4 ms·

Bitcoin cannot be expected to be priced "correctly" (whatever that means) since there's no practical way to short it.

mbgaxyz 9y ago
Bitcoin Futures start trading on the CME in the next few weeks: http://www.cmegroup.com/bitcoin http://www.cmegroup.com/bitcoin However the largest electronic brokerage in the US considers it unwise: https://cointelegraph.com/news/cme-clearing-member-to-regulator-bitcoin-futures-impossible https://cointelegraph.com/news/cme-clearing-member-to-regula...
- panarky 9y ago
  Peterffy's letter to the CME is short and fun reading. https://www.interactivebrokers.com/download/11-IB17-1145-tp-letter-to-futures-trading-commission.pdf https://www.interactivebrokers.com/download/11-IB17-1145-tp-... [PDF] His doomsday scenario is based on the Bitcoin price rising rapidly. The CME's volatility limits would kick in, preventing shorts buying to cover their positions. This leads to "ruin" for them and the CME, and contagion for the real economy. He has a good point, since losses on short positions are theoretically infinite, there's no way to put up enough margin for perfect safety.
- thisisit 9y ago
  Then this has happened - https://www.bloomberg.com/news/articles/2017-11-15/bitcoin-exchange-that-cme-plans-to-use-for-futures-is-down https://www.bloomberg.com/news/articles/2017-11-15/bitcoin-e... So it will be interesting to see how the pricing really works.
panarky 9y ago
You can short bitcoin just like you can short gold or yen or pork bellies or Treasury bonds. Be prepared to put up some hefty margin, though, because shorts have a tendency to get eaten alive. And you can still sell cryptocurrencies that you own, why exactly is shorting an asset required to value it fairly? Does anyone argue that difficulty in short-selling residential real estate prevents it from being fairly valued?
- abecedarius 9y ago
  I did read that argument about real estate just the other day.
s0rce 9y ago
Why can't you short bitcoin, will no one lend bitcoins?
- trophycase 9y ago
  You can, saying you can't short it is false.
indubitable 9y ago
How does shorting inherently help a commodity approach its "correct" value more rapidly?
- tfolbrecht 9y ago
  Performing a short is a sort of counter to to-the-moon talk. If you look at the mechanistic properties and costs associated with shorting, you can see how far the person buying the short thinks the value is from open market value. If you were to bet against the sun rising tomorrow, the market would "bet" to the contrary and the short would be cheap and accessible. It's not craps gambling, it's like betting on a boxing match. The bookie odds are based on previous records and some valuation model, you only come out ahead in the long if you have a superior valuation model, insider knowledge, luck, etc.
6nf 9y ago
But you can short it, there's lots of exchanges where you can do it.

Bitcoin Futures start trading on the CME in the next few weeks: http://www.cmegroup.com/bitcoin http://www.cmegroup.com/bitcoin However the largest electronic brokerage in the US considers it unwise: https://cointelegraph.com/news/cme-clearing-member-to-regulator-bitcoin-futures-impossible https://cointelegraph.com/news/cme-clearing-member-to-regula...

panarky 9y ago
Peterffy's letter to the CME is short and fun reading. https://www.interactivebrokers.com/download/11-IB17-1145-tp-letter-to-futures-trading-commission.pdf https://www.interactivebrokers.com/download/11-IB17-1145-tp-... [PDF] His doomsday scenario is based on the Bitcoin price rising rapidly. The CME's volatility limits would kick in, preventing shorts buying to cover their positions. This leads to "ruin" for them and the CME, and contagion for the real economy. He has a good point, since losses on short positions are theoretically infinite, there's no way to put up enough margin for perfect safety.
thisisit 9y ago
Then this has happened - https://www.bloomberg.com/news/articles/2017-11-15/bitcoin-exchange-that-cme-plans-to-use-for-futures-is-down https://www.bloomberg.com/news/articles/2017-11-15/bitcoin-e... So it will be interesting to see how the pricing really works.

panarky 9y ago

You can short bitcoin just like you can short gold or yen or pork bellies or Treasury bonds. Be prepared to put up some hefty margin, though, because shorts have a tendency to get eaten alive. And you can still sell cryptocurrencies that you own, why exactly is shorting an asset required to value it fairly? Does anyone argue that difficulty in short-selling residential real estate prevents it from being fairly valued?

abecedarius 9y ago
I did read that argument about real estate just the other day.

s0rce 9y ago

Why can't you short bitcoin, will no one lend bitcoins?

trophycase 9y ago
You can, saying you can't short it is false.

indubitable 9y ago

How does shorting inherently help a commodity approach its "correct" value more rapidly?

tfolbrecht 9y ago
Performing a short is a sort of counter to to-the-moon talk. If you look at the mechanistic properties and costs associated with shorting, you can see how far the person buying the short thinks the value is from open market value. If you were to bet against the sun rising tomorrow, the market would "bet" to the contrary and the short would be cheap and accessible. It's not craps gambling, it's like betting on a boxing match. The bookie odds are based on previous records and some valuation model, you only come out ahead in the long if you have a superior valuation model, insider knowledge, luck, etc.

6nf 9y ago

But you can short it, there's lots of exchanges where you can do it.