Peak Monetary Goofiness: One Thousand People Own 40% of Bitcoin Market

"About 40 percent of bitcoin is held by perhaps 1,000 users; at current prices, each may want to sell about half of his or her holdings, says Aaron Brown, former managing director and head of financial markets research at AQR Capital Management. (Brown is a contributor to the Bloomberg Prophets online column.)   What’s more, the whales can coordinate their moves or preview them to a select few.  Many of the large owners have known one another for years and stuck by bitcoin through the early days when it was derided, and they can potentially band together to tank or prop up the market...

As in any asset class, large individual holders and large institutional holders can and do collude to manipulate price,” Ari Paul, co-founder of BlockTower Capital and a former portfolio manager of the University of Chicago endowment, wrote in an electronic message. “In cryptocurrency, such manipulation is extreme because of the youth of these markets and the speculative nature of the assets.”

Olga Kharif, Bloomberg: The Bitcoin Whales: 1,000 People Who Own 40 Percent of the Market

'As in any asset class, large individual holders and large institutional holders can and do collude to manipulate price,'

Amen brother.  That's why we need regulators and oversight that is not 'captured' by those same very large institutions and wealthy political donors who are in such a good position to manipulate those markets.

And they are going to be bringing out a futures market and ETFs based on these digital chili beans.  This reminds me so much of the tech/internet bubble.

Gold and silver, I suspect, are going to be remembered as one such market segment that fell victim to the canard of free and naturally efficient markets and the natural rationality and fairness of financial and economic actors.  It is pretty hard to miss, particularly in silver.

My son and I had some time to discuss a number of things the past few days. He is a much better mathematician than I was at his age, and that makes sense because what he is doing at his level for Electrical Engineering starts to become very heavily dependent on mathematics.  I was much more of a boy programmer and systems architect at his age.

He was 'mining' his own bitcoins some years ago using a rig he set up using a video card and a few things he threw together just as a learning exercise.  We discussed the blockchains and how mining worked at some length back then.

I was curious to know about these 'forks' and where that was shaking out. Each new technology and bubble has its own set of jargon and technicalities.  As you may know, a Bitcoin has a memory block of a certain size. As a transaction in bitcoin occurs, that transaction is broadcast to the ENTIRE community of bitcoins, and is updated on them. I did not realize that is how it is set up.

The 'forking' is the usual scalability story, a fix to address a structural memory shortage, as we saw in the internet when we started running out of IP addresses based on the original IP block architecture.

Now I understand why bitcoin transactions can take so very long to complete, and why they are not being used in day to day transactions. And they are not, despite the hype.  They are used primarily for speculation and hoarding.

What I did not understand was how highly concentrated bitcoin ownership is by its nature, and why the 'bitcoin' market is becoming increasingly fragmented with different groups with their own architecture creating their own non-interchangeable types of bitcoins and crypto-currencies.

The key to this is obviously going to be the middlemen, the exchanges.  And I do not believe that they are particularly well founded or regulated.

I was a little surprised when he explained to me why and how a small group of oligarchs with access to enormous computing power were essentially in control of the future of the market. The early adopters are essentially along for the ride.  The technocrats are essentially making it up as they go along, and they do not necessarily agree, or have to agree, with each other.

And then today the story broke which I quoted above and below. And then the whole thing kind of fell together for me.

I cannot believe that the regulators have allowed the CME to bring out futures for these things, which apparently they are going to do over the weekend. Futures on a very immature, unregulated commodity which is closely held by about 1,000 people, most of whom know each other.

Bitcoins are not self-sufficient, naturally constrained, or universal.  That they are 'digital gold' is at best a reach, and more likely one of those passing fancies that become popular then fade.   Bitcoin is just a unit, a value bucket, that requires someone else to stand behind it in its particular manifestation.  And that is the key.

Gold is gold, and has 'worked' since the days of Alexander.  Cryto-currencies are just a new form of a very old enthusiasm.   The Bitcoin market seems much more like the very early over-the-counter stock market under the buttonwood tree.  Or perhaps even tulipmania.

I am not saying that everyone involved with this is acting in bad faith.  Not at all.  And something like a cryptocurrency *could* become real money some day.   It needs someone with a lot of financial clout to stand behind it with sufficient full faith and credit at a stable value of exchange for some particular flavor of crypto-coin.

This is just my own, certainly fallible, judgement.  But based on everything I know this is nuts.  And it is going to end very badly.

"Roughly 40% of the cryptocurrency is owned by 1,000 people, claims Aaron Brown, head of financial markets research at AQR Capital Management. In such an unregulated market, Brown said large holders of bitcoin could potentially be working together to orchestrate price changes. Given bitcoin’s recent spike, now could be a great opportunity for these users to part with a portion of their bitcoins, locking in the near 1600% price increase since the start of the year.

Bitcoin appears to be making its way into mainstream investing. Last Friday the US regulator gave the CME group and CBOE Global Markets the green light to launch bitcoin futures. Just yesterday, London-based digital banking company Revolut launched Bitcoin, Litecoin and Ether trading for their users.

As the cryptocurrency becomes a more mainstream investment and demand for it rises, these bitcoin ‘whales’ will be able to part with their bitcoins for a hefty profit. This could leave new investors with an asset in the midst of a bubble.

Roger Ver, a well known early adopter of bitcoin said, regarding ‘whales’ working together, “I suspect that is likely true, and people should be able to do whatever they want with their own money.”

Read the entire story at Market Mogul here.

Stocks and Precious Metals Charts - The Melody Lingers On

"The song is ended, but the melody lingers on…."

Irving Berlin

We put up the Christmas tree today, and opened boxes with wreathes, night lights, and other decorations. I was caught off guard by a box that held her favorite scarves and gloves.

I picked up a position in silver today.

If I had Bitcoins, I would be taking a big chunk off the table now and putting some of it here. But that's just my opinion, and I could be wrong.

Non-Farm Payrolls tomorrow.

Have a pleasant evening.

Stocks and Precious Metals Charts - What Goes Around

“Incestuous, homogeneous fiefdoms of self-proclaimed expertise are always rank-closing and mutually self-defending, above all else.”

Glenn Greenwald


"For too many of us the political equality we once had won was meaningless in the face of economic inequality.  A small group had concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labor — other people's lives.  For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness...

The money changers have fled from their high seats in the temple of our civilization.  We may now restore that temple to the ancient truths.  The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit."

Franklin D. Roosevelt


"When we talk about morality, and when we talk about justice, we have to, in my view, understand that there is no justice when so few have so much, and so many have so little."

Bernie Sanders

Stocks muddled through today, closing nearly unchanged with a little dead cat bounce in the FANGs.

Oil lost ground despite a larger than expected drawdown in crude. The larger than expected build in gasoline put a damper on that short term enthusiasm.

The Washington Circus continued playing its tunes to itself today.

A vote in the House today to impeach President Trump was defeated 364 to 58. Way too early. lol.

It will be interesting to keep an eye on the Congressional antics with regard to the government shutdown.

Gold and silver took the usual early morning hits and then floundered sideways for the rest of the day. I ascribe this action to the pre-Non-Farm payrolls jimmy-jive. The regulation of US markets is near an all time low in my judgment.

The rest of the leaves from the big oaks dropped in a passing storm last night. The yard looks like I have not touched it at all. Well, one more good session and I think I can put the mower away and bring out the snowblower and get it ready.

The young man is coming to spend some time here for the next couple days. He has been working weekends on his research projects. I took Dolly to the groomer— she was not pleased.  She is pouting on her pillow. But she needed it.  And I was tired of stepping on the acorn tops she has been dragging in with her tail on the kitchen floor.  That is no fun in bare feet.

And so there is sweet and sour meatball soup on the stove, and it looks to be coming together nicely.

I am going to make oatmeal raisin cookies using my mother's recipe which was written on the inside of her old cookbook from the Jane Addams School that in those days was at 49th and Carnegie in Cleveland.  It is The Settlement Cookbook by Mrs. Simon Kander (orig. pub 1903).   I am substituting pecans for walnuts and adding chopped dates with the raisins.

Have a pleasant evening.

Stock Market and Precious Metals Charts - You Can't Handle A Tax Cut

“The gods are deaf when we pray to them, their fire
Recoils from our offering, their birds of omen
Have no cry of comfort, for they are gorged
With the thick blood of the dead.   O my son,
These are no trifles!  Think.  All men make mistakes,
But a good man yields when he knows his course is wrong,
And repairs the evil.  The only real crime is pride.”

Sophocles, Antigone


"I think it would be nice just tonight to just acknowledge that this tax cut is really not for the middle class; it’s for the rich. And that whole thing about higher wages, well, it’s a good selling point, but we know companies don’t just give higher wages — they don’t just give away higher wages just because they have more money. Corporations are sitting on a lot of money. They are sitting on a lot of profits now — I don’t see wages going up."

Senator Sherrod Brown (D)


“I think not having the estate tax recognizes the people that are investing. As opposed to those that are just spending every darn penny they have, whether it’s on booze or women or movies.”

Senator Chuck Grassley (R)

I think Chuck forgot about healthcare, food, rent, and education.  The kinds of little details and modern problems that are not a problem for the elite living within the Washington power bubble.

Apparently some think that only corporations and the already wealthy are smart enough to handle any extra cash.  Deserving.  The rest can wait for the trickle down effect.  And keep waiting.

And you thought you number one on Orange Donny's priority list.  This guy and his entourage is all circuses and no bread.    It's a club, and you aren't in it.

Don't feel badly if you were taken in.   Look how many people were bamboozled by Obama, and the heart of big money clubbiness, Hillary.

Stocks were in rally mode this morning, and there was the usual heavy-handed hit on the precious metals in late London trading and the opening of the Comex.

However, stocks did a rather impressive turnabout, closing flat to down by the end of trading.

Several reasons could be cited for this. Probably the most significant is the usual blundering destructiveness of the GOP Congress in their haste to hit the trough.

The Freedom Caucus in the House is throwing a monkey wrench into the work on a continuing budget resolution that would prevent a government shutdown. These freedom-lovers have demanded that Paul Ryan include no Democrats in any of the budget resolution discussions. The better to avoid a workable solution that might be contaminated by something less harsh and obtuse.

And of course there was the howler, pointed out to me yesterday by my Samoan attorney, that in their zeal to skin the people and please their masters, the Senate GOP accidentally retained the 25% AMT on that new breed of aubermenschen. the corporations.   Some say this helped to throw a wet blanket on the big tech rebound on the Nasdaq.

And so the Congress is falling all over themselves to apologize, and to remove this insult to their corporate constituents.   As for the regular people, well, they care not so much.  They wouldn't know what to do with the extra money if they had it.  They would probably blow it on things that would immediately boost GDP, and not on stock buybacks, dividends, and monopolization.

Non-Farm Payrolls on Friday.

Have a pleasant evening.