3 ms·
You can be right that it will crash and still lose your shirt if you short it, if you are wrong about the timing. As Keynes said: “the market can stay irrationa
by pg314 9y ago
You can be right that it will crash and still lose your shirt if you short it, if you are wrong about the timing. As Keynes said: “the market can stay irrational longer than you can stay solvent.”
There is an inherent asymmetry between going long and short. If you're going long, your losses are capped at what you put in, and your gains are unlimited. The opposite is true if you are going short: your losses are unlimited, but your gains are limited.
- oskarth 9y agoThat's a good counter argument, thank you. This is why I also mentioned betting against over a multi-year period, which you can do manually like Sam Altman did with tech valuations, or using something like longbets.org. You can also structure the bets so your losses or gains are limited or unlimited on whatever side you want, assuming you find a counterparty who is willing to take the bet. It is definitely more work though and maybe not something most people are willing to do unless they have strong reasons to believe they are right and can profit from it. (Another way is also to do proxy bets/investments, i.e. go long on things that are inversely correlated with X, but this is less practical in the case of cryptocurrencies for various reasons.)
- SeoxyS 9y agoYou don't have to sell short, you can buy puts which give you far greater (not unlimited) upside than your capped downside.
- pg314 9y agoTrue, but then your timing is even more crucial. You can be right about a coming crash, but if it happens after your put option expires, it won't do you any good...