tag:blogger.com,1999:blog-6704573462403312459.post7595029585038369611..comments2024-03-29T02:53:03.321-04:00Comments on Moneyness: Not all bitcoin are equal or: One dollar, two pricesJP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-6704573462403312459.post-30797155779729456982014-02-26T11:48:52.997-05:002014-02-26T11:48:52.997-05:00Based on events of the past week, I will add two m...Based on events of the past week, I will add two more hypotheses: fraudulent manipulation of the exchange rate by insiders; or, accurate reporting of a premium that was created by the need for gox btc deposits to fuel a fraudulent scheme (either perpetrated by insiders, outsiders, or both)...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-31033339788987263132014-02-19T21:21:58.634-05:002014-02-19T21:21:58.634-05:00JP, the # of circulating notes in Phi was prob som...JP, the # of circulating notes in Phi was prob somewhere in between. Gorton writes on p. 13 that it was unlikely that all the listed notes were actively traded; instead, <i>Van Court</i> strove for complete coverage of any note that might possibly be encountered.<br /><br />Interestingly, even by 1858 the mean discount for even very distant notes (e.g. Carolinas, Montana, GA, KY) was often quite low (around 1-3%). For states with really strong banking systems (e.g. MA), discounts were consistently very low (less than half a percent).John Snoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-10615146891285976432014-02-19T20:54:38.203-05:002014-02-19T20:54:38.203-05:00Certainly branch banking prohibitions made the sit...Certainly branch banking prohibitions made the situation worse than in Canada, where all notes exchanged at par. But according to his own research, Selgin claims that by the eve of the Civil War, the total discount on all the notes of Union banks would have been less than 1% in the NY or Chi markets.<br /><br />http://www.youtube.com/watch?v=JeIljifA8Ls (from 5:00)John Snoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-67247465232524996852014-02-19T20:34:15.678-05:002014-02-19T20:34:15.678-05:00Maybe there is some feature of Gox that explains t...Maybe there is some feature of Gox that explains the seemingly irrational appetite for Gox$ -- the trading API, the way the Gox trading algorithm interacts with HFT strategies, banking convenience for Japanese customers... Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-84515315322640893982014-02-19T18:19:30.782-05:002014-02-19T18:19:30.782-05:00Mike,
branch banking was forbidden in the 19th ce...Mike,<br /><br />branch banking was forbidden in the 19th century US, that might explain why there was such a wide variety and spread of bank notes.Peter Šurdahttp://www.economicsofbitcoin.comnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-68077855115266804472014-02-19T18:07:11.783-05:002014-02-19T18:07:11.783-05:00"But there was no delay in dollar withdrawals..."But there was no delay in dollar withdrawals during the time when Gox had good Dwolla integration. Yet there was still a premium (BTC/USD, if I'm not having a dyslexic moment again). How do you explain that?"<br /><br />Good point. I'm puzzled. But I don't think the higher trading volume theory can explain it. Gotta be something else.<br /><br />"New depositors were seeking GoxUSD, for reasons that I don't understand."<br /><br />Certainly strange. New depositors were basically selling higher value Fed dollars or banking dollars for bad Gox dollars when they could have purchased better Bitstamp dollars. The FedDollar:MtGoxDollar exchange rate should have been above 1 in order to motivate people to hold bad MtGoxDollars. But it traded at par, indicating that people were willing to make the trade. Perhaps it was just ignorance that drove everyone to MtGox? Good advertising?JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-19631207967490486012014-02-19T14:18:57.109-05:002014-02-19T14:18:57.109-05:00But there was no delay in dollar withdrawals durin...But there was no delay in dollar withdrawals during the time when Gox had good Dwolla integration. Yet there was still a premium (BTC/USD, if I'm not having a dyslexic moment again). How do you explain that?<br /><br />Also find it hard to believe that USD withdrawal delays would result in a consistent premium vs. other exchanges. I would expect for the value of GoxUSD to spiral downward much more rapidly. Yes, GoxUSD holders were offering a discount, but there must have been new money being deposited in Gox at the same time. New depositors were seeking GoxUSD, for reasons that I don't understand. Is it possible that Gox is a more convenient exchange for certain customers? Either due to geography, scale, or other reasons?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-69282759256792110242014-02-19T12:59:50.606-05:002014-02-19T12:59:50.606-05:00Ok, I got you now. Some thoughts:
"Back in t...Ok, I got you now. Some thoughts:<br /><br />"Back in those halcyon days, the premium was explained by some as a liquidity premium due to the much higher trading volume available at Gox."<br /><br />Even though Gox had higher trading volumes back then, my thinking on this is that this would have simultaneously improved the liquidity of both MtGox dollars and MtGox bitcoin. Which would have added an equal premia to both, this having a canceling effect such that the ratio of MtGoxBTC:MtGoxDollars should not have deviated from its previous level or the level seen in the wider market. (However, we would have seen a premium develop in MtGoxDollars:BitstampDollars and in MtGoxBTC:BitstampBTC.)<br /><br />So I'm partial to the "speed of withdrawals" argument, since that effected only one half of the MtGoxDollar:MtGoxBTC equation.<br /><br />"I would expect that Gox $ deposits would eventually go to zero, and would not be replaced by new deposits"<br /><br />I'd argue that deposits were being replaced, specifically by MtGox dollar owners discounting their deposits to a low enough level that they could motivate outsiders to buy those deposits with bitcoin.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-90024514398377038012014-02-19T11:58:26.106-05:002014-02-19T11:58:26.106-05:00What I meant is the USD price of Gox BTC was highe...What I meant is the USD price of Gox BTC was higher, as it was just a few weeks ago. Not the reciprocal.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-52849886377452372992014-02-19T06:13:39.659-05:002014-02-19T06:13:39.659-05:00Mike, the bank note reporter I linked to quotes no...Mike, the bank note reporter I linked to quotes note prices at Philadelphia. (Prices would have been different in New York) Given the fact that it provides quotes on notes from all over North America, I'd assume that notes often circulated far from the town of the issuing bank.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-35877630181321157142014-02-19T06:09:47.314-05:002014-02-19T06:09:47.314-05:00Hi Ezekiel, thanks for popping by. I wasn't aw...Hi Ezekiel, thanks for popping by. I wasn't aware that MtGox USD/BTC was once quoted at a higher rate than elsewhere. My chart shows a lower rate going back to late 2012. I suppose I should have extended it back further in time in order to get more of a flavor for the full life of the premium/discount.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-41299396441804989802014-02-18T18:43:34.758-05:002014-02-18T18:43:34.758-05:00JP:
"A note issued by a bank based in rural P...JP:<br />"A note issued by a bank based in rural Pennsylvania and spent in South Carolina would have to take a circuitous and potentially expensive route back to its issuer prior to being cashed in for the metal. "<br /><br />I've always wondered about this. Textbooks usually talk about how there were 5000 banks in the US issuing 8000 different kinds of notes, and it sounds chaotic. But of course there were also maybe 5000 towns in the US. In any given town there would have been only a few banks, so only a few kinds of circulating notes. Not chaotic at all. Of course a Pennsylvania note would be hard to spend in South Carolina, but how often would a Pennsylvania note make it that far from home?Mike Sproulhttp://www.csun.edu/~hceco008/realbills.htmnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-51698522395878893582014-02-18T14:06:41.106-05:002014-02-18T14:06:41.106-05:00Very interesting! I like the issuer discount as a ...Very interesting! I like the issuer discount as a way to think about the price spread between exchanges. I wonder if this is borne out with ripple issuer discounts as well.<br /><br />To play devil's advocate, I've noticed that Mt Gox has always quoted a higher USD/BTC price than other exchanges. This was true even in the days of seamless Dwolla integration (the last time I ever used Gox, by the way). Back in those halcyon days, the premium was explained by some as a liquidity premium due to the much higher trading volume available at Gox. I found that explanation plausible at the time. As the liquidity offered on other exchanges caught up with and surpassed Gox, I would have thought the premium would disappear. Maybe it just took some time for the network effects of Gox's early liquidity premium to be eroded. :) <br /><br />When Mt Gox started encountering hard times in the press, and yet Gox USD/BTC was still favored, the coindesk muppetry decided the Gox premium was due to the eagerness of the marginal GoxUSD holder to acquire GoxBTC to speed withdrawal of funds from that exchange. I suppose that both explanations could be true (first a liquidity premium, then a dollar illiquidity discount), but I kind of wonder how the market could transition seamlessly between such motivating environments without a more fundamental shift (perhaps such as the shift currently underway at Gox).<br /><br />I don't think the Mt Gox USD/BTC premium can really be explained very well during any time period as a market discount. In the pre-malleability crisis days (say, a month ago), if Gox $ account holders were in such a rush to get out of Gox$, I would expect that Gox $ deposits would eventually go to zero, and would not be replaced by new deposits. There would be an initial rush to the GoxUSD exits, which would explode without an upward bound until no depositors were left. Instead, GoxUSD has collapsed vs. GoxBTC, on quite healthy trading volume. Anonymousnoreply@blogger.com