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Even when buying puts on a regulated exchange like LedgerX, which custodies all the cash that would pay out on the bet?

by SilasX 4y ago

JumpCrisscross 4y ago
> a regulated exchange like LedgerX, which custodies all the cash that would pay out on the bet Bitcoin crashing would take out LedgerX. At that point, you’re an unsecured creditor. There is also legitimate question to them paying out a massive short after something like this.
- SilasX 4y ago
  The exchange is not long Bitcoin, and it holds (edit: typo) all trader assets separately from its own, so no, a crash in bitcoin wouldn’t “take out” LedgerX. You’re just making stuff up now.
  - JumpCrisscross 4y ago
    > exchange is not long Bitcoin, and it hold me all trader assets separately from its own, so no, a crash in bitcoin wouldn’t “take out” LedgerX It would take Herculean effort for any crypto business to survive, well, crypto wiping out. Deposits would become worthless, cash would be pulled, credit would vanish as would investment. If markets don’t take them out, their banks and regulators will. It’s the crypto equivalent of Treasuries defaulting.
    - SilasX 4y ago
      It doesn't matter -- LedgerX doesn't own those Bitcoin or the customer deposits and never did. Even if the business fails (from e.g. being in debt and the fees drying up), customer assets are held separately from their own assets and would be available for withdrawal. Since you pretty clearly didn't research before posting, you may not realize that FTX bought LedgerX (in late 2021), and that owner did become insolvent, and regulators did look into the books, and even that didn't prevent options contracts from being settled and assets withdrawn. Guess we found Hercules! If you're not willing to admit when you're wrong, you'd be doing the site a favor to stop posting out of ignorance -- it's not helping.
      - JumpCrisscross 4y ago
        > customer assets are held separately from their own assets and would be available for withdrawal This protects cash and crypto at LedgerX. (Assuming it has few senior creditors.) Shorts are different. If you place 1 BTC short with LedgerX, it doesn’t hold 1 BTC of cash. Instead, it maintains claims on others. Those claims become unlikely to pay in a crash. That’s LedgerX’s counterparty risk, which does it in, which does you in. Shorts are inherently leveraged in a way longs are not. > that owner did become insolvent, and regulators did look into the books, and even that didn't prevent options contracts from being settled and assets withdrawn Yes, standard bankruptcy priority was followed. Also, no leveraged positions needed to be unwound way out of the money. There is plenty online about why shorting coins on crypto exchanges is stupid. It’s a simplified version of why FX shorts, when done with large anticipated gains, are placed offshore from the target currency.
        SilasX 4y ago
        >If you place 1 BTC short with LedgerX LedgerX doesn’t support short-selling or margin trading. If you buy a put (the suggestion I made in my original comment), the counterparty sets aside the cash to honor it. (I think you’re confusing short-selling with a short position, but that doesn’t sound like mistake someone with your bio would make.) Are you done being confidently incorrect, or can I expect you to pollute more discussions with baseless claims you know nothing about? Bookmarking to warn future HNers what they’re dealing with. It’s fine to make mistakes. It’s not fine to be that wrong, with that level of confidence.
        kasey_junk 4y ago
        I don’t know anything about LedgerX or Crypto trading but do have a fair bit of fx experience so have a few questions about what you are describing. Doesn’t this just move the counterparty risk away from the exchange and onto another participant in the crypto ecosystem? One that is even more systematically long crypto and one with less regulatory protections around senior debt? Why would someone be a counterparty to this trade? It seems like they are trading a lot of downside risk to get cash equivalents upside. I’m sure I’m not understanding something about this setup but it certainly seems worse in all ways than an exchange actually enabling more traditional shorting.

Even when buying puts on a regulated exchange like LedgerX, which custodies all the cash that would pay out on the bet?

by SilasX 4y ago

Even when buying puts on a regulated exchange like LedgerX, which custodies all the cash that would pay out on the bet?

> a regulated exchange like LedgerX, which custodies all the cash that would pay out on the bet Bitcoin crashing would take out LedgerX. At that point, you’re an unsecured creditor. There is also legitimate question to them paying out a massive short after something like this.

SilasX 4y ago
The exchange is not long Bitcoin, and it holds (edit: typo) all trader assets separately from its own, so no, a crash in bitcoin wouldn’t “take out” LedgerX. You’re just making stuff up now.
- JumpCrisscross 4y ago
  > exchange is not long Bitcoin, and it hold me all trader assets separately from its own, so no, a crash in bitcoin wouldn’t “take out” LedgerX It would take Herculean effort for any crypto business to survive, well, crypto wiping out. Deposits would become worthless, cash would be pulled, credit would vanish as would investment. If markets don’t take them out, their banks and regulators will. It’s the crypto equivalent of Treasuries defaulting.
  - SilasX 4y ago
    It doesn't matter -- LedgerX doesn't own those Bitcoin or the customer deposits and never did. Even if the business fails (from e.g. being in debt and the fees drying up), customer assets are held separately from their own assets and would be available for withdrawal. Since you pretty clearly didn't research before posting, you may not realize that FTX bought LedgerX (in late 2021), and that owner did become insolvent, and regulators did look into the books, and even that didn't prevent options contracts from being settled and assets withdrawn. Guess we found Hercules! If you're not willing to admit when you're wrong, you'd be doing the site a favor to stop posting out of ignorance -- it's not helping.
    - JumpCrisscross 4y ago
      > customer assets are held separately from their own assets and would be available for withdrawal This protects cash and crypto at LedgerX. (Assuming it has few senior creditors.) Shorts are different. If you place 1 BTC short with LedgerX, it doesn’t hold 1 BTC of cash. Instead, it maintains claims on others. Those claims become unlikely to pay in a crash. That’s LedgerX’s counterparty risk, which does it in, which does you in. Shorts are inherently leveraged in a way longs are not. > that owner did become insolvent, and regulators did look into the books, and even that didn't prevent options contracts from being settled and assets withdrawn Yes, standard bankruptcy priority was followed. Also, no leveraged positions needed to be unwound way out of the money. There is plenty online about why shorting coins on crypto exchanges is stupid. It’s a simplified version of why FX shorts, when done with large anticipated gains, are placed offshore from the target currency.
      - SilasX 4y ago
        >If you place 1 BTC short with LedgerX LedgerX doesn’t support short-selling or margin trading. If you buy a put (the suggestion I made in my original comment), the counterparty sets aside the cash to honor it. (I think you’re confusing short-selling with a short position, but that doesn’t sound like mistake someone with your bio would make.) Are you done being confidently incorrect, or can I expect you to pollute more discussions with baseless claims you know nothing about? Bookmarking to warn future HNers what they’re dealing with. It’s fine to make mistakes. It’s not fine to be that wrong, with that level of confidence.
        kasey_junk 4y ago
        I don’t know anything about LedgerX or Crypto trading but do have a fair bit of fx experience so have a few questions about what you are describing. Doesn’t this just move the counterparty risk away from the exchange and onto another participant in the crypto ecosystem? One that is even more systematically long crypto and one with less regulatory protections around senior debt? Why would someone be a counterparty to this trade? It seems like they are trading a lot of downside risk to get cash equivalents upside. I’m sure I’m not understanding something about this setup but it certainly seems worse in all ways than an exchange actually enabling more traditional shorting.