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Shorting Bitcoin

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Re: Shorting Bitcoin

#41

Post by londons_explore »

__zack wrote: post #35
tempestn wrote: post #23

I've sold Tether for both USD and CAD without any issue or significant delay. What are the difficulties the author is referencing? (Asking genuinely, not arguing.)

The difference is between exchanging tether and redeeming tether. Exchanging tether is easy as long as there’s a counterparty willing to buy your tether in exchange for USD. But in principle you should be able to go to the “tether mint”, give them your tethers, and they redeem them 1:1 to USD. Apparently this is not very straightforward to do. This podcast episode covers the topic well: https://anchor.fm/cas-piancey/…

It would seem likely that the tether mint participates in some exchanges and buys or sells to keep the price stable.

This theory is backed up more by the fact the tether price history matches with a script in someone's basement that occasionally crashes and it takes a few hours to repair, during which the price wanders before being clamped 1:1 again.

That's functionally identical to going to the mint directly, and means the mint doesn't require any customer service etc.

Re: Shorting Bitcoin

#42

Post by [deleted] »

mjol wrote: post #18
brian_cloutier wrote: post #17

Earlier quoted context omitted.

Your answer only rephrases the question. The only way for it to hit $0 is if nobody is willing to buy the stock. This seems unlikely, given that the Bitcoin they're holding, even at 50% of present value, is still worth significantly more than $0.

The losses from their bitcoin position can exceed their current market cap.

[deleted]

Re: Shorting Bitcoin

#43

Post by breck »

I love this sort of thing. He’s making a bet, explains his reasoning, and does it in the open! That’s great.

I disagree that there’s no tech here. IMO public ledgers that never sleep are far superior(thanks to the hard work of many people over the past decade), and their advantage over retail banking will only increase. My online banks keep getting worse, crypto keeps getting better. Think about this: banks are CLOSED 77% of the time! Need to send a wire? 3/4 times bank will be closed. Capital will just move far more efficiently on block chains.

I have NO idea whether crypto is a good investment. I agree with the OP that insiders dominate it. But the tech has gotten really solid and I don’t see how the rest of banking has a chance, unless our government wants to burn our economic lead down to protect the status quo.

Re: Shorting Bitcoin

#44

Post by G3rn0ti »

Many traders still predict Bitcoin to be over 100k by the end of the year. December could align with the bubble peak due to Bitcoin‘s investment cycle triggered by the halving events. That could wreck his short position but if he’s lucky, it will burst earlier.

Re: Shorting Bitcoin

#45

Post by drbacon »

mattmaroon wrote: post #14
hgibbs wrote: post #9

Earlier quoted context omitted.

Puts have limited downside?

Yes. Stocks can’t drop below 0.

I think hgibbs is confused between puts (a contract for the ability to sell at a price) and shorting (borrowing to sell immediately and buy back later), but your comment isn't quite right either.

Shorting has unlimited downside, since it may be arbitrarily expensive to buy back the shares/coins that you borrow.

Puts, on the other hand, have a strike price. A contact to be able to sell Bitcoin for $30K is worthless on the expiration date if the market price is $40K. Anybody can sell at a better price than your contract on the open market. The market price going to 0 is the best thing for the owner of a put option. "Stocks can’t drop below 0." is actually a bummer for the put owner. If a stock could go lower, the put owner could sell the asset for even MORE than the market price of the asset.

What hgibbs probably wants to hear is this: The worst case for a put owner is for the put option to expire worthless since the market value of the asset is greater than the strike price when the option expires. The maximum downside is a contract worth $0.

If you want to pay a premium to be able to sell bitcoin at the end of the year for $20K, but the value is still $30K on December 31, your put option is worthless, and that's as bad as it gets.

...UNLESS you're buying puts on margin without a stop-limit.

Re: Shorting Bitcoin

#46

Post by 22c »

tempestn wrote: post #23

I've sold Tether for both USD and CAD without any issue or significant delay. What are the difficulties the author is referencing? (Asking genuinely, not arguing.)

Yeah, I took issue with that statement.

>In practice they’re quite difficult to convert to real money.

In practice they're quite easy to convert to real money, they're often the most liquid pairs available and extremely easy to convert close to 1:1 for another USD stablecoin as well, if that's your bag.

I have no idea how easy it is in practice to redeem 1 USDT for 1 USD, but it's very easy to convert even a marginally large sum of USDT to "real money" (fiat).

Where it can get difficult is withdraw limits on centralised exchanges, or overly cautious (hoop jumping) KYC processes. This is regardless of whether you're using USD, CAD or any other currency.

Re: Shorting Bitcoin

#47

Post by skybrian »

hgibbs wrote: post #9
paulpauper wrote: post #6

Earlier quoted context omitted.

buying puts and having no investment expertise. yeah that is going to end well.

Puts have limited downside?

Buying put options has limited downside in the same sense as buying a lottery ticket. The worst case (and not an uncommon case) is that they turn out to be worthless and you only lose the money you spent.

Re: Shorting Bitcoin

#48

Post by caf »

kebman wrote: post #25
danaris wrote: post #3

Earlier quoted context omitted.

From the second paragraph: > This is part of this blog’s Investing theme, whose Intro[0] makes it clear that I have no investment expertise and nobody should take this as investment advice, because it’s not. It’s just a bloggy disclosure of some of my own financial positions, which I owe readers anyhow. So...yeah, no one's claiming he has an edge or a good strategy. This is based on his beliefs , not intended as good…

If it's so biased and opinionated, what is its value to HN readers? Is there any merit to his opinion? Is there any proof?

I don't know what other people found interesting, but personally I found it mildly interesting to see the reasoning about choice of financial vehicles to "short bitcoin" without actually literally short-selling bitcoin.

The author's opinion about bitcoin is neither here nor there.

Re: Shorting Bitcoin

#49

Post by factorialboy »

G3rn0ti wrote: post #44

Many traders still predict Bitcoin to be over 100k by the end of the year. December could align with the bubble peak due to Bitcoin‘s investment cycle triggered by the halving events. That could wreck his short position but if he’s lucky, it will burst earlier.

Halvenings are overrated. Bitcoin historically peaks 1yr after US elections and then finds a bottom and floats there for 3.5 yrs.
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