
Trader Made 295% on Cryptocurrency Derivatives - mcone
https://www.bloomberg.com/news/articles/2017-09-27/cryptocurrency-derivatives-you-bet-this-trader-has-295-return
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refrigerator
> The price of bitcoin has increased sixfold in the past year

Later, regarding the trader in question,

> His portfolio is up 295 percent in the past 12 months.

...am I interpreting the numbers wrong, or has he done significantly worse
than the market here?

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lawn
Yes. The price of Bitcoin was ~$600 12 months ago, ~990$ Jan 1st and it's now
~4080$. Trading should be compared against simply holding, otherwise what's
the point?

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weavie
You want to compare it against holding through market fluctuations. Sure
holding would have been better this year. Should bitcoin crash next year, it
will be interesting to see if he is still in profit or not when the person
holding is down. I assume this is why he is currently not up against holding,
because he has spread his risk to accommodate any crashes.

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kaffeemitsahne
Only 295% in a year? Not that spectacular in the current market.

~~~
rurban
I got 500% in a few months. Clear sign of a bubble, high risk high reward

~~~
charlesdm
But no one knows when and if the music will stop. I'm not a huge crypto bull,
but if you count Bitcoin + Ethereum, you're "only" looking at $90bn in market
cap. There are at least several clear use cases now, unlike several years ago
when it was all talk about revolution / anarchy / we're taking the power back
to the people -- that nonsense.

Let's assume the technology has some value and Bitcoin could become a store of
value at some point. I don't know if it will, but let's make the assumption.
Then $90bn is a pittance, in comparison to the value of the global equities
and gold market.

Apple is an $800bn company. Visa is a $250bn company. Mastercard $150bn.
Facebook $480bn. And so on.

Crypto could very well become a $1-3-5tn market (again, I have no idea whether
this will happen, and most of these ICOs look like garbage, but if either
Bitcoin managed to become a store of value or Ethereum achieves a fraction of
what they're trying to do, both will be very valuable). And if institutional
money at some point enters the space, that will be (very) positive for the
value of these things.

But even IF it's a bubble: the .com bubble wiped away $1.9tn in value. Crypto
is at $100bn at the moment. The main currencies (Bitcoin + Ethereum, which
account for 75% of crypto value) might very well go 10-20x again before any
major breakdown occurs.

I've been on the fence multiple times: it's a bubble, it's not a bubble, and
frankly, I have no idea. But the potential might be there at least, so it's
probably a good idea to at least own some. The potential downside is: you lose
your money. But the upside is 10 to 20x, which seems pretty good.

~~~
simias
>There are at least several clear use cases now, unlike several years ago
[...]

What would you say are these use cases? From where I stand the use cases of
bitcoins are pretty much the same they were a few years ago, only the volume
increased. It's a lot of speculation, some black market purchases and some
donations. A few shops accept bitcoin but it's still pretty niche, and most of
them convert into fiat immediately anyway.

Arguably there are even fewer use cases than a few years ago because of the
prohibitive cost of the transactions, you can't move money around for cheap
like you used to (that might change in the near future with segwit, we'll
see). It's simply not cost-effective to use bitcoin for small transactions
anymore, at least if you want to be reasonably sure it'll be confirmed in a
short amount of time during the busy time of the week.

~~~
charlesdm
The only use case of Bitcoin (I think) will be store of value. Digital gold
essentially. Ethereum seems more interesting and versatile.

I'm not big on gold either, but like Bitcoin it has limited use cases aside
from embedding tiny amounts into electronics and jewellery.

Speculation, probably. Alternatively, the returns could be due to the
uncertainty: will it or will it not become a store of value. You're
essentially getting compensated for not knowing and for the risk you're
taking.

If you look at Microsoft, when it IPOed, it was worth $750M. Now it's worth
$550bn. Companies IPO a lot later now, so unless you're seed investing, you
can't get those returns by investing in the public markets. With Bitcoin, it
essentially started from zero, hence the crazy returns.

Having something that is safe “outside of the system" is also pretty good. I
know for a fact, if the Bitcoin price would be relatively stable (or
comparable to normal gold) and it would serve as a store of value, I would
rather own Bitcoin because it is 1) more convenient to move around (in
comparison to gold bars, or no fees in comparison to an ETF), and 2) more safe
from confiscation. And I say that without trying to sound like a conspiracy
nut.

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gthtjtkt
> His portfolio is up 295 percent in the past 12 months.

The coins on Coinbase alone (BTC, ETH, LTC) are up 600%, 2200%, and 1300%,
respectively. Many altcoins have done several times better.

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reacharavindh
Probably a naive question, but I wonder if money in and out of bitcoin could
be regulated by the governments in the future as “gambling” income or loss?
Since I hardly hear anybody use bitcoin or *coin as cash rather than just
speculating that the value will go up...

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charlesdm
Gains are generally seen as investment income, and taxed as capital gains
(depends on the country however)

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ajiang
If you're comparing his returns with your own, take into consideration risk-
adjusted returns. Traders try to avoid massive downside risk, and the best
ones structure trades where they stand to lose very little in most outcomes.

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ignawin
Is it an article? I think I just read a very lengthy eToro ad.

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searine
Yeah, your portfolio is up now, but when the crash inevitably comes, how are
you going to get that money out?

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gruez
any of the many exchanges where you can convert coins to fiat?

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atomical
During high volume in the past Coinbase has suspended withdrawals of Ether.
Call it a glitch, scaling issue, or whatever but it's still a valid concern.

~~~
FireBeyond
"whatever" \- market manipulation?

I think on more than one occasion, Coinbase, and other exchanges have been
guilty of having outages/ suspending withdrawals etc during crashes... never
seems to happen during upswings, though...

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atomical
That is a serious accusation. They have had outages during peak traffic.

