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Author Topic: derivatives on btc  (Read 1548 times)
bracek
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May 16, 2011, 08:10:20 PM
 #1

I think that futures, shorts, options, bonds and other deriving
stuff similar to that is a great danger to the btc

the reason is because it creates a leverage.
If someone could bet (and win money) that btc would crash,
then there is just a matter of time when parameters (and price) will be set
to favor that outcome on pure economical base,
"nothing personal, just business"...

if there is a leverage, than politics can make it move
if bitcoin has nothing else correlated to it, than it would be much harder to hurt it...


what do u say?
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FreeMoney
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May 16, 2011, 10:49:00 PM
 #2

I think that futures, shorts, options, bonds and other deriving
stuff similar to that is a great danger to the btc
 

None of those things are dangerous to the bitcoin system. All of them could be dangerous to your coins if you use them incorrectly.

Leverage is just borrowing to buy. If you borrow to buy and lose that sucks for you. If you borrow to buy and lose and can't pay that sucks for the guy who loaned you the money.

All those instruments will strengthen and stabilize markets as they allow people to use bitcoin without taking risk that they don't want by hedging it away. A contractor gets half up front and half afterwards so he uses a little to buy puts now to guarantee that the coins he'll get later will buy him that new machine. He reduces his risk this way which makes bitcoin more valuable to him.

Hopefully we will have good markets for this stuff soon.

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Maltamir
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May 19, 2011, 11:12:49 AM
 #3

First, just create Swap, Options, Forward and Future products on each btc/xxx pair.
But is there a real need of these financial products for some transactions on btc exchang eplatform?
markm
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May 19, 2011, 01:37:02 PM
 #4

You could maybe start by simply mortgaging coins.

Like most mortgages, you'd only get to borrow some fraction of the purported/appraised value.

So maybe you could find for example someone who will loan you USD$50 against a bunch of bitcoins mtgox claims is worth USD$100 that day. You can use it to buy more bitcoins if you wish. If the purported value of the mortgaged bitcoins falls below USD$100 you have to pour in more or pay back the loan or forfeit the coins. Nice and simple. No risk to the loaner since they hold the coins. Or maybe you and they agree on an escrow service to use for it.

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May 19, 2011, 02:30:17 PM
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In the Bitcoin economy the cost of lending is transparent.  Because there is no central authority policing fraud, users are incentivized to decide for themselves wheter they trust the counterparty.  Since Bitcoin users are not guaranteed to be bailed out if they make stupid lending decisions, they are likely to think very carefully who they lend their money to, and this will lead to the emergence of decentralised trust systems such as otc-wot.

That's why I think it's unlikely that we will see irresponsible speculation with borrowed money on a massive scale.

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Nefario
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May 19, 2011, 02:47:25 PM
 #6

I'll be adding shorting to glbse.com in about a months time (after every other damn important feature that needs done).

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silversurfer
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May 19, 2011, 03:12:37 PM
 #7

I'll be adding shorting to glbse.com in about a months time (after every other damn important feature that needs done).

How will collateral work on that?  What if someone shorts 1000 BTC and it goes up to $20?  Will you need to put up your own capital to take these bets?  Will it be 'naked short selling' or will there be a market to lend ones BTC to those wishing to short?

That which is falling should also be pushed.
Isepick
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May 19, 2011, 03:35:27 PM
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Sweet, then we can start trading spreads.  Wink
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May 19, 2011, 04:17:56 PM
 #9

I'll be adding shorting to glbse.com in about a months time (after every other damn important feature that needs done).

How will collateral work on that?  What if someone shorts 1000 BTC and it goes up to $20?  Will you need to put up your own capital to take these bets?  Will it be 'naked short selling' or will there be a market to lend ones BTC to those wishing to short?

Good question. Users will be given the option of putting the assets they own up for shorting. This will involve a little risk, for example if the short goes wrong and the traders position has to be called, but no one is willing to sell, or to sell below an atronomical price then the assets being lent out for shorting will be gone.

That's the risk, the upside is that the asset lender will get some of the profit generated from a succesful short.

Margin rules will be set, so that users who are shorting have enough btc in their account to cover their position. Once they go beyond that point (or a point just before it, or a point calculated on the next highest available sell, i.e. way out of the short) they will be forced to settle, solidifying their loss.

Although right now there isn't anywhere near enough liquidity in GLBSE to make shorting work, I think most people who have bough shares won't sell at anything less than what they've paid (at least not yet).

Give it time.

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