My previous thread about how the TH1 contract gains value from the ability to short it:
https://bitcointalk.org/index.php?topic=794060.0


I'm shorting this asset. I think it is grossly overpriced and will only mine around 0.85-0.95 BTC.  It does get extra value from your ability to lend it out, however I think that value will decline as the contract value declines and as Bitfinex issues more shares.  Though Bitfinex hasn't issued more shares in several days - so it is possible that they have changed their policy.

It is very puzzling that the value of TH1 has increased over the past seven days as during that time it should have mined and lost 10% of its value.

The TH1 mining contract has been mining "lucky". It has mined more shares than it would be expected to do so given its hash rate and the difficulty.  This combined with the decline in the BTC price (which will cause some miners to shutdown) may explain part of the increase in TH1 value.  But I would think that it would slow the decline in value, rather than actually increase the TH1 price.

It looks like GHS at Cex.io has also increased in price over the past seven days. Over the past seven days Cex.io had 2200 (BTC) volume for GHS, whereas Bitfinex had 470 TH  (or around 600 BTC) volume.  So the GHS contract might be dominating the market. That said, it is a permanent contract (assuming they don't increase the fees to the point of killing it off) whereas TH1 loses all of its value in 77 days.

Well, Im shorting aswell


Agree, but there is a risk that contract value will decline sharply before expiration and will be somewhat inflated up to that point, thus driving up the swap rates and swap costs for shorters. Also Bitfinex issuing more shares at will is not how such things should be done, because it affects greatly the demand/supply ratio and therefore price. Its very unprofessional of them.


Another "shady" part of this contract (in addition to sporadical increase in number of shares) is how these mining profits are calculated. If you will lookup these mined blocks you will see that they are mined by a far greater pool than it is stated, and for the TH1 contract only some blocks are selected, again we dont know the mechanism of such selection.

Im short at the moment, but dont expect the price to decrease any time soon.

Not really, let me explain:

Last payout ATM:
September 29, 2014 - 09:00:11 AM CEST    323050    3,544.34    400    25.023    2.82404547
Pool of 3500 THs recieved 25.023, TH1 share of it is 2.82404547 (as in 400/3500). So it is pretty fair.

I was referring to blocks mined by a pool (you can lookup by IP on blockchain) and that there was a much larger pool that mined like 10 blocks and only 3 of them were selected to count towards TH1. As I am writing this pool for TH1 has been changed and now its IP shows only proper TH1 blocks (323050, 322980 and 322955).

Next difficulty increase might be zero.

I think the increase is simply due to a decrease in the expected rate of rise difficulty.

I'm a bit confused about this swap issue. Right now to short the security you pay 0.3% a day.  0.3% of the borrowed currency, which would be th1 contracts. When do these get compounded.?

How are you calculating that? How much are you expecting difficulty to increase?

GHS is up 8.7% in the past 24 hours.

https://bitcoinwisdom.com/markets/cexio/ghsbtc

So GHS is Trading at 2.7 BTC / THs which cannot be profitable.

If TH1 tracked that contract, you might expect it to also increase in price. It might be going up a little. There is a strong bid wall (25) at 1.255.

I think the limited available of swap and Bitfinex refusing to issue any more shares is supporting the artificial price.

What I don't understand with all the negativity on long TH1 is even with a difficulty increase with 10 TH1 contracts will get you  .2btc per day so even if contract price goes to zero ur still gonna make 20% by mid December. This is the facts as I have owned TH1 since day one with an average of 1.2 BTC per TH1. So I plan on holding it to expirery unless it rises to a price that I can't resist selling 

The difficulty would have to increase a lot more then predicted to cause a loss from claiming the dividend and letting the contract expire, assuming you owed it close to the beginning of the contract.

So far 24 hour TH1 contract volume is 25.  Last time I checked (12 hours ago) it was around 12.

I don't see the 100 new issued shares.  I suspect they are slowly adding them to the market to avoid the fall in price that would come from a market sell order.

...

Edit: Some evidence of the 100 new shares can be found in the increase in TH1 swaps (from 204 to 224) and the swap offers have another 29 available.  So that is an increase of 49 which fits with the previous case where 52% of the swaps were being lent out.

I'm very puzzled as to why 48% of the swaps aren't lent out.  I guess the market has a large number of short term traders?  It's strange that they don't lend it out for the minimal 2 days.

Do stop-loss orders appear on the order books?  If not, it could be that they've got stop losses and want to be able to liquidate their position.