BitCoin Skeptic

This blog is titled "BitCoin Skeptic".  I registered the URL well over a year ago (I am checking my records to see if I can identify the exact date) presumably at a moment when I was feeling especially bearish about that much-discussed crypto-currency. 

I may resort to referring to BitCoin as a "so-called currency", which is inelegant language, but whose negative connotation is in line with my views.

"Skeptic" should suggest a reasoned position on the matter.  Naturally, I consider that my views are reasonable, although I not have carried out in-depth research.  My stance is therefore partly intuitive ("gut feel").

In principle, it would be appropriate for me to put forward a strong opinion only after I had tried out the technology first-hand.  I have some appetite to do that in the spirit of discovery, and consistent with my practice of "learning by doing".  However, one of the problems that I see with BitCoin is the apparent complexity involved in handling it, as well as the absence of reliable service providers. 

These difficulties (real or perceived) have been enough to prevent me from becoming a participant in any BitCoin transactions so far.

Of course, I haven't really been interested in buying BitCoins.  My objective has been to find a way to take a short position.  Until now, this has not seemed viable.

I was beginning to think that I would be stuck, unable to "put my money where my mouth is".

However, I recently visited the website of IG Index (an established provider of financial spread betting markets).  I was interested in markets on conventional products like equities, currencies and commodities.  I was surprised to find out that they are now offering spread bets on the BitCoin price.

This changes the situation considerably!  Using IG Index would eliminate my concerns over counterparty risk, and my operational and security concerns about most BitCoin providers.  It would also mean that any gains I made in taking a short position would be paid out in GBP ("real money", as I like to call it.) 

That last point is quite important, philosophically.  As far as I could tell, other products that I had seen before that might have allowed me to take a short (BitCoin derivatives) were to be settled in BitCoin.  Since I believe that BitCoins are really worth $0, and are at least due for a dramatic decline, it would of course be sub-optimal to be paid my gains in that form. 

In the most extreme case, I suppose, I could be "completely" correct and see the BTC fall to zero and my puts would actually be worthless.

My initial due diligence on the IG Index product was very encouraging.  I was very impressed with their spread betting platform, and the BitCoin contracts is quoted with a very respectable bid-offer spread and a reasonable cost of carry.  I know that IG Index does use the markets to hedge its net client exposure but I would assume that in this case they are relying on genuine 2-way flow. 

They probably also judge that offering this product is good marketing.  They have converted at least one interested party into an active client on other contracts ! 

More on that in future posts.  For now, the key point is that it looks like I'm now able to express my strongly-held views on the BitCoin price if I wish to.  It's likely that I will go ahead and do that.  I will post the outcome here.  But I'm also motivated to express some other views on financial markets, and to put those into practice as well.

My other views are not as strident as my ultra-negative outlook for BTC, but admittedly most of them are "negative".  I do have a strong bias in my predictions.

The New Year is a good time for "Top 10s" and so on, so I will pick out ten predictions that I am willing to put my name to and post them here.