Crypto Trader Digest – August 3

BitMEX Happenings

Last Monday, BitMEX launched 25x leveraged futures contracts and dropped fees exchange-wide to 0%. The initial response has been very positive. Trading volumes and user signups have increased dramatically. In the coming weeks, we plan to add advanced order types, and additional products. Stop Limit orders will be added shortly, and Litecoin futures will launch this week. Please read below for more details on the Litecoin futures’ launch.

BitMEX aims to be the most trader friendly exchange globally. Please let us know anything we can add or do to enhance your trading experience.

BitMEX To Launch Litecoin Futures


At 12:00 GMT Wednesday August 5th, 2015, BitMEX will launch its first altcoin futures contract XLT7D. XLT7D will allow traders to speculate on the LTCUSD exchange rate. XLT7D will expire each Friday at 12:00 GMT based on the Bitfinex LTCUSD 10:00 GMT to 12:00 GMT two-hour Time Weighted Average Price (TWAP). The biggest problem with other Litecoin futures contracts is that you must use Litecoin as margin. XLT7D will be margined in Bitcoin; profit and loss will also be in Bitcoin. Traders stand to gain or lose 0.001 Bitcoin per $1. If the XLT7D price is $4, each contract is worth 0.004 Bitcoin.

The XLT7D contract is ideal for traders who hold Bitcoin, but want to speculate on LTCUSD. The maximum leverage allowed will be 15x. A position worth 150 Bitcoin will require 10 Bitcoin as margin. If a trader’s equity drops below 2%, BitMEX will liquidate the position. XLT7D will be margined according to the Dynamic Profit Equalisation system.

The Dog Days of Summer


The northern hemisphere summer finale is here. Europeans have flocked to the Med, perfecting their North African look; New Yorkers (the only city that really matters in American finance) have packed their searsucker suits and nantucket reds, and headed for the Waspy enclaves of The Cape, The Hamptons, or The Breakers; The Chinese are escaping the sweltering Beijing desert and concrete Shanghai jungle for Southeast Asian beach paradises. Intraday volatility has declined, and the annualised variety while initially rising in July, has stayed fairly constant.

The jobbers left trading Bitcoin have time to ponder the events that could pop or drop the price in the final quarter of 2015. The biggest event or non-event will be whether Empress Yellen decides to raise rates. While many now expect a 0.25% rise by their December meeting, various US economic data points could forestall liftoff. The Greek / European drama has not ended. Capital controls remain, and the stock market crashed when it reopened after being closed for over a month. Various European countries hold national elections in 4Q as well. The wrong result for Brussels could see Euro contagion risk soar, taking Bitcoin along with it. Don’t forget the Chinese. The CCP is battling to convince their population to Keep Calm, and Trade Equities. The externalities of more free money in the Middle Kingdom could materialise in the most unexpected places (read cryptocurrencies).

Global macro investing is fun again. The Bitcoin price action in July shows that challenges to the global financial system status quo are positive for Bitcoin. 7 years after the GFC and a systematic attempted eradication of volatility, who amongst us believes that the re-introduction of macro risk into the system will carry us to new heights? Between now and year end, a steady stream of events will introduce uncertainty and that is the fuel on which Bitcoin feeds. The best way to purchase year-end long exposure is by buying BitMEX December futures, XBTZ15. XBTZ15 allows up to 25x leverage, and is the cheapest of the XBT series in terms of its premium to spot. XBTZ15 will profit from global macro uncertainty in two ways. The rise in the price of Bitcoin and the increase of price volatility. These will increase the spot and interest rate component of XBTZ15.

Ethereum: Vapourware No Longer


Congratulations are in order for the Ethereum team. After completing one of the most successful crowdfunding campaigns ever, many thought Vitalik & Co. would be permanent residents at the Bunny Ranch, and Ethereum would live up to the etymology of its name.

The spot markets for ETH/USD and ETH/BTC will go live any day now. Given how successfully they have created a community around their project, I expect trading volumes will be brisk. The next question is, what about a derivative on Ether? Ether is the token that powers the smart contracts built on top of the Ethereum protocol. For the ecosystem to have any value, participants must be able to exchange Ether for other cryptocurrencies (Bitcoin) or fiat currencies (USD).

BitMEX is committed to providing leveraged products that are wanted / needed by the trading community. Our initial thoughts are a 10x to 15x leveraged futures contract on ETH/USD or ETH/BTC. For either contract, Bitcoin would act as the currency for margin, profit, and loss. What we want to know from you our users is whether this product is attractive, and which pair you would rather trade (ETH/USD or ETH/BTC)? Please contact us to opine. We want to move quickly to launch a derivatives market to capture the positive momentum surrounding Ethereum.

Bitcoin Leveraged Loans


Last Monday July 27th, we increased leveraged dramatically on our XBT series futures contracts. Almost immediately, the basis between the future and spot price increased. The front month contract at the time, XBTN15, experienced the most dramatic rise in annualised % basis. The chart above is a time series of the Bitfinex spot price, and the annualised % basis.

On the 27th, the basis was trading at 100%. In the next two days, due to the increase in leverage and the upward trajectory of the price, the basis tripled to over 300%. The increase in leverage to 25x was the biggest contributing factor. The return profile of the XBT series favors bullish traders. This is because their return in USD terms is squared on the upside, and their downside in USD terms is reduced as well. The greater the leverage, the greater amount of USD they are implicitly allowed to borrow from the shorts.

The shorts will demand a higher and higher premium over the spot price to compensate them for the negative USD gamma or convexity. The type of traders most prone to supply short interest in the highly leveraged XBT series are arbitrageurs. They will sell XBT futures expensive and buy either spot or another leveraged futures contract trading at a lower premium.

The buyers paying these high premiums don’t expect to hold the contract until maturity. They plan to capture a short term spike in price, which makes the premium almost irrelevant to them. The arbitrageurs must hold the contract until maturity to capture the premium. They will be very aggressive in raising the premium higher and higher as they get shorter and shorter. If they sell too cheaply, they could face exponential losses if the price rises or falls too much.

With these risks in mind, selling the elevated XBTN15 basis was a no-brainer trader for an arbitrager. On the July 29 with 2 days until expiry, XBTN15 traded at a 400% premium while spot was at $295. If you sold XBTN15 and bought spot, the price would need to fall below $258 or rise above $346 to suffer a loss. Given there was only 2 days left until expiry, the likelihood of the price falling outside those bands was very low.

Traders with spare capital should consider loaning USD to leveraged long futures traders. The risk adjusted returns are very attractive.

Weekly Review: Bitcoin Investment Products



Week Ending GBTC Avg Volume WoW % Chg % Premium XBT Avg Volume WoW % Chg % Premium
7/24/2015 311 XBT 5.57% 295 XBT -0.32%
7/31/2015 326 XBT 4.65% 5.54% 503 XBT 70.75% -0.59%


XBT Spot

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So close, but so far. The $300 ascent was cut short, and back down we slid to $275. The price is now trading in a $275 – $285 range. The good news is that in the absence of a new global macro event, the price has held above $270.

August is an ideal time to accumulate a long position at lower and lower prices. As I have stated above, the number of possible macro shocks in store for the fall from known and unknown sources will favour Bitcoin. Averaging into a long position while things are quiet is prudent.

$260 is the Maginot Line. If this level fails, Bitcoin will retest $220 and then possibly $200. Discerning a short term direction while we aimlessly vacillate between $275 and $300 is a fool’s errand. Pick a direction and stick with it, or the wood chipper will eviscerate you.

Trade Recommendation:

Buy December 2015 (XBTZ15) futures contracts while spot is below $300. If spot falls below $260, transition into a net short position using the front month XBT contract.


Crypto Trader Digest – July 20

Slow Motion Banking Collapse


The Grexit can was kicked a few months down the road by a last minute capitulation by Prime Minister Alexis Tsipras. A bridge loan has been arranged so that the ECB and IMF can be paid their tribute. The Greek parliament voted to subjugate their nation in exchange for zero. The various EU nations are borrowing money from their populations to pay back zombie loans. The focus will shift to the Greek banking system, and how long the generosity of the ECB lasts.

The banks are open today. Capital controls are still in place. What the world is witnessing is a slow motion bank run. The ECB will not continue to fund the banks indefinitely. At some point they will tire of increasing their Greek liabilities and cut the banks off once and for all. Greek depositors know their banks are living on borrowed time. They will rush to withdraw in cash and send abroad any amount that is permitted. Images of long bank withdrawal lines, and empty store shelves will continue to frame the collective world image of Greece. We like to pretend that our 21st century society is more civilised and advanced than the late 19th and early 20th century. Our Just-In-Time highly advanced production economy depends on the free flow of capital between suppliers of raw materials and producers of finished goods. Remove that even for a short while, and the human condition will regress to levels of our great grandparents.

The European diplomats are all comfortably back at their favorite summer holiday destinations. Beneath the surface, the markets are setting up for an explosion of volatility this fall. Spaniards have watched the complete German subjugation of a vassal state without one bullet fired. They take to the polls later this year. Prime Minister Rajoy’s People’s Party is in trouble. They have towed the austerity line, and there are rumblings of dissent amongst the plebes. If Greece succeeds in getting a debt haircut, which the IMF (aka US) is advocating, the Spaniards will demand one too. To get one, the government will have to take the currency union to the brink of breakup like the Greeks.

Global macro volatility and instability has proven supportive of Bitcoin. Bitcoin was the only asset outperforming during the midst of the latest Grexit crisis. Once Grexit was off the table, the price fell almost 15%. 7 years after the onset of the GFC, it appears that another unlikely event could plunge the world financial markets into turmoil once more. December Bitcoin futures contracts expire just before the end of 2015. If you believe the world is going to get more uncertain, consider buying XBTZ15 and use Bitcoin to reduce the overall volatility in your portfolio.



During Empress Yellen’s testimony in front of the US Congress and Senate, she stated that a hike in interest rates is very likely to happen by the end of 2015. A 0.25% increase in the Federal Funds rate may happen at the September or October FOMC. After over 6 years of 0% interest rates, the onset of positive short term rates will significantly impact financial markets globally.

There are two camps with regards to how markets will react to a Fed in a tightening cycle. The first camp believes that the hike in interest rates confirms that the US economy is strong. The financial markets will welcome confirmation that the largest economy in the world is on sure footing. The second camp believes that the world has become addicted to 0% interest rates, and the onset of more expensive money will destroy asset markets globally.

I agree with the second camp’s doom and gloom position. With regards to the Bitcoin price, it is unclear as to the initial price reaction. During margin calls, investors will dump everything they can to raise cash. Bitcoin could become a casualty as well. Or it could rally substantially as global financial market instability rises.

The one thing I am certain about is that unsecured USD interest rates will rise faster than those for Bitcoin. The basis between forward and spot prices for Bitcoin will increase. I would rather benefit from a general rising interest rate environment, and not be subject to whether I can call the price direction correctly. There are several strategies to profit from this view.

Strategy 1:

If you are a long holder of Bitcoin and don’t intend to sell regardless of the short term price, consider replacing your long physical Bitcoin with leveraged futures contracts. As the USD rates rise, your futures contract will become more valuable. With the Bitcoin not utilised as margin, you can sell them for USD and lend on a margin trading platform to earn extra income.

Trade Recommendation:

Buy XBUZ15 (25 December 2015) futures contracts.

Strategy 2:

To go long solely the futures’ basis, buy a leveraged futures contract and short sell spot Bitcoin. You have removed the price risk from the trade, and will benefit if the futures’ basis increases. You can short sell spot Bitcoin on a variety of margin trading platforms.

Trade Recommendation:

Buy XBUZ15 futures contracts. Short sell spot Bitcoin.

Strategy 3:

To go long solely the futures’ basis, construct a calendar spread between two different maturity futures contracts. Buy a December expiring futures contract, and sell a September expiring futures contract. As rates rise, the calendar spread will increase because the longer dated futures contract has more time value.

Trade Recommendation:

Buy XBUZ15 futures vs. sell XBUU15 (25 September 2015) futures contracts.

Weekly Review: Bitcoin Investment Products


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Week Ending GBTC Avg Volume WoW % Chg % Premium XBT Avg Volume WoW % Chg % Premium
7/10/2015 1,035 XBT 8.35% 2,673 XBT 0.00%
7/17/2015 760 XBT -26.56% 6.03% 1,441 XBT -46.09% -0.17%

The end of the current chapter in the Greek melodrama caused volumes to slide on both GBTC and XBT. As we enter the final weeks of summer, expect a general decline in volumes traded.

XBT Spot

Screen Shot 2015-07-20 at 5.54.10 pm

The Grexit premium is slowly leaking from Bitcoin. The Greeks were betrayed by their leaders and continue to suffer in the Euro straightjacket. As the price hovers in the $270’s, it will take renewed cash buying pressure to lift Bitcoin back above $300.

Unless PM Tsipras is ejected by his party and fresh elections are called in Greece, the end of summer will end quietly for Europe. Bitcoin volatility will follow as well. Traders can return to their Mediterranean holidays, and stop babysitting their Bitcoin.

To maintain the bullish momentum, Bitcoin needs to hold $260. $300 was held for one 1D candle. That in itself is positive, but bulls will have to remain resilient as they are tested at lower levels. The level of XBT swaps outstanding on Bitfinex has fallen by almost half. The XBT swap rate stands at only 0.0058% per day; it is practically free to short Bitcoin. If the bears want to test $260 with vigor, it will not cost them much to do so.

Trade Recommendation:

Sell XBTN15 while spot is below $280. The downside target price is $260. If spot manages to rally above $280, cover the short XBTN15 position.

Crypto Trader Digest – July 13

Greece To Sell Islands To Fund Its Banks


The people of Greece have been betrayed. Prime Minister Alexis Tsipras called a referendum on the conditions of the controversial EU bailout package. The people voted not to accept the terms. Now he has “signed” a new program that cedes all control of Greece to Brussels. The most galling part of the new plan is that proceeds from a 50 billion Euro privatisation fund (read: selling Greek islands and public utilities to the highest bidder) will be used to recapitalise the failing banks. The EU has robbed Peter to pay Paul. In the end they have provided no real assistance to their European brother.

Greece has until Wednesday to pass the agreement in parliament. The Greek people need to make themselves heard. They must put the fear of God into any MP who dares to ignore the landslide No vote in the referendum. If this agreement passes, violence will reign in Greece. If the banks somehow manage to reopen, they will be emptied of Euros within days.

As this agreement hit the newswires, Bitcoin began nosediving. The price touched a low of $281. Once more information about the deal trickles out, traders will focus their sights on Wednesday and the political fight to pass the agreement. $300 Bitcoin may return in a few days time.

Bitcoin is one of the only ways that European people can secure assets outside of the EU banking systems. Germany is hell-bent on demonstrating to Spain, Italy, Portugal, and France what happens when they are disobeyed. Citizens of these countries must read the writing on the wall. It is not enough to hold cash under the mattress, or spirit capital to Switzerland. Every EU citizen will now wonder: is our country next? Will we be made to beg for scraps from unelected bureaucrats? Redenomination risk is real, and the contagion will spread across Europe. Bitcoin will continue to be bought on these fears regardless of whether the Greeks receive another bailout.

China: The Wests Portrait Of Dorian Gray


The financial services industry employs many intelligent people. But in the end there are only two actions, Buy or Sell. China is seeking to remove the sell button permanently in an attempt to prop up its market. Authorities have even threatened jail time for those who sell their holdings. 50% of the market is shut, and you can now pledge your house as collateral for a loan to buy stocks.

Many western commentators have chastised China for not living up to the free market principles they were supposedly striving to implement. China is not doing anything that western governments (US and Europe) haven’t tried before. The Chinese style is just a tad more in your face. Franklin D. Roosevelt in 1933 banned the private holding of gold by US citizens. Those who refused to sell their barbaric relic to the government at a below market rate faced federal prison. China is the US and Europe’s portrait of Dorian Gray.

If China’s brash way of dealing with falling asset markets proves successful, similar measures will be introduced when the contagion spreads to western capital markets. People invest in paper assets (stocks, bonds, etc.) to store and grow wealth. If there is no exit, these assets are worth zero. You can’t eat stock. You can’t eat Bitcoin either, but at least there are free markets for the exchange of Bitcoin.

Santa Baby


Santa baby, just slip a Bitcoin under the tree for me;
Been an awful good girl, Santa baby,
So hurry down the blockchain tonight

The low volatility phase that began in mid-April is over. 30-day realised Bitcoin volatility has risen to 50.96%. As the volatility mean reverts, the current market structure will change dramatically. With the backdrop of Grexit and turmoil in financial markets globally, the more likely scenario is for Bitcoin to continue its upward ascent with increased vigor. While short dated futures’ basis on BitMEX and our competitors has risen sharply, December futures’ basis (XBUZ15) on BitMEX has barely budged.

As volatility increases, the Bitcoin call option becomes more valuable. Given an unlimited upside, longs will be willing to pay increasing rates to borrow USD and buy Bitcoin. XBUZ15 has the most remaining time value, and the rate rise will impact this contract’s basis the most.

There are two ways to profit. If you would like to retain upside exposure to Bitcoin and rates, buy XBUZ15. If you would just like to profit off of rising rates, then buy XBUZ15 and sell XBUU15. This will cost you around $2-$4, as XBUZ15 is more expensive by that amount than XBUU15. The $2-$4 is your entry fee and maximum loss. Effectively, you are borrowing money between September and December for 5% per annum. Given the explosive nature of Bitcoin, that is very cheap. Compare to Bitfinex, where you can borrow USD at 27% per annum.

Trade Recommendation:

Buy XBUZ15 outright, or buy XBUZ15 and hedge your delta by selling XBUU15.

The Litecoin Pump and Dump

Screen Shot 2015-07-13 at 10.41.27 am


Until last Friday, Litecoin was up 8x on the month. Since writing Chinese Promoter Pumping Litecoin Via Ponzi Scheme on Friday morning, the price of Litecoin has fallen 45%. The promoter began cashing out his position on Friday afternoon. LTC dumped and Bitcoin pumped on all the Chinese exchanges. Spot Bitcoin on hit a high of 2335 CNY or $376; a full retrace happened in minutes and any traders with derivative positions that included China prices got rekt. This happened against a backdrop of a major DDoS attack on many of the leading Chinese exchanges and Bitfinex. There is no definitive evidence of chicanery but where there’s smoke, there’s fire.

Which altcoin will this well-run operation pump next? Be sure to let us know when you do.

Weekly Review: Bitcoin Investment Products



Week Ending GBTC Avg Volume WoW % Chg % Premium XBT Avg Volume WoW % Chg % Premium
7/3/2015 771 XBT 14.74% 1,255 XBT -0.09%
7/10/2015 1,035 XBT 34.31% 8.35% 2,673 XBT 112.98% 0.00%

The LTC and Bitcoin dump and pump on Friday lit a fire under the trading volumes of GBTC and XBT. Volumes surged on Friday, and XBT traded an all time high 5,170 Bitcoin. With the heightened Greek drama, expect volumes to continue increasing. GBTC’s premium now stands below 10%. As more supply enters the market, it appears the market maker is able to better control the premium.

XBT Spot

Screen Shot 2015-07-13 at 7.07.44 pm

The news of a Greek deal slid across the wires. The price slowly faded lower. Within minutes, Bitcoin was in freefall and retested $281. The level held on two attempts, and a consolidation is under way around $285. Intraday volatility has returned. Babysitting your Bitcoin is essential. After a sleepy start to the summer, proper risk management techniques need to be employed or you will find yourself rekt.

The Greece saga is not over. The parliament must approve the deal by Wednesday. Bitcoin will be in a holding pattern until then. The news is likely to be negative (Bitcoin positive) up until the vote. My base case is for the Greece parliament to sell their citizens down the river and vote to approve the deal. The downside target is $260. Medium term I am still bullish Bitcoin as the Greece debacle has laid bare the intentions of the EU overloads. Spanish elections are this fall and the ruling party is in trouble. Expect a flare up of European contagion risk as the markets focus on the next weakest links.

Trade Recommendation:

Sell XBTN15 into the retracement of the $281 fall. The downside target price for spot is $260. If a the EU agreement is voted down, cover quickly.

Bring On The Weekend: Grexit & China QE

Screen Shot 2015-07-03 at 3.45.39 pm
Shanghai Composite Index, Bloomberg


Greeks head to the polls this weekend to vote on whether or not to accept the now expired EU bailout package. 5 years of can kicking has finally come to a definitive vote on Greece remaining in the EU currency union. The issues and implications have been covered ad nauseam by countless blogs and the financial news media.

In a nutshell:

No Vote: The bank run and capital controls will continue. Greece will attempt to negotiate further with the Troika, but the likely outcome is Grexit.

Yes Vote: The bank run and capital controls will continue unless the ECB provides more Euro liquidity to Greek banks. A new government will likely be formed, and negotiations will begin anew. Grexit isn’t off the table, but the timeline is pushed further into the future.

Impact on Bitcoin:

No Vote: Grexit becomes a very likely scenario, and global asset markets fall. Bitcoin sentiment improves as the misery imposed by capital controls and the shortage of goods continues. Positive price impact.

Yes Vote: The capital controls will still be in place. Global asset markets will rally, but could fade quickly as the facts on the ground will not materially change. This is the scenario that is priced into the markets currently. Bitcoin sentiment might be dampened somewhat, but the fact that capital controls will remain and the ECB still might not provide more Euros to banks means that the Bitcoin story begin pushed by the MSM will continue to gain ground. Neutral price impact.


China QE

The second and more important development is the continuation of the crash in the Chinese equities market. This past weekend the PBOC launched a double rate cut (the one-year lending rate and the Reserve Ratio Requirement). The last time they did that was October 2008 on the heels of the Lehman Brothers bankruptcy. Investors didn’t play ball instead sending equites sharply lower on the week. The Shanghai Composite was down 10% on the week and closed below 4,000.

Regulators are in full panic mode. The government ordered state owned news sites to only publish positive news about the stock market. [ZH] Many analysts expect the margin calls to continue as the various shadow conduits (Umbrella Trusts) of equity market leverage continue to unwind. Calls for additional easing from the PBOC (People’s Bank of China) and outright quantitative easing are growing. The addition of the global market turmoil surrounding Greece means that the PBOC will likely add additional easing measures this weekend. They like to announce rate cuts on Saturday or Sunday. Bitcoin will react positively from additional easing out of China.

The Greek vote and the possibility of PBOC easing is the perfect setup for another Bitcoin rally over the weekend. After almost reaching $270, Bitcoin has retraced $20. The Greek vote is Sunday. Buy the rumour sell the fact. On Friday and Saturday, begin accumulating a long Bitcoin position with XBTN15 while spot is below $255. The Greek vote will be known Sunday night European time right before Asian financial markets open on Monday. That is the optimal time to close the position whether in profit or loss.

Crypto Trader Digest – June 29

BitMEX Happenings

Screen Shot 2015-06-29 at 11.13.10 am

We have been hard at work building a new simplified trading UI. The first version is available for comment onBitMEX Testnet. Please test the new interface and provide your feedback. We will launch the new UI along with our new higher leveraged contracts very shortly. If you like the current UI, it will still be available under the “Advanced” option.


The PBOC Is Taking Over From The Fed

zhou xiachuan

The hottest market in the past year has been the China A share market. The main indices are up over 100%. Millions of newbie traders are entering the casino with freshly minted yuan that they can now leverage. Chinese investors are being herded from one flagging investment (real estate) to the new and shiny equity market. At the helm of the SS. REKT is the PBOC (People’s Bank of China).

Through various liquidity injecting programs and schemes, the PBOC has injected trillions of RMB into financial institutions. The money made its way to the stock market and the results are there for all to see. The universal force of gravity has taken a liking to the Chinese stock market recently. In the last few weeks the Shanghai Composite Index is down almost 20%. The PBOC heard the cries of newly rekt retail traders and responded with a monetary bazooka this weekend.

For the first time since October 2008 (the beginning of the GFC), the PBOC cut both the one-year lending rate (0.25% to 4.85%) and the Reserve Ratio Requirement (by 0.50% for some banks). Forget Greece this is where the real action is. Money printing and the associated inflation never ends up exactly where central banks intend. The excess RMB liquidity won’t sit snugly in equities, but will find other financial assets as well. Bitcoin is one such asset that could benefit from a tidal wave of RMB free money.

Greece is just a sideshow. The real action is happening in China. The PBOC is engineering a financial asset bubble in an attempt to mitigate the inevitable slowdown in the real economy. The effects on Bitcoin may not be immediate, but long term bulls should begin positioning for Chinese traders to once again fall in love with Bitcoin.

Trade Recommendation:

Buy XBTZ15 (25 December 2015) futures contracts.


How Would A Greek Use Bitcoin?


How would a Greek actually use Bitcoin? Now that capital controls are introduced many think it’s the perfect time for Greek citizens to adopt Bitcoin. Let’s analyse how exactly they could do that.

Greeks can now only withdraw 60 Euro per day and outbound remittances are not permitted. The banks and stock market are closed today as well. Currently there are two types of Greeks. Those who got their money into cash or abroad, and those with deposits sitting in domestic banks. The unlucky Greeks with money still in banks are SOL. With no hard cash and no ability to wire money, there is little they can do to buy Bitcoin. Those who have cash and offshore Euro have options.

Will Greeks buy daily necessities (gas, food, water etc.) with Bitcoin?

Probably not because stores want Euros in cash. Stores need to pay for inventory and their staff, that is done in Euro not Bitcoin.

Will Greeks use Bitcoin as a store of value?

Maybe but if they already have offshore Euros, what urgent need do they have for Bitcoin. If they have cash, buying daily necessities is of more use than a store of value that can’t be exchanged for any real goods.

Will Greeks use Bitcoin to turn onshore cash into offshore Euros (buy Bitcoin, sell it abroad, remit Euro to an offshore bank account)?

Possibly, this is the most likely use case currently for Bitcoin. There is one problem, who is going to sell it to them? Local Bitcoin sellers realise Euro once they sell their Bitcoin. They must recycle that cash back into Bitcoin to trade again. Outward remittances are not permitted, so it is effectively impossible for local sellers to replenish their inventory. Tourists are a solution to this problem. If you are planning a trip to Greece, buy some Bitcoin and then sell it locally in Greece at a huge markup. At a 10%-20% markup, a savvy tourist can easily pay for a substantial portion of their trip by selling Bitcoin.

Will the Greek government use Bitcoin as their national currency?

Keep dreaming. Greece needs to devalue its currency to regain competitiveness in Europe. That is not possible using Bitcoin.

Bitcoin isn’t useful for Greeks who didn’t act early to secure their wealth. It isn’t very useful to Greeks who got their money out either. If Bitcoin rallies on Grexit, it is solely because traders believe others globally will re-examine how they store and secure their wealth and turn to Bitcoin as a possible alternative.


Weekly Review: Bitcoin Investment Products

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Week Ending GBTC Avg Volume WoW % Chg % Premium XBT Avg Volume WoW % Chg % Premium
6/19/2015 609 XBT 15.66% 1,896 XBT 0.41%
6/26/2015 197 XBT -67.66% 17.32% 923 XBT -51.30% -0.35%

As the rally to $260 fizzled out, so did volumes on GBTC and XBT. Weekly ADV was down over 50% on both securities. Volumes rebound on Friday as the Greece drama reached a new level of absurdity. The Greece EU bailout package referendum is Saturday. Volumes will recover as volatility returns to financial assets globally.


XBT Spot

Screen Shot 2015-06-29 at 11.12.46 am

The bombshell over the weekend was Greece’s decision to let the people decide whether or not to accept the latest EU bailout program proposal. Faced with real democracy, financial markets worldwide are in turmoil. The market expects voters to reject the EU proposal, which accelerates a possible Grexit. EURUSD opened down 200 pips, S&P 500 futures are down, and Asian markets are down close to 2% as I write this newsletter. All eyes will be on the European open, especially financials (here’s looking at you Deutsche Bank).

Bitcoin has rallied $10 since the announcement, and now hovers at $250. From reading Reddit and many trader chat rooms, sentiment has improved. Traders are bullish and think the Greece turmoil will give Bitcoin a healthy bid. $260 is the all-important near-term level. To confirm the start of a real rally, Bitcoin must shoot through $260 on increasing volume. Another feeble attempt like last week, would be very negative in light of the positive sentiment currently expressed.

Trade Recommendation:

Buy XBTN15 while spot is below $255. If $260 is attempted on declining volume, close the position and go short with a $240 downside target.

Crypto Trader Daily – 26 April 2015

Price Action

Another push was made for $210 today. The price reached a low of $213 on Bitfinex before rallying back to $220. The retrace was a weak attempt at a rally. A renewed fade to $210 will begin shortly, and expect a hard fought battle. The overall downward trend remains, and the market awaits the all-important retest of $200.


Trade Idea

Sell XBUK15 above $215 with a $210 target price.


In the News

Capital Controls Arrive: Greece Begins Confiscating Deposits Of “Small Debtors” (Zerohedge)

The “War on Cash” Migrates to Switzerland (Contra Corner)

Crypto Trader Daily – 21 April 2015

Price Action

All quiet on the trading front. The price range was $222 to $227 on a light volume day. The market is in another holding pattern awaiting a sudden move higher or lower. $230 looks to be a formidable level to punch through. Expect the market to drift lower and retest $218.


Trade Idea

Accumulate short positions in XBUK15 in the high $220s looking with a downside target price of $218.


In the News

The Bankster War on Cash; JPMorganChase Begins to Prohibit the Storage of Cash in Its Safety Deposit Boxes (EPJ)

Tsipras to Seize Public-Sector Funds to Keep Greece Afloat (Bloomberg)

US Police Officer Charged with Receiving Stolen Bitcoin Miners (CoinDesk)

Crypto Trader Daily – 27 February 2014

Price Action

Welcome back volatility. The Asian lunch hour(s) featured a short squeeze on Bitfinex that started a rally to $262. The price is now fluctuating in a $250-$255 range. Now that the market has awoken from its slumber, expect some fire works this weekend as Chinese traders make up on lost time.

Trade Ideas

A solid break above $260 and the recent $270 high will be tested. Given the amount of time the price spent flat-lining from $235-$240 this rally could continue to $280. Purchase XBTH15 below $260 to express this view.

In the News

DigitalBTC reports loss in ASX filings (CoinDesk)

Gavin Andresen improves Bitcoin’s block validation performance (CoinTelegraph)

Greek bank run intensifies, Piraeus Bank ATMs run dry (Zerohedge)

Crypto Trader Daily – 24 February 2014

Price Action

All is quiet ahead of the return of the Chinese traders after the lunar new year holiday. A very quiet day with the price flirting around the $240 level. Trading volumes should begin to pick up tomorrow morning Asia time.

Trade Ideas

In anticipation of the return of price volatility, buy BVOLH15 (the historical volatility future expiring in March). 30 day realised volatility could climb back above 150% if January’s gyrations are repeated.

In the News

Another Bitcoin miner bites the dust (CoinDesk)

Ryan Kennedy of Moolah arrested in the UK (Coinfire)

Troika happy with Greek proposed reforms (Zerohedge)

Crypto Trader Daily – 17 February 2014

Price Action

Extend and pretend is the name of the game from Europe. Another critical meeting, and another episode of can kicking. No new news on Greece, and another day of $230-$240 range bound trading for Bitcoin. The Chinese New Year lull has officially set in.


Trade Ideas

Selling realised volatility for February during these times is prudent. Trade the BVOLG15 (27 February 2015) realised volatility futures contract. After an eventful end of January and start to February the contract has been bid up. If trading continues this way until the end of next week, realised volatility should decline.


In the News

Netagio shutters Bitcoin exchange (ConDesk)

2,180 Bitcoin foundation members barred from voting (CoinTelegraph)

VICE interviews Winklevoss twins (VICE)

Crypto Trader Daily – 16 February 2015

Price Action

Back to square one. Early morning Asia time, the final slam down brought Bitcoin below $230. Some traders expect further downside below $220. The recent spate of exchange hackings did not improve sentiment either. Bter, HitBTC, and Excoin were all “hacked” in the span of 24 hours. The Eurogroup has a press conference planned at 7pm GMT where hopefully more light will be shed on the Grexit situation. Financial market globally are waiting with baited breath for further developments, Bitcoin is no different.


Trade Ideas

In light of the global macro confusion and fear surrounding Greece, it is prudent to flatten out ones book. The price could easily drop below $220 or regain the mid $240s in the next 12 hours.


In the News

Bter hacked of 7,000 Bitcoin (CoinDesk)

Two more exchanges are compromised (Reddit)

Iran and Bitcoin (Coin Telegraph)