Are we allowed to talk about Bitcoin?

I agree. The site could use a few of them. Although I'm afraid their posts still might get lost in the endless crap of a few people I've noticed who are on here all day long every day like it is their job, and spend much of that time taking lame shots at people or trying to start fights with others. But it was still a pretty good thought by you.

 

Same to you.

BTW, I exchanged e-mail with one of my brokers who deals in the futures earlier, because I was really curious. He said there had been a little forced selling already, overnight and this morning. They operate with daily risk limits. But not many of his customers had messed around with it, thankfully (they had put steeper margin requirements on it than the exchange did to discourage it).

He was expecting a lot of margin calls to be going out later today. Anyone undercapitalized who didn't understand leverage, and messed with that bull, is getting the horns unfortunately. I feel pretty bad for anyone it is happening to. It is going to be a painful lesson for someone. Hopefully there aren't too many of those someones -- there actually might not be, at least that is my hope.

 

Much of the trading -- of all of the cryptocurrencies -- has been in Asia. In fact, people looking for a reason for the bitcoin move in the last day (other than 1 - it's a bubble and was going to go at some point, so why not today?, and 2 - there are now CME futures) have pointed to a hack of a South Korean exchange a few days ago (by North Korea), and the firm behind it declaring bankruptcy.

But you still have to put it into some perspective. The entire market capitalization of bitcoin, even with the run up in price, is fairly small -- in the low hundreds of billions depending on the price swing at whatever time you are reading this. There has been relatively impressive trading volume -- for something so small -- the last year +, but that is only considering the way it was being traded. Conceivably it wasn't going to take much if someone wanted to push around the price.

That is where the futures come in -- or may still come in, to a MUCH greater degree than this (and they could still push the price up in a massive short squeeze to try to create some pain in the other direction). The CBOT launched a contract a little less than 2 weeks ago and the CME launched one this week. Those contracts settle in cash, so there isn't any actual bitcoin behind them. They do have an outsized potential to move the price of bitcoin, though, because a lot of institutions that weren't touching bitcoin on unregulated exchanges can get into the game now -- and they have real money to play with. There is the potential to arbitrage using those futures. On top of it, it was not impossible, but VERY difficult to short bitcoin. The futures made it easy, which conceivably creates a two-way trade that really didn't exist before.

The volumes on those futures contracts were relatively small at first -- a lot of brokers put high margin requirements on them, and those who could afford the margin were smart enough to sit and watch first. The CME contract (which is going to be the more widely traded) was doing something like $70 million a day the first few days. ... to put that in perspective, about $60 billion of notional gold and $140 billion of notional oil change hands every day. The minute it was on overnight, the trading volumes picked up. I think it is probably just a preview. If you get anywhere near the kind of trade that other commodities (or the currencies) get, it will find a "real" price -- even a more distorted, more bubble-like price if that is the direction it goes first. Goldman Sachs is in the process of setting up a trading desk to make markets in cryptocurrencies. It would not be surprising if they arb the shit out of bitcoin, meaning. ... telling their clients to get long (to create the short squeeze) to run up the price. ... but only so they can clean house when they are ready to use their prop money to destroy the speculative longs for even more money than there is to be had right now.