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lavalamp comments on A proposed inefficiency in the Bitcoin markets - Less Wrong
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Bitcoin is plenty liquid right now unless you're throwing around amounts > $1 mil or so.
Look at the grandparent:
Given that the expected value for the change between today and tomorrow ((+250-200)/2=+25) is publicly known, I wonder who will sell him bitcoins for $1000 today.
In other words, the situation as described is unstable and will not exist (or, if it will appear, it will be arbitraged away very very quickly).
What Vaniver said. Also, emperically, you can look at the current price/order book on an exchange and see that people are in fact willing to sell you these things. If my holdings represented a life altering sum of money it would be time to take less risk and I would be one of those people.
Sigh. Again, look at the context. There is a claim
Which happens to be wrong.
Ah, you're disagreeing with the model and phrasing it as "if that model were true, no one would sell you btc, but people are willing to sell, therefore that model is false." Do I understand?
If so, I do not agree that "if that model were true, no one would sell you btc" is a valid inference.
Essentially, the model says "there is free money lying on the ground, just picking it up is a 'guaranteed-positive-return trading strategy'."
I am pointing out that free money lying on the ground is an illusion.
If someone has a log utility function, a half chance of $800 and $1250 is as valuable as a certainty of $1000. Basically, people who have more risk than they want are selling to people that have less risk than they want.
(The stated example- of 2.5% growth in absolute terms per day- is very exaggerated compared to actual asset prices, I think. If this were about an asset that had an expectation of 2.5% growth in absolute terms per year, but the high variance, then it would be reasonable to imagine the market being much happier with the $1000 today than the gamble, because of how risky and low-growth it is compared to other options.)