CoinLab News = Price collapse

[notig]

This idea requires cooperation between your clients which isn't realistic unless anonymous. So really, you can as well have these coin ranges in a form of a public but anonymous ledger. Anybody who knew his/her id in the ledger would be able to verify quickly that their coins are on display. No overlaps possible. No communication needed A completely transparent bank.

if you could prove that your coins were there how does that prove that extra coins aren't there?

[ArticMine]

I would like to remind all Canadians that http://cavirtex.com/ is an outstanding exchange I really feel i can trust them with my money ( and with more security improvements on the way!) .  Keep using cavirtex!

It is a great option and I use it regularly; however there are situations where one can make use of the additional liquidity provided by MtGox. I have accounts at both.

[solex]

Trading platform = shorting.
3 or 4 medium sized corporations with 3 or 4 multimillion shorts puts the prices in $10 or below in no time.

The ability to short doesn't magically allow the price to be driven down longer than the term of the loan contract.  They have to rebuy the units they short-sold within the time limit, and if the rest of the market hasn't agreed with them during that period of time, they lose money on the short.

And further. All the ability to short on a market does is provide stability to the market price, because shorters become buyers during a price dip (as they are taking profits).  Stupid politicians think that shorting makes things crash faster, hence the regular bans during recessions.

Bitcoin must be the world's No.1 high-growth financial instrument, with a four-year track record which demolishes even gold's performance. Anyone/corporation attempting a long-term short would be totally insane. They would get more of a kick from sticking an electric eel up their trouser leg (it would be far cheaper!)

[niko]

I don't see how investment firms could "crash the price" as described in OP, but I do see how this latest development may lead to bitcoin becoming more of a speculative vehicle, and less of a trading currency or secure long-term investment. Wild fluctuation in price - in either direction - is disruptive. Oh, well. Not really bad news, but not quite what I was hoping for.

[Spaceman_Spiff]

This idea requires cooperation between your clients which isn't realistic unless anonymous. So really, you can as well have these coin ranges in a form of a public but anonymous ledger. Anybody who knew his/her id in the ledger would be able to verify quickly that their coins are on display. No overlaps possible. No communication needed A completely transparent bank.

if you could prove that your coins were there how does that prove that extra coins aren't there?

What do you mean?

[Littleshop]

In addition to the news that CoinLab is gonna manage USA/CA funds from Mtgox, they are announcing a professional, safe and licensed trading platform for US Corporations.

Trading platform = shorting.

3 or 4 medium sized corporations with 3 or 4 multimillion shorts puts the prices in $10 or below in no time.

First of all shorting can only reduce the price on that platform.  Unlike stock markets, actual bitcoins can not be created out of thin air.  If you buy cheap shorted bitcoins and can not withdraw them, it is a 'bucket shop'. 

Second of all, with shorting you get short squeezes.  And unlike the stock market, a bitcoin short squeeze can kill (expose the reality) of a trading platform.  While it is POSSIBLE with paper stocks to withdraw the certificates and have them sent to yourself, NOBODY does this.  With bitcoin many people actually do withdraw from the trading platform and can expose the lack of real bitcoins behind the scenes.

BRING IT ON!

[Jeweller]

The real goal would be to help the public know they really can and should demand proof that their deposits are safe and sound and not fractionally pledged, the same way "provably fair gaming" is teaching us by example that we should demand, well, provably fair games.

In turn, this would cut down the number of "paper bitcoins" in existence (or rather, I should say, "bitcoin-denominated promises", because the "paper bitcoins" I have in mind - like bitaddress.org and bip38 - are actually close to the best kind of bitcoins you can have!)

Awesome, awesome idea.  I'm replying without having really thought through much (and indeed somewhat off-topic from the OP) but that sounds like it would work, right?  Because of the non-fractional reserve, you'd have to pay some kind of fee to store your BTC at the First Bank of Casascius, though.  So basically you're paying a party to securely store your BTC for you.  Which is the whole idea of the original purpose of banks,  except now the fact that they're actually holding on to it is instantly verifiable.  Cool.

You haven't, like, patented that idea or anything yet, have you?  heh.

[Ichthyo]

If i loan 50k BTC @ 1% interest over the week - e.g. so must pay back 50500BTC, and sell 50k BTC at once time, it'll start a panic / bubble burst.

Still trying to figure out how this will cause a crash. (i've never played other markets).  If you loan someone 50k BTC plus interest and they have to pay you back bitcoins then how does that involve selling at all? Or are you saying that they loan in bitcoins but expect to be paid in cash?

This is how "shorting" works:

• borrow coins
• throw them on the market
• hope to kill the rates (1)
• buy back at lower rate (2)
• pay back the loan

(2) is where you are taking profit
(1) is where the risk or the catch is hidden

What would happen if someone throws 50k coins on the BTC market as it stands now?
Simple: everyone and my grandmother would rush in to get his hands on the "cheap coins". Thus the manipulator has to compete with everyone and my grandma for buying back, and competing with my grandma will kill 'tem

[sublime5447]

OP is now on my ignore list.

DICK, if not scammer. i am going to have my dad look at your code and we will see if you as much of a piece of shit as I think you are. If not sorry for being hasty. Then again you were awful hasty toward me. I trust MoneyPaktrader over this guy for sure.

[granolageek]

If i loan 50k BTC @ 1% interest over the week - e.g. so must pay back 50500BTC, and sell 50k BTC at once time, it'll start a panic / bubble burst.

I would love to see you try.  Most likely, you would have to pay substantially more purchasing the 50500 BTC towards the end than you get for selling the 50000 BTC all at once at the start, and thus would lose a lot of money.  So long as rational market makers outweigh those engaging in irrational herd behaviour in the interim period.  Hint: they probably will.

Yes. The market is still too thin to get a decent hourly rate for pushing it around by a few percent.  And pushing it down by 60% to $10 will get you slaughtered like the hog you are. I tend to agree that the smaller speculators alone would force you back up to $40 by the time you finished covering your shorts. But at some point between $15 and $20 the real buyers will show up. The ones who want their weed from Silk Road, their asthma meds from India, or just their Wordpress fee, which they _could_ pay with fiat.

Many of them could come up with two or three months in advance for a 30% discount, money they can afford to gamble. Small amounts each, but thousands of buyers, and very, very strong hands. Pump and dump only works if you're not dumping below what it's really worth.

[Gatekeeper]

not to mention the fact that 50k coins would only drop us to the $26-$27 region and i'd bet it would be back up to $30 very quickly.

$10 would take 150k btc without anyone even trying to buy against it. So you'd need a good $5m to get near $10

[Crypt_Current]

In addition to the news that CoinLab is gonna manage USA/CA funds from Mtgox, they are announcing a professional, safe and licensed trading platform for US Corporations.

Trading platform = shorting.

3 or 4 medium sized corporations with 3 or 4 multimillion shorts puts the prices in $10 or below in no time.

First of all shorting can only reduce the price on that platform.  Unlike stock markets, actual bitcoins can not be created out of thin air.  If you buy cheap shorted bitcoins and can not withdraw them, it is a 'bucket shop'. 

Second of all, with shorting you get short squeezes.  And unlike the stock market, a bitcoin short squeeze can kill (expose the reality) of a trading platform.  While it is POSSIBLE with paper stocks to withdraw the certificates and have them sent to yourself, NOBODY does this.  With bitcoin many people actually do withdraw from the trading platform and can expose the lack of real bitcoins behind the scenes.

BRING IT ON!

Pretty sure this is exactly what happened with Bitcoinica.  Anyone else remember that?

[DoomDumas]

No worry at all.. If it implies some bad thing, it also allow big money to get in the experiment.. it should accelerate the developpement of BTC business and accelerate the adoption by the mass.. It will also bring a lot of money in, this is not bad at all.. it's the normal evolution of BTC !

2013 is and will be a historic year for BTC !  fasten your seat belt and enjoy the show

[molecular]

This is possible when you can create commodities out of thin air (like "paper silver").

I have thought of making a proof-of-concept "Casascius Bank" but where I accept no more than about 1000 BTC in total deposits.

The real goal, though, wouldn't be to become a bank.  It would be to illustrate a proof-of-concept: provably secure depositing.

I had a similar thought (create proof-of-concept bitcoin bank). I would also have auditable deposits. However I would give out ripple BTC IOUs and have a transparent reserve ratio. 100% in the beginning, but less later.

[SkRRJyTC]

In addition to the news that CoinLab is gonna manage USA/CA funds from Mtgox, they are announcing a professional, safe and licensed trading platform for US Corporations.

Trading platform = shorting.

3 or 4 medium sized corporations with 3 or 4 multimillion shorts puts the prices in $10 or below in no time.

First of all shorting can only reduce the price on that platform.  Unlike stock markets, actual bitcoins can not be created out of thin air.  If you buy cheap shorted bitcoins and can not withdraw them, it is a 'bucket shop'. 

Second of all, with shorting you get short squeezes.  And unlike the stock market, a bitcoin short squeeze can kill (expose the reality) of a trading platform.  While it is POSSIBLE with paper stocks to withdraw the certificates and have them sent to yourself, NOBODY does this.  With bitcoin many people actually do withdraw from the trading platform and can expose the lack of real bitcoins behind the scenes.

BRING IT ON!

Pretty sure this is exactly what happened with Bitcoinica.  Anyone else remember that?

This is why BFX forces users to take loans from other users of actual bitcoins and the trades happen directly on gox, although you can choose to route through the smaller BFX order book for much cheaper fees.  This way there arent any 'paper bitcoins' being shorted.  No bucket shop there.

[tvbcof]

First of all shorting can only reduce the price on that platform.  Unlike stock markets, actual bitcoins can not be created out of thin air.  If you buy cheap shorted bitcoins and can not withdraw them, it is a 'bucket shop'. 

Second of all, with shorting you get short squeezes.  And unlike the stock market, a bitcoin short squeeze can kill (expose the reality) of a trading platform.  While it is POSSIBLE with paper stocks to withdraw the certificates and have them sent to yourself, NOBODY does this.  With bitcoin many people actually do withdraw from the trading platform and can expose the lack of real bitcoins behind the scenes.

BRING IT ON!

Here, here.  Finally something we agree on (...possibly because I am to some extent abandoning some of my philosophical hopes for Bitcoin...)

In mainstream-land the DTCC and SEC have the backs of 'bitcoinica's in that sphere.  People can be sold a handful of nothing because their computer screen tells them that they have shares of stock or whatever.

In Bitcoin-land there is not a big barrier to taking possession of what one has bought, and any outfit that goes out of their way to erect one will be viewed with rightful suspicion.  Sure, some outfits will be pulling a Corzine and dipping into seg funds, but as they crash and burn customers will be even more inclined to watch their own backs.  Or exit the economy when they have been robbed one to many times.

I'll look forward to some amazing short squeeze actions and will be prepared to (attempt to) capitalize on them.  So ya, BRING IT ON!

[Nemesis]

OP is now on my ignore list.

DICK, if not scammer. i am going to have my dad look at your code and we will see if you as much of a piece of shit as I think you are. If not sorry for being hasty. Then again you were awful hasty toward me. I trust MoneyPaktrader over this guy for sure.

Why you're at it..... ask your dad to come here to protect your ass.

[myself]

If i loan 50k BTC @ 1% interest over the week - e.g. so must pay back 50500BTC, and sell 50k BTC at once time, it'll start a panic / bubble burst.

There's enough people out there looking for "ways" to invest their BTC with viable returns.

As soon as someone makes a nice platform to short, the bubble will burst a lot quicker.  It wont take more than a sell off of say 100k BTC lent to cause a crash.  As soon as it crashes, can easily buy it back in a weeks time to cover the short.

1% per week bitfinex.com on USD had 1% per day and some time per hour

[Aseras]

This is possible when you can create commodities out of thin air (like "paper silver").

I have thought of making a proof-of-concept "Casascius Bank" but where I accept no more than about 1000 BTC in total deposits.

The real goal, though, wouldn't be to become a bank.  It would be to illustrate a proof-of-concept: provably secure depositing.

My "bank" would create cryptographic signatures on a daily basis proving in fact that I have every single bitcoin I say I have on deposit.  Meanwhile, I would break down that 1000 BTC into "ranges" to assert that they are owned by specific depositors (but only in a manner where the depositors themselves can identify their own funds, not the public).  For example, if I held 4 deposits for 4 people, and they were 100, 200, 300, and 400, then I would say that coins 1-100 belong to depositor 1, coins 201-400 belong to depositor 2, 401-600 and 601-1000 belong to depositors 3 and 4.  I would sign and send messages to each depositor, which would allow them to reconcile, catch, and out me if (for example), I told two people they each own the same range of coins.

The real goal would be to help the public know they really can and should demand proof that their deposits are safe and sound and not fractionally pledged, the same way "provably fair gaming" is teaching us by example that we should demand, well, provably fair games.

In turn, this would cut down the number of "paper bitcoins" in existence (or rather, I should say, "bitcoin-denominated promises", because the "paper bitcoins" I have in mind - like bitaddress.org and bip38 - are actually close to the best kind of bitcoins you can have!)

If your bank only sat on deposits and "secured" them how do you plan to make money? The idea is the bank uses deposits to make investments and has a percentage witholding they keep for withdrawals.

[Spaceman_Spiff]

If your bank only sat on deposits and "secured" them how do you plan to make money? The idea is the bank uses deposits to make investments and has a percentage witholding they keep for withdrawals.

Yes, I think the proposal would be better described as a 'vaulting service' than as a bank.