OT: Ray, how's your Bitcoin investment going?

[cfox]

Originally Posted by fuzzalow

OK, point taken that my limited knowledge of Bitcoin hinders my recognition of the value or solution it offers. Is it safe to say that the main thing it offers is a way to circumvent banking & financial transaction fees? Because if true, the payoff for me as a retail customer is NOT paying credit card fees or PayPal fees to move small to medium size amounts of money around. In this example, Amex & PayPal both charge ~3% to transact across which is a savings to me using Bitcoin. But this may be offset by the variable exchange rate in cashing in Bitcoins back to real currency if not completing a full one-way trip for the transaction.

I seek not a primer on Bitcoin, if I am wrong about the preceding, then simply advise and I will look further. But my actual point here is this is a very small payoff to me as a retail client to entrust a Bitcoin exchange to safeguard my money - a steekin' 3% savings!?!? Or is the real seduction the ability to "mine" bitcoins which I see as burning CPU cycles to "produce" bitcoins from thin air.

VC participation as an investment is a very different animal than the retail users with their money in Bitcoin exchanges.



$10M side bid/offer is for all purposes a fictitious number. It will change, and certainly the spread will change, if the volatility, demand for liquidity and order imbalance were to heat up. In fairness, perhaps the daily aggregate dollar volume is enormous so there really is liquidity in the Bitcoin exchange. I dunno.

I don't want to sound like I'm just bashing away, hence the remark that I didn't wish to appear to say "I told you so" based on the hindsight of reading of the Mt Gox bankruptcy.

The appeal varies depending on the end user: some like the fee-less structure, some like the fixed supply/inflation "hedge" angle, and some just like the libertarian aspect to it. And, yes, it appeals to criminals, although that use is supposedly greatly exaggerated by the press and is (massively) dwarfed by the use of actual currency.

Without going to far into it, you don't need to keep your coins at an exchange. You can store them locally on your own hard-drive or, better yet, a "cold storage" device not connected to the internet, like a thumb drive. As long as you don't lose your drive, your coins are 100% safe. Unless you are a very active trader, there is no point in storing your coins in your exchange account.

And yes, like any market, the bid/offer size is fictitious to a degree. Like any market, once a bid starts to get hit/offer lifted, a lot of the stack will cancel.

[cloudguy]

Originally Posted by cfox

You don't need to keep your coins at an exchange. You can store them locally on your own hard-drive or, better yet, a "cold storage" device not connected to the internet, like a thumb drive. As long as you don't lose your drive, your coins are 100% safe.

Should I then place my thumb drive under my mattress, for extra safety?

[Tony T]

Originally Posted by cfox

…As long as you don't lose your drive, your coins are 100% safe.

…or if the flash drive is damaged, so have multiple copies, with one in a Safe or Safe Deposit Box.

Old new: IT worker throws out hard drive, loses $7.5 million Bitcoin fortune (I wonder if he's still looking)

[cfox]

Originally Posted by cloudguy

Should I then place my thumb drive under my mattress, for extra safety?

safest place? ass

[cfox]

Originally Posted by Tony T

…or if the flash drive is damaged, so have multiple copies, with one in a Safe or Safe Deposit Box.

Old new: IT worker throws out hard drive, loses $7.5 million Bitcoin fortune (I wonder if he's still looking)

I remember that story. sad/funny. I would round up a posse and rent 20 back hoes

[Tony T]

Thumb Drive:

[Tony T]

Originally Posted by cfox

I remember that story. sad/funny. I would round up a posse and rent 20 back hoes

He posted a pic of the site on Twitter: https://twitter.com/howelzy/status/4...004672/photo/1

[Pete Mckeon]

Folks have different experiences and information of the various aspects of financial environments.

How they use it for things like bitcoin, penny stocks and even gold are the users responsibility and happiness thus whichever gives you the biggest smile.

I personally would not be a person that would use them based on my personal views of risks vs rewards which I use for investments

Sorry I did not mean to offend you. Pete

Originally Posted by fuzzalow

I had not read that news report yet at the time of my previous post. I would not have posted if I had because it seems too much like saying "I told you so...". What I think about Bitcoins would be unchanged regardless.

[fuzzalow]

Originally Posted by Pete Mckeon

Folks have different experiences and information of the various aspects of financial environments.

How they use it for things like bitcoin, penny stocks and even gold are the users responsibility and happiness thus whichever gives you the biggest smile.

I personally would not be a person that would use them based on my personal views of risks vs rewards which I use for investments

Sorry I did not mean to offend you. Pete

No worries, no problem at all. Offend?! You mean to me?? I have no couth so I am not even sure you're talkin' to me.

I am wary of financial instruments that get portrayed as swiss army knives of finance. Makes me believe that it purposely obscures the fact that there is supposed to be real money functioning behind all this bitcoin facade. But the only thing that's real is the currency and not the multipurpose razzle dazzle of the bitcoin.

Reminds me of a saying of sage wisdom in the casino industry: "The guy that invented gambling was smart but the guy that invented the gaming chip was a genius".

[Tony T]

Meanwhile, at Citigroup:

Citigroup Takes $400 Million Hit, Alleging Fraud in Mexico

Citigroup Inc. said as much as $400 million was stolen from its Mexico unit in what the bank's chief executive called a "despicable crime."

The New York bank announced Friday that it was cutting its fourth-quarter and full-year results by about $235 million after finding allegedly fraudulent billings at its Mexico unit, Banco Nacional de Mexico, CORPTRC.MX 0.00% or Banamex.

[Louis]

Originally Posted by Tony T

Meanwhile, at Citigroup:

We're not setting the bar terribly high, if our criterion is that Bitcoins be better than the existing banksters...

[happycampyer]

This was published a few months back, but is still an interesting read:

Yermack, Is Bitcoin a Real Currency?

The abstract:

Motivated by Bitcoin’s rapid appreciation in recent weeks, I examine its historical trading behavior to see whether it behaves like a traditional sovereign currency. Bitcoin has exchange rate volatility an order of magnitude higher than the volatilities of widely used currencies, undermining Bitcoin’s usefulness as a unit of account or a store of value. Bitcoin’s daily exchange rates exhibit virtually zero correlation with bona fide currencies, making Bitcoin useless for risk management purposes and exceedingly difficult for its owners to hedge. Bitcoin also lacks access to a banking system with deposit insurance, and it is not used to denominate consumer credit or loan contracts. Bitcoin appears to behave more like a speculative investment than like a currency.

[cfox]

Originally Posted by happycampyer

This was published a few months back, but is still an interesting read:

Yermack, Is Bitcoin a Real Currency?

The abstract:

Motivated by Bitcoin’s rapid appreciation in recent weeks, I examine its historical trading behavior to see whether it behaves like a traditional sovereign currency. Bitcoin has exchange rate volatility an order of magnitude higher than the volatilities of widely used currencies, undermining Bitcoin’s usefulness as a unit of account or a store of value. Bitcoin’s daily exchange rates exhibit virtually zero correlation with bona fide currencies, making Bitcoin useless for risk management purposes and exceedingly difficult for its owners to hedge. Bitcoin also lacks access to a banking system with deposit insurance, and it is not used to denominate consumer credit or loan contracts. Bitcoin appears to behave more like a speculative investment than like a currency.

Thanks Happy, that's a great paper, but he is incorrect on a major point: there is a growing bitcoin derivatives market. It, like everything regarding bitcoin, is young, but it does provide a way to hedge, or get outright short, bitcoin.

Another interesting thing in the paper; the author debunks the myth that bitcoin is a bonanza for criminals. He makes the point that Marc Andreesen has been making for a long time, and that is that it's much more difficult to launder money or avoid taxes with bitcoin than with hard cash.

I don't want to come across as the bitcoin cheerleader here, as I'm sure it seems, but I see a lot of people (not you, Happy) with strong opinions about bitcoin while they freely admit to not knowing anything about it.

[CNY rider]

Originally Posted by Tony T

Meanwhile, at Citigroup:

Citigroup Takes $400 Million Hit, Alleging Fraud in Mexico

Citigroup Inc. said as much as $400 million was stolen from its Mexico unit in what the bank's chief executive called a "despicable crime."

The New York bank announced Friday that it was cutting its fourth-quarter and full-year results by about $235 million after finding allegedly fraudulent billings at its Mexico unit, Banco Nacional de Mexico, CORPTRC.MX 0.00% or Banamex.

When they do it it's "accounting irregularities".
When it's done to them it's a "despicable crime".

[fuzzalow]

Originally Posted by cfox

Thanks Happy, that's a great paper, but he is incorrect on a major point: there is a growing bitcoin derivatives market. It, like everything regarding bitcoin, is young, but it does provide a way to hedge, or get outright short, bitcoin.

Another interesting thing in the paper; the author debunks the myth that bitcoin is a bonanza for criminals. He makes the point that Marc Andreesen has been making for a long time, and that is that it's much more difficult to launder money or avoid taxes with bitcoin than with hard cash.

I don't want to come across as the bitcoin cheerleader here, as I'm sure it seems, but I see a lot of people (not you, Happy) with strong opinions about bitcoin while they freely admit to not knowing anything about it.

Heck, don't take an ad hominen dig at me, instead why don't you counter the points of my arguments. Anything I could possibly bring up as downside risk and variables in the Bitcoin landscape should have already been vetted as part of the diligence and strategy formation in how Bitcoin was to be used. Because unless the plan is flying blind with no instruments, none of what I said should have come across as news. Finance is a cruel profession, what rigor isn't self imposed will, with harsh surety, be exposed and exploited by others.

None of this is personal. The conversations are civil and interesting and I don't wish to spoil the conversation so I will stand down my comments.