Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk
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I still hold though that Bitcoin was an early prototype and its value will sooner or later approach zero.
I do however think that blockchains and cryptocurrencies are a good idea and here to stay.
To build on your example:
Linux is here to stay but a number of the old companies, distros and packages are either gone or on life support and newer companies, distros and packages are making our wishes reality.
It's like Snapchat's dog-face filter is the normalising step for AR, you need the small, novel things to move the needle.
As they did Charles Ponzi's international reply coupons.
> That is all kind of the same vibe as Bitcoin
You mean the creator(s) who went to great lengths to hide their identities (that's reassuring), or do you mean the various ripoff artists, fraudsters, imprisoned scammers etc.?
> It has securely held Billions of USD equivalents in value for years.
So did tech stocks in 1999...so did subprime mortgages in 2007...
I've read Bitcoin is like email, Bitcoin is like TCP/IP, Bitcoin is like the entire Internet. Now I've read Bitcoin is like Linux.
At one time few people had heard of (random thing from thin air) New Kids On The Block.
Some didn't understand the new fangled (boy band) concept, some thought existing bands/music were good enough, some thought they'll take over the world, and some just thought they could get rich off it all before it collapsed.
Bitcoin is something that happened to catch on (entirely, by design, due to profit motive), which is why it's superficially similar to other things that happened to catch on. (Even things that catch on because they're actually useful, and not just a potential route to get rich quick without any effort.)
Once upon a time Denmark, like Bitcoin, didn't exist.
Danes (like Bitcoiners) were a strange bunch, famed and feared for their involvement in crime to make money. Slowly their influence started to spread, however, despite - but in some ways because of - their criminal behaviour.
Many legends were created... Ragnar Lothbrok, Ivar the Boneless, Magical Tux and Free Ross.
Then along came Christianity[1] (Coinbase/Winklevii) which provided more legitimacy with other, less beardy, groups. The true believers didn't like this, of course, but most people recognised the social and economic benefits of selling out everything they were supposedly all about.
The similarities end there, sadly, because today Bitcoin consumes even more power than Denmark. A fact which is completely batshit insane, but since Bitcoin hype and hysteria is even more insane, and increasing with every $1000 price pump, nobody cares.
Serious question (which will go largely unanswered in favour of turning this text white) for people who seriously think Bitcoin ranks in importance/significance with email/Internet/Linux/Denmark:
Now in its tenth year[2], what has Bitcoin actually achieved, other than a sickening energy waste and crazy price fluctuations and speculation?
[1] Which is also Bitcoin: https://twitter.com/larslfe/status/909192006362005506
[2] See creation dates for bitcoin.com/net/org.
Yes, this is possibly getting too large too fast. Yes there is a chance this is a bubble because the barbers and shoeshine boys are talking about it. But there is also a chance that we genuinely are at the beginning of the transition from Fiat currencies to crypto (beginning of the S-curve mass adoption). And given that we live in the digital connected age dealing with a virtual concept, it takes a lot less time for things to catch on and spread like wild fire, as opposed to other transitions in history like snail mail -> Email (which also was not that slow).
And if at all that crypto vision does come true, the value of BTC and some of these other top cryptos would be worth a _lot_ more than it is right now.
Again, this could go the other way and it could all come crashing down soon and maybe the hype dies down. But I feel a majority of the HN community is just waiting for that to happen which I did not expect.
There’s also some contention because Bitcoin Cash (the other fork of Bitcoin) is in a lot of ways closer to the original design of Bitcoin (“peer-to-peer cash”), but is having to fight for the name “Bitcoin”.
I think having the first-mover advantage and name recognition, the network effect that it has right now and the global media's attention, it looks really difficult for a smaller coin with better tech overtaking BTC anytime soon.
We've all seen technologies that are more advanced than an established player in a field but a lot of times, that does not matter. That's what I believe at least for the short to mid-term timeline.
Obviously, there is more than enough happy-clapping on the side of speculators to balance everything out, but I do wish the conversation more often found a practical mid-ground.
There isn't much middle ground. Bitcoin has proven to do a horrible job at just about every single thing it was originally marketed as. It isn't free, it isn't instant, it isn't permissionless, it isn't anonymous, it isn't secure, and it isn't decentralized. The only thing bitcoin has going for it is the price, which is more likely than not fueled largely by exchanges pulling funny business.
People do discuss Bitcoin differently depending on whether they have bought in or not. But the dangerous effect is the opposite of what you aluded to. People attached to bitcoin who have money on the line engage in acrobatic brain gymnastics to find ways to rationalize the value of it because they desperately want their gains to be real. At the moment they simply aren‘t. Bitcoin has failed it‘s initial mission, it‘s impractical and people just speculate that somehow things might change in the future. It‘s just a mind game right now. So your mid-ground would require me to accept that there is some value in the speculation regarding bitcoin which is a tough sell. It‘s mostly greed and people will be hurt by it at some point. Let‘s stop before it gets to messy!
This is a really poor reason to use BTC.
A) BTC is supposed to be a currency - generally, a currency is not where you should be storing wealth. Currencies are not designed to be 'stores of value' - they are there to facilitate economic activity and transactions.
If you want to 'store wealth' - put it in real estate, bonds or equities. Commodities. Other currencies. A broad mix/basket of many of them.
B) There's no reason at all to think that BTC will necessarily be worth more/less than another currency. Why do you think BTC will 'always go up'? Much of the BTC hype may have already been had.
C) By simply keeping your currency in a trivial savings account, will roughly protect it from inflation.
In addition - most bank accounts are Federally insured - in case something goes wrong, you get up to $200K back etc..
D) Risk. BTC could go to zero tomorrow. Probably not - but possibly. It's extremely volatile = bad store of value.
People have this really odd view that 'currency = value' ... it's not ... currency is just a 'medium of exchange' - so you only need to hold it when you want to transact with someone else in a common/liquid way.
Over any reasonable length of time, currency is generally not a good place to hold value, and it's not designed for that.
If you have lot's of currency, trade it for something else, spread it out.
There will never, ever be a currency or any other magical currency store of value that will provide what you are kind of implying. Never. This is because the ratio of 'things people need' and the 'amount of currency they need to transact for' is constantly in flux, ergo, a 'fixed' currency constantly in flux relative to that.
They were talking about the blockchain and its public recordkeeping. There's nothing like Wells Fargo doing shady things and charging you money, or BofA randomly charging you money or changing their account rules, or freezing your account...
Coins have their downsides, but a public ledger for absolute truthkeeping is not one of them.
As long as you don't mind the value of that wealth fluctuating by very large amounts. Today that wealth might be worth $10k, but in a month it very well could be $100...
Wells Fargo clerk issue is totally separate from this.
I can't do anything with Bitcoin that I can't do more easily with my credit card. It offers no value except a tool for rampant speculation. Block chain is junk, and while I see promise in the future I strongly believe we're in the Myspace stage. Something better will come along in a few years and blow this garbage away. Something that's actually usable as a real currency in all the ways I can use a dollar and maybe more.
It has a good chance of working, in my opinion (the lightning network), if they don't dawdle too long. But the clock is ticking.
The whole reason we have currency is to allow transactions between people that don't trust each other, so I don't think Lightning network will do anything significant
Lighting network is also distributed, you don't need a direct channel between you and another party to pay them. You just have to find a route.
1. With the caveat that you (or a service you delegate) need to be prepared to broadcast a transaction within some time period if a peer tries to defraud you, which is unlikely since if they fail they lose their funds in the channel.
2. Assuming enough liquidity in the network
Who cares? Honestly, who cares if BTC is the one that wins? I only care about some cryptocurrency seeing mass adoption, I don't care if that's BTC or any of the other thousand coins.
Well, everyone who is long on BTC.
I think a bigger risk than specifically Bitcoin failing is all this crypto fragmentation. If not Bitcoin, then what?
When Yahoo was replaced by Google people switched and their lives didn’t change.
If/when Bitcoin goes to zero people could lose faith in crypto completely there might never be a replacement.
If currencies go to zero and the masses lose their money then they could lose faith in the whole system. Interop of 100+ currencies won’t matter if all have zero value.
I’m not saying this will happen, but suggesting it’s a worst case scenario.
Is it not obvious to you that no fees is a ridiculous proposition? Free transactions mean spam and that doesn't work in a distributed ledger.
That's false as your credit card issuer controls who you can and cannot transact with. With BTC you control whom you transact with.
BTC was always about reducing control from a few centralized parties. I don't want my bank or paypal account being arbitrarily frozen.
Nowadays BTC is not very good at transactions due to exorbitant fees + very slow confirmation times, but things like ethereum, bitcoin cash, and altcoins offer options. ETH is very quick.
Good old fashioned cash is much better for criminal activity.
A crypto like Zcash (another fairly large crypto) that utilizes zk snarks to encrypt transactions and then decouple coins from their history would be much better suited for illegal transactions.
For Bitcoin like technologies completely lack privacy.
Sure, all of this technology is nascent and scaling issues are yet to be solved. But it's far from useless in its current form. Not every application needs 10s of thousands of txs per second, for example ICOs. I know that this is another hot-button issue, but some of us feel strongly that people should not be protected from themselves. And that's the most important thing that blockchain offers: true freedom, and that's why it's so exciting. Especially at this junction, in the wake of the internet having been co-opted by big business and big government.
- it is not transactional, as each trade costs $30-40. as exchanges hold the orders for weeks
- it is not rare, as there are tons of viable cryptocurrencies coming out each day
- it is not safe, as exchanges go bankrupt and shutdown.
- it is not stable, as prices fluctuate wildly each day. Downside could be 90%, upside could be 20%.
- it is not fast, as 100K+ transactions awaits
- it is not anonymous
- it is not valued correctly, as a sell order of $100M will most likely reduce the price by 50%
The social mechanisms (regulatory etc.) around retail banking are a crucial safety measure for individuals in the first instance. Bitcoin discards all that. If you repair the safety net, by creating a web of trust between principals (e.g. banks), proof-of-work becomes an unnecessary nuisance.
From the recent ING paper: "The average person [...] dislike[s] having no rights, no recourse, no guarantees, no legal coverage, nothing. They just want secure, reliable and hassle-free access to their money, and if they forget their password, they want to be able to call their provider and have the password reset for them. And with reason: recent analysis suggests that up to about 20% of all Bitcoin in circulation may be lost forever, due to, for example, misdirected transactions, lost passwords and crashed hard disks. Banks are the usual providers of custodian functions preventing loss and theft."
It's possible to be anti-Bitcoin while accepting that digital money is the future.
On top of all that, we're still entirely unsure how the system is going to function once all bitcoin has been mined and it becomes a pure transaction system.
The Bitcoin/blockchain-agnostic term for the basic abstraction these intermediaries share is "distributed ledger", though that doesn't solve the whole problem.
Having said that, I think there's a bit of (healthy) skepticism amongst those of us who hold "traditional" assets regarding BTC.
As someone who holds real estate as part of the investment portfolio, I understand and see the return from the rental properties. Stocks give me dividends. Bonds give me interest payments.
Currently, all these yields are in dollars. But would I gladly accept BTC as payment? Currently -- no. It's too volatile for it to be useful. And the entire issue of blockchain transaction backlog is worrisome.
So if a tenant comes to me and says, "I'll pay this month's rent in BTC," I'd still have to say, "No thanks. I'll take dollars please."
I can only speak for myself but I see this chance as practically being 0.
As far as I can tell the only people who would need something like Bitcoin are those who participate in illegal/immoral activity. Seeing as there is no regulation, I don't think it's far fetched to believe those who have a large amount of Bitcoin, such as hackers who were paid ransoms in it, would have motivation to try to increase the perceived value of it.
Personally I believe that people, especially those who already participate in illegal activity, trying to profit is easy for my mind to grasp and believe than for some technological revolution. I suppose the bias from my personal experiences shows as well given that I haven't met a single person who has purchased Bitcoin for its utility but many who have bought it because "it's going to go UP!!!!!!!!!".
I suppose personally I don't want to see people throw their money away, especially because in this case I believe it will benefit scammers, and that's why I have a negative attitude towards it.
It's entirely fair. Bitcoin is a solution in search of a problem. The only "solution" it's solved so far is lining the pockets of the folks at the top of its pyramid. Bitcoin has been around for, what, 9 years now? If it was going to see mainstream adoption, it would have happened a long time ago.
> I think you should give the cryptoscene another chance and do some research on what's going on. Saying that all this work, money and effort is something that will only benefits scammers is a bit unfair.
I suppose the issue is that I don't really see anything wrong with our existing currencies but there are hurdles and issues to using cryptocurrencies (I can't actually use it to buy many things and its value fluctuates too much for my stomach to handle).
Maybe, but the current price is no reflection of that. The current price is based on speculation, not utility. No "maybe" about it.
[1]https://arstechnica.com/tech-policy/2017/12/bitcoins-insane-...
Worse, people with massive crypto fortunes can act as evil as they want, and society can't do anything to stop them. Right now we can take the money away from the powerful, if society collectively agrees to. That will become impossible.
If BTC had no upper limit, I would agree with you. But Satoshi capped it, and theories abound as to why. The most reasonable explanation is that he wanted to incentivize network strength: more participants, the healthier the network, and deflationary currency encourages adoption from a game theory point of view.
But think about the endgame. What do you think will happen when coins stop being minted? When there are only 400 BTC left to mine? What will happen to all those miners and the vast worldwide mining apparatus?
If Satoshi were still around, he would likely want to remove the hard cap. And then we'd be in a different situation. But he didn't, so we're not.
And you might not be able to take money away from the powerful, but you can still throw them in prison.
That's the kind of threat model at stake here. Another Putin emerging. And this one may be much less predictable.
If Satoshi were around, his opinion would carry weight. He's the spiritual leader and mysterious benefactor, the only person to have ever solved the byzantine generals problem with sybil resistance. If he spoke, people would listen more closely than to others.
In fact, people are resisting change mostly because they want to stick to satoshi's original vision. So he is speaking to us, in a way, by saying nothing. That's him communicating his vision to us, and us agreeing with it.
If he were still around, he might very well say "I only did that to ensure the network stayed healthy! We still have an endgame to think about! The miners will eventually run out of coins to mine, and it's in our interests to continue the status quo rather than degenerate into that world."
You can't thrown Putin in prison because he's not a resident of a country you control.
Likewise, you can't steal his money, even under the current system.
Can we present the argument without appealing to a fear of the evil Russian boogeymen?
And if this is a speculative bubble the way it looks like it is, it will end like other speculative bubbles. A few people will get absurdly rich, not because they added any value to the system, but because they were able to time the market. Their money will come from the many others who will lose a lot because they tried to do the same thing but were too late.
Beyond that, there seems to be a small group of people who are interested in it because they see it as an alternative to fiat currency. But strong opposition to fiat currency seems to be one of those odd economic beliefs that some people get, similar to the people who think that our society would be great if we just got rid of money and had a barter system. Outside of fringe beliefs, fiat currency is generally seen as a useful tool.
A lot of millenials have learned a lot about the existing financial system due to Bitcoin, even if it was initially to make a quick buck, and I suspect there's no way back to fiat for a lot of them.
This is exactly the kind of one-sided perspective that makes me very sceptical. No, they didn't 'leave fiat' in any way, and they never will. At best they can hedge against it a little. But while that might be personally profitable, it is not clear at all whether it is a net benefit; the main problem of western economies nowadays seems to be too tight monetary policy, and crypto is tighter than fiat.
Whether millenials have learned about existing financial systems or not is immaterial. It's unlikely they'd be holding a position in bitcoin if it weren't for the massive gains that have been seen in the past year. It's purely a get rich quick play for the majority of buyers today.
Is not cryptocurrency the ultimate fiat currency?
It only has worth because we all "agree" it does via supply and demand for the currency itself, rather than any backing material value. Aside from a bunch of power plants in China, I suppose? But people don't hold Bitcoin at $20,000 because they strongly believe in the material worth of the rural Chinese electric grid.
(post edited to say "fiat currency" rather than the noun "fiat" which means decree or command)
I did not mean the bare word "fiat", and will update my post accordingly.
The housing market crashed in 2008 when everyone defaulted on their loans and all the speculation on those assets went upside down. I wonder what a cryptocurrency crash would look like.
People are negative about it because they missed the ride up. It was at $1k earlier this year when these people started dissing it and calling it a Ponzi scheme, and now it's at $15k. Those people missed out a 15x gain, something most startups they've labored their life over can't do. It's human nature to be jealous
Before you jump on the hype train, just ask yourself if it really is a train you want to get on, consequences and all. Alas I fear lot of people are already too invested in bitcoin as to see the problems with it.
https://www.schneier.com/blog/archives/2017/12/crypto_is_bei...
Crypto just means hidden.
Blockchains are objectively a better system. If the government pulls a Napster on Bitcoin (and Blockchains), I hope they get whatever is coming to them. Napster -- it had its problems with fairness and ownership, and a reasonable case could be made as to why it hurt creative producers. But Bitcoin/Blockchains? Literally no case can be made as to why we have banks when we have Bitcoin. It helps everyone except the people in charge of the inferior systems.
For example, what happened with Slavery? There was a lot of old money in Slavery and at some point we had to be like "sorry guys, your system sucks". Of course, that ended with war. But at the end of the day, we are in a better system. I can proudly say "slavery is disgusting" without fear of being hurt by the government.
Today we live in a time of financial slavery. A time where certain people get to control our money and thus our means. When will we be able to say that "banks are disgusting"? I am waiting for that day.
1. High net worth clients demanding such products. 2. Obvious FOMO. 3. In case this crypto thing becomes big they don’t want to be criticized. 4. All companies are seeing a nice bump in their share prices with any association to crypto
EDIT: I work in the area, not a shill.
>Best performing asset class over the last few years.
Previous performance is not a predictor.
>Even if it is a bubble, you might as well allocate a few %'s of your portfolio to it if you're wealthy
If it's a bubble it's a terrible idea to allocate a few percentage points to it.
Why? The word 'bubble' has negative connotations, but the flip side is the only opportunity of a great multiplier on your investment in a short time is during a bubble. Caveat of course, you can lose a lot of money, but that's why you allocate 1% of your portfolio so you can still survive.
[1] Although some whale customers may be able to. They may win big - or at least, lose less, at your expense.
It's crazy to think an amateur investor in Bitcoin is going to be able to "keep the exits clear". By the time you see the downturn those exits are long gone.
If an amateur can actually guess when the downturn starts (a really big if), they should not have much of a problem exiting. Even if a large investor can identify the downturn, if they try to exit quickly, they will probably just exacerbate the problem, without even being able to get all the way out themselves
I mined some bitcoin in the early days, when you could solo-mine for a week or so and net coins. I had a handful of coins that I cashed out for less than $100, because I didn't like Bitcoin as a long-term investment. If I'd sold half, I'd have made a tidy profit off the sale of the first half, with another handful of coins that, even if they tanked, I'm still in the black. But, if they go to some ridiculous number, like $10,000, I'm substantially better off.
Needless to say, I didn't save half, but even for people buying in now (I'm not), could end up doing well, even if the trajectory of BTC is $15k, $20k, $45k, $0, Of course, if the trajectory is $15k, $10k, $5k, $0, they'll be shit out of luck.
But basically it's because we don't try to time the market in that sort of way. Bubbles are great if you can sell right when you need to and (1) Bitcoin is fucking godawful at that and (2) we don't want to try and do that. Better to invest long term and ride an economic wave.
Timing in the sense of "we think European stock are going to do well so we'd likely to slightly increase the allocation across our portfolios" is alright but timing in the sense of "we think we can buy a new type of highly volatile asset with no underlying fundamentals and which doesn't fit neatly into any of our extant asset classes and sell it before it goes bad even though we can't do the same thing with regular old GE stock" is really bad.
Think of it this way, would you ever put 2% of your IRA on a roll of the craps wheel? No, because that's not what that account is for.
EDIT: Maybe a better example would be like buying TSLA options. You wouldn't do that in a portfolio because it's volatility for basically no reason.
We have no idea how far cryptocurrencies will run. There will be corrections along the way, but if it actually is a major bubble it might very well run up to $10tn in market cap before we see a major correction.
But I agree with the options example. Just being OK with risking a part of your portfolio doesn't mean being stupid about it. You want to make sure that the upside is sufficient and the true downside isn't 0. Which is why I would say crypto currently seems like a better investment than angel investing or buying options. You are probably putting 50% of your capital at risk, for a potential 5 to 10x return.
Come on man... That number is straight from your ass.
>I don't disagree with that, but by that definition, no investor should be taking any above average risk. I think being aggressive with a few percentage points of your portfolio on "long shots" or high risk stuff is not necessarily bad.
Not necessarily, it's more about minimizing timing risk. If you think Bitcoin will continue to run up in some sort of Keynesian-Beauty-Contest-Unpoppable bubble and/or is the new gold or what have you then yeah as a long term investment, cool. Most people don't think that though.
>But I agree with the options example. Just being OK with risking a part of your portfolio doesn't mean being stupid about it. You want to make sure that the upside is sufficient and the true downside isn't 0. Which is why I would say crypto currently seems like a better investment than angel investing or buying options. You are probably putting 50% of your capital at risk, for a potential 5 to 10x return.
None of these numbers come from anywhere though. The real answer is that with crypto you're putting ??% of your capital at risk for a potential ? to ?x return. There's no numbers to pin on anything, it's completely baseless. It's like a currency in that respect, it's only worth what people think it is with no underlying fundamental. You can't quantify anything about it because it's based on the psychology of individual investors and the sociology of investing groups. If some guy in Barron's wrote a really good and well researched article about how bitcoin is bad because it can't scale and you really need one of the scaling coins and you should get out now because BTC valuation is only based on there being a greater fool after you and so on the thing and if some guy on reddit wrote the same thing you don't think the price would dip? Of course, BTC is a meme, it only works because people believe in it. So how much do you want to bet on other people buying into it?
This is my biggest concern with Bitcoin right now. There doesn't seem to be any rational way to justify or explain its price.
How would someone go about making the argument that Bitcoin is over or undervalued at $10, or $100, or $100K? What's the justification?
Even currencies have far more fundamentals. Currencies at least represent faith in the governments that issue them, and those governments' ability to pay treasury bonds and manage inflation. I have never heard a good explanation for what the price of Bitcoin should be in terms of USD.
I found the risk/reward to be worthwhile, but I'm not risking what I can't afford to lose.
Yeah, this isn't a mutual fund. Yeah, it's not directly applicable. But chasing previous returns is a way to lose money, not gain it.
If I had $100 million, I wouldn't have any issues with investing $2-3 million in Bitcoin just for shits and giggles.
The idea is that when you have boatloads of money, you don't have to be risk-averse, as the marginal utility of each dollar you have is very low.
The best performing asset class is cocaine. Buy leaves from the growers, process, sell to the red carpet users. Thousands percent every year.
A lot of people jump on guys like Jamie Dimon and Lloyd Blankfein for calling Bitcoin massively volatile / a bubble / whatever, like they hate cryptocurrencies.
They don't care, and they aren't supposed to. Their business is to sell whatever the customer wants to buy, cheaper or easier than they can get it elsewhere - and right now the customer wants to buy Bitcoin. Who cares if the backside falls out of it later?
He can't be merely a skeptic when he's selling his own version to some of the largest banks in the world.
The amount fiat currency can be doubled overnight by the authority over the fiat currency. Stealing, in effect, from all of the people holding that currency. Non-fiat, like gold or bitcoin (at least this is what the true believers believe), have a high amount of work that needs to be done to just get a little bit more of it. No grabbing half the currency overnight.
bitcoin-core can double the amount of bitcoin overnight. They can commit new code which does that and shows up in the next client.
But, that would presumably be noticed: either in the oss repo, or in the blockchain itself.
So I think more accurately, it's sort of in between a fiat currency and a commodity. It's a fiat currency whose operation is completely transparent.
And with Bitcoin Cash gaining in popularity, a fork is not an impossibility. In fact, BCH is popular because it's actually usable unlike BTC at the moment (extremely high fees, slow confirmation times).
It is also my understanding that the crypto- in cryptocurrency enables anonymous trade. This would seem to preclude the need to even pay taxes since no government could even track the transactions. As I understand it this is the primary value proposition of Bitcoin.
Why would you want to pay taxes to the US government in any currency other than the US Dollar? I really don't understand the value there. Do people pay US income taxes in Euros? Why? How?
Blockchain technology aka shared public ledger has a value proposition.
The problem with subprimes was that banks were issuing questionable loans, and then selling them to investors (Without telling them that the loans weren't worth the paper they were printed on.)
This carries a significant reputation risk because they were, quite literally, defrauding their customers.
A crypto trading desk, on the other hand, just lets them buy or sell crypto on a customer's behalf, and charge them a fee for it - much like Coinbase does for retail customers. They won't have any insider knowledge about crypto, and they probably won't even care if BTC goes to $100,000 tomorrow, or to $0. The customer asks the bank to sell them BTC, the bank gives them a quote, and the customer accepts or rejects it. The bank doesn't know if its a good price, nor does it care - and the customer knows that the bank doesn't know, or care.
There's still ways to defraud customers in this arrangement, but there are far fewer incentives to do so... Compared to offloading toxic, shitty mortgages off your books, after having bribed ratings agencies to rate them AAA.
If you really care about crypto, this is a Good Thing (tm). Currently, the counterparty risk with Bitcoin exchanges is through the roof. Some of them allow illegal wash trades, some of them don't follow KYC, some of them go belly-up and steal all your bitcoin and dollars, some of them may be front-running their users, some of them don't allow half their users to withdraw USD, some of them are down for minutes a day... For anyone trading in an extremely volatile environment (Like Bitcoin), this practically screams: "RUN, DON'T WALK AWAY."
The counterparty risk with a Goldman Sachs trading desk is... Much lower.
This is not very dissimilar. I am certain the majority of investors who will buy bitcoin did not do their due diligence in term of how the currency works (in fact I see a lot of pretty financially switched on people around me who seem quite confused on how it works). They buy now because they want the return and will complain that they weren't aware of the risks when they lost their shirt.
There's certainly more due diligence that they could have done, but that's a red herring. There was plenty of outright fraud on the part of the ratings agencies. No subprime mortgage should have been rated triple-A. Yes, you could blame investors and pension funds for not realizing that they were systemically duped, and buyer beware and all that, but the ecosystem expected that CRAs were not flat-out lying to them.
Also, some of those investors were legally obligated to invest portions of their portfolio into AAA instruments. Their hands were, quite literally, tied.
> Investors losing money = investors suing. Selling products that you don't believe in yourself = testifying in front of a bunch of angry senators waiving internals emails about "shitty securities" at you.
When I buy a shitty penny stock from my stock broker, and the stock tanks, I can send as many nasty e-mails to him, and my senator as I want. Unfortunately for me, nobody will care one whit.
When Charles Schwab sells me a share of MSFT stock, it's not because they believe, or don't believe in MSFT. Their opinion of MSFT is completely irrelevant to this transaction. They do it because I asked them to sell me a share, and because someone else asked them to buy a share.
When some crook sells me a mortgage that they underwrote, that they then bribed a credit rating agency to rate highly, that I'm legally obligated to buy... That is an entirely different situation. Do that enough, and you bet some state senator is going to be gunning for them.
I am sure there was fraud as well. But fraud doesn't explain the financial crisis. Investor complacency, untested new product, excess leverage and reliance on short term funding, too much liquidity in the system, interest rates too low for too long, these were the fundamental reasons.
Fraud is the only thing that caused the financial crisis. Period.
Fraud from the top on through the bottom. The guy lying about his income to the mortgage broker who knew the dude was lying (and likely told him how to do it effectively), to the ratings agencies lying, to the wall street banks lying, to robosigning, etc. etc. etc. It was outright fraud every step of the way and almost no one who participated in that market has clean hands.
There's a world of difference between "We misjudged the long-tail risk of the instrument we rated" and "We straight up lied so that we could keep getting business from the banks."
Half the mortgages in some of those AAA instruments were issued to people with income at minimum wage, or with credit rating in the 500s, or to people buying homes that were never even looked at by underwriters. This isn't a "Whoops, our math was a bit off, we didn't expect the collateral to drop in value for a bit."
This is straight-up fraud, and the people carrying it out should have been taken out back, and had their shirts taken away from them. We need more, not less personal responsibility from our professional sectors.
This exact phrase should be painted on the wall of the lobby of every investment bank in the world.
This move by Goldman is based on learning. They will trade against the clients. Except they would hedge it.
I really doubt getting bailed out should be called "burned". More like they realized they could get away with murder.
I doubt they care about being criticized and until GS releases Goldman Coin I doubt they're trying to get a share price bump from this.
If it's on exchanges, then it has nothing to do with high net worth clients, or any other kind of client, because they won't be trading with their clients specifically, they'll be trading with other market participants.
if it's OTC, then it could be part of a package of services for clients. That would still a bit weird, though, because a bank would normally act as a broker rather than a dealer for its clients - going to the market and finding them the best price, rather than making its own price.
I think that their reason is much simpler: they think they can make money doing it. I guess you could call that FOMO. But basically, they think that with their trading instincts, technology, and famously huge brains, they can move their prices around so that they can buy low and sell high without getting, as we say in the trade, their faces ripped off.
Traders Lament Death of FX Volatility as Torpor Tanks Returns
https://www.bloomberg.com/news/articles/2017-12-10/traders-l...
Stocks and commodities spread through society that way, from the most well connected VCs down to the lower class when the price rise makes them feel like they have a chance to get rich after it is shown in their nonfinancial choices of entertainment
Bitcoin hasnt gone through society in this route
Existing hedge funds, VCs, University endowments and pension funds are legally incapable of buying cryptocurrency
They are all forming new LPs with new operating agreements to do so
There is no institutional leverage or credit in the cryptocurrency ecosystem
There are no derivatives to manage risk yet
The lower class will be selling to the institutions soon
Not what I’m hearing in legal circles
Everyone wants exposure, and if they require a new legal structure or a financial derivative they are doing what needs to be done.
The pensions will just go through the next hedge fund that buys for them.
I sold it about a week ago.
"Hi. Thank you for your excellent stewardship of my retirement savings all these years. You have helped us change a lot of things, and weather some pretty terrific storms like the Fall of 2008. I am now focused on a higher risk-reward trade off, and will be entrusting my son to invest my assets into the brave new world of crypto currencies. With thanks, please kindly close all of my accounts and begin the process of moving my funds to my son so that he can purchase Bitcoin."
I am not kidding. This, folks, is how the world ends.
Where I am from, that order would be totally illegal. ain't happening.
1) Transferring your money directly would allow to avoid inheritance tax.
2) Some jurisdictions have hard limits on what you can "donate" to your children. It can be "low" like 100k per 10 years.
In the same way, it's not tax evasion to have a successful business, say, making a million dollars selling shoes, even though there are limits on how much money you can make selling shoes before you have to pay tax on it. It is tax evasion if you make a million dollars of taxable income and only pay enough tax for half a million.
Do you have a specific jurisdiction in mind where this transfer would be tax evasion?
Point being. When the client ask "transfer the money to my son and close my account", he usually doesn't mean "take 30% off, transfer what's left to my son and close the account".
You can have a look at France. I am not sure what paperwork is needed to make it legitimately, it's non trivial.
It’s pretty common to move around retirement accounts in the US, the most popular type are tied with your job and frequently move when you change employers.
I would be really surprised if you couldn't transfer 100k (or 1M or 100M) anywhere. Sure, the recipient might need to pay taxes on that.
For international transfers, I've seen some getting cancelled without notification, the money is just sent back. It's weird.
Yea, no kidding!
The silver lining is that at 80, he won't have to live in penury for very long.
I feel really sad reading this. This can only end in tears for people like this old guy, or the people buying BTC with their credit card, or the people taking out mortgages to buy crypto.
[1]: https://en.wikipedia.org/wiki/Levi_Strauss_%26_Co.#Origin_an...
(/s)
https://www.smithsonianmag.com/history/there-never-was-real-...
Pretty much any 5 of the Fortune 100 has a market cap greater than 500bn, 500bn is a fuck tonne of money but compared to the aggregate size of the market it's pretty much bugger all.
What is the market cap of our two-animal store-of-value ecosystem?
(Unless you're an economist, the answer is not "Two million dollars.")
On the other hand, if I then went ahead and sold your cat to some outside party for $600, and you sold my dog for $400, we could reasonably say that the market cap is ~$1000.
This of course is a guess, and it could well have little impact. But it seems that the risk is larger than the size of this market would otherwise be in more mature sectors.
Maybe not right now, but the way things are going I wouldn't be too surprised if it actually ends up happening. I'm also sure plenty of people in the finance industry see this as a good profit opportunity; They might not find the gold themselves, but they will make plenty of money selling shovels to the people looking to find gold.
If GSCO is serious its coders will write code to run against crypto-APIs at the speed unseen by the "My exchange run on Rails" crowd.
If trading is not your primary business, you really do not want to do API trades.
I see no reason to consider that, though. You'd have to say that, not only the US dollar, but every paper currency is crashing, along with gold. That seems quite a stretch.
No. Crypto's a bubble. This isn't fiat currencies sliding.
[1] https://www.bloomberg.com/news/articles/2017-12-21/tax-free-...
Perhaps I am too cynical but given Equifax is still fresh on my mind I really have doubts the US government will do anything but pass laws to make sure they are getting taxes from cryptocurrencies.
Taxing cryptocurrencies will likely push traders who want a greater margin to foreign countries' exchanges; but I see it as a step in the right direction for institutionalizing the practice. I've seen a posts across multiple subreddits where people want to start trading these purely as investment vehicles rather than use the underlying technology. With an influx of ideologies working both with and against one another, a lot of ordinary people can get harmed from the wild-west environment and volatility associated with it.
Believing crypto-crypto trades would be like-kind was always pretty fanciful thinking.
its one of those "heads I win, tails you lose" scenarios...GS will keep the profits but if things go south, their losses can just be taken out of your local school budget
Of course the companies getting billions in government support will win big and easily pay back their loans. If they didn't get TARP bailout, they would fail and better competitors would replace them.
I'm not damning GS...any entity that has officially crossed over into too-big-to-fail should take as many crazy risks as possible...why not?
The above is purely my opinion and is frequently the subject of disagreement. It is, however, why I got into bitcoin.
Don't worry, in 18 months^, Lightning Network (TM) will come out and fix everything by adding a second layer to bitcoin, nevermind that the first layer will be ignored
^ Not accounting for perpetual delays as LN as been promised for a long time
If another becomes more popular, everyone shifts to it, and the price crashes, what use was bitcoin as a store of value?
The difference with other assets like cash or gold is that they have value that is supported by a clear rationale based on a central bank’s economic policies.
1. I believe in the technology approach bitcoin is taking over any other coin (I believe functionality like smart contracts should be a side chain to the main bitcoin chain).
2. It has had a firm 21m supply cap since the beginning
3. It is the most decentralized
4. It has the largest userbase -- it's a more widely adopted currency
5. It has the most proof of work behind it (most of the mining power in the world targets the bitcoin blockchain). Proof of work is what keeps the chain secure from malicious actors.
6. The ledger is public
Something like gold can't be audited. If I bought gold, I wouldn't want to store that in my house. I'd need to trust a third party to store it for me. Who's auditing that third party? Is my gold only mine on paper? Bitcoin is auditable, gold is not (for the average person).
Cash is a depreciating asset -- at best, it loses 2% per year (likely much more).
Prop trading firms have no reason not to manipulate the cryptomarkets (it seems legal) and have the capital and knowledge to do so. Or am I missing something and manipulating these markets is illegal?
The further the regulators try to reach, the further their opponents move away. That's a game the regulators won't win. It ends with complete anonymity for everybody.
I am also wondering if your comment is serious of not because it doesn't add anything to the discussion.
The fact that things are changing so fast that I can't tell if a comment is serious on HN says something I think.
Basically, I would structure the desk such that the technologically savvy people are analysts to the risk savvy people, with some quants to assist them and conceive pricing/predictive tools.
Your average quant is likely to know a lot about the financial markets, and have the ability to learn about individual crypto coins, but also likely to be unaccustomed to discretionarily managing risk.
I don't know how you would find someone who has been successful in trading bitcoin, but that would probably have more to do with luck than skill anyway. Not to mention that a large component of successfully trading on a desk involves communication with others, and that is larger than just "was this guy able to make money by being long bitcoin in 2017."
The list of things that makes this as genuine as it can be goes on and on.
It's a repeat of the 2008-09 crash from subprime loans. Everyone knew what was happening. But they just wanted to make as much money from the situation before getting out. Of course Lehman Brothers didn't get out in time.
Only if you make a crypto that runs on any device, needs tiny amounts of energy and therefore is impossible to take over.
Gold 2016 - 2017: almost no change
BTC 2010 - 2017: ~22499899% increase
BTC 2016 - 2017: ~1700% increase
One seems a bit more bubbly than the other don't you think?
Previous crashes = bankers dunking on retail investor rubes
Coming cryptoocurrency crash = nerdboi investor rubes dunking on bankers
Buy my pretties! Buy!
Create a wallet using this site https://raiwallet.com/, paste your address here and I'll send you some raiblocks. The transaction time is about ~5 seconds and there are no fees, so it's almost on par with a credit card, except you don't depend on a bank or a credit card company.
Also, check out this link to google trends: https://trends.google.com/trends/explore?q=raiblocks. You'll see that the country with the most interest in raiblocks is Venezuela, which coincidentally is going through hyperinflation. Bitcoins used to be quite big there as a way of avoiding the loss in value of the national currency, but as the country became poorer and the cryptocurrency networks more congested, the fees became prohibitively expensive. Raiblocks could be a good alternative to cash, or at least help some of the most technically savvy people.
What I'm aiming at is, give the technology a chance. As the top poster says, it might be a big bubble, but it might also be a revolutionary technology (or both, just like the internet).
EDIT: Sorry folks I have to go so you'll have to wait until I check my account again. Still I'll do my best to keep sending as long as people keep asking.
Although this site doesn't seem all that secure
I had heard about XRB for awhile but I'm surprised I couldn't find it on any of the major exchanges.
xrb_3fkg5jonksmby4xjzs8or8pf1btzja7wjk3c3wz3do8o3k1ie9dd5d7yf6nk
Thanks!
Why is RaiBlocks superior to other cryptocurrencies?
xrb_1mf1quypikgen383zos45696gatdtj8kq9d3henygnr7ncx9gqkr84rp1u5g
xrb_3ty7th6gpqnbi7p9169uaed7nwtdajj5ipc84x5dq9sc4top1sukqsrukxsy
Thanks for exposing me to this!
ac15f66716f6df73a2d2a54e207e3d64ebc30570367d39e7bf8c56e5f337aaeb
xrb_1z1cpzukqq5io1tdrffjkzdic1gzf5dr3bm9bur1owgerb917nhaaqobzrxn
Thanks, I'll pay it forward as well.
https://raiblocks.net/block/index.php?h=8CFDF6515E6E6A06BB11...
Thanks, no need to pay back. Enjoy!
I made an account on that site, xrb_1h7fo6dwweg1gibqdddtgrfxfziqr6ezkzcfidnmsc6gnrbqerkynk4be63a
xrb_196w8xumh5ewazrpfrdzspjf74ba8ijsqgrf8eemau8t8tqiekn7ishzouc7
Thanks!
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Thanks!
The one thing I didn't see in the paper is how you can make sure that other users have logs of your account. Bitcoin gives transaction fees as a way to pay for your stuff to be in the data, but how would I make sure mine is tracked?
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Thanks!
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> Raiblocks could be a good alternative to cash, or at least help some of the most technically savvy people.
Do you see any downsides? The only technical one I'm seeing is that the protocol isn't battle tested (e.g. can it cope with being spammed like crazy given it has zero fees?).
My wallet. xrb_1o85pzjf9nqkk76ku5qfzqkw6u6a3qt18o53ugh9dnaypotykzzqc7rcff4m
Anyway I know a thing or two about the technology, so if you have questions let me know and I'll do my best to answer or point you in the direction where I think you'll most likely find the answer :).
xrb_1ejsq9xkn5c4ciuexdgrp8hckmyf9q7fwttergsr3hqfrfqfu6k1x6upy8gn
xrb_3wq3d975sq1oef7y35mzakrywke18hab85g548wkshu61pec4fxkixbwhr48
Thanks!
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thx bro
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Thanks!
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xrb_1g9wwy6g39ae7hd7e4rr88pb48mkuhnf94bzzys1zq5tdi9ktm5ak7xo5wf5
xrb_31nc5rs8bfon399zfpzp9iar8wimfr7kp8i8dsm7b56ke7ogz6ghsmpgnjkk
Thanks!
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xrb_3ty8ni6tmh8be7yhupzzfswc18zjbk3di9wtqwaifb3rkeim4nyka1a3jwef
Sure, why not.
Thanks.
I'll give it a go. Thanks!
I'll test it out. Thank you!
xrb_1rkecomb7s3c8kkg8dir9frrpxxpazm3j531jcbh7zpqoe9umdbzoi
Thanks!
Edit: tried to figure this out. There is no mining but there is something POW that it wants me to opt in to use my browser for.
Where can I read more about this (except for the source code).
You can read more about the coin at this website: https://raiblocks.net/, or on its subreddit. There is some "PoW" involved but it's used to deter spammers, and it's not a key component of the protocol. Since there are no fees, there's no tangible economic disincentive to deter someone from spamming the network. Thus, before sending a transaction you have to solve a small problem that takes a couple of seconds in commodity hardware.
Address: xrb_3e54ix1ehqzwgufh5daspyk7fcyui1izsbdnxqqsxw5nefjc6p1yzt1m641d
xrb_3ni3ow69ecnrcbk7szto98apz3pure5tkxhye1unh4f1n3n74rsgqxdnsik8
Thanks
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Thanks!
Thanks!
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xrb_1mrb18cstrjrectodi6qjnm3jnjq79tbtuzhcbxix4oait6ity4gzxdhy9s8
How do I mine some ?
xrb_3ouz8ygb6mem18s5iq4b3qbum4qznnuhujj9zqbyntcxted5ah7xej45eerx
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xrb_3yrjpgt7f3au9x8b4xws4mih7yti9oytdj5xd3ybdjpyunt674x3y3hwdhh5
Thank you so much. :)
Thank you! :)
Thanks!
happy trading
Edit : i’m also not asking for the list of legal shops that accept bitcoins, i’m wondering about the percentage of officialy legal bitcoin transactions vs the rest.
How exactly do you plan on converting fiat to btc and then paying for transactions? Every step of the way is going to be on the. public. ledger. Forever. Linked to each step along the way. C'mon.
BTC is for people who don't want to be at the whim of banks or paypal. Or it was anyways, until the fees became too high and the transaction times became too long.
The serious use is with other coins like ETH (powering smart contracts, dApps) and BCH (hard fork of bitcoin from August that doesn't have BTC's current issues). Or altcoins. Raiblocks and XRP have extremely quick confirmation times.
All of which have a public ledger by the way. If you want to do illegal activities, you'd probably want to use Monero or NAV, but first you'd have to prove either are truly private.
Plus, if everything was public an easily traceable to a person then why are exchange platforms hacked ? You could easily identify the authors of the hack and sue them... i guess there isn’t enough regulation to make tracing the bitcoin a big enough legal threat. Or that tracing to the wallet without being able to identify the owner is useless. Which means it’s still good for other illegal activities.
Tech moves fast, you know ?