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Author Topic: Bitcoin is the most dangerous item to short.  (Read 4322 times)
twolifeinexile
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January 19, 2013, 05:27:02 PM
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Come across this comments and remind me about shorting, and this is killer identity of bitcoin, you can not really short it naked, which means you always have to borrow from someone to short (which now seems too difficult, the lending market here seems almost dead), so bitcoin market may not be your normal currency market (there is maybe intermediate danger to short, but ultimately you have a central bank to back you up, and that is banks do, shorting dollars/yen/euro into eternal......)
And also it is not like shorting gold, since gold in current financial market is totally financialized, meaning long/shorts are just contract tokens, since no gold transfer needed, only contract backed by gold.

Not bitcoin, bitcoin real transfer is too easy not to, so speculating on the short is too danger. You need to get people panic, hey, how could 21m something distributed among some hundredths of thousands users that evenone have only a portion of their asset in bitcoin to be panic???


What do you make of the fact that the price goes up in small, continues steps - and then there come sudden big dumps.  Most of volume is on down moves - but it still goes up.  Looks like the buyers have more cold blood - while the sellers are more impulsive.

This pattern is called a "right translated cycle".  Typical price action in a bull market.  Slow methodical rises with short scary vertical drop corrections.

Bear will markets show the opposite action, slow steady declines punctuated by sharp short-covering rallies.

More info:
http://www.decisionpoint.com/tacourse/Cycles2.html

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lucif
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January 19, 2013, 05:42:45 PM
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When volume on bear side, but price goes up slowly - its called wedge buddy, hehe. Also, negative volume divergence.

Price can escape up from here only being in bubble mode.
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January 19, 2013, 05:43:27 PM
 #3

Awesome info thanks.

Is bitcoin very dangerous to short? Yes, it is highly risky, but it is compensated by the potential gain... so people still do it.

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January 19, 2013, 05:47:25 PM
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I sold bitcoins yesterday on 12€, placed an order to buy at 10.7

There's my bet.

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January 19, 2013, 06:06:08 PM
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When it comes to shorting Bitcoin one must mention Pirate and his huge BTC short position. Of course he defaulted on his contracts when the short squeeze was applied.

Hint: To those long on Bitcoin. Take delivery.

Concerned that blockchain bloat will lead to centralization? Storing less than 4 GB of data once required the budget of a superpower and a warehouse full of punched cards. https://upload.wikimedia.org/wikipedia/commons/8/87/IBM_card_storage.NARA.jpg https://en.wikipedia.org/wiki/Punched_card
twolifeinexile
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January 19, 2013, 06:15:46 PM
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When it comes to shorting Bitcoin one must mention Pirate and his huge BTC short position. Of course he defaulted on his contracts when the short squeeze was applied.

Hint: To those long on Bitcoin. Take delivery.

I thought long bitcoin always means delivery, otherwise you are just long some one's bitcoin denominated promissory note? Not like dollar, since all dollars in banks are FDIC insured, and implicit backed by federal reserve (if banks could not use their asset to secure loan from market, then federal reserve will take the asset as collateral and issue loans), so all dollars in banks are dollars, not some chase dollar note or citi dollar note.

Most people who long bitcoin with Pirate are just long pirateBTC note, which probably should be rated as a junk note with grade C, his note should be less than 1 BTC if correctly priced,so by entering the price on par (pay 1BTC to get pirateBTC), you are already losing money before he defaulted,
ArticMine
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January 19, 2013, 06:39:25 PM
 #7

When it comes to shorting Bitcoin one must mention Pirate and his huge BTC short position. Of course he defaulted on his contracts when the short squeeze was applied.

Hint: To those long on Bitcoin. Take delivery.

I thought long bitcoin always means delivery, otherwise you are just long some one's bitcoin denominated promissory note? Not like dollar, since all dollars in banks are FDIC insured, and implicit backed by federal reserve (if banks could not use their asset to secure loan from market, then federal reserve will take the asset as collateral and issue loans), so all dollars in banks are dollars, not some chase dollar note or citi dollar note.

Most people who long bitcoin with Pirate are just long pirateBTC note, which probably should be rated as a junk note with grade C, his note should be less than 1 BTC if correctly priced,so by entering the price on par (pay 1BTC to get pirateBTC), you are already losing money before he defaulted,

Of course the creditworthiness of the shorts is critical here; however this is closely related to the market. Pirate is the perfect example. When the BTC / USD rate was falling at a rate greater than 7% a week as was the case in the fall of 2011 Pirate had no problem meeting his obligations and his notes were good, it is when the market turned in 2012 that the short squeeze was applied and this massive short defaulted. The Pirate investors who took delivery ahead of the default and squeezed the short made money.

The sure way for the longs to squeeze the shorts is to take delivery and this works in any market.

Concerned that blockchain bloat will lead to centralization? Storing less than 4 GB of data once required the budget of a superpower and a warehouse full of punched cards. https://upload.wikimedia.org/wikipedia/commons/8/87/IBM_card_storage.NARA.jpg https://en.wikipedia.org/wiki/Punched_card
marcus_of_augustus
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January 21, 2013, 12:41:55 AM
 #8

If you are holding any other assets and not in bitcoins you are by definition short bitcoins.

Just by holding US dollar cash last year you lost 160% by not being in bitcoin.

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January 21, 2013, 12:47:23 AM
 #9

If you are holding any other assets and not in bitcoins you are by definition short bitcoins.

No you are not.  Shorting is being lent an asset and selling it (to buy it at lower price later and give back to lender).
marcus_of_augustus
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January 21, 2013, 01:08:56 AM
 #10

If you are holding any other assets and not in bitcoins you are by definition short bitcoins.

No you are not.  Shorting is being lent an asset and selling it (to buy it at lower price later and give back to lender).

Thnx for the lesson in trading terminology ...

... short is also used to mean "not long".

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January 21, 2013, 01:17:25 AM
 #11

... short is also used to mean "not long".

Yeah, and "a Ponzi scheme" is also used to describe bitcoin.  Doesn't make it right though.
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January 21, 2013, 01:57:15 AM
 #12

Actually it means short selling since the term "short" means levering a trade using credit.  You can be short BTC or Short USD for example.

Long means you do not use credit in your position. So by definition somebody who does not own BTC but has USD is long USD.
If you buy BTC on mtgox and withdraw them you are long BTC.

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twolifeinexile
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January 21, 2013, 04:59:28 AM
 #13

If you are holding any other assets and not in bitcoins you are by definition short bitcoins.

No you are not.  Shorting is being lent an asset and selling it (to buy it at lower price later and give back to lender).

Thnx for the lesson in trading terminology ...

... short is also used to mean "not long".


when you say short bitcoin when you are not holding it, you were use bitcoin as benchmark, in that way, yes, you are shorting bitcoins by not long.
Your underlying assumption is natural position is holding all your assets in bitcoin.
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January 21, 2013, 05:09:43 AM
 #14

If you are holding any other assets and not in bitcoins you are by definition short bitcoins.

No you are not.  Shorting is being lent an asset and selling it (to buy it at lower price later and give back to lender).

Thnx for the lesson in trading terminology ...

... short is also used to mean "not long".


Well not really.  That would be neutral or no position.  Short is when you owe bitcoins that you do not actually own, with options or protection.  (I am not saying that options or protection currently exist)

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January 21, 2013, 05:13:41 AM
 #15

If you are holding any other assets and not in bitcoins you are by definition short bitcoins.

No you are not.  Shorting is being lent an asset and selling it (to buy it at lower price later and give back to lender).

Thnx for the lesson in trading terminology ...

... short is also used to mean "not long".


Well not really.  That would be neutral or no position.  Short is when you owe bitcoins that you do not actually own, with options or protection.  (I am not saying that options or protection currently exist)
short != leveraged

all short means is selling with intention to buy back lower (cover)

shorting with leverage is what your talking about

http://en.wikipedia.org/wiki/Short_%28finance%29

twolifeinexile
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January 21, 2013, 06:00:04 AM
 #16

If you are holding any other assets and not in bitcoins you are by definition short bitcoins.

No you are not.  Shorting is being lent an asset and selling it (to buy it at lower price later and give back to lender).

Thnx for the lesson in trading terminology ...

... short is also used to mean "not long".


Well not really.  That would be neutral or no position.  Short is when you owe bitcoins that you do not actually own, with options or protection.  (I am not saying that options or protection currently exist)
short != leveraged

all short means is selling with intention to buy back lower (cover)

shorting with leverage is what your talking about

http://en.wikipedia.org/wiki/Short_%28finance%29

If you short, you are naturally in a leverage position, since short generate additional asset (by selling the item you short), and liability (to return the item back), so if you are not leveraged before, you total asset is your total net asset (equity), after the short, you total asset /you net asset (equity) is bigger than 1.


Accumulating debt is leveraging
Draino
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January 21, 2013, 07:20:28 AM
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i always took the term short to mean that you were selling something you didn't have..

or in other words,  a person selling BTC, even though he is "short" on the coins to do it...
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January 21, 2013, 07:23:58 AM
 #18

i always took the term short to mean that you were selling something you didn't have..

or in other words,  a person selling BTC, even though he is "short" on the coins to do it...

That is also the correct use, people who are telling otherwise are pulling stuff out of their noses.

First they ignore you, then they laugh at you, then they keep laughing, then they start choking on their laughter, and then they go and catch their breath. Then they start laughing even more.
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Digital money you say?


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January 21, 2013, 07:40:56 AM
 #19

Looks like the buyers have more cold blood

Not that my holdings amount to much, but I have to say that I completely wrote off my 'investment' the moment I got my coins. I consider the fiat money I paid for them dead and gone.

Cold blood? More like liquid nitrogen.

I mean, what do I have to lose? Some Monopoly money which was going to inflate out of control anyway? I pay more for car repairs!

Edit: In fact, the only reason I would 'cash out' would be to buy an asset, like a house or property, which I could not buy with bitcoin. Silver? Gold? All good! All I need is to get paid in btc and I would never touch a dollar again except to buy groceries! Grin

Edit2: The only reason I don't keep all of my assets in btc is because of it's volatility. If it ever levels off or keeps a steady growth rate I will keep a majority of my funds in btc.

FAP Turbo 2.0, the FOREX trading robot which also trades bitcoin!

I had to link it because I love the name. Seriously, that is the real name.
marcus_of_augustus
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January 21, 2013, 07:51:57 AM
 #20

If you are holding any other assets and not in bitcoins you are by definition short bitcoins.

No you are not.  Shorting is being lent an asset and selling it (to buy it at lower price later and give back to lender).

Thnx for the lesson in trading terminology ...

... short is also used to mean "not long".


when you say short bitcoin when you are not holding it, you were use bitcoin as benchmark, in that way, yes, you are shorting bitcoins by not long.
Your underlying assumption is natural position is holding all your assets in bitcoin.


... and we have a winner.

The guy who is obsessed with mucus and nasal emissions must have pulled out some brains at some point I think.

Measuring your worth in bitcoins should be the new norm for anybody who is serious about this little experiment .... all others are short by definition ... there are no 'neutral' positions, that is a fallacy peddled by fiat-meisters, all assets are in play. All wealth assets are measured with respect to something else, when you can realise that you have begun your journey to wealth and understanding money.

Being "in" dollars is the same thing to being long dollars and being in bitcoin is the same thing as being short dollars, there is no difference (some quibble about leverage but leverage of 1 is still short). If you sell any asset you are a natural short since if you were to ever buy that asset back again you would either gain or lose on the round-trip, so all trades include a long and a short component, it is inescapable.

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