Riley: Bitcoins? Trust Those Who Know How to Play the Short Side
Wednesday, December 13, 2017
I have always viewed market activity through the lens of listed derivative securities. I watched the opening this week in Bitcoin futures on the CFE Chicago Futures Exchange (CBOE) while the activity was respectable it was not overwhelming.
I expect the volume and open interest to expand dramatically over the next few weeks as various entities move to take early mover advantage of this potential blockbuster market of cryptocurrency derivatives.
Thus far I have used my extensive trader instincts and limited understanding of cryptocurrency to determine that the short side fraud trade of JPM’s Jamie Dimon was just dumb or early. Either way it was useless advice to anyone. Dimon violated the first rule of trading, “Know what you don’t know." Nobody knows the value of Bitcoin or the value of Bitcoin futures and that includes me. The more I have questioned market traders and professional strategists and risk managers the more I realize how little I know and how complicated the whole discussion is.
In times like this smart traders trade small, close to the vest and look for arbitrage opportunities. Anyone can play macho man and flip coins for a million dollars, maybe that shows balls, but it does not show brains. From my trader perspective, a huge long position in Bitcoin makes little sense right now.
Just search for Bitcoin and you will find a million opinions both short term and long term. Remember though, none of them knows, yet watching CNBC and various pundits all day claim insight. A neutral viewer would reasonably conclude that no one knows anything about Bitcoins. The opinions were so random that viewers would not be wrong in further questioning the entire financial system.
I then sought an informed outside opinion from a friend and colleague I trust, I went to Ryan Atkinson a former employee at LETCO on the American Stock Exchange and later a competitor in the hedge fund world. Both Ryan and I scored big on the “big short” using credit default swaps on subprime commercial and residential Mortgage pools in 2007 and 2008. I trust guys who know how to play the short side and, so I was fascinated to hear his current take on Bitcoin. Please take the time to read “Bitcoins Greater Fools.”
The next few weeks are setting up to be eventful for Bitcoin markets and in general for all market participants as players will be maneuvering for what I expect to be a very dangerous 2018.
Related Slideshow: GoLocal: Benchmark Poll, October 2017
Next year, in November of 2018, there will be a statewide general election for Governor and many other state offices. How likely is it that you will vote in this election?
Will you definitely be voting, will you probably be voting, are you 50-50...
Definitely be voting: 78%
Probably be voting: 13%
What would you say is the number one problem facing Rhode Island that you would like the Governor to address?
Jobs and economy: 21%
State budget: 9%
Corruption/Public integrity: .8%
Don’t know: .9%
Recently, a proposal has been made to permit the issuance of $81 million in bonds by the State to build a new stadium for the Pawtucket Red Sox. If there was an election today on this issue, would you vote to approve or reject issuing $81 million in financing supported moral obligation bonds to build the stadium?
Net: Approve: 28%
Definitely approve: 15%
Probably approve: 14%
Net: Reject: 67%
Probably reject: 19%
Definitely reject: 48%
Don't know: 4%
The next question is about the total income of YOUR HOUSEHOLD for the PAST 12 MONTHS. Please include your income PLUS the income of all members living in your household (including cohabiting partners and armed forces members living at home).
$50,000 or less: 27%
More $50,000 but less than $75,000: 13%
More $75,000 but less than $100,000: 13%
More $100,000 but less than $150,000: 17%
$150,000 or more: 13%
Don't know/refused: 17%
What particular ethnic group or nationality - such as English, French, Italian, Irish, Latino, Jewish, African American, and so forth - do you consider yourself a part of or feel closest to?
Black or African American: 6%
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