XBTUSD均值回归交易策略

经过一年多的时间,现在是时侯分析XBTUSD资金利率的可预测性了。 XBTUSD 100x杠杆合约是一个没有到期日的比特币兑美元掉期合约。为了根据现货市场价格来为掉期合约定价,买空方或卖空方需要根据市场对未来价格的预期来支付对方利息(亦称为资金费用)。利息一般取决于过去8小时的加权平均掉期溢价及现货价格。

 

资金利率公布后尚有8小时的宽限期,然后才会被收取。不想支付或获取资金利率的交易者,可在宽限时间内撤离。关键问题是,你可否透过已公布的资金利率来预测比特币的未来价格?

我分析了2017年3月至今的数据。我的数据包含了每8小时的资金利率,及其后8小时XBTUSD掉期合约的对数收益率(log return)。


T0: 现在

T1: 未来八小时

X-轴:资金利率于T0公布,于T1收取

Y-轴:Log(XBTUSD P1 / XBTUSD P0)

简单回归分析

上表是所有数据的XY散点图。图表清楚地说明了资金利率并没有显着的预测能力。

 

深层分析

当资金利率呈现极正或极负数值时,可能意味着市场方向有所逆转,也即是均值回归。利用极端的资金利率作为交易信号,我们可以采取逆势交易策略。

例子:

假设资金利率达顶点(+ 0.375%),我们是否能够更准确地预测XBTUSD未来8小时内的回报是否为负数呢?

为了进一步分析这项假设,我计算了资金利率的样本均值和标准差,并以基准点(bps)为单位。

1bps = 0.01%

平均值: 1.66bps

标准差: 17.13bps

我先组成一西格玛(One Sigma)及二西格玛(Two Sigma)带,然后进行均值回归测试。

1 西格玛 = 1标准差

假设:

负值很大的资金利率能预测未来8小时后可得到正回报;正值很大的资金利率则能预测未来8小时后为负回报。

资金利率的测试幅度取决于西格玛(Sigma)与平均值的距离。

下表列出了结果:

西格玛 资金利率 样本数量 成功百分比 累积资金利率 累积XBTUSD回报 累积回报 总观察数量占比
-2 -32.61 21 47.62% -7.71% 3.36% 11.07% 4.01%
-1 -15.47 62 53.23% -16.76% -18.15% -1.38% 11.83%
1 18.80 81 45.68% 25.10% -14.77% 10.33% 15.46%
2 35.93 36 44.44% 13.49% 6.90% 20.39% 6.87%

样本数量 – 在524个资金周期中,这显示了资金利率低过或等于调整后西格玛测试的次数(假设资金利率为负数)。

成功百分比(%)– 在样本总数中,这代表当资金利率为负数时,得到正回报的次数。反之亦然。

累积回报 – 这是不论成功或失败情况下所得的净回报(包括资金利率)。如果资金利率为负数,对买空方来说,你会因为利率为负数而得到资金;如果资金利率为正数,对卖空方来说,你会因为利率为正数而得到资金。

总观察数量占比 – 样本数量/ 524(资金周期总数)

 

总结

上述数据清楚地说明了,交易员可以采用极端的资金利率作为交易信号,并采取逆势交易。而接收资金利率以抵消该市场趋势则为这个策略带来了好处,同时也是该交易策略显着的回报的来源。

搭建一个简单的交易算法便可以捕捉到此阿法值(alpha)。在每个资金时戳,若资金利率高于或低于所设的边界,便进行逆势交易。然后紧接着下一个资金时戳前,替XBTUSD平仓。

需要留意的是,本次研究采用的样本数量相对较小。我将在明年初再次研究并观察此结果有否改变。

 

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BitMEX (www.bitmex.com)

 

XBTUSD Funding Mean Reversion Strategy

 

After over a year in existence, it is time to analyse the predictive properties of the XBTUSD funding rate. The XBTUSD 100x leveraged contract is a Bitcoin / USD total return swap that has no expiry date. To anchor the price of the swap back to the spot market, an interest payment (we call this funding) is exchanged between longs and shorts. The interest rate by and large is determined by the previously observed 8-hour time weighted average premium of the swap vs. the spot price.

The funding rate is published with an 8-hour grace period before it is charged. That allows traders who do not wish to pay or receive funding to exit their positions before the funding timestamp. The question is, can you predict the future price of Bitcoin by the published funding rate?

I have analysed data from March 2017 until now. My data series consists of the funding rate every 8 hours, and the log return of the XBTUSD swap over the next 8 hours.

T0: Now
T1: 8 hours in the future

X-axis: Funding Rate published T0 to be charged at T1
Y-axis: Log(XBTUSD P1 / XBTUSD P0)

Simple Regression

The above chart is a XY scatter plot of the data. The chart clearly illustrates the funding rate contains no significant predictive power.

Digging Deeper

When the funding is extremely positive or negative, this could signal a reversal in the market’s direction i.e. mean reversion. Using an extreme funding rate as the signal, we can take the counter trend position.

Example:

If the published funding is at the maximum +0.375%, does that predict with greater accuracy whether the return of XBTUSD in the next 8 hours will be negative?

To further analyse this hypothesis, I calculated the sample mean and standard deviation of the funding rate in basis points (bps).

1bps = 0.01%
Mean: 1.66bps
Standard Deviation: 17.13bps

I constructed one and two sigma bands. I then conducted mean reversion tests.

1 Sigma = 1 Standard Deviation

Hypothesis:

A large negative funding rate predicts a positive return for the next 8 hour period. A large positive funding rate predicts a negative return for the next 8 hour period.

The magnitude of the funding rate tested depends on the number of sigmas away from the mean.

The following table lists the results.

Sigmas Funding Rate Sample Size % Success Cumulative Funding Cumulative XBTUSD Return Cumulative Return % of Total Observations
-2 -32.61 21 47.62% -7.71% 3.36% 11.07% 4.01%
-1 -15.47 62 53.23% -16.76% -18.15% -1.38% 11.83%
1 18.80 81 45.68% 25.10% -14.77% 10.33% 15.46%
2 35.93 36 44.44% 13.49% 6.90% 20.39% 6.87%

Sample Size – Out of 524 funding periods, this is the number of times that the funding rate was less than or equal to the sigma adjusted test (assuming a negative funding rate).

% Success – Out of the sample size, this is the number of times where the funding rate was negative and the next period return was positive or vice versa.

Cumulative Return – This is the net return, including funding, of both success and failure situations. If the funding rate is negative, you go long, and you receive funding because the rate is negative. If the funding rate is positive, you go short, and you receive funding because the rate is positive.

% of Total Observations – Sample Size / 524 (Total Number of Funding Periods)

Conclusion

The data clearly illustrates that traders may use an extreme funding rate as a signal to take the counter trend position. The added benefit of receiving funding for bucking the trend is what provides a significant majority of this strategy’s returns.

A simple trading algo can be constructed to capture this alpha. At each funding timestamp, if the funding rate is above or below your limit, place the counter trend trade. Immediately after the next funding timestamp, close your XBTUSD position.

The one caveat is the sample size is still relatively small. I will revisit this study early next year to observe if the results change.

 

狼来了

本周,中国人民银行规定禁止投资及交易ICO(“虚拟货币首次公开发售”)项目 。然而,当我们认真分析后,似乎感觉这个禁令有点雷声大雨点小。分析了其向公众公布禁令的方式和迟迟未开展的行动后,我更相信这项禁令的宣传意义更大。

什么被禁止了

中国人民银行(PBOC)指出ICO为非法融资行为。交易所必须停止所有加密货币的交易。几乎全国的ICO交易平台随即关闭。而过去数天,许多交易所亦将其交易货币下架。你可以想像,当没有了零售买家这层炮灰,加密货币的价格便开始下趺。

从中国所募集的资金必须退还比特币或以太币。但实际上操作起来是不太可能实现的,这赋予中国人民银行一个好的借口了去关闭不遵循法律的相关交易平台。

加密货币交易平台的管理者这回必须拿出得体的应对手段,被提问时也要乖乖回答,要不然PBOC就会指控他们在违反一条根本不可能遵守的法律。

与那些可以以人民币兑换比特币或以太币的大型交易平台一样,中国人民银行现在可以完全控制它们了,这是推出新规定的主要原因。

 

什么是没有被禁止的

中国人民银行可能已经禁止中国ICO的发行及交易;然而,他们并没有限制ICO融资方法及渠道。 ICO的革命性在于其资金来自于以非政府统一的货币,通常是比特币或以太币。

如果中国客户仍然可以合法地将人民币兑换为比特币或以太币,并从交易平台上提取加密货币,他们则可以认购任何他们想投资的ICO项目。一旦投资者的资产转化成加密货币型态,PBOC便很难控制其资金流向。

中国人民银行并不愚蠢。他们非常了解ICO项目中资金流入及流出的方式。因此,ICO新条例中的漏洞显然是故意的 。这次PBOC的公关做的很漂亮。

中国人民银行展示了它对零售投资者的关心。 PBOC避免投资者在这种高风险的新投资市场中亏损。但如果PBOC真的关心中国的金融体系的健康,便应该放缓一直使得房地产价格膨胀的银行信贷 。但这永远不会发生,所以透过另一个行业来证明它们的用心良苦。

透过容许三大加密货币交易平台照常经营,PBOC其实放任ICO在中国市场缓慢发展。权威人士认为,ICO对中国市场是有价值的。它可促进企业家创造出能够推动中国发展的应用技术。

 

全国代表大会

共产党第十九次全国代表大会将于十月举行。中国各各方面将与这个会议息息相关。习近平主席在该会议中必须呈现出中国是个正迈向强大的国家。外部对维持和平与繁荣所来了的威胁是不容许的。

曾在活跃一时的ICO项目对中国来说是个负担。筹集的资金不断增加,数亿美元投资在的高风险项目的情况不容忽视。在重要的全国代表大会之前,北京不能容许看到一大群投资者在街上游行抗议,就因为他们投资了那些一文不值加密货币而损失惨重。

公布了禁止交易ICO的消息一天后,CCTV报道了ICO暂停交易的情况。他们声称,60个ICO项目在47个平台上共募集了26.16亿人民币,涉及105,000个投资者。高协调性的报导加上在黄金时段播出赋予了戏剧张力。感到不安全的政府都常在大型活动发生创造出良好景象。其人民肯定感受到了来自政府的关怀。

未来,低位抄底!

加密货币市场不再想以往一样尊重中国人民银行。比特币和以太币分别在禁令出台后下跌了15%和20%。然而,两币几乎已经达到了周一经历的损失。对许多投资者来说,这个禁令提供了一个加大投资该资产类别仓位的绝佳机会。

中国人民银行在禁止ICO的同时,并没有解决中国投资者为什么迫切地将自己的储蓄转移给具有好看网站介面的根本原因。对于大多数投资者而言,房地产市场依然昂贵,而在2015年大跌市之后,许多投资者避免投资A股市场。人民银行继续通过宽松的信贷政策允许国内银行来扩大货币供应量。这种大量印钞的情况使得同志们对人民币大幅贬值心生恐惧。任何可以抗通胀的资产或投资都成为中国储户蜂拥而至的对象。

中国投资者在经历了一些自由投资的经验后,这些新规定会令到投资者们懊恼及不适应。毕竟禁止的水果味道尝起来更甜。通过禁止ICO,中国人民银行创造了行业中最好的营销手段。

ICO资产类别还是非常小众的。但现在中央电视台正在教育着每个中国人什么是ICO 。更多的人会尝试着购买这个被禁的资产。这对市场来说不是负面消息,这反而是任何替代资产最想要发生的事情之一。

中国的ICO筹资活动将会转移到地下进行。全国人大会议后,对ICO融资的限制将会放宽。记得今年早些时候对三大交易平台的“打压”行动。几个月后,中国人民银行允许交易和提款再次正常运作。

有经验的离岸交易平台可以因国内交易平台关闭所造成的市场空白而获利。虽然通过WeChat和QQ集团的融资活动将会停止,但积极的ICO发起人将创造出创新的方式来满足中国投资者对于投资产品的无限需求。

 

 

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BitMEX (www.bitmex.com)

The Big Bad Wolf

This week the PBOC decreed that its plebes may not invest or trade Initial Coin Offerings (ICOs). However when one engages in critical thought, it appears this ban has more bark than bite. Examining the way in which the ban was presented to the public, and the actions that were not taken, leads me to believe that this ban is for publicity only.

What Is Banned

ICOs are considered an illegal form of financing by the PBOC. Exchanges must stop supporting any trading of the tokens. Almost immediately most of the Chinese ICO trading platforms shut down. Over the past few days, many exchanges delisted any tokens from their platform. As you can imagine, without the cannon fodder of retail punters, token prices initially collapsed.

Projects that raised money from Chinese nationals must refund them their Bitcoin or Ether. Since in practice, this is impossible to accomplish, the PBOC now has a nice excuse to shut down any exchange it wishes for violating the law.

Token exchange owners must take their butt finessing with a smile on their face. They must bend over again when asked, or the PBOC will find them in violation of a law that is impossible to abide by.

Similar to the large exchanges that deal with RMB to Bitcoin or Ether trading, the PBOC now has token trading platforms firmly under their control. That is the primary reason for these new regulations.

What Is Not Banned

The PBOC might have banned the issuance and trading of ICOs in China; however, they did not outlaw the way in which ICOs are funded. The revolutionary aspect of ICOs is that the money raised is in the form of a non-governmentally aligned currency. Usually that is Bitcoin or Ether.

If Chinese punters can still convert RMB into Bitcoin or Ether legally, and withdraw their digital currency from the exchange, they can still subscribe for any ICO they wish. Once the trader’s assets are purely in the crypto space, it is very difficult for the PBOC to control where that money goes.

The PBOC isn’t stupid. They are very informed on how money flows into and out of ICOs. Therefore, this was a deliberate omission from the new ICO regulations. What the PBOC did is construct a beautiful piece of PR.

The PBOC demonstrated that it cares about the wellbeing of retail investors. The PBOC has prevented investors from losing money in this risky and volatile new asset class. If the PBOC really cared about the financial health of China it would stop propping up the property market by continuing to allow banks to issue credit. But that will never happen, so another industry was targeted to prove their good intentions.

By allowing the big three exchanges to continue business as usual, the PBOC is allowing the ICO market to limp along in China. The high priests recognise that a vibrant ICO market in China is valuable. It helps promote entrepreneurs to create the next wave of useful technological applications that could propel China forward.

The National Congress

The 19th National Congress of the Communist Party begins in October. Every aspect of life in China is affected by this pow-wow. Xi Jinping must present a country that is chugging along towards greatness. No outward crack in the veneer of harmony and prosperity is allowed.

The once vibrant ICO industry in China was a liability. The amounts of money raised grew and grew, and the risk of a high profile project absconding with hundreds of millions of dollars could not be ignored. The last thing Beijing needs before the all-important National Congress is a horde of destitute punters protesting about losing their money in one or more shitcoins.

One day after the ban, CCTV ran a piece about the cessation of ICO trading in China. They claimed that 60 ICOs raised 2.616bn CNY, across 47 platforms, involving 105,000 investors. The highly coordinated nature of the announcement and than a prime time television piece about the new regulations is good theatre. Insecure governments will create good theatre in advance of important jamborees. The plebes must feel the love.

The Future, BTFD!

The crypto market does not respect the PBOC like it once did. Bitcoin and Ether declined 15% and 20% respectively immediately following the ban. However, both have almost paired Monday’s losses. To many traders, this ban presented a perfect opportunity to increase their exposure to the asset class.

While the PBOC banned ICOs, it did not address the root cause of why Chinese investors are desperate to hand their savings to teams with slick websites. The property market is still too expensive for most traders, and after the 2015 carnage, many traders avoid the A-share market. The PBOC continues to allow domestic banks to expand the money supply through aggressive lending. This unabashed money printing creates a fear amongst comrades of a massive upcoming devaluation of the RMB. Any asset or scheme that can generate inflation beating returns excites desperate Chinese savers.

After experiencing a modicum of freedom over the investment of their savings, Chinese investors will chafe under these new regulations. The forbidden fruit tastes sweeter. By banning ICOs, the PBOC just created the industry’s best marketing tool.

The ICO asset class is still very niche. But now that CCTV is educating everyone in China about what they are. More people will attempt to purchase this taboo asset. Far from negative, this is one of the best things that could happen to any alternative asset.

ICO fundraising in China will move underground. After the National Congress, the restrictions on ICO fundraising will loosen. Remember the “crackdown” on the big three exchanges earlier this year. After a few months, the PBOC relented and allowed trading and withdrawals to function normally again.

Savvy offshore trading platforms will profit from the gap in the market caused by the closure of the leading onshore Chinese trading platforms. While overt fundraising through WeChat and QQ groups will cease for now, motivated ICO promoters will create innovative ways to access the insatiable demand for alternative savings products from Chinese investors.

推它吧

硬分叉来了又走了,我们现在好多了。根据你询问的对象不同,比特币现金到底是一个巨大的成功或失败这个问题的答案个有千秋。交易员们只关心盈利 。恐惧,贪婪和交易平台制定的政策不同为交易员们提供了利润丰厚的套利机会。

比特币现金不是第一个通过比特币的硬分叉而诞生的竞争币,但却是第一个得到广泛宣传的。即使是“纽约时报”也撰写了文章来解释什么是比特币现金,以及它对于比特币来说的意义是什么。

即便SegWit已经被激活,放大潜在交易容量的辩论还依然持续着。在今年秋天,比特币很有可能再次硬分叉。一个激活了SegWit以及拥有2MB区块大小(SegWit2x)版本的比特币将开始被交易。因此,交易员应该在硬分叉发生的整个过程中了解如何使用衍生工具赚钱 。

 

理论

我将在这个例子中使用比特币(XBT)和比特币现金(BCH)来说明。

任何数字货币的硬分叉都与股票分红类似 。在任何试点网络的哈希值是有限的 。矿工将根据价格比率来决定挖哪一种数字货币的矿。然后,挖矿难度将会根据在哈希力和价格比例达到平衡的前提下来进行调整。价格导致挖矿难度进行调整。

8月1日北京时间21:17是比特币现金分发的登记日。如果您在该日持有比特币,理论上,您可以以1:1的比例获得比特币现金。如果您在登记日后购买比特币,您便无法收到任何比特币现金。

登记日过后,股票将会除息。股票价格将根据支付的股息金额而下降。如果我们认为硬分叉与派股息相似,那么比特币除息日为8月1日 。 比特币的价格应该根据比特币现金价值而相应降低。

实际上,由于价格导致难度调整,比特币不一定会根据比特币现金的价值下跌 。此外,与股票派的现金股息不同,比特币现金是一种可交易货币,其价值亦会波动。

多头期货合约的持有人是不会收到股息的。因此,期货合约应根据预期收到的股息打折后计算交易价。如果不是这样计算,套利者将可以透过买入股票并卖出期货合约来套利。他们将从持有的股票获得股息,如果获得的股息大于期货的折价,他们就可以赚取利润。

比特币期货市场也会出现同样的现象。 BitMEX决定XBTUSD和XBTU17所依据的指数里不包括比特币现金的价值。交易员若希望在没有任何比特币价格风险的情况下建比特币现金仓位,他们可以先购买比特币,然后出售与美元等值的掉期或期货合约,然后他们将收到比特币现金。请注意,他们将不会在BitMEX上收到比特币保证金相应的比特币现金。

理论上来说XBTUSD和XBTU17相对市场上的比特币现金应该有价格折扣。 与比特币现金的价格的巨大差异来自于对未来价格的未知。

 

硬分叉前XBTUSD和XBTU17的走势

上图是7月30日至8月3日XBTU17的价格折扣。该图表显示,交易员由于试图创建没有市场风险比特币现金将期货价格推向逆价差。在登记日前几个小时价格折扣接近5% 。

上述图表是XBTUSD在同一时期内的百分比溢价或折扣。交易员也透过出售XBTUSD来建立比特币现金仓位。掉期价格有着逆价差,导致空头方需要支付多头方。在这段时间内,空头方支付了交易金额的3.51% 。值得注意的是,该掉期在登记日之前的几个小时的折价也达到 3.52% 。

以下交易假设您对比特币现金的前景保持中性。 比特币现金可能成功也可能失败,但我将描述的交易将产生可预测的回报。所描述的交易也没有比特币/美元价格风险。

 

交易1:购买XBTU17 vs  做空现货比特币


在这段期间比特币的借贷利率上涨 。我们并不建议在借贷利率高昂的情况下借比特币 。谨慎的交易员应在事件发生前就准备好信贷额度。这使得他们能够以更便宜的价格锁定借贷利率。

 

使用上述图表作为交易指引,在硬分叉发生前几个小时执行交易来获得最佳回报,当其他交易方是最不理性的时候。最好的一点是,基础如同预期一般在硬分叉之后快速的恢复到中位数 。因此,借用比特币的时间是有限的。


假设您每天支付1%的借款利率来借比特币。 24小时内,XBTU17的折扣从5%跌至1%。因此,您可以在一天内赚取3%的利润。


交易2:购买XBTUSD vs 做空现货比特币


值得重提的是,这个交易的最佳时机是硬分叉发生前几个小时。资金的优势在于利率从负转为正的那段时点,掉期价格必须由折价交易变为溢价交易。所以你可以得到两次报酬。

 

您可以获得全部折扣,再加上退出时,掉期合约将是溢价交易的。当掉期基准向中间值回升时,您仍可以每8个小时获得利息。一旦公布的利率是正的,你可以在有溢价的情况下平仓。8月1日后,正利率发生在十个资金供应期之后。

 

硬分叉后XBTUSD和XBTU17的走势

硬分叉已经结束了。比特币社区内用户均放下了心头大石,但对冲的仓位需要进行平仓。任何建了比特币现金仓位的 交易员都持有了它,并且必须关闭做空的衍生头寸。问题是,如果比特币随着市场平仓的过程中上涨,,基准将上涨,对冲交易方则需要以一个较高溢价来平仓 。

因为我们知道做空所收到的压力很大。因此,在登记日后买涨是个谨慎的做法。

上图是8月3日至8日的XBTU17溢价。价格大幅上涨是发生在价格突破3000美元的时候。值得注意的是,交易员 在硬分叉之后仍有几天的时间以折扣价交易XBTU17。做了这些交易的交易员是你在乘坐公共汽车时试驾兰博基尼。

以上图表是XBTUSD在同一时期内的百分比溢价。价格上涨发生在价格突破3,000美元的时候。在同一时间,资金成本从负转为正。做空方总共收到交易资金1.76%的利润。


交易:购买XBTU17 vs  做空XBTUSD

这个交易的目的就是基于XBTU17价格恢复平均值的特性。使用保证金交易的对冲方会选择空头期货合约来建立比特币现金仓位,因为他们在硬分叉前支付的利率是固定的。与具有可变利率的XBTUSD相反,并且不能被预先计算。

因此,XBTU17基准将从负转向正。由于XBTU17基数向平均值回升,XBTUSD的资金将从负向转为正。您可以从XBTU17基准上涨中受益,再加上您空头的XBTUSD对冲也将在每8个小时收到利息收入。 搞定!

 

SegWit2x 硬分叉

比特币现金是今年晚些时候大事件的热身。大区块支持者和SegWit的推崇者相信,他们的想法在 最近的硬分叉事件上得到了证实。大区块支持者指出比特币现金的价值高于零代表了市场对规模解决方案是有需求的。支持SegWit的人们指出,比特币价格的上涨证明了市场对其规模解决方案的重视。

在纽约协议中带出SegWit2x的硬分叉方案之前,双方都不会退缩。围绕着SegWit2x硬分叉的恐惧、不确定性和怀疑(FUD)将会持续发出声音。

这个不安的情绪会盖过比特币的价格。在硬分叉发生之前,价格应该不会突破 5,000美元。这情况就像复制了比特币现金硬分叉时的情况,只不过盘子更大了点。上述的交易模式和市场场景将在几个月内保持可操作性及相关性。

 

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BitMEX (www.bitmex.com)

Push It

The hard fork came, went, and now we are much better for it. Depending on who you ask, Bitcoin Cash is a roaring success or failure. Traders are neutral beings only concerned with generating profit. The fear, greed, and widely different policies enacted by exchanges offered juicy arbitrage opportunities.

Bitcoin Cash was not the first altcoin to enter existence through a hard fork of Bitcoin. However, it was the first to be widely publicised. Even the New York Times wrote decent articles explaining what Bitcoin Cash was, and what it could mean for Bitcoin.

Even though SegWit is activated, the scaling debate is not finished. Later this fall, it is extremely likely that Bitcoin will hard fork again. A version of Bitcoin with SegWit and a 2MB block size (SegWit2x) will begin trading. Therefore, traders should learn about how to make money using derivatives before, during, and after a hard fork.

Theory

I will use the example of Bitcoin (XBT) and Bitcoin Cash (BCH) in this theoretical example.

A hard fork of any digital currency is akin to a stock dividend. There is a finite amount of network hash power at any time. Miners will decide which version of a coin to mine based on the price ratio. The difficulty will then adjust to bring the ratio of hash power and price into equilibrium. Price leads difficulty adjustments.

1 August 13:17 UTC was the record date for BCH distribution. If you held XBT on that date, you theoretically were entitled to BCH in a 1:1 ratio. If you purchased Bitcoin after the record date, you did not receive BCH.

After the record date, a stock goes ex-dividend. The stock price will drop by the dividend that is paid. If we believe that hard forks act like dividends, then XBT went ex-div on August 1st. XBT should have dropped by the value of BCH.

In practice, because price leads difficulty adjustment, it isn’t necessarily true that XBT will or should drop immediately by the value of BCH. Additionally, unlike stock dividends which are a discrete amount of cash, BCH is a tradable currency and its value fluctuates.

Holders of long futures contract do not receive dividends. Therefore a futures contract should trade at a discount relative to the expected dividend payment. If it doesn’t, arbitrageurs will buy a stock and sell the future. They will receive the dividend payment from their long stock position, and if that is greater than the futures discount, they make money.

The same phenomenon should occur in the Bitcoin futures markets. BitMEX decided that our XBTUSD and XBTU17 products underlying index would not include the value of BCH. Traders who wished to create BCH without any XBT price risk bought XBT, then sold the USD equivalent number of swap or futures contracts, and then receive BCH. Note, they would not receive any BCH for XBT margin held on BitMEX.

XBTUSD and XBTU17 theoretically should trade at a discount relative to the value the market places on BCH. The big difference with BCH is that the future price is unknown.

Pre-Fork XBTUSD and XBTU17 Behaviour

The above chart is the outright % discount of XBTU17 from July 30th to August 3rd. The chart illustrates that traders attempting to create BCH without market risk drove the futures into extreme backwardation. The discount reached almost 5% hours before the record date.

The above chart is the outright % premium or discount of XBTUSD during the same time period. Traders also sold XBTUSD to create BCH. The swap was backwardated, which resulted in shorts paying longs funding. Over this time period shorts paid 3.51% of funding. Remarkably the swap reached an outright 3.52% discount hours before the record date.

The following trades assume you have no view on the viability of BCH. BCH may or may not be successful, but the trades I will describe yielded predictable positive returns. The trades described also have no Bitcoin / USD price risk.

Trade 1: Buy XBTU17 vs. Short XBT Spot

Predictably interest rates to borrow Bitcoin spiked during this period. Borrowing Bitcoin during the eye of the storm is not advisable. Prudent traders should have credit lines in place well in advance of the event. That allows them to lock in much cheaper rates.

Using the above chart as a guide, putting this trade on hours before the fork yields the best returns. That is when traders are the most irrational. The best part is that the basis will mean revert quickly, and it did, after the fork. Therefore you limit the amount of time you pay to borrow Bitcoin.

Assume you paid an egregious 1% per day to borrow Bitcoin. XBTU17’s discount went from 5% to 1% in 24 hours. Therefore, you could have earned 3% in one day on this trade.

Trade 2: Buy XBTUSD vs. Short XBT Spot

Again the best time to put this trade on is hours before the fork. The beauty of funding is that for the rate to go from negative to positive, the swap must go from trading at a discount to a premium. Therefore you get paid twice.

You capture the full discount, plus when you exit, the swap will be at a premium. While the swap basis mean reverts, you also get paid interest every 8 hours for being short. Once the published rate is positive, you close you long at a premium. After August 1st, it took a subsequent ten funding periods before the rate was positive again.

Post-Fork XBTUSD and XBTU17 Behaviour

The fork is over. The community breathes a sigh of relieve and hedges must be unwound. Any trader that created their BCH now has it, and must close short derivative positions. The problem is that if Bitcoin rallies alongside the unwind, basis will rise, and hedgers will be forced to cover at much higher premiums.

A priori we know the short squeeze will be violent. Therefore it is prudent to go long basis after the record date.

The above chart is the XBTU17 outright % premium from August 3rd to 8th. The massive jump in premium occurred as the price broke $3,000. Remarkably traders were given an opportunity for days following the fork to buy XBTU17 at a discount. Those that did are test driving Lambos while you ride the bus.

The above chart is the XBTUSD outright % premium over the same time period. The spike in premium occurred as the price broke $3,000. During that same time period, the funding went from negative to positive. In total, shorts received 1.76% of funding.

Trade: Buy XBTU17 vs. Short XBTUSD

The aim of this trade is to play the mean reversion of XBTU17 basis. Hedgers on the margin will choose to short the future to create BCH because the interest rate they pay via the discount pre-fork is fixed. As opposed to XBTUSD which has a variable interest rate, and cannot be known a priori.

Therefore XBTU17 basis will go from negative to positive. As the XBTU17 basis mean reverts, XBTUSD’s funding will shift from negative to positive. You benefit from a rising XBTU17 basis, plus your short XBTUSD hedge also receives interest income every 8 hours. Booyakasha!

SegWit2x Hard Fork

Bitcoin Cash was a warm up for the main event later this year. Both the big blockers and SegWit disciples believe their cause was vindicated by the recent hard fork. Big blockers point to the non-zero value of BCH as proof the market values their scaling solution. SegWit folks point to the high and rising price of Bitcoin as proof that the market values their scaling solution.

Neither side will back down before the SegWit2x hard fork put forward in the New York Agreement. The Fear Uncertainty and Doubt (FUD) surrounding the SegWit2x hard fork will be deafening.

This FUD will put a lid on the Bitcoin price. $5,000 will not be broken until after the hard fork occurs. This sets up an exact replica of the Bitcoin Cash hard fork with more money on the line. The trades and scenarios described above will remain relevant in a few months time.

我不是你老子

今年7月,BitMEX的团队去了威斯康星州的密尔沃基进行团建活动。密尔沃基在夏天是美丽的。我在清新的空气中享受着湖泊和河流岸边的晨跑。我正在为香港冬季壁球节训练,所以我感激任何更有利于我的有氧运动计划实施的条件。

有一天午餐时,班和他的妻子想吃牡蛎。他们离开桌子后不久却返回来了。班讲述了他们如何尝试购买牡蛎。由于愚蠢的规定,服务员要求他们进入餐厅内并在被服务着和注视着的情况下用餐。然而,由于等待的餐桌服务的顾客很多,他们结果什么也没吃到。

像保姆一样的国家依旧存在着,餐馆居然不相信两个大人有能力把牡蛎壳放在嘴里吧唧吧唧地吃掉。反而,两个成人必须由另一个人监督,并为这种“服务”支付小费和消费税。

全球人口的幼稚化的趋势没有任何减轻的迹象。政府试图进入我们生活的各个方面,在大多数情况下,政府的介入使得我们生活条件和环境更差了。从某方面来说,比特币的出现正是对这种保姆式干预的反抗。

比特币和数字货币赋予成年人自由控制自己财务的权力,但是这种自由是有成本的。成年人需要自己掌握市面上所有的可用信息并自行作出决定。成年人自己去承担好坏决定所带来的后果。在比特币的世界里,没有执行官告诉成年人该如何行动,该在哪个地方交易,无法监督每个交易场所,更无法在成人用户失去密码后来保护他们。

部分比特币交易员秉持着这种自我承担的精神。但是,其他交易员对比特币运作模式与其他受监管的资产市场运作模式不同而表示担心。在最近一篇标题为Meet ‘Spoofy’. How a single entity dominates the price of Bitcoin.”的媒体文章中,作者对一群交易员欺骗市场和扭曲市场行为感到愤怒。作者确实对Tether提出了有意思的指控; 然而,这个问题只能留给未来文章去解释了。

我完全不希望比特币的交易模式像传统资产一样。比特币交易员应该自由地去交易。我会详细说明一些市场行为并阐述为什么我相信它们不会对比特币市场的公正性造成威胁。

 

内幕交易

一个交易员的工作是获取比市场更多更准确的信息。这就是内幕交易的教科书定义。不使用内幕信息的交易员是不会赚钱的。

内幕交易主要是在股票市场中受最多监管。股票价格之所以呈现间接性上涨的原因是交易信息在市场中的滞后效果。如果所有信息都是公开的并可用来决定交易,股票交易形态会更加平稳。

美国监管机构对于内幕交易的控诉最为频繁。但讽刺的是,美国的议员们却被允许在他们监管的公司里进行内幕交易。这形成了一个有趣的“三角恋”。

公司游说(俗称“贿赂”)立法者制定相关的法规。立法者们知道,他们所做的某些决定一旦公开就会对股价产生积极或消极的影响。这些立法者就根据这些信息交易来获得高于平均水平的回报。

过度的监管和法律制度为大型公司提供了防御的护城河。这个循环将一直存在,因为只有大型的,富有的公司才能承受不断贿赂所需要支付的成本。这些贿赂能为他们带来比改善产品还要好的投资回报。

立法者在市场中两面受益。他们的连任活动是由大企业资助,同时他们可以在重要的政策出台前夕进行股票交易。越官僚的政府体系中越多这种三角关系。

比特币交易发生在一系列无关联的交易平台和不同的司法管辖区,所以构成内部信息的概念很难辨别。由于对比特币的价值还没有一个公认的定义,任何市场消息对其价格会有积极或消极的影响其实取决于谁来回答这个问题。

在首次代币发行和竞争币市场中,若你在发行前拥有该项目关潜在合作伙伴信息,软件漏洞的信息或某个重要开发进程的信息,这些信息是可以带来巨大投资收益的。花时间与加密货币开发者交流并积极参与加密货币社区活动的交易员们能在这个市场赚取最多的钱。

总得来说,如果你愿意投入越多精力在你的“手艺”里,你赚得钱就越多。

 

误导市场行为

在大多数受监管的交易平台上误导市场行为属违法行为。误导市场行为就是靠下一些实际上并不会真正兑现的单去扰乱市场对未来价格的判断。误导市场行为其实就是一种虚张声势的伎俩。

我惊讶地发现这样的做法在某些交易中是非法的。假设你想购买价值10亿美元的比特币,你会告诉市场吗?当然不会,一个聪明的交易员会虚张声势,说他们想卖出10亿美元的比特币,然后当市场相信后,比特币价格就会下降,到时候交易员再以低价购入。

如果交易员拥有投资要求的抵押品,不管他的真正意图什么,原则上交易员就可以下单。真正的问题在于,当根据下单价格产生合理交易时,交易平台是否违背了下单价格优先于下单时间的原则而让这些虚张声势的交易员可以逃过一劫。

与其关注比特币大额交易订单的闪现,上述提到的文章作者其实着重于分析交易平台的操作是否违反了下单价格优先下单时间的交易原则。

BitMEX而言,价格优先原则是神圣不可侵犯的。我们从来没有,将来也不会违反这个基本的订单分配的原则。

许多手动比特币交易员认为,大多数比特币交易平台容许做市商在交易时违反下单价格优先原则。当交易员看到报价,他们考虑之后手动下单。他们原本以为会立刻成交的订单却没有成交。而当市场价格变动后,他们才欲哭无泪。他们认为他们的订单应该已经被市场接纳,但不知何故,做市商们却能够从有效交易中脱逃。

BitMEX交易平台的订单匹配是自动的。一旦提交的订单得到对应匹配,做市商是无法在交易完成前撤出他们的交易的。我重申一下,BiMEX始终遵守着下单价格优先的原则。

手动交易员必须意识到,与交易程序相比,人眼看到后经过大脑来处理整个交易环节是缓慢的。你本身的速度相对较慢并不代表交易平台有问题。

如果你不能接受你作为一个人的劣势,你可以要么使用交易程序,要么将整体交易时间框架拉长一点。

 

声誉

最成功的比特币交易平台拥有良好的名声。比特币交易是没有存款保险或全球比特币交易警察来保障的。如果你不赞成交易平台的运作方式或业务模式,你可以随时离开该平台。

为了留住客户,交易平台的运营商必须取悦用户。与传统资产市场相反,往往金融机构取悦的是监管者,而不是用心改善付费客户的体验。

名声的建立是一项永恒的工作,但被名誉扫地往往在一瞬间。

监管机构人可以被收买,并且大多数都是被他们监管的公司所迷惑。许多金融机构的高层职位是由前监管人所担任。在彩虹的尽头肯定有金子的诱惑,所以有能力的人才愿意接受比私人公司工资还底的政府工作。

在数字货币市场交易的成年人拥有很大的权力来集体塑造交易体验。来自意见领袖的推特或者转贴文章会对交易平台的安全性和完整性造成很大的影响。成年人应该利用这种力量来创造一个能安全赚钱的交易环境。

上述媒体的文章是一个很好的例子。主流金融新闻观察到这点并且通过报道扩大了作者观点的影响力。这些观点对文章中提到的许多交易平台都不太好。不管是好是坏,这肯定会影响交易外流到其他交易平台,一些被人认为是相对诚实的平台。

舆论才是市场最好的驱动者。

 

日间交易员

如果您不能每天在聊天室、留言板上至少呆上12个小时,同时不断地去查看你的仓位,就别日间交易数字货币。如果您不能24小时接听电话,一周内的短线交易也会有很大风险。

这是一个成年人的市场。成熟一点,主动自我学习并在这个过程中体验真正的自由。

 

 

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BitMEX (www.bitmex.com)

I Ain’t Yo Daddy

This July the BitMEX team absconded to Milwaukee, Wisconsin for a team offsite. Milwaukee in the summer is beautiful. I thoroughly enjoyed morning runs on the banks of lakes and rivers in clean, crisp, and dry air. I’m currently training for Winter squash season in Hong Kong. Anything that makes keeping to my cardio schedule easier is appreciated.

One day at lunch Ben and his wife wanted to eat oysters. They left the table and returned shortly afterwards. Ben recounted how they attempted to purchase oysters, but due to a silly regulation, they had to be seated, served, and supervised while eating them. There was a long line for table service so they were unable to consume anything.

The nanny state is alive and well. Two adults cannot be trusted to put a shell to their mouth and slurp a morsel of food. Instead, they must be supervised by another human, and pay tips and tax for that privilege.

The infantilization of the global population shows no signs of abating. The government injects itself into every aspect of our lives, and in most cases we are worse off for it. Bitcoin in some respects is a reaction against this trend.

Bitcoin and the digital currency industry empowers adults to take control of their financial well being. This is liberating, but it comes with costs. Adults are expected to make informed decisions by ingesting all available information. Adults make their own good and bad choices. There is no CEO of Bitcoin to tell adults how to behave, where to trade, protect them if they lose their password, or police trading venues.

Some Bitcoin traders live by this ethos of personal responsibility. However, many of these same traders express concern that Bitcoin markets do not operate like other regulated asset classes. In a recent Medium article entitled “Meet ‘Spoofy’. How a Single entity dominates the price of Bitcoin.”, the author rants and raves about how a trader or group of traders are spoofing and distorting the market. The author does present interesting allegations about Tether; however, that rabbit hole is best addressed in another newsletter.

I wholeheartedly do not wish Bitcoin to trade like traditional assets. Traders should be free to, well trade. I will detail certain market practices, and why I believe they pose no threat to the integrity of the Bitcoin markets.

Insider Trading

The job of a trader is to have better information than the market. That is the textbook definition of insider trading. Traders who do not use inside information will not make money.

Insider trading is most policed in the equity markets. The reason why there are discontinuous jumps in the price of stocks is that information is held back from the market. If all available information could be traded upon at any time, trading patterns would be smoother.

American regulators are the most aggressive prosecutors of insider traders. The irony is that US congressmen and women are allowed to insider trade on companies which they essentially regulate. That creates an interesting love triangle.

Companies lobby (aka bribe) lawmakers about regulations. The lawmakers know that certain decisions they make will positively or negatively impact the stock price once made public. These same lawmakers then trade on this information and earn above average returns.

Excessive regulation and legalese provide a defensive moat for large companies against small ones. The cycle perpetuates itself because only large and well heeled companies can afford the cost of continuous bribery. This bribery presents a much better return on investment than improving their underlying product.

Lawmakers receive cash on both sides of the equation. Their reelection campaigns are funded by big business, and they get to trade the stock ahead of important regulatory changes. A variant of this triangle is present in most heavily bureaucratic governments.

Bitcoin trading occurs across a set of unaffiliated exchanges and various jurisdictions. The notion of what could constitute inside information is difficult to discern. Given the lack of a generally accepted theory on the fundamental value of Bitcoin, a piece of market news has positive or negative implications depending on who you ask.

In the ICO and altcoin markets, knowledge about potential partnerships, software bugs, or completion of certain development milestones before the general public can provide immense profits. The traders who invest the time speaking with the developers and are active in the community, are the traders who make the most money.

What a thought, if you put more effort into your craft, you make more money.

Spoofing

Spoofing is illegal on most regulated exchanges. Spoofing is the act of posting a order you do not have the intention of honoring. Spoofing is bluffing.

I find it incredible that this is illegal in certain markets. If you wanted to buy $1 billion worth of Bitcoin right now, would you tell the market? No. A smart trader would bluff that they wished to sell $1 billion worth of Bitcoin, and then if the market believes him and trades lower, buy at a lower price.

If a trader has the collateral needed to place an order, he or she should be allowed to place that order. Whether or not he intends to get filled is irrelevant. The big problem, however, is if the exchange violates price -> time priority in order to let the spoofer get off the hook, if a legitimate trade occurs based on their price.

Rather than focus on the flashing of large orders on Bitcoin exchanges, the author of the above mentioned article should focus on whether price -> time order matching priority was violated.

Speaking for BitMEX, price -> time priority is sacrosanct. We have never, and will never violate this essential law of order matching.

Many point and click traders believe that the mythical market makers on most Bitcoin exchanges are allowed to violate price -> time priority. The human trader sees a price, they think about it, then place a manual order. The order they thought would be instantly filled is not. Now the market has moved away from them. They cry foul. They believe their order should have been filled, and somehow the market maker was able to get out of a valid trade.

At BitMEX order matching is done atomically. If your order submission creates a match, there is no way a market maker can pull their quote before being filled. I reiterate, price -> time priority always holds at BitMEX.

Point and click traders must recognise that the human eye to brain to motor function loop is extremely slow when compared to a trading robot. You are slow, but the exchange in most cases is not at fault.

If you cannot accept your inferiority as a human, either trade with a robot, or trade using a higher time frame.

Reputation

The most successful Bitcoin exchanges have the most pristine reputations. There is no deposit insurance or global Bitcoin trading cop to run to. If you do not approve of the way an exchange operates or their business practices, you are free to leave the platform at any time.

In order to retain customers, exchange operators must cater to their users. Contrast that to traditional asset markets. Financial institutions fluff regulators rather than improve the experience of their paying customers.

Reputations take forever to build, and are tarnished instantly.

Regulatory agencies can be bought, and most are held captive to the industries they police. Most high level jobs at financial institutions are held by ex-regulators. There has to be a pot of gold at the end of the rainbow to entice capable individuals to accept government jobs that pay less than the private sector.

Adults trading digital currency markets have extreme power to shape the collective trading experience. A tweet or reddit post from a KOL greatly impacts the perceived safety and integrity of an exchange. Adults should use this power to create a trading environment that is conducive to safety and wealth generation.

The above mentioned Medium article is a great example. The mainstream financial press picked up on this and amplified the reach of the author’s views. These views are not kind on many of the exchanges mentioned in the post. This surely will drive business to other outfits who, rightly or wrongly, are deemed to be honest.

The court of public opinion is the best motivator.

Day Traders

If you cannot devote at least 12 hours per day in chat rooms, on message boards, and constantly monitoring your positions, do not day trade digital currencies. Trading with a less than 1 week time horizon is dangerous if you cannot devote yourself to being on call 24/7.

This is a market for adults. Be an adult, educate yourself, and in the process obtain true freedom.

付费参与

中国矿工:我想在中国建一座新的矿场。

北京:靠!伙伴,你必须付出代价才能参与游戏。

 

国当局最近阻止比特币发展的行动让我联想起了约翰·戴维森·洛克菲勒(John D. Rockefeller) 当初扼制初期石油市场的行动。洛克菲勒之所以能够像神一般的控制着石油行业是因为他铲除了“杂草”。

“杂草”指的是一群随时随地钻油井的小团体。他们没有任何组织性。混乱的钻井行为减少了油井的自然寿命,引起石油价格剧烈波动。洛克菲勒铲除杂草的方式赋予了他强盗男爵的头衔。

中国政府和洛克菲勒有很多共同点。中国政府想要控制经济的各个层面。当一个新的产业出现时,他们容许产业内部的激烈竞争。一旦几个胜利者出现,他们便扼杀弱小玩家,并向生存者提出一个无法拒绝的条件。生存者们可以选择支付延续生命的成本,或将一死了之。

好处可以以不同的形式来呈现。但是,基本上北京可以用绝对权威来招呼你,而在此期间你最好保持微笑。比特币矿业也是如此。

地方政府每个季度都会争相发布令人震惊的增长数字。他们会为了实现增长不择手段。成功意味着在北京的一席之地及家族的财富。

因此,由于许多西部贫困地区铝矿产能过剩而拥有多余的电力,比特币矿业的迅速发展意味着任何拥有资本和地方政府关系的人都可以透过挖掘比特币获利。BitMEX研究报告“挖矿诱因-第二部分-为什么中国成为了比特币采矿行业龙头”对此主题进行更深入的讨论。

中国的采矿业由几个大型的矿池运营商和矿工组成。然而,也有很多较小的采矿组织。北京的雷达尚未探测到这些小矿场,但这个情况不会一直持续下去。

最近泄漏的文件中概述了北京将如何通过大型防火墙(GFW)来阻止比特币区块的传播功能。许多人也正确地指出,矿工们可以通过虛拟私人网络(VPN)轻松避过这些规管措施。在最近的Bitkan会议期间,我向我的老外朋友提起这事。他说,使用VPN或类似的手段绕过大型防火墙会减慢你成功开采区块的速度,导致无法与他人竞争。

他认为这些规管措施会导致小型采矿场的死亡。大规模的矿场才可以承受绕过大型防火墙所需要购买直接线路的成本。北京将这些线路只卖给符合条件的同胞们以监控所有流量。费用就类似于向政府支付继续经营的贿赂经费。没有这个线路,你将无法在国际竞争中生存。北京将完全控制你业务的成败,你将付出他们要求的一切。

他补充说道:

例如,内蒙古人口和经济增长相对较低,没有人想搬到那里。几年前,内蒙古当地政府向愿意迁移业务到那里的中国企业提供大量土地。搬到那里的公司实际上有两个目的,一个是建造制造设备,另一个是采矿煤。

这些公司可以以廉价成本发售所开采的煤炭或者建造并营运自己的小型煤电厂。这导致内蒙古的煤电厂数量涨幅惊人,其中绝大多数发电量都很小,大约都在50250兆瓦左右。

在这些公司搬到那里之后,由于面临全球商品行业经济放缓的打击。几乎所有这些工厂都开始挖掘比特币。他们把矿工当作设备费用,用较高的用电成本来降低企业的利润和税收。他们因此获得了税外的稳定额外收入。

比特大陸(Bitmain)绝对是主导中国比特币矿业的领军机构 。内蒙古和邻近省份的绝大多数工厂都如此操作,共同占有大量哈希算力。

我认为这是大陆打击采矿业最可能的原因,因为这些工厂全都在赚取税外利润。通过关闭其网络,可以迫使产业更集中,大型企业将获得执照,然后政府可以对其进行管理和征税。在我看来采矿行业在中国不会死亡,而会成为一个持牌行业。

价值二千一百万比特币的关键问题是北京是否会用这笔力量试图杀死比特币。鉴于许多地方政府和党的高级官员都可以从采矿中持续获利,我相信北京更愿意维持现状。

我相信北京对互联网的应对方式可以作为对比特币的一个借鉴。北京容忍虛拟私人网络的存在,并出售专用线路让某些组织绕过大型防火墙。 虛拟私人网络对许多读者来说是很便宜且容易的;不过,绝大多数中国群众仍然很穷,无法支付虛拟私人网络的成本,更重要的是他没有这方面的欲望。他们很满意中国内联网的现状,也没有翻墙的欲望。

只要普罗大众的思想不被开放的互联网荼毒,北京对少数富豪精英追逐网络自由这件事采取开放态度。一个最好的例子是我在上海的一个朋友所从事的工作。他的工作是教导准备到国外求学的中国精英学生们如何透过互联网获取某些历史事件的正确版本 。中国觉得群众可以无知,但他们不希望自己最好最出色的精英们与国际同辈相比相形见绌。

最近关闭加密货币交易所,禁止ICO募集资金,以及通过中断区块传播而压制比特币网络等行为使得只有富有的少数人可以享受到加密货币科技所带来的成果,而普罗大众是被排除在外的。

时间会告诉我们,比特币和其他加密货币对于中国人民群众能够带来的真正价值。如果加密货币像水一样,当赋予其足够时间,他们会接触到底层群众。如果他们不是水,那么只有一小部分中国投资者将继续交易,投资和使用该技术。

 

 

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BitMEX (www.bitmex.com)

Pay to Play

Chinese Miner: I would like to build a new mine in China.

Beijing: Well Sheeeeeeit. Partner, you’re gonna have to pay to play.

The recent actions by Chinese authorities to stymie the growth of Bitcoin reminded me of John D. Rockefeller’s quest to tame the infantile oil market. Rockefeller was able to exert god-like control over the oil industry because he eradicated wildcatters.

Wildcatters were small outfits that drilled oil wells wherever they could. They were not organised, and this chaotic drilling reduced the lifespan of oil patches and caused intense volatility in the price of oil. The ways in which Rockefeller culled the wildcatters earned him the title of a Robber Baron.

The Chinese government and Rockefeller have many things in common. The Chinese government wants to control every aspect of the economy. When a new sector emerges, they allow fierce competition. Once a few winners have emerged they decimate the small fish, and present the survives with an offer they can’t refuse. Pay to play, or die.

The payment can be in many forms. But essentially Beijing can tap dat ass whenever it likes, and you better smile during the session. The Bitcoin mining industry is no different.

Local governments all vie to post earth shattering growth numbers every quarter. They will do anything in their power to achieve growth. Success guarantees a seat at the table in Beijing, and riches for your family.

For this reason, as well as overinvestment in aluminum production capacity, many poor parts of north western China have an abundance of electrical generation capacity. The boom in Bitcoin mining meant that anyone with capital and some connections at the local government level could profitably mine Bitcoin. Read the BitMEX Research report titled Mining Incentives – Part 2 – Why Is China Dominant in Bitcoin Mining, for a more indepth discussion of this topic.

The Chinese mining industry is dominated by a few large pool operators and miners. However, there are scores of smaller mining outfits. Beijing has little visibility into many of the smaller outfits. That could not continue forever.

A recently leaked document outlines how Beijing may block the propagation of Bitcoin blocks via the Great Firewall (GFW). Many correctly pointed out that miners could easily evade these measures through the use of VPNs. I brought this up with a laowai mining friend of mine during the recent Bitkan conference. He said that the use of a VPN or other means to evade the GFW would slow down the broadcast of your successfully mined block to the point where someone else would beat you to the punch.

In his opinion, these actions will kill all small mining outfits. The big boys can afford direct lines that bypass the GFW. Beijing sells these lines to compliant comrades, and can monitor all traffic. The fees paid are akin to a bribe to the government to continue operation. Absent this, you will be too slow to compete internationally. Now Beijing has complete control over the success or failure of your business, and you will pay whatever they ask.

He further added:

For instance, Inner Mongolia has relatively low population and economic growth. No one wants to move there. A few years ago the local Inner Mongolian government offered Chinese companies large pieces of land if they moved operations from other provinces. Each company who moved there actually got two titles, one for building manufacturing facilities and the other for strip mining coal.

The companies could cheaply and easily mine the coal for sale or build their own smaller coal power plants to run their operations. This led to a staggering amount of coal power plants in Inner Mongolia, most of them fairly small, around 50 to 250 MW.

After these companies moved there they were hit by the global slowdown in the commodity industry. Almost everyone of these factories started mining Bitcoin on the side. They write off miners as an equipment expense, and use the higher electricity usage costs to lower corporate profit and tax. In return they get a consistent side revenue that is not taxed.

While Bitmain is certainly the biggest miner in China, it by no means dominates. The vast majority of factories in Inner Mongolia and neighboring provinces are all doing this and collectively represent a significant amount of hash power.

I think this is the most likely the reason for the mainland crackdown on mining as all these factories are avoiding tax and laundering profits. By shutting things down at a network level that will force a greater centralization, the large players will then get licensed, and the government can regulate and tax them. In my opinion I don’t believe mining will be dead in China, I think it will become a permissioned industry.

The 21 million Bitcoin question is whether Beijing would use its new power to attempt to kill Bitcoin. Given that many local governments and senior members of the party profit from the continuation of mining racket, I believe the status quo suits Beijing.

Beijing’s treatment of the internet is an apt comparison for how I believe they will treat Bitcoin. Beijing tolerates the existence of VPNs, and sells private lines to bypass the GFW to certain organisations. Operation of a VPN seems cheap and easy to many readers; however, the vast majority of the Chinese masses are too poor to purchase a VPN, and more importantly have no desire. They are perfectly content with the China intranet, and have no desire to escape.

Beijing has no problem with the wealthy elite enjoying a few freedoms, as long as the mindset of the masses is not poisoned. A prime example is the job of a friend of mine in Shanghai. He re-taught elite Chinese students slated to study abroad the correct version of certain historical events. China has no problem with the masses being ignorant, but they don’t want their best and brightest to appear stupid vs. their international peers.

The recent closure of exchanges, banning of ICO fund raising, and the probable disruption of the Bitcoin network by poisoning block propagation, ensures that the masses may not enjoy the fruits of cryptocurrency, but the wealthy few can.

Time will tell whether Bitcoin and other cryptocurrencies present a real value proposition to the Chinese masses. If cryptocurrencies are like water, they will reach the lowest point given enough time. If they are not, then a small percentage of Chinese investors will continue to trade, invest, and use the technology.

愤世嫉俗的人看什么都不顺眼

为什么我们作为一个行业,要寻求来自于我们试图颠覆的行业-金融业的认可?对于大多数人来说,去忽视来自于我们这个时代两位最强大的金融家:摩根大通的杰米·戴蒙 (Jamie Dimon)和桥水(Bridgewater)的雷伊·達里奧(Ray Dalio) 的言论是很困难的。

杰米认为有必要发布一段诋毁比特币的言论,以分散人们对其银行不堪入目的季度交易收入的注意。他称比特币为欺诈,并表示将开除所有交易比特币的员工。雷伊说比特币是泡沫,因为它没有市场应用的价值;它的价格波动太大使其无法应用在日常商务中。

对比特币最常见的批评之一是,除了作为投机者的工具之外,因为它价格的波动太大导致它没有任何其他用处。比特币不能像黄金一样为资产保值,因为它的价值波动太大。

但为什么黄金被公认为是稳定的代名词呢?没错,黄金有一千多年作为财富和国际贸易象征的历史性地位。然而,在过去某个时候使用黄金作为货币是具有革命性意义的,甚至可能被视作是异端邪说。

 

一个有关黄金的思想实验

想象一下自己生活在数千年前早期人类文明世界,在黄金被认定为“金钱”之前。你的部落或村庄仍然使用用贝壳作为交易的媒介。贝壳非常罕见所以具有价值。他们很容易被辨认,也很难假冒。然而,要储存大量的贝壳是很困难的,随着时间的流逝,贝壳也会被分解。随身携带大量的贝壳也是相当困难的。由于伊隆·马斯克(Elon Musk)当时还没有出生,这些贝壳没法自动驾驶。

有一天你发现有种黄色斑点的金属。它的光泽诱使你拿起几块小岩石来研究。与你以往见过的许多岩石和金属不同,黄金是很软的。在火炉中,你将金块融化在一起并发现这种新金属很容易掌控。

第二天你试图记住你发现黄金的地方。经过几周的搜索,您找到另外几枚金块。你突然产生另一个想法:也许黄金是罕见的。

作为一个具有有公民意识的村民,你安排了与村领导们会面,向他们展示了新发现。你提出了以黄金取代贝壳作为交易货币的可能性。他们取笑你。用一块金色的石头作为钱,多么愚蠢。大家都知道,贝壳才是钱,贝壳一直都会是钱。你感到气馁但你没有放弃。

然而, 一个参与会议的女人认为黄金能够做出好的珠宝饰物。它非常有光泽,看起来比村民穿戴的饰品好多了。她问你黄金的来源,并问你是否能帮助她将黄金变为珠宝。

你找到一个地方,一个可以定期挖出黄金的地方。这成为一个热潮。每个人都喜欢他们的新黄金首饰,它好看多了,其形态也不会随着时间改变。

鉴于你手中工具太原始,很难生产出大量的黄金。黄金首饰开始起到了原型货币的作用。穿戴它的人更富有了,因为每年都需要用更多贝壳来购买这小玩意儿。

这时村里的长老开始担心。他们的财富都是以贝壳的形态存放着。面对更好的交易媒介黄金,贝壳每年贬值。更糟糕的是,由于黄金罕见的,具有惰性的,无法伪造的并易于运输等特性,一些商人倾向在出售商品时收取黄金而不是贝壳 。

由于这个村庄接触黄金的历史很短,导致其价值波动很大。没有人知道它相对于实际商品和服务的价值,所以它作为货币仍不像贝壳一样稳定。长老们利用这种恐惧和其价格剧烈波动性来警告村民们不要把黄金当作钱。黄金怎么可能是钱,它只是一颗颗用于打扮的漂亮石头。

随时间过去,村落慢慢认识到黄金及金属货币在性质上作为交易媒介更为优越。慢慢地,黄金对比真实货物和服务的价值飞涨。那些“投资黄金”的人,随着社会转向更好的货币体系,他们的购买力飞速增长。

 

货币转型

从以物易物,商品货币(黄金)到纸币,加密货币,每一次转型都是一个从极大波动性趋向稳定的过程。新形式的货币在前一秒仍然无法购买任何商品和服务,突然间它的购买力就会迅速增加。因为网络效应, 不同形式的货币转型肯定是混乱的。

在交易网络中必须有一定比例的人用该交易媒介对其货物和服务进行定价,该交易媒介才能有价值。然而,没有人想成为第一个接受新货币的人。所以在货币采用过程中,鸡与鸡蛋的问题使得转变一旦发生,就会非常迅速。

对于精明的投机者来说,赶在货币转型面占据一席之地是非常有利可图的。因为没有交易网络的钱是没有价值的,它本质上是个从无到有的过程。而比特币也是如此。

 

从零到比萨

比特币比萨日(2009年5月20日)是比特币第一次与现实货物的交易。此后,随着其交易网络的发展和人们对比特币具有货币工具特性的认可,导致比特币对应实际商品和服务的价值大幅增加。

如果比特币价格非常稳定,那么我们便不是身处在货币体系转型的过程中。由于这种转型极其罕见,参与的交易者,投资者和投机者得到的是大多数人永远不会经历的特权。

货币的过渡之路是崎岖的。这些转变也需要时间。没有任何货币工具能够在十年之内完全取代其前身。因此,因为社会对货币工具的偏好所产生的阶段性价格波动而蔑视比特币的行为是愚蠢的。

 

嫉妒

成为跨国银行的首席执行官是非常困难的。像杰米这样的首席执行官们致力于他们所带领的机构,他们做出了很多牺牲。人性使然,他们目睹年轻人几年内单单因为相信不同的交易媒介而身价暴涨过亿,这个过程肯定会令他们感到恶心。

同时,看着一群小孩口口声声要拆除他们牺牲一切所经营的货币体系令金融高管们感到厌烦。同时,聪明的金融高管们正在一边公开嘲笑着加密资产,一边忙于购买这些加密资产。另一方面,愚蠢的人就继续对中央银行印刷的货币下着重注。

比起从前现今世界联系更加紧密了。从模拟到数码加密货币的转变将是混乱和波动的。我很庆幸自己活着,幸运自己能够在新旧交替的时代中赌上自己的财富。

 

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BitMEX (www.bitmex.com)

Haters Gonna Hate

Why do we, as an industry, look for validation from the finance industry we are trying to disrupt? It’s difficult for most to ignore statements from two of the most powerful financiers of our age: Jamie Dimon of JP Morgan and Ray Dalio of Bridgewater.

Jamie felt the need to distract the crowd away from his bank’s disastrous quarterly trading revenue results by launching a diatribe on Bitcoin. He called it a fraud and said he would fire employees who traded it. Ray said that Bitcoin was in a bubble because it provided no utility; it is too volatile to be used as a currency in everyday commerce.

One of the most common criticisms of Bitcoin is that it is too volatile to be used as anything but a tool of speculators. Bitcoin cannot be a store of value like gold because its value fluctuates too wildly.

But why is gold put forward as the epitome of stability? Yes, it has over a thousand years of history as the symbol of wealth and international commerce. However, at one point in time using gold as a currency was revolutionary and possibly heresy.

A Gold Thought Experiment

Imagine yourself part of a early human civilisation thousands of years ago, before gold was accepted as money. Your tribe or village uses shells as money. The shells are sufficiently rare that they hold value. They are easily recognised and hard to counterfeit. However, it is hard to store the shells in vast quantities, and over time the shells degrade. Carrying a large quantity of shells is also quite difficult. Elon Musk hasn’t been born yet. Few of these shells are self-driving.

One day you discover specks of a yellow metal. Its lustre entices you to pick up a few small rocks and study them. Unlike many rocks and metals you deal with, gold is quite soft. Over a hot fire, you melt some of these gold nuggets together and find it is quite easy to work with this new metal.

The next day you tried to remember where you discovered the gold. After a few weeks of searching you were able to locate another few nuggets. Another thought: perhaps gold is rare.

As a civic-minded person, you arranged a meeting with the village leaders and showed them your new discovery. You asked if possibly gold could replace shells as the accepted currency. They laughed at you. A gold rock as money, how silly. Everyone knows that shells are money, and shells will always be money. You feel deflated but not defeated.

Yet – a woman at the meeting thought the gold would make good jewelry. It was very shiny and looked much better than the drab trinkets townspeople wore. She asked where you acquired the gold and if you could help her fashion it into jewelry.

You were able to find a location where if you dug, gold appeared fairly regularly. It was a hit. Everyone loved their new gold jewelry, it looked much better, and it held its form over time.

Given the primitive tools at your disposal, it was very difficult to find large quantities of gold. Gold jewelry began to function as a proto currency. Those who wore it were richer, as it required more and more shells each year to purchase a standard bauble.

At this point the village elders began to worry. Their wealth was stored in the form of shells. In the face of a better monetary instrument, gold, the shells depreciated in value every year. Even worse, because gold is rare, inert, impossible to counterfeit, and easy to transport, some merchants preferred to sell goods for gold rather than shells.

Because the village had a limited history handling gold, its value fluctuated wildly. No one know what it should be valued at vis-a-vis real goods and services so it still wasn’t as stable a monetary instrument as shells. The elders used this fear and price volatility to warn the plebes not to consider gold as money. Why should gold be money, it was just a shiny rock used for beautification purposes.

Overtime the village could not ignore that gold and metallic monetary instruments in general were technologically superior. Slowly then quickly, the value of gold vs. real goods and services skyrocketed. Those who had “invested” in gold, saw their purchasing power increase dramatically as the society switched to a better monetary technology.

Monetary Transition

From barter, to commodity money (gold), to paper fiat money, to cryptographic money, each one of these transitions features extreme volatility then stability. The new form of money at one point will not be able to purchase any goods and services, then all of a sudden its purchasing power increases quickly. The network effect ensures that the transition between different forms of money is chaotic.

A monetary instrument can only have value if a sufficient percentage of the network will price their goods and services in said instrument. However, no one wants to be first. The chicken and egg problem of monetary adoption ensures that once the switch happens it occurs quickly.

For savvy speculators, properly positioning oneself in front of a monetary shift is extremely profitable. Because money has no value without its network, it essentially goes from being worth nothing to something. Bitcoin is no different.

From Zero to Pizza

Bitcoin Pizza Day (May 20th 2009) is the first time Bitcoin was exchanged for a real good. Since then, as the network grew and people valued the characteristics that make Bitcoin a possible monetary instrument, its price vs. real goods and services increased dramatically.

If Bitcoin were not volatile then we would not be experiencing a monetary system transition. As traders, investors, and speculators participating in such a transition is the privilege that most humans will never experience given their infrequency.

Monetary transitions are zig zags not straight lines. Also these transitions take time. No monetary instrument completely replaced its predecessor in under a decade. Therefore it is foolish to pooh pooh Bitcoin because of volatility that is entirely due to a phase shift in monetary instrument preferences of a society.

Envy

Becoming the CEO of a multinational bank is incredibly difficult. CEOs like Jamie Dimon dedicated their lives to the organisations they lead and have made many personal sacrifices. Being human, it must irk them that youngins have become worth $100 million plus in a few years due to a belief in a different way of transferring value.

It also is annoys senior financiers that these same pups’ stated goal is to dismantle the monetary system that they sacrificed everything to lead. The smart financiers are busy buying crypto assets while they publicly deride them. The dumb ones double down on the supremacy of central bank printed fiat denominated assets.

The world is more connected than ever. A move from analog to digital cryptographic money will be chaotic and volatile. I consider myself lucky to be alive, and fortunate to be able to stake my personal fortune betting against the old and for the new.