Archive for May, 2018

CBOE and bitcoins

Sunday, May 13th, 2018

Well, at the time when I wrote the CBOE article, soon after the CME announced they’d open their exchange BEFORE the CBOE. The most interesting of things happened as a result. I bought bitcoins at 11k, it moved to 12k, 13k, 15k, 17k, 20k, in a matter of days, followed by a fall to 15k, rise to 17k, dip to 14k, and so on… Anyone who followed bitcoin price movement prior to the CME opening would’ve seen this. They would’ve also witnessed the hyper volatility that happened a bit prior to the CME opening, and a bit after.

While I profited from my original theory of the impacts of the first cryptocurrency exchange opening, the effects of the exchange is arguably short-lived. While it’s true that at the beginning, it’s easier to gain from a buy and hold position than a hold and sell, in the long-run things can change dramatically.

The reason being is that now, it’s possible to SHORT bitcoin, and that creates incentive for current holders of bitcoins to sell. Due to the lack of regulation of bitcoin, it’s even possible for a major holder of bitcoin to enter into a short position, and then LIQUIDATE their inventory, causing a dramatic drop in bitcoin prices, then closing their short, and then buying their bitcoins back, milking the good-will that’s in the market.

I think the hype behind cryptocurrency has largely died down, and everyone has gotten their taste of it. In order for the price of the cryptocurrency to rise, outside money must flood in, I just don’t see a strong compelling reason for that at the moment, except in the case of Japan, where they’re experiencing negative interest rates.