People do not understand the risks involved with bitcoins. By all means invest to your hearts desire, but at least accept the level of risk you are bearing. The United States constitution says, "The Congress shall have Power To...coin Money, regulate the Value thereof, and of foreign Coin...."
ARTICLE I, SECTION 8, CLAUSE 5
What if congress passes a law taxing 10% on all transactions/transfers using bit coins? In the banking act of 1865 congress did just that on all bank notes that were not the standard USD. This forced all the banks/states that had their own currency to conform to a unified national currency and pretty much killed their currencies overnight. Congress can pass a similar law regarding bitcoins instantly without outside approval from any other branches because of the power granted by the constitution. THIS IS A HUGE RISK! People believe that the big dogs of capital management firms (JP, Morgan Stanley, Goldman) may start trading bitcoin at a level higher than experminenting and novelty. I don't know if that will or will or not happen. My thoughts is the second it gets even remotely relevant and stable as an actual currency, congress passes a severe bitcoin tax. This would prevent corporations from viably even considering investing a bitcoin fund (unless its black market, which would be much smaller than the potential future "legal" market) A possible reason why congress might pass this "bit-tax" because it could mess with demand for US dollars globally, which would hurt us a net debtor nation. Another reason would be to protect the fed from losing any domestic monetary policy control. This is important during times of recessions and it can be used to control the interest/inflation rate. One more reason could be to stop black market trading of currencies. Very bad for funding international terrorism, or you know DPRK's nuclear program (rhetoric congress can easily use). So why yes there potentially lot of money to potentially be made in the short-run, there Is great risk involved. Long term, i believe the risk to be too great to bear. The risk perception is far lower than I believe is actually involved, especially reading comments on this sub. In the finance industry, if you do not convey the proper level of risk or you guarantee returns to a client, SOMEONE GOES TO JAIL. Be cautious and informed. -JB Also anyone who disagrees on the risk-factor, or the severity of the impact please comment.
Payment processor going public. Doesn't list Bitcoin as risk factor.
Payment processor First Data Corp. has filed an S-1 in anticipation of an IPO. I'm going through it now but noticed that they don't mention Bitcoin anywhere in the prospectus! Not even in the risk factors! Companies like First Data typically charge businesses 1.5-2.5% of purchase price, and 20-30c per transaction for the privilege of accepting credit cards. Bitcoin is a huge rock hurtling towards their checkerboard and they don't even acknowledge it!
Risk Factor from ETF filing: "Miners Could Act in Collusion to Raise Transaction Fees, Which May Adversely Affect the Usage of the Bitcoin Network." Purely hypothetical, right?
Bitcoin miners, functioning in their transaction confirmation capacity, collect fees for each transaction they confirm. Miners validate unconfirmed transactions by adding the previously unconfirmed transactions to new blocks in the blockchain. Miners are not forced to confirm any specific transaction, but they are economically incentivized to confirm valid transactions as a means of collecting fees. Miners have historically accepted relatively low transaction confirmation fees, because miners have a very low marginal cost of validating unconfirmed transactions (see “Bitcoin and the Bitcoin Industry—bitcoin Mining and Transaction Fees”). If miners collude in an anticompetitive manner to reject low transaction fees, then Bitcoin users could be forced to pay higher fees, thus reducing the attractiveness of the Bitcoin network. Bitcoin mining occurs globally and it may be difficult for authorities to apply antitrust regulations across multiple jurisdictions. Any collusion among miners may adversely impact the attractiveness of the Bitcoin network and may adversely impact an investment in the Shares or the ability of the Trust to operate.
The value of the Shares relates directly to the value of the bitcoins held by the Trust and fluctuations in the price of bitcoins could adversely affect an investment in the Shares.
The value of bitcoins as represented by Winkdex may be subject to momentum pricing whereby the current Winkdex value may account for speculation regarding future appreciation in value. Momentum pricing of bitcoins may subject Winkdex to greater volatility and adversely affect an investment in the Shares.
Winkdex is an exponential moving average calculated using volume weighted trading price data from various Bitcoin Exchanges chosen by the Index Provider. Pricing on any Bitcoin Exchange in the Bitcoin Exchange Market can be volatile and can adversely affect an investment in the Shares.
The Bitcoin Exchanges on which bitcoins trade are relatively new and, in most cases, largely unregulated and may therefore be more exposed to fraud and failure than established, regulated exchanges for other products. To the extent that the Bitcoin Exchanges representing a substantial portion of the volume in bitcoin trading are involved in fraud or experience security failures or other operational issues, such Bitcoin Exchanges’ failures may result in a reduction in the Winkdex spot price and can adversely affect an investment in the Shares.
Since there is no limit on the number of bitcoins that the Trust may acquire, the Trust itself, as it grows, may have an impact on the supply and demand of bitcoins that ultimately may affect the price of the Shares in a manner unrelated to other factors affecting the global market for bitcoins.
The Shares may trade at a discount or premium in the trading price relative to the NAV per Share as a result of non-concurrent trading hours between the [EXCHANGE] and the Bitcoin Exchange Market.
To the extent that bitcoin prices on the Exchange Market move negatively during hours when the [EXCHANGE] is closed, trading prices on the [EXCHANGE] may “gap” down at market open.
A possible “short squeeze” due to a sudden increase in demand for the Shares that largely exceeds supply may lead to price volatility in the Shares.
Purchasing activity in the Bitcoin Exchange Market associated with Basket creations or selling activity following Basket redemptions may affect the Winkdex and Share trading prices. These price changes may adversely affect an investment in the Shares.
An investment in the Shares may be adversely affected by competition from other methods of investing in bitcoins.
Winkdex may be affected by the sale of other DMBA ETPs tracking the price of bitcoins.
Political or economic crises may motivate large-scale sales of bitcoins, which could result in a reduction in the Winkdex value and adversely affect an investment in the Shares.
As the Sponsor and its management have no history of operating an investment vehicle like the Trust, their experience may be inadequate or unsuitable to manage the Trust.
The value of the Shares could decrease if unanticipated operational or trading problems arise.
The Shares may trade at a price which is at, above or below the NAV per Share and any discount or premium in the trading price relative to the NAV per Share may widen as a result of non-concurrent trading hours.
If Authorized Participants are able to purchase or sell large aggregations of bitcoins in the open market at prices that are different than the Winkdex spot price, the arbitrage mechanism intended to keep the price of the Shares closely linked to the Winkdex spot price may not function properly and the Shares may trade at a discount or premium to their NAV per Share.
If the processes of creation and redemption of Baskets encounter any unanticipated difficulties, the opportunities for arbitrage transactions intended to keep the price of the Shares closely linked to the Winkdex spot price may not exist and, as a result, the price of the Shares may fall.
The postponement, suspension or rejection of creation or redemption orders, as permitted in certain circumstances under the Trust Agreement, may adversely affect an investment in the Shares.
The Trust could experience unforeseen difficulties in operating and maintaining key elements of its technical infrastructure.
The Trust’s internal systems rely on a Security System that is highly technical, and if such system contains undetected errors, the value of the Shares could be adversely affected.
The Trust’s ability to adopt technology in response to changing security needs or trends poses a challenge to the safekeeping of the Trust’s bitcoins.
Security threats to the Security System could result in the halting of Trust operations, the suspension of redemptions, a loss of Trust assets, or damage to the reputation and brand of the Trust, each of which could result in a reduction in the price of the Shares.
A loss of confidence in the Security System and the Trust’s security and technology policies, or a breach of the Security System, may adversely affect the Trust and the value of an investment in the Shares.
Bitcoin transactions are irrevocable and stolen or incorrectly transferred bitcoins may be irretrievable. As a result, any incorrectly executed bitcoin transactions could adversely affect an investment in the Shares.
The Trust’s bitcoins may be subject to loss, damage, theft or restriction on access.
The Shareholders’ limited rights of legal recourse against the Trust, the Trustee and the Sponsor and the Trust’s lack of insurance protection expose the Trust and its Shareholders to the risk of loss of the Trust’s bitcoins for which no person is liable.
Bitcoins held by the Trust are not subject to FDIC or SIPC protections.
The Trustee’s limited liability under the Trust Agreement may impair the ability of the Trust to recover losses relating to its bitcoins and any recovery may be limited, even in the event of fraud, to the market value of the bitcoins at the time the fraud is discovered.
The Trust may not have adequate sources of recovery if its bitcoins are lost, stolen or destroyed.
The liquidity of the Shares may also be affected by the withdrawal from participation of one or more Authorized Participants.
As a new fund, there is no guarantee that an active trading market for the Shares will develop. To the extent that no active trading market develops on the [EXCHANGE] and the assets of the Trust do not reach a viable size, the liquidity of the Shares may be limited or the Trust may be terminated at the option of the Sponsor.
The lack of a market for the Shares may limit the ability of Shareholders to sell the Shares.
The [EXCHANGE] may halt trading in the Shares, which would adversely impact investors’ ability to sell Shares.
The Trust may be required to terminate and liquidate at a time that is disadvantageous to Shareholders.
Shareholders will not have the rights enjoyed by investors in certain other vehicles.
The Trust Custody Account will be administered using computer hardware and software owned by the Sponsor and leased and licensed to the Trustee.
The Trustee is solely responsible for determining the value of the bitcoins, and any errors, discontinuance or changes in such valuation calculations may have an adverse effect on the value of the Shares.
Extraordinary expenses resulting from unanticipated events may become payable by the Trust, adversely affecting an investment in the Shares.
The Trust’s transfer or sale of bitcoins to pay expenses or other operations of the Trust could result in Shareholders incurring tax liability without an associated distribution from the Trust.
The sale of the Trust’s bitcoins to pay expenses not assumed by the Sponsor at a time of low bitcoin prices could adversely affect the value of the Shares.
The value of the Shares will be adversely affected if the Trust is required to indemnify the Sponsor or the Trustee under the Trust Agreement.
Intellectual property rights claims may adversely affect the Trust and an investment in the Shares.
Shareholders will not have the protections associated with ownership of shares in an investment company registered under the Investment Company Act of 1940 or the protections afforded by the CEA.
The United States tax rules applicable to an investment in the Shares and the underlying bitcoins are uncertain and the tax consequences to an investor of an investment in the Shares could differ from the investor’s expectations.
Regulatory changes or actions may alter the nature of an investment in the Shares or restrict the use of bitcoins or the operation of the Bitcoin Network in a manner that adversely affects an investment in the Shares.
It may be illegal now, or in the future, to acquire, own, hold, sell or use bitcoins in one or more countries, and ownership of, holding or trading in Shares may also be considered illegal and subject to sanction.
If regulatory changes require the regulation of bitcoins under the CEA by the CFTC and/or under the Securities Act by the SEC, the Trust and the Sponsor may be required to register and comply with such regulations. To the extent that the Sponsor decides to continue the Trust, the required registrations and regulatory compliance steps may result in extraordinary, non-recurring expenses to the Trust. The Sponsor may also decide to terminate the Trust. Any termination of the Trust in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.
Shareholders cannot be assured of the Sponsor’s continued services, the discontinuance of which may be detrimental to the Trust.
Shareholders may be adversely affected by the lack of independent advisers representing investors in the Trust.
Shareholders may be adversely affected by lack of regular shareholder meetings and no voting rights.
All these risks were outlined in the S1 paperwork.
03-04 03:22 - 'Yes. I'd still hold because if they were worth that much the risk factor has pretty much disappeared. / And I don't require much. I suppose I'd spend them eventually but it could easily take me 50-70 years and I'd certainly set...' by /u/ughud2 removed from /r/Bitcoin within 39-44min
''' Yes. I'd still hold because if they were worth that much the risk factor has pretty much disappeared. And I don't require much. I suppose I'd spend them eventually but it could easily take me 50-70 years and I'd certainly set some aside for my children/grandchildren. And all this assumes that I'm a lazy fuck that doesn't actually contribute anything to society and therefore earn return on my capital. When the fact of the matter is, it's easy to stay rich because you get first pick of the low-hanging fruit of interest-bearing investments due to economies of scale. EDIT: The people who sell (liquidate into USD) when the price rises to 100k/1m/10m don't really believe in the long-term ideological proposition that bitcoin provides. I have an ideological problem with the way the financial system currently works. I have a problem with the moral hazard that complex banking schemes inevitably introduce into society. My ideological position is subsidized by the increasing value of bitcoin. But it's there. And it'll be there once I don't have to worry about possibly losing my money anymore. Of course people will diversify, but your delusional if you think the people who have been holding as bitcoin rose from $0.10 to $1000 (x10k) are going to sell because it goes from $1000 to $10m (x10k). They'll sell some to diversify but not all and probably not most. ''' Context Link Go1dfish undelete link unreddit undelete link Author: ughud2
Why I'm not worried about a resurgence of inflation
TL/DR: Despite massive fiscal stimulus packages and seemingly never-ending quantitative easing programs, I don't believe we're headed towards a world of out-of-control inflation. Why? The prospect of permanent economic scarring in certain sectors due to extended lockdowns coupled with rapid technological adoption are two factors that are likely to keep price pressures low. Investors seem quite concerned about rising inflation risk, which is likely supporting the strong bid for inflation-hedging assets like gold and bitcoin year to date. Adding fuel to the fire, top money managers, like Bridgewater and BlackRock, have been vocal in financial media lately about the risk of a high-inflation regime down the road. A high-inflation regime would be a remarkable departure from the past decade, where inflation was relatively tame even despite ultra-low interest rates and the introduction of unconventional monetary policy tools, like quantitative easing (see chart here: https://ibb.co/Dt8nVFC). Similar to what was observed over the past cycle, I don't see recent policy action leading to sky-high inflation in the future.
First, it's important to note that fiscal and monetary stimulus is aresponseto a weak economic outlook. Direct income assistance (i.e. the CARES Act) is meant to help offset lost wages due to extended lockdowns and business closures. Those who believe inflation is going to materially rise would argue that the government built a "bridge too far" - though so far the pandemic has outlasted the duration of U.S. stimulus measures.
Second, the pandemic has supercharged the digital economy. E-commerce is exploding (see chart here: https://ibb.co/7GQknX6) - a long-term trend that I believe is likely here to stay. It is well studied that e-commerce is a deflationary force (read more here: https://www.nber.org/papers/w24649). The intuition is straightforward - the internet increases price transparency, lowers barriers to entry, fuels competition, and increases aggregate supply. More online shopping is likely to keep goods price inflation in check for now. This goes without mentioning innovations in the services sector, such as telehealth and online education, which could also keep inflation at bay.
Lastly, as a professional investor focused on global macro, predicting where the global economy is headed is hard and an incredibly humbling exercise. I prefer preparing my own portfolio for a range of outcomes - so while I personally hold some gold and bitcoin, I wouldn't bet the farm on a resurgence of inflation in the future.
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