Financial Big banks push back on launch of bitcoin futures

Big banks push back on launch of bitcoin futures
The Bitcoin Offensive
IMF Warns China of Financial Risks
Will the P/B ratio gather results equal to the M/B ratio?
Was bored in class and drew an example of how I think MBS work beneath the surface. Am I more or less right?
Buttonwood: Criticism of index-tracking funds is ill-directed

Big banks push back on launch of bitcoin futures

Posted: 06 Dec 2017 11:48 PM PST

submitted by /u/what_wags_it
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Posted: 07 Dec 2017 08:33 AM PST

Yesterday, as I was reading groupme messages in my fraternity group chat, I saw that someone had called me over my stance on bitcoin. In a chapter meeting two weeks ago (November 27th, 2017 to be exact) I had made remarks that I thought it was time to sell bitcoin, as the commodity was nearing $10,000 USD, and I (incorrectly) believed that investor speculation would peak, and people would stop investing in something that is supposed to be a store of value.

The purpose of a store of value is to mediate risk, as there is supposed to "be stable demand for an underlying asset." (Wikipedia) But is there anything stable about Bitcoin? The value of the currency is skyrocketing forward, and is likely to reach $16000 USD (as I was typing the rest of this, it hit 16000. Go figure.) by the end of today (December 6th, 2017). On what grounds? I believe Bitcoin's current price increase is based on the speculation that its current price has not peaked. People see the commodity as a form of investment, and are more than happy to dump savings into the system in order to make a quick buck of "free internet money".

The thing that scares me about bitcoin is the concept of "Hodl (Hold On for Dear Life) (r/Bitcoin)". Members of Reddit's Bitcoin community are frequently seen spamming this message in regards to Bitcoin hitting a new high. Not only does this hivemind mentality worry me, but the underlying concept of continuous holding is worrisome as well.

Let's talk pyramid schemes. A person gets his or her friends to invest money into a "groundbreaking new opportunity" that is sure to produce in tremendous gains. Their friends give them money, and then that person goes out to other people to talk about tremendous gains. The scammer collects their money gives it to the original investors, and the asks them to reinvest, as they'll make even MORE money. At the same time, he encourages those original investors to find other people to invest into whatever, in order to insure a continuous income flow of income. He then goes and pays back the second group of investors with the collected money, pockets some of the returns, encourages those investors to get friends in on this, and the cycle continues. Of course, this cycle isn't continuous, as there is no underlying value behind this growth of money, other than the continuous investment that is being created due to people pulling money from their friends. Eventually this reaches a wall, and the whole scheme collapses, with many people losing a lot of money, and a few on top getting away with huge returns, and a few people on top going to jail.

Now let's look at bitcoin. I want to preface this argument by saying I DO understand that there is some underlying value in the crypto-currency. First, I want to emphasize its value as an anonymous store of value that can be tracked from user to user and takes place online. For people who want to hide for whatever reason (privacy concerns, drug deals, etc.) this store of value is great. Therefore, as a currency, it DOES have some underlying value. The problem I have with it as of right now is the reason its current value is so high in relation to the US Dollar. It's current level of value does not accurately represent the value it has as a currency. Instead, its value is inflated by speculation and "Hodl" mindsets. If people continuously pour money into something, of course its value will initially rise. However, there are only so many people willing to put their life savings into the currency, and eventually Bitcoin's value will fall, and people will lose a lot of money. To me, it feels somewhat similar, but not exactly the same, as a pyramid scheme. Except in this case, the ones profiting are those making money off of high transaction fees when it comes to purchasing and selling (if you want to do so in a timely manner), not who created it. Another thing that worries me is many of Bitcoin's "investors" don't know what it is they're buying. Sure, they know it's a form of money, the value of which continues to go up. But beyond that? While there are certainly some who understand what value Bitcoin provides, I think that many people have no idea what they're getting into.

Keep in mind that anyone who is still "Hodling" their money in Bitcoin has unrealized gains. Until they sell and make a profit, they have not increased their net worth in the slightest. Unfortunately, due to Bitcoin's low transaction speed, it could take a while before these "investors" can actually profit off of Bitcoin. Of course, what happens when Bitcoin crashes? Everyone tries to sell as fast as possible, the servers become incredibly laggy, and everyone loses money. What matters here is the "when" as no one can be sure when Bitcoin's value will crash. But I simply do not see any way Bitcoin's value will continue to rise indefinitely.

Bitcoin scares me. It's the cumulation of mob mentality, unrealized gains, investor speculation, fomo, and short term growth mindset, all wrapped into a shiny package that screams free internet money. Of course I don't want people to lose their money, but at this rate I don't see how it's not possible. I believe that this is the next big bubble of our time, and when it pops, it will pop hard and fast.

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IMF Warns China of Financial Risks

Posted: 06 Dec 2017 09:47 PM PST