THE BITCOIN COMMITMENT OF TRADERS

Committed Goats

In the United States commodities futures market the CFTC (Commodities Futures Trading Commission) publishes a regularly publishes a commitment of traders (COT).

The CFTC is the government agency that regulates futures exchanges in the United States. In my day the COT report was gathered at the end of each month and published mid-month. Because of this relatively long time frame in speculative markets, the reports could be manipulated and by the time the information was published, it was not very useful as an indicator.

For this reason, I never gave it much stock. . . . except you wanted to know when it was published because surprises in the report could move a market short term.

However, this has changed. The reports are compiled after the market’s close every Tuesday and published after the close on Friday. There is a world of information on the CFTC website. One link will lead to another, so for serious students it is important check it out. It will give a great deal of insight on why futures markets exist and who uses them.

Again, futures markets exist for one reason and one reason alone. . . they are a vehicle for commercial interests to pass on risk . . . very real risks that exist. A casino creates risk that does not otherwise exist. That is why a participant in casino games is known as a gambler, while a non-commercial participant in futures markets is known as a speculator. A speculator performs a very useful function in the marketplace and society as a whole. . . a gambler does not.

(This is a distinction which can never be emphasized enough. Especially in the face of the coming Exthit [pronounced with a lisp and weak wrist]. No doubt the victims will blame speculators and some vast conspiracy for the alt coin/ICO demise rather than own up to their own stupidity. The futures markets have actually provided an avenue for bag holders of these worthless fiat creations a means of protecting themselves from total ruin. . . at least those fiat creations with a once significant market cap.)

There are now also useful charts available to help read the weekly COT reports. Here is an example for gold.

The Commitment of Traders breaks down the open interest into specific categories such as commercial users, large speculators, and small speculators. Generally when you see a large speculators leaning 80% or more one way, the market will go that way. That is based on the theory that large speculators tend to be right more than they are wrong. . . that is why they are a large speculator.

Again, I never found COT that useful in my commodity futures trading days. . . but I am certain this has changed. . . as more timely and relevant reports are made available to the public. If anyone out there can guide us to a good source of how to use COT as an indicator . . . I am sure it can be useful in the arsenal of successful traders. There is simply a lot more information available today than 40 years ago.

But this article is about bitcoin futures. . . and bitcoin futures volume within the United States are simply irrelevant . . . so while there is a COT report on bitcoin, it simply is not useful . . . because the lion’s share of trading is outside the United States. Perhaps that will one day change . . . but for now U.S. bitcoin futures are simply irrelevant.

However, that does not mean a commitment of large traders is not discoverable. For example, it is well known that ICO scammers own a great deal of Eth. It is also well known from the Bitmain IPO offering and public statements that Jihaun Woo and Roger Ver own a great deal of bCash. And that Hedge Fund manager Michael Novogratz holds a large losing crypto position which includes bitcoin.

This is not a futures position . . . but an actual bag holding. . . and this is reflected in the market caps as Eth has declined from 18% to 10% since mid-June while bCash has followed suit dropping from 5.5% to under 4%.

While a large speculative futures long position is bullish in commodity futures . . . not so in private fiat currencies . . . . one aspect of sound money is wide distribution. . . . and bitcoin is slowly being distributed into many small hands. Private fiat currencies, like bCash and Eth, essentially claim they are money because they say so . . . and millions is spent to support their claim by the large centralized bag holders.

And the propaganda machine has been working overtime for the past three months with no effect on the bear market. Here is one example I just found today. There are dozens of them daily,

There is no use case of blockchain for business, using their definition of blockchain, which is no definition at all! This article uses all the buzz words to create a false narrative without articulating what blockchain is or what it can be used for! By not defining blockchain, the narrative can promise anything while delivering nothing.

The use case of blockchain for business is unconfiscatable store of value. . . therefore blockchain is bitcoin and bitcoin alone . . . and hodling bitcoin is dynamic growing monetary energy at rest, locked in a box with a private key, waiting to be unleashed at an opportune time by the hodler. The coming new wave for bitcoin will emerge as HAVE ENTREPRENEURS MERGE WITH HAVE NOT ENTREPRENEURS. The myth of banking the unbanked is pure poppycock and phony altruism to launch ICO frauds.

The unbanked are unbanked for a reason. . . if they can’t maintain a bank account in their country of origin, they have nil chance of using bitcoin. . . rather bitcoin will be increasingly be adopted by successful honest entrepreneurs with bank accounts who are being robbed and increasingly unbanked by central banks (For example, last week the Central Bank of Mexico put a 24 hour hold on wired funds). . . yes some of these are unbanked due to criminal enterprises or political beliefs . . .but these unbanked are unbanked because they are excluded, not because they are incompetent. Bitcoin is not and never will be for the ignorant and incompetent.

There is a long/short ratio published by Bitfinex . . . but frankly I do not understand it. . . and the source is very questionable . . . and it makes no sense to me whatsoever. . . . perhaps someone smarter than me can clue me in. . . but I only see this indicator as something created by Bitfinex to add confusion into the mix.

I do understand open interest. Open interest is the total number of open positions . . . they can be commercial or speculative . . . and includes large and small commercial interests . . . and large and small speculative interests. The total number of longs always equals the total number of shorts. . . so the Bitfinex data makes no sense to me whatsoever. . . I find it highly suspect . . so please enlighten me if you understand it because I just don’t get it . . . and have no clue how Bitfinex can compile such data. Someone please enlighten this ignorant Ugly Old Goat.

Bitmex tracks the current open interest on each of its contracts in real time. . . but it is not integrated on Trading View. If Trading View would track this Open Interest it would be a very useful indicator . . . in my opinion more useful than volume. As traders this is something we need to lobby for with Bitmex and Trading View.

Please note, to be a successful trader you do not need to know COT or long short/ratio or basis . . . all these things can be useful . . . but they can also simply add confusion. . . again the number one, number two, number three and number four rule in successful trading is Money Management!

The only thing positive for Bitcoin right now is the backwardation. The March futures started trading and immediately went to backwardation.

But basis is a lousy timing mechanism. So far every test of the two week low at 6220 has been met with resistance. . . so backwardation continues to rule the day. . . . but backwardation alone is nothing to trade on . . . except to favor the backward futures.

Will the support hold? No one knows. We should be going down, but we are not. Every available avenue is being used to pump the alt/ICO to no avail. . . .the plumbing seems to be leaking badly. . . and if the pipes break we will be going down, down, down. It looks like we have a whole lot of small and medium traders short in the anticipation of huge carnage from a few very large traders . . . once side or the other will likely soon get crushed.

After traveling the world Ugly Old Goat finally returned home. . . so the long awaited debut with Tone Vays is now at least a possibility. I had to travel to TJ International Airport to pick him up . . . so I liquidated my position . . . as the last rally was completely unexpected . . . and since I was traveling I did not want a large position with my only option a cell phone. . . when it become clear the rally was fizzling I stepped back in my shorts at a lower price and reduced position. . . so I helped reduce Open Interest for the sole reason to reduce risk.

Tone says to double down if we break. . . not my style . . . I like selling rallies. . . but might make an exception here.

Hope this helps.

Have lots to write about, so hope I can get it done before appearing on Tone Vays.

UOG

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