Are we allowed to talk about Bitcoin?

So. ... During the last 24 hours, the price of bitcoin (in dollars) has gone through, $12,000. ... $13,000. ... $14,000. ... and a little while ago touched $15,000.

Here is how the price action on this thing has gone:
$0 - $1000: 1789 days
$1000- $2000: 1271 days
$2000- $3000: 23 days
$3000- $4000: 62 days
$4000- $5000: 61 days
$5000- $6000: 8 days
$6000- $7000: 13 days
$7000- $8000: 14 days
$8000- $9000: 9 days
$9000-$10000: 2 days
$10000-$11000: 1 day
$11000-$12000: 6 days
$12,000-$13,000: 17 hours
$13,000-$14,000: 4 hours
$14,000-$15,000: 10 hours

 

One of the more entertaining things I have seen recently was Peter Boockvar getting into a twitter war with Neel Kashkari, the idiot head of the Minnesota Federal Reserve Branch. Boockvar called out the Fed and other central banks around the world for creating the conditions for the "everything" asset bubble for which bitcoin is becoming the poster child. Kashkari is a fucking idiot, yet these smug Mr. Magoo types are given the power to subvert the most important market there is and price fix the cost of money -- with disastrous results over and over again.

 

Kashkari is not only a pretty good name for a guy running a Federal Reserve branch, it reminds me of an old supermarket near my house in Florida.

 

So obviously allowing an exchange in Slovenia to hold your wealth is a major risk. But if you do it via a U.S. exchange you have a whole different set of problems. Coinbase is the biggest exchange in the U.S. They recently turned over info for thousands of their customers to the IRS -- kind of defeating one of the assumed benefits of bitcoin. The IRS is now dogging those people for short term cap gains tax. Worse, let's say you actually did think of the thing as a currency (which is a bit ridiculous, given its lack of stability -- it is being almost entirely used as a speculative vehicle right now) and you took your bitcoin that has appreciated in value relative to the dollar and bought a home in bitcoins. The IRS stills wants the tax from you.

 

The CME futures contract started trading today. The CME is a larger exchange than the CBOE exchange that started trading a contract last Monday. And it dominates futures trading for currencies, so if these contracts stick around, I'd guess it is the CME product that becomes the standard. The major difference is that the CBOE contract is 1 for 1 -- it has a notional value of one bitcoin. The CME contract is for 5 bitcoins. The margin requirements for both are really high. To give an idea, you can trade an S&P mini futures contact with only about 5 percent margin, I believe. The margin requirement on the CBOE bitcoin contract is 40 percent. On the CME, it is 35 percent. At current bitcoin prices, that means the CME requires something like $33K, $34K just to trade one contract. And because of the volatility, and a lot of yahoos who are going to try to get rich quick, most brokers offering the contract have their own margin requirements that are much higher than that -- $40K, $50K, $60K per contract. The trade on the CME has been pretty orderly today, actually. And the premium / spreads on the CME contract have been tighter than they were on the CBOE contract last week. It's also actually has followed a pattern of short-term overbought / short-term oversold for day traders, which was interesting. I had no idea what to expect. It is not attracting much short interest (this is finally a way to short bitcoin), because I think as I speculated in a post last month, you have to wonder if there is going to be a massive short squeeze on the new futures contract that takes it into stratospheric bubble territory before it collapses. It would make sense -- from a market psychology standpoint. And at that kind of margin, you will need a lot of capitalization to withstand the kind of pain that would come with that, so a lot of people who see a short of their lifetime aren't f'ing with it so far.

If you just buy bitcoins for cash on an exchange, such as Coinbase, good luck, I guess. One thing to be careful about (other than the obvious). If you are gambling and this thing does go parabolic and you manage to get out with huge profits. ... Coinbase is turning over customer info to the IRS. So much of this, from that, to the futures contracts that give it a measure of being regulated and introduces a degree of possible price manipulation, belies the original rhetoric the evangelicals used for why bitcoin made sense. It's now a speculative vehicle with a value that is ridiculous to me, but at the same time, if someone is willing to pay $20K USD tomorrow for a bitcoin then that is what it is worth tomorrow.