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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

#51

Post by T-hawk »

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…

5) You are now $10,000 poorer.

You are now $5,000 poorer. You received $5k from selling the BTC in step 2, which must be netted out against the $10k cover cost.

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

#52

Post by dreamdu5t »

michaelochurch wrote: post #40
andrewljohnson wrote: post #32

Earlier quoted context omitted.

You miss the big picture. Digital currencies will exist as an instrument to hedge against currency fluctuations, commodity manipulation, and to let you deploy liquid money into assets with calculable appreciation/depreciation rates. It won't take much more than a large industry coalition to settle the price fluctuation around bitcoins, which will follow the basic organic market coalition... i.e. vendors accepting bit…

Digital currencies will exist as an instrument to hedge against currency fluctuations, commodity manipulation, and to let you deploy liquid money into assets with calculable appreciation/depreciation rates. National currencies are much less volatile than Bitcoins have shown themselves to be. In the future, we may not be using bitcoins, but you can bet we're going to be using coins made of bits. I think we can agree t…

> National currencies are much less volatile than Bitcoins have shown themselves to be.

Huh? Based on what data? Timeframe? What's "volatile"? BTC hasn't even been around for more than a couple years, and isn't even accepted by merchants yet.

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

#53

Post by minimax »

Permit wrote: post #47
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…

You've got the right idea, but I think your numbers are off. If you shorted 25 BTC at $200.00 would you not be credited with $5,000? So when the price rises to $400 you would have to buy back the equivalent amount with $5,000 of your own dollars and $5000 from the original short.

Math fail on my part. Thanks.

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

#54

Post by emin_gun_sirer »

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…

Don't forget that the short squeeze also feeds the runaway price of BTC and props it even higher.

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

#55

Post by minimax »

T-hawk wrote: post #51
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…

5) You are now $10,000 poorer. You are now $5,000 poorer. You received $5k from selling the BTC in step 2, which must be netted out against the $10k cover cost.

Yep. My bad.

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

#56

Post by jessriedel »

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…

Is there no scheme for shorting an asset over arbitrary timescales whose maximum possible loss is capped?

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

#57

Post by jessriedel »

txttran wrote: post #26
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 defaultin…

Haven't the bond yields, and hence prices, been flat? If so, why did anyone loose money?

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

#58

Post by betaclass »

jessriedel wrote: post #56
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…

Is there no scheme for shorting an asset over arbitrary timescales whose maximum possible loss is capped?

You BUY PUT options -- you buy the right to sale at a given price for some period of time. The most you can lose is what you paid out for the put option. If the price of the underlying commodity falls below the strike price, you essentially get the difference -- you buy at the new lower price and sell at the higher price.

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

#59

Post by conjecTech »

Long overdue. I've done some research on trying to short Bitcoins and could not come up with anything better than a naked short position or something with tremendous counterparty risk. I'm more interested in Bitcoins as a legitimate means of exchange rather than as an investment, and a service like this would enable me to protect against volatility, the same way similar services in existing ForEx markets protect borrowers and lenders in foreign markets.

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

#60

Post by DanielRibeiro »

trotsky wrote: post #7

An unregulated leveraged options platform with essentially no assets and what will undoubtedly be super senior debt deals with their prime broker writing naked contracts on something that moves 30% based on one website lagging out for a hour or two? what could go wrong

Coinbase, a YC company, recently raised 600k[1]. It was crowdfuneded though:

Having completed the FundersClub (YC S12) crowdfunding round, Coinbase raised $268,700, a little over its goal of $250,000, from 61 FundersClub members

[1] https://www.privateinternetaccess.com/blog/2012/09/coinbase-...

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