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> It also allows them to short—bet on a falling price—the cryptocurrency they borrow against the one they lend, mimicking a common tactic among hedge funds. The

> It also allows them to short—bet on a falling price—the cryptocurrency they borrow against the one they lend, mimicking a common tactic among hedge funds. The investor can sell the cryptocurrency they borrow on the open market and hope to buy it back at a lower price, pocket the difference and return the currency to the lender. Meanwhile, they are betting the currency they handed over as collateral doesn’t fall by as much as the one they borrow. I mean it makes sense that someone would come along and try and build a business around this as many hedge funds are already doing this sort of stat arb already. Locking down borrow is a real pain at the moment for a few reasons: - no standardized terms for collateral, terms, and borrow prices - no api to ping people for borrow - no way to get borrow quickly, ie if you see a short term trend you can't get borrow quick enough to do the trade before the market "arbs" out your anomaly. I don't however think this will be what makes people start to short bitcoin as I don't know who wants to make a pure directional bet on bitcoin going down at the moment. Like the commodity guys, CTA's, learned many years ago, you don't fight the trend, you latch onto it and ride it. Shorting bitcoin seems like trying to short China a few years ago. You can know that something is wrong and the numbers are all made up but being right doesn't matter when the market ignores fundamentals. Or put another way, in a trending market you can be right and get your face ripped off, or accept it and make money on the trend.

sokoloff 9y ago
> I don't know who wants to make a pure directional bet on bitcoin going down at the moment There's a line of reasoning that if no one thinks a security or asset will fall in price that's the best setup for it to do so. (If everyone thinks it's going up, from where would new buying money come?) I don't have a position in BTC (or any other coin), but I think it's likely that BTC hits $5K before it hits $20K.
- deleted 9y ago
  [deleted]
bradleyjg 9y ago
Another way of putting it is the old aphorism, which Keynes probably didn't coin[1]: The market can remain irrational longer than you can remain solvent. [1] https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/
clayrichardson 9y ago
Getting liquidity to short or long on margin is as easy as clicking a button and getting liquidated. Poloniex, Bitfinex and BitMex are some of the places you can play that game. You can even become a BTC lender on some of those exchanges and get around 20% APR since loans can be compounded every 1-2 days or even shorter depending on the duration of positions people open.
- jacksproit 9y ago
  Is it legal for them to offer those services?
  - LoSboccacc 9y ago
    I think it heavily depends on their client country of origin. Here as long as bitcoin aren't officially recognized as bearer bonds of sort you can trade them around freely and the state only comes in questioning about plusvalences when you convert them back into money.
ISL 9y ago
> You can know that something is wrong and the numbers are all made up but being right doesn't matter when the market ignores fundamentals. You can participate in the market simply by not buying. If nobody offers the short, it is not possible to accept it. In the case of BTC, one could arrange a private short (you loan me your BTC, for which I will pay you interest and return your BTC in two years) and short it that way. Caveat trader.

sokoloff 9y ago

> I don't know who wants to make a pure directional bet on bitcoin going down at the moment There's a line of reasoning that if no one thinks a security or asset will fall in price that's the best setup for it to do so. (If everyone thinks it's going up, from where would new buying money come?) I don't have a position in BTC (or any other coin), but I think it's likely that BTC hits $5K before it hits $20K.

deleted 9y ago
[deleted]

bradleyjg 9y ago

Another way of putting it is the old aphorism, which Keynes probably didn't coin[1]: The market can remain irrational longer than you can remain solvent. [1] https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/

clayrichardson 9y ago

Getting liquidity to short or long on margin is as easy as clicking a button and getting liquidated. Poloniex, Bitfinex and BitMex are some of the places you can play that game. You can even become a BTC lender on some of those exchanges and get around 20% APR since loans can be compounded every 1-2 days or even shorter depending on the duration of positions people open.

jacksproit 9y ago
Is it legal for them to offer those services?
- LoSboccacc 9y ago
  I think it heavily depends on their client country of origin. Here as long as bitcoin aren't officially recognized as bearer bonds of sort you can trade them around freely and the state only comes in questioning about plusvalences when you convert them back into money.

ISL 9y ago

> You can know that something is wrong and the numbers are all made up but being right doesn't matter when the market ignores fundamentals. You can participate in the market simply by not buying. If nobody offers the short, it is not possible to accept it. In the case of BTC, one could arrange a private short (you loan me your BTC, for which I will pay you interest and return your BTC in two years) and short it that way. Caveat trader.