
I Was Wrong About Bitcoin. Here’s Why - tysone
https://www.nytimes.com/2017/12/12/technology/bitcoin-predictions.html
======
philipodonnell
> I assumed that Wall Street would stay away.

> 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.

~~~
mcv
> Anyone who thinks these things is not paying attention to [...]

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.

~~~
philipodonnell
That may have been flippant, but the reduced volatility leading to lower
HFT/MM trading profits has been widely reported. Its not a leap to think those
people would look for a product with higher volatility if it could be done
with similar tools.

------
hawktheslayer
It would be funny if some of these trends reverse in a few years and he writes
another article titled " _I Was Wrong About Being Wrong About Bitcoin_ ".

------
bob_theslob646
>I assumed that Bitcoin’s extreme volatility would be a turnoff.

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...](https://www.marketwatch.com/story/nassim-black-swan-taleb-says-bitcoin-
cant-be-shorted-properly-as-futures-debut-2017-12-11))

~~~
unknown_apostle
To clarify: by this, Taleb means simply that there are no options on bitcoin
(there aren't any, right?)

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 :-)

~~~
bob_theslob646
The vol of bitcoin is way higher than 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...](https://twitter.com/nntaleb/status/939852491130396673?ref_src=twsrc%5Etfw&ref_url=http%3A%2F%2Fwww.marketwatch.com%2Fstory%2Fnassim-
black-swan-taleb-says-bitcoin-cant-be-shorted-properly-as-futures-
debut-2017-12-11))

~~~
tcbawo
Not sure about Bitcoin futures, but there are also options on futures.
Although similar principles apply. Just wait until people start manipulating
the market to push the futures and options around. There is a lot of bad
behavior that is monitored and punished by the SEC. I'm not sure which
domestic regulatory body will assert itself over cryptocurrencies.

~~~
bob_theslob646
SEC does not regulate futures.

>Commodity Futures Trading Commission (CFTC)—the federal agency that does
regulate futures trading. ([https://www.sec.gov/fast-answers/answers-
cftchtm.html](https://www.sec.gov/fast-answers/answers-cftchtm.html))

------
flembat
If it was meant to be a currency it seems to have failed. You want the value
of currency to be less unpredictable.

