3 ms·

Shorting relies on a fairly complicated and trustworthy financial system. It isn't some easy thing, it's quite a complicated thing to set up to work well enough

Shorting relies on a fairly complicated and trustworthy financial system. It isn't some easy thing, it's quite a complicated thing to set up to work well enough to serve as a financial product. This does not actually exist for Bitcoin. Shorting requires trusting an exchange, and statistically trusting a Bitcoin exchange is historically a terrible idea. So no, you can't just short Bitcoin and expect to make money.

eru 11y ago
You can sell bitcoin futures. That's equivalent to a short. Ie you and the counterparty agree on a price today to sell them bitcoins a fixed time later. If both of you keep honouring any margin calls you agree on, the risk is fairly low. No third party necessary. But yes, it is a more complicated transaction than the spot market.
- davidgerard 11y ago
  Is this hypothetical, or are there a few working examples, or are there a lot of working examples, enough that one could casually talk about shorting Bitcoin? How big is this market for Bitcoin shorts and futures, what sort of volume are we talking about at the present time? The only shorting I knew of was on exchanges of questionable trustworthiness.
  - eru 11y ago
    Sorry, purely hypothetical. But, it might be worthwhile to make this work. If you implement the margin calls right, there's almost no risk for any party involved. Stand by, while I talk to my bitcoin obsesses friends about a startup idea.
  - aianus 11y ago
    https://www.bitfinex.com/ https://www.bitfinex.com/ Large, relatively trustworthy exchange. Costs roughly 3.3% APR to borrow $1m worth of BTC for shorting right now: https://www.bitfinex.com/credit/index/btc https://www.bitfinex.com/credit/index/btc Edit: corrected the interest rate
    - davidgerard 11y ago
      https://np.reddit.com/r/BitcoinMarkets/comments/3nf3aa/daily_discussion_sunday_october_04_2015/cvnqr37 https://np.reddit.com/r/BitcoinMarkets/comments/3nf3aa/daily... I have no confidence in Bitfinex's ability to literally run their own systems. Typical Bitcoin system, i.e. cobbled together from cheese and string by amateurs. It's as if financial software and systems never existed.
      - aianus 11y ago
        Blame the government. It's not clear that it's legal to run a Bitcoin margin trading system in the U.S. so you have to make do with less-than-ideal offshore outfits.
        davidgerard 11y ago
        Alternately ... don't gamble on Bitcoin! Gemini is attempting to be as legit an exchange as is possible. Not sure they're offering shorting yet. OTOH, their volume is laughably tiny; everyone else is strongly suspected of frontrunning and Willybots. It turns out that crooks and scammers see an unregulated environment as a golden opportunity, but not for their customers.
        aianus 11y ago
        > Alternately ... don't gamble on Bitcoin! It's not gambling if, say, I need to hold Bitcoin in inventory to run my business but I want to short it on Bitfinex to hedge my exposure to currency fluctuations. Not shorting would be the gamble. > Gemini is attempting to be as legit an exchange as is possible. Coinbase Exchange is a perfectly legitimate exchange too (I work for Coinbase). But accepting deposits and lending them out to other users to short and/or trade on margin is a whole different regulatory ballgame. > It turns out that crooks and scammers see an unregulated environment as a golden opportunity The regulations here are actively hurting consumers as legitimate providers are afraid to step into the space. It's a self-fulfilling prophecy (too many regulations -> only idiots and crooks offer services -> consumers lose money -> more regulation). Edit: opinions are my own, not Coinbase's, yada yada

eru 11y ago

You can sell bitcoin futures. That's equivalent to a short. Ie you and the counterparty agree on a price today to sell them bitcoins a fixed time later. If both of you keep honouring any margin calls you agree on, the risk is fairly low. No third party necessary. But yes, it is a more complicated transaction than the spot market.

davidgerard 11y ago
Is this hypothetical, or are there a few working examples, or are there a lot of working examples, enough that one could casually talk about shorting Bitcoin? How big is this market for Bitcoin shorts and futures, what sort of volume are we talking about at the present time? The only shorting I knew of was on exchanges of questionable trustworthiness.
- eru 11y ago
  Sorry, purely hypothetical. But, it might be worthwhile to make this work. If you implement the margin calls right, there's almost no risk for any party involved. Stand by, while I talk to my bitcoin obsesses friends about a startup idea.
- aianus 11y ago
  https://www.bitfinex.com/ https://www.bitfinex.com/ Large, relatively trustworthy exchange. Costs roughly 3.3% APR to borrow $1m worth of BTC for shorting right now: https://www.bitfinex.com/credit/index/btc https://www.bitfinex.com/credit/index/btc Edit: corrected the interest rate
  - davidgerard 11y ago
    https://np.reddit.com/r/BitcoinMarkets/comments/3nf3aa/daily_discussion_sunday_october_04_2015/cvnqr37 https://np.reddit.com/r/BitcoinMarkets/comments/3nf3aa/daily... I have no confidence in Bitfinex's ability to literally run their own systems. Typical Bitcoin system, i.e. cobbled together from cheese and string by amateurs. It's as if financial software and systems never existed.
    - aianus 11y ago
      Blame the government. It's not clear that it's legal to run a Bitcoin margin trading system in the U.S. so you have to make do with less-than-ideal offshore outfits.
      - davidgerard 11y ago
        Alternately ... don't gamble on Bitcoin! Gemini is attempting to be as legit an exchange as is possible. Not sure they're offering shorting yet. OTOH, their volume is laughably tiny; everyone else is strongly suspected of frontrunning and Willybots. It turns out that crooks and scammers see an unregulated environment as a golden opportunity, but not for their customers.
        aianus 11y ago
        > Alternately ... don't gamble on Bitcoin! It's not gambling if, say, I need to hold Bitcoin in inventory to run my business but I want to short it on Bitfinex to hedge my exposure to currency fluctuations. Not shorting would be the gamble. > Gemini is attempting to be as legit an exchange as is possible. Coinbase Exchange is a perfectly legitimate exchange too (I work for Coinbase). But accepting deposits and lending them out to other users to short and/or trade on margin is a whole different regulatory ballgame. > It turns out that crooks and scammers see an unregulated environment as a golden opportunity The regulations here are actively hurting consumers as legitimate providers are afraid to step into the space. It's a self-fulfilling prophecy (too many regulations -> only idiots and crooks offer services -> consumers lose money -> more regulation). Edit: opinions are my own, not Coinbase's, yada yada