Bitcoin Forum
December 08, 2016, 06:00:39 AM *
News: To be able to use the next phase of the beta forum software, please ensure that your email address is correct/functional.
 
   Home   Help Search Donate Login Register  
Pages: [1]
  Print  
Author Topic: Hedge mining revenue?  (Read 1375 times)
gnar1ta$
Donator
Hero Member
*
Offline Offline

Activity: 756


View Profile
January 02, 2012, 03:39:47 AM
 #1

What is the correct way to protect mining revenue from another price decrease using Bitcoinica?  I'm somewhat familiar with trading but could use some help. If I'm concerned about a $1 decrease do I sell a trailing stop for the amount of BTC I'm holding $1 below market price?  Or do I buy a long position and hedge it separately with another?

Losing hundreds of Bitcoins with the best scammers in the business - BFL, Avalon, KNC, HashFast.
1481176839
Hero Member
*
Offline Offline

Posts: 1481176839

View Profile Personal Message (Offline)

Ignore
1481176839
Reply with quote  #2

1481176839
Report to moderator
There are several different types of Bitcoin clients. The most secure are full nodes like Bitcoin-Qt, which will follow the rules of the network no matter what miners do. Even if every miner decided to create 1000 bitcoins per block, full nodes would stick to the rules and reject those blocks.
Advertised sites are not endorsed by the Bitcoin Forum. They may be unsafe, untrustworthy, or illegal in your jurisdiction. Advertise here.
1481176839
Hero Member
*
Offline Offline

Posts: 1481176839

View Profile Personal Message (Offline)

Ignore
1481176839
Reply with quote  #2

1481176839
Report to moderator
1481176839
Hero Member
*
Offline Offline

Posts: 1481176839

View Profile Personal Message (Offline)

Ignore
1481176839
Reply with quote  #2

1481176839
Report to moderator
teek
Hero Member
*****
Offline Offline

Activity: 664


ASICMINER Official Canadian Distributor


View Profile
January 02, 2012, 04:08:08 AM
 #2

What is the correct way to protect mining revenue from another price decrease using Bitcoinica?  I'm somewhat familiar with trading but could use some help. If I'm concerned about a $1 decrease do I sell a trailing stop for the amount of BTC I'm holding $1 below market price?  Or do I buy a long position and hedge it separately with another?

You open a short position equal to the total amount you wish to hedge.  The idea is you need to have a no net position if you want to not be affected by the market swings, so if for example you are trying to protect 100 btc savings against fluctuation (thus long 100 btc) you need to short sell 100 btc, cancelling out your position..  It can be a little more tricky than that, but that's the basic idea.


gnar1ta$
Donator
Hero Member
*
Offline Offline

Activity: 756


View Profile
January 02, 2012, 04:19:31 AM
 #3

How do I actually short sell the 100 though?

EDIT: I see, just put a sell order up.

Losing hundreds of Bitcoins with the best scammers in the business - BFL, Avalon, KNC, HashFast.
kjj
Legendary
*
Offline Offline

Activity: 1302



View Profile
January 02, 2012, 04:21:55 AM
 #4

If there was a right way to do it, everyone would do it, and then it wouldn't work.

Trailing stops are uncertain.  None of the exchanges that I'm aware of can actually do them.  You can do it yourself with a bot, or with a meta-exchange, but you risk a fast move blowing past your price, and latency says that you can't remove that risk.  I think Bitcoinica does trailing stops, but they are the counterparty, so they have to charge you extra for their latency risk.  But, they may be your best bet, for now, because...

You can't really hedge properly, because we don't have an actual future or forward market.  And at this point, I don't think that anyone in the world even remembers how either of those used to work before leverage.  I've done a lot of work on futures before, and it isn't trivial to do it right, and it gets worse when you need to minimize trust.

p2pcoin: a USB/CD/PXE p2pool miner - 1N8ZXx2cuMzqBYSK72X4DAy1UdDbZQNPLf - todo
I routinely ignore posters with paid advertising in their sigs.  You should too.
Andrew Vorobyov
Hero Member
*****
Offline Offline

Activity: 565



View Profile
January 02, 2012, 02:58:25 PM
 #5

You go to bitcoinica.com

Deposit some cash and do short sell

Don't overleverage yourself.

Mushoz
Hero Member
*****
Offline Offline

Activity: 686


Bitbuy


View Profile WWW
January 02, 2012, 03:38:32 PM
 #6

Why pay the spreads? If you want a short position to cancel out your entire mining revenue you might just as well sell your mined coins...

www.bitbuy.nl - Koop eenvoudig, snel en goedkoop bitcoins bij Bitbuy!
gnar1ta$
Donator
Hero Member
*
Offline Offline

Activity: 756


View Profile
January 02, 2012, 04:32:58 PM
 #7

Why pay the spreads? If you want a short position to cancel out your entire mining revenue you might just as well sell your mined coins...

Why limit profits? I'd rather pay the spread than have some bonehead sell x hundred thousand BTC while I'm sleeping/working/vacationing and drive the price into the ground.  You only pay the spread if the order is executed right?

Losing hundreds of Bitcoins with the best scammers in the business - BFL, Avalon, KNC, HashFast.
omri
Newbie
*
Offline Offline

Activity: 22


View Profile
January 02, 2012, 04:52:26 PM
 #8

Why pay the spreads? If you want a short position to cancel out your entire mining revenue you might just as well sell your mined coins...
I think you are missing the point here.
 The idea is to hedge expected FUTURE mining revenue. Thus eliminating market risk from the mining operation income. It still leaves the risk of difficulty rise.
 One may sell short his expected mining revenue, and later deposit the mined coins to close out the position.
eldentyrell
Donator
Legendary
*
Offline Offline

Activity: 966


felonious vagrancy, personified


View Profile WWW
January 02, 2012, 08:06:21 PM
 #9

If there was a right way to do it, everyone would do it, and then it wouldn't work.

Actually there is a right way, it's called "futures", and all the commodities producers (farmers, metals miners, etc) do do it.  They sacrifice a small amount of expected return in exchange for a large decrease in variance.

Unfortunately we don't have futures yet in the bitcoin world.

Also keep in mind that -- unlike real-world commodities producers -- you don't know your "cost of production" beyond the end of the current difficulty window.  So you're already somewhat hedged: if the price plummets, the difficulty "ought to" drop, giving you more coins from the same equipment.  Of course it doesn't always work this way...

The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.
eldentyrell
Donator
Legendary
*
Offline Offline

Activity: 966


felonious vagrancy, personified


View Profile WWW
January 02, 2012, 08:07:08 PM
 #10

One may sell short his expected mining revenue, and later deposit the mined coins to close out the position.

... except that bitcoinica does not let you close out positions by depositing coins.  Like a casino, you have to buy the chips from the dealer...

The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.
Pages: [1]
  Print  
 
Jump to:  

Sponsored by , a Bitcoin-accepting VPN.
Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2006-2009, Simple Machines Valid XHTML 1.0! Valid CSS!