Cryptocurrency mega-thread

[bzparkes]

We used to get a weekend pump. That was fun.

Yeah i know, now it's a Monday dump

 

[bzparkes]

Biggest problem facing crypto and share markets isn't people's belief that it's a 'ponzi' scheme, it's the out of control derivatives markets. Apparently derivatives are valued at more than double the entire world's financial system. The casino it's turned into is it insane.

 

[BACCS]

PA looks bad here guys. I think it's over if we go below 30k again.

Hopefully one last pump into the 40s before then.

I’m not so sure on that. Hate on him all you like and take it with a grain of salt, but he has connections. Anyway, Bitboy is getting fed info that the institutions driving down the market were targeting either 28k (which was hit) or 24k. They are obviously treading a fine line given that they want to still make decent ROIs in the near future and attract retail investors to the market. One more leg down this weekend when the monthly and quarterly futures expire for BTC and ETH wouldn’t surprise me before the trend up to new ATHs starts to gain momentum.

I also suggest a listen of a video between Bitboy and London Real for anyone interested in the wider picture of crypto and where it has developed from since 2009. They both also go into past drug addictions and how they developed into the people they are today.

 

[BACCS]

Biggest problem facing crypto and share markets isn't people's belief that it's a 'ponzi' scheme, it's the out of control derivatives markets. Apparently derivatives are valued at more than double the entire world's financial system. The casino it's turned into is it insane.

I learnt just today actually that the derivatives market is worth 1 quadrillion dollars and the entire world economy is only worth 1.5 quadrillion dollars. Basically, two thirds of the global wealth is in derivatives, insane.

I may not have all the numbers exactly correct (I’m still researching and trying to learn more), but as you said, derivatives markets are insanely huge.

 

[ash_1050]

I learnt just today actually that the derivatives market is worth 1 quadrillion dollars and the entire world economy is only worth 1.5 quadrillion dollars. Basically, two thirds of the global wealth is in derivatives, insane.

When you say the 'entire world economy' are you referring to total world GDP output or another figure?

Assuming it is a reference to GDP I'm curious as to why you're adding notional values and GDP figures together, as they're entirely separate concepts?

Also what's your source on those figures?

 

[Evolved1]

I’m not so sure on that. Hate on him all you like and take it with a grain of salt, but he has connections. Anyway, Bitboy is getting fed info that the institutions driving down the market were targeting either 28k (which was hit) or 24k. They are obviously treading a fine line given that they want to still make decent ROIs in the near future and attract retail investors to the market. One more leg down this weekend when the monthly and quarterly futures expire for BTC and ETH wouldn’t surprise me before the trend up to new ATHs starts to gain momentum.

I also suggest a listen of a video between Bitboy and London Real for anyone interested in the wider picture of crypto and where it has developed from since 2009. They both also go into past drug addictions and how they developed into the people they are today.

I hope so. I've loaded up heavily earlier today, but with a tight stop loss. We'll see.

 

[BACCS]

When you say the 'entire world economy' are you referring to total world GDP output or another figure?

Assuming it is a reference to GDP I'm curious as to why you're adding notional values and GDP figures together, as they're entirely separate concepts?

Also what's your source on those figures?

I haven’t been able to cross reference where I got it from, so tbh I can’t answer your questions. I wasn’t going to post it until someone else posted something on the topic, I probably should’ve just not posted it… I may have completely misinterpreted what I read too, I’m very new to this. If I make the question more general, is a majority of the global wealth tied up in derivatives rather than tangible assets?

From my limited understanding, price fluctuation is heavily dictated by derivatives in crypto and traditional investment markets, is that correct?

 

[BACCS]

I hope so. I've loaded up heavily earlier today, but with a tight stop loss. We'll see.

What did you load up in?

 

[ash_1050]

I haven’t been able to cross reference where I got it from, so tbh I can’t answer your questions. I wasn’t going to post it until someone else posted something on the topic, I probably should’ve just not posted it… I may have completely misinterpreted what I read too, I’m very new to this. If I make the question more general, is a majority of the global wealth tied up in derivatives rather than tangible assets?

From my limited understanding, price fluctuation is heavily dictated by derivatives in crypto and traditional investment markets, is that correct?

Yeah I think you missed the mark with your interpretation, as Gross Domestic Product (GDP) and derivatives are entirely separate things. 'The entire world economy' would generally be considered to be the world GDP, i.e. the economic output of every country, which is somewhere around $81 trillion dollars.

The total value for derivatives is debatable, as there's two metrics you can qualify or exclude to reach a total value of derivatives, notional value, and market value. In a nutshell notional value is the value represented by the derivative, which is to say "what's it currently worth?". An example would be barrels of oil, if you've got a futures contract expiring 31/12/21 for 100 barrels of oil and the current value of oil is $40/barrel then your notional value is $4000.

Alternately if you're taking a more conservative approach to valuing derivatives you can use the market value instead, which is simply "what's someone willing to pay?". Using the above example if you wanted to buy the futures contract from it's current owner you'd be very unlikely to pay $4000 for it, despite this being the notional value. The real value may be higher if it looks like oil prices are suddenly about to spike and the market decides it needs to lock in oil security right now to hedge against this sudden rise, so it may pay more than the $4000 notional value. Alternately if oil production is expected to rise 30% tomorrow the price of oil would therefore decrease, so you may only be willing to pay $2800 for contracts with a notional value of $4000, as there's a risk they'll be worth much less come contract expiration. There's a few ways you can try and determine the market value, however the Black-Scholes Model is the most popular for determining what it's actually worth.

How does this all tie into your initial post? Adding the world GDP output ($81 trillion) and the total derivatives market (notional value $640 trillion, market value $12 trillion) together doesn't make sense. Instead you'd postulate that the notional value of the derivatives market is about 8 times that of total GDP output, or that GDP output is about 6 times larger than the market value of the derivatives market. This shows that the majority of global wealth is not tied up in derivatives, but instead spread across various asset classes.

 

[ash_1050]

Tying the above into a separate post about crypto this may be where a disconnect exists between those who are buying at every opportunity, and those of us who are sitting on the sidelines rather than buying. Let's assume BTC is "tangible" for the purposes of the explanation, though that would make an interesting tangent post on its own. Tangible property also has a notional value and a market value. Crassus was one of the first documented cases of realising this and exploiting the difference between the two for personal gain. He did so by using slaves as firefighters, who would rush to any building on fire, negotiate with the property owner to buy the property for Sestertius on the Denarius and then put the fire out, thereby netting a damaged property which, once restored, had a much higher notional value than the market value it traded for when it was burning to the ground. But I digress.

The market value of BTC is currently USD$32600, and this has been determined by the free market. The notional value is much more difficult to determine, as it's relatively new, the uptake in usage has been inconsistent and it's subject to a lot of uncertainty around legalities, market manipulation, storage and access. As such those of us who are advising the current price of BTC at $32600 is too high believe that the current notional value doesn't live up to the market value, and therefore it's not currently worth a buy. This may change in the future if one of two things happen, either the market value decreases to a point where it's lower than the perceived notional value, or the notional value increases to a point where it is higher than the market value. In both scenarios bitcoin would then become a buy.

 

[maryjames]

This time is different. It’s not the 1970s anymore.

another common phrase said before the big crash. The exact same thing was said during the peak of the IT boom.

What crash?

 

[BACCS]

Yeah I think you missed the mark with your interpretation, as Gross Domestic Product (GDP) and derivatives are entirely separate things. 'The entire world economy' would generally be considered to be the world GDP, i.e. the economic output of every country, which is somewhere around $81 trillion dollars.

The total value for derivatives is debatable, as there's two metrics you can qualify or exclude to reach a total value of derivatives, notional value, and market value. In a nutshell notional value is the value represented by the derivative, which is to say "what's it currently worth?". An example would be barrels of oil, if you've got a futures contract expiring 31/01/21 for 100 barrels of oil and the current value of oil is $40/barrel then your notional value is $4000.

Alternately if you're taking a more conservative approach to valuing derivatives you can use the market value instead, which is simply "what's someone willing to pay?". Using the above example if you wanted to buy the futures contract from it's current owner you'd be very unlikely to pay $4000 for it, despite this being the notional value. The real value may be higher if it looks like oil prices are suddenly about to spike and the market decides it needs to lock in oil security right now to hedge against this sudden rise, so it may pay more than the $4000 notional value. Alternately if oil production is expected to rise 30% tomorrow the price of oil would therefore decrease, so you may only be willing to pay $2800 for contracts with a notional value of $4000, as there's a risk they'll be worth much less come contract expiration. There's a few ways you can try and determine the market value, however the Black-Scholes Model is the most popular for determining what it's actually worth.

How does this all tie into your initial post? Adding the world GDP output ($81 trillion) and the total derivatives market (notional value $640 trillion, market value $12 trillion) together doesn't make sense. Instead you'd postulate that the notional value of the derivatives market is about 8 times that of total GDP output, or that GDP output is about 6 times larger than the market value of the derivatives market. This shows that the majority of global wealth is not tied up in derivatives, but instead spread across various asset classes.

So when that futures contract expires for the oil in your example, does that person then come out with $4000, but they don't actually 'own' the 100 barrels of oil?

 

[ash_1050]

So when that futures contract expires for the oil in your example, does that person then come out with $4000, but they don't actually 'own' the 100 barrels of oil?

Assuming the price remains unchanged at $40/barrel come contract end day on 31/12/21 you'd be obliged to either buy 100 barrels of oil for $4000 which is market price or you'd sell the contract at the last moment to someone for a slightly lower notional price, as no one would buy this contract off you for $4000 when they can just buy the barrels themselves at the market rate. You might instead sell it for $3800, which frees you up from an obligation to buy the oil and instead allows you to bank as close to 100% of the current market value of possible.

That's why we had the brief moment last year where oil contracts went negative, as the notional value was significantly less than the market value, as no one wanted to end up getting stuck with a stack of oil they couldn't use.

 

[BACCS]

Assuming the price remains unchanged at $40/barrel come contract end day on 31/12/21 you'd be entitled to either buy 100 barrels of oil for $4000 which is market price or you'd sell the contract at the last moment to someone for a slightly lower notional price, as no one would buy this contract off you for $4000 when they can just buy the barrels themselves at the market rate. You might instead sell it for $3800, which frees you up from an obligation to buy the oil and instead allows you to bank as close to 100% of the current market value of possible.

That's why we had the brief moment last year where oil contracts went negative, as the notional value was significantly less than the market value, as no one wanted to end up getting stuck with a stack of oil they couldn't use.

Ok thanks, this has been very helpful. These futures contracts are different to leverage trading longs/shorts though, is that correct?

 

[ash_1050]

Ok thanks, this has been very helpful. These futures contracts are different to leverage trading longs/shorts though, is that correct?

There can be some overlap depending on your leveraging/short strategy, as futures contracts may make up part of the strategy, but for all intents they're two separate things with two separate objectives, yes.

 

[BACCS]

There can be some overlap depending on your leveraging/short strategy, as futures contracts may make up part of the strategy, but for all intents they're two separate things with two separate objectives, yes.

Sorry if you've already explained this and I'm not understanding you fully, but are futures contracts and leveraged trades included in the value of the market cap?

 

[ash_1050]

Sorry if you've already explained this and I'm not understanding you fully, but are futures contracts and leveraged trades included in the value of the market cap?

What do you mean by 'market cap'? If you mean the market cap of a company, then no. They're separate items in separate asset classes.

 

[bzparkes]

I learnt just today actually that the derivatives market is worth 1 quadrillion dollars and the entire world economy is only worth 1.5 quadrillion dollars. Basically, two thirds of the global wealth is in derivatives, insane.

I may not have all the numbers exactly correct (I’m still researching and trying to learn more), but as you said, derivatives markets are insanely huge.

You watching Andre Jikh/read that Twitter thread too, eh?

 

[bzparkes]

I haven’t been able to cross reference where I got it from, so tbh I can’t answer your questions. I wasn’t going to post it until someone else posted something on the topic, I probably should’ve just not posted it… I may have completely misinterpreted what I read too, I’m very new to this. If I make the question more general, is a majority of the global wealth tied up in derivatives rather than tangible assets?

From my limited understanding, price fluctuation is heavily dictated by derivatives in crypto and traditional investment markets, is that correct?

Yeah I think you missed the mark with your interpretation, as Gross Domestic Product (GDP) and derivatives are entirely separate things. 'The entire world economy' would generally be considered to be the world GDP, i.e. the economic output of every country, which is somewhere around $81 trillion dollars.

The total value for derivatives is debatable, as there's two metrics you can qualify or exclude to reach a total value of derivatives, notional value, and market value. In a nutshell notional value is the value represented by the derivative, which is to say "what's it currently worth?". An example would be barrels of oil, if you've got a futures contract expiring 31/01/21 for 100 barrels of oil and the current value of oil is $40/barrel then your notional value is $4000.

Alternately if you're taking a more conservative approach to valuing derivatives you can use the market value instead, which is simply "what's someone willing to pay?". Using the above example if you wanted to buy the futures contract from it's current owner you'd be very unlikely to pay $4000 for it, despite this being the notional value. The real value may be higher if it looks like oil prices are suddenly about to spike and the market decides it needs to lock in oil security right now to hedge against this sudden rise, so it may pay more than the $4000 notional value. Alternately if oil production is expected to rise 30% tomorrow the price of oil would therefore decrease, so you may only be willing to pay $2800 for contracts with a notional value of $4000, as there's a risk they'll be worth much less come contract expiration. There's a few ways you can try and determine the market value, however the Black-Scholes Model is the most popular for determining what it's actually worth.

How does this all tie into your initial post? Adding the world GDP output ($81 trillion) and the total derivatives market (notional value $640 trillion, market value $12 trillion) together doesn't make sense. Instead you'd postulate that the notional value of the derivatives market is about 8 times that of total GDP output, or that GDP output is about 6 times larger than the market value of the derivatives market. This shows that the majority of global wealth is not tied up in derivatives, but instead spread across various asset classes.

Explained here

 

[BEaston]

Tying the above into a separate post about crypto this may be where a disconnect exists between those who are buying at every opportunity, and those of us who are sitting on the sidelines rather than buying. Let's assume BTC is "tangible" for the purposes of the explanation, though that would make an interesting tangent post on its own. Tangible property also has a notional value and a market value. Crassus was one of the first documented cases of realising this and exploiting the difference between the two for personal gain. He did so by using slaves as firefighters, who would rush to any building on fire, negotiate with the property owner to buy the property for Sestertius on the Denarius and then put the fire out, thereby netting a damaged property which, once restored, had a much higher notional value than the market value it traded for when it was burning to the ground. But I digress.

The market value of BTC is currently USD$32600, and this has been determined by the free market. The notional value is much more difficult to determine, as it's relatively new, the uptake in usage has been inconsistent and it's subject to a lot of uncertainty around legalities, market manipulation, storage and access. As such those of us who are advising the current price of BTC at $32600 is too high believe that the current notional value doesn't live up to the market value, and therefore it's not currently worth a buy. This may change in the future if one of two things happen, either the market value decreases to a point where it's lower than the perceived notional value, or the notional value increases to a point where it is higher than the market value. In both scenarios bitcoin would then become a buy.

Or a you believe the notional value is currently less than market (and likely always will be), but believe market value will still increase.

Good posts.

 

[Evolved1]

What did you load up in?

I'm only playing with eth and btc at the moment.

 

[ash_1050]

Explained here

The purpose of making an in depth and informative educational post was to encourage people to do their own research and understand things on an in-depth level.

That then prevents them to linking to miscellaneous articles, YouTube videos or charts and saying “this guy explains it” or “this graph explains it” and adding no actual commentary or discussion because you don’t understand the concept yourself. People need to be independent thinkers, not mouthpieces parroting someone else’s views.

 

[bzparkes]

The purpose of making an in depth and informative educational post was to encourage people to do their own research and understand things on an in-depth level.

That then prevents them to linking to miscellaneous articles, YouTube videos or charts and saying “this guy explains it” or “this graph explains it” and adding no actual commentary or discussion because you don’t understand the concept yourself. People need to be independent thinkers, not mouthpieces parroting someone else’s views.

Did you watch the video?

I'm not disagreeing with your post by the way, just think the vid's relevant to the discussion and explains it well.

 

[ash_1050]

Did you watch the video?

I'm not disagreeing with your post by the way, just think the vid's relevant to the discussion and explains it well.

I didn’t watch it, I want to hear your thoughts on it as I’m trying to promote active thinking and discussion rather than surface level interactions of posting videos to things you agree with. Watch it, put your thoughts into 2-3 paragraphs of what you agree or disagree with, or bits you don’t quite understand, and once I’ve got a baseline of your thoughts I’ll give it a watch and discuss it with you. Asking me to discuss it with you without providing any points of discussion is doing both of us a disservice.

 

[Ghost Patrol]

Cat Season

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