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Me too. I'm looking into shorting it on Kraken but I am not quite sure how it would work because it would be delisted before it went to 0 possibly and I am not
by piracy1 6y ago
Me too. I'm looking into shorting it on Kraken but I am not quite sure how it would work because it would be delisted before it went to 0 possibly and I am not quite sure how that would work.
- lalaland1125 6y agoDon't short it. The market can stay irrational much much longer than you can stay solvent.
- gjs278 6y agothe only risk to shorting tether would be the interest. it’s not like it will ever be worth more than a dollar.
- bugzz 6y agoFor stocks I agree, but here tether isn't ever going to go much above $1, right? So the downside of shorting is just that it ties up a lot of capital, right?
- samtheprogram 6y agoWouldn’t you be paying for time decay on any short positions?
- fny 6y agoTime decay happens on options. You pay interest on the tether you borrow.
- anonymoushn 6y agoDon't short the spot.
- samtheprogram 6y agoThanks, this clarified what’s going on for me. That means you’ll still be paying interest for whatever period you’re holding the position, which really isn’t that bad depending on the rates. However, not to detract from the thread I would think other concerns like market irrationality and delisting still applies.
- anonymoushn 6y agoIf you short the futures I don't think you'd be as affected by delisting of the spot, but the price calculation at settlement time could be dicey
- arcticbull 6y agoNot just at settlement, if one of the index exchanges goes insolvent and the price of BTC goes parabolic, it may push your short position past your brokers assigned personal risk tolerance for your account and they'll liquidate you. You'll be right, but broke.
- anonymoushn 6y agoI don't think FTX has any policy on this matter other than that they will liquidate you if you are sufficiently under-collateralized. A move in the price of an unrelated asset would not cause you to be under-collateralized.
- arcticbull 6y agoI'm referring to a real SEC regulated broker like InteractiveBrokers which allows you to buy and sell /BTCG1 futures. The price of the /BTCG1 future is calculated based on a blended average of the spot price at a bunch of other exchanges (the "Bitcoin Reference Rate" or, humorously, BRR). The current maintenance margin for a /BTCG1 contract is 40%. You're required to have enough margin to cover 40% of the notional value of the contract which is 5 BTC, roughly $100,000. Let's say you only have $200,000 of margin. A parabolic move towards infinity in the BRR due to insolvency in some of the exchanges involved in the calculation may double or triple the price of BTC. Further, the high volatility may increase the margin requirements beyond 40% and up towards 100%. This means you're going to get a margin call, and you either post collateral or get rekked. Not sure how FTX works.
- arcticbull 6y agoCounter-party risk is the issue. The only places you might be able to short for real dollars will require you post up collateral for your short. Then once the wheels fall off they'll declare bankruptcy and keep your collateral.
- eurusdac 6y ago'declare bankruptcy' is optimistic. More likely is that they disappear completely/fake their own death in a weird jurisdiction/get killed by gangsters/go to prison for child porn, etc.
- arcticbull 6y agoExchanges don’t just say it; they declare it ;)
- anonymoushn 6y agoIt costs like a penny per year to short Tether quarterly futures at one venue.
- deleted 6y ago[deleted]
- riffraff 6y agoIf you think tether will crash don't you think the whole crypto space will crash too? Or can you short it with fiat money on kraken?
- refulgentis 6y agoI highly recommend not doing this - I was shocked to see this article because I'm surprised its _still_ rolling - 2 or 3 years ago I was in your spot, and I would have wasted a ton of money and acquired a much darker view of the world. Much like TSLA, it'll be 10% of its size eventually, but who knows when or why, its teflon until it isn't.
- anonymoushn 6y agoYou wouldn't have wasted much money. At one crypto venue, this trade costs you less than 1% per year to keep on and ties up only 5% of your collateral (assuming you are 1x short and don't push the "pay higher fees for more leverage" button)
- optimiz3 6y agoWhy will TSLA be 10% of its size? Why can't it 2x and be worth an Amazon?
- csomar 6y agoPeople just throwing numbers. In the very long term, everything will go back to 0. Thus, not putting a timeline for your predictions is useless.
- dodobirdlord 6y agoBecause Amazon has 1.2 million employees, $386.1 billion yearly revenue, and $20 billion yearly net income. Tesla has yearly revenue of $31.5 billion and net income of $721 million. Presumably people think that Tesla is priced for explosive growth, but Amazon has also been on a growth tear that shows no sign of stopping, so the basic premise that Tesla at less than 1/10th the revenue and 1/20th the net income is worth half as much as Amazon seems fishy.
- tim333 6y agoThe bull case is Tesla goes 0.8% of global car sales to 20% or some such. Which is not impossible.
- JumpCrisscross 6y ago> I'm looking into shorting it on Kraken Why do you think Kraken would be in a position to pay you out if Tether goes under? Even the CME contract becomes sketchy when you’re talking about a meltdown at this scale—it’s priced off these exchanges. If they start experiencing edge case behaviour, prices could crash or multiply erratically. If you want to play this, it would likely involve a more sophisticated bet on exposed public companies and/or credits, or a simple bet with a trusted counterparty.
- csomar 6y agoTether USD is a token. If you short Tether, you already got paid. If Kraken is legit, then Tether should not affect its operations.
- piracy1 6y agoThis. If you short Tether, you already got paid.
- arcticbull 6y agoHence the 2% per month contango on a cash-settled futures contract which is practically unheard of. In theory you should be able to arbitrage by purchasing a bitcoin and shorting the futures contract to collect that sweet 2% per month. However in a wheels-fall-off situation, the price at USDT-only and insolvent USD exchanges could approach infinity, and since your real-world broker won't take your BTC as collateral, they'll simply liquidate you. Appears arbitrageurs are willing to leave 2% per month on the table to avoid being strung up in the event the wheels fall off.
- JumpCrisscross 6y ago> In theory you should be able to arbitrage by purchasing a bitcoin and shorting the futures contract to collect that sweet 2% per month Variation margin. Shorting the future requires you put up cash. If the price goes up, you have to put up more cash. One could hedge away part of this by holding Bitcoin and borrowing against it. But those lending channels are costly and not presently reliable. TL; DR That 27% spread [1] includes more than just systemic risk. [1] (1 + 2%) ^ 12 - 1
- arcticbull 6y agoNever short anything cryptocurrency related. There is simply too much counter-party risk. If the wheels fall off the Tether bus, they're going to take Kraken down with it, and you just won't get paid. Plus you're going to have to post collateral for your short position, which simply opens you up to even more loss potential. tr0lly seems to think the market is pricing in a 50% chance of a total systemic collapse on a 1 year time horizon by working backwards from the 2% per month contango on CME futures [1]. [1] http://www.tr0lly.com/bitcoin/bitcoins-overnight-collapse-probability-is-about-50/ http://www.tr0lly.com/bitcoin/bitcoins-overnight-collapse-pr...
- dash2 6y agoThe argument there starts from bitcoin futures being worth more than bitcoin today. What's wrong with the simple explanation that people expect the price of bitcoin to rise?
- arcticbull 6y agoThis is actually covered in the write-up but the answer is arbitrage. In a perfect world, I'd simply short-sell the future at a 2% premium over the spot price, then I'd buy a bitcoin on the open market. This pushes the price of Bitcoin up and the price of the future down. The gap closes to roughly zero, an I get 2% for my service.
- anonymoushn 6y agoHello, The reason that people don't take the 20%/year arb is that they are taking arbs that pay more than 20%/year. An additional reason, at some venues, is that the venue does not allow you to use 1 BTC to fully collateralize 1 short BTC future. At those venues, if you do this trade and the price of BTC goes up, you begin to pay interest to borrow dollars for your paper loss on the futures half of the trade. Edit: for CME in particular, I don't know, but I sort of expect that you cannot post collateral in crypto.
- bouncycastle 6y agoInstead of shorting it, you can do this: 1. Lock up your USD to USDC (get some ETH for gas) 2. Go to https://app.compound.finance/ https://app.compound.finance/ 3. Deposit the USDC as collateral 4. Borrow USDT (Tether) 5. Sell the borrowed USDT to USDC 6. Wait until USDT implodes to $0 If USDT implodes to $0 then you'll have nothing to pay back. You can even deposit the USDC to, say, Yearn and cancel out your interest expense. Of course, I do not expect USDT imploding anytime soon, so don't do this. Although it's often the preferred stablecoin to borrow because when it does implode, you will be lucky (assuming it goes under the peg).
- arcticbull 6y agoYou're assuming if the wheels fall off Circle will be around to pay you back.
- bouncycastle 6y agoWhich part of "don't do this" you didn't understand?
- arcticbull 6y ago"Of course, I do not expect USDT imploding anytime soon, so don't do this" doesn't suggest anything about counterparty risk with USDC.
- bouncycastle 6y agoUSDC is an example, it's not necessary that you use USDC, there are a few other currencies that can be used for collateral and swapped in to while you wait. Let's be clear: "Do not do this" means do not do this in whatever variation.
- gomox 6y agoWhy wouldn't they be?
- T-A 6y ago
- tim333 6y agoI was briefly short USDT on Kraken but their fees for that were terrible, like 25% per annum. I'm not sure if there is a more reasonable way of doing it.