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1) Shorting into a bubble is usually a terrible idea. 2) The only realistic way to short BTC is to do so via a very small list of exchanges. Even if you trust

by pja 9y ago

1) Shorting into a bubble is usually a terrible idea. 2) The only realistic way to short BTC is to do so via a very small list of exchanges. Even if you trust them (which, given the history of cryptocurrency exchanges is hardly a given) the borrow cost is huge: there's no way you could reasonably make this kind of macro BTC bet. The combination of these two realities makes the "If you don't believe the price, you ought to be shorting it" assertion completely baseless.

antonislav 9y ago
Could you expand on point 1? Or maybe point to some references?
- nikcub 9y ago
  If you're reading a story a week about x being in a bubble, then by definition it isn't a bubble
  - derenrich 9y ago
    That is not in the definition of a bubble. Nor does it preclude there being a bubble.
- thomasz 9y ago
  “The market can stay irrational longer than you can stay solvent.” - Keynes
- pja 9y ago
  Once a security has entered bubble territory, by definition its price has become disassociated from any underlying fundamentals - bubbles form when rising prices drive positive sentiment which pulls in fresh buyers who buy into the rising price story, driving the price higher which in turn draws in more buyers in a self feeding cycle that only ends when the supply of fresh buyers dries up. Because this is a self feeding cycle, the price can double & redouble from almost any point if the "story" is good enough. So you can be dead right about a given asset being in a bubble, but if you short it the odds are that you're going to get painfully stopped out long before the bubble collapse finally happens. As Keynes said, prices can remain irrational longer than you can remain solvent: The history of investing is littered with individuals who were right, but lost their capital because they were simply too early.
  - pja 9y ago
    & if you want evidence of this cycle in action for BitCoin, try this: “The price of BitCoin has a 91% correlation with Google searches for BitCoin” http://uk.businessinsider.com/bitcoin-price-correlation-google-search-2017-9 http://uk.businessinsider.com/bitcoin-price-correlation-goog... Obviously BTC can be in a bubble & whilst still having real value - the two things are not necessarily connected. (Although having a good future value story is helpful for a bubble to form in the first place I would argue.)
baddox 9y ago
Then at the bare minimum make some falsifiable prediction, like "a bitcoin will be worth less than 1,000 USD 24 months from today." If someone insists that shorting is infeasible, and refuses to make a clear prediction, then their claim is unfalsifiable and thus fairly meaningless.
- pja 9y ago
  Timing bubbles collapses is notoriously difficult. (In my personal opinion: It's like asking when the next collapse in a sandpile will happen & how big it will be. Not possible.)
- wakamoleguy 9y ago
  There's not a great reason to make such a claim, unless you are interested in proving a point afterwards. Instead, it's valid to believe "Bitcoin's price today is higher than its intrinsic value" and take action on that claim by not buying Bitcoin. You may not be forwarding the rational discourse on Bitcoin's price and value, but you are still "putting your money where your mouth is."

by pja 9y ago

antonislav 9y ago

Could you expand on point 1? Or maybe point to some references?

nikcub 9y ago
If you're reading a story a week about x being in a bubble, then by definition it isn't a bubble
- derenrich 9y ago
  That is not in the definition of a bubble. Nor does it preclude there being a bubble.
thomasz 9y ago
“The market can stay irrational longer than you can stay solvent.” - Keynes
pja 9y ago
Once a security has entered bubble territory, by definition its price has become disassociated from any underlying fundamentals - bubbles form when rising prices drive positive sentiment which pulls in fresh buyers who buy into the rising price story, driving the price higher which in turn draws in more buyers in a self feeding cycle that only ends when the supply of fresh buyers dries up. Because this is a self feeding cycle, the price can double & redouble from almost any point if the "story" is good enough. So you can be dead right about a given asset being in a bubble, but if you short it the odds are that you're going to get painfully stopped out long before the bubble collapse finally happens. As Keynes said, prices can remain irrational longer than you can remain solvent: The history of investing is littered with individuals who were right, but lost their capital because they were simply too early.
- pja 9y ago
  & if you want evidence of this cycle in action for BitCoin, try this: “The price of BitCoin has a 91% correlation with Google searches for BitCoin” http://uk.businessinsider.com/bitcoin-price-correlation-google-search-2017-9 http://uk.businessinsider.com/bitcoin-price-correlation-goog... Obviously BTC can be in a bubble & whilst still having real value - the two things are not necessarily connected. (Although having a good future value story is helpful for a bubble to form in the first place I would argue.)

baddox 9y ago

Then at the bare minimum make some falsifiable prediction, like "a bitcoin will be worth less than 1,000 USD 24 months from today." If someone insists that shorting is infeasible, and refuses to make a clear prediction, then their claim is unfalsifiable and thus fairly meaningless.

pja 9y ago
Timing bubbles collapses is notoriously difficult. (In my personal opinion: It's like asking when the next collapse in a sandpile will happen & how big it will be. Not possible.)
wakamoleguy 9y ago
There's not a great reason to make such a claim, unless you are interested in proving a point afterwards. Instead, it's valid to believe "Bitcoin's price today is higher than its intrinsic value" and take action on that claim by not buying Bitcoin. You may not be forwarding the rational discourse on Bitcoin's price and value, but you are still "putting your money where your mouth is."