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Author Topic: Naked Short Selling Bitcoin  (Read 6398 times)
bonker
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September 19, 2011, 08:47:39 PM
 #41


Are you high? Nothing you write makes any sense.

Look, it's simple, Bitcoin is all about free markets and liberalism and all that jazz. So I'm just saying I want to naked short sell.
Dude, if Bitcoin can't cope and shits itself up its own anus then that just be market forces.


You clearly have no idea what 'naked shorting' is...which is a good reason not to play around with it (or any form of leverage.)

 - Shorting is borrowing something, then selling it.

 - 'Naked shorting' is simply selling that something without bothering to own it or borrow it in the first place.

The idea is to buy it back later at a better price and return it to where you got it, and pocket the difference in the price.  That difference is in your favor if the value of the item goes down.  That is why 'shorting' is 'betting against'.

So, if you can sell BTC to someone without having any to sell, go for it.  I am sure that some people can do just that.  I doubt that _you_ will ever be able to.


Listen up knackersack, I was naked shorting Sterling in '92, the Yen during Koyoto and the banks in '08. So don't try to lecture me
on commerce buddy, I wrote the book, then tore it up... then re-wrote it again, and I might still tear it up again!

Seems you chimps can't answer a simple question about finding a counterparty in this scheme. 

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Lolcust
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September 19, 2011, 08:55:13 PM
 #42

Why don't you make one yourself ?

According to your claims, ye'r quite a rich lad!

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September 19, 2011, 09:14:54 PM
 #43

Bitcoinica seems happy to act as counter-party.
2112
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September 19, 2011, 09:38:44 PM
 #44

Could you point me to a concise and preferably online (being Belorussian I have a hard time ordering from them amazons) sources pertaining to "The public psychoanalysis of those well-known executives" ?
I just find that turn of phrase intriguing...
I'm not aware of anything like this. Fuckedcompany.com was a prominent fixture of the first dot-com buble. This is where I first read John Nagle's analyses. Its maintainer Phillip "Pud" Kaplan made a number of technical errors and all the archives are lost forever. I'm afraid that simply you had to be there or you had to know somebody who was there. Only a lore remains, you could probably search for mentions of "Bay Aryan", the premier satirist in that community.

Please comment, critique, criticize or ridicule BIP 2112: https://bitcointalk.org/index.php?topic=54382.0
Long-term mining prognosis: https://bitcointalk.org/index.php?topic=91101.0
tvbcof
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September 19, 2011, 09:39:26 PM
 #45


Listen up knackersack, I was naked shorting Sterling in '92, the Yen during...


Ya, ya, of course you were.  -snicker-

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September 19, 2011, 11:50:00 PM
 #46

Could you point me to a concise and preferably online (being Belorussian I have a hard time ordering from them amazons) sources pertaining to "The public psychoanalysis of those well-known executives" ?
I just find that turn of phrase intriguing...
I'm not aware of anything like this. Fuckedcompany.com was a prominent fixture of the first dot-com buble. This is where I first read John Nagle's analyses. Its maintainer Phillip "Pud" Kaplan made a number of technical errors and all the archives are lost forever. I'm afraid that simply you had to be there or you had to know somebody who was there. Only a lore remains, you could probably search for mentions of "Bay Aryan", the premier satirist in that community.


oh, so you're a follower of Nagle's?  that explains everything.  i don't agree with him either.
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September 20, 2011, 12:07:09 AM
 #47

Look, there's no polite way of telling someone that they are loosing touch with reality.

i actually do wish to hear your views on the perceived weaknesses in the protocol
1) bitcoin as an abstract idea and its current valuation in terms of FIAT currencies: I talked next to nothing about this

I only wrote about inconsistent use of big-endian and little-endian values in the protocol. This is pretty much it. It is a non-controversial issue, core developers pretty much agree with it, but consider it very low priority.

Perhaps if you sit with a friend and read the history of my posts, you'll understand that.

Perhaps you won't do anything like that, and you will continue seeing the world as filled with two kind of people: good (bitcoin supporters) and bad (attackers of bitcoin).

I feel that you are on your way to become another logansryche.

Please comment, critique, criticize or ridicule BIP 2112: https://bitcointalk.org/index.php?topic=54382.0
Long-term mining prognosis: https://bitcointalk.org/index.php?topic=91101.0
cypherdoc
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September 20, 2011, 04:45:53 AM
 #48

Look, there's no polite way of telling someone that they are loosing touch with reality.

i actually do wish to hear your views on the perceived weaknesses in the protocol
1) bitcoin as an abstract idea and its current valuation in terms of FIAT currencies: I talked next to nothing about this

I only wrote about inconsistent use of big-endian and little-endian values in the protocol. This is pretty much it. It is a non-controversial issue, core developers pretty much agree with it, but consider it very low priority.

Perhaps if you sit with a friend and read the history of my posts, you'll understand that.

Perhaps you won't do anything like that, and you will continue seeing the world as filled with two kind of people: good (bitcoin supporters) and bad (attackers of bitcoin).

I feel that you are on your way to become another logansryche.

from your posts you seem to take offense to anyone who disagrees with you. 

if the Satoshi client is so messed up why don't you do something about it besides wasting so much time here bashing anyone who is positive on the technology?  your constant complaining is annoying.   create your own client or if bit coin is such a bad thing create your own alt chain and divorce yourself from this forum where more positive ppl of Bitcoin are surely to congregate much to your chagrin.
MatthewLM
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September 20, 2011, 08:59:18 PM
 #49

If a company offers a futures contract for something they do not have at x price and buys them later for delivery at y price, is this a form of naked short selling?

Is it also when a broker pretends to buy some shares but simply takes the money and hopes to profit if the buyer wants to seemingly sell the non-existent shares at a lower price?

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tvbcof
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September 20, 2011, 10:56:54 PM
 #50

If a company offers a futures contract for something they do not have at x price and buys them later for delivery at y price, is this a form of naked short selling?

I would not think so (but could be wrong.)  In this case, nobody was delivered something which did not exist.

Is it also when a broker pretends to buy some shares but simply takes the money and hopes to profit if the buyer wants to seemingly sell the non-existent shares at a lower price?

Exactly this.  In this case they adjust your account balance to make it look like you have something when in fact you do not.  In my book, that is fraud.

As a matter of principle I keep almost all my BTC in my own wallet on my own machine and in my own house (with off-site backups.)  I keep at the exchange only what I need for trading and can afford to lose if they disappear.  That is quite practical to do with BTC, and if a trading house is reluctant to allow me to transfer my BTC with ease and at will, that would be a bit red-flag to me.  It _should_ be no skin off their ass and relatively little effort to allow me do what I want with my BTC.

I also make a point of keeping my stock certs in a safe deposit box, but that is much less practical than with BTC.  Possibly by design.

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September 20, 2011, 11:08:30 PM
 #51

If a company offers a futures contract for something they do not have at x price and buys them later for delivery at y price, is this a form of naked short selling?

Sorta, but not really.  The exchanges have margin requirements and provisions for cash settlement, so it is pretty much never a problem.  Some of the exchanges are now so distant from the physical markets that physical settlement is unusual.

Is it also when a broker pretends to buy some shares but simply takes the money and hopes to profit if the buyer wants to seemingly sell the non-existent shares at a lower price?

This is called FTD fraud, and it is illegal.  The brokerages have set up elaborate systems to ensure that a broker can always borrow shares in advance.  The system even allows cycling, where a broker borrows shares, sells them to a client, and then since the brokerage has control of the client's account, the shares return instantly to the borrowing pool to be borrowed again and again and again.  Extra bonus WTF ensues when the brokerage sells borrowed shares to the very same client it borrowed them from.  Even with this system set up to mock the SEC rules, FTD is still a regular daily thing, and as far as I can tell, no one ever gets prosecuted just for doing it.  But if the SEC is already planning to piss on a broker it'll usually get included in the book that they throw at him, which is how you get headlines like "Broker charged with 372 counts of securities fraud".

I seem to recall that some dot coms that got killed by this sort of thing, and the SEC did nothing even though there was plain evidence of FTD fraud.  Covered shorting can make it look like a thing has more supply on the market than it really has, which drives the price down.  Naked shorting can make it look like supply is infinite, which can destroy companies and lives.

Oh, and FTD isn't always fraudulent.  Sometimes there are legitimate errors and mistakes, but if I recall correctly, most of it is bogus.

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MatthewLM
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September 21, 2011, 01:44:39 AM
 #52

What does FTD stand for, sorry?

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September 21, 2011, 02:05:41 AM
 #53

What does FTD stand for, sorry?

'Failure To Deliver'

There is also a 'Stratigic Failure To Deliver' which means that it was not an accident of mis-placed paperwork but rather that the failures are deliberate.  I have never heard anyone aurgue that stratigic FTD's are anything but illegal, but the SEC not very interested in doing much about it.

Here's an interesting vid on the subject:

http://www.deepcapture.com/naked-short-selling-redefining-systemic-risk/

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September 21, 2011, 02:14:44 AM
 #54

The best way to define naked short selling is this I suppose -> Counterfeit securities. Right?

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tvbcof
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September 21, 2011, 02:25:02 AM
 #55

The best way to define naked short selling is this I suppose -> Counterfeit securities. Right?

Depends on what you want to do.

You could define it as 'providing liquidity' or 'allowing market cap to achieve fair value' if you were making a lot of money doing it.

I find 'counterfeiting' to be the most applicable definition personally.

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September 21, 2011, 07:04:18 AM
 #56

The best way to define naked short selling is this I suppose -> Counterfeit securities. Right?
Actually the better turn of phrase would probably be: selling "phantom securities" or "ghost securities".

Please comment, critique, criticize or ridicule BIP 2112: https://bitcointalk.org/index.php?topic=54382.0
Long-term mining prognosis: https://bitcointalk.org/index.php?topic=91101.0
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September 23, 2011, 08:48:22 AM
 #57

I would just like to say something about a few of the things that have been said in this thread.

First off about transaction timestamps.

A transaction doesn't have any timestamp at all.  The timestamp displayed in the client is merely the time the transaction was received by the client or the timestamp for the block.  There is a real reason for this, the node cannot modify transactions to list the time the transaction was seen, but more so that time wouldn't match between all clients, which would be even worse for accounting purposes.

Secondly the talk about chargebacks.

this is from a table that can be found in the white paper http://bitcoin.org/bitcoin.pdf

If an attacker controls 30% of the compute power then their odds of controlling the block chain after z blocks is P.  As you can see there is an exponential drop in the probability the attacker controls the block chain.

z=0 P=1.0000000
z=5 P=0.1773523
z=10 P=0.0416605
z=15 P=0.0101008
z=20 P=0.0024804
z=25 P=0.0006132
z=30 P=0.0001522
z=35 P=0.0000379
z=40 P=0.0000095
z=45 P=0.0000024
z=50 P=0.0000006

Now it's definitely true that the current client does not handle block chain reorganization particularly well, however the information necessary to completely reconstruct the reorganization is saved in blk0001.dat should anybody have to deal with transaction reversals.

As far as I am aware the only entity that has ever claimed to have a block chain reorganization negatively effect them is mybitcoin.com and to be frank I think he's lying.

As for the original topic of this thread.

Naked short selling only works when you're fairly certain you can settle with the shorting party at the end of the day, this is a lot easier to do when your clients have other assets you could freeze.
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September 23, 2011, 04:07:25 PM
 #58


<snip - interesting stuff about block chain re-orgs >

As for the original topic of this thread.

Naked short selling only works when you're fairly certain you can settle with the shorting party at the end of the day, this is a lot easier to do when your clients have other assets you could freeze.

It seems to me that someone wishing to 'naked short' will have problems to deal with at the 'beginning of the day' also.  That is to say, if they are going to sell into the market, they need to have something to sell.

With stocks, this is relatively easy because the seller has three days to dig up the shares after he or she sold them.  The SEC doesn't really mind if the three days is extended out to three years, and the DTCC doing the accounting creates something which looks to the buyer as though it were a share.  (Gotta keep 'confidence in the markets' ya know...)

No 'three day rule' with Bitcoin.  I surmise that the best way to do it with Bitcoin would be to own an exchange or wallet service.  To the person who bought the Bitcoin, just manipulate their account balance and tell them "Oh ya...we just sold you some Bitcoin...check your balances."   They do so and see they have fewer $$ and more BTC on their browser window and are happy.

In this case, then I can see your argument about being 'fairly certain that you can settle at the end of the day' although the same holds for a lot of types of futures and options.  Another requirement is that you don't have a run on your exchange/wallet service before the 'end of the day' comes...though that holds for a lot of types of fractional reserve operations.

I think that the biggest requirement is that you can keep the loot and not go to jail if/when things blow up.  Bitcoin shines here.



MatthewLM
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September 23, 2011, 08:15:06 PM
 #59

I've read that futures with no asset backing are considered naked shorts. Several places refer to them that way. It all depends on the person I suppose as to how they use semantics.

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September 24, 2011, 02:36:17 PM
 #60

I've read that futures with no asset backing are considered naked shorts. Several places refer to them that way. It all depends on the person I suppose as to how they use semantics.


"Semantics"
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