So a word of warning if you are thinking of playing the long-game here. The source of your observation is that bitcoin is (or has been) apparently undervalued.
But an other explanation is that its a bubble. While spot trading in bitcoin is quite liquid, the derivatives markets in bitcoin are fairly untested, relatively new, and fairly low volume. Right now, if I believe bitcoin is expected to climb, I can easily pile in, but shorting bitcoin takes more effort.
As the new bitcoin derivatives markets grow, its will give counterparties with negative opinions of bitcoin more voice, which may let the air out of the bubble a bit.
Edit: Also, we expect prices to take a multiplicative random walk, the meat here is whether or not the increase in expected value beats inflation/beats other asset markets you can easily invest in.
This is definitely a good word of warning, and I think it’s 60% likely that when the first serious Bitcoin-shorting vehicle is introduced, there will be at least a 30% price drop in the first week (if 60% seems high, remember Bitcoin drops 30% lots of weeks).
I think Dogecoin is an even starker example of what’s possible when you don’t have a derivatives market.
Tangent: Wtf is up with the various types of derivatives markets? Why can’t we just have asset markets and prediction markets?
So a word of warning if you are thinking of playing the long-game here. The source of your observation is that bitcoin is (or has been) apparently undervalued.
But an other explanation is that its a bubble. While spot trading in bitcoin is quite liquid, the derivatives markets in bitcoin are fairly untested, relatively new, and fairly low volume. Right now, if I believe bitcoin is expected to climb, I can easily pile in, but shorting bitcoin takes more effort.
As the new bitcoin derivatives markets grow, its will give counterparties with negative opinions of bitcoin more voice, which may let the air out of the bubble a bit.
Edit: Also, we expect prices to take a multiplicative random walk, the meat here is whether or not the increase in expected value beats inflation/beats other asset markets you can easily invest in.
This is definitely a good word of warning, and I think it’s 60% likely that when the first serious Bitcoin-shorting vehicle is introduced, there will be at least a 30% price drop in the first week (if 60% seems high, remember Bitcoin drops 30% lots of weeks).
I think Dogecoin is an even starker example of what’s possible when you don’t have a derivatives market.
Tangent: Wtf is up with the various types of derivatives markets? Why can’t we just have asset markets and prediction markets?