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Bitcoin Cash Questions

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divergence.PNG

 

Why is there such a large divergence between the major exchanges and the IG price?

Also the spread is huge and is literally changing every few minutes

Will we get a lower minimum contract size on the mini?

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Hey - I'm not sure if you've seen the Crypto mega thread, but hopefully it should answer a number of your questions. For convenience I have copy/pasted a couple of points below. We are currently reviewing our minimum bet sizes, and i'll pass your feedback onto the desk, however at the moment minimum values are unlikely to change. 

 

How does IG price Cryptocurrency?

Bitcoin and Ether is priced by taking a number of different price feeds from some of the largest exchanges and liquidity providers, and wrapping the IG spread about the best bid and offer (sell and buy price) in real time.

 

We price cryptocurrencies in a similar way to how we price our FX markets.  There is a video below which is worth watching, especially from the 2 minute mark, which explains our currency pricing model.

 

 

 

What impacts Bitcoin and Ether spread?

At IG we know that spread is an important factor for our clients, and we have worked hard to create some of the narrowest in the industry for FX, commodities, futures and other asset types. We are continuing this with crypto currencies but there are unique factors affecting these digital assets which mean that the difference between the buy and sell price (the spread) is larger than normal.

 

The market is still in its infancy and liquidity is relatively low. The majority of exchanges we deal with (which are some of the largest exchanges in the world) only have a few coins available at the touch price. For example, if you were to deal 1 CFD contract for Bitcoin (USD) your trade would be the equivalent of buying or selling 100 coins on exchange.

 

Cryptocurrency is priced on multiple exchanges, but there isn’t a singular ‘best bid and offer’. Therefore you get a number of different quotes which need to be taken into account. The list below is an example of the divergence in price on Bitcoin/USD at the moment of going to print for some of largest exchanges by volume (for the preceding 24 hours).

 

Exchange

Pair

24hr volume

Last traded price

Exchange 1

BTC/USD

$158,317,000

$4215.40

Exchange 2

BTC/USD

$66,580,500

$4212.43

Exchange 3

BTC/USD

$56,507,600

$4220.00

Exchange 4

BTC/USD

$52,349,100

$4220.10

Exchange 5

BTC/USD

$25,996,400

$4236.93

Exchange 6

BTC/USD

$22,151,800

$4347.95

Exchange 7

BTC/USD

$18,488,400

$4299.81

Exchange 8

BTC/USD

$11,558,100

$4216.61

Exchange 9

BTC/USD

$6,298,700

$4209.35

Exchange 10

BTC/USD

$4,844,130

$4263.70

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I know I keep bring this up, but... The ability to take smaller size positions would really up the number of spreadbets I place.

 

For example, I was looking at Bitcoin Cash, but at £10 per point, even when BCC was in the £350 range, it's was way too much risk for a small investor like me. Obviously, I wish I'd had the **** to buy it then!

 

On the fees side (I'm classing spread as a fee), I'd say IG is good, if you look at the overall cost. All the exchanges I've looked at charge a fee for funding (in fiat) or you have to pay a transaction fee to the network (e.g. BTC). Then on top, exchanges typically charge a percentage fee both when you buy and when you sell. (The only reason I trade Cryptos elsewhere is to buy smaller amounts.)

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Hi  - sorry that it's taken me a while to get back to you - this comment slipped passed me. When you first brought this to my attention and I discussed it with the desk they dropped the minimum bet sizes for CFD accounts only. There must have been miscommunication because I assumed they also dropped spread betting bet size. 

 

I double checked and saw that the minimum bet size was £1/pt, however I've spoken to the desk and they have reduced it to the requested 50p. I hope this is beneficial for yourself and the wider community. All the best. 

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Brilliant, thank-you so much. And I see the minimum size for BitCoin Cash have also come down to much more sensible levels.

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I recall a billionaire investor (can't remember name) who suggested that Bitcoin will hit a trillion dollar market cap. When he was drilled down he clarified that he did not mean Bitcoin by itself but Bitcoin, Bitcoin Cash and Bitcoin Gold combined would hit a trillion dollar market cap within the next few years. 

 

I think the narrative needs to be made clearer on Bitcoin Gold and Bitcoin Cash plus Bitcoin itself. Going forwards if one wanted to have a hedge or defensive position then they could allocate capital into Bitcoin Gold. Maybe they could use Bitcoin Cash to pay for goods and services such as a cup of coffee or a taxi due to faster transaction times. Both could be backed / supported by Bitcoin itself.

 

This is just me 'thinking out aloud' but the narrative is not clear enough for me yet. Once the person on the street 'Joe Bloggs' understands the advantages and uses for Bitcoin Gold, Bitcoin Cash and Bitcoin itself is when things will really start to get interesting.

 

Why would someone buy Bitcoin Cash ahead of Bitcoin? Why would someone choose Bitcoin Gold over Bitcoin Cash? Once the 'background story' is set and the narrative is clear then we will really begin to see the potential trillion dollar combined market cap. Until then capital will move between alt coins like Ripple, Litecoin, etc. I separate Ether as I think it operates in a different market within the same universe in terms of 'smart contracts'. 

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thanks  and nice rundown on thoughts  - I did however have a question TF. What do you see as a scalable and useful 'use case' for Bitcoin Gold?

 

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,

 

A very good question which is the crux of my point that I made in my previous post.

 

I am unsure about a scalable and useful use case for Bitcoin Gold which my previous point alludes to.

 

Bitcoin Gold was a hard fork from the original Bitcoin (open source). This was in relation to the mining process. The Bitcoin Gold developers backed a new algorithm which did not favour major mining operations.  One of the draws could be that it is a free open source project built by developers. 

 

To answer your question  from what I have read then Bitcoin Gold aims to integrate open source libraries and assist in academic and university collaboration. There is a plan to integrate a debit card program. Right now there are companies looking to back cryptocurrencies with real assets like gold. For example, Lionsgold, an AIM listed company has launched Goldbloc which is backing crypto with real gold. Other companies are also doing this and have got there well before Lionsgold.

 

My understanding is that Bitcoin Gold is specifically targeting the education market, research and scholarship area. I must admit how it will do this is a bit unclear to me. Personally, I think Ether will take a share of this market and if Bitcoin Gold is serious then it will find itself competing with Ether in this area and the use of 'smart contacts'. Bitcoin Gold could be used for voting, etc. Voting could be scalable and a useful use case but this is just me thinking out aloud.

 

The processing time for both Bitcoin and Bitcoin Gold are similar. Also the 21 million circulation is also very similar. However could Bitcoin Gold be used as a digital security system against Bitcoin and offer a security protection? I don't know but with replay protection that protects from accidents and threats then Bitcoin Gold could go down the security path. Again how likely is this?

 

The only thing I can see is that rather than Bitcoin becoming the digital store of value, it is Bitcoin Gold that becomes the digital gold. However, I think these forks could have a dilutive effect if there is no clear scalable use cases for the resulting new digital asset that is created after the fork.

 

One could ask the same question you have asked about Bitcoin Cash!

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