3 ms·

The hardest thing with shorting Bitcoin is expecting the exchanges to actually cough up when it comes due ... because exchanges have been failing left, right an

The hardest thing with shorting Bitcoin is expecting the exchanges to actually cough up when it comes due ... because exchanges have been failing left, right and centre this year, if not just taking everyone's money. Statistically, trusting Bitcoin exchanges is a terrible idea.

Animats 12y ago
Right. That's especially bad for a futures exchange. A cash Bitcoin exchange doesn't have any trading risk exposure. It can fail only through incompetence or criminality. A futures exchange/broker has trading risk - they have to be able to collect from losing traders. They say "BitMEX stands behind all trades." That will probably break when someone suffers a big loss and doesn't pay up. The exchange is in the Seychelles, or at least claims to be. Collecting may be difficult. There's no exchange control problem buying goods from China - that's both allowed and encouraged.
- STRML 12y ago
  Hey Animats - Sam here, CTO of BitMEX. We don't assume that anyone suffering a big loss can or will pay up - instead we proactively take steps in real-time to liquidate traders in a controlled manner to ensure that no trader can reach bankruptcy. This way, traders are force-exited from their positions well before they are able to reach anywhere near negative equity. We are indeed incorporated in the Seychelles, but we are open about who we are, unlike some others. Arthur Hayes (our CEO) and I are very proactive about risk, and we use our team's significant experience in finance to ensure that our exchange is constantly minimizing its risk. This is a gain for our customers as well. If BitMEX does not sustain any systematic loss, it can guarantee settlements. And since it guarantees settlements, it is finally an exchange where businesses and traders can actually hedge risk in Bitcoin, without having to simply sell coins.

Animats 12y ago

Right. That's especially bad for a futures exchange. A cash Bitcoin exchange doesn't have any trading risk exposure. It can fail only through incompetence or criminality. A futures exchange/broker has trading risk - they have to be able to collect from losing traders. They say "BitMEX stands behind all trades." That will probably break when someone suffers a big loss and doesn't pay up. The exchange is in the Seychelles, or at least claims to be. Collecting may be difficult. There's no exchange control problem buying goods from China - that's both allowed and encouraged.

STRML 12y ago
Hey Animats - Sam here, CTO of BitMEX. We don't assume that anyone suffering a big loss can or will pay up - instead we proactively take steps in real-time to liquidate traders in a controlled manner to ensure that no trader can reach bankruptcy. This way, traders are force-exited from their positions well before they are able to reach anywhere near negative equity. We are indeed incorporated in the Seychelles, but we are open about who we are, unlike some others. Arthur Hayes (our CEO) and I are very proactive about risk, and we use our team's significant experience in finance to ensure that our exchange is constantly minimizing its risk. This is a gain for our customers as well. If BitMEX does not sustain any systematic loss, it can guarantee settlements. And since it guarantees settlements, it is finally an exchange where businesses and traders can actually hedge risk in Bitcoin, without having to simply sell coins.