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That's an interesting trade. If you entirely ignore the Bitcoin aspect of it, you're just investing claims against a bankrupt Japanese company which is being c

by patio11 10y ago

That's an interesting trade. If you entirely ignore the Bitcoin aspect of it, you're just investing claims against a bankrupt Japanese company which is being competently administered in the ordinary course of a 民事再生。 Currently 100 yen worth of claims looks like it will receive 25 yen worth of satisfaction at a non-deterministic time between one and two years from now. But, but, but: something like 20 of those 25 yen are presently tied up in a non-liquid-but-very-volatile[+] security, so buying bankruptcy claims gets you effective 2:1 leverage on that security. (Handwavy assumptions: you're sure of getting the 5 yen back that is actually presently held in yen and you can borrow yen for approximately 0% in quantity, so essentially you're paying 10 yen for 20 yen worth of exposure to the security.) [+] Yes, you can sell 1 BTC without meaningful price impact, but you can't sell 200k BTC without meaningful price impact, so it is not liquid by the standards of hedge funds.

Animats 10y ago
That's just some bottom feeder buying up claims at a discount. There's a small industry which does that.[1] Sometimes the goal is to buy the business at a big discount and do something with the assets. [1] https://www.law360.com/articles/498711/understanding-the-reasons-traders-buy-bankruptcy-claims https://www.law360.com/articles/498711/understanding-the-rea...
- patio11 10y ago
  That was my first thought but, crucially, the bankruptcy administrator is not holding a pile of yen. If he were merely holding a pile of yen, this is a pretty boring deal, and you'd be right -- it's a straightforward swap of liquid cash for illiquid cash with an embedded premium for legal risk. But the bankrupt entity holds 200k odd Bitcoins, and that changes things a lot. I wouldn't make this trade even at an 85% discount to face value, because I think there's a significant likelihood that BTC goes to zero, and so would not buy it and especially would not buy it with embedded leverage.
  - herendin2 10y ago
    I assume you mean that you think there's a significant likelihood that BTC goes to zero before the BTC are returned to the creditors, right?
    - patio11 10y ago
      Subtly different: I think there exists a likelihood that BTC goes to zero before the BTC are sold. (BTC will not be returned to creditors directly, I predict with a fairly high degree of confidence. They'll be sold as a block; Kraken might be separately engaged to transfer money to foreign creditors who might take their transfers in BTC.)

by patio11 10y ago

Animats 10y ago

That's just some bottom feeder buying up claims at a discount. There's a small industry which does that.[1] Sometimes the goal is to buy the business at a big discount and do something with the assets. [1] https://www.law360.com/articles/498711/understanding-the-reasons-traders-buy-bankruptcy-claims https://www.law360.com/articles/498711/understanding-the-rea...

patio11 10y ago
That was my first thought but, crucially, the bankruptcy administrator is not holding a pile of yen. If he were merely holding a pile of yen, this is a pretty boring deal, and you'd be right -- it's a straightforward swap of liquid cash for illiquid cash with an embedded premium for legal risk. But the bankrupt entity holds 200k odd Bitcoins, and that changes things a lot. I wouldn't make this trade even at an 85% discount to face value, because I think there's a significant likelihood that BTC goes to zero, and so would not buy it and especially would not buy it with embedded leverage.
- herendin2 10y ago
  I assume you mean that you think there's a significant likelihood that BTC goes to zero before the BTC are returned to the creditors, right?
  - patio11 10y ago
    Subtly different: I think there exists a likelihood that BTC goes to zero before the BTC are sold. (BTC will not be returned to creditors directly, I predict with a fairly high degree of confidence. They'll be sold as a block; Kraken might be separately engaged to transfer money to foreign creditors who might take their transfers in BTC.)