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Author Topic: Economy > Economics > Naked Short Selling Bitcoin  (Read 912 times)
ejhuff
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September 19, 2011, 06:34:01 PM
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Feeding the Full Member trolls.  Bonker has insulted a number of informative replies.

I thought this newbie section was supposed to eliminate trolls? No?  Oh, I guess that was to eliminate hit and run spammers, which I guess it does. 

See the bottom for my informative reply.  Hopefully Bonker won't see it and insult me.

Economy > Economics > Naked Short Selling Bitcoin
https://bitcointalk.org/index.php?topic=42444

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Quote from: bonker on September 09, 2011, 10:44:21 AM
Anyone doing this yet? There must be a great market for naked short selling of this stuff. Come on
exchanges and you Bitcoin bulls, there is a market waiting for you to put
your money where your mouth is and offer naked short selling!

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Quote from: bonker on September 09, 2011, 03:15:12 PM
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Quote from: lemonginger on September 09, 2011, 03:11:31 PM
You need to look up the difference between short selling (which will certainly come to the exchanges) and naked shorting (which should not be done on the exchanges but on prediction markets instead)

Hey this aint no intellecutal competition. Setting up a short selling outfit is a piece of piss. Just wondering why there aint one out there.
Short selling Bitcoin would batter the price and drive out the speculators leaving only the true believers.


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Quote from: bonker on September 18, 2011, 07:39:41 PM
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Quote from: newguy05 on September 16, 2011, 12:33:44 AM
Quote
Quote from: bonker on September 09, 2011, 10:44:21 AM
Anyone doing this yet? There must be a great market for naked short selling of this stuff. Come on
exchanges and you Bitcoin bulls, there is a market waiting for you to put
your money where your mouth is and offer naked short selling!

why the f*** do exchanges want to share naked short selling with YOU when they can do it already with almost no margin limit and front run the orders.  mtgox controls at least 50%+ of the bitcoin market, they can and do short the bitcoins at will.

1) fill all buy orders down to a threshold with enough support  (~$5 currently)
2) fill all sell orders up to resistance (~$10 currently)
3) rinse and repeat.
4) and you cant do anything about it.

Same happened  on wall street back when they were still trading out on the streets.  I think it was outlawed in the 40s.

Listen up dipstick, I just want to locate a short selling outfit so I can make some quick green off Bitcoin.
 They are easy to set up, you don't need an exchange, just cash and a tiddly bit of infrastructure.

Now take your mumbo-jumbo and skeddadle.

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Quote from: bonker on Today at 01:00:09 PM
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Quote from: tvbcof on Today at 12:37:42 AM
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Quote from: bonker on September 18, 2011, 07:39:41 PM

Listen up dipstick, I just want to locate a short selling outfit so I can make some quick green off Bitcoin.
 They are easy to set up, you don't need an exchange, just cash and a tiddly bit of infrastructure.

Now take your mumbo-jumbo and skeddadle.
Sorry the guy lost you.  I'll try to be helpful again.

You want to short with someone elses liquidity?  Go to Bitcoinica.

You want to _naked_ short (and be on the winning side)?

 a) find an exchange who will work with you on the ponzi scam. *

or

 b) set up your own.

* If the Bitcoin network goes down before you run out of participants who will take something you are asserting is a bitcoin, it's not technically a ponzi operation...just good business.  If you can induce the Bitcoin network to go down by virtue of or as a side effect of your naked short operations, congratulations, you've won.  Good luck with that.

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.

Bonker wants to naked short sell.  Either she doesn't know what that means, or she is trolling.

The fact is, Bitcoin protects itself against naked short selling:  the network will not accept a sell transaction against an empty wallet.

Unlike the stock exchange, direct sales on Bitcoin are not recorded until delivery has occurred.  It just isn't possible to sell a promise to borrow bitcoins, while brokers can and do execute short sales before they have actually located specific shares to borrow.  See http://economix.blogs.nytimes.com/2008/09/11/short-sale-conspiracies/.

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Under Reg. SHO of the Securities and Exchange Commission, lists are published each day of stocks for which there are a large number of failures to deliver. For those shares, brokers are expected to make sure they can borrow before selling short. Deutsche did not do that on numerous occasions in 2005 and 2006.

But the complaint says that it found only two cases in which Deutsche failed to deliver shares within 13 days, as required by Reg. SHO. It says both of those trades were on NYSE Archipelago, but does not name the stocks. In those cases, the firm delivered the shares on the 18th and 23rd settlement day.

http://www.nytimes.com/2008/07/16/business/16short.html
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Short sellers borrow shares from brokers or institutional investors and sell them, hoping to buy them back later at a lower price and profit from the difference. The order aims at so-called naked short-selling, or selling shares short without first borrowing the shares or ensuring that they can be borrowed. The commission’s 30-day emergency measure aims to make abusive naked shorting harder by holding the brokers — or anyone involved in processing a short sale — responsible for any failure to deliver the borrowed shares within a mandated three-day period.


newguy05 describes something which only an exchange can do, since the exchange does not actually transfer bitcoins to the account holder's wallet when it executes a buy order.

1) fill all buy orders down to a threshold with enough support  (~$5 currently)
2) fill all sell orders up to resistance (~$10 currently)

However, this doesn't come out quite right.  Working out the details, I see this scheme works when the order book contains overlapping bid and offer prices.  This normally won't happen as the orders would be executed immediately without entering them into the book.  http://en.wikipedia.org/wiki/Order_book_%28trading%29.  But if the exchange delays executing these orders, it can accumulate enough to make a sure trading profit.

That is, suppose there are a few desperate people (who absolutely must come up with USD right away) willing to sell from $5 to $10, and lots of people hoping to sell above $10.

Correspondingly, there are a few desperate buyers (who absolutely must come up with BTC right away) willing to pay $10 down to $5, and lots of buyers hoping to buy below $5.

The exchange receives some of these desperate orders but pretends it hasn't received them yet.  It sets up its own trading account in order to profit from shooting fish in a barrel short selling, puts borrowed BTC from sellers into the trading account, and sells these to the most desperate buyer at his offering price instead of at the lower price the person they borrowed the BTC from was willing to sell at.

After filling all of the overlapping buy orders at the maximum bid prices, the exchange then returns BTC owned by the exchange in place of the borrowed BTC it already sold, and then buys them back at the minimum offer price instead of at the higher bid prices which were filled using borrowed BTC.

Or you could omit all of the borrowing and just say the exchange sells from its own account to the high bidders, and then buys back from the lowest offers.  So really I think what newguy05 described is called "trading ahead of the market".

I don't know if this can be detected or not by the account holders, but if not, this is one of the reasons we have government.  But then, unlike the "cash" bitcoin exchange P2P network, the currency to bitcoin exchanges ARE regulated by their local governments.  So if any given exchange is trading ahead of the market, it should be reported and investigated.
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