A less risky alternative than investing in Bitcoin directly

[ripper234]

If:

- You're impressed with the core Bitcoin concepts, but not necessarily the current implementation
- You think Bitcoin or Bitcoin inspired technology will revolutionize money as a know it in the next 5-10 years
- You have some money to invest but
- You're weary of Bitcoin because of various reasons (fear of market manipulation, hacks, or other crypto-currencies making BTC invalid)

Then ... why not short banking?

Bitcoin and Bitcoin-like currencies make several markets much weaker, if not obsolete. You could sell short or buy CALL options on some stocks of banks, payment processors or other financial services of the type that will get hurt if Bitcoin succeeds. Hold the short for 5-10 years, and you should profit, without risking the oh-so-scary Bitcoin.

Thoughts?

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[ElectricMucus]

That's baloney.

At first shorting stocks is a black art and is almost every time dominated by insiders. What could work is wait for the big bust and then short, anything else you could as well burn your money.

If you are good at trading you could go the opposite route: Play the forex and buy bitcoins with part of your profits.
More likely though you would be eaten alive the same way as with stocks by the professionals.

[ripper234]

That's baloney.

At first shorting stocks is a black art and is almost every time dominated by insiders. What could work is wait for the big bust and then short, anything else you could as well burn your money.

If you are good at trading you could go the opposite route: Play the forex and buy bitcoins with part of your profits.
More likely though you would be eaten alive the same way as with stocks by the professionals.

I'm talking about a long term investment, not about "Playing the forex".
If Bitcoin will indeed rise, then I believe banking companies and payment processors will see a huge decline.
If Bitcoin and Bitcoin-related currnecies do not succeed, this does't mean banking and payment processors will rise, they might stagnate or fall for another reason, so a shorting on them can still profit.

[mobodick]

"Bitcoin and Bitcoin-like currencies make several markets much weaker, if not obsolete."

Picture or it didn't happen...

[ripper234]

"Bitcoin and Bitcoin-like currencies make several markets much weaker, if not obsolete."

Picture or it didn't happen...

Sorry, will make several markets much weaker.

[P4man]

Thats just plain dumb. Bitcoin is lightyears away from hurting banks. Bitcoin could grow 1000x and it would barely register with banks. If you really think bitcoin is about to grow 1000x or more, youd have to be an idiot to short banks rather than buy bitcoins.

Thats not to say I think shorting banks currently is such a terrible idea, but the problems they are facing is not crypto currency.

[ElectricMucus]

That's baloney.

At first shorting stocks is a black art and is almost every time dominated by insiders. What could work is wait for the big bust and then short, anything else you could as well burn your money.

If you are good at trading you could go the opposite route: Play the forex and buy bitcoins with part of your profits.
More likely though you would be eaten alive the same way as with stocks by the professionals.

I'm talking about a long term investment, not about "Playing the forex".
If Bitcoin will indeed rise, then I believe banking companies and payment processors will see a huge decline.

That's not my point. Even if that scenario were to happen.
Stocks can rise significantly even if they are already overvalued for a long time. More likely you would receive a margin call long before they go bust.

What's so bad about my suggestion? If a few skilled traders decide to suck money out of the system and put it into bitcoin it would give it much more power than it currently has. Of course this would require much more work...  Bitcoin will not rise 'by itself'.

If you really want to hurt banks make lots of money and pull it out of their system. Shorting their stocks will not accomplish this. You could just not be payed which is of course illegal but nevertheless happens.
But putting alot of money into bitcoin will, yes that is risky but challenging the status quo always is. Looking for a less risky way to accomplish the same thing? Buy Gold & Silver. 

[DeathAndTaxes]

Exactly.  Banks will rise and fall completely unrelated to the success of Bitcoin.

To put it into perspective Paypal (much smaller than most banks) does about 100 transactions per second.  Bitcoin currently does about 0.2 transactions per second.  So if Bitcoin transaction volume grew by 400% it would still be 1% of Paypal.

Bitcoin is so infinitesimally small compared to major banks that massive increases in Bitcoin usage wouldn't have even a rounding error effect on Banks profitability.   Bitcoin could go bust and bank stocks go down or Bitcoin could see the greatest boom since its inception and bank stocks keep on rising.

[MatthewLM]

Didn't you mean out options?

[ripper234]

Didn't you mean out options?

Did you mean put options?

I might have been mistaken, I never remember which is which.

[Mageant]

Shorting banking stocks is actually outlawed now in many countries in Europe.

[ripper234]

Shorting banking stocks is actually outlawed now in many countries in Europe.

wtf?

[Mageant]

Shorting banking stocks is actually outlawed now in many countries in Europe.

wtf?

"France, Spain, Italy and Belgium’s bans on short-selling may fail to reverse the fall in financial stocks and instead may concentrate bets against banks elsewhere in Europe, according to lawyers, investors and academics. ..."
http://www.bloomberg.com/news/2011-08-11/france-spain-italy-belgium-ban-short-sales-to-halt-rout-in-bank-shares.html

[ripper234]

Shorting banking stocks is actually outlawed now in many countries in Europe.

wtf?

"France, Spain, Italy and Belgium’s bans on short-selling may fail to reverse the fall in financial stocks and instead may concentrate bets against banks elsewhere in Europe, according to lawyers, investors and academics. ..."
http://www.bloomberg.com/news/2011-08-11/france-spain-italy-belgium-ban-short-sales-to-halt-rout-in-bank-shares.html

Thanks for the link. Banning shorting is really silly.

[DeathAndTaxes]

Shorting banking stocks is actually outlawed now in many countries in Europe.

wtf?

"France, Spain, Italy and Belgium’s bans on short-selling may fail to reverse the fall in financial stocks and instead may concentrate bets against banks elsewhere in Europe, according to lawyers, investors and academics. ..."
http://www.bloomberg.com/news/2011-08-11/france-spain-italy-belgium-ban-short-sales-to-halt-rout-in-bank-shares.html

Thanks for the link. Banning shorting is really silly desperate.

FYP

[MatthewLM]

Didn't you mean out options?

Did you mean put options?

I might have been mistaken, I never remember which is which.

Yes put options, where the seller of the option offers to buy at the strike price.

[Explodicle]

Why would anyone short a company that cannot fail? If the banks ever run into trouble because of Bitcoin, the government will just rob the rest of us to bail them out again. The game is rigged.

[tvbcof]

Shorting banking stocks is actually outlawed now in many countries in Europe.

wtf?

"France, Spain, Italy and Belgium’s bans on short-selling may fail to reverse the fall in financial stocks and instead may concentrate bets against banks elsewhere in Europe, according to lawyers, investors and academics. ..."
http://www.bloomberg.com/news/2011-08-11/france-spain-italy-belgium-ban-short-sales-to-halt-rout-in-bank-shares.html

From what I understand, Bear Sterns and Lehman were under significant attack in 2008 from naked short selling.  A rule did come down to cease and desist naked short selling for a time during the crisis (which is kind of funny because it never was legal.)

I was not aware of the regular short selling ban in parts of EU.  Dumb/Desperate (imho.)

http://www.youtube.com/user/writerjudd#p/u/18/xUKSU1qahgE

[MatthewLM]

I remember hearing about temporary bans on short selling for all stocks in european stock exchanges before as a tool to stop price falls.