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Guest Post: Why One Trader Is A “Big Bitcoin Bear”
Via Kevin Muir of “The Macro Tourist” fame
We all know Dirty Harry’s viewpoint about opinions, but I wonder what Detective Callahan would think about today’s bitcoin mania. It seems like every Tom, Dick and Harry feels obliged to weigh in about the manic action of the their favourite virtual currency, yet I am curious how many of these crack pundits have ever even transacted in bitcoin.
I am by no means an expert, but have at least owned bitcoins, mined them, and even arb’ed them a
BitCoin, or BitConn, whatever you want to call it is useful in the sense that it makes you think about the modern meaning of money. You should think about the whole world going to a blockchain item and eliminating all other currencies. It is just a thought experiment, but an important one. The history of the Euro lends insight too as do Greek threats to partially bring back their own currency. The people that think hardest here probably will design the optimal medium of exchange. But if you think 2% loads per retail transaction are optimal, guess again. The one I’m studying is running 3-10 times as volatile as BitCoin on a daily basis. The big question is: Are runups largely a repudiation of central bank behavior?
What do you think of One Gram? Too much political risk?
Warren Buffet’s genius seems to be the ability to simplify investments to their most accurate risk interpretation. About gold – Buffet simply says – “It has no utility.” Meaning that it is not a critical finite resource, but rather it is a discretionary resource (90% of its market). The remaining 10% of industrial uses are also not critical either and have effective substitutes. In other words if all the gold on the planet disappeared over night – absolutely nothing would happen to the global economy.
Worse for gold, in an economic collapse most serious preppers agree that gold will have no value in a post collapse critical commodity trading society (food/water, shelter, and security) trades all having more value than a useless soft shinny metal. Gold (inwired human attraction to bright shinny useless things) trading would not likely find a place until a sufficient recovery of social order permitted an environment where secure exchanges could take place.
About bitcoin Buffet says – “It is nothing more than a way of transmitting money.” Having personally bought and sold Bitcoins in foreign purchase transactions it seems a cumbersome process and it provided zero anonymity. The only way to make an anonymous Bitcoin purchase is to buy the bitcoins with cash in a face-to-face transaction with the seller – a high risk potential in itself. This of course assumes you have accumulated significant amounts of cash without leaving banking or other transaction records that would create an auditable trail. It you are under law enforcement scrutiny to start with, you are pretty much screwed regarding anonymity to start with.
All that said, trading is all about the trading universe perspective. As long as someone doesn’t open the can of trading sardine reality (great article, great trading analogy), its all good… until it isn’t.