Pigs Get Slaughtered: Margin Trading Bitcoin

There is a famous saying “a fool and his money are soon parted”. One thing that bothers me about the Bitcoin space is all that all of the people catching this rising tide think they are the Warren Buffet and can’t lose. News flash: you aren’t a great trader. When every crypto goes up everyone looks like a genius. Then they get cockier and their false bravado builds pushing them to trade on margin making even more money.

Then suddenly a sharp drop in price hits a few margin players as the exchange forces them out of their position. This creates cascading margin sales as other people are then forced out.

This article on BI talks about the guys hurt in Bitcoins recent flash-crash. They trade using margin on Bitfinex and when the price tanks they get liquidated at prices they say aren’t fair. Its possible they were forced out at bad prices – but they still would have lost a lot of their holdings. Keep in mind these guys are using margin (very dangerous) on an exchange which is completely unregulated and has major rumors of shady behavior. This accident was waiting to happen.

This brings us to a well known trader saying to all those in the crypto space:

“Bulls make money, bears make money, pigs get slaughtered”

If You’re a CEO just say “Bitcoin”

Squares CEO Jack Dorsey (also CEO of Twitter) announced Square is going to add the ability to buy Bitcoin through its app and the stock is up ~3% today.

square bitcoin chart
square bitcoin chart

There are other examples here where stock news comes out including buzzwords like “bitcoin” and “Blockchain” which sends the stock soaring. If the recent Bitcoin/Bitcoin cash debacle proved anything its that this crypto space is rapidly changing and highly speculative. If you’re a CEO you can’t possibly predict your revenue from adding Bitcoin. Bitcoin is growing slowly as a payment method but its dominated by traders and holders. Yes “blockchain” is a revolutionary idea that will change business but I question the incremental value of Square adding Bitcoin purchases. Don’t get me wrong, as a holder of Bitcoin its great news. But is it really going to move the needle for Square in the near future?

I am not sure if the people buying Square on this news are just bullish on Bitcoin and its a way to express that, or if they think this is really going to boosts Square’s business. I wonder if the launch of Bitcoin Futures on the CME this December will cool this off a bit.

To me it reeks of speculation when stocks rip up just using these catchphrases and is something that helps build the Bitcoin “bubble” case.

Bitcoin Fork Called Off, Price…Drops??

The bitcoin hard fork knows as Segwit2x was “called off” today causing a sudden price spike then drop.

The strange thing about this is that the fork was a major point of dispute for those in the Bitcoin community and posed some risks. One would think that when you eliminate a risk the price would go higher, but not here.

This says to me that people were piling in ahead of the fork in anticipation of a “dividend” and nothing more. That tells me that greed is driving price, and its a bit concerning.

What Do CME #Bitcoin Futures Mean for Bitcoin

Everyone in crypto is excited about the launch of Bitcoin futures on the CME (Chicago Mercantile Exchange). The CME is one of the largest futures exchanges in the world. A few notes on this as I am reading a lot of nonsense out there:

  • Overall this has to be seen as bullish for Bitcoin and establishes the asset on the “institutional” playing field.
  • Bitcoin futures are CASH SETTLED which means when the contract expires you are charged or credited in USD the difference between the futures price and Bitcoin spot price. If you’re futures contract is $7000 USD and Bitcoin spot is $6000 USD you will lose $1000 USD from your account.
  • Cash settlement means the futures volume doesn’t necessarily translate into actual Bitcoin  volume. That being said I’d wager that Bitcoin volumes would move higher as traders arbitrage the futures versus actual Bitcoin.
  • Yes, some people will hedge with actual Bitcoin but settlement is still a major issue for institutions and will prevent them from trading actual Bitcoin. Essentially Hedge Funds and Banks can’t yet handle the storage and delivery of Bitcoin. (see here) Plus Bitcoin itself hasn’t been explicitly approved by the SEC or other regulatory bodies.
  • LedgerX already launched Bitcoin options which many will use in conjunction with Bitcoin Futures. You can buy or sell the options and use the future as a hedge if you’d like to trade the “volatility” of Bitcoin. You can also express a directional Bitcoin price view using Bitcoin futures and then hedge with options.
  • I find it somewhat ridiculous that this is a grand conspiracy by the banks to take down bitcoin. CME is a for profit exchange and Bitcoin is an asset with rapidly growing demand.

Catalonia Crypto Isn’t #Bitcoin Bullish

“Catalonia is also considering adopting its own digital token or cryptocurrency” I saw this on zerohedge as an attempt to ascribe a reason to the Bitcoin price spike today.  First, not every single move in an asset must have news attached. Second, Catalonia isn’t even its own legal entity. So you could buy into this crypto and have the EU reject it or call it illegal. Also they are looking at an ICO:

From Coindesk

Blockchain experts in Catalonia have sought help from Vitalik Buterin, Ethereum’s founder, according to El Pais. Vitalik advised the Catalonians to create an ICO to offer a currency that would work in tandem with the financing of a business project for the virtual residence program. The e-residency ecosystem could create an economic community independent of a central bank.

Estonia recently proposed “Estcoin,” a national cryptocurrency. If the country follows through on this plan, it would be the first national government to launch an ICO.

Kaspar Korjus, managing director for Estonia’s e-residency program, posted a Medium blog in August claiming Estonia could offer Estcoins to residents. The coins could be managed by the Republic of Estonia, but accessed by anyone through the e-residency program. The program would launch an ICO to offer the coins.

Korjus also said the ability to start a location independent company is the main factor driving the growth of the e-residency program.

IF this were all to happen it would be competition for Bitcoin. Second there is no proof it would launch on Ethereum.

Any news like this is crypto-bullish but don’t read that to mean “Bitcoin bullish.”

Why Bother with Litecoin?

Bitcoin’s recent price rise to all time highs has been quite amazing. Not so much that it hit $6k but that it happened in mere weeks. Ethereum has been doing, well, nothing. My unqualified opinon is that the ICO market is capping ETH prices(read here). But whats Litecoins excuse?

The chart below shows just how much Bitcoin has risen since April of 2017. The little triangle shows when ICO madness started kicking in which I think keeps ETH prices down. Litecoin over this period has done absolutely nothing.

Top Cypto Coin Chart
Comparison of BTC ETH LTC

Yes its true that many people will sell the “alts” (litecoin, ethereum, dash et all) to buy Bitcoin during strong moves. But has Bitcoin exerts in dominance just what is the purpose of a “Bitcoin Lite”? This isn’t a knock on Charlie Lee the (creator of Litecoin) I just think originally he wanted to be the #1 crypto and he lost that game. Litecoin is often branded as “Silver to Bitcoin’s Gold”.  Other coins like Dash say “this is why we’re better than Bitcoin“. Other coins like ZCash offer true anonymity.

Yes people wax poetically that Litecoin could be used for transactions in small denominations because Bitcoins transaction fees are higher – but I don’t think there is a big market for actual “spending” in Bitcoin. i.e. how many nerds are out there buying coffee with Bitcoin? I’d guess very few as everyone seems to assume Bitcoin is going to $10,000 plus in price.

In this moment there is no need for a “Silver to Bitcoins gold”. Litecoins network seems healthy if you check the stats. I’m not here to say Litecoin dies tomorrow. But I think if you’re speculating that its price will play “catch up” to Bitcoin you’ll have to wait a very long time (think mass crypto adoption). (Unless Bitcoin blows itself up with a forking or some other such catastrophic incident, of course).

 

Why Bitcoin is Going Up & Alts Are Not

Bitcoin is on the move, up around 5% today while Alts (Ethereum, Litecoin, etc) have been stuck in the mud. As you can see here in this chart of Ethereum priced in Bitcoin, Ethereum has been going down. Why is this?

Bitcoin is Outpacing Ethereum

I’m going to add my speculation – my guess is that Bitcoin will continue to move up faster than Ethereum or litecoin for the foreseeable future. Don’t be a fool and trade on my opinion.

  1. Ethereum is “all about the ICO’s”. ICO’s creating selling pressure as people buy tokens, and those tokens are transferred back into Ethereum and sold for fiat. That fiat is used by the “businesses” which issues the tokens. In my opinion this creates major selling pressure on Ethereum.
  2. Litecoin – I just don’t get why we need it. At least yet. This whole pitch of “its Bitcoins silver” makes no sense. Bitcoin is still in its infancy. Yes its the gold standard of crypto but is it really not meeting peoples needs at this point? Lets face it – Litecoin was created as a competitor to BTC and Bitcoin is kicking its @$$.
  3. No other ALT has created that “killer app” or that “must use” case. Therefore its all just speculation. Bitcoin is the household name when it comes to crypto and that’s where the money – the big money – is going to be flowing.
  4. I think the more Bitcoin outperforms the more investors will be running to it as opposed to the alts. However if Bitcoin tanks you can bet selling will happen in the alts. Inherently this boosts Bitcoin the best crypto bet.

Thats my analysis. Could be (probably) wrong, but hopefully thought provoking.

Whats the #1 Use for Bitcoin? Moving Money.

Currently the #1 use for Bitcoin and other crypto is the ability to store and move your money without intrusion. There is no other safer, easier method to transport funds around the world than Bitcoin. Governments are out for your wealth and will seize it first and ask questions later. If you’re caught with a bunch of legit cash you are presumed guilty of some crime pretty much automatically.

Someone didn’t tell these guys:

Cash seizure at airport (from Reddit):

I went to the airport today to head to San Francisco to buy a car I’d found on Craigslist. I find my gate and am strolling past it to go grab a bite to eat while I wait to board when I hear my name softly called from behind me. I turn around to see two guys I’ve never met.

They introduce themselves as what I think I remember to be DEA. We step into a stairwell to have words. They ask to search my bags, my person, etc. I complied to all. After a few minutes of them asking what I’m doing and me asking what hell they’re doing, they say they suspect me of dealing drugs. I tell them I’m not a drug dealer, that I don’t do drugs, that I can pass any test they wanna give me, yada yada yada.

They keep pressing and I eventually say something to the affect of ‘Is this about the cash in my bag? Did TSA see my cash and tell you guys to question me or something? I read the laws before coming here and there is nothing illegal about flying domestically with ANY amount of cash.’ They said it’s drug money, I told them they’re wrong and I can prove it. They said the car doesn’t exist, I told them they’re wrong and I can prove that too. I even showed them text messages the seller and I had exchanged. They said I can’t show where the money came from, I told them I can show them whatever transaction receipt they need. The money was pulled from a retirement account. I myself didn’t have the physical receipt on me (because why the fuck would I?), but I assured them that my accounts manager can show them whatever the fuck they wanna see. They didn’t care and took my cash anyway.

I missed my flight, was questioned for nearly 4 hours, was paraded through my hometown airport in fucking handcuffs, was charged with NOTHING, and was STILL robbed of nearly $20,000! Currently waiting to hear back from several different attorneys (it’s 11:00pm where I am).

Anyone have any pro tips on how to get my money back ASAP and also sue the fucking pants off this agency? I’m not a rich man, but I’m willing to spend more than I lost if it means I win and am able to get my stolen funds back while also telling the DEA or Uncle Sam or whoever to kiss my fucking nuts.

TL/DR…DEA (I think) seized my money in what certainly seems to be an illegal seizure. Want to get my money back and hopefully get some people fired along the way.

EDIT—- they called in a search dog while I was being interrogated. The dog casually strolled past 1 bag that didn’t belong to me, strolled past my bags with no reaction, and strolled past a fourth that also didn’t belong to me – no reaction to any bag. The handler took the dog around the corner and out of sight, said or did who knows what, came back in the room, PHYSICALLY PICKED UP MY TWO BAGS AND SHOOK THEM A LITTLE, and then the dog walked over and basically mimicked what the handler did. The dog grabbed my bags individually, shook them around in his mouth, and was then rewarded with a treat of some sort. While waiting for the dog to arrive, the DEA guy said the dog was gonna sniff my money, not my person or whatever. I told him I’d seen a thing on Dateline or something where 4/5 bills $20 or larger tested positive for cocaine traces and that there’s no way they can take my money based on a dog saying it smells like drugs. There’s an 80% chance of it happening. He told me to ‘shut up.’ No joke.

UPDATE — got ahold of a local attorney that offered to take the case pro bono. He said that since I can prove the money was legally earned, was withdrawn from my retirement account just a couple days ago, and that the money was all $100 bills and were still wrapped in the $10,000 bands that had the bank name and the date stamped on them, that immediately throws out the hit or whatever it’s called when the dog grabbed and shook my shit. Attorney told me go get bloodwork done today to show that I’m not a drug user.

He was a prosecutor for 23 years before going into criminal defense. He said there’s only like 1 or 2 scenarios where someone has a legitimate shot at suing the DEA, and that my case falls into that very unlikely category. He said I could likely expect a 100% return of the forfeiture within the next few weeks, or that we can forgo that option and instead attempt to sue the agency (which could end up taking a couple years).

Regardless, things are looking up.

My Favorite:

Sri Lankan arrested for trying to smuggle 1kg of gold in his rectum

A Sri Lankan man who raised suspicion by the way he kept looking around in an airport departure lounge was found to be carrying nearly 1kg (2.2lb) of gold stashed in his rectum.

The 45-year-old, who was headed for India, was arrested at Colombo airport on Sunday after customs officials noticed “suspicious movements”, said customs spokesman Sunil Jayarathne.

The man was carrying 904.77g of gold worth 4.5m rupees (£22,000), but was freed after a payment of 100,000 rupees, he said. Such methods of smuggling were not unusual, he said.

“The gold was wrapped in plastic bags inserted in to his rectum,” Jayarathne said, adding that there were four bags.

This is not the first such detection and this is a common method of smuggling.”

Morgan Stanley is On the Other Side of Jamie Dimons Bitcoin Trade

Bitcoin prices are heading higher today which some are attributing to the ECB (Euro. Central Bank) saying that Bitcoin and crypto was outside of their jurisdiction. I’d point out that regulating and taxing are two different things. I also don’t think that regulation is bad per se – there are a lot of scam artists out there.

Something I found quite a bit more interesting was that Morgan Stanleys CEO said Bitcoin was “more than a fad” shortly after news came out that former Morgan Stanley CEO John Mack is looking into launching an ICO. If this is true its a huge boost to the credibility of crypto, ICO’s and could pave the way for other big names to enter.

This is in sharp contrast to JP Morgans CEO Jamie Dimon who has been shredding Bitcoin the past several weeks.