40 ms·

Shorting Bitcoin

262 points by zdw 5y ago

paulpauper 5y ago
so this guy is buying puts on some bitcoin funds. Such a method would have gotten you killed more often than not . nothing in this post suggests he has anything of an edge or a good strategy.
- danaris 5y ago
  From the second paragraph: > This is part of this blog’s Investing theme, whose Intro[0] makes it clear that I have no investment expertise and nobody should take this as investment advice, because it’s not. It’s just a bloggy disclosure of some of my own financial positions, which I owe readers anyhow. So...yeah, no one's claiming he has an edge or a good strategy. This is based on his beliefs, not intended as good advice for you. [0] https://www.tbray.org/ongoing/When/202x/2021/06/25/Investing https://www.tbray.org/ongoing/When/202x/2021/06/25/Investing
  - paulpauper 5y ago
    buying puts and having no investment expertise. yeah that is going to end well.
    - ghufran_syed 5y ago
      As long as it's only a small percentage of their portfolio, seems safe enough. The max loss is the put premium. Are you getting it mixed up with selling puts, where your losses are unlimited?
      - hgibbs 5y ago
        That's not right either, your downside for selling puts is limited by the strike (worst case is you pay K for a stock worth 0). Short call positions are the ones with unlimited downside (worse case is that you get K but have to cover the cost of arbitrarily high priced underlying).
        Bootvis 5y ago
        Never mind, misread
        minitoar 5y ago
        Short option positions which gp is referring to aren’t really...optional. You sold the option to someone else.
        Kranar 5y ago
        Suppose you sell 1 put for 1 dollar with a strike of 100 dollars. The worst case scenario is that the asset decreases in price to be worth 0 dollars. The buyer of the put then exercises their option to sell the asset to you for 100 dollars, hence in total you lost 99 dollars. As a general matter, the most you can lose when selling a put is the strike price - premium.
        kortilla 5y ago
        You’re confusing selling (writing) options, which come with being on the receiving end of the exercise as an obligation.
    - hgibbs 5y ago
      Puts have limited downside?
      - mattmaroon 5y ago
        Yes. Stocks can’t drop below 0.
        jkhdigital 5y ago
        They can but only if all market participants act irrationally. Just want to make it clear that it’s not a law of nature that stock prices are bounded at 0. One could imagine a different legal regime in which equity ownership actually carried unlimited liability, in which case negative prices would most certainly be a thing.
        drbacon 5y ago
        I think hgibbs is confused between puts (a contract for the ability to sell at a price) and shorting (borrowing to sell immediately and buy back later), but your comment isn't quite right either. Shorting has unlimited downside, since it may be arbitrarily expensive to buy back the shares/coins that you borrow. Puts, on the other hand, have a strike price. A contact to be able to sell Bitcoin for $30K is worthless on the expiration date if the market price is $40K. Anybody can sell at a better price than your contract on the open market. The market price going to 0 is the best thing for the owner of a put option. "Stocks can’t drop below 0." is actually a bummer for the put owner. If a stock could go lower, the put owner could sell the asset for even MORE than the market price of the asset. What hgibbs probably wants to hear is this: The worst case for a put owner is for the put option to expire worthless since the market value of the asset is greater than the strike price when the option expires. The maximum downside is a contract worth $0. If you want to pay a premium to be able to sell bitcoin at the end of the year for $20K, but the value is still $30K on December 31, your put option is worthless, and that's as bad as it gets. ...UNLESS you're buying puts on margin without a stop-limit.
        hgibbs 5y ago
        My question was in relation to the parent comments claim that buying puts can cause unlimited losses - I was pointing out that this was wrong. The original comment seems to be edited now
  - kebman 5y ago
    If it's so biased and opinionated, what is its value to HN readers? Is there any merit to his opinion? Is there any proof?
    - temp8964 5y ago
      Maybe next month the guy can write another post: "How to lose money quickly" and gets on the front page again! Win-Win!
      - kebman 5y ago
        By his own analysis, he won't lose much, but enough to get annoyed. Looking forward to it! Anyway, I'll give the post this, though. It prompted some good replies, to no credit to the original author.
    - caf 5y ago
      I don't know what other people found interesting, but personally I found it mildly interesting to see the reasoning about choice of financial vehicles to "short bitcoin" without actually literally short-selling bitcoin. The author's opinion about bitcoin is neither here nor there.
      - microtherion 5y ago
        I agree. One of the problems with betting on the decline / collapse of an asset is finding counterparties that are likely to pay up if you win (a problem that some investors faced in 2008, e.g.), and while you may quibble with the author's investment thesis that there will be a decline / collapse, I think his choice of counterparties is quite sound.
- rantwasp 5y ago
  here is an idea: if you strongly believe in this put all (or a significant chunk) of your money where your mouth is. this guy has more money that he ever needs and now he’s seeking attention. this is the guy that quit from being a VP at Amazon out of principle (after he got rich) all the doom and gloom around bitcoin and all the bad PR I’ve seem lately has a purpose, but it’s not what you think it is.
cocktailpeanuts 5y ago
If BTC price doesn't recover soon and falls further, Microstrategy is what will kill BTC. I don't know why BTC investors are so crazy about Microstrategy buying BTC (This would have never happened back in the early days of Bitcoin), but if BTC price goes down further, Microstrategy will be forced to sell their BTC by their shareholders. Otherwise the Microstrategy stock itself will crash. Also when Microstrategy loses too much money, they may finally have to shut down because they borrowed so much money from people just to buy BTC. When Microstrategy crashes, along with them, the public sentiment for BTC will go to shit, and that will cause the crash of BTC itself since the whole recent price climb was based on the "institutions are buying up BTC" narrative. This is the scariest scenario. Once the downward spiral happens it will be unstoppable, it will be like the crash Mt. Gox caused, but like 100 times harsher.
- TheParkShark 5y ago
  MicroStrategy is up over 13% today. So the market doesn’t care or they can afford to lose some more on their Bitcoin hedge.
  - onlyrealcuzzo 5y ago
    Why would you expect a crypto stock to go down on a day when Crypto was up almost 10%?
- phasnox 5y ago
  If you are a shareholder, why would you sell on a loss?
  - mjol 5y ago
    because $MSTR will go to $0 a share if BTC loses another 50%
    - brian_cloutier 5y ago
      Your answer only rephrases the question. The only way for it to hit $0 is if nobody is willing to buy the stock. This seems unlikely, given that the Bitcoin they're holding, even at 50% of present value, is still worth significantly more than $0.
dmichulke 5y ago
Reminds me of the time when TSLA MCap got bigger than Volkswagen + BMW + Daimler + a few othere and I bought OTM puts. This was back when TSLA was at 160$ (800$ pre-split)
- SavantIdiot 5y ago
  The difference is Tesla makes cars, good cars, that people can use. Bitcoin makes "investors."
  - tessierashpool 5y ago
    OK, but Tesla makes cars that catch fire while parked, and their "profit" comes from selling carbon credits to GM and Fiat. I agree Tesla is less of a pyramid scheme, but I think it's still a pyramid scheme.
    - deleted 5y ago
      [deleted]
    - speedgoose 5y ago
      They invest a lot and not cars catching fire is unfortunately not that uncommon. I'm not sure Tesla is worse than the others. In electric cars, Hyundai and general motors got a few fires from LG batteries. If you think about ICE cars, its really not uncommon for them to burn too. If you really think Tesla is a pyramid scheme, you should consider reading their financial reports and test drive a recent one. It's perhaps a bit overrated and the full self driving is not happening anytime soon, but it's a solid product.
    - caf 5y ago
      The regulatory credit income is about what they're spending on R&D, so another way to look at it is "Tesla have GM and Fiat funding their R&D".
    - rcMgD2BwE72F 5y ago
      Tesla cars catch far less fire than their competitots's, EV or ICE. This has been debunked years ago, check your sources. As for credits making their profits, first it's like saying early Anazon could never turn profitable and second, just wait for the P/L report of this 2020Q2. You're in for a big surprise (my bet: profitable without counting credits amd even S/X sales!)
SavantIdiot 5y ago
FTA: "I’ve repeatedly criticized Bitcoin specifically and blockchain in general, on the grounds that I’ve seen no practical real-world applications," and "Bitcoin is not usable as a currency because the transaction costs and latency are both too high. (Yes, I know about the Lightning network.)" "My best guess is that pretty soon the supply of greater fools runs out." -- He's on to something! This is a pretty funny article that is remarkably lucid.
- Sammi 5y ago
  I've been hearing this sentiment ever since I heard about Bitcoin in 2011. Bitcoin has been through many huge crashes since, but the long term trend just keeps going up and up. So far the only fools are the one's that didn't HODL.
- rjmunro 5y ago
  > I’ve seen no practical real-world applications. I think money laundering and ransomware are both very practical real-world applications. Also I read you can use them for buying illegal drugs on the dark web. To be fair, they can be used for remittances - sending money back home from working abroad, but I'm not sure how practical that actually is on the ground compared to traditional suppliers like Western Union, or modern ones like TransferWise.
- anthony_barker 5y ago
  More than 50% of the worlds population live in a countries with currency controls(China, India, Angola, Nigeria etc). They have reasons to avoid currency controls. Another less nice example is the guy who had 50 million in BTC who went to german jail and they couldnt' recover the funds. This the first time in history you can have a "buried treasure" that you can protect just by memorizing 12 words. Greece was almost in continual default from 1800 until the EURO. (Reinhart, Carmen M.; Rogoff, Kenneth. This Time Is Different).
xvector 5y ago
I'm of two minds. Cryptocurrency is a beautiful technology. But the current prices have absolutely world-changing speculation already priced in. I think the price is largely meaningless, and cryptocurrencies are likely to crash hard, but at the same time, I don't really care, because the price is not the beautiful thing about crypto. Crypto achieved its purpose as envisioned by the cypherpunks that created it, the moment people started using it - for, say, Darknet drug markets: anonymous or pseudonymous exchange of value in a manner that cannot be censored by governments.
- jonny_eh 5y ago
  > Cryptocurrency is a beautiful technology On the surface, ya, but the proof-of-waste at its centre should be reason enough to consider the technology more harmful than not.
  - xvector 5y ago
    Thankfully most cryptos are moving to proof-of-stake.
    - arcticbull 5y ago
      Agreed, but there are real questions about proof-of-stake, such as the "nothing at stake" problem.
    - colordrops 5y ago
      Is proof-of-stake a proven technology yet though? Has it been shown to function without loopholes or exploits?
      - CryptoPunk 5y ago
        The first iteration of Ethereum's Proof of Stake protocol, the standalone Beacon Chain, has been working since December 1st 2020: https://beaconcha.in/ https://beaconcha.in/ So while not there yet, it's on its way to becoming proven technology. A big test will be how it handles general transaction processing. The Beacon Chain is limited to finalizing Ethereum PoW chain blocks at the moment.
tempestn 5y ago
I've sold Tether for both USD and CAD without any issue or significant delay. What are the difficulties the author is referencing? (Asking genuinely, not arguing.)
- aabhay 5y ago
  How much/which exchange? The volume and jurisdiction matters.
- Shosty123 5y ago
  Yeah, I'm not sure. Even if a direct CAD pairing wasn't available, I've always been able to exchange my tokens for USDT and then exchange that for CAD and eTransfer it to my bank.
- __zack 5y ago
  The difference is between exchanging tether and redeeming tether. Exchanging tether is easy as long as there’s a counterparty willing to buy your tether in exchange for USD. But in principle you should be able to go to the “tether mint”, give them your tethers, and they redeem them 1:1 to USD. Apparently this is not very straightforward to do. This podcast episode covers the topic well: https://anchor.fm/cas-piancey/episodes/Tether-A-Stable-Discussion-erhp88 https://anchor.fm/cas-piancey/episodes/Tether-A-Stable-Discu...
  - londons_explore 5y ago
    It would seem likely that the tether mint participates in some exchanges and buys or sells to keep the price stable. This theory is backed up more by the fact the tether price history matches with a script in someone's basement that occasionally crashes and it takes a few hours to repair, during which the price wanders before being clamped 1:1 again. That's functionally identical to going to the mint directly, and means the mint doesn't require any customer service etc.
  - deleted 5y ago
    [deleted]
  - question11 5y ago
errantmind 5y ago
Puts are fine but the swings will often get you liquidated if you use too much leverage. I personally wouldn't bet against Bitcoin knowing the state of the wider market (stocks at all time highs, inflation fears but also Fed rate hike fears). If inflation fears kick into high gear it could be enough to push BTC back to retest the ATH
- tasuki 5y ago
  > Puts are fine but the swings will often get you liquidated if you use too much leverage. Isn't that the same as saying "swings will often get you liquidated if you use too much leverage"? Whether puts or whatever else, if you use too much leverage, swings will often get you liquidated. Also, I don't think the author used any leverage. He just bought puts.
  - errantmind 5y ago
    Yes puts or calls can get you liquidated by swings. I was trying to get across that a lot of people are using high leverage right now to get-rich-quick and, especially in the crypto space, it is risky to the point of being unwise.. unless you have an edge with backtested, medium-term models that adequately account for the wide range of volatility, with automated take-profit / stop-loss in place.
    - anthony_barker 5y ago
      If you purchase the put you can only loose the premium. Naked puts (writing them) are another story
    - tasuki 5y ago
      > Yes puts or calls can get you liquidated by swings. No, when buying puts/calls, you can't get liquidated by swings. The worst that can happen is that they expire worthless. They could get liquidated if you borrowed money to trade them, but that's not in the nature of the put/call, that's in the nature of borrowing money to trade. In this specific instance, I understand the author bought puts with actual money, and there's no way he could get liquidated by whatever swing.
sonicggg 5y ago
The author is talking about buying puts. These have expiration dates and a set price. Not only he believes bitcoin will collapse, he is basically suggesting he has a crystal ball on when it's going to happen.
- jschulenklopper 5y ago
  > he is basically suggesting he has a crystal ball on when it's going to happen. No. Just some time before Christmas 2021.
breck 5y ago
I love this sort of thing. He’s making a bet, explains his reasoning, and does it in the open! That’s great. I disagree that there’s no tech here. IMO public ledgers that never sleep are far superior(thanks to the hard work of many people over the past decade), and their advantage over retail banking will only increase. My online banks keep getting worse, crypto keeps getting better. Think about this: banks are CLOSED 77% of the time! Need to send a wire? 3/4 times bank will be closed. Capital will just move far more efficiently on block chains. I have NO idea whether crypto is a good investment. I agree with the OP that insiders dominate it. But the tech has gotten really solid and I don’t see how the rest of banking has a chance, unless our government wants to burn our economic lead down to protect the status quo.
- rorykoehler 5y ago
  The amount of time it takes for me to move my own money between my own accounts pisses me off mightily. I can pay to have an "instant" transfer but that is just double dipping by the banks for a service that should be provided in the cost I'm already paying for my accounts. Crypto currently has far greater UX challenges but once these are fixed this is where crypto can win.
  - arcticbull 5y ago
    Free, instant transfers are already the status quo in a lot of the world, as of course they do not require blockchain. SEPA Instant Payment in the EU, for instance. In fact they're way faster than a Bitcoin transaction much of the time - and obviously way less expensive ($0 vs. $5-60). The US is moving to 24/7 free, instant payments as RTP rolls out. [1] The US has been quite far behind historically on this front however they are closing this gap, probably motivated in no small part by Bitcoin. [1] https://www.theclearinghouse.org/payment-systems/rtp https://www.theclearinghouse.org/payment-systems/rtp
    - xvilka 5y ago
      While it's true in some regions, most of the globe banking is still very slow. In any digital currency, like cryptocoins of CBDC it's the same globally, not per region.
G3rn0ti 5y ago
Many traders still predict Bitcoin to be over 100k by the end of the year. December could align with the bubble peak due to Bitcoin‘s investment cycle triggered by the halving events. That could wreck his short position but if he’s lucky, it will burst earlier.
- factorialboy 5y ago
  Halvenings are overrated. Bitcoin historically peaks 1yr after US elections and then finds a bottom and floats there for 3.5 yrs.
  - jakelazaroff 5y ago
    Where by “historically” you mean twice?
    - factorialboy 5y ago
      2013. 2017. 2021. Three in three.
      - jkepler 5y ago
        Correlation isn't causation. Bitcoin's network started January 3, 2009, so its halving cycles are roughly correlated with US presidential elections. Bitcoin is also global, and countries like France (home to Ledger and active bitcoin communities) have five-year presidential cycles. So I don't see a causal link to US politics. However, I do think people falling down the bitcoin rabbit hole help them see the state for what it is, which might reduce the importance people place of federal politics, if it increases decentralization and local action.
        factorialboy 5y ago
        I never said it's the cause. Just making an observation.
      - jakelazaroff 5y ago
paxys 5y ago
I agree with basically every word in the article, but would never ever short Bitcoin. Simply because the market can remain irrational longer than I can remain solvent. > When will it happen? I dunno. I’ll be astonished if we get through 2021 without an explosion. Everything he wrote was also true in 2020 or 2019 or 2018 or 2015, and yet there was no explosion. Why does he think Christmas 2021 will be different?
- mojuba 5y ago
  Almost everything except maybe the "fool pool" running out this time? Although even that is hard to speculate about. The crypto business may adjust and make itself even more accessible to a larger "fool pool". There's still a lot of money in the world that's in the hands of people who literally don't know what to do with it. Just create a sort of a Western Union for bitcoin and go to poorer countries... What a terrible, horrible idea that unfortunately might work.
  - elliekelly 5y ago
    > The crypto business may adjust and make itself even more accessible to a larger "fool pool". I’ve been seeing more and more ads recently from various companies advertising how easy it is to open an account to trade crypto and I think this is the reason.
- microtherion 5y ago
  One possible difference is that there seem to be an awful lot of supposedly "safe investment" offers out there promising outrageous interest rates for short term loans. I'm not keeping a particularly close eye on that market, but I don't recall that being mentioned in past years, and it would seem to be a sign of the bottom of the sucker pool being scraped.
vmception 5y ago
Someone that was predicted to own 5% (1mm) of all Bitcoins just died in Costa Rica I doubt they had a survivorship and secession plan for their bitcoins and I doubt Bitcoins become less scarce Shorting Microstrategy and Coinbase via puts are good ideas though. Microstrategy isnt overleveraged yet but its easy for them to be. Coinbase is just a share dump, thats the entire purpose of direct listings. This has nothing to do with Bitcoin.
- arcticbull 5y ago
  That is true, unless you believe that the scarcity isn't at all relevant to the price in your anticipated future state. After all, the sacks of garbage in my kitchen are scarce but you don't see people tripping over their shoelaces to pay $30,000 a piece.
  - vmception 5y ago
    I believe it is relevant as more bitcoin becomes distributed on bridges and in Defi protocols (see burned liquidity pool shares), on lightning and liquid, in longer dated “physical delivery” derivatives contracts and more
  - jkepler 5y ago
    You are confusing scarcity and monetary hardness. Its super easy to create more sacks of garbage, and if demand for them shot up, a ton of people would bring their own sacks to market, crashing the garbage sack price. This happened to silver between the two sold wars, and nations that abandoned bimetal standards late lost a lot of monetary value to those on just gold. Monetary hardness is whether its easy or hard to introduce more supply of a commodity money when demand goes up. More dollars are printed in response to demand, more gold mined in response to rising gold prices, more sacks of rubbish if that's what people clamor for. Dollars are harder money than sacks of garbage (unless we're talking about the failed Zimbabwe dollar), gold is harder than dollars. However, more bitcoin CAN'T be created than the predetermined, declining schedule. Today, bitcoin's stock to flow is roughly equal to gold, but at its next halving it will double its hardness, and that will double again at every subsequent halving. So, bitcoin will become exponentially the hardest money ever created. Scarcity is only part if monetary hardness. But perhaps you're right regarding future price: in the future (as is true presently), one bitcoin will be worth exactly 100,000,000 satoshis.
lordnacho 5y ago
Derivatives guy here. Perfectly fine opinion, but two issues. Why now? This is a general investing issue. Trading costs money, holding a put costs money, so why will the market do what you think in this time frame? Why are the puts cheap? This could be substantiated with some numbers, esp implied volatility. Are they cheap vs history? I don't know, but the reasoning should show why you think so. Note I'm not looking for breakevens. That can be worked out from the price, but it doesn't tell you whether that is more or less likely than the market's opinion. Totally reasonable points otherwise.
- femto113 5y ago
  Except if you believe, as the author does, that the entire market is just scams and insider manipulation there is no meaning to be gleaned from any of the numbers. If it's all a sham it will blow up at some point, it's just a question of when, but that will almost certainly be precipitated by some unpredictable external event.
  - AmericanChopper 5y ago
    That’s a very bad thesis to trade options on. The author believes that BTC is overvalued, but if you look at their reasons for believing it’s overvalued, some of them could have applied to BTC at any point in time over the past several years, and the rest could have applied to BTC and any point in time since it’s creation. By buying puts on bitcoin (derivatives), they’re not only betting that they’re correct, but also that something will happen in the next 5-6 months that will catalyze the market to correct that valuation. They don’t have any thesis at all for what’s going to catalyze this correction over the next 5-6 months. Their entire investment thesis is that “[they’d] be astonished if we get through 2021 without an explosion”. The investment described in this blog post is just a crypto-bear yolo play, with less thought put into it than your average r/WSB post. Edit: looking at the options chain for the BTC ETF they’re shorting, NTM puts are trading at $2, so the underlying has to lose about 1/3rd of its value for that trade to break even. If it goes to $0, their maximum profit is ~$400 per ~$200 contract. That’s certainly not a cheap contract.
    - 5y ago
victorfonseca 5y ago
BTC is not money? What it's? Disclosures · I have personally made money buying and selling Bitcoin.
- arcticbull 5y ago
  It's best modeled as a speculative asset. It has none of the hallmarks of a good currency. It's not fungible, it's not predictable, it's not cheap to exchange and its value flails around wildly like a decapitated chicken. That's even before you get into the Keynesian vs. Austrian argument that IMO should be long since settled but apparently, here we are.
  - otherme123 5y ago
    You are making up the qualities of good currency, and then conclude BTC has none of them. Qualities of good money are 1) Durability (not losing value with time), 2) Portability, 3) Scarcity (limited supply), 5) Divisibility, 6) Acceptability and 7) Storability. BTC has all of them except maybe 6). And I'm no defender of BTC, I don't like it and I don't think it will ever be the main currency. It will be at best like the gold backing the day to day exchanges in another kind of "coin", and used only for clearing. Money can be, and currently is, as "fungible" as annotations in a ledger. Banks are not that different from BTC, except they don't need "proof" because they limit who can add transactions: a VISA transaction is just "write in the ledger -X for this wallet and +X for this other wallet". No gold, bills or any fungible asset is moved around, exactly like BTC.
    - arcticbull 5y ago
      C'mon now BTC certainly doesn't have (1) it's down 50% in the last month. I'd quibble with (2) because portability does imply a low cost of portability which compared to USD it does not have. (3) It has. (4) It has. (5) It definitely isn't broadly accepted and (6) it's not great at either, just look at what percentage of the coins have already been lost. 20-30% in a decade. Every random walk down the time line leads to 100% of coins lost.
silexia 5y ago
Summary: -Bitcoin is not used used as currency -Bitcoin is extremely wasteful of energy -Bitcoin is very vulnerable to government legislation -Bitcoin is mostly a pump and dump by insiders I agree with the author's points.
wsc981 5y ago
So I will probably soon buy more Bitcoin as I believe the price will in the long run go up. Tether (USDT) is a huge liability that could cause a temporary crash. But at the same time you see some regulation changing that e.g. allows banks to be custodians for crypto-currencies. In my opinion this is huge. It means that eventually institutional investors can buy Bitcoin and other cryptos without having to worry about storage, keys, etc... Banks can handle the technical stuff. I have very little trust in the fiat system of the Eurozone and I'd bet there are investors that feel the same. Investors that will look into ways to spread the risk by adding different asset classes to their portfolios. Cryptos, especially Bitcoin, seems to be a very nice asset class to have in the long run. Another reason why I think Bitcoin is here to stay is that Bitcoin enables countries to get around US imposed sanctions. Iran is using Bitcoin for this purpose and I am sure other countries do so as well. Bitcoin as an asset class also offers a few nice features that one cannot find in other asset classes and I believe these features are responsible for most of Bitcoins inherent value: - You can manage the coin completely by yourself (which can also be a risk of course - if you lose it, it's your full responsibility) - The value of Bitcoin is not negatively affected by money printing (quite the other way around I'd wager). - It's a bit easier to hide crypto assets from tax agencies, this might become an especially valuable property if Central Bank Digital Currencies become a thing. For example if citizens are required to keep an account at the central bank and the central bank can at all times see all your CBDCs and impose sanctions on your CBDCs if you're not deemed a good citizen. - It's very simple to take with you on travel (e.g. by memorising wallet keys or using a hardware wallet like a Ledger Nano) unlike e.g. gold or fiat money (often some limit is imposed). - It's easy and cheap to transfer (no banks or other middlemen involved). - On a country level: can help bypass US sanctions. So I am still a long-term believer in Bitcoin, even though I do believe that USDT could cause a crypto-market crash at some point. I also believe US government agencies will only investigate USDT if they feel the value of Bitcoin is too high (which currently isn't true after the most recent crash) as a way to temporarily control the price of the crypto-currency. P.S.: I feel the authors' arguments 6 (climate) and 7 (greed) are not valid arguments for shorting Bitcoin. To me these seem mostly emotional arguments and I wouldn't want to make financial decisions based on emotions.
- gregopet 5y ago
surfingdino 5y ago
He's betting on prices going down at the end of the current 4-year Bitcoin cycle, which they historically have done. This is just trying to guess when it'll happen. Betting against Coinbase, an exchange, is a bit foolish as exchanges make money every time there is a trade, up or down. Their income is unaffected by market crashes, may even go up. That detailed dig into the past of MicroStrategy is interesting... but I don't know how it applies to today. It has a whiff of a personal grudge and the comment about laser eyeballs reminds me of people complaining about the "Beta" label and the pastel colours of the early Web 2.0 websites. Don't know why this blog post is important, tbh. But it shows that the crypto craze is in full swing when technologists start writing publicly about their investments.
- ffggvv 5y ago
  actually coinbase’s revenue tracks pretty well to bitcoins price. as when the price crashes people lose interest in it and volume goes way down. this is basically what happened between the end of the last bull market and the start of this one and the same is true for robinhood with stocks. bull market attracts more investors trying to get rich and drives volume. in turn when it crashes the volume dries up as retail loses interest
  - surfingdino 5y ago
    I am not surprised to learn that, but I will still maintain that exchanges are fairly immune to the fate of the securities/commodites/assests traded on them. Crypto today is a more complex, evolved sphere than four years ago and most of the value is not in the price of this or other coin/token but in the smart contracts. Which is something that Bitcoin does not have, but for some reason people see it as a valuable asset.
deleted 5y ago
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ur-whale 5y ago
a) Bitcoin price is extremely volatile, even on a 6-month time horizon, and IMO, given the volatility, this bet is a pure casino play: most of the rationale he puts forward has absolutely no reason to come to fruition within the next 6 months. The OP better pray he's not going to urgently need the money he parked in those puts any time soon. b) On a longer (years) time horizon, historical trend is telling a clear story: shorting Bitcoin is a very dangerous proposition. Whether you are long or short on Bitcoin, only play with money you can afford to lose.
thatsabadidea 5y ago
LOL - all unfounded/inaccurate FUD - get REKT - HFSP
xiekomb 5y ago
So many things wrong with this article. Taking a bet against bitcoin it totally legit but please don’t over simplify things or make false claims. “No real world use” for bitcoin and other crypto currencies: ok so the goods I bought for years with bitcoin do not exist? And the trading market you are playing on are not a real world use case? “ These practices have run rampant on every financial market in human history that hasn’t regulated against them fiercely. Why should Bitcoin be any different?”. That’s the ultimate authoritative argument. “Everybody knows”, “obviously”, etc. Please back up with facts and don’t make general claims like that. USDT: totally agree. But then don’t trade with usdt. Bitcoin not easily convertible to cash ? Maybe you should pickup a more serious trading desk. On boarding is much more restrictive than mainstream platforms like binance but nothing is more untrue that bitcoin is not liquid. You can settle trades in USD (not USDT) instantly with a serious regulated broker. Limitations of bitcoin: mining, fees, other. Agree, but nothing of these problems makes bitcoin an insider scam. Is there is a problem there is a solution. Who says that these shortcomings can’t be solved ?
bhawks 5y ago
The arguments outlined are not particularly strong unless you are already predisposed to not liking Bitcoin (which is fine, not liking a particular security is a perfect reason not to invest in it - however it's a bad reason to bet against it) 1: BTC is not controlled by insiders. Sure it's a great headline but once you account for the fact that a BTC wallet owned by an exchange that pools large amount of customer funds is not the same as Alice's Ledger nano you will quickly realize that assets are actually reasonably disbursed across many parties. Eg: https://insights.glassnode.com/bitcoin-supply-distribution/ https://insights.glassnode.com/bitcoin-supply-distribution/ 2: BTC by design will take around 10 minutes to confirm a transaction, further you will actually want 3-6 transactions to be really confident in finality. I agree, I am not waiting inline at the grocery for 60 minutes either. However dismissing layer 2 solution like lightening network deserves something better than handwaving. Lightening network works very well in my experience. Also I need to wait 5 days to transfer cash from my broker to my credit union, I wish I could use BTC. Finally wire fees are a trash fire. 3: Tether. Trading tether (or USDC or DAI) into fiat is quick and easy. Converting USDC to dollars is also easy. Yes tether is 'kinda suss' in a bank run scenario. USDC however is audited and regulated. I've seen papers both indicating that loose tether issuance distorts BTC prices and papers that cannot find a correlation. So this feels like a tossup (personally I hope all the fines and scrutiny on tether forces some house cleaning but I am not holding my breath) 4: lack of regulation. Regulation is not a cure all, Madoff pulled the wool over auditors eyes for years, no one was prepared for LTCM, regulators couldn't stop the 08 financial meltdown, and so on. BTC has no native ability for centralized control, however it also has 100% transaction transparency. That it extremely valuable. Finally centralized exchanges need to comply with local rules and regulations (have you seen the travel rule? That's some forceful regulation there). 5: is actually a repeat of 1 and 3. The insiders argument is overblown and turning stablecoin into fiat doesn't require 'good luck'. ( I am a very unlucky person but have done this multiple times myself). 6: PoW is ecologically unfriendly. Yes BTC energy usages should give pause. However it is only fair to talk about them in the context of the ecological effects of fiat money. Fiat printing is the way we have financed the last 20 years of war (whatever happened to war bonds??). If BTC underpinned our currency system there'd be a lot less room for environmentally destructive jingoism. 7: Libertarians are dumb so they must be wrong. Nothing to say here but ad hominem arguments don't seem effect asset prices. I struggle to find arguments here that would give me conviction to say BTC will crash in 6 months. I am 99.9% convinced that Tim Bray doesn't like BTC as a financial instrument but that has no meaningful impact on BTCs price... (It is not like he's Elon Musk ;) - actually I think Elon's market moving mojo is all gone now)
keymone 5y ago
let's go over beliefs: > high proportion of all Bitcoins are owned by insiders same as any other asset in the world, think pareto distribution - vast majority is owned by few entities. so since this point applies to everything pretty much equally - it can be discarded. > Bitcoin is not usable as a currency because the transaction costs and latency are both too high. (Yes, I know about the Lightning network.) mentions the working solution but chooses to ignore it without reason. not the best strategy in investing. > There are repeated allegations that Tethers are created out of thin air to prop up the price of Bitcoin prophecies of Tether collapse have been around so long, even broken clock theory proponents are getting grey in their hair waiting for anything to happen. but more importantly - if tethers are printed without backing, it doesn't mean there isn't demand for BTC. if BTC were bought with USDT, somebody in the world wanted those BTC and somebody else is stuck with USDT. what do you think happens when Tether collpases and USDT starts trading at discount, what do you think people will be dumping their USDT for? > much of the trading is seriously sketchy, whether that’s based on ad-hoc Tether creation, wash trading, or other well-known pump/dump schemes best argument not to short bitcoin. highly volatile asset will either trigger your stop-loss during a random 5-minute fluctuation or leave you devastated with debts orders of magnitude larger than your original investment if you choose full-idiot strategy of shorting without stop-loss. > The net effect is that money flows in from, in effect, suckers and rubes, then into the pockets of the insiders. again, applies to literally everything. > Bitcoin’s Byzantine-generals solution, based on proof-of-waste, is unacceptable in the face of the oncoming climate crisis. in fact absolutely opposite is true. bitcoin mining is the most green industry around and is driving development of green energy capacity faster than anything else. burning coal or oil for mining is expensive even politically (see china driving away all the miners, citing environmental concerns even though the real reason is inability to control flight of capital). to all people concerned about bitcoin's environmental impact: in the end, it's not your business what i do with the energy i purchase on a market, if you actually cared about the environment - you'd direct your anger at dirty energy producers, go do something useful with your lives instead of faking rage for virtue signalling. > Since Bitcoin has no practical uses absolutely false belief in my opinion. > Puts are pretty cheap. If I’m totally wrong and Bitcoin is still sailing along at the end of 2021, I’ll be annoyed but not impoverished. If it crashes I’ll be sad for the unfortunates who lost their stakes, and entirely unsympathetic to the insider community the author didn't cover another possible scenario: if bitcoin blows up the other direction, the author loses 100% of their investment (if they are smart) or unlimited amount of money (if they are stupid). so yeah, the entire belief set is wrong and author is most likely going to lose money unless they get very lucky.
martindale 5y ago
If your conviction is so strong, why proxy your short instead of just shorting the asset itself? I look forward to your prompt report in December...
CryptoPunk 5y ago
If your aim is to short bitcoin, you can do so directly, on numerous derivatives exchanges, including decentralized ones like Ethereum-based dydx: https://help.dydx.exchange/en/articles/4969332-a-beginner-s-guide-to-going-long-short-using-perpetuals-on-dydx https://help.dydx.exchange/en/articles/4969332-a-beginner-s-... Shorting $COIN is making a bet on the larger crypto market, which may outperform BTC.
timwaagh 5y ago
The fact is you did not short anything but you bought a put option. Even if I agree with you on bitcoin having an intrinsic value less than that of toilet paper, these reasons would have been true before the recent high point too. Instead, it reached that high point and an equivalent put would have expired worthless. Meaning you would have lost all of your investment. I think shorting is a better idea as it relies less on timing. But with the fed pumping massive amounts of money into the us economy, I think you are still not unlikely to get margin called for a bet that the fed will not destroy the value of the dollar faster than the bitcoin goes back where it came from.
ciconia 5y ago
> My best guess is that pretty soon the supply of greater fools runs out. “Two things are infinite, the universe and human stupidity, and I am not yet completely sure about the universe.” – Albert Einstein
fukd 5y ago
India and China have wonderful micro payments apps which means 3 billion people do not ever need bitcoin & co for online transcations or what not.
magma1983 5y ago
Markets can remain irrational longer than you can remain solvent.
sentinel 5y ago
I'd love to hear the one main argument against it. Throwing 7 arguments (some of them related) is throwing too large of a net. Is he hoping to get people convinced with at least one of the points resonating? IMO, in order (and happy to be proven wrong, I am curious what others think): 1. I'm not sure why this would matter. Wouldn't that mean that the insiders have all the incentive to sell the bitcoins they own, even in time – so they can make some "real" money? Wouldn't the price have crashed / gone to zero so many times until now? (there were plenty of opportunities to sell). There is def speculation in BTC, I am not denying that. 2. This is incorrect. Some (most?) people view BTC as a store of value, so in essence, transactions can be few and far between. The adage here is "transaction costs too high? – it means you're moving too little BTC". The Lightning network does play a role in transaction costs. 3. This might a good point. I don't know enough about Tether's use but I have heard this argument raised before. 4. Agree with author, but this point is rather vague. It could go either way. Not sure if regulation is as much of a silver bullet as he makes it out to seem. 5. This is a corollary to the above 2 points, so not really a different argument. 6. Is this the main argument? The author does seem to be an environmentalist - but there are plenty of arguments against this point too. I personally disagree with this point. 7. Again, not really a point, just a rant on what the author thinks are the people that own BTC. At this point he's just insulting BTC holders really, so you know, pyramid of argument (attack the argument not the person etc.) makes me discard this point entirely. Again, curious what others think, lots of smart people here.
ho_schi 5y ago
Bitcoin is pure capitalism. No real work, no real goods and no values of something and not benefit for human kind. So it is just gambling. I've a bad impression of crypto-blockchain-digital-coin stuff which purpose is to make some minority richer. The founders of Bitcoin stated they want free free us from central-bank-money? The central-banks are hopefully the only institution people can trust in stability a little. Politicians should look up their laws, most countries only allow their official currency for trade and should limit exchange to official currencies of other countries.
wraptile 5y ago
I seriously don't understand "bitcoin has no tech" argument. These people must be very priviledged and stationary if they never encountered issues with current banking systems. At some places transfering money at local level takes ages and international banking is almost always a complete an utter joke. I've been waiting for over a month for a new debit card from Revolut while using their highest subscription tier and that's supposed to be the new hip, cool kids bank. It often takes days to move money between countries - even miniscule amounts that should be immune. Even our debit cards are region locked and extremely confusing, your VISA doesn't work the same everywhere. It's just complete and utter chaos if your finances are just slight bit out of the norm. Even if bitcoin is not the holy grail - it's still extremely useful piece of technology for many of us.
ben-gy 5y ago
This reminds me of Bill Ackman’s war against Herbalife, which in my opinion, is a perfect example of a pyramid scheme that is too big to fail. Ref: https://www.investopedia.com/news/billionaire-bill-ackman-dumps-herbalife-ending-5year-war-betting-against-it/ https://www.investopedia.com/news/billionaire-bill-ackman-du... Whether the OP is right or wrong, I honestly don’t think the crypto ecosystem is independent enough from critical transactions for it to collapse as described.
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thisisit 5y ago
I like how he talks about Microstrategy but not Tesla's position in bitcoin and how Musk's tweets are affecting crypto prices.
puranjay 5y ago
If anyone is looking to short BTC and doesn't trust any CEX, I recommend Dydx.exchange, which is completely decentralized.
1experience 5y ago
This is how to lose money with shorting 101. You should never base your shorts on solely rational points (long-term rational points, even worse) when going short on bubbly assets. Things like "Bitcoin is not a viable payment method, it's centralized, possibly manipulated, fueled by the greater fool" is not a valid shorting motive unless you have a triggering event caused by your aforementioned rational point.
- puranjay 5y ago
  My thesis for longing/shorting BTC at this point is purely Elon Musk's tweets
  - elliekelly 5y ago
    Sure he tweets every time he pumps it up but are you confident he’ll give you (and all the rest of his followers) a heads up before he dumps it? I wouldn’t be. And for that reason alone it’s a fatally flawed investment strategy.
    - puranjay 5y ago
      he just has to tweet something remotely bearish and the market craters The last time he cracked a joke about BTC maxis and sure enough, the market dumped. When he talked about BTC's eco impact, it dumped hard as well. You can trace the pumps/dumps to the exact moment of his bearish/bullish tweets. It's unreal
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aazaa 5y ago
Shorting deep into a double-digit correction sounds just as likely to lose money as buying deep into a double-digit expansion. The author is talking about a short-term trade, not an investment. There's a lot less room for error on the timing, and I suspect the timing here. On that note, the author says nothing about the halving cycle. Proceed with caution, brave "shorter." The bigger problem is that all of the author's criticisms have been valid for many years. This is old news. It would be more interesting to read about a complaint that has never been discussed before and to understand why this time will be different for Bitcoin.
Bayart 5y ago
Don't do any technical analysis, trust your guts, short low, buy high, lose all your money, get paid in HN points.
- deleted 5y ago
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Yizahi 5y ago
He is right on all counts about Bitcoins, Tethers, Lightning and so on, but I still wouldn't short crypto today. Irrationality is still building up and opinions of crypto adepts are "buy". At least I think so by reading forums. If I had to guess crypto will require a large external event to crash - Taiwan annexation, Zeta variant of Covid, Russia invading Eastern Block etc. Something which will prompt one or more large players to get out first, and then it will start falling down like a house of cards because of Tethers (and now USDC are suspect too).
runbathtime 5y ago
All personal opinion- Puts are speculative gambling if no current position and a hedge if in a current position to the downside. You can still hold your beliefs without putting on a trade. Why do you want to put on a trade that is inflexible on timing? Bitcoin can be manipulated by tweets, incoming regulation, news, whales, etc. If you are not privileged to have this info then know you are in a game where you are disadvantaged. Curious how others are shorting crypto.
tigereyeTO 5y ago
I disagree with his beliefs. I think a few of the beliefs he states for his reasoning are incorrect. Incorrect input leads to incorrect output. Kudos to him for putting his money where his mind is, but frankly when he learns more about bitcoin and his incorrect beliefs are shattered, I'd imagine his conclusion would be altered as well.
frhack 5y ago
Coinbase is not BTC only. The crypto market cap is growing exponentially since 2015 Today BTC is only 46.3% of the total market cap, BTC is proof of work, while the future is proof of stake. The crypto market is growing very fast and it is changing very fast too. https://ventures.coinbase.com/ https://ventures.coinbase.com/
- sangnoir 5y ago
  To rephrase an old saying: "When BTC sneezes, the crypto market catches a cold"
  - frhack 5y ago
    If BTC sneezes because mining is prohibited, proof of stake cryptocurrency stay health.
jl2718 5y ago
If you’re wondering how your ‘crypto savings accounts’ can return 12% on USD, it’s the option spread from this guy.

262 points by zdw 5y ago

so this guy is buying puts on some bitcoin funds. Such a method would have gotten you killed more often than not . nothing in this post suggests he has anything of an edge or a good strategy.

danaris 5y ago
From the second paragraph: > This is part of this blog’s Investing theme, whose Intro[0] makes it clear that I have no investment expertise and nobody should take this as investment advice, because it’s not. It’s just a bloggy disclosure of some of my own financial positions, which I owe readers anyhow. So...yeah, no one's claiming he has an edge or a good strategy. This is based on his beliefs, not intended as good advice for you. [0] https://www.tbray.org/ongoing/When/202x/2021/06/25/Investing https://www.tbray.org/ongoing/When/202x/2021/06/25/Investing
- paulpauper 5y ago
  buying puts and having no investment expertise. yeah that is going to end well.
  - ghufran_syed 5y ago
    As long as it's only a small percentage of their portfolio, seems safe enough. The max loss is the put premium. Are you getting it mixed up with selling puts, where your losses are unlimited?
    - hgibbs 5y ago
      That's not right either, your downside for selling puts is limited by the strike (worst case is you pay K for a stock worth 0). Short call positions are the ones with unlimited downside (worse case is that you get K but have to cover the cost of arbitrarily high priced underlying).
      - Bootvis 5y ago
        Never mind, misread
        minitoar 5y ago
        Short option positions which gp is referring to aren’t really...optional. You sold the option to someone else.
        Kranar 5y ago
        Suppose you sell 1 put for 1 dollar with a strike of 100 dollars. The worst case scenario is that the asset decreases in price to be worth 0 dollars. The buyer of the put then exercises their option to sell the asset to you for 100 dollars, hence in total you lost 99 dollars. As a general matter, the most you can lose when selling a put is the strike price - premium.
        kortilla 5y ago
        You’re confusing selling (writing) options, which come with being on the receiving end of the exercise as an obligation.
  - hgibbs 5y ago
    Puts have limited downside?
    - mattmaroon 5y ago
      Yes. Stocks can’t drop below 0.
      - jkhdigital 5y ago
        They can but only if all market participants act irrationally. Just want to make it clear that it’s not a law of nature that stock prices are bounded at 0. One could imagine a different legal regime in which equity ownership actually carried unlimited liability, in which case negative prices would most certainly be a thing.
      - drbacon 5y ago
        I think hgibbs is confused between puts (a contract for the ability to sell at a price) and shorting (borrowing to sell immediately and buy back later), but your comment isn't quite right either. Shorting has unlimited downside, since it may be arbitrarily expensive to buy back the shares/coins that you borrow. Puts, on the other hand, have a strike price. A contact to be able to sell Bitcoin for $30K is worthless on the expiration date if the market price is $40K. Anybody can sell at a better price than your contract on the open market. The market price going to 0 is the best thing for the owner of a put option. "Stocks can’t drop below 0." is actually a bummer for the put owner. If a stock could go lower, the put owner could sell the asset for even MORE than the market price of the asset. What hgibbs probably wants to hear is this: The worst case for a put owner is for the put option to expire worthless since the market value of the asset is greater than the strike price when the option expires. The maximum downside is a contract worth $0. If you want to pay a premium to be able to sell bitcoin at the end of the year for $20K, but the value is still $30K on December 31, your put option is worthless, and that's as bad as it gets. ...UNLESS you're buying puts on margin without a stop-limit.
        hgibbs 5y ago
        My question was in relation to the parent comments claim that buying puts can cause unlimited losses - I was pointing out that this was wrong. The original comment seems to be edited now
- kebman 5y ago
  If it's so biased and opinionated, what is its value to HN readers? Is there any merit to his opinion? Is there any proof?
  - temp8964 5y ago
    Maybe next month the guy can write another post: "How to lose money quickly" and gets on the front page again! Win-Win!
    - kebman 5y ago
      By his own analysis, he won't lose much, but enough to get annoyed. Looking forward to it! Anyway, I'll give the post this, though. It prompted some good replies, to no credit to the original author.
  - caf 5y ago
    I don't know what other people found interesting, but personally I found it mildly interesting to see the reasoning about choice of financial vehicles to "short bitcoin" without actually literally short-selling bitcoin. The author's opinion about bitcoin is neither here nor there.
    - microtherion 5y ago
      I agree. One of the problems with betting on the decline / collapse of an asset is finding counterparties that are likely to pay up if you win (a problem that some investors faced in 2008, e.g.), and while you may quibble with the author's investment thesis that there will be a decline / collapse, I think his choice of counterparties is quite sound.
rantwasp 5y ago
here is an idea: if you strongly believe in this put all (or a significant chunk) of your money where your mouth is. this guy has more money that he ever needs and now he’s seeking attention. this is the guy that quit from being a VP at Amazon out of principle (after he got rich) all the doom and gloom around bitcoin and all the bad PR I’ve seem lately has a purpose, but it’s not what you think it is.

cocktailpeanuts 5y ago

If BTC price doesn't recover soon and falls further, Microstrategy is what will kill BTC. I don't know why BTC investors are so crazy about Microstrategy buying BTC (This would have never happened back in the early days of Bitcoin), but if BTC price goes down further, Microstrategy will be forced to sell their BTC by their shareholders. Otherwise the Microstrategy stock itself will crash. Also when Microstrategy loses too much money, they may finally have to shut down because they borrowed so much money from people just to buy BTC. When Microstrategy crashes, along with them, the public sentiment for BTC will go to shit, and that will cause the crash of BTC itself since the whole recent price climb was based on the "institutions are buying up BTC" narrative. This is the scariest scenario. Once the downward spiral happens it will be unstoppable, it will be like the crash Mt. Gox caused, but like 100 times harsher.

TheParkShark 5y ago
MicroStrategy is up over 13% today. So the market doesn’t care or they can afford to lose some more on their Bitcoin hedge.
- onlyrealcuzzo 5y ago
  Why would you expect a crypto stock to go down on a day when Crypto was up almost 10%?
phasnox 5y ago
If you are a shareholder, why would you sell on a loss?
- mjol 5y ago
  because $MSTR will go to $0 a share if BTC loses another 50%
  - brian_cloutier 5y ago
    Your answer only rephrases the question. The only way for it to hit $0 is if nobody is willing to buy the stock. This seems unlikely, given that the Bitcoin they're holding, even at 50% of present value, is still worth significantly more than $0.

dmichulke 5y ago

Reminds me of the time when TSLA MCap got bigger than Volkswagen + BMW + Daimler + a few othere and I bought OTM puts. This was back when TSLA was at 160$ (800$ pre-split)

SavantIdiot 5y ago
The difference is Tesla makes cars, good cars, that people can use. Bitcoin makes "investors."
- tessierashpool 5y ago
  OK, but Tesla makes cars that catch fire while parked, and their "profit" comes from selling carbon credits to GM and Fiat. I agree Tesla is less of a pyramid scheme, but I think it's still a pyramid scheme.
  - deleted 5y ago
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  - speedgoose 5y ago
    They invest a lot and not cars catching fire is unfortunately not that uncommon. I'm not sure Tesla is worse than the others. In electric cars, Hyundai and general motors got a few fires from LG batteries. If you think about ICE cars, its really not uncommon for them to burn too. If you really think Tesla is a pyramid scheme, you should consider reading their financial reports and test drive a recent one. It's perhaps a bit overrated and the full self driving is not happening anytime soon, but it's a solid product.
  - caf 5y ago
    The regulatory credit income is about what they're spending on R&D, so another way to look at it is "Tesla have GM and Fiat funding their R&D".
  - rcMgD2BwE72F 5y ago
    Tesla cars catch far less fire than their competitots's, EV or ICE. This has been debunked years ago, check your sources. As for credits making their profits, first it's like saying early Anazon could never turn profitable and second, just wait for the P/L report of this 2020Q2. You're in for a big surprise (my bet: profitable without counting credits amd even S/X sales!)

SavantIdiot 5y ago

FTA: "I’ve repeatedly criticized Bitcoin specifically and blockchain in general, on the grounds that I’ve seen no practical real-world applications," and "Bitcoin is not usable as a currency because the transaction costs and latency are both too high. (Yes, I know about the Lightning network.)" "My best guess is that pretty soon the supply of greater fools runs out." -- He's on to something! This is a pretty funny article that is remarkably lucid.

Sammi 5y ago
I've been hearing this sentiment ever since I heard about Bitcoin in 2011. Bitcoin has been through many huge crashes since, but the long term trend just keeps going up and up. So far the only fools are the one's that didn't HODL.
rjmunro 5y ago
> I’ve seen no practical real-world applications. I think money laundering and ransomware are both very practical real-world applications. Also I read you can use them for buying illegal drugs on the dark web. To be fair, they can be used for remittances - sending money back home from working abroad, but I'm not sure how practical that actually is on the ground compared to traditional suppliers like Western Union, or modern ones like TransferWise.
anthony_barker 5y ago
More than 50% of the worlds population live in a countries with currency controls(China, India, Angola, Nigeria etc). They have reasons to avoid currency controls. Another less nice example is the guy who had 50 million in BTC who went to german jail and they couldnt' recover the funds. This the first time in history you can have a "buried treasure" that you can protect just by memorizing 12 words. Greece was almost in continual default from 1800 until the EURO. (Reinhart, Carmen M.; Rogoff, Kenneth. This Time Is Different).

xvector 5y ago

I'm of two minds. Cryptocurrency is a beautiful technology. But the current prices have absolutely world-changing speculation already priced in. I think the price is largely meaningless, and cryptocurrencies are likely to crash hard, but at the same time, I don't really care, because the price is not the beautiful thing about crypto. Crypto achieved its purpose as envisioned by the cypherpunks that created it, the moment people started using it - for, say, Darknet drug markets: anonymous or pseudonymous exchange of value in a manner that cannot be censored by governments.

jonny_eh 5y ago
> Cryptocurrency is a beautiful technology On the surface, ya, but the proof-of-waste at its centre should be reason enough to consider the technology more harmful than not.
- xvector 5y ago
  Thankfully most cryptos are moving to proof-of-stake.
  - arcticbull 5y ago
    Agreed, but there are real questions about proof-of-stake, such as the "nothing at stake" problem.
  - colordrops 5y ago
    Is proof-of-stake a proven technology yet though? Has it been shown to function without loopholes or exploits?
    - CryptoPunk 5y ago
      The first iteration of Ethereum's Proof of Stake protocol, the standalone Beacon Chain, has been working since December 1st 2020: https://beaconcha.in/ https://beaconcha.in/ So while not there yet, it's on its way to becoming proven technology. A big test will be how it handles general transaction processing. The Beacon Chain is limited to finalizing Ethereum PoW chain blocks at the moment.

tempestn 5y ago

I've sold Tether for both USD and CAD without any issue or significant delay. What are the difficulties the author is referencing? (Asking genuinely, not arguing.)

aabhay 5y ago
How much/which exchange? The volume and jurisdiction matters.
Shosty123 5y ago
Yeah, I'm not sure. Even if a direct CAD pairing wasn't available, I've always been able to exchange my tokens for USDT and then exchange that for CAD and eTransfer it to my bank.
__zack 5y ago
The difference is between exchanging tether and redeeming tether. Exchanging tether is easy as long as there’s a counterparty willing to buy your tether in exchange for USD. But in principle you should be able to go to the “tether mint”, give them your tethers, and they redeem them 1:1 to USD. Apparently this is not very straightforward to do. This podcast episode covers the topic well: https://anchor.fm/cas-piancey/episodes/Tether-A-Stable-Discussion-erhp88 https://anchor.fm/cas-piancey/episodes/Tether-A-Stable-Discu...
- londons_explore 5y ago
  It would seem likely that the tether mint participates in some exchanges and buys or sells to keep the price stable. This theory is backed up more by the fact the tether price history matches with a script in someone's basement that occasionally crashes and it takes a few hours to repair, during which the price wanders before being clamped 1:1 again. That's functionally identical to going to the mint directly, and means the mint doesn't require any customer service etc.
- deleted 5y ago
  [deleted]
- question11 5y ago

errantmind 5y ago

Puts are fine but the swings will often get you liquidated if you use too much leverage. I personally wouldn't bet against Bitcoin knowing the state of the wider market (stocks at all time highs, inflation fears but also Fed rate hike fears). If inflation fears kick into high gear it could be enough to push BTC back to retest the ATH

tasuki 5y ago
> Puts are fine but the swings will often get you liquidated if you use too much leverage. Isn't that the same as saying "swings will often get you liquidated if you use too much leverage"? Whether puts or whatever else, if you use too much leverage, swings will often get you liquidated. Also, I don't think the author used any leverage. He just bought puts.
- errantmind 5y ago
  Yes puts or calls can get you liquidated by swings. I was trying to get across that a lot of people are using high leverage right now to get-rich-quick and, especially in the crypto space, it is risky to the point of being unwise.. unless you have an edge with backtested, medium-term models that adequately account for the wide range of volatility, with automated take-profit / stop-loss in place.
  - anthony_barker 5y ago
    If you purchase the put you can only loose the premium. Naked puts (writing them) are another story
  - tasuki 5y ago
    > Yes puts or calls can get you liquidated by swings. No, when buying puts/calls, you can't get liquidated by swings. The worst that can happen is that they expire worthless. They could get liquidated if you borrowed money to trade them, but that's not in the nature of the put/call, that's in the nature of borrowing money to trade. In this specific instance, I understand the author bought puts with actual money, and there's no way he could get liquidated by whatever swing.

sonicggg 5y ago

The author is talking about buying puts. These have expiration dates and a set price. Not only he believes bitcoin will collapse, he is basically suggesting he has a crystal ball on when it's going to happen.

jschulenklopper 5y ago
> he is basically suggesting he has a crystal ball on when it's going to happen. No. Just some time before Christmas 2021.

breck 5y ago

I love this sort of thing. He’s making a bet, explains his reasoning, and does it in the open! That’s great. I disagree that there’s no tech here. IMO public ledgers that never sleep are far superior(thanks to the hard work of many people over the past decade), and their advantage over retail banking will only increase. My online banks keep getting worse, crypto keeps getting better. Think about this: banks are CLOSED 77% of the time! Need to send a wire? 3/4 times bank will be closed. Capital will just move far more efficiently on block chains. I have NO idea whether crypto is a good investment. I agree with the OP that insiders dominate it. But the tech has gotten really solid and I don’t see how the rest of banking has a chance, unless our government wants to burn our economic lead down to protect the status quo.

rorykoehler 5y ago
The amount of time it takes for me to move my own money between my own accounts pisses me off mightily. I can pay to have an "instant" transfer but that is just double dipping by the banks for a service that should be provided in the cost I'm already paying for my accounts. Crypto currently has far greater UX challenges but once these are fixed this is where crypto can win.
- arcticbull 5y ago
  Free, instant transfers are already the status quo in a lot of the world, as of course they do not require blockchain. SEPA Instant Payment in the EU, for instance. In fact they're way faster than a Bitcoin transaction much of the time - and obviously way less expensive ($0 vs. $5-60). The US is moving to 24/7 free, instant payments as RTP rolls out. [1] The US has been quite far behind historically on this front however they are closing this gap, probably motivated in no small part by Bitcoin. [1] https://www.theclearinghouse.org/payment-systems/rtp https://www.theclearinghouse.org/payment-systems/rtp
  - xvilka 5y ago
    While it's true in some regions, most of the globe banking is still very slow. In any digital currency, like cryptocoins of CBDC it's the same globally, not per region.

G3rn0ti 5y ago

Many traders still predict Bitcoin to be over 100k by the end of the year. December could align with the bubble peak due to Bitcoin‘s investment cycle triggered by the halving events. That could wreck his short position but if he’s lucky, it will burst earlier.

factorialboy 5y ago
Halvenings are overrated. Bitcoin historically peaks 1yr after US elections and then finds a bottom and floats there for 3.5 yrs.
- jakelazaroff 5y ago
  Where by “historically” you mean twice?
  - factorialboy 5y ago
    2013. 2017. 2021. Three in three.
    - jkepler 5y ago
      Correlation isn't causation. Bitcoin's network started January 3, 2009, so its halving cycles are roughly correlated with US presidential elections. Bitcoin is also global, and countries like France (home to Ledger and active bitcoin communities) have five-year presidential cycles. So I don't see a causal link to US politics. However, I do think people falling down the bitcoin rabbit hole help them see the state for what it is, which might reduce the importance people place of federal politics, if it increases decentralization and local action.
      - factorialboy 5y ago
        I never said it's the cause. Just making an observation.
    - jakelazaroff 5y ago

paxys 5y ago

I agree with basically every word in the article, but would never ever short Bitcoin. Simply because the market can remain irrational longer than I can remain solvent. > When will it happen? I dunno. I’ll be astonished if we get through 2021 without an explosion. Everything he wrote was also true in 2020 or 2019 or 2018 or 2015, and yet there was no explosion. Why does he think Christmas 2021 will be different?

mojuba 5y ago
Almost everything except maybe the "fool pool" running out this time? Although even that is hard to speculate about. The crypto business may adjust and make itself even more accessible to a larger "fool pool". There's still a lot of money in the world that's in the hands of people who literally don't know what to do with it. Just create a sort of a Western Union for bitcoin and go to poorer countries... What a terrible, horrible idea that unfortunately might work.
- elliekelly 5y ago
  > The crypto business may adjust and make itself even more accessible to a larger "fool pool". I’ve been seeing more and more ads recently from various companies advertising how easy it is to open an account to trade crypto and I think this is the reason.
microtherion 5y ago
One possible difference is that there seem to be an awful lot of supposedly "safe investment" offers out there promising outrageous interest rates for short term loans. I'm not keeping a particularly close eye on that market, but I don't recall that being mentioned in past years, and it would seem to be a sign of the bottom of the sucker pool being scraped.

vmception 5y ago

Someone that was predicted to own 5% (1mm) of all Bitcoins just died in Costa Rica I doubt they had a survivorship and secession plan for their bitcoins and I doubt Bitcoins become less scarce Shorting Microstrategy and Coinbase via puts are good ideas though. Microstrategy isnt overleveraged yet but its easy for them to be. Coinbase is just a share dump, thats the entire purpose of direct listings. This has nothing to do with Bitcoin.

arcticbull 5y ago
That is true, unless you believe that the scarcity isn't at all relevant to the price in your anticipated future state. After all, the sacks of garbage in my kitchen are scarce but you don't see people tripping over their shoelaces to pay $30,000 a piece.
- vmception 5y ago
  I believe it is relevant as more bitcoin becomes distributed on bridges and in Defi protocols (see burned liquidity pool shares), on lightning and liquid, in longer dated “physical delivery” derivatives contracts and more
- jkepler 5y ago
  You are confusing scarcity and monetary hardness. Its super easy to create more sacks of garbage, and if demand for them shot up, a ton of people would bring their own sacks to market, crashing the garbage sack price. This happened to silver between the two sold wars, and nations that abandoned bimetal standards late lost a lot of monetary value to those on just gold. Monetary hardness is whether its easy or hard to introduce more supply of a commodity money when demand goes up. More dollars are printed in response to demand, more gold mined in response to rising gold prices, more sacks of rubbish if that's what people clamor for. Dollars are harder money than sacks of garbage (unless we're talking about the failed Zimbabwe dollar), gold is harder than dollars. However, more bitcoin CAN'T be created than the predetermined, declining schedule. Today, bitcoin's stock to flow is roughly equal to gold, but at its next halving it will double its hardness, and that will double again at every subsequent halving. So, bitcoin will become exponentially the hardest money ever created. Scarcity is only part if monetary hardness. But perhaps you're right regarding future price: in the future (as is true presently), one bitcoin will be worth exactly 100,000,000 satoshis.

lordnacho 5y ago

Derivatives guy here. Perfectly fine opinion, but two issues. Why now? This is a general investing issue. Trading costs money, holding a put costs money, so why will the market do what you think in this time frame? Why are the puts cheap? This could be substantiated with some numbers, esp implied volatility. Are they cheap vs history? I don't know, but the reasoning should show why you think so. Note I'm not looking for breakevens. That can be worked out from the price, but it doesn't tell you whether that is more or less likely than the market's opinion. Totally reasonable points otherwise.

femto113 5y ago
Except if you believe, as the author does, that the entire market is just scams and insider manipulation there is no meaning to be gleaned from any of the numbers. If it's all a sham it will blow up at some point, it's just a question of when, but that will almost certainly be precipitated by some unpredictable external event.
- AmericanChopper 5y ago
  That’s a very bad thesis to trade options on. The author believes that BTC is overvalued, but if you look at their reasons for believing it’s overvalued, some of them could have applied to BTC at any point in time over the past several years, and the rest could have applied to BTC and any point in time since it’s creation. By buying puts on bitcoin (derivatives), they’re not only betting that they’re correct, but also that something will happen in the next 5-6 months that will catalyze the market to correct that valuation. They don’t have any thesis at all for what’s going to catalyze this correction over the next 5-6 months. Their entire investment thesis is that “[they’d] be astonished if we get through 2021 without an explosion”. The investment described in this blog post is just a crypto-bear yolo play, with less thought put into it than your average r/WSB post. Edit: looking at the options chain for the BTC ETF they’re shorting, NTM puts are trading at $2, so the underlying has to lose about 1/3rd of its value for that trade to break even. If it goes to $0, their maximum profit is ~$400 per ~$200 contract. That’s certainly not a cheap contract.
  - 5y ago

victorfonseca 5y ago

BTC is not money? What it's? Disclosures · I have personally made money buying and selling Bitcoin.

arcticbull 5y ago
It's best modeled as a speculative asset. It has none of the hallmarks of a good currency. It's not fungible, it's not predictable, it's not cheap to exchange and its value flails around wildly like a decapitated chicken. That's even before you get into the Keynesian vs. Austrian argument that IMO should be long since settled but apparently, here we are.
- otherme123 5y ago
  You are making up the qualities of good currency, and then conclude BTC has none of them. Qualities of good money are 1) Durability (not losing value with time), 2) Portability, 3) Scarcity (limited supply), 5) Divisibility, 6) Acceptability and 7) Storability. BTC has all of them except maybe 6). And I'm no defender of BTC, I don't like it and I don't think it will ever be the main currency. It will be at best like the gold backing the day to day exchanges in another kind of "coin", and used only for clearing. Money can be, and currently is, as "fungible" as annotations in a ledger. Banks are not that different from BTC, except they don't need "proof" because they limit who can add transactions: a VISA transaction is just "write in the ledger -X for this wallet and +X for this other wallet". No gold, bills or any fungible asset is moved around, exactly like BTC.
  - arcticbull 5y ago
    C'mon now BTC certainly doesn't have (1) it's down 50% in the last month. I'd quibble with (2) because portability does imply a low cost of portability which compared to USD it does not have. (3) It has. (4) It has. (5) It definitely isn't broadly accepted and (6) it's not great at either, just look at what percentage of the coins have already been lost. 20-30% in a decade. Every random walk down the time line leads to 100% of coins lost.

silexia 5y ago

Summary: -Bitcoin is not used used as currency -Bitcoin is extremely wasteful of energy -Bitcoin is very vulnerable to government legislation -Bitcoin is mostly a pump and dump by insiders I agree with the author's points.

wsc981 5y ago

So I will probably soon buy more Bitcoin as I believe the price will in the long run go up. Tether (USDT) is a huge liability that could cause a temporary crash. But at the same time you see some regulation changing that e.g. allows banks to be custodians for crypto-currencies. In my opinion this is huge. It means that eventually institutional investors can buy Bitcoin and other cryptos without having to worry about storage, keys, etc... Banks can handle the technical stuff. I have very little trust in the fiat system of the Eurozone and I'd bet there are investors that feel the same. Investors that will look into ways to spread the risk by adding different asset classes to their portfolios. Cryptos, especially Bitcoin, seems to be a very nice asset class to have in the long run. Another reason why I think Bitcoin is here to stay is that Bitcoin enables countries to get around US imposed sanctions. Iran is using Bitcoin for this purpose and I am sure other countries do so as well. Bitcoin as an asset class also offers a few nice features that one cannot find in other asset classes and I believe these features are responsible for most of Bitcoins inherent value: - You can manage the coin completely by yourself (which can also be a risk of course - if you lose it, it's your full responsibility) - The value of Bitcoin is not negatively affected by money printing (quite the other way around I'd wager). - It's a bit easier to hide crypto assets from tax agencies, this might become an especially valuable property if Central Bank Digital Currencies become a thing. For example if citizens are required to keep an account at the central bank and the central bank can at all times see all your CBDCs and impose sanctions on your CBDCs if you're not deemed a good citizen. - It's very simple to take with you on travel (e.g. by memorising wallet keys or using a hardware wallet like a Ledger Nano) unlike e.g. gold or fiat money (often some limit is imposed). - It's easy and cheap to transfer (no banks or other middlemen involved). - On a country level: can help bypass US sanctions. So I am still a long-term believer in Bitcoin, even though I do believe that USDT could cause a crypto-market crash at some point. I also believe US government agencies will only investigate USDT if they feel the value of Bitcoin is too high (which currently isn't true after the most recent crash) as a way to temporarily control the price of the crypto-currency. P.S.: I feel the authors' arguments 6 (climate) and 7 (greed) are not valid arguments for shorting Bitcoin. To me these seem mostly emotional arguments and I wouldn't want to make financial decisions based on emotions.

gregopet 5y ago

surfingdino 5y ago

He's betting on prices going down at the end of the current 4-year Bitcoin cycle, which they historically have done. This is just trying to guess when it'll happen. Betting against Coinbase, an exchange, is a bit foolish as exchanges make money every time there is a trade, up or down. Their income is unaffected by market crashes, may even go up. That detailed dig into the past of MicroStrategy is interesting... but I don't know how it applies to today. It has a whiff of a personal grudge and the comment about laser eyeballs reminds me of people complaining about the "Beta" label and the pastel colours of the early Web 2.0 websites. Don't know why this blog post is important, tbh. But it shows that the crypto craze is in full swing when technologists start writing publicly about their investments.

ffggvv 5y ago
actually coinbase’s revenue tracks pretty well to bitcoins price. as when the price crashes people lose interest in it and volume goes way down. this is basically what happened between the end of the last bull market and the start of this one and the same is true for robinhood with stocks. bull market attracts more investors trying to get rich and drives volume. in turn when it crashes the volume dries up as retail loses interest
- surfingdino 5y ago
  I am not surprised to learn that, but I will still maintain that exchanges are fairly immune to the fate of the securities/commodites/assests traded on them. Crypto today is a more complex, evolved sphere than four years ago and most of the value is not in the price of this or other coin/token but in the smart contracts. Which is something that Bitcoin does not have, but for some reason people see it as a valuable asset.

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ur-whale 5y ago

a) Bitcoin price is extremely volatile, even on a 6-month time horizon, and IMO, given the volatility, this bet is a pure casino play: most of the rationale he puts forward has absolutely no reason to come to fruition within the next 6 months. The OP better pray he's not going to urgently need the money he parked in those puts any time soon. b) On a longer (years) time horizon, historical trend is telling a clear story: shorting Bitcoin is a very dangerous proposition. Whether you are long or short on Bitcoin, only play with money you can afford to lose.

thatsabadidea 5y ago

LOL - all unfounded/inaccurate FUD - get REKT - HFSP

xiekomb 5y ago

So many things wrong with this article. Taking a bet against bitcoin it totally legit but please don’t over simplify things or make false claims. “No real world use” for bitcoin and other crypto currencies: ok so the goods I bought for years with bitcoin do not exist? And the trading market you are playing on are not a real world use case? “ These practices have run rampant on every financial market in human history that hasn’t regulated against them fiercely. Why should Bitcoin be any different?”. That’s the ultimate authoritative argument. “Everybody knows”, “obviously”, etc. Please back up with facts and don’t make general claims like that. USDT: totally agree. But then don’t trade with usdt. Bitcoin not easily convertible to cash ? Maybe you should pickup a more serious trading desk. On boarding is much more restrictive than mainstream platforms like binance but nothing is more untrue that bitcoin is not liquid. You can settle trades in USD (not USDT) instantly with a serious regulated broker. Limitations of bitcoin: mining, fees, other. Agree, but nothing of these problems makes bitcoin an insider scam. Is there is a problem there is a solution. Who says that these shortcomings can’t be solved ?

bhawks 5y ago

The arguments outlined are not particularly strong unless you are already predisposed to not liking Bitcoin (which is fine, not liking a particular security is a perfect reason not to invest in it - however it's a bad reason to bet against it) 1: BTC is not controlled by insiders. Sure it's a great headline but once you account for the fact that a BTC wallet owned by an exchange that pools large amount of customer funds is not the same as Alice's Ledger nano you will quickly realize that assets are actually reasonably disbursed across many parties. Eg: https://insights.glassnode.com/bitcoin-supply-distribution/ https://insights.glassnode.com/bitcoin-supply-distribution/ 2: BTC by design will take around 10 minutes to confirm a transaction, further you will actually want 3-6 transactions to be really confident in finality. I agree, I am not waiting inline at the grocery for 60 minutes either. However dismissing layer 2 solution like lightening network deserves something better than handwaving. Lightening network works very well in my experience. Also I need to wait 5 days to transfer cash from my broker to my credit union, I wish I could use BTC. Finally wire fees are a trash fire. 3: Tether. Trading tether (or USDC or DAI) into fiat is quick and easy. Converting USDC to dollars is also easy. Yes tether is 'kinda suss' in a bank run scenario. USDC however is audited and regulated. I've seen papers both indicating that loose tether issuance distorts BTC prices and papers that cannot find a correlation. So this feels like a tossup (personally I hope all the fines and scrutiny on tether forces some house cleaning but I am not holding my breath) 4: lack of regulation. Regulation is not a cure all, Madoff pulled the wool over auditors eyes for years, no one was prepared for LTCM, regulators couldn't stop the 08 financial meltdown, and so on. BTC has no native ability for centralized control, however it also has 100% transaction transparency. That it extremely valuable. Finally centralized exchanges need to comply with local rules and regulations (have you seen the travel rule? That's some forceful regulation there). 5: is actually a repeat of 1 and 3. The insiders argument is overblown and turning stablecoin into fiat doesn't require 'good luck'. ( I am a very unlucky person but have done this multiple times myself). 6: PoW is ecologically unfriendly. Yes BTC energy usages should give pause. However it is only fair to talk about them in the context of the ecological effects of fiat money. Fiat printing is the way we have financed the last 20 years of war (whatever happened to war bonds??). If BTC underpinned our currency system there'd be a lot less room for environmentally destructive jingoism. 7: Libertarians are dumb so they must be wrong. Nothing to say here but ad hominem arguments don't seem effect asset prices. I struggle to find arguments here that would give me conviction to say BTC will crash in 6 months. I am 99.9% convinced that Tim Bray doesn't like BTC as a financial instrument but that has no meaningful impact on BTCs price... (It is not like he's Elon Musk ;) - actually I think Elon's market moving mojo is all gone now)

keymone 5y ago

let's go over beliefs: > high proportion of all Bitcoins are owned by insiders same as any other asset in the world, think pareto distribution - vast majority is owned by few entities. so since this point applies to everything pretty much equally - it can be discarded. > Bitcoin is not usable as a currency because the transaction costs and latency are both too high. (Yes, I know about the Lightning network.) mentions the working solution but chooses to ignore it without reason. not the best strategy in investing. > There are repeated allegations that Tethers are created out of thin air to prop up the price of Bitcoin prophecies of Tether collapse have been around so long, even broken clock theory proponents are getting grey in their hair waiting for anything to happen. but more importantly - if tethers are printed without backing, it doesn't mean there isn't demand for BTC. if BTC were bought with USDT, somebody in the world wanted those BTC and somebody else is stuck with USDT. what do you think happens when Tether collpases and USDT starts trading at discount, what do you think people will be dumping their USDT for? > much of the trading is seriously sketchy, whether that’s based on ad-hoc Tether creation, wash trading, or other well-known pump/dump schemes best argument not to short bitcoin. highly volatile asset will either trigger your stop-loss during a random 5-minute fluctuation or leave you devastated with debts orders of magnitude larger than your original investment if you choose full-idiot strategy of shorting without stop-loss. > The net effect is that money flows in from, in effect, suckers and rubes, then into the pockets of the insiders. again, applies to literally everything. > Bitcoin’s Byzantine-generals solution, based on proof-of-waste, is unacceptable in the face of the oncoming climate crisis. in fact absolutely opposite is true. bitcoin mining is the most green industry around and is driving development of green energy capacity faster than anything else. burning coal or oil for mining is expensive even politically (see china driving away all the miners, citing environmental concerns even though the real reason is inability to control flight of capital). to all people concerned about bitcoin's environmental impact: in the end, it's not your business what i do with the energy i purchase on a market, if you actually cared about the environment - you'd direct your anger at dirty energy producers, go do something useful with your lives instead of faking rage for virtue signalling. > Since Bitcoin has no practical uses absolutely false belief in my opinion. > Puts are pretty cheap. If I’m totally wrong and Bitcoin is still sailing along at the end of 2021, I’ll be annoyed but not impoverished. If it crashes I’ll be sad for the unfortunates who lost their stakes, and entirely unsympathetic to the insider community the author didn't cover another possible scenario: if bitcoin blows up the other direction, the author loses 100% of their investment (if they are smart) or unlimited amount of money (if they are stupid). so yeah, the entire belief set is wrong and author is most likely going to lose money unless they get very lucky.

martindale 5y ago

If your conviction is so strong, why proxy your short instead of just shorting the asset itself? I look forward to your prompt report in December...

CryptoPunk 5y ago

If your aim is to short bitcoin, you can do so directly, on numerous derivatives exchanges, including decentralized ones like Ethereum-based dydx: https://help.dydx.exchange/en/articles/4969332-a-beginner-s-guide-to-going-long-short-using-perpetuals-on-dydx https://help.dydx.exchange/en/articles/4969332-a-beginner-s-... Shorting $COIN is making a bet on the larger crypto market, which may outperform BTC.

timwaagh 5y ago

The fact is you did not short anything but you bought a put option. Even if I agree with you on bitcoin having an intrinsic value less than that of toilet paper, these reasons would have been true before the recent high point too. Instead, it reached that high point and an equivalent put would have expired worthless. Meaning you would have lost all of your investment. I think shorting is a better idea as it relies less on timing. But with the fed pumping massive amounts of money into the us economy, I think you are still not unlikely to get margin called for a bet that the fed will not destroy the value of the dollar faster than the bitcoin goes back where it came from.

ciconia 5y ago

> My best guess is that pretty soon the supply of greater fools runs out. “Two things are infinite, the universe and human stupidity, and I am not yet completely sure about the universe.” – Albert Einstein

fukd 5y ago

India and China have wonderful micro payments apps which means 3 billion people do not ever need bitcoin & co for online transcations or what not.

magma1983 5y ago

Markets can remain irrational longer than you can remain solvent.

sentinel 5y ago

I'd love to hear the one main argument against it. Throwing 7 arguments (some of them related) is throwing too large of a net. Is he hoping to get people convinced with at least one of the points resonating? IMO, in order (and happy to be proven wrong, I am curious what others think): 1. I'm not sure why this would matter. Wouldn't that mean that the insiders have all the incentive to sell the bitcoins they own, even in time – so they can make some "real" money? Wouldn't the price have crashed / gone to zero so many times until now? (there were plenty of opportunities to sell). There is def speculation in BTC, I am not denying that. 2. This is incorrect. Some (most?) people view BTC as a store of value, so in essence, transactions can be few and far between. The adage here is "transaction costs too high? – it means you're moving too little BTC". The Lightning network does play a role in transaction costs. 3. This might a good point. I don't know enough about Tether's use but I have heard this argument raised before. 4. Agree with author, but this point is rather vague. It could go either way. Not sure if regulation is as much of a silver bullet as he makes it out to seem. 5. This is a corollary to the above 2 points, so not really a different argument. 6. Is this the main argument? The author does seem to be an environmentalist - but there are plenty of arguments against this point too. I personally disagree with this point. 7. Again, not really a point, just a rant on what the author thinks are the people that own BTC. At this point he's just insulting BTC holders really, so you know, pyramid of argument (attack the argument not the person etc.) makes me discard this point entirely. Again, curious what others think, lots of smart people here.

ho_schi 5y ago

Bitcoin is pure capitalism. No real work, no real goods and no values of something and not benefit for human kind. So it is just gambling. I've a bad impression of crypto-blockchain-digital-coin stuff which purpose is to make some minority richer. The founders of Bitcoin stated they want free free us from central-bank-money? The central-banks are hopefully the only institution people can trust in stability a little. Politicians should look up their laws, most countries only allow their official currency for trade and should limit exchange to official currencies of other countries.

wraptile 5y ago

I seriously don't understand "bitcoin has no tech" argument. These people must be very priviledged and stationary if they never encountered issues with current banking systems. At some places transfering money at local level takes ages and international banking is almost always a complete an utter joke. I've been waiting for over a month for a new debit card from Revolut while using their highest subscription tier and that's supposed to be the new hip, cool kids bank. It often takes days to move money between countries - even miniscule amounts that should be immune. Even our debit cards are region locked and extremely confusing, your VISA doesn't work the same everywhere. It's just complete and utter chaos if your finances are just slight bit out of the norm. Even if bitcoin is not the holy grail - it's still extremely useful piece of technology for many of us.

ben-gy 5y ago

This reminds me of Bill Ackman’s war against Herbalife, which in my opinion, is a perfect example of a pyramid scheme that is too big to fail. Ref: https://www.investopedia.com/news/billionaire-bill-ackman-dumps-herbalife-ending-5year-war-betting-against-it/ https://www.investopedia.com/news/billionaire-bill-ackman-du... Whether the OP is right or wrong, I honestly don’t think the crypto ecosystem is independent enough from critical transactions for it to collapse as described.

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thisisit 5y ago

I like how he talks about Microstrategy but not Tesla's position in bitcoin and how Musk's tweets are affecting crypto prices.

puranjay 5y ago

If anyone is looking to short BTC and doesn't trust any CEX, I recommend Dydx.exchange, which is completely decentralized.

1experience 5y ago

This is how to lose money with shorting 101. You should never base your shorts on solely rational points (long-term rational points, even worse) when going short on bubbly assets. Things like "Bitcoin is not a viable payment method, it's centralized, possibly manipulated, fueled by the greater fool" is not a valid shorting motive unless you have a triggering event caused by your aforementioned rational point.

puranjay 5y ago
My thesis for longing/shorting BTC at this point is purely Elon Musk's tweets
- elliekelly 5y ago
  Sure he tweets every time he pumps it up but are you confident he’ll give you (and all the rest of his followers) a heads up before he dumps it? I wouldn’t be. And for that reason alone it’s a fatally flawed investment strategy.
  - puranjay 5y ago
    he just has to tweet something remotely bearish and the market craters The last time he cracked a joke about BTC maxis and sure enough, the market dumped. When he talked about BTC's eco impact, it dumped hard as well. You can trace the pumps/dumps to the exact moment of his bearish/bullish tweets. It's unreal

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aazaa 5y ago

Shorting deep into a double-digit correction sounds just as likely to lose money as buying deep into a double-digit expansion. The author is talking about a short-term trade, not an investment. There's a lot less room for error on the timing, and I suspect the timing here. On that note, the author says nothing about the halving cycle. Proceed with caution, brave "shorter." The bigger problem is that all of the author's criticisms have been valid for many years. This is old news. It would be more interesting to read about a complaint that has never been discussed before and to understand why this time will be different for Bitcoin.

Bayart 5y ago

Don't do any technical analysis, trust your guts, short low, buy high, lose all your money, get paid in HN points.

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Yizahi 5y ago

He is right on all counts about Bitcoins, Tethers, Lightning and so on, but I still wouldn't short crypto today. Irrationality is still building up and opinions of crypto adepts are "buy". At least I think so by reading forums. If I had to guess crypto will require a large external event to crash - Taiwan annexation, Zeta variant of Covid, Russia invading Eastern Block etc. Something which will prompt one or more large players to get out first, and then it will start falling down like a house of cards because of Tethers (and now USDC are suspect too).

runbathtime 5y ago

All personal opinion- Puts are speculative gambling if no current position and a hedge if in a current position to the downside. You can still hold your beliefs without putting on a trade. Why do you want to put on a trade that is inflexible on timing? Bitcoin can be manipulated by tweets, incoming regulation, news, whales, etc. If you are not privileged to have this info then know you are in a game where you are disadvantaged. Curious how others are shorting crypto.

tigereyeTO 5y ago

I disagree with his beliefs. I think a few of the beliefs he states for his reasoning are incorrect. Incorrect input leads to incorrect output. Kudos to him for putting his money where his mind is, but frankly when he learns more about bitcoin and his incorrect beliefs are shattered, I'd imagine his conclusion would be altered as well.

frhack 5y ago

Coinbase is not BTC only. The crypto market cap is growing exponentially since 2015 Today BTC is only 46.3% of the total market cap, BTC is proof of work, while the future is proof of stake. The crypto market is growing very fast and it is changing very fast too. https://ventures.coinbase.com/ https://ventures.coinbase.com/

sangnoir 5y ago
To rephrase an old saying: "When BTC sneezes, the crypto market catches a cold"
- frhack 5y ago
  If BTC sneezes because mining is prohibited, proof of stake cryptocurrency stay health.

jl2718 5y ago

If you’re wondering how your ‘crypto savings accounts’ can return 12% on USD, it’s the option spread from this guy.