Trader Made 295% on Cryptocurrency Derivatives
bloomberg.com
bloomberg.com
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?
https://www.aei.org/publication/warren-buffett-wins-1m-bet-m...
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.
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.
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.
Was it also a bubble when Bitcoin went from $10 to $100 in 3 months back in 2013?
The coins on Coinbase alone (BTC, ETH, LTC) are up 600%, 2200%, and 1300%, respectively. Many altcoins have done several times better.
Or to buy actual assets like real estate with them.
I'm not buying that it's a scaling issue personally.
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...