"Stocks No Longer Make Sense To Me" - Here's Why Quants Are Embracing Bitcoin
Content adapted from this Zerohedge.com article :Source
by Tyler Durden
Since bitcoin first seeped into the public consciousness in 2013, the stereotypical image of the cryptocurrency trader is the 25-year-old tech bro who uses phrases like "YOLO" and "FOMO" when describing his trading strategy and general investing philosophy.
In more recent years, the image of the mom-and-pop crypto trader has taken hold, as Mrs. Watanabe - the archetypal Japanese and South Korean house wife once known for trading foreign exchange - has migrated to trading bitcoin and ethereum.
But as the Financial Times pointed out in a story about financial professionals dabbling in crypto markets, the hoodie-wearing twentysomething described above isn't entirely representative of the crypto community. In fact, many former Wall Street professionals - some with backgrounds working at hedge funds or quantitative trading shops - have embraced cryptocurrency trading.
And while the allure of obscene returns is obviously one reason for the attraction, one venture capitalist interviewed by the FT offered an even more revealing answer:
He embraced crypto after becoming disillusioned with traditional markets, which "no longer make sense" thanks to nearly a decade of central bank intervention.
"I've been out of the stock market because it stopped making sense to me," he says. Central bank support for the markets plus the trend of passive investing have turned it into a game with unclear rules.
"Over the past few years or so, everyone has just been buying indexes and they haven't been doing price discovery.** They're just investing in a trend of something going up and up and up,"** he says.
Until very recently, volatility in global stock markets had fallen to one of the lowest levels in history - making life difficult for quantitative traders who leverage up and play for small moves.
But in the crypto market, circumstances couldn't be more different. Such high volatility is essentially a quantitative traders' dream.
"In a days worth of cryptocurrency movement you have a week or a month of equity market movement or a decade of country debt," he said.
Another apt description came from a hedge fund trader who said financial professionals are drawn to bitcoin for the same reasons they're drawn to the poker table.
"It's fun," one hedge fund trader said, adding that she did not want "fomo," the acronym for 'fear of missing out'. One London-based banker was more blunt: it was gambling for people who could afford to lose a bit of money. "That's it. Nothing else."
We're not sure the surprising number of people who bought bitcoin on their credit cards last year would agree.
"I’ve been out of the stock market because it stopped making sense to me," he says. Central bank support for the markets plus the trend of passive investing have turned it into a game with unclear rules.
"Over the past few years or so, everyone has just been buying indexes and they haven’t been doing price discovery. They’re just investing in a trend of something going up and up and up," he says.
BTC trading with exchange hacks that can wipe out your trading account, random unknown occurrences such as tether injections, no regulation, violent volatility, countless other unknown variables including random regulation all makes sense to you. You can forecast accurate price discovery in a market like this? This guy is fucking nuts.
thanks for share @zer0hedge
Best job, thank you.... Resteem and upvote this post.
thank you very much for the article. read, delve. I'm beginning to understand!))))
first time reading your post and attract me and awesome post!
yaah when stock market fallen that making life difficult for quantitative traders who leverage up and play for small moves. followed and resteemed your post sir!
The stock market is an antiquated system at this point. Time for some of that progress we're always hearing so much about.
Good job I like this post thanks for information
thanks, for sharing, a lot of newa of bitcoin, @zer0hedge
With Wall Street professionals having backgrounds working at hedge funds or quantitative trading shops embracing cryptocurrency trading, there is no doubt about the future of cryptocurrency. It's still yielding more returns.
Indeed traditional markets no longer make sense, the volatility in global stock markets falls reducing the returns in the investment.
Bitcoin could be a gamble for people who can afford to lose the money they are investing, but I feel in the long run these people are always expecting returns.. whether it's months, or years.. Thats the beauty of cryptocurrency.
The stock market makes less sense now than it did 20 years ago. Of course, the amount of automated trading increased substantially...
At the same time, I am not sure the crypto world makes much more sense. There are a lot of games played in this arena also. Over time, this could clear out, but for now, it is petal to the medal.
The Fed has pumped the market up as much as it could. Will it pop? At some point. However, do not underestimate Wall Street's ability to bubble things. I feel that we are going to see a repeat of the dotcom era but this time the word "blockchain" will be the trigger for stocks to fly.
If the stock exchange was tokenized, it my be harder to regulate. But it would be easier for money to flow in.