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The Bitcoin Price Has Been Remarkably Stable Lately

By Kyle Torpey Feb 27, 2015 6:58 AM EDT

bitcoin volatility

NEW YORK (InsideBitcoins) — Although there are many different arguments bitcoin skeptics like to throw at bitcoin, the bulk of them fall into three broader categories: volatility, security, and convenience. These issues are still legitimate concerns for most of the general public at this time, but various developers in the bitcoin space have been making some slow and steady advances in these three key areas. The good news for the bitcoin community is that volatility seems to be on the decline and proper security measures are becoming much more practical for the general public.

[Read More: Bitcoin: A Possible Solution for Ukrainians Rocked by a War-Torn Economy]

Consumers seek volatility assistance

Price volatility seems to be the main concern among individuals who don’t see the point of using bitcoin on a regular basis. While bitcoin payment processors, such as Coinbase and BitPay, have removed the concern of volatility on the merchant side of things, consumers don’t yet feel comfortable about the idea of keeping a portion of their savings in bitcoin. However, there are a few indications that volatility as a whole will become a less-worrisome issue in 2015.

Bitcoin volatility is on the decline

Volatility2015

btcvol.info

First, let’s look at the numbers. Even with this morning’s 6% move, bitcoin volatility is not what it was in the past. The cryptocurrency recently enjoyed its longest run of sub-five percent volatility (as calculated by btcvol.info), and the “huge crash” seen earlier in the year was less volatile than an average day for bitcoin in the second half of 2011. It should also be noted that the last two major spikes in volatility over 10% were at least partially caused by the now defunct Mt. Gox exchange.

The first spike occurred when the incompetent exchange could not handle the large amount of trading volume during the April 2013 bubble, and the second spike occurred when the potentially fraudulent Willy bot was affecting the market, Mt. Gox went bankrupt, and regulatory rumors out of China were basically controlling the market. While Mt. Gox is now out of the picture and the public is better educated on the relationship between bitcoin exchanges and the actual bitcoin blockchain, regulatory uncertainty is still a serious issue.

[Read More: What Part Did the Mt. Gox Bot Really Play in the Bitcoin Price Bubble?]

Hedging could bootstrap bitcoin stability

In addition to the natural decline in volatility, there are also various tools coming to market that could enable users to hedge their bitcoins in a somewhat decentralized manner. Several platforms that allow users to bet on the price of any asset from the US dollar to Apple stock will allow individuals to hold bitcoin without having to worry about violent price swings nearly as much. Hedgy, Ultracoin, Truthcoin, and Orisi are all platforms that could allow users to hedge their bitcoins with exposure to fiat currencies, stocks, precious metals, or basically anything else via smart contracts. Whether or not it would be a good idea to create tradeable “bitUSD”, “bitgold”, or “bitEUR” out of these sorts of derivatives is still up for debate.

Although the Ultracoin client currently only allows users to take short and long positions on various assets for specific periods of time, Reggie Middleton recently confirmed that they are going to make those long and short smart contracts exchangeable in one form or another. In the near future, we could be looking at a situation where mainstream bitcoin wallets have the option to hedge bitcoins with fiat exposure at the click of a button.

You can follow @kyletorpey on Twitter.

 

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  • The focus of this piece was on bitcoin. It was about bitcoin volatility, so I only wanted to cover hedging options that were denominated in bitcoin.

  • BtoC

    I never said that the facts you state (about the # of assets) are incorrect.

  • Ok, I count 19 assets in 2 asset classes, UltraCoin counts ~100,000 assets in all asset classes, of which you can mix and match, short or go long and apply leverage of up to 10,000. I don’t see any inaccuracy in my statements. Like I said I have nothing respect for Invictus, and I got my education on the product directly from the founder. He’s a smart dude for whom I have great respect, but that does not mean that the products are currently on par.

    The price feeds for UtlraCoin clients can be independently audited.

    Thanks for the compliments, btw. They are greatly appreciated.

  • BtoC

    I don’t doubt your understanding of financial instruments! Presence on mainstream media though proves mostly other great qualities of yours (your loving way, the trust that your voice and your person evokes in people). The combination of such qualities are rare!

    What makes me a bit sad is that you put out those claims without being properly informed about alternatives products like the Bitshares project. Bitshares is a cryptocurrency product that has it’s own blockchain. The limit to what pairs can be traded is set only by price feeds published by delegates (delegates are comparable to miners or mining pools respectively in Bitcoin). The final price feed results from a median of at least 51 separate price feeds published by delegates. This, compared to ultracoin, has one disadvantage and one advantage: It is harder to get very many price feeds online (so less trading pairs). But it is less vulnerable to price feed manipulation.

    I would be happy to see such refined distinctions about design trade offs instead of broad claims about “the most advanced” system. To me the former is more credible.
    Look at this quote for example “UltraCoin does what bitUSD does plus more, but the bitSUD, etc. products can’t match the UltraCoin product.” it’s just a very unspecific claim without arguments and obviously without understanding of what you compare Ultracoin to (see above).

    You can find a video series about what Bitshares is here (including the financial instruments it offers and how they work): https://www.youtube.com/watch?v=vqTbfbn7Vco&list=PLjgfpSQFJTLpKmTGCG8FjvDFbfst6F-x5

    You can look at all the trading pairs here http://bitsharesblocks.com/assets/market. There certainly is not only BitUSD. At the moment (will change) all assets are traded against BTS (Bitshares currency).

    Ultracoin client download: I am pretty sure my browser does that. After downloading it Chrome only lets me discard the file. Further Information gets me to this site: https://support.google.com/chrome/answer/2898334?p=ib_download_blocked&hl=de&rd=2
    I hope that helps!

    Peace 🙂

  • Just as the Bitshares guys are likely dramatically better coders than I am, I’m confident that I’m probably a bit more financially inclined than they are. More about me: https://www.youtube.com/watch?v=umXDKIGxk-M

    To my knowledge, there not a cryptocurrency product, not to mention a pure bitcoin product, that can create, trade and settle over 100,000 different derivative combos through the blockchain. If that statement is true, then UtlraCoin wallet is better than the bitUSD product. UltraCoin does what bitUSD does plus more, but the bitSUD, etc. products can’t match the UltraCoin product. That doesn’t mean that I don’t respect them. The CEO of Invictus appears to be a champion coder. We are competitors and my firm took a different approach than Invictus. I have put several hundreds of hours into the financial engineering of this product, at least as much time as was spent in the software engineering effort. Hopefully, it shows.

    I’ve done very little on the economics side in the engineering of the product. I don’t believe that is where the effort belongs. The more advanced products are ideal for macro, but that comes only in trade design, not essential product engineering.

    As for the warning that Chrome gives you (I presume you’re using windows), that’s probably not a Chrome warning, that’s an OS warning that you are downloading an executable from a non MSFT partner site. The file is safe to run, you can trust me on that. Several thousand have ran it with no problem.

  • BtoC

    The time you put in here very much speaks for you! And I am very happy about the in depth answers you gave. It seems like, in contrast to all the marketing blabla I heard and read of ultracoin before, that there is something of value. So thank you very much!

    Feedback on the client download: I tried to download the client but google chrome reported to me that the file is an “irregular file” and might pose a threat to my security so I didn’t proceed.

    I am very unbiased on all the different crypto 2.0 projects. It is not my intention to create any drama. What made me comment like I did was your statement that “The reason why our products are so much more advanced is because they were created by a financial engineer, not a software engineer.” The developers at Bitshares at least have shown great understanding of economics and financial instruments. Given this observation that is shared by many that understand the potential of combining derivatives with blockchain technology, your comment seemed unjustified. Extraordinary claims (“our products are so much more advanced”) require extraordinary evidence 😉

  • “I wouldn’t be too quick to judge other people’s abilities ;)”

    I think my judgement of other’s abilities is just fine, and I quote “I have a lot of respect for the coding capabilities of those guys”. Please don’t try to create drama where none exists!

    It is not a metaprotocol, it is simply an advanced use of bitcoin script. Like I said, we use nothing but what the bitcoin code offers.

    The rest of your questions as follows…
    “- The two parties that enter into the derivatives contract have to put up collateral to make sure the other party can be paid. What is used as collateral? Bitcoin? ”

    Like I said, this is a 100% bitcoin prodcut, so that is what is put up as collateral.

    “- How much collateral (in relation to the the value of the contract) has to be put up?”

    Like I said earlier, the parameters are fully customizable by the participants, thus it is up to them how much collateral is put up.

    “- Can all assets be traded against each other that have a price/data feed? CNY/USD, Gold/AppleStock…etc.”

    Yes, and in any combination the participants desire. I quote from my answer above ” and yes, you can do that with any combination of over 45,000 different assets, and with forex you can go long and short two different currency pairs, this means the product can trade roughly 100,000 difference products – the most powerful bitcoin application in existence today, and materially more flexible than projects such as bitUSD, NXT, etc.”

    “- Who is responsible to keep the data feeds up to date and accurate? ”

    Our oracle, referenced the diagram I posted above.

    “- Are all contracts recorded in the Bitcoin blockchain?”

    All Tx are recrordedin the blockchain

    “- Are the derivative contracts respectively the transactions that define them executed automatically by Bitcoin miners that, I assume, process your tx?”

    Yes! Miners cant’t tell our transactions from anyone else’s. At least to the best of my knowledge…

    “- Will your software be open source?”

    We will probably open source the client as a reference client for others to build off of in due time, but we are not there yet. We have to gain traction and polish the system to my satisfaction.

    “- Does a user always need Bitcoin to use your system? Or are there other means of “payment”?”

    This is all bitcoin, through and through. I have considered making a USD and EUR system but that is difficult and time consuming to do without introducing counterparty risk. We can’t afford the distraction right now but if the demand is thee we will do it in the future.

  • BtoC

    Thanks for helping me understand your system better.

    So the ultracoin client matches the two parties of a derivative contract. Right?

    A few questions remain:
    – The two parties that enter into the derivatives contract have to put up collateral to make sure the other party can be paid. What is used as collateral? Bitcoin?
    – How much collateral (in relation to the the value of the contract) has to be put up?
    – Can all assets be traded that have a price/data feed? CNY/USD, Gold/AppleStock…etc.
    – Who is responsible to keep the data feeds up to date and accurate?
    – Are all contracts written into the blockchain (publicly visible)?
    – Does a user always need Bitcoin to use your system? Or are there other means of “payment”?

  • The UltraCoin wallet is pure bitcoin. We don’t use altcoins, sidechains, or tokens. All assets and transactions are held and done on blockchain, All of the technology used is ours, hence there are no colored coins (which are flawed in my opinion for they allow counterparty risk as representations of value, versus value itself).
    The wallet has no predefined smart contracts at all. The user provides all definition, using our GUI and input parameters. Since bitcoin script is non-turing, so is our product since our product is 100% bitcoin.
    The result of the users inputs is itself the derivative, and is extremely flexible, expressed as a continuous payoff digital swap that precisely tracks the price and value of the underlying with 100% correlation, bounded by the assets put at risk. This means you can only win or lose as much money as you put into the system, even if you dial the leverage all the way up to 10,000x – and yes, you can do that with any combination of over 45,000 different assets, and with forex you can go long and short two different currency pairs, this means the product can trade roughly 100,000 difference products – the most powerful bitcoin application in existence today, and materially more flexible than projects such as bitUSD, NXT, etc. I say this in defense of the author, and not to knock the other products (I have a lot of respect for the coding capabilities of those guys, btw). The reason why our products are so much more advanced is because they were created by a financial engineer, not a software engineer. This means that they are much deeper as a financial solution, and to date, and to my knowledge, have no peers.
    You can see everything that is going on by clicking a button in our wallet that allows you to trace the path and current location of your assets at any given time.
    We are a software company, not a financial concern so we – at no time hold nor have possession or control of your assets. Zero counterparty risk at all times.
    Yes, tx are on BTC block chain, conf. times range from 2 minutes to 40 minutes – a vast improvement from today’s system which takes from 1 – 3 days to 2 or 3 weeks to enter and unwind.

    The product is available to download and trade with right now. You can perform trades from 15 cents to several hundred million dollars, so the best way to learn about it is to download it and give it a try. From first thought to first trade takes minutes, literally!

    There are no account sign ups, no registrations, no verification, we don’t even ask for your email address. All you need is bitcoin- or even test coins which we provide via links. We also have a spreadsheet to model a trade before you enter it so you have an idea of potential outcomes.
    Here’s the download link to get started http://ultra-coin.com/index.php/download-now

  • BtoC

    Thank you for the info!

    So maybe you can correct me on my guess below about how you achieve this?

    With ultracoin you provide a wallet that has built in functionality for a few predefined smart contracts (derivatives, other financial instruments?, not turing complete) and then you / the company behind ultracoin issues colored coins that represent certain real world assets (currencies, commodities etc.). And then those colored coins can be used in combination with the derivatives etc. contracts the wallet provides.

    And all tx are on the Bitcoin blockchain (> 10 min confirmation times)?

  • “Would you please share with us how tx are processed in your system”

    We use a highly customized bitcoin J wallet as a base. Everything is pure bitcoin through and through, although you can trade and hedge ANY asset.
    Unlike bitUSD, you can hedge against every major and most secondary currencies, and even exotic pairs – as well as other cryptos. You can also hedge against metals, other commodities, indices, stocks and bonds. We also supply enough leverage to guarantee instant and dramatic price action if that’s your thing.

    Tx are handled just like any other bitocin wallet transaction. The collateral is held in the bitcoin blockchain via multisig and nlocktime.

    Let me know if I’ve answered your questions fully. If not, I’ll go at it again 🙂

  • BtoC

    I ll say that Kyle is a great journalist! His understanding of blockchain technology is far ahead. I also really wondered by the obvious was not mentioned! A little awkward. But I recommend everyone to check out his other articles.

  • BtoC

    Reggie, thanks for that!

    Would you please share with us how tx are processed in your system, who holds the collateral for the derivative contracts and what ledger are you doing these tx on?
    To be honest I find all the talking about the great possibilities of such a system sound like marketing brainwash talk if there is not precise clarity about how the system actually is supposed to work. Please help us out in being transparent about these things!

    Thanks!

  • Thanks for the mention Kyle. It is greatly appreciated. One correction:

    “Although the Ultracoin client currently only allows users to take short and long positions on various assets for specific periods of time, Reggie Middleton recently confirmed that they are going to make those long and short smart contracts exchangeable in one form or another. In the near future, we could be looking at a situation where mainstream bitcoin wallets have the option to hedge bitcoins with fiat exposure at the click of a button.”

    Anyone can hedge any exposure to any asset or currency now with our bitcoin wallet. What we are working on is the ability to sell that hedge off into an open market before the contract expires, thus creating a market where not only are exposures exchangeable, but the contracts for those exposures are exchangeable as well. This will result in internal price discovery where holders of bitcoin wallets could potentially be more influential on interest rates, stock prices and forex rates than those in the legacy centralized exchanges.
    Cool and exciting stuff. In addition, these are actual exchanges of value, not exchanges of representations of value, ie. colored coins.

  • DanielM

    bitUSD the name was coined by Bitshare.But you right absolutely the author is under no obligation but in a way it’s like talking about the blokchain without mentioning Bitcoin. And I’m not talking only about Bitshare I’m talking about all the solutions that are already there he does not even mention it. But I see your point I see now that he only mentions projects that are gonna use Bitcoin. I did not know Truthcoin it will be based on Bitcoin. Sorry.

  • Mateo Vega

    Are you lost or intentionally spamming your alt on a Bitcoin site? The author is under no obligation to talk about your shitty Bitshares asset.

  • BtoC

    Can anyone provide a link that clearly describes what technology ultracoin is/will use(ing)? I get that it is supposed to provide smart contracts but how are tx processed / how is the ledger updated? In which way is it decentralized? Thanks!

  • DanielM

    So you completely omitting to say that bitUSD already exist and it working for a while now. You are talking about some obscure coins and ignore Bitshares who basically invented bitUsd. Bitshares it is forth on coin market cap and yet you are talking about some coins that they are not even in the development right now like Trutcoin. There are also other options that you fail to mention like Nubtis and others. In fact, you don’t even say that there are already options out there. This is really crappy journalism really !!!

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