5 ms·

Beware that: “The market can stay irrational longer than you can stay solvent.” (John Maynard Keynes) Especially relevant to short selling

acjohnson55 9y ago
100%. I agree that BTC has been in a bubble, but if I had ever acted on this hunch, I'd be so far underwater right now. There's no telling how long the rally might continue, nor where the correction will settle. The other commenter made the astute observation that the less leveraged way to make this bet would be to go long on some competing asset.
- rothbardrand 9y ago
  One of my personal indicators that Bitcoin is in a bubble is when Bitcoin articles on hacker news are overrun with people talking about their bitcoin related businesses, instead of being overrun with skeptics and people saying it's in a "bubble". We have gone from %90 negative a couple years ago on HN to about %50 negative today.
  - arglebarnacle 9y ago
    To be fair, if bitcoin had improving institutional support, adoption, technology, etc., you would observe the same trend in HN discussion about it. That would seem to make it a problematic indicator of a bubble, at least on its own. Of course, if one rules out the possibility that cryptocurrency is going to be a thing, then it's in a bubble by definition any time it's worth more than zero. This appears to be the underlying view of at least some commenters here.
    - kuschku 9y ago
      Look at what happened out there. When Bitcoin first hit $1000, many businesses started accepting bitcoin, even some hosters. Tipping bots became popular on forums, there were tutorials for old people on how to use bitcoin on TV and in the newspapers even, etc. Now? I don't know a single business I use that offers bitcoin payments. All of them have removed it again. Bitcoin's actual value as currency has gone down massively. Yes, it is used. A lot, even. But not as day-to-day currency.
      - mrb 9y ago
        "All of them have removed it again" Completely false. Occasionally you will read a newsstory about a merchant who stopped accepting BTC. But, as of today 160k+ merchants accept it, and there was never any large scale event where "all" of them stopped accepting it.
        rb666 9y ago
        The 160k+ is meaningless when no one is actually using BTC to buy things. Also, not far from the truth anyway: http://www.businessinsider.com/merchants-arent-accepting-bitcoin-2017-7 http://www.businessinsider.com/merchants-arent-accepting-bit...
        mrb 9y ago
        Your comment is irrelevant to the point being discussed: it's obviously false that "ALL merchants STOPPED accepting bitcoin". Also this Morgan Stanley research note, and the reporting on it, is of laughable quality... 1) They don't release data: "Morgan Stanley, which based its usage analysis on the information, didn’t say which companies are using bitcoin." 2) They extrapolate from an insufficient number of data points: 3 companies in the top500 this year, down from 5 last year, accept Bitcoin. It's like saying Ferrari's market share is dropping because only 3 billionaires bought a Ferrari this year, down from 5 last year. 3) They attribute a quote to the analyst ("The disparity between virtually no merchant acceptance and Bitcoin’s rapid appreciation is striking,") when in fact it was a quote from Overstock CEO: https://cointelegraph.com/news/bitcoin-merchant-shunning-is-striking-overstocks-medici-president https://cointelegraph.com/news/bitcoin-merchant-shunning-is-... 4) They claim Bitcoin's skyrocketing price is one of the causes of the decrease in payments. They present of course no facts to justify this theory, because it's false. In the past, anecdotal data reported by merchants has shown precisely the opposite: customers spend their newfound riches.
        lambdadmitry 9y ago
        But it also makes sense "from the first principles": BTC is wildly deflationary right now, so there is a very strong incentive to hold BTC instead of paying with it. It's a flip side of "sheltering from the inflation" point that is quite popular among BTC enthusiasts. You can't have one without the other.
  - clarky07 9y ago
    I don't think this particular comment section is even close to 50%. Far more negative.
ovulator 9y ago
Shorting has got to be the dumbest way to invest. With a normal investment there is a ceiling to how much you can lose (the amount you invested) but there is no ceiling to how much you can gain. The complete opposite is true for shorting, not a bet I would make on any certainty level.
- alistproducer2 9y ago
  This is my exact thought as well. The risk-reward of shorting makes the most sense when volatility is low. It is certainly the worst thing to do in an irrational bull market AKA bubble.
- arcticfox 9y ago
  You can just artificially limit your losses by bailing out when you lose as much as you shorted. You run a small / theoretical risk of getting stuck in a short squeeze situation where you can't get out, but that risk varies substantially by security and there are often laws or mechanisms you can use to protect yourself.
  - honestlyreally 9y ago
    Crypto currency is the wild west,there's no one coming to save you, exchanges and whales have access to the books on who they can squeeze. Its how many operate.
- magnetic 9y ago
  Maybe it's a calculated risk thinking that if you lose the bet you file for bankruptcy?

acjohnson55 9y ago

100%. I agree that BTC has been in a bubble, but if I had ever acted on this hunch, I'd be so far underwater right now. There's no telling how long the rally might continue, nor where the correction will settle. The other commenter made the astute observation that the less leveraged way to make this bet would be to go long on some competing asset.

rothbardrand 9y ago
One of my personal indicators that Bitcoin is in a bubble is when Bitcoin articles on hacker news are overrun with people talking about their bitcoin related businesses, instead of being overrun with skeptics and people saying it's in a "bubble". We have gone from %90 negative a couple years ago on HN to about %50 negative today.
- arglebarnacle 9y ago
  To be fair, if bitcoin had improving institutional support, adoption, technology, etc., you would observe the same trend in HN discussion about it. That would seem to make it a problematic indicator of a bubble, at least on its own. Of course, if one rules out the possibility that cryptocurrency is going to be a thing, then it's in a bubble by definition any time it's worth more than zero. This appears to be the underlying view of at least some commenters here.
  - kuschku 9y ago
    Look at what happened out there. When Bitcoin first hit $1000, many businesses started accepting bitcoin, even some hosters. Tipping bots became popular on forums, there were tutorials for old people on how to use bitcoin on TV and in the newspapers even, etc. Now? I don't know a single business I use that offers bitcoin payments. All of them have removed it again. Bitcoin's actual value as currency has gone down massively. Yes, it is used. A lot, even. But not as day-to-day currency.
    - mrb 9y ago
      "All of them have removed it again" Completely false. Occasionally you will read a newsstory about a merchant who stopped accepting BTC. But, as of today 160k+ merchants accept it, and there was never any large scale event where "all" of them stopped accepting it.
      - rb666 9y ago
        The 160k+ is meaningless when no one is actually using BTC to buy things. Also, not far from the truth anyway: http://www.businessinsider.com/merchants-arent-accepting-bitcoin-2017-7 http://www.businessinsider.com/merchants-arent-accepting-bit...
        mrb 9y ago
        Your comment is irrelevant to the point being discussed: it's obviously false that "ALL merchants STOPPED accepting bitcoin". Also this Morgan Stanley research note, and the reporting on it, is of laughable quality... 1) They don't release data: "Morgan Stanley, which based its usage analysis on the information, didn’t say which companies are using bitcoin." 2) They extrapolate from an insufficient number of data points: 3 companies in the top500 this year, down from 5 last year, accept Bitcoin. It's like saying Ferrari's market share is dropping because only 3 billionaires bought a Ferrari this year, down from 5 last year. 3) They attribute a quote to the analyst ("The disparity between virtually no merchant acceptance and Bitcoin’s rapid appreciation is striking,") when in fact it was a quote from Overstock CEO: https://cointelegraph.com/news/bitcoin-merchant-shunning-is-striking-overstocks-medici-president https://cointelegraph.com/news/bitcoin-merchant-shunning-is-... 4) They claim Bitcoin's skyrocketing price is one of the causes of the decrease in payments. They present of course no facts to justify this theory, because it's false. In the past, anecdotal data reported by merchants has shown precisely the opposite: customers spend their newfound riches.
        lambdadmitry 9y ago
        But it also makes sense "from the first principles": BTC is wildly deflationary right now, so there is a very strong incentive to hold BTC instead of paying with it. It's a flip side of "sheltering from the inflation" point that is quite popular among BTC enthusiasts. You can't have one without the other.
- clarky07 9y ago
  I don't think this particular comment section is even close to 50%. Far more negative.

ovulator 9y ago

Shorting has got to be the dumbest way to invest. With a normal investment there is a ceiling to how much you can lose (the amount you invested) but there is no ceiling to how much you can gain. The complete opposite is true for shorting, not a bet I would make on any certainty level.

alistproducer2 9y ago
This is my exact thought as well. The risk-reward of shorting makes the most sense when volatility is low. It is certainly the worst thing to do in an irrational bull market AKA bubble.
arcticfox 9y ago
You can just artificially limit your losses by bailing out when you lose as much as you shorted. You run a small / theoretical risk of getting stuck in a short squeeze situation where you can't get out, but that risk varies substantially by security and there are often laws or mechanisms you can use to protect yourself.
- honestlyreally 9y ago
  Crypto currency is the wild west,there's no one coming to save you, exchanges and whales have access to the books on who they can squeeze. Its how many operate.
magnetic 9y ago
Maybe it's a calculated risk thinking that if you lose the bet you file for bankruptcy?