Dec

2

Infographic: Visualizing the Journey to $10,000 Bitcoin

How did Bitcoin jump 10X in value in the matter of just 11 months? This timeline visualizes the events in the journey to $10,000 Bitcoin. After dotcom popped, many companies lost 98% market cap - yet an operating concern remained (YHOO comes to mind). What's behind Bitcoin? I have removed 2000-3000 as an area of support following this weekend's madness. Clearly, she'll end below 1 Alas, as I always said, the hi print is likely prior to CME debut.

Andy Aiken writes: 

"Clearly" and yet Anatoly claims to have no position. Evidently his net worth is tied up in airline vouchers.

anonymous writes: 

Actually the "right" trade during the dotcom bubble was to be long and own low delta, far out of the money puts. The same was true during the silver bubble, the nat gas bubble and all exponential moves. What I find astounding is that some people never learn from their past mistakes. If you don't know who the sucker is at the poker table, look in the mirror…. Of more interest than calling the "top" or "bottom" in bitcoin (or anything else) for bragging rights and which are worthless, what do intelligent people expect the opening futures yield curve/implied interest rate for Bitcoin futures to look like? There is no real borrow market; so should futures be in backwardation? Or should it be upward sloping like a regular currency with a positive interest rate? My guess (based on learning from experience) is that speculative flows will swamp arbitrage flows and so it will be in backwardation so long at the market is rising strongly — and once the price has topped and it starts declining, the yield curve can/will go positive. My instinct is that the shape of the futures yield curve will provide a better clue about the status of the bear/bull debate than pulling numbers out of the air — and it's options on futures where the real fun will be had. Does anyone have a better perspective on this?

Andy Aiken writes: 

Finally an interesting question on this subject. There could be some good spread trade opportunities, since I expect the term structure to move wildly in the initial stage of market development.

I expect it to be mostly in contango at first, but move to a modest backwardation that reflects an implied yield.

Bill Rafter writes: 

From the cheap seats, bubbles tend to coexist with inversions (backwardation). Current uncertainty places a premium on the near month while the distant months play with the expectation of mean-reversion. Isn't that exactly what Bitcoin is all about? So you would expect Bitcoin futures to show backwardation. The only problem is that you cannot build an economically rational model for such a price structure. Thus it seems as though momentum and sentiment will rule the day. Appropriate quote from the Senator: "It is conjecture. When a researcher lacks hard evidence, conjecture is his greatest tool. Some conjecture better than others. Some conclusions are more conclusive than others."


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6 Comments so far

  1. Scott on December 2, 2017 5:33 am

    Ah yes, the spreads will be will quite nice with implied vols over 100. With so much questionable activity in the exchanges, I just hope we get to see it before one of them implodes like mt. Gox again. Inevitable.

  2. russell thomas on December 2, 2017 6:42 am

    My thoughts on a perceived Bitcoin bubble. The price of bitcoin is reaching for the sky . It may be the first time in history where the whole world is able to speculate together connected by a light speed communication network called the internet. Not just many nations but different age groups. Mostly the young. Kids can mine from their bedrooms and trade on smartphones which everyone has. The young have grown up on bitcoin

  3. Ed on December 4, 2017 8:32 am

    The right trade was to ride the bubble while knowing it was a bubble, Soros style.

  4. Arch Stanton on December 4, 2017 6:09 pm

    There should be a law, in the spirit of Godwin’s Law, to reflect that all financial websites eventually turn into Bitcoin discussion venues.

  5. Andrej Bojovic on December 4, 2017 6:22 pm

    For those who know this area, where would you look for the “low delta, far out of the money puts”?

  6. Pierre Aribaut on December 31, 2017 5:14 am

    There are now many risks on the Bitcoin : spread (already big when nothing happens, so imagine when something happens…), liquidity (market risk), exchange platform (that can be hacked or implode, so you can lose your bitcoins because of the platform), valorization (market risk).

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