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Bitcoin Climbs as Futures Debut Fails to Incite Attack by Shorts
- empath75 9y agoYou would have to be nuts to short when there's an exchange printing billions of dollars of unbacked tokens they can use to drive up the price at will. If you want to short cryptocurrency, short tethers.
- mancerayder 9y agoHow would one do that technically? The value doesn't fluctuate. How would you time when tether goes to 0? If it ever goes to 0, that is.
- tome 9y ago> there's an exchange printing billions of dollars of unbacked tokens they can use to drive up the price at will Can you explain? What's the exchange? How do they print Bitcoin (I presume that's what you mean by "tokens")? How does that drive the price up rather than down?
- gthtjtkt 9y agoThe token is called "Tether" and it's run by the Bitfinex exchange. It's supposed to be backed by US dollars, but they've refused to release any third-party audits to support that statement and it says this on their website: "There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers." So, basically, it's Monopoly money. Bloomberg recently did a story on it: https://www.bloomberg.com/amp/news/articles/2017-12-05/mystery-shrouds-tether-and-its-links-to-biggest-bitcoin-exchange https://www.bloomberg.com/amp/news/articles/2017-12-05/myste...
- klipt 9y agoAnd the market cap is over a billion! I wish I could print a billion in monopoly money and exchange it 1:1 for real dollars... https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/
- tome 9y agoAh, so we're into fractional reserve territory. Never mind, I hear there are cryptocurrencies that will save us from that.
- klipt 9y agoOf course, there's SeriouslyGuysUseThisLimitedCoinOnlyNoOtherCoinsCoin.
- jcoffland 9y agoThat is not how market caps work. No one can exchange all the Tethers for the market cap in USD.
- klipt 9y agoNo, I'm saying the market cap is the number of tethers that tether.to has printed so far.
- ufo 9y agoTo be fair, no one can exchange Tethers for any amount of USD. Bitfinex and all other Tether-using exchanges only allow people to cash out with Bitcoins. (Instead of the weakness of tethers being reflected in lower prices, it is reflected by inflated the tether-denominated prices for Bitcoin inside Bitfinex)
- bufferoverflow 9y agoI'm consistently confused as to who is buying all the tethers in such crazy amounts. It's not like they are appreciating in value. They are sort-of pegged to the dollar, but why not just hold the real dollars?
- EthanHeilman 9y ago>why not just hold the real dollars? Some exchanges don't accept fiat, so if you want to trade USD/BTC you settle for USDT/BTC.
- Scott_Sanderson 9y agoNo one is buying those tethers. Bitfinex is printing them and using them on their own exchange's margin trading market. They use it to wash trade the price up or down as desired. There is some evidence they have been wash trading down to trigger stop loss sell orders and buying the cheap coins. Then they wash trade up and sell.
- zone411 9y agoSorry, but what? What exchange is printing billions of $ of unbacked Bitcoins?
- askafriend 9y agoHe's right. It's Bitfinex and it's been going on for a while now. A ton of people have called them out and they've largely ignored everyone. They've promised an audit and no audit has materialized in the years since they've promised one. There's a fantastic anonymous twitter account that's been calling them out for months now and gathering pretty damning evidence: https://twitter.com/Bitfinexed https://twitter.com/Bitfinexed
- zone411 9y agoBitfinex prints Tethers, not Bitcoins.
- JumpCrisscross 9y ago> Bitfinex prints Tethers, not Bitcoins "Yeah, but he's our bastard" [1]! Joking aside, you deposit a coin with Bitfinex and get some pixels saying "one Bitcoin". You then trust those pixels can be exchanged for Bitcoins or dollars down the road. If they're playing fast and loose with one, it's a funny argument to make that they aren't doing the same with the other. [1] https://en.wikiquote.org/wiki/Talk:Franklin_D._Roosevelt https://en.wikiquote.org/wiki/Talk:Franklin_D._Roosevelt
- askafriend 9y agoThey make claims that Tether are 1:1 redeemable with USD.
- empath75 9y agoI didn't say they were.
- zone411 9y ago
- BLanen 9y agoDon't short tethers. The margin rates might just eat your gains from it going to 0.
- abrkn 9y agoIt's $1.15b[1] and most likely to be the result of incoming USD wires. The Tether USD in circulation accounts for 0.36%[2] of the Bitcoin (BTC) market cap. - [1] http://omniexplorer.info/ask.aspx?api=getpropertytotaltokens&prop=31 http://omniexplorer.info/ask.aspx?api=getpropertytotaltokens... - [2] https://coinmarketcap.com/ https://coinmarketcap.com/
- jaxondu 9y agoDid not read the article, looks like someone is writing to boost the rise. As of this writing BTC is about $18.6k. It was hovering around $19.5k this past weekend.
- 659087 9y agoThis seems to be the case with most of the articles about Bitcoin. I suspect there are a number of large holders and exchanges paying PR firms to get stories like this published/upvoted/etc and keep the train going.
- mancerayder 9y agoI don't view Bloomberg as a paid-to-write-articles-to-sell type of place [edit: other than advertising space]. Otherwise no one would be taking them seriously, least of all financial professionals sitting in front of their expensive terminals. Call me skeptical about the alleged claims about Bloomberg's motives. Also the article doesn't contain mind-blowing information, it's just pointing out that shorting isn't happening yet.
- 659087 9y agoI'm not suggesting Bloomberg is accepting money, but individual writers would be a much softer target. It's also possible that the writers are invested in Bitcoin themselves.
- mancerayder 9y agoAnything is possible, but an accusation of bad faith requires more than the off chance that the accuser is correct. Some argumentative support for the accusation, for example.
- deleted 9y ago[deleted]
- mancerayder 9y ago
- verroq 9y agoYou’ve been able to short bitcoin on okcoin, bitfinex, bitmex either via margin or through futures products for years. Secondly, newly launched futures products will have very thin liquidity due to the lack of market makers. There is no way a short/long position on CME will move the market in a meaningful way for a while. I wish Bloomberg et al will stop repeating this “you can’t short” meme because it you can and you could for years.
- JumpCrisscross 9y agoCounterparty risk makes those venues practically useless for shorting. If Bitcoin goes up, you lose on the short. If Bitcoin crashes, the exchanges likely get compromised and you lose on counterparty risk. The only time you "win" is if Bitcoin goes down a little. Those aren't savvy trading parameters.
- verroq 9y agoIf you are short and bitcoin goes up, then you should lose money. That is expected. If bitcoin price crashes, how does it imply exchanges will become compromised??? Counterparty risk also exists for established exchanges. Secondly I’d venture to say for retail traders, their offerings are vastly inferior to bitfinex/bitmex/okcoin. You get much higher leverage and lower margin requirements. You also don’t pay for quotes or any “access” fees which eat into your margins.
- JumpCrisscross 9y ago> If bitcoin price crashes, how does it imply exchanges will become compromised??? The same way every market before central counterparties (CCPs) failed: exchange participants default and leave the exchange holding the bag [1]. If an exchange permits shorting, then it permits margin accounts. When prices drop, margin borrowers have a habit of defaulting. This is in addition to the risk of lightly-regulated exchanges having fewer Bitcoins than they claim to have [2][3]. > Counterparty risk also exists for established exchanges It's better managed. Goldman Sachs requires 100% margin on its Bitcoin trades [4]. This is only the first layer of protection. If you bust on a CME trade, your broker makes up the difference; if they bust, other CME members make up the difference; et cetera [5]. Central counterparties were created to solve this problem. [1] https://www.federalreserve.gov/econresdata/feds/2016/files/2016087pap.pdf https://www.federalreserve.gov/econresdata/feds/2016/files/2... [2] https://www.bloomberg.com/news/articles/2017-12-05/mystery-shrouds-tether-and-its-links-to-biggest-bitcoin-exchange https://www.bloomberg.com/news/articles/2017-12-05/mystery-s... [3] https://www.theguardian.com/technology/2017/jul/11/gox-bitcoin-exchange-mark-karpeles-on-trial-japan-embezzlement-loss-of-millions https://www.theguardian.com/technology/2017/jul/11/gox-bitco... [4] https://www.bloomberg.com/news/articles/2017-12-14/goldman-said-to-seek-100-margin-on-some-bitcoin-futures-trades https://www.bloomberg.com/news/articles/2017-12-14/goldman-s... [5] https://www.cmegroup.com/education/files/balancing-ccp-and-member-contributions-with-exposures.pdf https://www.cmegroup.com/education/files/balancing-ccp-and-m...
- grandalf 9y agoShort term betting (for or against) Bitcoin is unlikely to result in much profit.
- 0003 9y agoIt is not so much a directional play as it is a force for arbitrage opportunities.
- grandalf 9y agoTrue, but those arbitrage opportunities will stabilize the price and make other similar opportunities less profitable. I suspect that the real reason these haven't all been ironed out (exploited already) is because Bitcoin exchanges lack the infrastructure guarantee that transactions close when they are expected to, and thus the fee levels wash out much of the arbitrage (for now). But arbitrageurs operating outside the exchanges can use this to their advantage and probably harvest a bit of profit on the chaos for the time being.
- 0003 9y agoYeah - exactly.
- burger_moon 9y agoYep, this is a good explanation of how it's done, https://en.wikipedia.org/wiki/Convergence_trade https://en.wikipedia.org/wiki/Convergence_trade
- rb808 9y agoI dont think there are any experienced shorters sane enough to short something with this much upward momentum. Once we get a decent downtrend though watch out.
- zone411 9y agoThat's not how it works... If you believe that "upward momentum" or "downtrend" mean something, why don't you go long now and sell at the first signs of weakness? Easy money, right? In reality, there are no simple and exploitable rules like this.
- nerdponx 9y agoCould someone with some forex knowledge explain how cash-settled futures do and don't affect spot markets?
- pash 9y agoI and some others explained this in another thread [0] about a week ago. The basic explanation is that because of a simple arbitrage relationship between futures and spot, prices in these markets are tightly linked regardless of how the futures contracts are settled. 0. Read the replies to this comment: https://news.ycombinator.com/item?id=15895477 https://news.ycombinator.com/item?id=15895477
- readhn 9y agoWhat goes up must come down. What goes up fast and hard usually falls faster and harder. Market 101.
- cgmg 9y agoThat's not how it works.
- kypro 9y agoWhat do you disagree with?
- yeahsure 9y agoWhen was the last time gold was traded for < $10? Not everything that goes up is surely to go down. At least not in a lifetime. Nobody really knows what's going to happen, that's market 101.
- kypro 9y agoEverything goes to 0 eventually. The statement is true. Gold is obviously much less likely to go to 0 unless the human race is either on the brink of extinction or extinct, but when you're talking about stocks or currencies a huge percentage will go to zero in less than human lifespan.
- babuskov 9y agoSomething as simple as Apple shares doesn't follow your pattern.
- readhn 9y agoits not my pattern. its just the way markets work. of course it applies to apple as well as any other asset class. its just a matter of your time horizon and time frames. in any stock or asset there is time to be bullish, there is time to be bearish and there is time when no position is a position as well.
- switch007 9y agoLiterally drops after the article is published. From ~19,338 to now ~18,469
- deepsun 9y agoAuthors probably shorted bitcoin before publishing the article.
- briatx 9y agoThe problem is that all of the Bitcoin futures are cash settled contracts. This means that they are not resolved with delivery of the commodity and have no direct influence on the underlying markets.
- notyourday 9y agoToday BTC futures are gambling. In China based on Bet365 data the most popular wager is direction of the market going i.e. up/down.
- jusonchan 9y agoSo what do you guys think of this? I believe all BTC trading spikes are driven by some of the existing owners swapping coins and cash every now and then to keep the trading volume high. It is in their best interest to get the prices bounce back higher whenever it goes down. Once the price is manipulated higher, they can sell and keep the cash when someone who thought BTC is the next "I-Dont-Know-What-It-Is-But-Its-Going-Higher-Everyday" buys it. Since there are no regulators to protect against market manipulation, it's a fairly easy thing to do 'legally'. As per GDAX you only need 10s of millions of dollars worth of coins to manipulate and mint money on this. Ordinary folks can't do it, but those who have been holding a few thousand or tens of thousands of coins can easily do this. The bitcoin billionaire brothers for example can do this. Buy every low priced limit order until it hits the price they want and then sell it off based on the frenzy buying on the back of the "always-bouncing-back-safe-harbor-currency". Rinse and repeat every time price takes a dip. I hope at some point someone will step into regulate things around bitcoin so that the real market demand will determine its prices. I read an article that people are mortgaging their homes to buy BTC. If nothing changes, we might be looking at a sequel of the movie "The Big Short"
- cryptodogemoon 9y agoCryptocoin exchange rates are largely defined by pump and dump whale gangs spreading rumors and luring in novice investors. [0] https://news.ycombinator.com/item?id=7126153 https://news.ycombinator.com/item?id=7126153
- mancerayder 9y agoCouldn't your theory be validated by seeing large sums repeatedly moving to or from the same wallet IDs?
- qubex 9y agoI have to admit that I'm quite surprised by this, I had expected that the debut of futures would have caused an almost-instant disruption of supply and demand. Still, any time now...