[2018-11-07] It's Hard to Short Crypto – And That's Propping Up Prices

[mocker001]

https://www.coindesk.com/its-hard-to-short-crypto-and-thats-propping-up-prices-study-finds/

This is an interesting read. In summary, his conclusion is, "if it was easier to bet against cryptocurrency prices through short positions, more of these assets would go to zero" This gentlemen makes a smart comparison between genuine crypto currencies, fraudulent ones and the ones that were supposed to be a joke.

Agreeing with him or not is a different issue, but the study makes a more than decent effort to contribute something interesting, unlike those repetitive posts of fear mongering.

[1Referee]

Considering that the market here isn't following logic, but speculative incentives only, most shorters will be rekt in the long run if they believe coins without utility will become worthless one day. The nature of this market is that when Bitcoin goes up, nearly all coins will follow.

Even plenty of Bitcoiners (me included) were virtually rekt by believing that straight shitcoins would vanish or become worthless. It's not going to happen. In other words, be happy that there isn't a way to short coins outside the top 10, because it would have made plenty of people lose tons of money.

Also, there is no point for exchanges to allow users to long or short coins outside the top 20 with how easy it is to manipulate their markets, even if you fetch prices from multiple exchanges.

[Carlton Banks]

In other words, be happy that there isn't a way to short coins outside the top 10, because it would have made plenty of people lose tons of money.

Also, there is no point for exchanges to allow users to long or short coins outside the top 20 with how easy it is to manipulate their markets, even if you fetch prices from multiple exchanges.

What's the evidence that the top 20 coins are easy to manipulate? It's mostly just people saying that.

If anything, what this article says (and what you say above) adds to the case that options for manipulating the biggest cryptocurrencies and more limited than they are in the established finacial markets. Which isn't me saying cryptos aren't manipulated at all, just that there's need for some perspective on manipulation: it's harder to manipulate asset prices in markets that can be settled instantly in a practical way, as with bitcoin and other cryptocoins.

[1Referee]

What's the evidence that the top 20 coins are easy to manipulate? It's mostly just people saying that.

Altcoins severely lack liquidity, both on the buy and sell side, and this gets worse the further down you go on the list. The lack of liquidity is what makes altcoins an easy target for manipulation by either Bitcoin whales or institutions milking their financial advantage in the market.

You surely have noticed how altcoins generally pump and dump harder than Bitcoin, and that on way lower volumes. Altcoins are almost leveraged instruments on their own, which is why people tend to park their funds in altcoins rather than Bitcoin during bull runs, and convert back to Bitcoin during corrections.

If you make sure there is an incentive for deep pockets to manipulate altcoin markets, which there is if you can either long or short their prices, the manipulation kicks in naturally, especially in case there is next to no liquidity preventing you from toying with certain altcoin markets.

[Carlton Banks]

Altcoins severely lack liquidity, both on the buy and sell side, and this gets worse the further down you go on the list. The lack of liquidity is what makes altcoins an easy target for manipulation by either Bitcoin whales or institutions milking their financial advantage in the market.

You surely have noticed how altcoins generally pump and dump harder than Bitcoin, and that on way lower volumes. Altcoins are almost leveraged instruments on their own, which is why people tend to park their funds in altcoins rather than Bitcoin during bull runs, and convert back to Bitcoin during corrections.

If you make sure there is an incentive for deep pockets to manipulate altcoin markets, which there is if you can either long or short their prices, the manipulation kicks in naturally, especially in case there is next to no liquidity preventing you from toying with certain altcoin markets.

I'm inclined to agree. But I would say that the top 3-5 are less susceptible to pump & dumps, precisely because they have better liquidity than any of those below them. Overall though, with so many inexperienced people playing these markets, there is a hell of a wide range in prices that whales can exploit. More people learning how to play the game well only seems to attract more inexperienced players, so the rollercoaster price dynamics will be around for a while. And I worry when I hear people say "this market's manipulated", as all that does is embolden people who want to control cryptocurrencies (as if that doesn't constitute manipulation either)

[figmentofmyass]

In other words, be happy that there isn't a way to short coins outside the top 10, because it would have made plenty of people lose tons of money.

Also, there is no point for exchanges to allow users to long or short coins outside the top 20 with how easy it is to manipulate their markets, even if you fetch prices from multiple exchanges.

What's the evidence that the top 20 coins are easy to manipulate? It's mostly just people saying that.

If anything, what this article says (and what you say above) adds to the case that options for manipulating the biggest cryptocurrencies and more limited than they are in the established finacial markets. Which isn't me saying cryptos aren't manipulated at all, just that there's need for some perspective on manipulation: it's harder to manipulate asset prices in markets that can be settled instantly in a practical way, as with bitcoin and other cryptocoins.

what's your take on services like bakkt that are in the pipeline? even though they won't allow margin on their physically settled bitcoin futures (at first anyway), the potential for manipulation via commingling and rehypothecation seems real enough. when collateral backing physically settled markets is simultaneously owned by multiple parties, it's hard to imagine that it doesn't affect price. that's how everyday futures markets work. the question is, how much physically delivered bitcoin will actually leave the platform vs being rolled into new contracts?

i imagine we'll eventually have leveraged paper markets like gold too. all in due time.

[Carlton Banks]

what's your take on services like bakkt that are in the pipeline? even though they won't allow margin on their physically settled bitcoin futures (at first anyway), the potential for manipulation via commingling and rehypothecation seems real enough. when collateral backing physically settled markets is simultaneously owned by multiple parties, it's hard to imagine that it doesn't affect price. that's how everyday futures markets work. the question is, how much physically delivered bitcoin will actually leave the platform vs being rolled into new contracts?

There's a piece missing from Bakkt's model: what's their strategy for handling a run on BTC holdings? It's very tempting to assume that their deliberation on the subject concluded that it can only happen once, and to plan for that contingency appropriately. It's the same model as gold certificates after all; do or say anything and everything to play for as much time as you can get, then make sure you are well positioned when you default (hell, not even acknowledging the default is an option, "pivot to quantum currency" maybe? )

Another perspective would be this: if you had a choice between trading with Bakkt's model (multiple claims to the same underlying asset, but higher potential reward for higher potential risk), or using atomic swaps between cryptocurrencies, which would you choose? Both would potentially be very lucrative. And the answer has alot to do with guessing how long Bakkt might remain BTC-solvent.