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Bitcoin Exchange Had Too Many Bitcoins

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Re: Bitcoin Exchange Had Too Many Bitcoins

#211

Post by TrickyRick »

thisisit wrote: post #192
TrickyRick wrote: post #150

Earlier quoted context omitted.

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?

Not really, because stock prices are adjusted downwards in case of forward splits or stock dilution etc. If they the diluted shares are "worthless" so to speak then it doesn't matter. What the real scenario is when there is a spin off where Stock A becomes Stock A + Stock B. In that case short sellers are responsible for the value of stock B. Though no one will try going this route just to screw some short sellers. I…

Yeah, that makes sense. The share class example was a stupid one, but perhaps then it would work with a spin-off company? Although as you say, no one would probably do it, if nothing else because of the probable backlash of PR. Although it does make for an interesting thought experiment.

Re: Bitcoin Exchange Had Too Many Bitcoins

#212

Post by aeorgnoieang »

TrickyRick wrote: post #211
thisisit wrote: post #192

Earlier quoted context omitted.

Not really, because stock prices are adjusted downwards in case of forward splits or stock dilution etc. If they the diluted shares are "worthless" so to speak then it doesn't matter. What the real scenario is when there is a spin off where Stock A becomes Stock A + Stock B. In that case short sellers are responsible for the value of stock B. Though no one will try going this route just to screw some short sellers. I…

Yeah, that makes sense. The share class example was a stupid one, but perhaps then it would work with a spin-off company? Although as you say, no one would probably do it, if nothing else because of the probable backlash of PR. Although it does make for an interesting thought experiment.

It seems like it could work with a spin-off company, especially if the market judged the company (minus the spin-off) and the spin-off as being of greater value for whatever reason, e.g. 'focus'.

Re: Bitcoin Exchange Had Too Many Bitcoins

#213

Post by skywhopper »

Good article. A blockchain can only protect systems that it encodes directly. And for the simple cash transactions that's easy enough. But humans can, have, and will devise all sorts of derivative financial instruments to amplify the utility of assets, and no mathematical system can encode all the arbitrary possibilities that implies into their structure beforehand.

Instead, we're back where we started where legalities and regulations matter and the reliability of your durable ledger is limited to the transactions it actually captures.

Re: Bitcoin Exchange Had Too Many Bitcoins

#214

Post by rsync »

pdkl95 wrote: post #180
gnaritas wrote: post #104

Earlier quoted context omitted.

I'd say you don't really understand what you're critiquing; you think those things are bad because you heard they were, from someone else who likely doesn't understand it either. There's absolutely nothing wrong with short selling or high frequency trading. Short sellers help keep prices fair and companies honest, HFT makes trading cheaper for everyone. The markets are worse without them, the market was worse before…

> I'd say you don't really understand what you're critiquing I'd say that you are assuming that optimizing for price is good, and presupposing how a market should be judged. Cheaper is good when it represents new innovation, less energy waste, and similar improvements. Cheaper can also mean cuts to wages and jobs, or a reduction in quality. > There's absolutely nothing wrong with short selling Leverage can be used fo…

"Leverage can be used for good, and sometimes it's used irresponsibly. As this thread's article demonstrates, short selling also creates systemic risk."

What critics of short selling are often unaware of is the role that short holdings play in dampening a market crash.

The act of unwinding your short position involves buying the stock which means that for every tick downward in stock price there is new upward pressure on the price as buyers step in to cover their short position.

Were these constant, ready buyers not extant, market downturns can turn into precipitous crashes very quickly.

Re: Bitcoin Exchange Had Too Many Bitcoins

#215

Post by smogcutter »

repomies691 wrote: post #167
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…

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.

Is it possible to fork bitcoin in such a way that BTC holders can't get the new coins? If not, then it's not just a handout. The fact that anyone can fork it is an unfortunate property for your money to have that doesn't change what's happening here.

Re: Bitcoin Exchange Had Too Many Bitcoins

#216

Post by gnaritas »

the_mitsuhiko wrote: post #176
gnaritas wrote: post #104

Earlier quoted context omitted.

I'd say you don't really understand what you're critiquing; you think those things are bad because you heard they were, from someone else who likely doesn't understand it either. There's absolutely nothing wrong with short selling or high frequency trading. Short sellers help keep prices fair and companies honest, HFT makes trading cheaper for everyone. The markets are worse without them, the market was worse before…

There are plenty of people that have legitimate concerns about HFT or rather the mechanics they promote (frontrunning trades in particular).

HFT doesn't front run trades, that's a misconception and really just a way to slander HFT as evil. Calling their misconceptions legitimate is an abuse of language. Front-running is a crime, it has an actual meaning and you are misusing the term. Front-running is when a broker buys or sells using advanced knowledge of trades they're making on behalf of their clients, i.e. it is risk free and is theft. HFT does not front run their clients, they attempt to trade faster than their competition at risk, these are vastly different things and to call HFT front-running is dishonest slander.

There are no legitimate complaints against HFT trading that aren't simply misconceptions about what they do or how markets work.

Re: Bitcoin Exchange Had Too Many Bitcoins

#217

Post by smogcutter »

dx034 wrote: post #168
an_account wrote: post #149

Earlier quoted context omitted.

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 sh…

Fair, and Levine points this out in the article. He also observes that part of what makes bitcoin tricky and non intuitive is that if it worked like a company spinoff, not much new value should be created. Post split the price of BTC plus BCC should more or less equal the old BTC price, but that hasn't happened, because these are tulip bulbs.

Re: Bitcoin Exchange Had Too Many Bitcoins

#218

Post by gnaritas »

pdkl95 wrote: post #180
gnaritas wrote: post #104

Earlier quoted context omitted.

I'd say you don't really understand what you're critiquing; you think those things are bad because you heard they were, from someone else who likely doesn't understand it either. There's absolutely nothing wrong with short selling or high frequency trading. Short sellers help keep prices fair and companies honest, HFT makes trading cheaper for everyone. The markets are worse without them, the market was worse before…

> I'd say you don't really understand what you're critiquing I'd say that you are assuming that optimizing for price is good, and presupposing how a market should be judged. Cheaper is good when it represents new innovation, less energy waste, and similar improvements. Cheaper can also mean cuts to wages and jobs, or a reduction in quality. > There's absolutely nothing wrong with short selling Leverage can be used fo…

> I'd say that you are assuming that optimizing for price is good,

No, capitalism assumes that. HFT traders offer a product to the free market, they sell liquidity and they do it cheaper than their old school competition, there are willing buyers, that is the only justification they require to exist.

> Leverage can be used for good, and sometimes it's used irresponsibly. As this thread's article demonstrates, short selling also creates systemic risk.

Leverage and short selling are different issues, that leverage can be dangerous is not a valid critique of short selling, you're trying to move the goalpost, this is a fallacious argument.

> Eliminating middlemen and/or reducing transaction overhead costs do not require high frequency.

No one said it did, however HFT does do that, which is what was claimed, so again, a fallacious and baseless critique.

> "Buy low, sell high." is the foundation of any successful trading strategy. HFT (when successful) is literally the same thing at much shorter time scales and improved heuristics. Machine learning can probably provide more detailed at a much finer-grain than a simple 10 day sliding window. Again, this does not require high speed.

Again, baseless critique, no one said it required HFT. HFT trading sells liquidity cheaper than those old school simple traders, the market chose HFT.

Do you have any actual critique of HFT, or do you simply presume it's bad and then employ fallacious arguments that X doesn't require HFT? You quite literally have added nothing to the conversation. That it's possible to have a healthy market without HFT is irrelevant, it asserts HFT is bad without evidence, HFT traders have the same right to trade that anyone else does, you don't just get to ban them because you don't like them without cause. That something still works without HFT is not evidence against HFT any more than the fact that I can still travel without a car is evidence against cars.

Re: Bitcoin Exchange Had Too Many Bitcoins

#219

Post by gnaritas »

tnone wrote: post #157
gnaritas wrote: post #104

Earlier quoted context omitted.

I'd say you don't really understand what you're critiquing; you think those things are bad because you heard they were, from someone else who likely doesn't understand it either. There's absolutely nothing wrong with short selling or high frequency trading. Short sellers help keep prices fair and companies honest, HFT makes trading cheaper for everyone. The markets are worse without them, the market was worse before…

Healthy competition optimizes for value, HFT is just optimizing for profit. These are not the same. It's paperclip maximizing, using an economic Maxwell's demon.

> Healthy competition optimizes for value, HFT is just optimizing for profit.

Value is measured by profit, if what the HFT's were offering was of no value, there would be no profit in it as no one would buy their liquidity. HFT sell liquidity, that there are willing buyers proves their value. Quite simply, you do not know what you are talking about.

Re: Bitcoin Exchange Had Too Many Bitcoins

#220

Post by nostromo95 »

Twisell wrote: post #209
nostromo95 wrote: post #199

Earlier quoted context omitted.

Simple derivatives like calls and puts are unbannable . Observe that I can replicate the payoff of a call option by borrowing money to buy the stock [1] or replicate a put by shorting a stock and lending money. [1] http://people.stern.nyu.edu/adamodar/pdfiles/eqnotes/optionb...

But it's way more risky cause you could end up loosing more than the price of the option. Thus people would be more careful which is an improvement in my point of view. Re-establishing the uptick rule would be a middle ground between banning totally and current speculative frenzy.

No, you can replicate the option exactly if you keep re-weighting the debt and stock ownership.

Granted, this is only really feasible for large institutional investors, but you can do it.

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