After months of stability, Bitcoin has finally broken below the $6000 price level. Here’s why it’s even worse than you think.

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Attention! Did you know that purely by coincidence, within 18 hours of bitcoin’s price crash, natural gas futures spiked by as much as 20% ? It made headlines in the financial world, but unless you’re a regular follower of commodity derivatives you might have missed it. …

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Old versus new!

Cryptocurrencies claim they aren’t centralized.Whilst this is technically true, I want to argue that, until decentralized exchanges become popular, the practical reality is that price risk for bitcoin is still extremely centralized. Not only this, I will argue that cryptocurrencies are much more susceptible to centralized risk than traditional financial markets.

I’m going to make the theme of this article one of comparison — I will compare cryptocurrencies with the oil futures market through a hypothetical scenario.I will do this to determine which of these two markets (one developing, the other already developed) is more susceptible to centralized price risk. …

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A brief story before we get started

Last week one of my trading students, who was a very young man asked me what stock I thought was good to ‘invest’ in. I suspected he wanted to make a lot of money very quickly and so I challenged him. I asked him “what criteria do you want me to recommend to you a stock?” and he replied the same as before: One that would make him a lot of money quickly. He then asked me about Apple, Alphabet and a few other tech stocks (the type that very young men are apt to wonder about). I asked him about dividend payments, and he said “who cares about dividends, they are so small that it won’t affect my trading account” Again, a very typical, and perhaps reasonable response. In a sense, he was correct — the dividend payments certainly wouldnt make a difference in his trading account. Then I asked him “If you had a billion dollars to invest, would you care about a stocks dividend? Would it be significant?” He conceded that it would warrant consideration. Then I threw a curve-ball his way- I asked him “Is trading fair? Is it a level playing field?”. He didn’t understand what meant, so I clarified “Does each market participant have the same amount of money to invest in the market?” …


M.C. Ross

Veteran futures trader, markets and finance enthusiast - I like to speculate and think aloud about whatever I find interesting, but usually finance and trading.

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