Friday, November 17, 2017

All The King's Horses

This week the smart money left the casino and the dumb money got tapped out. I wonder what happens next...

A sustained price drop is no longer an option for Bitcoin. Of course the same is true for the Dow. They've both gone FULL CASINO. And now the doors are all closed...

Running out of dumb money again:

IPO StitchFix was predicted at $18-$20, reduced to price at $15 and closed at $15.15, coincidentally...

"Three companies have postponed their IPO this week. As usual, the dreaded "market conditions" are typically cited."

"Several recent highly touted Chinese IPOs are trading below their IPO price"

By sheer coincidence, small caps massively outperformed again today. Suffice to say, the tax cut Maginot Line would have broken without the invisible floor below small caps:

Bitcoin is an analog for Globalization and the Dow Casino: What this week's "event" proved is that gamblers really don't care if they're involved in Ponzi schemes, as long as they keep going up and up and up. But as always, don't take my word for it:

Mark Cuban on Bitcoin, October 2017:
“'s interesting because I think there are a lot of assets that have values based on just supply and demand. You know, most stocks, they don't have any intrinsic value, no true ownership rights, no voting rights, you just have the ability to buy and sell those stocks. They're like baseball cards and I think Bitcoin is the same thing...”

"It is incredible how we lose sight of the risks when we're bamboozled with riches, hype and misinformation..."

This week was a seminal event for the world's largest crypto currency and yet gamblers have done everything possible to minimize and ignore it. They've even gone so far as to wholesale abandon it as a functioning currency, despite spending the past four years telling us non-stop it was the cure for fiat. Therefore, what was supposed to be a functioning currency is the new digital "gold". There's only one problem, it can be cloned and forked endlessly. Minor issue. As long as everyone remembers the name "Bitcoin" this will be fine, since that's the only distinguishing attribute. 

First, rewind to August of this past year, for some edification:

"After Bitcoin fork on 1 August it became obvious that Bitcoin the protocol did have an inherent vulnerability. This was that if the chain loses mining power it will have to wait a full 2016 blocks before the difficulty can be adjusted to bring the block time back to the normal 10 minutes. This vulnerability was never considered or analysed because until now the miners had no choice but to keep mining on the Bitcoin chain. After the fork however, the whole landscape has changed. Miners have a choice and power to influence the fate of the chain they are mining on."

A Chain Death Spiral occurs when the block time increases leading to some miners switching chain. As more miners leave the problem gets worse and a feedback loop results in the dreaded Chain Death Spiral."

Now, this week:

"Difficulty automatically adjusts itself to match the hash rate so that transactions won’t take too long. But the difficulty only adjusts every two weeks at the moment, so, if the hash rate suddenly plummets the difficulty could be rendered too high for the amount of processing power on the network. This in turn could mean severe delays in completing Bitcoin transactions. This was felt and mentioned by many over the weekend and it left Bitcoin on the cusp of a catastrophic failure. The spiral starts once the delays are unbearable and investors decide to dump the coin. This leads to a price drop which ultimately makes it unprofitable for miners who then move to other coins. 

“Transactions get backlogged to a point where the coin becomes basically useless”

The Mempool is the transaction buffer for the Bitcoin network. When it's large it means that there is a significant bottleneck. 

In other words a sustained price drop is no longer an option. So $200k here we come, hopefully no one minds a pit stop at $0.