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Bitcoin Exchange Had Too Many Bitcoins

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Re: Bitcoin Exchange Had Too Many Bitcoins

#161

Post by kgwgk »

perfunctory wrote: post #155

> The way short selling works is that X borrows a share from Y and sells it to Z. So Y owns one share, and Z owns one share, and X owes one share, and everything balances out and there's only one share outstanding. Is that really true? That would mean that both Y and Z should get dividend payment, which doesn't make sense. I always assumed that when X borrows one share from Y, the Y does not own that share any more.

Why wouldn't it make sense? If you buy a stock don't you expect to get dividends? You may have bought it from a short seller. Or you may have loaned it to a short seller (brokers often do that without your knowledge, but with your permission). Everything balances out because the company will pay to Z and X will pay to Y. What doesn't make sense is for both Y and Z to vote, for example.

Re: Bitcoin Exchange Had Too Many Bitcoins

#162

Post by Twisell »

matt_wulfeck wrote: post #156
Twisell wrote: post #96

Earlier quoted context omitted.

Maybe I'm too "left wing", but if you ask me short selling, complex products and high frequency trading are among technological "improvements" that have led actual stock exchange to an ugly mess where biggest profits are made by "scamming" efficiently other users. Should regulators forbid (or tax more) some (or all) of this mechanisms markets will quickly resume to what they should be, places for people to invest mon…

These types of valuations are exactly where we need short selling. There's no logical way to put downward pressure on these cryptos because the liquidity is impossibly thin and there's no real way to short them.

Or it's simply that people that invest in overrated value will get burned someday, instead of randomly anybody due to natural fluctuation being amplified by bots.

For exemple just look at the shape of AAPL in the long run, instead of a steady curve associated with profit growth, you have an unstable mess for no reason. And people that place selling stop (that brokers recommand because they it's "safer") happens to sell/buy at worst possible moment. And this is where profit from HFT actually comes... Not thin air random people getting burned.

If investing in a company mean more thinking because you could effectively bein burned by investing in bad stock I call that the normal state. Because currently the mindset of trader is more that even if it's non-sensical to invest in Unicorn-ass-corp, it still worth supporting it because they can make profits with options anyway as long as there is movement.

Re: Bitcoin Exchange Had Too Many Bitcoins

#163

Post by lmm »

an_account wrote: post #149
smogcutter wrote: post #60

Earlier quoted context omitted.

This is less like an arbitrary handout from a third party and more like a stock split. If you hold a security, you generally have no idea whether its been lent to a short. The idea of "your" stock being lent doesn't even really mean anything - the shares are fungible. So when the stock splits (or a company is spun off as in the paypal example, etc), you'd be awfully surprised to find the value of your stake halve bec…

BCH _feels_ like a stock split. Where it's not like a stock split is that literally anybody can create a new blockchain just like BCH and give everyone who owns BTC a coin on this new blockchain. In that regard, it _feels_ more like a handout.

There's no charter of incorporation for bitcoin. To a large extent it is what everyone agrees it is. I think people recognize that BCH is as genuine a "coin" as BTC whereas BCM wouldn't be.

Re: Bitcoin Exchange Had Too Many Bitcoins

#164

Post by Grangar »

tpallarino wrote: post #48
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…

Except your clone doesn't have miner support, community support, and get listed by major exchanges. I hate that people are acting like anyone can just go and make a fork for free money.

If you own a big mining pool you can get support. And with a simple propaganda campaign you can get people to support your fork much like BCH.

Re: Bitcoin Exchange Had Too Many Bitcoins

#165

Post by lmm »

TrickyRick wrote: post #150
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…

Could a similar trick be used by a company to screw over short sellers? Say by issuing a class of shares which are essentially worthless, forcing short sellers to buy it to cover their shorts? Or would a short seller simply "borrow" those shares as well?

I imagine it would be no different from how we handle regular stock splits or rights offerings.

Re: Bitcoin Exchange Had Too Many Bitcoins

#166

Post by perfunctory »

perfunctory wrote: post #155

> The way short selling works is that X borrows a share from Y and sells it to Z. So Y owns one share, and Z owns one share, and X owes one share, and everything balances out and there's only one share outstanding. Is that really true? That would mean that both Y and Z should get dividend payment, which doesn't make sense. I always assumed that when X borrows one share from Y, the Y does not own that share any more.

@kgwgk well, the company obviously doesn't want to pay the dividend twice. So indeed they will only pay to Z. If X pays Y I presume that's just the terms of the lending agreement.

> What doesn't make sense is for both Y and Z to vote, for example.

Very good point. But it just confirms that it makes no sense to say that Y still owns a share.

Re: Bitcoin Exchange Had Too Many Bitcoins

#167

Post by repomies691 »

smogcutter wrote: post #60
andy_wrote wrote: post #41

Earlier quoted context omitted.

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…

This is less like an arbitrary handout from a third party and more like a stock split. If you hold a security, you generally have no idea whether its been lent to a short. The idea of "your" stock being lent doesn't even really mean anything - the shares are fungible. So when the stock splits (or a company is spun off as in the paypal example, etc), you'd be awfully surprised to find the value of your stake halve bec…

It is most definitely not a stock split, but a free handout. Anyone can create a shitcoin at any time that gives "free shitcoins" to all bitcoin, ethereum etc holders. In fact, that is clever marketing for the altcoins because then the shitcoin gets attention, possible support from exchanges etc.

Re: Bitcoin Exchange Had Too Many Bitcoins

#168

Post by dx034 »

an_account wrote: post #149
smogcutter wrote: post #60

Earlier quoted context omitted.

This is less like an arbitrary handout from a third party and more like a stock split. If you hold a security, you generally have no idea whether its been lent to a short. The idea of "your" stock being lent doesn't even really mean anything - the shares are fungible. So when the stock splits (or a company is spun off as in the paypal example, etc), you'd be awfully surprised to find the value of your stake halve bec…

BCH _feels_ like a stock split. Where it's not like a stock split is that literally anybody can create a new blockchain just like BCH and give everyone who owns BTC a coin on this new blockchain. In that regard, it _feels_ more like a handout.

It's not really a stock split (where you get multiple shares for the same company) but a company split. If a company splits itself into two parts (e.g. Amazon to be split into retail and AWS) they can distribute shares of both new companies to the shareholders of the old company. In that situation you have the same problem. If the new AWS shares are not traded and you were short Amazon, you would have to cover AWS shares and therefore buy them.

In reality it's not an issue with large companies because it happens rarely and there are so many shareholders that a market would appear quickly.

Re: Bitcoin Exchange Had Too Many Bitcoins

#169

Post by filmackay »

an_account wrote: post #149
smogcutter wrote: post #60

Earlier quoted context omitted.

This is less like an arbitrary handout from a third party and more like a stock split. If you hold a security, you generally have no idea whether its been lent to a short. The idea of "your" stock being lent doesn't even really mean anything - the shares are fungible. So when the stock splits (or a company is spun off as in the paypal example, etc), you'd be awfully surprised to find the value of your stake halve bec…

BCH _feels_ like a stock split. Where it's not like a stock split is that literally anybody can create a new blockchain just like BCH and give everyone who owns BTC a coin on this new blockchain. In that regard, it _feels_ more like a handout.

It's not a stock split (which would issue you more BTC), but a demerger - or a spin-off. This is where a company gives out shares in proportion to existing shareholding. It's like BTC has "spin off" BCH which was part of BTC - but now trades independently. I'd say a LOT of people do not understand this, because the price of BTC should have fallen, which I guess makes sense since this BTC has no entitlements and therefore is driven, a little like gold, on future expectations or speculation.

https://en.wikipedia.org/wiki/Demerger

Re: Bitcoin Exchange Had Too Many Bitcoins

#170

Post by filmackay »

panarky wrote: post #33
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…

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 think this is a bit one-sided, that you've created "forced buy in". You've also created a LOT of supply as well, which goes a long way to counter-balance the demand.

Besides, the exchanges do not seem to have implemented this as a demerger spin-off (you were short BTC, but you do not need to return BCH - just bTC), and as a consequence NOT created "forced buy in".

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