The economics of BitCoin

Relax

So this niche economic activity of bitcoin that is a bit of a rigmarole to go through ,especially if you just struck a £20 million deal with Mr big only to learn that by the time he got home he only really had £10 million in his account due to a flash crash and wants to discuss ways that you can make good the short payments.

The vast amount of traffic in bitcoin is people now buying it because they think it will make them richer. As long as those people don't use up all their life savings , borrow or use some other kind of leverage mechanism to keep reinvesting then the crash will not be too bad ~ Just a bunch of sad stories being told in the pub about the time they were worth a fortune and should have sold up.

I fear , especially in Asia , there is the beginnings of a real hysteria that will cause some real misery.

If bitcoin reaches £40,000 then the crash will be very very bad

cjohnstone4384

When it enters the futures market do we expect it to fall or rise?

GreatApe

Relax wrote: »

So this niche economic activity of bitcoin that is a bit of a rigmarole to go through ,especially if you just struck a £20 million deal with Mr big only to learn that by the time he got home he only really had £10 million in his account due to a flash crash and wants to discuss ways that you can make good the short payments.

The vast amount of traffic in bitcoin is people now buying it because they think it will make them richer. As long as those people don't use up all their life savings , borrow or use some other kind of leverage mechanism to keep reinvesting then the crash will not be too bad ~ Just a bunch of sad stories being told in the pub about the time they were worth a fortune and should have sold up.

I fear , especially in Asia , there is the beginnings of a real hysteria that will cause some real misery.

If bitcoin reaches £40,000 then the crash will be very very bad

Mr Big can move it back into the currency of his choice within 10 minutes of your transfer so unless there is a big crash within 10 minutes he will get more or less the same back. Also there is presumably a lot of value in him being able to transfer his £20 million to his secretive swiss bank accounts within minutes rather than have to drive a lorry full of used tenners across borders and take it into cleaners who will at a fee clean it into his accounts. Whereas the bit coins, Mr banker I was lucky I was one of the first to mine them on my cellphone ten years ago this $20 million is all legit ....

Most importantly if you are the buyer do you risk taking $20 million to Mr Big?
Or would you rather offer Mr Big $22 million in coins and you send a dozen of your men with cars. As each one leaves with 1/12th of the goods you wire 1/12th of $22 million. That way you get your goods at a lower risk. If you took him cash Mr Big might decide to rob you. Or one of your men rob you before during or after. Or the cops figure it out and your both out of pocket. Or at some stage in getting all this together someone fooks you over. It lower the risk for you greatly to use coins in which case they have real value to the transaction. Likwsie Mr Big is probably going to be glad for the coins stright to his wallet and stright out to his swiss account. Better than risking and paying the costs of $20 million moved across borders and cleaners. Win win

GreatApe

cjohnstone4384 wrote: »

When it enters the futures market do we expect it to fall or rise?

Its driven by speculation right now so it could double or half just flip a coin

Long term 10 years out I think I can see the value in a crypto asset as a store for hidden wealth. That may or may not be bitcoin but whatever it is it could have a market cap in the low $trillions.

GreatApe

https://www.youtube.com/watch?v=vjf_EjQATGU

Friedman describing something similar in 1999

economic

GreatApe wrote: »

Not necessarily
You could sell something you own for bitcoin like a house
You could purchase coins for cash at the local coins for cash exchange
Those might be legal actual shops if the coins become accepted legitimately
Or it might be the local gangster who set up a local exchange for cash. Buys bit coins for $10,000 and sells them for $10,500. You go to him and buy your coins at $10,500 and he gets rid of them to others for $10,000. Why would bit coin owners sell to this gangster rather than an exchange? Maybe to avoid taxes etc. Or of course there might be electronic exchanges in countries that do not share the details of their customers maybe they do not even keep the records they delete them instantly so no records to hand over.



As the seller you are in no additional risk, it is very low risk for you. You get an encrypted email saying please send 1kg of coke to address xyz here is your payment of 1 coin. You send to address xyz no one knows who you are. If your goods are good quality/value you will get repeat business.



Doesnt work like that, all you have of the buyer is an address. Its not like they send you a photocopy of their passport or add you on facebook. They can use any address and even bounce it a few times or even forward directly to the end users.



Face to face dealings are surely much less safe in every way.

the cash to BTC exchange is definitely traceable to the person. So if the person who is buying the drugs transfers the money he has to btc then the authorities could question the transactions (they could even question all transactions whether dodgy or not). of course if the buyer of the drugs can say its from a legit sale of a house then he would be fine. but what are the chances of the buyer of drugs using legit clean money to purchase the drugs?

if they do it the traditional way of cash to drug exchange, the cash will be most likely from ill gotten gains. with your BTC idea, he will be exchanging this ill gotten gained cash to btc and so the authorities will be all over him.

GreatApe

economic wrote: »

the cash to BTC exchange is definitely traceable to the person. So if the person who is buying the drugs transfers the money he has to btc then the authorities could question the transactions (they could even question all transactions whether dodgy or not). of course if the buyer of the drugs can say its from a legit sale of a house then he would be fine. but what are the chances of the buyer of drugs using legit clean money to purchase the drugs?

if they do it the traditional way of cash to drug exchange, the cash will be most likely from ill gotten gains. with your BTC idea, he will be exchanging this ill gotten gained cash to btc and so the authorities will be all over him.

Yes in theory if you could get the exchanges to hand over the information you could track all transactions by just following the ledger. However the black market can get over this by having physical exchanges with cash transactions.

That is to say Mr Big can buy 100 coins from a miner (or anyone who has coins from years ago) for $1,500,000 in used notes. There is nothing to link him to his wallet and he managed to just add $1.5 million to his wallet. Of course he does not even need to go himself he could get someone to get someone to go and buy the coins for cash to reduce his own personal risk

These physical cash exchanges could be big business. The governments would have to stop them but how you stop one exchange and someone just opens another? They do not even have to be buildings it can just be people meeting in parks or cars with suitcases of cash or blood diamonds or whatever.

Also there is some evidence to suggest the criminals were just holding the bitcoins and not converting back into cash. Some gangsters in Bulgaria got caught and they have something crazy like 600,000 bit coins ($9 billion at todays price but they probably acquired them at much lower prices). If you are a meth dealer or whatever and a customer just paid you in 1,000 bit coins do you really want to convert that to cash you then have the problem of $15 million in cash to hide/secure why not just keep it as coins? Of course at some point you may want to spend this. If on further illegal purchases you would just buy your guns in coins. If for legal purposes like paying for your kids schools you might need to turn it into cash you could do that at a physical exchange. Some other gangster wants to buy 10 coins to buy himself some coke so he meets one of your men in the park hands over $150,000 and you transfer him 10 coins

hildosaver

Criminals don't use bitcoin - they use US dollars mostly or if in crypto they use Monero.

westernpromise

Hilarious - the futures contract launches and instantly disconnects from the supposed underlying asset:

Prices of the Chicago Board Options Exchange (CBOE) Bitcoin futures contracts expiring in January jumped to $18,800 (£14,000) on Monday morning, from their opening level of $15,000...

The rise was followed by an increase in the price of Bitcoin itself, which surged past $16,700,
http://www.telegraph.co.uk/business/2017/12/10/cboe-bitcoin-futures-live-will-bubble-burst-trading-goes-mainstream/

Eric_the_half_a_bee

westernpromise wrote: »

Hilarious - the futures contract launches and instantly disconnects from the supposed underlying asset:

Prices of the Chicago Board Options Exchange (CBOE) Bitcoin futures contracts expiring in January jumped to $18,800 (£14,000) on Monday morning, from their opening level of $15,000...

The rise was followed by an increase in the price of Bitcoin itself, which surged past $16,700,

So can I sell forward at $18,800, buy now at $16,700, and guarantee myself a risk-free profit?