The crypto thread

[warpus]

So wait, if you are buying a stock, you can't just like buy 20% of an Apple stock and have to turn to an ETF if you want to do that?

Since this is deviating a bit from the thread subject.. let me note that I saw an article the other day that an ETHereum ETF is now being considered as well.

 

[RobAnybody]

I honestly don't know. I have never bought an actual stock - only done a monthly contribution to a mutual fund for many years (EDIT: oh, plus my 401k, which is on auto-pilot). I guess I just assumed that absent an ETF you had to buy in whole shares. If someone who knows more than me about buying stocks (not a high bar to clear ) weighs in on that, I could be totally wrong.

 

[warpus]

I googled this further and apparently you can buy fractional shares, but it seems to be done through some sort of intermediary that buys whole stocks somewhere else and re-sells parts of them on paper. There seem to be multiple different ways of accomplishing this, one of them being ETFs.

I am curious about the limitation that does not allow you to break down a stock into constituent parts though. Is it legal in nature? Some sort of economic limit? A mathematical limitation? Are stocks actual physical objects that are impossible to break down further? Are they elementary particles or something? Was all of this just made up by a bunch of old white men with weird hats 400 years ago and this is the way it is now and that's all there is to it?

Okay, so I googled this too. You can't break a stock into pieces because the trading fees wouldn't make it feasible for you to buy 0.4 of a share without losing money every time. Which doesn't make sense to me, since I thought the google stock is trading above $2k, for instance.. So..

The other explanation seems to be that in order to be a shareholder you have to hold at least 1.. That's just how they defined this thing, so it seems that it's the case of the old men in silly hats. But somebody correct me if I took a wrong step there somewhere in my sleuthing & logic.

----

According to this news article that just popped up, Bitcoin is now at its all-time price. I tried to look up where experts think the price is going to go by end of year, but it seems that the answer ranges from $5,000 to $500,000 so I'm just going to ignore all that

 

[innonimatu]

So wait, if you are buying a stock, you can't just like buy 20% of an Apple stock and have to turn to an ETF if you want to do that?

Since this is deviating a bit from the thread subject.. let me note that I saw an article the other day that an ETHereum ETF is now being considered as well.

What is the point of this thread? How to be in on one of the current get-rich-quick schemes?

News about technical aspects of "cryptocurrencies" will be few. Technically there is nothing new to be added about this stuff.

As a civilization we deserve the crap we're in now, don't we?

 

[Birdjaguar]

First Bitcoin Futures ETF Rises in Trading Debut
ProShares Bitcoin Strategy ETF advances nearly 5% following its closely watched launch

New York (CNN Business)Cryptocurrency investors finally got what they've been clamoring for as the first bitcoin-linked, exchange-traded fund launched Tuesday.

The ProShares Bitcoin Strategy ETF began trading at $40 a share under the ticker symbol "BITO" and finished the day up 5%. The ProShares fund is the first of what is expected to be several ETFs that track bitcoin futures to debut on Wall Street.
VanEck, Invesco, Valkyrie and Galaxy Digital are among several investment firms that have applied with the Securities and Exchange Commission to launch bitcoin ETFs.
Bitcoin has surged in value this month in anticipation of the fund's debut and thanks to the fact that more big institutional investors are buying it. The cryptocurrency has rallied despite continued criticism from JPMorgan Chase (JPM)CEO Jamie Dimon, who recently dubbed it "worthless."

Prices topped $64,000 Tuesday afternoon, up from just below $44,000 at the end of September, a more than 40% surge.

This could make bitcoin bigger than ever
Bitcoin is now within 1% of its all-time high of a little less than $65,000 earlier this year.
"The ETF approval is a watershed moment for the industry," Bitcoin Foundation chairman Brock Pierce said in a statement to CNN Business. "This moment is long-awaited, as numerous entrepreneurs and firms have sought approval from regulators since as early as 2013."
"Today begins an era where retail investors can invest directly into Bitcoin through the ETF, and serves as further validation of Bitcoin and cryptocurrencies across the country and on a global basis," Pierce added.

Making bitcoin more available to the masses
Bitcoin bulls argue that having an ETF will make it easier for average investors to take part in the crypto market, without having to mine bitcoin themselves.
"We believe a multitude of investors have been eagerly awaiting the launch of a bitcoin-linked ETF after years of efforts to launch one," ProShares CEO Michael Sapir said in a statement Monday.
"BITO will open up exposure to bitcoin to a large segment of investors who have a brokerage account and are comfortable buying stocks and ETFs, but do not desire to go through the hassle and learning curve of establishing another account with a cryptocurrency provider," Sapir said.

Crypto 101
It's important to note that the ProShares ETF — as well as any others that may get SEC approval going forward — invests in bitcoin through futures contracts. That means that investors buying into the fund will not own any actual bitcoin.
But another asset manager, Grayscale, announced plans Tuesday to file to convert its Grayscale Bitcoin Trust (GBTC), which was mainly geared towards high net worth accredited investors, into an ETF that would hold bitcoin at its spot (or market) price.
"We believe that if regulators are comfortable with ETFs that hold futures of a given asset, they should also be comfortable with ETFs that offer exposure to the spot price of that same asset," Dave LaValle, global head of ETFs at Grayscale Investments said in a press release. "GBTC proves that there's strong investor demand for physically-backed bitcoin investment vehicles."
Still, having any type of bitcoin ETF available could attract more new cryptocurrency investors. Some may have been staying on the sidelines, even though there are now more opportunities to trade cryptocurrencies through firms such as Coinbase or Robinhood.
"The availability of a Bitcoin futures ETF is a big step for bitcoin awareness and regulation for the crypto industry," Christine Brown, chief operating officer at Robinhood Crypto, said in an email to CNN Business. "After the SEC previously rejected several applications for these types of funds, the ETF going live on brokerages opens the door for a new group of investors."

 

[Moriarte]

I am curious about the limitation that does not allow you to break down a stock into constituent parts though. Is it legal in nature? Some sort of economic limit? A mathematical limitation? Are stocks actual physical objects that are impossible to break down further? Are they elementary particles or something? Was all of this just made up by a bunch of old white men with weird hats 400 years ago and this is the way it is now and that's all there is to it?

I don’t think there is native architecture encouraging the break down of stocks into the units smaller than one. I mean mathematics and bank interfaces. You can buy a “lot”, which is 100 shares, but buying the 1/10th is not allowed. I am not certain, but, on the surface, the answer seems to be about the shareholder voting rights, as you mention, which wasn’t framed to deal with fractions, legally. Successful, growing companies often do splits to encourage accumulation by retail investors. In that case the share ownership quantities get readjusted. If you own 1000 shares of a $800 stock before the split, after the 4:1 split you will own 4000 shares, $200 a share.

Crypto doesn’t need to “split”, because of two things - native architecture supports fractionalising to the extremes and then governance has a different structure to that of stocks. Governance in crypto doesn’t have to depend on the number of coins you own, but rather on the soundness of the proposal that you put up. In case of, say, Ethereum, if most nodes agree that your proposal bring merit to the project, then it will be universally adopted, even though you’re a developer, who spends little time in the field, but happen to come up with a great improvement proposition.

Since this is deviating a bit from the thread subject..

Don’t worry about it. Way I see it, the topics are often intertwined, or rather, one is an improved instance of the other.

 

[Samson]

the first of what is expected to be several ETFs that track bitcoin futures to debut on Wall Street.

So this is not bitcoin price, but how people expect it to change, ie. leveraged speculation, ie. much riskier than buying bitcoin?

Bitcoin bulls argue that having an ETF will make it easier for average investors to take part in the crypto market, without having to mine bitcoin themselves.

Seriously, these people do not know what they are talking about, right? Investors never mine bitcoin, they buy it.

 

[EnglishEdward]

So this is not bitcoin price, but how people expect it to change, ie. leveraged speculation, ie. much riskier than buying bitcoin?

Looks like they are setting up a vehicle to enable defrauding customers.

 

[warpus]

You can buy a “lot”, which is 100 shares, but buying the 1/10th is not allowed. I am not certain, but, on the surface, the answer seems to be about the shareholder voting rights, as you mention, which wasn’t framed to deal with fractions, legally.

This does sound to be the most likely reason. It seems a bit silly when you first think about it, but it seems that the whole system they've setup now relies on this limitation.

Another stock limitation that seems silly is that you can only buy/sell/trade during office hours. What sort of medieval system is this. When I was researching and buying some crypto for my goddaughter I was often doing it late at night, when I think the best. If I want to trade stocks, I have to wait until monday morning? Who do I look like, some sort of grandpa from the 1980s?

Don’t worry about it. Way I see it, the topics are often intertwined, or rather, one is an improved instance of the other.

I feel for the mods, you know? They probably see something off-topic in a post and get triggerred

 

[Samson]

Another stock limitation that seems silly is that you can only buy/sell/trade during office hours. What sort of medieval system is this. When I was researching and buying some crypto for my goddaughter I was often doing it late at night, when I think the best. If I wanted to trade stocks, I have to wait until monday morning? Who do I look like, some sort of grandpa from the 1980s?

I think it is even worse if you are not in a major stock market timezone. If you live on the west coast you have to trade in the morning, starting at silly o'clock.

 

[Birdjaguar]

I think it is even worse if you are not in a major stock market timezone. If you live on the west coast you have to trade in the morning, starting at silly o'clock.

Through Vanguard I can enact trades anytime day or night but they are not put into action until the market opens in NY. Apple is at $149.42 as I write this, up $0.67 so far. If I want to buy or sell and my transaction happens at the end of day close, that price will be different but probably not by much and in the long run insignificant.

Yes, day traders have to act in real time, and a fifty cent difference may mean profit or loss for the day. But they are in the business of risk taking and get what they deserve for being day traders.

 

[warpus]

Why haven't they changed this so that you can trade whenever you want? What's the limitation in this case? Is it legal as well, or is there something else going on? It seems like "We need a person to put in the trade manually" would be a silly reason (but is that it, for some reason?)

 

[El_Machinae]

The time-limits on trading interface with the time-limits of when you're allowed to release news regarding a company.

 

[warpus]

The time-limits on trading interface with the time-limits of when you're allowed to release news regarding a company.

Can you elaborate on this? I'm curious how this all ties together. What exactly is meant by "when you're allowed to release news regarding a company" and why would being able to buy a stock at 2am interfere with that?

 

[Moriarte]

Why haven't they changed this so that you can trade whenever you want? What's the limitation in this case? Is it legal as well, or is there something else going on? It seems like "We need a person to put in the trade manually" would be a silly reason (but is that it, for some reason?)

Doesn’t need a person for decades now. It’s one of those things no one will be bothered with unless absolutely forced to by competition. Take money transfer. Why does it still take Days, in this day and age, to transfer money between London and Dubai? The answer is simple: why would they bother upgrading infrastructure when everything is going so well. “if it works, don’t fix it”.. and the rest, you know how it goes.

 

[warpus]

Isn't it a lot easier to use the blockchain to send money these days? I mean, you need to be set up to do that first, but assuming that the people on both ends of the transactions have wallets, sending money via this tech is almost instant and has super low fees.

When I was doing my research, I came across at least one blockchain tech/coin that's designed for remittance specifically.. (here is an example of one) i.e. the money people send back to their home country from places like the U.S. Western Union usually eats up a decent % of this $$, but it seems that with El Salvador & other countries embracing blockchain, more and more people are going to be sending money this way. You end up paying less to send the money and it arrives a lot faster - win/win/win.

Will Western Union adapt to this and figure out a way to compete? They almost seem like a predatory business really, with their super high fees and all. From my experience businesses like that refuse to adapt and try to cling to their business model for as long as they can. Or am I completely wrong and they are already working on embracing blockchain tech and/or attempting to compete with it?

Are our financial systems and institutions really that much out of date? I suppose we'll see if decentralized finance is able to compete with these existing centralized systems we have. Right now we're IMO too early to really say either way. Will be interesting to see what happens to businesses like Western Union though.

We live in a global economy that does not sleep - it makes zero sense to limit financial activity to outdated concepts like business hours

 

[El_Machinae]

Can you elaborate on this? I'm curious how this all ties together. What exactly is meant by "when you're allowed to release news regarding a company" and why would being able to buy a stock at 2am interfere with that?

It's considered "unfair" to have a time-advantage when it comes to trading stocks. There will be bad news and the faster person getting the news gets the advantage. So, news releases and reports occur during non-trading hours. That way it gives everyone time to rebalance their expectations and then enter new bids/asks into the trading desk.

 

[warpus]

Is this a case of this rule making more sense when the news spread via horse & carriage or whatever and not the sort of instantaneous method of communication we have today?

It seems to me that allowing trades & reporting to happen 24/7 would eliminate this issue (today, maybe not 80 years ago). It also sounds like a cultural artefact that people are just really used to, which might make it hard to change

 

[Birdjaguar]

Making bad news public at 2:00 AM and enabling selling by those tuned into when announcements take place would be advantageous. Employees could certainly take advantage of this. Currently good and bad news be dumped anytime, but the buying and selling has to take place during business hours for better "wisdom of crowds" effects. There is less discrimination against people vs machine trading.

 

[warpus]

Making bad news public at 2:00 AM and enabling selling by those tuned into when announcements take place would be advantageous.

So I mean, I get it, but it seems that somebody will have an advantage no matter what you do.

Is the main worry here one of insider trading? i.e. a company could attempt to time announcements such that those in the know could jump on the news first and profit off them? Is that the main thing these rules are attempting to prevent?

Employees could certainly take advantage of this. Currently good and bad news be dumped anytime, but the buying and selling has to take place during business hours for better "wisdom of crowds" effects. There is less discrimination against people vs machine trading.

An earlier post here seemed to imply that news could only be pushed out during non-trading hours. I was going to ask how that makes sense for a company which is being traded in multiple places. i.e. if your stock is being traded in Japan and the U.S., it seems that you'd never be able to find a time to post news.

I do see the issue with bots, who obviously don't need to sleep like humans do.

I'm still a bit confused though, since these issues don't seem to affect crypto/blockchain trading much. From what I understand there are a lot of bots in place who trade while people are sleeping. Maybe I'm out of the loop, but this doesn't seem to be a problem; the traders simply do what they can.

Is this simply a case of this space not being very regulated yet? How could they regulate this though, since trading is 24/7? If this isn't a problem here, why is it a problem with more traditional stocks?