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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

by 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and regulators did look into the books, and even that didn't prevent options contracts from being settled and assets withdrawn.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and regulators did look into the books, and even that didn't prevent options contracts from being settled and assets withdrawn Yes, standard bankruptcy priority was followed.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.
    - SilasX 4y ago
      Thanks! You're showing a lot more curiosity and honesty than JumpCrisscross. >Doesn’t this just move the counterparty risk away from the exchange and onto another participant in the crypto ecosystem? They have to set the money aside for the (cash-secured) put they're writing, out of their control, so no, you don't depend on any later solvency of that counterparty to honor the put. And, as above, customer access to these assets survived even the FTX bankruptcy, since they're not recognized as exchange assets in the first place. >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. Same reason anyone else sells cash-secured puts. >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. Except that you, the person taking a short position (by buying puts) actually get a payout in the worst-case scenario, and have effectively no counterparty risk. That's at least one way that it's better. Also, I don't know what's "non-traditional" about buying puts as a means of establishing a short position. It seems that, like JumpCrisscross, you're being sloppy about the difference between short-selling (borrow an asset to sell) and a short position (any position that increases in value as the underlying decreases). Edit: Also, one thing that bothers me here is the lack of a coherent model behind the objections. On the one hand, you both want to claim something is impossible, but when I show it is, you want to insist that that way is "worse in every way". What?
      - 4y ago

by SilasX 4y ago

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.
  - SilasX 4y ago
    Thanks! You're showing a lot more curiosity and honesty than JumpCrisscross. >Doesn’t this just move the counterparty risk away from the exchange and onto another participant in the crypto ecosystem? They have to set the money aside for the (cash-secured) put they're writing, out of their control, so no, you don't depend on any later solvency of that counterparty to honor the put. And, as above, customer access to these assets survived even the FTX bankruptcy, since they're not recognized as exchange assets in the first place. >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. Same reason anyone else sells cash-secured puts. >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. Except that you, the person taking a short position (by buying puts) actually get a payout in the worst-case scenario, and have effectively no counterparty risk. That's at least one way that it's better. Also, I don't know what's "non-traditional" about buying puts as a means of establishing a short position. It seems that, like JumpCrisscross, you're being sloppy about the difference between short-selling (borrow an asset to sell) and a short position (any position that increases in value as the underlying decreases). Edit: Also, one thing that bothers me here is the lack of a coherent model behind the objections. On the one hand, you both want to claim something is impossible, but when I show it is, you want to insist that that way is "worse in every way". What?
    - 4y ago