given. But
I suspect that the idea of cryptocurrency is here to stay, at least for my
lifetime. Solely because it's fun. But of course like anything, I could be
wrong.

~~~
laichzeit0
> and if you've got anything more than disposable income invested in it,
> you'll probably get burnt really bad.

Maybe, if you’re stupid enough not to have a stop loss. In that case you
probably _deserve_ to lose everything.

~~~
DougN7
Stop losses don't protect you if the fall is rapid enough and there are no
buyers. Your order simply won't get executed (at least not where you want it).
That's what I think will happen if the Bitcoin bubble bursts. Being
'intelligent' doesn't protect you from reality. But I'm sure you knew all
that, and don't _deserve_ to lose your money.

~~~
laichzeit0
I wonder how that would work in reality. There are so many exchanges. You’d
have to do a massive coordinated effort. Any “massive” drop on a single
exchange would be seen as a great arbitrage opportunity and get eaten up.

~~~
DougN7
There are a lot of exchanges. But YOU (or any person in particular) trying to
cash out at any point in time will need to move your coins to that exchange
(and create an account, etc), and then try to sell. There aren't a lot of
buyers when a bubble is popping. And not much potential for arbitrage when
everything is going down. And with Bitcoin's slow confirmation rates, I think
it would be worse than a typical stock market. No, if the bubble pops, it's
going to be bad for everyone involved.

------
sillysaurus3
I'm interested in collecting strategies for destroying bitcoin. Would anyone
like to brainstorm?

If the resources of all governments combined were brought to bear on the
problem of demolishing BTC, what would be a way to accomplish that?

Making it illegal won't work. Neither will buying it – that will just raise
the price. 51% attacks aren't effective because all they can do is double-
spend coins, not arbitrarily reassign wealth.

~~~
wyldfire
It's virtually indestructible. But global prohibition would limit its utility
and likely cascade to diminished investment in mining.

But it will likely never go away until/unless you could find an unfixable
flaw. For example, a flaw in the hashing algorithm that permits you to double-
spend. Unfortunately there's effectively an enormous bounty on that particular
defect that no one has yet claimed. If someone did, another coin with another
hashing algorithm would take bitcoin's place.

More importantly -- what is your motivation? Let's please enumerate the evils
going on in the world and rank bitcoin appropriately. It's not worth your
time.

If you are really in a huff over the energy consumption I think your
consternation is poorly focused. Again, let's rank our concerns here. In any
case, the best way to "destroy" proof-of-work coins is to invest and promote
coins that are similarly effective without proof-of-work. e.g. proof-of-stake
coins like Raiblocks.

~~~
empath75
If china decided to shut down the mining operations, that would have a massive
impact on the block chain.

~~~
wyldfire
You're mistaken. The difficulty would re-calibrate and it's business as usual.

However, if China or some other government compelled miners to sign invalid
transactions, this would have a big impact. This is a weakness of proof-of-
work secured coins (note that they also have many strengths that proof-of-
stake coins lack).

EDIT: I was unclear what I meant by "this is a weakness of PoW" \-- the energy
signature of concentrated mining operations make them easy for governments to
find.

~~~
empath75
Depends on how much the hashrate changed:
[http://bitcoinandtheblockchain.blogspot.com/2017/08/chain-
de...](http://bitcoinandtheblockchain.blogspot.com/2017/08/chain-death-spiral-
fatal-bitcoin.html)

~~~
wyldfire
You are correct, this seems like a defect that should be addressed.

------
dokein
Has anyone found a place where detailed arguments for bitcoin (pros and cons)
are laid out? Forums seem to be meme-based (e.g. "HODL") and/or superficial.

~~~
bsurmanski
From my understanding, the main benefit is zero trust transactions. You can
make a digital transaction without trusting anyone, especially the other
party.

The downside is this guarantee has some trade-offs. Mainly transaction speed
is super slow (10m to confirm a transaction went through) and transaction fees
are very high (especially now with the "bubble", it's something above
10$/transaction). Furthermore, all transactions are public record, which isn't
desirable if you're a fan of privacy. The value is very volotile right now,
making it hard to really budget out your net worth.

IMO, if you can just trust a third party (eg, credit card processing), then
you get much better guarantees. (Fast payment, relative privacy, low
transaction fees), with the further benefit of chargebacks. If someone steals
money from your Bitcoin wallet, you're screwed, with a credit card you phone
them up and they undo it.

Actually, even with Bitcoin you need to trust a third party: the exchange.
Many people hold their money in the exchange, and there have been multiple
cases where they've lost a bunch of user's money. IMO a real bank or credit
card processor is more trust worthy than a crypto exchange.

That's all to say that currently crypto makes no sense for real transactions.
That's not to say the issues are unfixable, for example Monero provides
privacy guarantees.

As well, other uses may be valid, the main case is "a hold of value", like
gold. IMO, crypto has no intrinsic value (not even decorative like gold) and
is very volotile, so it's up to you to decide whether it's going to last.

Lastly, there are novelty uses like ethereum's trusted computation platform.
That's a complicated topic in itself but pretty much each of these uses has a
counterpart with much better guarantees if you can use a trusted third party.

~~~
berberous
Ethereum's ecosystem is trying to solve a lot of this. For example, the 0x
protocol allows exchanges (in the 0x parlance, 'Relayers') to forego holding
customer assets (and therefore also avoid KYC/AML/etc.). They take a fee for
creating the UI and matching orders, but the matched orders execute as smart
contracts on the Ethereum blockchain pursuant to the open 0x protocol.
Multiple relayers will compete for business using this protocol. The first
relayers will be launching soon (e.g. Radar Relay).

~~~
runeks
That would be really useful if blockchains could handle more than 20-ish
transaction per second without sacrificing either decentralization, security,
or both.

------
bayareabronco
I'm not a Bitcoin expert, but I don't see how anyone can view Bitcoin as
anything other than an elaborate pyramid scheme. Said another way, why would
anyone "invest" in Bitcoin unless there is an expectation that the price of
Bitcoin will increase? At some point, the price of Bitcoin will level off,
investors will exit, and then the price will fall, quickly and steeply.

~~~
craigc
I read someone else who wrote about this before. One question I have is why
you think that specifically about Bitcoin and not about other things like gold
or stocks?

People who purchase stocks early do so expecting the price to rise when more
people buy in later for higher prices. Same thing with gold. People say stocks
have value because they provide dividends, but when was the last time anyone
made significant income due to dividends? I think most companies do not even
pay dividends.

If Bitcoin was actually a pyramid scheme then the early investors would be
eager to cash out at the expense of everyone else, but many people involved in
Bitcoin truly believe in the technology and the idea of a global currency that
exists outside of government/bank control. Those people are not eager to part
with their Bitcoins, and I don’t know why that would change all of a sudden.

~~~
rhino369
>One question I have is why you think that specifically about Bitcoin and not
about other things like gold or stocks?

Gold has similar issues. But there is significant non-speculative value in
gold. How much, I'm not sure, but it's useful for electronics and for
decoration, etc. Also, gold's value is the supposed stability. Bitcoin's value
is it's supposed growth, which leads to nasty feedback loops.

I wouldn't invest in gold. I think it's still in a bit of bubble caused by the
08 financial crisis.

Stocks are a different story altogether. You are buying equity in a company
that has value. The stock market might be under or overvalued at any given
time, but it is still tied to the value of the companies.

~~~
craigc
> Stocks are a different story altogether. You are buying equity in a company
> that has value. The stock market might be under or overvalued at any given
> time, but it is still tied to the value of the companies.

I would say stocks are valued by the perceived value of the company and/or the
potential future value. They are somewhat speculative too. Look at Tesla or
Amazon for example. They have insane values despite not even turning a profit
for long periods of time.

I get your point though. Bitcoin has no intrinsic value tied to anything
specific, but I still don’t think that makes it a pyramid scheme. Bitcoin has
A LOT value to people in countries that are on the brink of economic collapse
due to inflation. Even in the United States, the FED prints over $200 billion
a month. So in theory Bitcoin should hold value over the long term better than
the US dollar.

~~~
rhino369
Stocks are definitely speculative, but just not nearly to the same degree.
They are speculating on what will happen in the meatspace. Telsa's valued
because people are betting they'll become a major car company. And stocks like
Tesla are outliers.

Bitcoin speculation is now just speculation based on price alone. Why is
bitcoin going up? Because people think it will go up. That is a nasty feedback
loop, that right now is causing it to have insane growth. The higher the price
the more demand, the more demand, the more price goes up, etc.

But the opposite can (and will) happen. The demand for bitcoin drops because
the price drops, the demand drops cause the price to drop further. etc.

Since the stock market is based on meatspace demand, if Tesla started to
spiral for no reason, someone would buy it just to make a cash profit from it.
People like Warren Buffet buy companies they think are undervalued to capture
the profit.

>Bitcoin has A LOT value to people in countries that are on the brink of
economic collapse due to inflation. Even in the United States, the FED prints
over $200 billion a month. So in theory Bitcoin should hold value over the
long term better than the US dollar.

They'd be better off buying property, securities, or even just USDs.

Bitcoin has gone up over 10 times this year. There is a huge risk it'll go
back down to 1/10th. I wouldn't put any significant amount of money in such a
volitile "asset."

------
thisisit
One question these _smooth_ debut articles don't answer is - How easy it is to
short bitcoin futures on these markets? Without an effective way to short,
this is still unproven.

Wow, the downvotes. it seems the fanboys don't really want to hear the truth.
So long it is an echo chamber, on with the ponzi scheme.

~~~
detroitcoder
You can short right now but there are heavy margin requirements. But you are
absolutely correct that being able to short is critical here. BTC futures are
cash settled, which relies on market forces to keep the future market tied to
the underlying asset. However it seems to be OK so far bc CME futures are at
18960 and gemini spot is at 18500. We saw 15% spreads when CBOE launched last
week so this is a good sign.

------
sedtrader
My best guess is that this is great for everyone involved. Traders and
investors can hedge future risk, brokers and exchanges can rack up fees, and
institutional banks can hold the futures contract of an unregulated asset on
their balance sheet. Eventually something will have to give, but for now I
don't see any negatives here.

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betolink
"Anyone who thinks that you can have infinite growth on a planet with finite
resources is either a madman or an economist." \- Sir David Attenborough.

Now we can add "bitcoin investors" to the list.

~~~
adventured
What makes that quote entirely meaningless, is that it doesn't in any way
define the potential of the non-infinite growth. If humans can manage 2-3%
global economic expansion per year vs sub 1% population expansion for the next
several hundred years, growth might as well be infinite for our purposes.
There's no reason to think that very modest outcome can't be accomplished
given our demonstrated ability to make great technological leaps over time.

Humans can also increase the resource potential of the planet through
engineering, which has already begun in a massive way with eg agriculture and
will dramatically accelerate with robotics, AI, CRISPR, etc. It also ignores
the ability to harvest the solar system and pull greater resources toward
earth, which we will do in the coming centuries.

There's nobody of any credibility seriously proposing infinite growth, it's an
invented strawman to easily knock down by Attenborough, for ideological
purposes.

------
down
Stop trying to understand bitcoin, you privileged, elitists hacker news folk
won't ever understand it how is to deal with a hostile corrupt government that
through banks/inflation just robs you.

~~~
hnarn
I can't tell if this comment is serious or an attempt at sarcasm. Regardless,
there's a very valid point in there that if you're in a "hostile" country, BTC
has given you an opportunity to get your money out in an easier and more
secure way than ever -- if you can deal with the volatility.

