6 ms·

Short Seller Says Naive Bitcoin Traders Open a Pathway to Profit

36 points by hamstercat 9y ago

number_six 9y ago
It really is the Wild West of crypto currency right now. Greed is going to fuel a lot more arbitrage opportunities like these as people invest in crypto "derivatives" without fully understanding what they are buying.
ThomPete 9y ago
Cant determine whether this is a PR piece or actually sound “investment advice”
- danvoell 9y ago
  Assume PR. The investor has already locked this position and by others doing so, the spread will become tighter and he will profit.
- jstanley 9y ago
  Just because it's PR doesn't make it wrong. Yes, he profits if you do what he says. But... so do you!
  - ThomPete 9y ago
    I am always cautious when people share "their secrets" with the rest of the market. I am not saying it's wrong but I have been in cryptocurrencies long enough to know it's not as simple as it might look. I would be skeptical of the ability to short this market substantially since those who came in very early and at very low prices hold quite a lot and can afford it to go way down yet and thus will be long on this if need to. That's also just another theory we have no way of knowing whether is true or not. So only time will tell.
- frgtpsswrdlame 9y ago
  PR but it's no more PR than any other pro-bitcoin article that's been on the front page.
  - ThomPete 9y ago
    Well, so far the pro's have been fairly correct. That doesn't mean there won't be a major correction but again it just sounded disingenuous to me.
pmc1 9y ago
> Citron would not be pounding table if not appropriate,” he wrote. “Thank you for the 70 percent profit.” So Bitcoin is up several 1000%s on the year and he is beating his chest from a 70% profit on the short side?
- stygiansonic 9y ago
  He's not "on the short side". If you read the article, he's talking about an arbitrage opportunity, which if executed properly, should not be net long nor net short.
  - sedtrader 9y ago
    Citron is on the short side. Their entire investment strategy of the company is to short assets, in this scenario the future is used as an arbitrage hedge, but overall yes citron is short biased on bitcoin.
    - kgwgk 9y ago
      It’s bitcoin-neutral, that’s the whole point of the hedge.
      - pmc1 9y ago
        Citron is not bitcoin neutral. They are short biased bitcoin as their website and twitter account reiterate. And a hedge doesn't mean "neutral." It simply protects you in the event that an investment doesn't go as expected.
        kgwgk 9y ago
        The bloomberg piece says: “Left recommends shorting the trust, buying bitcoin futures”. He says in the video: “I don’t even care what happens to bitcoin”. Where is the short bias?
- ameister14 9y ago
chipgap98 9y ago
Citron's entire business is shorting investments and then trying to cause a panic with negative PR to move the market in their favor. It is shocking that what they do is legal. This doesn't mean they are wrong here, but I wouldn't describe them as a trusted source either.
- lojack 9y ago
  > It is shocking that what they do is legal. What is legal about it? Buying a stock and releasing positive PR sounds a lot like pump and dump which is illegal. Is it just the fact that they are shorting the stock that makes what they're doing legal?
- frgtpsswrdlame 9y ago
  He's not shorting it, he's just arbitraging GBTC vs. the bitcoin futures. The Bitcoin Investment Trust, a publicly traded vehicle whose bitcoin holdings are worth $1,601 a share, nonetheless trades at a price more than double that amount, according to data compiled by Bloomberg. A savvy trader could in theory mint money by betting that gap will shrink. Futures contracts introduced over the past week by Cboe Global Markets Inc. and CME Group Inc. provides a way to do that: Buy the futures, short sell the Bitcoin Investment Trust.
- travmatt 9y ago
  Why should it be illegal? Muddy Waters regularly exposes fraudulent companies by finding fraud, taking a position, exposing said fraud, then profiting from the correction. I understand that spreading lies should be illegal, but I struggle to understand why disseminating factually accurate information should considered a negative thing.
csomar 9y ago
This is not a good trade and here I’ll outline the reason. 1- You need to borrow GBTC to be able to short it. The borrowing comes at a cost “interest rate” 2- Futures themsleves comes with a premium and require rolling over. It is 100% stupid to use futures instead of the real thing: just buy bitcoin. 3- You won’t be able to cash out until the GBTC premium dissapears. If you are small this might never happens. 4- You might also find yourself in a bad situation: Bitcoin price goes up. You’ll need to supplement capital to your short. That can be an arbitrairly high amount of USD. 5- 4 can be fixed with futures as they allow you to withdraw non realized gains. But it comes at the price of paying for rollover premium. 6- GBTC high price might be due to illiquidity. Not interest. Tldr: don’t follow this guy. Very sophisticated trade and not clear if it can be profitable.
- option_greek 9y ago
  >> You won’t be able to cash out until the GBTC premium dissapears. Hence the reason for this PR article :).
- kgwgk 9y ago
  Using futures is not 100% stupid when it makes issue (4) a non-issue.
  - csomar 9y ago
    Futures comes at a cost, however: premium and rollover costs. Premium costs is not fix if you need to rollover. You’ll need to pay both premium and interest on gbtc. Also futures on CME are not easily tradable. The contract value is $100k and liquidity is not impressive so far.
    - babaganoosh89 9y ago
      CFE futures are for 1 bitcoin and seemed reasonably liquid for small trades.
fwdpropaganda 9y ago
> The futures are already showing signs of efficiency. When they debuted a week ago, Cboe’s traded for a price as much as 13 percent higher than the price of bitcoin -- a wide gap indicating an immature market Can someone explain this to me? If the market expects the price to go up a lot, why wouldn't the futures trade at a large premium?

36 points by hamstercat 9y ago

It really is the Wild West of crypto currency right now. Greed is going to fuel a lot more arbitrage opportunities like these as people invest in crypto "derivatives" without fully understanding what they are buying.

ThomPete 9y ago

Cant determine whether this is a PR piece or actually sound “investment advice”

danvoell 9y ago
Assume PR. The investor has already locked this position and by others doing so, the spread will become tighter and he will profit.
jstanley 9y ago
Just because it's PR doesn't make it wrong. Yes, he profits if you do what he says. But... so do you!
- ThomPete 9y ago
  I am always cautious when people share "their secrets" with the rest of the market. I am not saying it's wrong but I have been in cryptocurrencies long enough to know it's not as simple as it might look. I would be skeptical of the ability to short this market substantially since those who came in very early and at very low prices hold quite a lot and can afford it to go way down yet and thus will be long on this if need to. That's also just another theory we have no way of knowing whether is true or not. So only time will tell.
frgtpsswrdlame 9y ago
PR but it's no more PR than any other pro-bitcoin article that's been on the front page.
- ThomPete 9y ago
  Well, so far the pro's have been fairly correct. That doesn't mean there won't be a major correction but again it just sounded disingenuous to me.

pmc1 9y ago

> Citron would not be pounding table if not appropriate,” he wrote. “Thank you for the 70 percent profit.” So Bitcoin is up several 1000%s on the year and he is beating his chest from a 70% profit on the short side?

stygiansonic 9y ago
He's not "on the short side". If you read the article, he's talking about an arbitrage opportunity, which if executed properly, should not be net long nor net short.
- sedtrader 9y ago
  Citron is on the short side. Their entire investment strategy of the company is to short assets, in this scenario the future is used as an arbitrage hedge, but overall yes citron is short biased on bitcoin.
  - kgwgk 9y ago
    It’s bitcoin-neutral, that’s the whole point of the hedge.
    - pmc1 9y ago
      Citron is not bitcoin neutral. They are short biased bitcoin as their website and twitter account reiterate. And a hedge doesn't mean "neutral." It simply protects you in the event that an investment doesn't go as expected.
      - kgwgk 9y ago
        The bloomberg piece says: “Left recommends shorting the trust, buying bitcoin futures”. He says in the video: “I don’t even care what happens to bitcoin”. Where is the short bias?
ameister14 9y ago

chipgap98 9y ago

Citron's entire business is shorting investments and then trying to cause a panic with negative PR to move the market in their favor. It is shocking that what they do is legal. This doesn't mean they are wrong here, but I wouldn't describe them as a trusted source either.

lojack 9y ago
> It is shocking that what they do is legal. What is legal about it? Buying a stock and releasing positive PR sounds a lot like pump and dump which is illegal. Is it just the fact that they are shorting the stock that makes what they're doing legal?
frgtpsswrdlame 9y ago
He's not shorting it, he's just arbitraging GBTC vs. the bitcoin futures. The Bitcoin Investment Trust, a publicly traded vehicle whose bitcoin holdings are worth $1,601 a share, nonetheless trades at a price more than double that amount, according to data compiled by Bloomberg. A savvy trader could in theory mint money by betting that gap will shrink. Futures contracts introduced over the past week by Cboe Global Markets Inc. and CME Group Inc. provides a way to do that: Buy the futures, short sell the Bitcoin Investment Trust.
travmatt 9y ago
Why should it be illegal? Muddy Waters regularly exposes fraudulent companies by finding fraud, taking a position, exposing said fraud, then profiting from the correction. I understand that spreading lies should be illegal, but I struggle to understand why disseminating factually accurate information should considered a negative thing.

csomar 9y ago

This is not a good trade and here I’ll outline the reason. 1- You need to borrow GBTC to be able to short it. The borrowing comes at a cost “interest rate” 2- Futures themsleves comes with a premium and require rolling over. It is 100% stupid to use futures instead of the real thing: just buy bitcoin. 3- You won’t be able to cash out until the GBTC premium dissapears. If you are small this might never happens. 4- You might also find yourself in a bad situation: Bitcoin price goes up. You’ll need to supplement capital to your short. That can be an arbitrairly high amount of USD. 5- 4 can be fixed with futures as they allow you to withdraw non realized gains. But it comes at the price of paying for rollover premium. 6- GBTC high price might be due to illiquidity. Not interest. Tldr: don’t follow this guy. Very sophisticated trade and not clear if it can be profitable.

option_greek 9y ago
>> You won’t be able to cash out until the GBTC premium dissapears. Hence the reason for this PR article :).
kgwgk 9y ago
Using futures is not 100% stupid when it makes issue (4) a non-issue.
- csomar 9y ago
  Futures comes at a cost, however: premium and rollover costs. Premium costs is not fix if you need to rollover. You’ll need to pay both premium and interest on gbtc. Also futures on CME are not easily tradable. The contract value is $100k and liquidity is not impressive so far.
  - babaganoosh89 9y ago
    CFE futures are for 1 bitcoin and seemed reasonably liquid for small trades.

fwdpropaganda 9y ago

> The futures are already showing signs of efficiency. When they debuted a week ago, Cboe’s traded for a price as much as 13 percent higher than the price of bitcoin -- a wide gap indicating an immature market Can someone explain this to me? If the market expects the price to go up a lot, why wouldn't the futures trade at a large premium?