The benign product is sovereign programmable money, which is historically a niche interest of folks with a relatively clustered set of beliefs about the state, the literary merit of Snow Crash, and the utility of gold to the modern economy.
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This product has narrow appeal and, accordingly, is worth about as much as everything else on a 486 sitting in someone's basement is worth.
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The other product is investment scams, which have approximately the best product market fit of anything produced by humans. In no age, in no country, in no city, at no level of sophistication do people consistently say "Actually I would prefer not to get money for nothing."
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This product needs the exchanges like they need oxygen, because the value of it is directly tied to having payment rails to move real currency into the ecosystem and some jurisdictional and regulatory legerdemain to stay one step ahead of the banhammer.
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Pause here to acknowledge that product two has learned exactly which words to emphasize to product one's audience to borrow their credibility, networks, and talents to facilitate the building of their payment rails and legal entity shellgames. ("It's censorship resistance!")
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"Why are Bitcoin exchanges hives of scum and villainy?" Because if they weren't Bitcoin would be valued at its use value, not its speculative value. "Why don't we find a bottom in the market?" Because the use value is, to a reasonably accurate approximation, zero.
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Oh to be a character in a Michael Lewis book, seeing the world around him gone utterly mad and being virtually unable to stop it or profitably trade it because of market microstructure. *sigh* Hey narrator, make this book more like the Big Short and less like Flash Boys, please.
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Replying to @PaulsonJonathan
Believe me, I know, but the combination of ~$40k of margin requirement per Bitcoin (at least at my broker) plus 25% circuitbreaker (and pre-commitment to not settle at or near zero) means my risk to the upside is uncapped but returns on the downside are not very attractive.
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Replying to @patio11
Is that margin per contract or per coin? (IIRC each contract is five bitcoin). I don’t follow why circuit breaker matters or what pre-commitment you mean; if the prices at the bitcoin exchanges drop to ~0 the future will settle there? Is risk worse than any other short?
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Patrick McKenzie Retweeted Patrick McKenzie
Margin is per coin (it's $40k for the contract which is 1 BTC and $200k for the contract which is 5; can't remember which exchange is which). If prices drop to zero they've said "Won't settle near zero."https://twitter.com/patio11/status/930338462531698688 …
Patrick McKenzie added,
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Replying to @patio11
Wow 10x margin is insane. Thanks for the CME reference; I hadn’t seen that. That’s really bad...seems to defeat the whole point of having a future :(
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