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Author Topic: On short selling  (Read 303 times)
deisik
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January 17, 2019, 01:42:12 PM
Merited by mirakal (1)
 #1

This topic is supposed to be a place for discussing a very important issue, that of short-selling and its effects on Bitcoin's price and ultimately its fate (yes, it may be that important). I have to say right at the outset that I don't have a definitive answer to the question of whether Bitcoin short selling hurts it and if it does, how much

A month or so ago, when Bitcoin was in what can be described as a free fall, many people here were recommending to move coins out of exchanges as these coins had been allegedly fueling massive short-selling and thus contributing to further downfall of Bitcoin's price. Personally, I have no doubts that there is an element of truth in these claims as I'm often shorting myself and can say from first hand experience that shorts do drive prices down

And while short-term effects of short-selling (pardon the pun) seem to be abundantly clear and not really a point of debate (but you are welcome provided you actually have to say something worthy of debating), the long-term effects of shorts are not so obvious. While many might think they have only negative consequences, there should be some that don't support this view or have certain reservations about this matter



So is massive short-selling good or bad for Bitcoin or is it in fact completely irrelevant in the long run?

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January 25, 2019, 02:58:39 AM
 #2

sell fast if you get a profit, of course, it doesn't matter because you can get results, and when you don't get a profit, it's better to hold on to the right time to make a sale.
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January 25, 2019, 07:19:23 AM
Merited by roycilik (2)
 #3

i think it really helpful with me now . thank you very much
do you think it is a clear plan?

Broken bot?

sell fast if you get a profit, of course, it doesn't matter because you can get results, and when you don't get a profit, it's better to hold on to the right time to make a sale.

Have you read the OP?

So is massive short-selling good or bad for Bitcoin or is it in fact completely irrelevant in the long run?

Short-shelling (either margin or simply dumping) is inherently part of the market, and it can hurt any asset, not only Bitcoin. Looking at price history, we can see massive dump or pump for Bitcoin, roughly every 4 years. Tbh there is no one who knows whether this action will be relevant or not for the future, but someone might argue that if we hold the $3k level it could provide massive support for the future (TA wise).

Bear and bull will come and go in every asset. If you need to cut loss, then you can sell, but if you think holding won't hurt you even if the price fell as low as $0, then holding might be your choice.
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January 25, 2019, 08:13:54 AM
 #4

So is massive short-selling good or bad for Bitcoin or is it in fact completely irrelevant in the long run?

Short-shelling (either margin or simply dumping) is inherently part of the market, and it can hurt any asset, not only Bitcoin. Looking at price history, we can see massive dump or pump for Bitcoin, roughly every 4 years. Tbh there is no one who knows whether this action will be relevant or not for the future, but someone might argue that if we hold the $3k level it could provide massive support for the future (TA wise)

I wouldn't equal selling on margin and dumping your own coins

When you sell your own coins, you are basically done as you can't sell what you don't have already. But when you are selling on margin, it is a completely different situation and environment. Essentially, you are selling the coins you don't have. But that's not even the biggest issue here. These coins can in fact be used for driving prices down further because you can sell them numerous times. Indeed, you can say that whoever bought your coins can sell them too but in general it wouldn't be a rational act as in that case they would be better off by not buying them at all in the first place

And it is conceptually different with selling coins on margin since there is a clear financial incentive to go short-selling in a bear market. It is still not the same as selling your own coins and buying back at a lower price as in the latter case you would be minimizing your losses, not maximizing your profits (as with short-selling)

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January 25, 2019, 08:16:06 AM
 #5

Bitcoin is very short at the moment, buy 3 BTC at the moment, sell when it rises to the level of 5%, buy more when it drops 5% again, the short-term investment system is right now. Continue.
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January 25, 2019, 09:08:31 AM
 #6


And while short-term effects of short-selling (pardon the pun) seem to be abundantly clear and not really a point of debate (but you are welcome provided you actually have to say something worthy of debating), the long-term effects of shorts are not so obvious.

So is massive short-selling good or bad for Bitcoin or is it in fact completely irrelevant in the long run?


It won't be irrelevant, but it would be very stupid to hold a long term short position on a deflationary cryptocurrency that has only been rising since the first day its market was created.



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January 25, 2019, 09:49:39 AM
 #7


And while short-term effects of short-selling (pardon the pun) seem to be abundantly clear and not really a point of debate (but you are welcome provided you actually have to say something worthy of debating), the long-term effects of shorts are not so obvious.

So is massive short-selling good or bad for Bitcoin or is it in fact completely irrelevant in the long run?


It won't be irrelevant, but it would be very stupid to hold a long term short position on a deflationary cryptocurrency that has only been rising since the first day its market was created

Past performance is not indicative of future outcomes

As I already answered in another thread, people in the dotcom era were likely thinking the same about startups which had been only rising since the first day they were created (when everything around these people had already started to fall apart). Anyway, it is not a question of whether to short Bitcoin or not, this topic is about understanding how short-selling, that is, selling borrowed coins, affects prices. Not that it would matter a lot here, but Bitcoin is still inflationary

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January 25, 2019, 10:18:12 AM
 #8

The most important thing, for now, is safe your capital. we never know how many people are greedy in the crypto world. at least the short term can be used for this moment. even though only 5-10% can take profit better than having to lose more.

 
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January 25, 2019, 10:28:06 AM
 #9

Bitcoin is very short at the moment, buy 3 BTC at the moment, sell when it rises to the level of 5%, buy more when it drops 5% again, the short-term investment system is right now. Continue.
Reading the recent happenings in the world of cryptocurrencies it come to my notice that short selling is the best for now because of the  short rise and fall on daily basis. At a time last year i bought some fractions of bitcoin for hold in long term but seriously i ran at lose even the capital was lost too which i regretted. This year will be short selling if there is a little gain from the investment, don't want to take the risk again.

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January 27, 2019, 07:08:23 AM
 #10


And while short-term effects of short-selling (pardon the pun) seem to be abundantly clear and not really a point of debate (but you are welcome provided you actually have to say something worthy of debating), the long-term effects of shorts are not so obvious.

So is massive short-selling good or bad for Bitcoin or is it in fact completely irrelevant in the long run?


It won't be irrelevant, but it would be very stupid to hold a long term short position on a deflationary cryptocurrency that has only been rising since the first day its market was created

Past performance is not indicative of future outcomes

As I already answered in another thread, people in the dotcom era were likely thinking the same about startups which had been only rising since the first day they were created (when everything around these people had already started to fall apart). Anyway, it is not a question of whether to short Bitcoin or not, this topic is about understanding how short-selling, that is, selling borrowed coins, affects prices. Not that it would matter a lot here, but Bitcoin is still inflationary


It is inflationary, but not in the same way like the fiat monetary system is inflationary, whimmed by some people on top of a building somewhere.

I believe the effects of short-selling in Bitcoin are negligent if you zoom out enough. Bitcoin demand has a lot of potential to grow, and there is not enough supply to cover the demand. We might only be starting to scratch the surface.


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January 27, 2019, 07:22:48 AM
 #11

I believe the effects of short-selling in Bitcoin are negligent if you zoom out enough. Bitcoin demand has a lot of potential to grow, and there is not enough supply to cover the demand. We might only be starting to scratch the surface

I can't say that I strongly disagree

If you zoom out enough, it may well be so, i.e. shorts become inconsequential (as this is what I think myself). But this assumes there is enough demand in the first place to make naked shorting a losing business as someone who tried to short Bitcoin in late 2016 (if I'm not mistaken) lost around 300 bitcoins only to have his short position liquidated. But with no demand, shorts are just accelerating the process which would go on its own even without them

With that said, though, we still can't discard the fact that you short with coins borrowed, i.e. with someone else's coins who is taking kinda counter-short position. Really, if you had bitcoins and expected the price to fall, it would make sense to sell them, not lend. But if you expect the price to grow, lending them and earning interest makes sense, after all. This is where things get complicated

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January 28, 2019, 05:59:07 AM
 #12

I believe the effects of short-selling in Bitcoin are negligent if you zoom out enough. Bitcoin demand has a lot of potential to grow, and there is not enough supply to cover the demand. We might only be starting to scratch the surface

I can't say that I strongly disagree

If you zoom out enough, it may well be so, i.e. shorts become inconsequential (as this is what I think myself). But this assumes there is enough demand in the first place to make naked shorting a losing business as someone who tried to short Bitcoin in late 2016 (if I'm not mistaken) lost around 300 bitcoins only to have his short position liquidated. But with no demand, shorts are just accelerating the process which would go on its own even without them


What kind of "demand" are we talking about? Short term demand, long term demand? Because Bitcoin has not reached its full potential in dark market commerce yet in my opinion.

Quote

With that said, though, we still can't discard the fact that you short with coins borrowed, i.e. with someone else's coins who is taking kinda counter-short position. Really, if you had bitcoins and expected the price to fall, it would make sense to sell them, not lend.


Zoom out, it would depend on the time-frame.


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January 28, 2019, 07:52:33 AM
 #13

I believe the effects of short-selling in Bitcoin are negligent if you zoom out enough. Bitcoin demand has a lot of potential to grow, and there is not enough supply to cover the demand. We might only be starting to scratch the surface

I can't say that I strongly disagree

If you zoom out enough, it may well be so, i.e. shorts become inconsequential (as this is what I think myself). But this assumes there is enough demand in the first place to make naked shorting a losing business as someone who tried to short Bitcoin in late 2016 (if I'm not mistaken) lost around 300 bitcoins only to have his short position liquidated. But with no demand, shorts are just accelerating the process which would go on its own even without them

What kind of "demand" are we talking about? Short term demand, long term demand? Because Bitcoin has not reached its full potential in dark market commerce yet in my opinion

In this case it doesn't matter

Because to make shorting (short selling specifically) a losing business the demand should be sufficient to trigger a forced liquidation of these shorts. As you can see, time is not one of the variables at play here. You just need the price to make an abrupt movement to the upside to catch short traders unprepared. Basically, this is what short squeezes are about, i.e. about making short sellers cover their positions at a loss due to a sudden excess of demand (or have these positions liquidated by the exchange itself)

With that said, though, we still can't discard the fact that you short with coins borrowed, i.e. with someone else's coins who is taking kinda counter-short position. Really, if you had bitcoins and expected the price to fall, it would make sense to sell them, not lend

Zoom out, it would depend on the time-frame.

No, it doesn't. The profits earned as well as losses incurred remain the same irrespective of the timeframe in which they occurred

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January 28, 2019, 08:21:05 AM
 #14


With that said, though, we still can't discard the fact that you short with coins borrowed, i.e. with someone else's coins who is taking kinda counter-short position. Really, if you had bitcoins and expected the price to fall, it would make sense to sell them, not lend

Zoom out, it would depend on the time-frame.


No, it doesn't. The profits earned as well as losses incurred remain the same irrespective of the timeframe in which they occurred


Maybe I got confused. Ok, if my time-frame is "HODL", and expect Bitcoin to be in 6 figures by 2025, wouldn't it make more sense to lend them than do a more active style of trading?


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January 28, 2019, 09:24:18 AM
 #15


With that said, though, we still can't discard the fact that you short with coins borrowed, i.e. with someone else's coins who is taking kinda counter-short position. Really, if you had bitcoins and expected the price to fall, it would make sense to sell them, not lend

Zoom out, it would depend on the time-frame.


No, it doesn't. The profits earned as well as losses incurred remain the same irrespective of the timeframe in which they occurred

Maybe I got confused. Ok, if my time-frame is "HODL", and expect Bitcoin to be in 6 figures by 2025, wouldn't it make more sense to lend them than do a more active style trading?

No, it wouldn't make much sense

Quite the contrary, it doesn't make any sense unless you feel completely averse to trading. If you are going to lend these bitcoins, the interest rates you are likely to receive will be miserable, something like 1% annually. Add to this the risk of exchange scamming (not uncommon in this world), you will see why it is not worth the money accumulated. On the other hand, you can day trade with a minor part of your stash, keeping the rest of your coins in a personal wallet and still be better off profit-wise (and still more so if you expect Bitcoin to be 6 digits by 2025)

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January 28, 2019, 11:12:44 AM
 #16


With that said, though, we still can't discard the fact that you short with coins borrowed, i.e. with someone else's coins who is taking kinda counter-short position. Really, if you had bitcoins and expected the price to fall, it would make sense to sell them, not lend

Zoom out, it would depend on the time-frame.


No, it doesn't. The profits earned as well as losses incurred remain the same irrespective of the timeframe in which they occurred

Maybe I got confused. Ok, if my time-frame is "HODL", and expect Bitcoin to be in 6 figures by 2025, wouldn't it make more sense to lend them than do a more active style trading?

No, it wouldn't make much sense

Quite the contrary, it doesn't make any sense unless you feel completely averse to trading. If you are going to lend these bitcoins, the interest rates you are likely to receive will be miserable, something like 1% annually. Add to this the risk of exchange scamming (not uncommon in this world), you will see why it is not worth the money accumulated. On the other hand, you can day trade with a minor part of your stash, keeping the rest of your coins in a personal wallet and still be better off profit-wise (and still more so if you expect Bitcoin to be 6 digits by 2025)


Ok, I'm now not sure if I understand what the whole topic is. Haha sorry.

But if it includes day trading, then I believe it comes with more risk, and would depend on skill, luck, experience, and everything else that separates a winner from a loser. Maybe as a default, the "HODL" is best for most.


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January 28, 2019, 11:44:06 AM
Last edit: February 03, 2019, 03:22:32 PM by deisik
 #17

With that said, though, we still can't discard the fact that you short with coins borrowed, i.e. with someone else's coins who is taking kinda counter-short position. Really, if you had bitcoins and expected the price to fall, it would make sense to sell them, not lend

Zoom out, it would depend on the time-frame

No, it doesn't. The profits earned as well as losses incurred remain the same irrespective of the timeframe in which they occurred

Maybe I got confused. Ok, if my time-frame is "HODL", and expect Bitcoin to be in 6 figures by 2025, wouldn't it make more sense to lend them than do a more active style trading?

No, it wouldn't make much sense

Quite the contrary, it doesn't make any sense unless you feel completely averse to trading. If you are going to lend these bitcoins, the interest rates you are likely to receive will be miserable, something like 1% annually. Add to this the risk of exchange scamming (not uncommon in this world), you will see why it is not worth the money accumulated. On the other hand, you can day trade with a minor part of your stash, keeping the rest of your coins in a personal wallet and still be better off profit-wise (and still more so if you expect Bitcoin to be 6 digits by 2025)


Ok, I'm now not sure if I understand what the whole topic is. Haha sorry

No need to be sorry, you can't understand everything

But it is quite simple really. If it is not profitable to lend, it turns quite profitable to borrow, whether the market is rising or falling. In the case of market rising, you borrow to open a long position (yes, it is not just about short selling). On the other hand, if the market is falling, you borrow to open a short position, i.e. sell on margin. And this is exactly what the whole topic is about, i.e. on short selling. Pretty simple, isn't it?

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February 02, 2019, 02:28:05 PM
 #18

sell fast if you get a profit, of course, it doesn't matter because you can get results, and when you don't get a profit, it's better to hold on to the right time to make a sale.
I always sell my cryptocurrencies in the right time so once I sell it I will not have any regrets that I sell it. In addition to that, at this current situation of market I am in the process of holding because the price is totally down and I do not want to cut my losses so I will hold it.

 
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February 03, 2019, 03:11:14 PM
 #19

It's too low to sell and therefore I don't choose to sell even if the reason is cutting losses. I am more patient to wait for the price to increase better, and as long as I still have patience then I keep holding.

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February 03, 2019, 08:02:55 PM
 #20

There are always going to be short positions being taken out when people think prices are going to go down, which can lead to further price decreases. That's just how it works. It's not just bitcoin but it happens in stocks, derivatives, anything that can be traded on an exchange essentially.

It's obvious that this drives prices down in the short run. However, I don't believe that it is necessarily harmful in any way in either the short or long runs.

What matters in the long run is the fundamentals of bitcoin, whether the network is functional or has improved, whether people still see utility in bitcoin as a store of value and currency, and whether adoption has increased or not. Thus, short term price swings that are caused by people trading on leverage or shorting the market shouldn't really do much in the long term, as it doesn't influence the fundamentals whatsoever.

 
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