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Coinsetter raises $500k to bring leverage, shorting to Bitcoins
- jeremyjh 14y agoAre there some 0s missing? $500K doesn't sound like any amount of money to open a "mature" trading platform.
- patio11 14y agoOn the Bitcoin Software Maturity Scale, where hundreds of thousands of dollars routinely gets entrusted to 17 year olds coding bucket shops in Ruby on Rails and 80% of the global transaction volume is run through a company in Tokyo set up to trade Magic: The Gathering cards, a guy with financial industry and experience and enough money to pay for a single professional security audit is practically IBM.
- bdr 14y agoYour point is true, but fyi the M:tG aspect was long gone by the time gox was sold to Tibanne. It just happened to be a domain the original founder had around.
- jnbiche 14y agoAnd yet look at how the one YC-funded, quant-founded Bitcoin company is doing in terms of security and stability.
- GHFigs 14y agoBitcoin Software Maturity Scale Ah yes, that scale that's numbered from 0 to 0.8 and then back to 0.7.
- gwern 14y ago> and 80% of the global transaction volume is run through a company in Tokyo set up to trade Magic: The Gathering cards Gasp! You're right! What other companies have I foolishly entrusted parts of my life to? /looks at his video game console, run by a company in Kyoto set up to sell handmade hanafuda cards Not you too, Nintendo! ;_; I don't know what to believe in now.
- tnorthcutt 14y agoVideo game console != currency exchange company.
- gwern 14y agoThat was not my point at all. My point was that patio11 is, shamefully, engaged in well-poisoning by bringing up the distant origins of MtGox, which have zero relevance to any consideration of MtGox's current professionalism, security, regulatory compliance, risks to users etc. (A point that you would think would be obvious to anyone on Hacker News, who is aware of how companies 'pivot' all the time.) It has changed too much, isn't even owned or run by the same people, and has a long enough and spotty enough track record to judge on its own. I illustrate the irrelevance and fallacy by applying the same well-poisoning to a pleasingly symmetrical example: another Japanese company which was also set up to deal with playing cards - Nintendo. No one would dream of judging Nintendo by its playing cards origin, because that was a long time ago, different people are involved now, and it has ample room to judge it since. Just like MtGox.
- gwern 14y agoFor example, MtGox shutting down trading is a great argument against its competence! But it shutting down trading has nothing to do with its origins as a card trading site. Bringing that up is pure rhetoric.
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- ChuckMcM 14y agoAnd who says there isn't any innovation in online gambling?
- everettForth 14y agoCongrats to Coinsetter! Hopefully this should lead to longer term price stability of bitcoins.
- ChuckMcM 14y agoUnder what scenario would this increase stability in bitcoins?
- deleted 14y ago[deleted]
- dragonwriter 14y ago> Because it allows not only buyers of an asset, but sellers as well. Support for shorting doesn't allow sellers whereas a system without such support allows only buyers; to have buyers you have to have sellers -- any market has both. Shorting is essentially equivalent to acquiring a debt denominated in the commodity shorted (so "shorting bitcoins" is essentially just borrowing bitcoins) and immediately converting the borrowed commodity into something else (presumably, bitcoin shorters would generally be converting them into traditional sovereign currencies.)
- kevinpet 14y agoThis is great news if it works out. The ability to short is an important part of moderating a bubble.
- jnbiche 14y agoYou can short now: icbit.se is a well-run exchange and derivatives market.
- trotsky 14y agoAn unregulated leveraged options platform with essentially no assets and what will undoubtedly be super senior debt deals with their prime broker writing naked contracts on something that moves 30% based on one website lagging out for a hour or two? what could go wrong
- deleted 14y ago[deleted]
- gfodor 14y agobitcoins was babby's first forex trading platform. I guess it's time for nerds everywhere to get a crash course in options (emphasis on the word crash.)
- angersock 14y agogod this is going to be good Edit: Is anyone actually recording the market movements? It'd be really neat to see minute-by-minute how this goes down.
- bwood 14y agoBitcoin Charts [1] keeps history for dozens of exchanges (which all float at slightly different values) and has a free API to let you request any period of interest. Beyond just market price, I think you can get records of every individual trade. If nothing else, this whole bitcoin thing is a fascinating experiment! [1] http://bitcoincharts.com/charts/ http://bitcoincharts.com/charts/
- minimax 14y agoNo legitimate prime broker is going to touch this thing.
- DanielRibeiro 14y agoCoinbase, a YC company, recently raised 600k[1]. It was crowdfuneded though: Having completed the FundersClub (YC S12) crowdfunding round, Coinbase raised $268,700, a little over its goal of $250,000, from 61 FundersClub members [1] https://www.privateinternetaccess.com/blog/2012/09/coinbase-first-crowd-funded-bitcoin-company-raises-over-600k/ https://www.privateinternetaccess.com/blog/2012/09/coinbase-...
- lwat 14y agoI just found out that IG Markets have added Bitcoin binaries to their trading platform. You can bet on the Bitcoin price being above / below $100, $150, $200 etc on MtGox at some point in the future.
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- michaelochurch 14y agoThis is a big deal. With leverage and shorting, the only people who will have use for BitCoins (as opposed to a long position in a margin account) will be the small set who need the specific type of liquidity that BitCoin offers... and that will prove to be a small set. (People who need regular anonymous liquidity have other means.) I will also remark that, even when a bubble is underway, shorting is dangerous. If you don't know what margin calls are (and how much it sucks to get hit by one) then stay out.
- waterlesscloud 14y agoThe real value in bitcoin is that it provides settlement from anywhere in the world to anywhere in the world in at most a couple of hours. Very few other options exist for such rapid settlement. Whatever happens with bitcoin, that pace of commerce exists in the world now. To me, the interesting thing to be doing at this point is figuring out how to take advantage of that speed with new business models.
- jacoblyles 14y agoNo, the real value in bitcoin is the blockchain. It shows us a method to use to create and mutate an agreed-upon public state history using a p2p network. Namecoin shows that this can be used for other purposes than merely currency. Blockchain based coordination and provision of public goods is the future.
- tocomment 14y agoHmm, that's an interesting point. I wonder if it could be adapted for secure online voting somehow? Perhaps we could finally have a system that's anonymous but prevents double voting?
- mcherm 14y agoVoting is an incredibly hard problem. For instance, your description "anonymous but prevents double voting" is ripe for fraud: I go around paying people to vote for me (or intimidating them into doing so). The secret ballot, cast in public, is resistant to that attack. More generally, one requirement of a voting system is that people trust it. Any elaborate system, no matter what it's theoretical advantages, can have a hard time meeting this hurdle because there are many people in the population who are NOT experts on cryptography and won't be comfortable with any elaborate system.
- mtgx 14y agoWouldn't this, ironically, stabilize Bitcoin, if others try to take advantage of its growth and try to bring it down again?
- fennecfoxen 14y agoIt would indeed stabilize Bitcoin, but I don't see what's so ironic about it. Short-selling and other derivatives substantially stabilize a lot of markets, popular delusion to the contrary notwithstanding.
- runT1ME 14y agoBut now there is double the incentive to artificially drop the value of BitCoin as much as possible, no? I don't know how trading bitcoins work, but won't this increase volatility both ways in addition to overal stability (taken as an average).
- derefr 14y agoYes--basically, short-selling just creates the same kind of "flight to quality" gravity that kills markets when people start to feel pessimistic about them, but pulls in the opposite direction: so now, on average, everything will "draw a straight[er] line", but moment-to-moment you'll just have price spikes that kill the short positions in the same way price-plummets kill the long positions. What Bitcoin really needs to smooth out its volatility, as far as I can tell, is HFT market-makers trading tiny amounts of BTC by the millisecond. Which should theoretically be easier with an all-digital currency--but, if done in "real" BTC, requires probably at least a million times the block-chain growth velocity Bitcoin currently has. It could still probably be done with "BTC liabilities" on a private exchange, though.
- unclebucknasty 14y agoThat's an interesting question and I think it's hard to say. If by "stabilize", you mean reduce volatility, I would bet no. I would say we could possibly see even more volatility once leverage and shorting enter the picture. But, if by "stabilize", you mean put some downward pressure on the price, then I would guess maybe or even likely. Under the traditional rules I would have more confidence in the latter than just maybe, but with bitcoin, it seems like we've long ago tossed the traditional rules.
- minimax 14y agoThe people here talking about shorting bitcoin to moderate the bubble have no idea what they're talking about. Shorting a bubble is about the stupidest thing you can do. Here's how that math works: 1) You open a margin account with $10,000. 2) You borrow 25 BTC from your broker and sell them on the market at $200. You hope that the price crashes to $0 and your net profit will be $5,000. 3) What actually happens is that the price doubles to $400. It would now cost you $10,000 to close your position (buy the 25 BTC back at market prices). 4) Your broker realizes this and decides -- without asking -- that it doesn't like this state of affairs and closes the position for you, wiping out your margin. 5) You are now $10,000 poorer.
- wmf 14y agoBut that would moderate the bubble somewhat, would it not?
- minimax 14y agoWe're talking about opening a short position in the face of manic buying. Buyers will still vastly outnumber sellers, and in the end you'll be forced to buy back at a higher price in a so-called short squeeze which will drive prices even higher. Lots of reasonable people thought they could short the dot com bubble only to get creamed as prices moved higher.
- yarou 14y agoAnd? This is the very definition of a margin call. Retail investors ought to RTFM when it comes to financial services products, especially when it comes to forex.
- minimax 14y agoYes I was just walking through the mechanics of a margin call on a short position that goes sour. Lots of people understand that shorting helps you profit when prices decrease, but not everyone understands the risks, especially in the face of manic bubble buying.
- fixxer 14y agoAs a former trader (FI arb), I absolutely love this... for all the wrong reasons. I always wanted to DDOS my way to higher profits.
- heathendom79 14y agoBy the way there's also MPEx www.mpex.co which was established on August 2011 and "has neved been hacked".
- nevster 14y agoWith the price soaring to new heights, how do you pay for things in bitcoins when a single bitcoin is worth so much? Can you pay in fractions of a bitcoin?
- conjecTech 14y agoLong overdue. I've done some research on trying to short Bitcoins and could not come up with anything better than a naked short position or something with tremendous counterparty risk. I'm more interested in Bitcoins as a legitimate means of exchange rather than as an investment, and a service like this would enable me to protect against volatility, the same way similar services in existing ForEx markets protect borrowers and lenders in foreign markets.
- krichman 14y agoHow does the ability to short protect you? Genuinely curious, I don't know anything about markets beyond traditional buy and sell.
- conjecTech 14y agoSay I sell you a house and allow you to finance it with a mortgage denominated in Bitcoins. The house would normally sell for $250,000, so as of yesterday, I would have accepted 1,000 bitcoins for it. Let's then say that over the course of the next year the price tumbles to $5 per bitcoin. You can now go out and spend $5,000 to pay off the mortgage entirely. However, if I shorted bitcoins by buying put options(the right to sell them at a certain price at some point in the future) which enabled me to sell 1,000 bitcoins at $230, I would effectively insure that I will only ever lose a maximum amount of $20,000 because of the volatility as opposed to the $245,000 I would lose if I was not able to hedge my position. Similarly, if I had a price for something i wanted to sell truly denominated in bitcoins, (i.e. not dynamically changing to always reflect a constant price in USD or some other currency), there would be a similar risk, particularly if I'm keeping my earnings in the form of bitcoins instead of immediately selling them. You can start to see why options are a very important step in something becoming a true currency. It allows you to safely deal with it somewhat more independently of volatility.
- krichman 14y agoYes that acts just like purchasing an insurance policy! I guess I was imagining the case where you short and then the price doubles when you need to buy, and not considering that you could buy an option and only use it if the price falls. Thank you for taking the time to explain it.