Taleb and Roubini to Speak at Coingeek Conference

Bitcoin sceptics Nouriel Roubini and Nassim Nicholas Taleb join speakers’ roster at CoinGeek Zurich

Discussion topics will include but not limited to:

What currently drives market value of BTC vs what should drive real value of a digital asset

Does the market correctly consider the real utility of a blockchain or its native token(s)

How should actual utility influence the market price of a blockchain’s token

How should scalability of a blockchain influence the market’s valuation

Nassim Nicholas Taleb: “I had hoped bitcoin would be a currency that could be transacted with but BTC has turned out to be too volatile and thus a speculative tool, so I look forward to sharing my thoughts and discussing further on this roundtable panel.”

Nouriel Roubini: “I think calling cryptocurrencies a currency is a misnomer. The question is if Bitcoin is an asset and if cryptocurrencies can have real utility? I am happy to discuss this further look forward to discussing this at CoinGeek Conference.”

I am surprised to see Taleb using the trading symbol, BTC, instead of Bitcoin. Taleb had said in February that he was selling his BTC because of the volatility, and he has called it an open Ponzi. He also recently had a spat with BTC holders over whether it was following the Bitcoin white paper or not.

Bitcoiner Max Keiser Debates with Nassim Taleb Regarding Bitcoin White Paper

The crux of the debate between BTC and other chains such as the Bitcoin fork BSV, is about what the digital money should do. BTC limits the number of transactions via the size of its blocks and thereby moved towards a "digital gold" model where the coin has a very high value. BSV moved in the opposite direction towards unlimited blocksize. BTC is the digital equivalent of gold because it is very slow and expensive to transact. BSV is akin more to high-frequency trading, aside from potentially saving businesses and consumers billions in fees collected by payment networks such as Mastercard and Visa, it also allows for future applications in data markets and new economies.

I discussed why I believe BSV's model is the future in: Using Bitcoin for Censorship Resistant Communication

My most recent post on Bitcoin, more BTC price focused is here: BTC Waterfall Decline Approaches

As I expected would happen with a BTC sell-off, BSV went down with it. It bounced off long-term support, but I believe that will break when BTC heads towards $20,000 and potentially lower prices.

I see long-term support around $50 if BTC goes into a major bear market. I will be keeping an eye on the BSVBTC ratio if that happens. For now, BSV has not broken down relative to BTC. Volume is collapsing in the crypto market though...

If this ratio is rising in a bear market, I will be aggressively buying. If it dips along with BTC, I will probably wait longer because it will indicate the whole market is getting blown out. I expect 90 to 99 percent of the crypto market will disappear in major bear market. The survivors will eventually generate returns that will mirror the gains in BTC and Ethereum over the past decade. The corrollary is the doctom bubble versus the survivors such as Amazon and startups such as Google, Facebook and Netflix.

Finally, BTC looks like it could be ready to collapse as soon as this week given the drop in volume:

Stability Breeds Instability: Trading Limits Must Go

Caixin: Let's Experiment with Lifting Trading Limits on China's Bourses

Setting a daily limit on share price changes in either direction was meant to prevent sharp market swings. The idea is that it will give investors more time to digest information before deciding whether or not to buy or sell a stock.

The reality of China's stock market, however, is the market seems to have fluctuated even more widely than bourses without the trading limit. For the cap to have the desired effect, investors must be willing to look for what made the price of a stock change, reasons that are related to the firm's condition and performance. This happens only in a market dominated by institutional investors who base their decisions largely on fundamentals.

If a company's stock is valued 50% lower by the market, the Chinese system requires more than six trading days to adjust. The reverse happens quicker, but it still requires several trading days. This enhances the Chinese retail investor's momentum instincts. Herd investors don't pile into a stock that undergoes a one-day adjustment, but they do start piling into (or fleeing from) shares that hit the trading limit for several days in a row. Market manipulation is also easier.

Renminbi Volatility Will Increase

Some background: Upcoming reform to bring more capital to China: economist

Major reforms toward the Chinese currency's full convertibility expected in the next five months will encourage more capital inflow into China this year, Deutsche Bank said in a report on Wednesday.

The resulting capital inflow will add to the yuan's strength against other currencies and lead to more liquidity to support growth for the world's second largest economy, said the bank's chief China economist Zhang Zhiwei, though he did not specify what measures will come along.

Overseas investors still face hurdles to expand exposure to China's capital market, though the country has taken measured steps in recent years to loosen grips over its capital account.

China has pledged to make the yuan convertible under the capital account this year during the country's annual parliamentary session in March.

While China is on its way to undoing more restrictions over capital flowing through its borders, Zhang said regulators will still maintain necessary controls to keep financial risks at bay.

From 21st CBH: 人民币汇率波幅或扩大 第二强货币的上下限在哪？

According to the State Administration of Foreign Exchange announced the "2014 China international payments report," 2014 China's international balance of payments surplus of $ 257.9 billion total, down 48% compared with 2013. Among them, the current account surplus of $ 219.7 billion, up 48%; the capital and financial account surplus of $ 38.2 billion, down 89%. Although the overall balance of payments surplus presents, but more substantial decline in surplus in 2013 emerged, showing face some downward pressure on the yuan.

Experts said, looking ahead, the yuan has now vulnerable. RMB appreciation cycle lasts 20 years or over, two-way volatility will increase, there may even be a mild case of devaluation, but a large devaluation appears less likely.

Whatever your forecast for the Chinese currency is, opening the capital account widens the potential trading range for the currency and increases the odds of a large devaluation.

Hang Seng China retail banking and wealth management business executives Houxue Ming believes that "the future of the RMB exchange rate changes will have a significant period of time span, for two reasons: First, the dollar will be a long bull market; the second is China's economic slowdown, interest rates drop quasi may become the norm. "

A formula for a potentially large devaluation.

Greenwoods Asset Partners, a Hong Kong company executives had Xiaosong reply reporter said in an interview, "the RMB against the US dollar exchange rate fluctuations depends on the Sino-US trade surplus, China's monetary policy and capital account liberalization process, surrounding the national currency depreciation, as well as IMF October this year to assess whether inclusion of the RMB cross a variety of factors, such as SDR currency basket, expected future volatility of the RMB exchange rate will increase, down 2% on the benchmark exchange rate fluctuations restrictions are likely to widen."

If China fully opens the capital account this year and allows cross border flows, there is a significant risk of a major devaluation. I would say extremely high, if only because I get the sense that "the market" doesn't fully appreciate how this will change perceptions, let alone reality. The way the renminbi has behaved to date is that it falls nearly every time the reserves either stay flat or slightly decline. China's reserves are protected by the closed capital account, but once it is open, the changes in the reserves will become more volatile.

The Market is Simply NOT Expecting This to Happen

When you have been involved in the markets for many years you will probably come to realize a pattern in market behaviour. Periods of low volatility are followed by periods of high volatility. This observations tie in nicely with Nassim Taleb’s concept of fragility and anti-fragility: systems that appear stable and have not been subject to stress are inherently fragile. The more stress a system has been subject to the more anti-fragile it becomes.

A key factor is the U.S. dollar. The U.S. dollar weakened as China purchased large amounts of U.S. treasury bonds. I sense the general opinion of the opening of China's capital account is that since this is long-term bullish for China, the renminbi will appreciate. In the short-term, however, a rising yuan, caused by a rising U.S. dollar, is bad news for China. Anything is possible, but I don't see a rising yuan on top of a rising dollar as a likely outcome. More likely is China sees capital outflows, which leads to the selling of U.S. treasuries and the depreciation of the yuan versus the dollar as those treasuries are sold. The "China sells treasuries, U.S. dollar tumbles" thesis only works if China's reserves are growing or stable. If China's reserves are falling, the amount of assets backing the yuan is falling.

Nassim Taleb talks up Ron Paul for 8 minutes on CNBC

Nassim Taleb on Antifragility

Nassim Taleb, author of Fooled By Randomness and The Black Swan, talks with EconTalk host Russ Roberts about antifragility, the concept behind Taleb's next book, a work in progress. Taleb talks about how we can cope with our ignorance and uncertainty in a complex world. Topics covered include health, finance, political systems, the Fed, your career, Seneca, shame, heroism, and a few more.

Taleb on Antifragility, hosted by Russ Roberts.