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As someone who spent a year or so trading bitcoin for fun.

1) It's a mostly unregulated market full of scammers and pump and dump schemes artificially manipulating the price.

2) All the news and rumors about bitcoin and any other crypto currency should be assumed to a lie propagated by someone to move the price in one direction or another.

3) Nobody on the internet who claims to know why the price of bitcoin goes up or down on a given day has any fucking idea what they're talking about, and if they didn't they wouldn't be posting about it online.

4) As long as bitcoin is useful for buying drugs or another criminal activity, it's going to be worth something.

5) When you suddenly start paying attention to bitcoin because the price has gone up a bunch recently, don't buy it, because it's about to crash.




> 3) Nobody on the internet who claims to know why the price of bitcoin goes up or down on a given day has any fucking idea what they're talking about, and if they didn't they wouldn't be posting about it online.

I'm not one of these people or know any of them, so you might very well be right.

In general, though, there are usually a (small) number of people observing any field who should be doing professional analysis work, but who don't "think they could do that sort of thing" or think it "takes someone way smarter than them." They have too low an opinion of their own knowledge to think it has value. So, instead, they go on giving away extremely high-value market analysis for free in the comments section of some blog.


Sure, out of 100 people offering explanations on line, one or two have a clue. Good luck figuring out who it is, though.


Do you have an example of that?


Dr. Michael Burry is a pretty good example. Wrote more and more detailed and excellent analysis of stocks on forums. Wound up getting enough attention he started a hedge fund, Scion Capital. Was possibly the first to recognize the CDO disaster. He's a main character in The Big Short. The book has a fair amount of detail about the guy.


I've read through many of Michael Burry's old (early-mid 2000s) forecasts on the Value Investors Club forums, and I have to say, I'm not as impressed as the hype would suggest. Don't get me wrong, he's clearly very intelligent and understands the underlying theory. But a lot of the legend ascribed to him is less impressive when you consider the fact that shorting a market/security requires being more than just right, it requires being right at the right time. It's not enough to say, "We're in a tech bubble!" or, "We're in a housing bubble!"; any number of credible analysts is doing this all the time - what is actually difficult, and consequently profitable, is to forecast both the correct trend and the correct time in which the market will collectively "realize" the trend. On a long enough timeline, any reasonable forecast can be vindicated. 18 months, 12 months - not even six months is a sufficiently narrow slice of time for forecasting a market correction. I see a lot of people (not necessarily you) using Burry as an ideological example of someone who stood up to Wall St and beat them at their own game. The narrative of Burry as a heroic figure who beat a bunch of traders and hedge funds through superlative intellectual prowess scratches a fundamental underdog itch in storytelling (and for some, it also appeases a political ideation about Wall St as well). But I think the evidence that he could really pinpoint exactly when the crash would happen is inconclusive at best.

As one example, we can look at the forecast Burry is best known for, from The Big Short (and the corollary film depiction), and I found myself identifying much more with Michael Burry's investors than those who praised him at the end of the story. Scion Capital was hemorrhaging its investors' money, and for a nontrivial amount of time even after it became widespread knowledge among the institutional elite, the market failed to crash and vindicate Burry's short. From Burry's perspective, everyone around him thought he was wrong, but this misses a lot of the nuance. His fund's investors weren't necessarily concerned with him being right or wrong per se, they were concerned with the ridiculously inane risk he decided to take with the entirety of the firm's capital. It's great that his bet turned out so well for him, but calling it genius (as many do) is so charitable as to be almost literally incredible. Michael Burry could have easily been right but unlucky, and simply run out of capital before he could make a return on the short. This is why the saying, "The market can stay irrational longer than you can stay solvent" is so important.

Look at this from the perspective of Burry's investors, not the retrospective story of Burry's victory. If you were an investor in a hedge fund, and one day out of the blue the CEO emailed to inform you that the entirety of the fund's capital would be liquified to leverage a single market position, and that you would not be allowed to withdraw any of your capital, would you react with approval, lukewarm disinterest or abject horror? Even if you bought fully into Burry and his strategy, would you have the requisite nerve to be comfortable with such an astronomically risky and contrarian position?

That said, one of the things that impressed me most about Burry is that he could withstand such intense and prolonged pressure from both investors (harassing, suing and ostracizing him) and significant financial loss (albeit ultimately unrealized). It takes incredible fortitude to be able to lose that much capital in the pursuit of a positive return.


Fantastic comment. Burry is obviously a really intelligent guy, but what he did was absolutely insane, and it's important that people realize that.

People can make correct predictions, but there are tons of nuances around them. You could have predicted the Note 7 disaster, but Samsung's stock is up 27% from its pre-incident price. Maybe you knew about VW's problems years ago. Oh, too bad, their stock is up over 50% since 2011. Oh, you knew about the Toyota mat problems? That entire incident amounted to a nearly invisible blip on the stock price.

Betting nearly a billion dollars of other peoples' money on one single thing is absolutely insane. There are a million ways to be completely right and still lose everything.


Or, you could have known all those things, and you could realize that ever since Intel and the Pentium bug in the 1990s, that correctable product defects--even those requiring massive recalls and which are reputation-damaging--are more often than not buying opportunities for stocks with large market caps and low PE ratios.

Not disagreeing with your points about the million ways you can be right (and be unable to execute on it), though. Just that there are about a billion ways to be wrong, and a lot of those come from not taking a broad enough perspective about the impact. Burry did the research, saw the systemic complexity and dominoes that would fall, which perhaps gave him a little more confidence than a CNBC blowhard just looking at some new high in home buying and calling a market top. But he absolutely could have been wrong if he executed poorly.


The price crashed today because the BOC visited BTCC. I think that's obvious.


> The price crashed today because the BOC visited BTCC. I think that's obvious

This is a good hypothesis, but it is far from obvious.

I remember, years ago, unwinding a portfolio of correlation trades. The trades consisted of bets on how assets would correlate, e.g. Apple might be expected to correlate with Microsoft more than with Société Générale, a French bank. We were under a time crunch to unwind the massive portfolio. Given the structure of the trades, unwinding them meant reversing their implied correlations. Thus, for one week, the market's largest names anti-correlated with reference to how a few traders had previously thought they should have correlated. The moves were noticeable; the attribution far from obvious. Nevertheless, talking heads proceeded to breathlessly blame political crises in Spain.

To properly attribute this Bitcoin activity to the People's Bank of China, one would want to examine country-level Bitcoin flows of funds around the time of the PBoC announcement, paying attention to hourly data around when the Chinese- and English-language announcements were made/leaked.


None of that has anything to do with bitcoin and the PBoC news. This is the third time this week where PBoC news came out and the price tanked immediately. Whether this is fear over the PBoC, or fear of fear over the PBoC, doesn't matter to the point at hand.


The issue here is that the real data is known, intimately, by exchanges. The rest of us speculate.

These moves are mostly retrenchment and speculative/sentimental response to China messaging though. Consider -- if there was real, imminent concern that Chinese exchanges might be shut down and funds frozen, would the price at these exchanges fall or rise?

It would rise, because getting BTC out is going to be far safer than fiat.


Maybe. Who knows. Maybe it's just a profit taking retreat. Markets in the short term are generally just a random walk.


Doesn't most of this apply to financial markets in general, not just specifically bitcoin? The only obv exception being that they are "regulated" although that is also arguable.


I think you answered your own question with the obv answer - most financial markets are regulated.

We can argue that the market price of something is already reflective this risk from regulation (or lack thereof) but that would require everyone in the market to be perfectly informed.

As this person said, there is plenty misinformation being spread by rational actors who stand to benefit from Bitcoin price manipulation. In other financial markets there are at least some restrictions on this type of behavior, like insider trading, etc.


What "regulation" would prevent Bitcoin's volatility? The fact of the matter is that most of Bitcoin's value is speculative, and therefore extremely volatile, and it will be that way until large numbers of things can be bought at static Bitcoin prices (not converted Bitcoin at the current BTC/USD exchange rate). Tying assets to tangible value is the only way to add price hysteresis to any fiat instrument, including fiat currencies like US dollars. If there weren't millions of things you could buy for a fixed price in USD, you had better believe it would show the same volatility.

People like to throw around the talking point that "markets need to be regulated", but the analysis stops there. Don't be so quick to regulate without an idea of why/if it's necessary, or what the true effects of the regulation would be. A regulation should be a response to a well-defined problem (defined as an encroachment of someone's liberty, whether specific or the public at large) with a known cause, such that the regulation maximizes overall freedom. At least, in a fair system.


Regulating the supply so that it's not a deflationary currency would solve some of Bitcoin's volatility issues.

You can counter by saying, "It's not designed that way" but Bitcoin is designed to accept whatever forks a concensus of miners accept, so it is possible.


> Regulating the supply so that it's not a deflationary currency would solve some of Bitcoin's volatility issues.

Please elaborate/provide evidence. I have never heard of such a link or economic property that would demonstrate that volatility is impacted by the sign of the inflation rate.

And of course, miners already influence the money supply by choosing to sell or hold their supply, so they act as a decentralized form of the ECB/Fed/etc. Their less influential 'monetary policy' is probably much less harmful as well.

And it's important to understand what deflation is -- Bitcoin only appreciates when people assign more value to it. All things being equal, Bitcoin is NOT deflationary, whereas the USD is inflationary, because even with 100% adoption the USD supply is artificially increased, and the value eroded.


>I have never heard of such a link or economic property that would demonstrate that volatility is impacted by the sign of the inflation rate.

Then you must have been asleep during economics class when they covered the great depression.

Most modern currencies are inflationary and have taken steps to remove deflationary properties like the gold standard, because it exasperates volatility and economic bubbles. It promotes hoarding, which decreases liquidity and increases volatility.

It's exactly why quantitative easing is used to increase supply of money in order to maintain a specific range on inflation.


> Then you must have been asleep during economics class when they covered the great depression.

Personal attacks are no substitute for content and explanation; I'm trying to help you by giving a chance to better expound your original point.

For your own understanding, I would recommend reading the Monetarist explanation of the Great Depression: https://fee.org/articles/money-in-the-1920s-and-1930s/. There is also the Austrian Economics approach which is built around the fact that inflation was promoted to keep commodity values constant -- in reality, I think both Monetarist and Austrian economic factors played a role.

Most likely, I would guess the issue is that you don't understand the definition of volatility: https://en.wikipedia.org/wiki/Volatility_(finance)#Mathemati...

Please review these materials and explain how price volatility is related to the sign of inflation, or whether you meant something else. My assumption is that it is not, and I have seen no evidence to suggest otherwise. You can look at the most volatile years of US exchange rates and they were during the Jimmy Carter "stagflationary" era. You may be conflating volatility of a currency with volatility of other measures in an economy.


sure, there is some regulation (definitely more than in the btc world), but even that doesn't prevent things like the goldman sachs deal back in 2008 from happening. the point I'm trying to make - financial markets in general are volatile and largely unpredictable with plenty of fud and disinformation floating around, not that different from the "bitcoin world".


I'm not saying regulation is working exceedingly well, just that some regulation is still better than none.


The sheer unpredictability of Bitcoin even bites those who try to use price manipulation to their advantage though at times.

Look at what happened with pirateat40, the "bitcoin savings and trust" ponzi scheme king who couldn't pay out one time and decided to try to try his hand at market manipulation instead.


Especially the part about people with no actual knowledge of a stock making guidance regarding its future, and people who want to manipulate the price of a stock incentivizing people who know nothing about a stock.


> 5) When you suddenly start paying attention to bitcoin because the price has gone up a bunch recently, don't buy it, because it's about to crash.

That's my favorite time to sell. Glad I sold at $900 when everyone was raving about it just a few weeks back.


That's an awesome sell, but didn't it get up to 1000$?


Well, when it was $1,000 one of my friends was waiting to sell until it hits $1,200, which it never did. The peak is only evident in hindsight. Still glad I sold at $900 considering I bought several years ago after the last crash.


~$1130 or something


> 1) It's a mostly unregulated market full of scammers and pump and dump schemes artificially manipulating the price.

How can you "artifically manipulate" the price of Bitcoin? By buying lots of it then selling? How can that be bad?


> How can you "artificially manipulate" the price of Bitcoin? By buying lots of it then selling? How can that be bad?

You can spread false news that could bump it in either direction. For example a government is planning legislation around bitcoin or (like in this case) a bank is looking closer at money flowing to/from exchanges. These could drive down the price. On the other hand stories about governments embracing it, a company starting to accept it, or more "positive" bitcoin stories could drive up the price.


I think the point of most pump and dump schemes is getting someone else to buy so that you can sell and leave others holding the bag.

Other scams are probably more like MtGox where the coins don't exist or are routinely stolen.


He addresses in his next points, by causing a news event that drives the price against the dollar up or down.


Number 3 and number 5 are a contradiction, won't you say?


5 was me being somewhat sarcastic. I see so many people on bitcoin forums saying something like "Wow, the price has really gone up, it's going to the moon now, I just spent my retirement betting everything on bitcoin with 25x leverage on some shady chinese exchange.

Then a week later they're on suicide watch because the price went down 5-10% and they lost everything.

On some level, it's just common sense. A bitcoin is a bitcoin. If bitcoins didn't suddenly become more valuable for some obvious reason, then if the price has doubled in a few weeks, then that makes it a worse time to buy, not a better one.

I will never understand why people suddenly want to buy something after the price has gone up a bunch, because the price has gone up. You want to buy it before. Obviously if the price went up because the reward halved or, i dunno, citibank started taking bitcoin deposits, that's a different story, but just jumping in because of FOMO is stupid. (I saw the same thing with Nvidia, and warned people out of buying it and sold most of mine to lock in profits after the hype train started getting out of control in the past few weeks.)


I agree with you. But it's ironic because what you are saying (educating people when you have already figured out a pattern that you could exploit) doesn't seem to be in your best interest. And sure the actual harm is nominal (people reading you HN comment) but...


So the price has just dropped, good time to buy it then?


Well it's a better time.


Only if it has dropped below its discounted present fundamental value (PQ=MV).


on a given day is the important bit.

I knew the housing market was going to crash, but I had no clue when. That's enough not to buy into a bubble, but not enough to make money from a bubble.


Not really. Knowing that it's going to crash is different from knowing why it's going up or down.

In particular, knowing that it's going to crash is just a standard observation about markets in general: If you buy because it's going up, you're already too late, and you're likely to lose your shirt.


Number 5 is a recurring pattern on financial markets. But it tells you nothing about timing, and there's always the "this time is different" risk that although low can easily eat all of your money.

Or, in other words, #5 is a recurring pattern on financial markets. If you rely on it alone for investing your money, you are crazy.


I'm a fan of the term "narrative fallacy" for #3 https://wiki.lesswrong.com/wiki/Narrative_fallacy


> Nobody on the internet who claims to know why the price of bitcoin goes up or down on a given day has any fucking idea what they're talking about,

> don't buy it, because it's about to crash.

This seems rather contradictory.


Re point 5

Pay attention to the "bitcoin " Google trends graph and overlay it onto your bitcoin price chart of choice.


The problem is Google trends lags two days behind, so it doesn't give a clear picture of "now" interest


Regarding number 4, are you sure it's not the other way around?


Both of you are right. One does not exclude the other. Bitcoins having value creates a demand from merchants, who want to accept them and sell them for USD, and drugs being available for bitcoins creates a demand from consumers, who buy bitcoins and send them to merchants.

If the Bitcoin market consisted solely of drug trade, it would constitute drug sellers selling bitcoins to drug consumers on exchanges, only to again receive the same bitcoins shortly thereafter, as payment for drugs.


> 4) As long as bitcoin is useful for buying drugs or another criminal activity, it's going to be worth something.

How does that turn around?


I think they mean this: As long as bitcoin is worth something, it's going to be useful for criminal activity.


yeah this is what I meant.


3) I thoroughly disagree as there are clear and consistent correlations of Bitcoin price to certain events, such as news of Yuan devaluation. Of course correlation /=/ causation, and especially as this is a very low barrier of entry trading market, it creates incredible randomness/volatility.

To be perfectly honest, your rhetoric just seems to spread FUD, when the real truth is there are simply a lot of unknowns, and a lot of people who claim to know them, and you need to use your best research and judgment to sift through the noise.


6) after a crash and bubble is the perfect time to buy :)


Is there any good source for knowledge on what's affecting the price of Bitcoin and other cryptos?

Where can someone learn about this stuff?


Basically, where Bitcoin is at now, by looking at just the price, it's impossible to tell whether an exchange has been hacked, a major government is banning it or some guy finally remembered his Bitcoin wallet password and cashed out.


The people that know what affects the price of bitcoin own a lot of bitcoin, and they know what's affecting the price because they're moving the markets themselves.



1) It is attractive because it it unregulated. The inflation however is mathematically guaranteed. That is perhaps the best regulation you can ever have for a currency.

2) True about USD and Fed too or almost every other things that are publicly traded. The reason Musk makes all those news headlines is because he wants his company look attractive too investors.

3) True about stock market and all other financial instruments too. We have plenty of analyst giving after the fact analysis. They have no clue.

4) Agreed.

5) Generally true about stock market too. One should always buy low and sell high. Not other way around.


> The inflation however is mathematically guaranteed.

You mean "deflation". Inflation is when your currency is worth less than it was before.

Also, I'd be careful of claiming anything is "mathematically guaranteed", which is a much stronger claim than anything you encounter speculating in a market. There's no axiom or theorem demonstrating that Bitcoin is worth anything.


Sorry. My point was protection from inflation is guaranteed. Bitcoin might lose its value because of market but no one can print Bitcoins at a whim to reduce the value of coins in my hand.


Just asking for fun, as I'd never bet my money on it, but is there any way to 'short' bitcoin today?


You can buy put options on deribit.com (with a huge spread, mind you). https://www.deribit.com/main#/options

It's effectively shorting selling, except you know in advance how much you stand to lose (what you paid for the option), as opposed to borrowing bitcoins and selling them, and then having to buy them back at some unknown price in the future.


Unlike futures (say a 2 year crude oil contract), you can only short bitcoin for day-trading. The trick is that in most exchanges you pay a huge fee everyday to hold your position. So you can't say, "I think Bitcoin will crash in 2018" and open that position. In a few days the fees eat up everything and you are forced to liquidate at the price that day. (see bitfinex, whaleclub, etc, etc)


That's not necessarily true. I work on BitMEX, and we offer quarterly futures contracts that don't have holding fees. Today, with the price movement, they've been even trading at a discount to spot.


You can do all kinds of crazy bets with bitcoin, and do it leveraged up to your eyeballs. People do it all the time.


You can short Bitcoin at Bitfinex and ICBIT.


Wasn't Bitfinex hacked?



So basically just like any other financial asset.


> As long as bitcoin is useful for buying drugs or another criminal activity, it's going to be worth something.

That's a tautology, isn't it? People found the German Papiermark useful for criminal and non-criminal activity, which meant that it was worth something. Until it wasn't.

An old billionaire who has been around long enough to see fly-by-night scams come and go, Charlie Munger, called Bitcoins "rat poison". The only problem with that is the commodity of rat poison has some actual value.

In the past 20 years we have seen various things with inflated values. Homes with sub-prime mortgages in 2007, stocks like Webvan and Pets.com in 1999. Bitcoin, which is trading for $775 now, and was worth $1020 last week, is one with those things, as well as with Dutch tulip bulbs and the like.

Comparing a Bitcoin to any other commodity, I have to ask, what use value does it have? It has none. Gold is useful because it can fill teeth, conduct electricity etc., I can also easily use it to trade as a currency as it is durable, portable, divisible and uniform. Bitcoin is traded, but has no underlying usefulness like other commodities.

Sometimes people fish around for a comparison to something with worth and are hard up for one until in desperation they point to the only thing they can - the dollar. True, the piece of paper dollar never had intrinsic value. Until August 1971, it was convertible to gold. The US did and does store thousands of tons of gold at Fort Knox and in other places. In 1971, it temporarily (with exceptions for some people) stopped that convertibility. So the dollar now is doubly abstracted, it was an abstraction of the gold, then with the window closed it became an abstraction of that abstraction. The US pays a lot to guard those tons of gold that still implicitly (instead of explicitly) backs its currency. Bitcoin does not have tons of gold implicitly backing it. It is inherently worthless.


But the value of Bitcoin is that it is durable, portable, divisible and uniform - and basically in limited and predictable supply (unlike the Weimar Reichsmark or the Hungarian pengo.) That's what makes it useful. Why does a currency need to have other "functions"? Its usability as currency is its underlying usefulness.

Lots of perfectly reasonable and useful modern 'paper' currencies are not backed by any commodity nor have been since their most recent introduction. Money is useful as money, that's generally good enough.


Most reasonable paper currencies are backed by the fact that millions of people need to pay their taxes in that currency. That's generally what gives fiat money value.


I wouldn't quite agree that tax requisition is "the thing" that gives a paper currency value, though of course it is one. (I mean, lots of people/companies hold USD, EUR, CHF, JPY, etc., without ever needing to pay taxes in those currencies.) But my main point is that it's not commodity backing that matters, and that currencies don't need to have "intrinsic value" in some other use than as currencies.

In any case, I find it kind of amusing how much incensed criticism Bitcoin gets simply for being a currency that exists. It's like, imagine people wrote thousands of angry, scathing articles and comments all over the internet about the Azerbaijani manat or something.


> I mean, lots of people/companies hold USD, EUR, CHF, JPY, etc., without ever needing to pay taxes in those currencies.

I don't think vkou was claiming that you yourself need to pay taxes in the currency yourself. Just that the fact that there's workers out there in another country who needs to pay their taxes in their local currency and will therefore need to charge for their work in that currency or trade for it. Either option will lead to some predictable demand that you can depend on whether you pay taxes in the country in question or not.


All cryptocurrencies are durable, portable, divisible, and uniform. Nearly all of them will be worthless, and many that were already created and possess those four characteristics are already worthless. Bitcoin may escape that fate (I own a a fair amount, so I hope so), but it won't be because of those four traits.


Sure, most cryptocurrencies will probably fail over the long run. But the comment I was responding to was asserting that Bitcoin would fail because it lacks "underlying usefulness" or "commodity backing". I disagreed with that concept of money - but I didn't say that possessing the aforementioned properties of money would ensure that Bitcoin, or any currency, would not fail.


Bitcoin has value because you

1. Can buy drugs with it

And

2. Can avoid capital controls imposed by your socialist country


Fisher's equation describes the value of any currency - even gold - PQ=MV.




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