Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Bitcoin Exchange Had Too Many Bitcoins

bloomberg.com

Post reply on HN
Print view View original

81–90 of 241 posts

Re: Bitcoin Exchange Had Too Many Bitcoins

#81

Post by jackgavigan »

andy_wrote wrote: post #41
panarky wrote: post #33

Earlier quoted context omitted.

Matt sums it up well in a footnote: Imagine if I announced tomorrow that I had created a new blockchain, called Bitcoin Matt, and that everyone who owned a BTC today will tomorrow own both a BTC and a BCM. Fine, great, you all own BCMs, congratulations. But also anyone short a BTC today will be short a BCM tomorrow, and will be forced to go buy in those BCM shorts. Even with no economic support for BCM -- with nobody…

I'm not knowledgeable about BTC; this is the part that confused me. If you short a stock, and it distributes dividends or stock or ponies, as Levine says, you have to return that to the borrower. I'm not sure if this is law or just the overwhelming common practice of the markets, but either way we agree on this. You _could_ devise a short agreement where you say "no distributions are owed," but that's not the standar…

> If on the other hand you short a stock, and a third party says "Hey, I'm going to give everyone who owns this stock on this date a bag of cash!" I don't think that shorts would be obligated to cover that.

With stocks, the question of what the borrower is expected to cover will be addressed in the loan agreement. For example, here is a relevant paragraph from the 2010 Global Master Securities Lending Agreement:

Where the term of a Loan extends over an Income Record Date in respect of any Loaned Securities, Borrower shall, on the date such Income is paid by the issuer, or on such other date as the Parties may from time to time agree, pay or deliver to Lender such sum of money or property as is agreed between the Parties or, failing such agreement, a sum of money or property equivalent to (and in the same currency as) the type and amount of such Income that would be received by Lender in respect of such Loaned Securities assuming such Securities were not loaned to Borrower and were retained by Lender on the Income Record Date.

Here are some relevant definitions of terms used in the paragraph above:

Income Record Date, with respect to any Securities or Collateral, means the date by reference to which holders of such Securities or Collateral are identified as being entitled to payment of Income;

Income means any interest, dividends or other distributions of any kind whatsoever with respect to any Securities or Collateral;

Re: Bitcoin Exchange Had Too Many Bitcoins

#82

Post by tanderson92 »

thefalcon wrote: post #37
curiousgal wrote: post #6

Earlier quoted context omitted.

You're probably subscribed to his newsletter then, it's the only newsletter in my inbox.

Good call. I've only ever read this and, interestingly, the semi-related Dole article, but they were both superb. Subscribed.

Don't miss out on the incredible "Arbitrage Discovered", one of the best things he has ever written: https://www.bloomberg.com/view/articles/2015-02-27/arbitrage...

Re: Bitcoin Exchange Had Too Many Bitcoins

#83

Post by tpallarino »

zwily wrote: post #63
tpallarino wrote: post #50

Earlier quoted context omitted.

Hedging against a clearly inflated asset is "funny business"?

The funny business is that people were creating a position guaranteed to pay out free money, assuming bitfinex actually followed their own policy.

That's not true, I performed calculations beforehand to decide whether it was more profitable to hold BTC in the margin wallet as opposed to other assets (which I knew would rise after the fork). The core question is whether altcoins would rise more than the price ratio of BCH/BTC. Alts went up 20% while BCH/BTC is ~0.15, meaning you were better off skipping the BCH altogether and just holding alts. The tradeoff is the increased risk.

Re: Bitcoin Exchange Had Too Many Bitcoins

#84

Post by eloary »

jstanley wrote: post #4

Great writeup. Almost anything written by Matt Levine is worth reading. This is a concise and accurate description of the fun that occurred with Bitfinex's handling of the BCH fork. At least, it's fun if you weren't involved. If you naively held BTC on Bitfinex and were hoping to receive an equal amount of BCH you probably didn't think it was fun. If you carefully read Bitfinex's statements and decided to take advant…

It was exactly this kind of fun that led me to stay in my altcoin holdings and not participate at all in BCH. Liquidity puts a serious damper on a lot of slick crypto trade ideas - it's a "tortoise and the hare" kind of scenario.

Re: Bitcoin Exchange Had Too Many Bitcoins

#85

Post by NelsonMinar »

devrandomguy wrote: post #76
NelsonMinar wrote: post #40

It is hilarious watching people try to reinvent financial institutions without any knowledge of or respect for history.

They are just exploring the solution space, with minimal baggage to hold them back. The real problem, is that people are trying to make a living off of something that is still experimental / alpha level maturity. Seems like the people who do understand banking history are unwilling or unable to make any kind of improvements, at least in regards to the issues that digital currencies are working to address.

Sure, but their youthful experiments are involving billions of dollars worth of money. Or at least they claim it does.

Re: Bitcoin Exchange Had Too Many Bitcoins

#86

Post by devrandomguy »

NelsonMinar wrote: post #85
devrandomguy wrote: post #76

Earlier quoted context omitted.

They are just exploring the solution space, with minimal baggage to hold them back. The real problem, is that people are trying to make a living off of something that is still experimental / alpha level maturity. Seems like the people who do understand banking history are unwilling or unable to make any kind of improvements, at least in regards to the issues that digital currencies are working to address.

Sure, but their youthful experiments are involving billions of dollars worth of money. Or at least they claim it does.

And why is so much money getting dumped into these constructs? AFAIK, it is speculators that are inflating that economy, not the coin devs hyping it as an investment.

If it's any consolation, money doesn't disappear, it just becomes someone else's. It's still in the economy. Think of it as an overpriced research project, that the media went nuts over.

Re: Bitcoin Exchange Had Too Many Bitcoins

#87

Post by panarky »

cwkoss wrote: post #20
thefalcon wrote: post #12

Earlier quoted context omitted.

You're saying that people buying BCH right now aren't aware that there's a huge glut of supply waiting to flood the market, and aren't taking this into account in their buying decisions? There is no need for anyone to have BCH in hand today, no reason for someone to value a BCH today more than a BCH in a week. If they thought that thousands of people selling BCH once they are able will lead to a drop in price, they w…

I think the average cryptocurrency trader is much lower-information than you are estimating. There are hundreds of rubes who see "Bitcoin Cash" and think that because it suddenly jumped to the 3rd largest cryptocurrency by market cap, lots of people are talking about it, and its cheaper than Bitcoin, this could be their chance to get the elusive short-term 3x+ crypto ROI. Many of these people have no concept of the l…

I'd guess a lot of the BCH volume is from well informed momentum traders riding the volatility wave.

Re: Bitcoin Exchange Had Too Many Bitcoins

#88

Post by matt_wulfeck »

> But BTC hasn't really lost any value since the spinoff, still trading at about $2,700. So just before the spinoff, if you had a bitcoin, you had a bitcoin worth about $2,700. Now, you have a BTC worth about $2,700, and also a BCH worth as much as $700. It's weird free money, if you owned bitcoins yesterday.

Doesn't this throw up any red-flags to the btc/crypto apologist? This type of behavior is not how healthy markets work.

Re: Bitcoin Exchange Had Too Many Bitcoins

#89

Post by lqdc13 »

matt_wulfeck wrote: post #88

> But BTC hasn't really lost any value since the spinoff, still trading at about $2,700. So just before the spinoff, if you had a bitcoin, you had a bitcoin worth about $2,700. Now, you have a BTC worth about $2,700, and also a BCH worth as much as $700. It's weird free money, if you owned bitcoins yesterday. Doesn't this throw up any red-flags to the btc/crypto apologist? This type of behavior is not how healthy mar…

Could be that people are more confident in BTC after they decided to do something about the slow confirmations. As in the value of the original Bitcoin jumped at the time of the split but was offset by the split.

Also possible that the split generated free publicity that made some people invest in it.

Re: Bitcoin Exchange Had Too Many Bitcoins

#90

Post by spectrum1234 »

matt_wulfeck wrote: post #88

> But BTC hasn't really lost any value since the spinoff, still trading at about $2,700. So just before the spinoff, if you had a bitcoin, you had a bitcoin worth about $2,700. Now, you have a BTC worth about $2,700, and also a BCH worth as much as $700. It's weird free money, if you owned bitcoins yesterday. Doesn't this throw up any red-flags to the btc/crypto apologist? This type of behavior is not how healthy mar…

The market expected BTC to fall by about as much as BCH increased. It did not. The market was wrong by about ~25%. At least in that moment.
Post reply on HN