Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - George Samman: BTC.sx, Bitcoin Derivatives, Recent Price Movements, Wall St and Regulation

Episode Date: August 25, 2014

George Samman is co-founder and COO of the Bitcoin derivatives exchange, BTC.sx. George helps us get a broad understanding of derivatives as a financial product, and we explore their uses in the context of Bitcoin. He also brings his perspective with regards to bridging the gap between Wall Street and the Bitcoin ecosystem. As a Chartered Market Technician, he has a very technical view on market movements and gives us his thoughts on the recent BTC price fluctuations. Episode links: BTC.sx SeedCoin George Samman This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/035

Hello and welcome to Epicenter Bitcoin, the show which talks about the technologies, projects, and startups driving decentralization and the global cryptocurrency revolution. My name is Sebastian Kutjou. And I'm Brianne from and Crane. Today we're here with George S. Mann. He's a co-founder and CEO of PTCSX. He lives in New York. Previously, he was a portfolio manager at an asset management firm in New York. And he's also a chartered market technician.

So we kind of have somebody who's switched over from the traditional. world of finance to Bitcoin and we're really excited today to dive into BTCS derivatives and the kind of bridge of finance and Bitcoin so George is great to have you on hey thanks for having me I'm really excited to be here looking forward to the show thanks so much for joining us perhaps you could start by by telling us a bit about BTCXX or even perhaps telling us how you started getting involved with Bitcoin and then tell us about BTCXX. Yeah, sure.

So I had heard about Bitcoin a while back. Essentially in 2010, 2011, a famous market researcher named Bob Prector started talking about it and its disruptive effects. And it got my interest right away. I moved to Australia in 2013, and that's where I met Joe Lee. And he had started this company by building the product. And I came on board as a second employee and co-founder and started working with him. I was really excited about joining him and joining a disruptive technology like Bitcoin and having a financial product that we could basically make to disrupt.

And so your background is in finance. obviously. Yeah, so my background's in finance, as Sebastian said, I worked on Wall Street for many years as a portfolio manager, a trader, and a charter market technician. Making the switch to Bitcoin for me was kind of a natural transition as I saw the implications for it in the real world. So when I met Joe, we kind of had a natural relationship and we decided that me coming on board would be really good for the team. So can you run us a bit through how BTCSX has developed since then? So I guess since Joe initially started, did he develop the initial platform or did you guys hire developers? Actually, he built it himself. Before that, he was doing a lot of arbitrage between.

different currency pairs and Bitcoin. And he made some money doing that by creating trading bots. And then he put all the money into building this platform. When we first started, there was nothing like this of its kind in the marketplace. Essentially, our product is a Bitcoin-only derivatives trading platform. We allow you to go long or short versus your Bitcoin exposure and use leverage of up to 10 to 1 to do that. So Joe found it, Joe basically coded this product, made it, and made it into a reality, and we've gotten pretty good traction ever since then. So for those listeners, and I'm sure there are plenty of them who aren't familiar with what derivatives are, can you explain that?

Explain what derivatives are in general or just the different types of derivatives? Let's talk about derivatives in general. And then we can kind of talk about how exactly that looks like in the case of Bitcoin. Sure. So essentially what a derivative is is a product that derives its value from the performance of an underlying entity. What that means is that you're not paying for the price of the underlying entity. It's basically indexing an asset or an interest rate from an underlying asset class. So what it allows you to do in essence is within our case is if you have one Bitcoin,

it allows you to take that Bitcoin or even half of a Bitcoin and use up to 10 to one leverage so that you're trading more than just the value of that one Bitcoin, which in essence allows you to make more money off of the Bitcoin that you put up as essentially collateral. There are different types of derivatives, which we could talk about in a little bit, and they serve a number of purposes. You can use them to ensure against price movements, basically that's called hedging. You can use them to increase your exposure of price movements for speculation,

which is what I was talking about when I'm saying that we're providing this leverage of up to 10 to 1, which allows you to really get a lot of exposure to Bitcoin. and make more than just being in a traditional long position. And then there's also arbitrage opportunities which you're able to get based off of Bitcoin. And arbitrage essentially allows you to find mismatches in price in the market. And you can take advantage of these arbitrage opportunities especially well if you have access to derivatives.

Yes. And if you have access to algorithms, as well, which is really how you capture the difference in prices. For example, just last week we saw BTCE had prices in the low 300s in Bitcoin, while BitStamp and some of the other exchanges were up in the 400s. If you were able to go in and get that price, you were able to essentially expose an arbitrage opportunity as prices came back to a normal, came back to the mean. So in that case, what's happening is somebody's buying their bitcoins on BTCE and selling them on BitSamp for that, and the arbitrage is that margin that you're making in between.

Correct. Okay. And so in the context of Bitcoin, so how does Bitcoin fit into this idea of a derivative? Well, it's a new marketplace. And it's only starting to, I wouldn't even say mature, but become a reality. Bitcoin fits in in the sense that people are starting to make these derivatives. Where one company that is, there are many others that are in the futures market and the options market, which are other types of derivatives.

And really what derivatives do for the Bitcoin market in general is they allow you different ways to capture price and capture ways to profit on price, either by going long or short. are hedging the underlying asset. And what this does is it essentially gives you ways to protect or ways to speculate and gain more than you would by just owning a Bitcoin. So if you own just one Bitcoin, right, and it goes from $500 to $600, you get $100 off of that. If you're using futures or leverage, you can make that into multiple just the

hundred dollars or for example if you own a whole lot of bitcoin and you want to protect versus downside you want to keep the long position in it and you have a hundred bitcoin and you want to keep the long position in it but you're afraid that there's going to be a directional movement that goes against you to the downside you could essentially go short or you can hedge with options or go short futures and essentially what that does is it helps to protect when the the price goes against you so that you could capture some money back as you lose in the principal price. These are all new things with Bitcoin.

And obviously, one of the major problems there is that it's not a very liquid market at the moment. It's only, the market cap is only about $6 billion approximately. It's about the same market cap as urban outfitters, just to give you an example at this point in time. So what you need is liquidity really. And the thing with liquidity is once you get liquidity, it begets more liquidity. And option, what you're seeing now is that traders are seeing the volatility in the market.

And that's not going to go away anytime soon just because there's so much, it's a new, it's a Bitcoin's so new and there's so much going on in the space and there's headline risk all the time. And then there's just really this fact that we were talking about before, which is kind of, margin and market orders, large orders, move price dramatically in directions. So traders really like to see volatility. And you could hedge that versus other asset classes as well. Bitcoin kind of acts in its own way. It's not correlated to other assets.

So you could capture some profits by doing these things at this point in time. So in your platform, for example, But you don't have options, right? I mean, the type of derivative you have, are those contracts for difference? They are not contracts for difference per se. Contracts for difference have an underlying future. We do not have that at all.

Our product is based on you bringing Bitcoin on the site and you using leverage of up to 10 to 1, whatever you want, and then we send our orders out to market. And we get you the amount that you had the amount that you specified in your in your in your contracts. It's not a contract for difference. It's kind of model like that. It's what it really is called is a rolling spot forward contract. Are you planning on expanding into other areas as well in the future, for example, to offer options and things like that?

We have been discussing it internally and we haven't exactly. decided yet, but we are planning on offering some different products relatively soon. And I can't really talk about them in specifics now, but I can say that we do want to offer our clients a whole host of products and options would be something that we'd be interested in. So I'd just like to come back to what we're discussing earlier and really to get some concrete use cases for this. So correct me if I'm wrong, but most.

of your users would use a platform like BTC.SX to speculate or hedge risk? Correct. Correct. Okay. So could you go and give us some examples of some use cases for both of those different needs? Sure. So I'll start with just speculation. Essentially, we have a bunch of traders on our site.

very sophisticated traders, other people who are just looking to try and boost the amount of profit that they have in Bitcoin, and they'll start to see Bitcoin move dramatically in a certain direction, long or short. And as we know, Bitcoin is exposed to extreme price movements. So volatility is really the friend of our site at the moment in the sense that people like to trade these price movements because they can capture a tidy, sum a tidy profit when they do. So with our site, you can, like I was saying before, you could come on and use leverage

to basically garner profits based on these extreme price movements that you see in the price of Bitcoin. As far as hedging goes, you would hedge really like what we see with people who are hedging, is like I said before, people who have a whole bunch of Bitcoin and they want to just essentially capture some movement to the downside. They have a long position that they're not willing to sell, but they know that there's going to be some kind of downward price movement. So what they do is they put a position on that's called a short, and they hold it as the price goes down. And then they'll close it when they think the price is going to go back up,

and it really protects you in the sense of allowing you to gain some profit on a downside move when you lose a whole bunch of principle. Could you explain a bit how leverage works? Because I'm not sure I quite understand that. Yeah, sure. So leverage is basically a product that allows you to take a fractional amount of Bitcoin and turn it into a lot more. So if we have leverage of 1 to 10 on 1 Bitcoin,

the one Bitcoin you become on your site, essentially is traded out to market as if it were 10 Bitcoin. And you will profit according to that amount, the 10 Bitcoin you put on. So what it essentially does is it allows you to take a larger position than you actually have to capture a price movement. Now, obviously, with that, you have downside risk as well. Meaning that if the price goes against you, you could lose your entire position. So by just one-tenth, right? So you'd have a price decrease of one-tenth

and it essentially would wipe you out, no? So we allow you to set stop limits on the site. And also we also kind of imply stop limits. We only allow you to lose your position. You can't go negative on our site. Yeah, right. It protects you and it protects us. It's a risk management tool that we use

in order to make sure that the downside risk is only limited to the balance of the account, or actually the trade, sorry. So when we look at BTCSX, is there a difference there because it's Bitcoin or what you're providing the service would really be the same if it was just some other type of exchange rate underlying it? It's modeled after foreign exchange, but it's Bitcoin only. We don't touch Fiat in any way, shape, or form. some other strangers are offering margin trading,

but they're doing it Bitcoin to Fiat. We're Bitcoin only. When you come on the site, you bring your own Bitcoin on. And when you leave the site, you leave with Bitcoin. So it's Bitcoin only. But yes, it's modeled after things that you would find in the real world of commodities and foreign exchange. So that also, of course, means because you have margin calls and you close positions that essentially there's no, well, the counterparty risk only is between me and your platform.

It's not between me and people who take the opposite position on your site. Correct. I mean, there's always counterparty risk in the exchange as well, but that's different, a different risk. I mean, we use BitStamp. You know, obviously, if you had been using Mount Gox, it's a different story. You know, but with us, that's what you said is exactly right. So can you explain how exactly that cooperation or that you using BitStamp works? Yeah, so we use BitStamp as our service provider and we're in the process of integrating other exchanges as well.

That's something else we're working on, but right now we use BitStamp. What do you mean with service provider? What exactly does BitStamp do? We send our orders to BitStamp. They fill them for us. There are our exchange. So essentially that means if I take a position on BTCSX, you then trade in real time, I guess, on BitStamp. Yes, it's, yeah, exactly.

It's market orders out to BitStamp. We, yeah, that's exactly what it is. Okay, no, that makes sense. Would you also think in the future of perhaps having you own Bitcoin, coin fiat exchange so you don't have to outsource that to bit stamp or an exchange or do you think that that's a model that makes sense to kind of draw on the liquidity pool that's present in existing exchanges right now we have found that a lot of exchanges want to work with us because we've we've done fairly well and we provide liquidity we've thought about it in the past but the answer is that we

want to stay Bitcoin only. We don't want to deal with Fiat for a lot of reasons, mainly it's a strategic decision based on the regulatory environment of employing Fiat. But we have thought, you know, at some point maybe that could change once we have a clear set of a clear path of regulation. But right now, for us, we'd like to make Bitcoin-only products in the derivative space. And I think that's the strategy we're going to stick with for the new. your future and what we'll wind up doing is just integrating with other exchanges besides BitStamp. And so for now you're using BitTam.

So I guess this is a risk for you also, I guess that you're trying to hedge of being with only one exchange because if something happens to the exchange, basically you can't operate anymore. That happened before when you were working with Mount Gox, correct? Right. And we're fully aware of the risk. And that's why we're in the process right now of adding multiple exchanges to the site. Okay.

Can you tell us, so, yeah, let's talk about kind of the legal status of Bitcoin derivatives. And perhaps this can be a good segue into some other topics we want to discuss. But financial instruments and financial products are highly regulated. How do Bitcoin derivatives fall into this? regulation or do they at all? And how do you see that evolving in the next few months and years? Yeah, interesting question. The answer is right now there really isn't any regulation on Bitcoin derivatives. But the real answer is there is going to be regulation on Bitcoin derivatives and most companies that are in our space, be it exchanges or anything that has to do with

financial products and services are preparing for this. Now, from everything that we can garner, it's going to be the CFTC in the United States that's going to be the one to be managing Bitcoin derivatives. They manage derivatives of all other kinds in the United States. So we're expecting them at some point to make a ruling as to how and when they will be regulated and what that's going to be and what that will entail. So does that mean in the meantime

there are no rules and you guys can just kind of do whatever you want? I would say that if you take that mentality you're going to get yourself into trouble. I think you should act accordingly as if there are rules. I mean there have been rulings from FinCEN

about what Bitcoin is and isn't. There have been rulings from the IRS, but some of the other agencies are taking a wait-and-see approach for now. Right now, no, there is no regulation, but I think it behooves people to find out and try and figure out where they stand within Bitcoin. By saying that, I mean that I think the CFTC would be open to hearing different cases and trying to figure out how they're going to regulate.

from everything that I've been hearing that that regulation should be coming in the next few months. So, yeah, so perhaps this is a good segue into something that's quite close to home for you is the bit license proposal. Can you tell us a bit about bit license and how it applies to derivatives?

Well, I don't know that it necessarily applies to it applies to derivatives in the sense that if it's a Bitcoin derivative, it applies to everything Bitcoin. Anything and everything that has to do with Bitcoin is what the Bit License is talking about. So essentially, it's trying... I guess if we're going to talk about Bit License,

we have to say that as it stands right now, it is a rule that's going to really hurt a lot of industry in the Bitcoin community. The way it stands is, you know, they're trying to put a one-size-fits, all bit license for every company no matter its size, so that transaction cap or significance in the ecosystem are equal, which is really not good for an industry that's very small and in the process of innovating right now. There's a saying that I always hear that I think

applies pretty much to what they're doing. It goes like, the best antidote to the disruptive power of innovation is over-regulation. And I think they've started from a place of a highly over-regulatory stance, trying to encompass everything as one part of a coin and from there really stifling it all. What I mean by that is that if you're trying to innovate in the space, whether you're trying to make new bit currencies or work on the blockchain, you essentially have to get a bit license and you're deemed illegal to begin with until you've gotten permission from the New York to state Department of Finance.

to get anything done. These kind of things are really not going to help the industry. I think this is more of a place where the regulation has come in, or the proposal has come in high and heavy, and there's going to be a lot of room for negotiation, and hopefully they decide to take a stance where they're more friendly than they have been. I mean, just recently they announced another 45-day period. A lot of people have taken alarm of this, and you've seen some of the bigger players like Circle come out and say something against the bill license that it was effectively destroy their ability to do business in New York and potentially everywhere. You've heard this also in the sense that anyone who, even if you're in exchange and you

have someone using Bitcoin on your site, that you have to fill out all of these privacy. You're basically giving up, it's an overreach of privacy also, in my opinion. Basically, everyone and anything that has anything to do with anyone in New York will have to submit to the privacy laws of the United States. States in a way that just is not even fair at this point. I absolutely agree. So let's just assume that the worst case happens and it kind of goes through

the way it is now. Would you guys take a similar approach to Circle or what Circle has announced and just try to block New York users and try to avoid it? Yes. I think that everyone's going to have to take this approach and I think unfortunately what this law is going to do is what, see, the people who have embraced over-regulation, in my opinion, are the big players who are well-funded. It's in their best interest to let this law come in to be as is, right? Because then they basically monopolize the whole entire Bitcoin space and everyone else kind of goes away and dies. This is a common theme that

you see over time with a lot of information and communication industries in the United States. a concentration of power is good for them. It destroys infant industry. It destroys Bitcoin companies that are trying to innovate. It will make a lot of companies move out of New York and basically become inoperable. So, you know, we're incorporated in Singapore and the UK. We have an office in New York, which is where I work from. But, I mean, if this, we can't really speculate because it's not a law yet, but this law

will hurt not only us, but a lot of people in the industry. And we'll definitely have to reassess our strategy if it comes in high and heavy like it is now. I think you made a great point, you know, that some Bitcoin companies have sort of been, initially they know they were very like, oh, you know, regulations are important. This is needed. And of course, Circle was sort of first among them. And I think it just is such a great demonstration of how, how it has gone way too far in this first proposal that even companies like that,

even in a company like circle where they hired people from Goldman Sachs, they hired some guy from like a US Consumer Financial Protection Bureau or something like that for their board. And even they don't want it. They have lobbyists. They have lobbyists in Washington as well. Exactly. Exactly. And so if even they say we can't do this, then it just goes to show that they're way too far.

So I'm sure they have to scale back. But even if they scale back to a point where it's acceptable for a company like Circle, it's going to be a huge issue for so many other companies. Exactly. And miners as well. I mean, you've seen stories about how they'll have to close shop too. The problem for me is it's with everything with government. And especially when it comes to companies that are in the information and communication space,

which I consider Bitcoin to really be, based on the blockchain. And not only let's not forget that there's always this debate, is it a currency, is it a commodity? But it's a real threat to a lot of industries, including the government's own fiat printing industry, but banks, credit cards as well. So they are going to do everything in their power,

I think, to make it pretty difficult. But at the end of the day, I don't think it's going to be able to stand due to the decentralized nature of Bitcoin. However, I always feel like, you know, when when these things happen, old guard is able to come in and swipe a lot of space. So for me, it would be like if this law was to stand as is, it would really just let Wall

Street come in and control and the banks control how Bitcoin is and is used in the financial piece of it. And probably in the consumer piece as well. So I don't know. I don't know what the outcome is going to be. But it would probably mean to me that the United States. States and New York would take a step back in being innovative in the Bitcoin space and the financial space as well. So what does the idea look like to you then? I mean,

Benjamin Milowski has come out this week saying that, you know, so obviously there's a new 45-day window and reconsidering perhaps some of the some of the wording of this legislation and mostly because of the public outcry. Right. And so perhaps. we'll see this legislation be scaled back, maybe not to the degree that we would like, but ideally, what do you think Bitcoin regulation should look like if we need any? Yeah, so I was just going to say that before I answer that, but now it kind of is the same question. So I think that there needs to be some regulation. For example, we're in the process of completing our AMLKYC, which is anti-money laundering, know-your-customer policy.

These are the kind of things that I think you need to see in the Bitcoin space. Why? Because you need to know who's using your site. If you're funding terrorists, if you're funding people who are dealing drugs or whatever it might be, these are things that are illegal and they should be illegal. And people should not be using Bitcoin to do that. So I think there needs to be some regulation in that sense. How much otherwise, I'm not really sure at this point.

I mean, it's hard to even have this conversation when it's not even being defined as a currency. So it's being treated basically as property, currency, and a commodity all at once. So it's getting taxed and regulated from all different angles. And there really needs to be one unified policy going forward and one that allows companies in the space based on, I would say, size and also based on the business they're in. to kind of be in different pieces of regulation. Right now, everyone is kind of being lumped in one big giant regulation, and that's just not the way it should work. How it pans out is another question.

But the problem with the United States in general is that you have a federal and then a state, and the states and the federal can make different laws. So you're seeing that with like money transmitters and the federal versus the state, on that issue, even though Finston has ruled that everyone's a money transmitter that basically touches Bitcoin. So I think there needs to be more coherency in really the regulatory structure, and there needs to be more visionaries looking at this and actually understanding what Bitcoin is before they rush to put rules in that have been used for the old guard and for old types of money and old types of financial products.

I would go above and beyond the federal and state problem that you're talking about and say that it's even broader than that because we have 190 countries in the world and they can all implement regulation as they seem fit. And if another country or state decides to enact similar legislation, then perhaps companies would even have to have contradicting, if there's contradicting regulations, that might even pose a problem for companies that can't be within the regulation of two jurisdictions at once. Yeah, I've thought about that too. And again, I guess that goes back to what I said earlier. The best antidote to the disruptive power of innovation is over-regulation. And these people, let's face it, Bitcoin is a threat to the old power structure. It's decentralized, though, and people are embracing it.

people within countries are embracing it because they're sick of their own countries, whether it be the rulers making bad policy decisions, central banks, printing money, manipulating currency. Look at Argentina, for example. I don't know how this is all going to end, but there's a lot of debt in the world and it's not being addressed. And there is a system out there. Europe is still in recession. and not getting much better.

The United States, for all of its apparent recovery, I mean, it's not being seen by most people. The richest 1% are the ones who have really benefited the most in this recovery because it's an asset-based recovery based on what I was just saying, Central Bank money printing, which has led to people investing in stock markets, real estate, etc. Those type of asset classes. And most people don't own those anymore.

In fact, 55% of Americans, which is the highest since the 1940s, are not even in the stock market anymore. So really, this has only benefited a few people. And while the stock market has gone up, nothing has been done to address the debt problems that we see. Global stock markets have gone up. And the debt problems have gone up as well. They haven't gone down. So this will come home to roost at some point unless there's some kind of clear policy in place. I mean, we're looking at some point in the future in an inflationary event.

And really, all these things that we talk about point to Bitcoin as something that people would want to own in a portfolio, if not just own, to stay away from what I see as another bubble forming. I think that's a great segue. It's something that I was really looking forward to touching on with you. And it's a topic that's kind of been looming around. It's been on people's minds. And that's the involvement of Wall Street and financial institutions in Bitcoin. And of course, you're kind of touching on the potential power of Bitcoin as an asset in case there is a financial crisis, in case there is significant inflation, you know,

relates to that very closely. Now, in your experience, I don't know, in BTCSX, perhaps we can start there. have you seen or do you know that there are, let's say, hedge funds or similar financial institutions using your platform at this stage? Or have you had inquiries from them about trading on your platform? Right now we have mostly retail clients. We have had inquiries from hedge funds about our site and how to use it and what we are doing. Another thing that we are in the process of doing is making it robust enough for institutional trade. See, there is a tremendous amount of interest in Bitcoin from the Wall Street community.

But what they need to see is something I touched on before, which is more liquidity. They come in with a massive amount of money and they want to have big buying power and buy big lots. You can't really do that without moving the price tremendously. That's why you need a more sophisticated marketplace to develop. So you're starting to see that a bit. I mean, you have people like Pantara who are working with Fortress Capital, who are basically investing in Bitcoin companies in the infrastructure. Fortress actually bought about $25 million in Bitcoin. You hear Bill Miller, who's a famous stock trader on Wall Street talk about it all the time.

There's a lot of people who are starting to embrace it as a new financial asset. The one thing, though, that I would tell you is that in general, and there was a Wed Bush Morgan report that came out. out on August 20th. And in it, he was saying something which is absolutely true. Regardless of what's your stances on Bitcoin as far as a store of value, is it a currency, what is it, how can I use it? It is very volatile. And traders love volatility. So I think once you see regulation in the marketplace, you can see a lot of Wall Street players come in. They can't really get into unregulated markets, either by their mandates or they're waiting and seeing what the regulation is going to be. But once they are able to, they're going to come in like they do everything else.

I mean, this is a volatile market. There's sophisticated products being built, which are derivatives. You're seeing high-frequency trading being traders coming in as well, and there's margin trading. And as all of these other retailers start to accept Bitcoin more and more, that's how you're going to get more liquidity into this market and drive it. But for now, there's waiting on the sidelines, and they want to get into this. It's going to be a massive marketplace. They know it.

And the volatility and the trading volumes, there's a connection between that, right? I mean, with Bitcoin, we see it. Everyone sees it when there's big movements in price. That's when you see higher volume days in Bitcoin. Stable Bitcoin price isn't really an actual. active market. So there's a major opportunity, you know, like for example, you have this Bitcoin ETF, which the Winkle bosses want to bring to NASDAQ. That would be a major catalyst for an upside move in Bitcoin. A, it would be Wall Street embracing Bitcoin. And I'm, you know,

everyone is always talking about it. There's speculation that it may or may not happen soon, but it looks like it's going to happen. And as it happens with most ETF, they suck in the underlying assets. So it should be price positive in many ways. It'll bring a lot of people who have been sitting on the sidelines because they're scared of Bitcoin. They don't know what it is. This will give them a vehicle to buy Bitcoin.

And as more and more people buy Bitcoin through the ETF, more Bitcoin needs to be purchased physically into the ETF. These are the kind of things which, if they start to happen, will really solidify Bitcoin in the space and really make it a, a new financial asset that can be traded on Wall Street. Yeah, no, I absolutely agree with your assessment. I think the same way. And you have some idea of the time frame.

I guess if the ETF is going to drive a lot of things, then we don't know when that's going to happen. But let's assume the ETF doesn't happen. How do you think that would happen, that build-off of liquidity? Is it just going to be a gradual process, or are there going to be certain events that really catalyze this?

Yeah, I think a lot of things will do it. I think as more and more big merchants start to accept it, that will build up liquidity. As we get closer to some kind of regulation and as more and more people within the Wall Street community start to embrace it as something that has staying power and isn't going anywhere, which I think it's proven at this point,

you'll see more and more people start to buy it. And as we get to, get more volatility, you'll see people trading in and out of it. A lot of people hoard it, as they say, and that's been detrimental because it just stays, people just hold it long and don't do anything with it. And it basically takes those coins out of the community. When Mount Gox went down, that also took a lot of liquidity out of the marketplace. So now you're starting to see a lot of other products being built that will pretty much dislodge people from their Bitcoin and make them really go back into the float. What are some of the events that I can, you know,

could think of. Well, I mean, really, those will be news driven. So if we have an event of some kind of bank run or default for a country or the stock market starts to decline, I would think that people would want to put their money into a different asset class. From what I'm hearing with the ETF, I mean, it should be here before the end of the year. Also, essentially after the summer's over, as everyone knows, sell in May and go away is an old saying in the trading community, which means that you sell in May, you go on vacation, you come back September, October. So from a seasonal perspective, you should start to see upside move in the price of Bitcoin when people come back from their vacation, September, November, I mean September, October,

and probably into year end. You know, obviously, whatever happens as far as regulation goes could be market catalyzing, or negative. But we still are pretty much headline-driven in Bitcoin. And that'll be the case for the future, I believe, even though it's been pretty stable in here up until recently. So if a Bitcoin ETF is going to come, would automatically also derivative exist on top of the Bitcoin ETF

or would those be created if there's enough demand? Yeah. I think what you're saying is that they won't automatically exist, they'll have to be created synthetically at first. And then obviously, if there's a demand for it, it will be built. The ETF will come

first. And if it's going to be as popular as people think it is, I think it's going to be very popular. Then people will want to do things where they're able to use futures or options versus the ETF.

Really, the sky's the limit when it comes to the different types of products you can build around things once it's been deemed to have staying power and not go anywhere. So we've been talking a lot recently about infrastructure components, right? So there's a lot of small pieces to this larger picture puzzle, I guess. And so touching on the traction of Bitcoin in Wall Street, what other infrastructure or what are the things you think need to happen?

obviously an ETF would be good news for Wall Street to really embrace Bitcoin. I mean, when I say Wall Street, I mean the greater financial community. Yeah, I think you need more robust exchanges. It's like, you know, they're able to handle volume and margin and not really cause prices to drop. That's a pretty inefficient market when you put a market order out for a bunch of Bitcoin and the price drops, you know, 50, 60 bucks in no time, that would scare a lot of people away, and it still will. You need products that are going to make that less and less viable.

I think that's a real piece there. Other things that will help really get Bitcoin traction going, really more products. I think right now you have products out there. but people need to know how to use them. I think education is another thing because right now, besides Wall Street, traders in general who are using Bitcoin aren't sophisticated traders in general. So educating them on the uses of different derivative products would really help Bitcoin

in general because it'll show them how they can protect themselves versus the volatility that we've seen. And really what happens is as more and more people pile into different types of products such as futures and options and different derivative products, volatility over time will come down because everyone is kind of starting to protect themselves. And by doing that, essentially, you're tightening the volatility band around it. And it kind of big volatility, volatility begets volatility as much as liquidity begets liquidity. So the more and more people who start to protect themselves, the less and less volatile the market gets in general. Right now,

people are just kind of slamming around big orders, getting in and out of the market, kind of in panic and panic swings up and down, panics and manias. And that's what you're seeing in the price action. I mean, when you see things drop and move like this, really on no news, you know, it's been pointed that margin trading was the culprit and then it's been denied by the exchanges. I don't know what's true or not true, but I will tell you that there are definitely people who are sniffing around limit orders that have been placed and, and exploding them. And that's why you've seen these prices drop like that because people want to buy coins cheap. And they're seeing people who aren't really sophisticated in what they're doing,

getting blown up. And that needs to change. And obviously, that changes when you get big players in. So, and, you know, some of these market exchanges are going to be institutional-grade exchanges where there haven't been many in the past, and they're gearing up for them. And why would they be gearing up for it? Because they see big players who want to use Bitcoin and need this type of infrastructure in place. Yeah, I think you sort of just beat us the topic we really wanted to cover, which was the Bitcoin price and market movements. And it's interesting because we've been doing this for a while now, I guess almost nine months, this podcast. And we've basically never talked about price because, you know, we think generally it's not so important.

We care more about the technology, et cetera. But of course, you know, it's still a great time. I think now, especially that we have you on to really kind of dive into that because it does matter for a lot of things. And we have also the price increase. Of course, one of the effects is that it helps people building Bitcoin companies because they hold Bitcoin. You know, so it's really important on that front as well.

Correct. And we have seen kind of a lot of volatility. you've seen a price decrease pretty significant lately even though it doesn't seem there were any negative news do you know what was going on there well I mean I've read

speculation from a bunch of different people and it sounds pretty coherent to me that there were some margin traders who got caught in bad positions and were forced to liquidate

and it brought the price down. Could you just for the non-fincially savvy, explain what a margin trader is? So people have X amount of dollars that they deposit on a site, on an exchange with any marketplace. There's margin. That allows you to essentially, it's a different form of leverage, really. It just allows you, depending on what percent the exchange or the company allows you to use. you can buy more than you actually have in your balance based on that. And when the position goes against you. So just like on BTCSX.

Sure. It's just a different form of it. It's borrowing. It's borrowing versus the house and you pay a interest rate on it. And if it goes against you. But the difference with a lot of margin trading in general is, unlike on our site, you can go negative and then you owe the house money, which is really uncharted territory in Bitcoin because there are no,

real clear-cut rules and contracts as to how you pay back in exchange if you owe them money. Basically, you can walk away from it at this point. And there's no one that's going to say to you, that's illegal, you owe this money, whatever. There's no rules in place for that. So that's another thing that needs to be come to the play to make a more mature marketplace, trust and collection of your debts, really. So that's been part of the problem. But then obviously when people see these price movements, they get panicking and start to sell as well.

And you just have a downward trend. You never really know, with price in general, prices tend to move up as a mystery. And then you find out later, oh, there was something wrong. I mean, oh, that's why, because there was something really good that happened. And when they move down, it's the same way. Price moves before you actually usually get the news. So do you think there may be some negative news that's been driving the price down? let's assume if that margin call thing, you know,

wasn't the whole story that we haven't yet heard about, some insider information? I would have thought so a couple of maybe a week or two ago, but the price is stabilized here and seems to be holding in this range now. So I think the news came out, whatever it was in the fact of maybe it was the margin trading thing, which seems plausible to me, even though there's been denial of it,

just because of the way the price moved and then came back. I mean, people came in and bought it when they saw this big disparity in prices between the different exchanges. There's been technical levels that have also been hit.

A lot of trading in Bitcoin isn't just fundamental. It's technically driven as well lately. So, you know, there are areas of support and resistance that are natural magnets for price, and they kind of have gone to that and then stabilized and they are where they are now based bouncing off of those.

So those get hit. And again, that's also traders who are sniffing out. Basically, places of support and resistance are areas that in the past have held or held for periods of time or become a place where the price is bumped up to and can't get through, right? And the reason why is there's either stops there or other people bidding it up and supporting the price at those levels for a variety of reasons. And really, that's where we are right now. I mean, it's sitting here at the 500 level, and 500's a pretty big area of support. So I think the news is probably out already in that it was probably driven by a lot of people just not exactly. in trades that they should have been in, margin trading that got blown up.

And now it's stabilizing a bit. And it can move in a direction from here. You know, I mean, I could speculate on where the price is going to go. Let's do that, yes. Sure. Okay. So I don't usually do this a lot just because, you know, I'm in the business of building our company out. And of course, you can always be wrong.

And, yeah. Yeah, well, I mean, that's really what technical analysis is more than anything, is another tool for risk management. It gives you price points where you can clearly see that an event is going to happen one way or the other, and you can act according to that event. So right now, when I'm looking at price, I see that it's holding here in the 500 level. It bounced off of the 450 level, which was really a big support level as well, and it's come back up, and now it's sitting at 500. The next price movement that it needs to get through, resistance level that it needs to get through now is 560. That was old support. And when old support breaks, it becomes new resistance.

So that's the next important level. Now, if we get up to 560, which I think we will do in the coming days, weeks, and we bounce back off, we probably will see another test of that 440, 450 level. Once we get back down there, if we do, either we're going to. going to break through 560 or not is basically what I'm saying. And if we don't, we get back down to 440. If 440 doesn't hold, you might actually see it going and testing some of these old lows, which I mean the old lows of the year, which are around 360. But I'm really in the bullish camp, longer term, you know, next three to six months. I think that you'll have seasonality coming in,

and you'll also have, once we get up past 560, if we break through there and hold, you. old. Next levels are, you know, 600 big round number. And then you want to get back up to that old high back from June, I guess it was, of 680. Once you get through there, you know, really you're going up towards 800. My prediction is just based on the fact that I think that there's been so many really positive events in the space and more positive events are coming that we're going to test the old highs again sometime in the next three to six months. But I'd say in the nearer term, you're going to have a battle between 560 and 440, maybe this 500 level.

But again, if something really positive happens, all bets are out the window. And by positive, it could be negative for the world as whole and good for Bitcoin as in a macro event that's a default or something. Or it could just be something related to the Bitcoin environment where the ETF is finally deemed good to go by this SEC or anything really, it could be, more and more merchants accepting it. You just never know.

But I would say right now, right here, we're going to be range-bound until we could break one way or the other. It seems like just based on all the positive news that's been coming out in the last, I guess, really six months. I mean, major merchants accepting

in the U.S., and just, apart from the regulation stuff, just kind of bad news. But generally speaking, I think we've had good news coming out. And it seems like the price is not so much being reflected on news, but on some other factors. Yeah, I agree. And again, you know, it's also a matter of don't underestimate the fact of people trying to get in cheaper. So I mean, when you want, you want, you want, you know, when I'm saying people are sniffing out these stops, they're trying to get the.

the price down to a level where they can buy it on the cheap. And it's a strategy that, you know, a lot of people employ. And I would say that if you talk to most people in the space, it's been a tough couple of months with the downtrend and price for a lot of reasons, one of them being that we all like the up prices. We're building out our companies. And up prices attract more people in general and get their interest up than down prices. But as you said, there has been tremendous amount of positive news. And I would say that the interim, the short to intermediate price trend shouldn't really matter if you're a believer in Bitcoin because what you're seeing is adoption on a massive

scale and it's getting bigger and bigger by the day. And that's an exciting factor in itself. And also just the build out, for me, I love to see the build out of the blockchain and all the disruptive potential in that. So I'm excited about the future of Bitcoin. I'm a holder here. And for my money, I think that whatever the short-term prices, if it's to the downside, I'm holding through it.

And I think that you'll see big returns by the end of the year. Yeah. So if you could make some sort of prediction as to what I don't, we really don't like doing this, but we just kind of do what your prediction is for price by the end of the year. What would you be ranging in on? I would say between 900 and 1,200. Okay, so back where we were at the end of the year, of last year? I think the old high is definitely a place that we'll get to, one way or the other.

And why shouldn't we? If we got there back in November when there wasn't even anywhere close to what's being built now, I think that it's a logical place to test again and see where we are. So yeah, I look in that range. I definitely think there's upside in the price. The predictions are a lot more careful than some of the other predictions that we've seen. I think it was recently at Coin Summit. People were saying two, three thousand by the year.

But I agree. I think that that old high is probably a good prediction for this year. Hey, I'll premise it with this or I'll disclaim it with this, that if some kind of macro event happens, that's pretty significant, the fact that there was very little liquidity in this marketplace, if people start piling into this,

you could see it hit 2000, 3,000 in no time. And that's just a reality of the marketplace we're in. I mean, and that would be, hey, I would love that. I mean, I own Bitcoin and I'm a Bitcoin bull. And for me to see the prices like that, it makes me feel great.

But the other, the flip side, of that, though, is what would cause it would be something that wouldn't be great for the global economy. But, or it could just be other things that cause it to go to that price level. It could just be people piling in causing a price, another euphoric price rise. But yeah, I think that, you know, my, I think my prediction is for me just based on historical pricing, some good news coming out and seasonal factors. And just looking at the chart as it stands now, just upside projections, really.

So I guess the long and short of it is, if you have some money, now would be a good time to buy it. I think so. I think what you might want to do is dollar cost average in, which is a strategy where you just put some in now, then put some in a month from now, put some in a month from there. and that way, if the price goes up or down a little bit, you're kind of averaging into it a bit, and you just employ that strategy. And then you have until you get to your position size that you want to have. That way, if it goes up today or goes down tomorrow,

you're not really worried or concerned about price movement. Okay. And so just as a disclaimer, this is non-investment advice for our listeners. Yes, I'm not offering investment advice. I'm just merely speculating on past price and future price. Yeah, I think it's an interesting topic, and we are so much at the beginning here, right? Because you're pointing out some important things, which is the liquidity just isn't here yet, right? You have these Bitcoin exchanges.

They're very liquid. So once we have actually properly functioning Bitcoin markets, it will be very interesting to see what happens. And especially also once you have your proper access to it because it's still such a pain to create an account, actually be able to trade. And then when you start having perhaps companies that hold some Bitcoin's on a book,

I mean, this is all going to take some time. Yes. But it would be very, very interesting what happens then. and I think it will just be a radically different world. And of course, if we can sort of project in the short term, then you're totally right that because there's such a small amount of liquidity in these markets, that you can have dramatic price movements. You know, if all of a sudden people want to buy Bitcoin

and, you know, only like one or two percent of Bitcoin's are actually available for sale and trade it, then you can have huge price changes with really. relatively small amounts of money. Yeah, I agree. So that's also something interesting. Also, another problem is with a lot of the wallets that you use now, if you want to convert from Bitcoin to Fiat or Fiat to Bitcoin, it takes four days to get into your bank account.

So that's money that's lost for four days, which you could use to buy or sell Bitcoin, right? That needs to be improved as well. I mean, in general, with money transfer in the Fiat world, you can get it pretty quickly. So that to me is something else that is also stopping, is a factor that's impeding liquidity because there'll be days where certain people might have made a profit cashed out

and then want to get back in and they have to wait and the price might get away from them and then they'll miss their opportunity. So that's something else, yeah. Cool. Well, thanks so much for joining us today and kind of dive into some topics that we've covered very little on our podcast, a particular price and kind of what's going to go on there.

And also talk about derivatives because it's such an important topic. And it's a topic that's going to, you know, we'll start taking on a much bigger role, I think, in the year ahead, the two years ahead and kind of after that. Absolutely. Thanks for having me. I really enjoyed my time speaking with you guys. And if you ever want to do a show on technical analysis and you want to do a show on technical analysis and you want me to explain some of this stuff,

I'd be happy to come back on and do that. Cool, thanks very much. Thank you. And of course, if people want to try out BTCSX, I actually just before the show, I made an account, I put in 20-milly-Bitcoins, so about $10, and let me check where I am right now. Apologies for the delay.

I've lost 40 cents, so I'm not doing too well, but I think I will be able to survive this terrible loss, and I hope that by tomorrow I'm going to do much better than that. Yeah, so please, please use it. It's actually a nice user interface because I haven't done any derivatives trading

before, any error leverage trading I mean, about some stocks and stuff, but nothing like that, and it's really easy to figure it out. So it's ptc. sX, so, you know, it's quite interesting, although probably don't bet your house on it. Yes, I agree.

But please use the site. Yes, exactly. Yeah, so thanks so much for listening. If you want to support the show, reviews are very much appreciated. You can do this on iTunes. And you can also let us know what we're doing well, but we can still improve. And you can follow us on Twitter at Epicenter BTC.

And you can support us by donating, which we also very much appreciate. And you can find our donation address, which we have for Bitcoin, Lightcoin, and Dogecoin, on EpicenterBitConn.com slash tips. So thanks so much and we look forward to being back next week.