= 27d567bc2d48d9f40e9ccc20ea370b15)
Tenoke comments on Why you should consider buying Bitcoin right now (Jan 2015) if you have high risk tolerance - Less Wrong
You are viewing a comment permalink. View the original post to see all comments and the full post content.
= 783df68a0f980790206b9ea87794c5b6)
Loading…= b715d02e85f7b3b4ae65ca3d3e450868)
Subscribe to RSS Feed
Powered by Reddit
= f037147d6e6c911a85753b9abdedda8d)
You are viewing a comment permalink. View the original post to see all comments and the full post content.
Comments (136)
I used to believe that bitcoin is under-priced before, but there are so many agents involved in it now (including Wall Street), that I can't really convince myself that I know better than them - the market is too efficient for me.
Additionally, I'd be especially wary about buying based on arguments regarding the future price based on such obvious metrics, that many agents pay attention to.
It would be an interesting analysis to find out how many traditional players are involved and to derive from that confidence in the optimality of the bitcoin price.
I am not very knowledgeable about bitcoins but I do have some famiality with banks responsiblies under US and EU anti money laundering regimes. I think that bit coins would pose a number of complience challenges and that it would be pretty tough for banks to be confidbet they weren't running afoul of regs. So my guese is that but coins probably have very little bank activity. Similarly I bet they don't have much activity from the large hedge funds. It's probabky limited to small funds.
Correct, few banks are willing to go anywhere near bitcoin or bitcoin-related companies. Doesn't stop people from actually using bitcoin though, because the whole point of bitcoin is that it invalidates the need for a bank...
Hedge funds aren't investing in bitcoin because for the moment they are not really able to, except for a few weird, esoteric, accredited-investor-only funds. That should change if the Winklevoss COIN ETF is accepted though.
You're confused between hedge funds and mutual funds. Hedge funds have pretty much no legal restrictions on what they can do with their money.
By not able to I mean literally not able to, as in not possible / convenient. There simply isn't sufficient investing infrastructure or liquidity in place for most hedgies.
It's worth noting that efficient markets are a modeling assumption to make certain economic problems computationally tractable and easy to model. It's not a law of nature confirmed by observation. On the contrary a lot of times markets are observed to be inefficient (eg the housing market mid 2000s or at a higher level of sophistication the mortgage backed securities market in the same period).
Even very liquid markets like the FX market with technically sophiscated arbitrage free pricing models still have had long running well known ineffiencies like the forward rate bias.
Sure, but they are still a useful heuristic.
That's fair enouph. So long as it is remembered that it's a heuristic and is used to guide thinking rather than stop thinking it is certianly valuable.
Corollary: if you want to find investments with significantly higher than average expected values, look for structural reasons that a market might be inefficient, or reasons that many smart players might be making the same evaluation mistake.
Note that actually following the above as advice might be extremely hazardous: taken in a different light, it feels a lot like the advice "seek out confirmation bias".
What about a possible federal regulation?