• C++ Programming for Financial Engineering
    Highly recommended by thousands of MFE students. Covers essential C++ topics with applications to financial engineering. Learn more Join!
    Python for Finance with Intro to Data Science
    Gain practical understanding of Python to read, understand, and write professional Python code for your first day on the job. Learn more Join!
    An Intuition-Based Options Primer for FE
    Ideal for entry level positions interviews and graduate studies, specializing in options trading arbitrage and options valuation models. Learn more Join!

Bitcoin

What do you think the intrinsic value of bitcoin is?

I really don't think that Bitcoin itself has much intrinsic value, I guess one could say that it has value as a hedge against inflation... So like gold.

Ethereum however, uses the blockchain technology in a much more interesting way basically allowing you to pay (at very high rates) for processing power by the miners. While you would never use an ethereum contract to do heavy computation, you can use them to do some really interesting things, such as more complicated derivatives.
 
Random thought
Is there a CDS-type market for bitcoin?
Funnily enough a futures market opened literally days ago in Chicago The Strange New World of the Bitcoin Exchange Futures Market. As far as I know some companies are issuing bonds in bitcoin. Bitcoin bond launch brings digital currency step closer to 'world of high finance'

A CDS is the next natural step (then CDO, CDO^2 etc and other madness) and so would equity and interest rate derivatives. As is extending derivatives to other cryptocurrencies.
 
Jack Rasmus:

Bitcoin and other crypto currencies are the speculative investing canary in the global financial asset coalmine.

One can debate what constitutes a financial bubble—i.e. how much prices must rise short term or how much above long term average rates of increase—but there’s no doubt that Bitcoin price appreciation in 2017 is a bubble by any definition. At less than $1000 per coin in January, Bitcoin prices surged past $11,000 this past November. It then corrected back to $9,000, only to surge again by early December to more than $15,000. Given the forces behind Bitcoin, that scenario is likely to continue into 2018 before the bubble bursts. Some predict the price for a Bitcoin will escalate to $142,000, now that Bitcoin trading has gone mainstream on the CME and CBOE, and offshore, commodity futures exchanges.
 
The most sensible argument about bitcoin I have read about is that governments are not going to allow their grip on money to be taken away from them that easily.

Those were my first thoughts after hearing about bitcoin and cryptocurrencies. I still think it has some way to go before such an event, if governments can find a way to control it. And as new investors are buying in their droves perhaps as a long term investment in terms of years (as opposed to weeks/months) it is worth investing in, as long as you ignore the enormous day to day volatility and take a punt as to when the hype will finally die down and get out before that.

There is also a lot of hype about blockchain, but it's not all hype. A lot of simple processes that involve ledgers and that don't require too much human ingenuity or human elements can be automated. Managing stuff like medical records, public record keeping are only some of the benefits and any simple processes that a spreadsheet can manage, a smart contract can manage too as the security behind blockchain means you need to hack 51% of the nodes in the network to make fraudulent changes. At least guys I know that have worked with blockchain say it's pretty bulletproof.

But blockchain won't replace lawyers or as many of the major jobs people tell me it will. For starters this stuff a friend tells me about it ending a lot of public administrator jobs - even he admits that governments will fight that. Also it won't replace lawyers. A bit like the way Big Data or AI won't take over the world, it won't replace complex stuff that needs human interaction. Maybe for routine stuff like buying a house you could do it using a blockchain network with strong security to replace needing a lawyer, but in complex transactions they are needed from day one. For instance when I was in Project Finance a typical transaction had dozens of legal agreements 100+ pages long and a legal adviser analysed those documents each time a legal waiver was needed whenever an adverse event happened (which was often, especially as an asset was close to being built). AIs have not replaced that level of cognition or attention to detail (yet..)
 
Last edited:
Those were my first thoughts after hearing about bitcoin and cryptocurrencies. I still think it has some way to go before such an event, if governments can find a way to control it. And as new investors are buying in their droves perhaps as a long term investment in terms of years (as opposed to weeks/months) it is worth investing in, as long as you ignore the enormous day to day volatility and take a punt as to when the hype will finally die down and get out before that.

There is also a lot of hype about blockchain, but it's not all hype. A lot of simple processes that involve ledgers and that don't require too much human ingenuity or human elements can be automated. Managing stuff like medical records, public record keeping are only some of the benefits and any simple processes that a spreadsheet can manage, a smart contract can manage too as the security behind blockchain means you need to hack 51% of the nodes in the network to make fraudulent changes. At least guys I know that have worked with blockchain say it's pretty bulletproof.

But blockchain won't replace lawyers or as many of the major jobs people tell me it will. For starters this stuff a friend tells me about it ending a lot of public administrator jobs - even he admits that governments will fight that. Also it won't replace lawyers. A bit like the way Big Data or AI won't take over the world, it won't replace complex stuff that needs human interaction. Maybe for routine stuff like buying a house you could do it using a blockchain network with strong security to replace needing a lawyer, but in complex transactions they are needed from day one. For instance when I was in Project Finance a typical transaction had dozens of legal agreements 100+ pages long and a legal adviser analysed those documents each time a legal waiver was needed whenever an adverse event happened (which was often, especially as an asset was close to being built). AIs have not replaced that level of cognition or attention to detail (yet..)

Blockchain technology can make sense, but is in no way dependent on bitcoin being a high valued piece of currency.
 
Well, there are two time tested principles; you never invade Russia in winter and second you never short a ferocious bull market. It's a nice bubble to ride...remember altavista, netscape but make sure you get out before the fat lady stops singing and everyone makes a dash to the door.

Ironically, wall street has lent legitimacy to a shitty tech like BTC by listing it for the fear of missing out when it would have collapsed under its own weight.

We are seeing the moral hazard of bailing out banks, QE et al manifested in strange ways. Good times, I would say.
Funnily enough a futures market opened literally days ago in Chicago The Strange New World of the Bitcoin Exchange Futures Market. As far as I know some companies are issuing bonds in bitcoin. Bitcoin bond launch brings digital currency step closer to 'world of high finance'

A CDS is the next natural step (then CDO, CDO^2 etc and other madness) and so would equity and interest rate derivatives. As is extending derivatives to other cryptocurrencies.
 
Bitcoin is a digital currency created in January 2009 following the housing market crash. It follows the ideas set out in a white paper by the mysterious and pseudonymous Satoshi Nakamoto. The identity of the person or persons who created the technology is still a mystery. Bitcoin offers the promise of lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority, unlike government-issued currencies. A lot of people try to make money on it. I usually try to find some crypto signals and invest in them.
 
Last edited:
Top