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Coinsetter raises $500k to bring leverage, shorting to Bitcoins

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Re: Coinsetter raises $500k to bring leverage, shorting to Bitcoins

#21

Post by GHFigs »

patio11 wrote: post #6
jeremyjh wrote: post #2

Are there some 0s missing? $500K doesn't sound like any amount of money to open a "mature" trading platform.

On 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.

Bitcoin Software Maturity Scale

Ah yes, that scale that's numbered from 0 to 0.8 and then back to 0.7.

Re: Coinsetter raises $500k to bring leverage, shorting to Bitcoins

#23

Post by gwern »

patio11 wrote: post #6
jeremyjh wrote: post #2

Are there some 0s missing? $500K doesn't sound like any amount of money to open a "mature" trading platform.

On 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.

> 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.

Re: Coinsetter raises $500k to bring leverage, shorting to Bitcoins

#24

Post by wmf »

minimax wrote: post #20

The 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 th…

But that would moderate the bubble somewhat, would it not?

Re: Coinsetter raises $500k to bring leverage, shorting to Bitcoins

#25

Post by bwood »

angersock wrote: post #17
gfodor wrote: post #13

Earlier quoted context omitted.

bitcoins 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.)

god 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.

Bitcoin 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/

Re: Coinsetter raises $500k to bring leverage, shorting to Bitcoins

#26

Post by txttran »

michaelochurch wrote: post #15

This 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 yo…

If you need further evidence on how dangerous shorting is, even for something that everyone thinks will go down, consider the "Widowmaker" bond trade.

Essentially, most traders agree that the Japanese Government (JG) will have to soon increase the yield of their new bonds (which have historically been very low) because of Japan's huge and growing national debt (200% of GDP) and the slowly increasing risk of defaulting. Once this happens, the value of the current bonds in the market will drop because who wants to buy bonds with a lower yield at the same price? After the Fukushima disaster, investors thought for sure that the JG would increase yield to get more money to repair infrastructure, deal with a weakened economy, etc. Many, many hedge fund managers have shorted Japanese bonds and all of them have lost money. Yet, the idea persists and every day, traders are shorting JG bonds, convinced that it can't stay low forever. No doubt, one day it will pay off, but will you be the lucky one to cash in? Unlikely.

Re: Coinsetter raises $500k to bring leverage, shorting to Bitcoins

#27

Post by yarou »

minimax wrote: post #20

The 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 th…

And? 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.

Re: Coinsetter raises $500k to bring leverage, shorting to Bitcoins

#28

Post by minimax »

yarou wrote: post #27
minimax wrote: post #20

The 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 th…

And? 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.

Yes 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.

Re: Coinsetter raises $500k to bring leverage, shorting to Bitcoins

#29

Post by fennecfoxen »

mtgx wrote: post #19

Wouldn't this, ironically, stabilize Bitcoin, if others try to take advantage of its growth and try to bring it down again?

It 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.

Re: Coinsetter raises $500k to bring leverage, shorting to Bitcoins

#30

Post by minimax »

wmf wrote: post #24
minimax wrote: post #20

The 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 th…

But that would moderate the bubble somewhat, would it not?

We'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.

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