Bitcoin Exchange Had Too Many Bitcoins

With stocks, the question of what the borrower is expected to cover will be addressed in the loan agreement. For example, here is a relevant paragraph from the 2010 Global Master Securities Lending Agreement:

Where the term of a Loan extends over an Income Record Date in respect of any Loaned Securities, Borrower shall, on the date such Income is paid by the issuer, or on such other date as the Parties may from time to time agree, pay or deliver to Lender such sum of money or property as is agreed between the Parties or, failing such agreement, a sum of money or property equivalent to (and in the same currency as) the type and amount of such Income that would be received by Lender in respect of such Loaned Securities assuming such Securities were not loaned to Borrower and were retained by Lender on the Income Record Date.

Here are some relevant definitions of terms used in the paragraph above:

Income Record Date, with respect to any Securities or Collateral, means the date by reference to which holders of such Securities or Collateral are identified as being entitled to payment of Income;

Income means any interest, dividends or other distributions of any kind whatsoever with respect to any Securities or Collateral;

As for the other part. The whole BTC/BCH thing is like a spinoff. And yes the short sellers are on the hook if Stock A tomorrow becomes Stock A + Stock B. Can they say no, well Stock B is more than I paid for A+B combined so I am not paying? Not really because if that was the case it leaves open the door for someone saying - well stock A has appreciated more than I expected so no payout.

Now in case of forks and whether people can be on the hook for the other fork? Well, depends on how famous the fork is really. If it is as famous as BTC cash, well then that is a risk you have to take as a speculator. If not, then why was someone betting on bitcoin going down the drain after the fork? Were they not clear of the implication of the fork taking off? If not, then that's a lesson learned.

To paraphrase Matt Levine - "The basic appeal of the cryptocurrency revolution, to people like me who are not making any money off of it, is that it is fun to watch people rediscover all of the lessons of financial economics, one at a time, in public. "

https://www.bloomberg.com/view/articles/2017-06-23/buffett-d...

Any one can fork a coin. Then attach a significant market value to the given fork by promoting it heavily. Or if required they can do it after the fact - They can be on the buy-side and creating an ever increasing bid to pump the fork.

As for the support, you will have human greed play a big role. Everyone holding x coin gets 1 x coin + 1 fork coin with significant value which means it will create some market as well as intice miners to mine a coin with much smaller difficulty.

Let's start with a simple example. A company has a single class of shares. All these shares are fungible. This means that it does not matter that you hold share number 545 our of 1,000,000 or share number 390,056 out of a million. Each of these million shares is identical to the others. Just the same way each $1 bill is identical to each other $1 bill.

A stock split happens. Now there are twice as many shares. However, at the moment of the split, each share is worth half as much. The total market value has not changed. Of course, trading continues and the shares will move up or down in value.

Short holders will need to come up with 1 additional share for each 1 share that they hold. This is because the stock split affects the exact class of shares that the short holder owe.

If a company issues more shares of the same class, short sellers do not need to do anything. Nothing happened to their shares. I would imagine that the value of each outstanding share would drop, and short sellers would actually profit.

If the company issued shares of another class, that would not introduce new responsibilities to short holders.

Short holders are obliged to do things on shares that they actually own. A dividend affects existing shares, hence short sellers need to pay those dividends. A split affects existing shares, hence short sellers need to find extra shares to make the lender whole. A new stock issue does not affect those existing shares: new shares are being introduced.

Another way to think about this is to think what happens if you are long 1 share of a company. If a dividend is paid, then you are paid 1 share's worth of a dividend. If a split happens, your 1 share is now 2 shares (each at half the price of the original). However, if a company issues more stock, you do not get more shares. The same rules govern short sellers. However, they must give instead of receiving.

What the real scenario is when there is a spin off where Stock A becomes Stock A + Stock B. In that case short sellers are responsible for the value of stock B. Though no one will try going this route just to screw some short sellers. If the spun off division (or company) is worthless, the stock prices will come around to reflect that and even Stock A's price will suffer from this "trick" used by management.

But more importantly, that protection money becomes actual protection money, since you can't opt-out. I've bought a lot of used stuff over the years to strangers using cash, deliberately abdicating that protection. Yet if I want to do that online, I can't.

Within the Single Euro Payments Area, credit transfers (i.e. bank transfers) have been free for almost a decade and will be instant (<10s), effective November of this year. Another regulation, Payment Services Directive 2 will bring more open access to bank accounts as well, requiring banks to provide access to APIs.

Relatedly, the EU also limits interchange fees for credit and debit cards (to 0.2 and 0.3%, respectively). This is the reason why integrators like Stripe charge 1.4% for European and 2.9% for non-European cards.

Payments can be quick, simple and cheap. All you need is some competition, or regulation to favour end-users' interests.

If it's any consolation, money doesn't disappear, it just becomes someone else's. It's still in the economy. Think of it as an overpriced research project, that the media went nuts over.

I could not find any stats on the amount of fiat flowing in and out of these "exchanges", which, by the way, have zero oversight and tend to disappear every few months or so.

I'd say that you are assuming that optimizing for price is good, and presupposing how a market should be judged. Cheaper is good when it represents new innovation, less energy waste, and similar improvements. Cheaper can also mean cuts to wages and jobs, or a reduction in quality.

> There's absolutely nothing wrong with short selling

Leverage can be used for good, and sometimes it's used irresponsibly. As this thread's article demonstrates, short selling also creates systemic risk.

> trades used to cost way more due to wall street middle men taking a big cut of every trade

Eliminating middlemen and/or reducing transaction overhead costs do not require high frequency. You're seeing effects of technological improvements and better regulations. The same improvements also benefit "slow" trading.

> chart patterns

> getting rich with strategies as stupid simple as buy the 10 day high and sell the 10 day low

"Buy low, sell high." is the foundation of any successful trading strategy. HFT (when successful) is literally the same thing at much shorter time scales and improved heuristics. Machine learning can probably provide more detailed at a much finer-grain than a simple 10 day sliding window. Again, this does not require high speed.

> HFT is a sign of a healthy free market

It tells you little about the health of the market; HFT is a sign of a market uses short-term transaction ordering heavily when reconciling trades. It's entirely possible to have a healthy market batched trades that all execute at the same unified price.

Short sellers were blamed for the Wall Street Crash of 1929.[15] Regulations governing short selling were implemented in the United States in 1929 and in 1940.[citation needed] Political fallout from the 1929 crash led Congress to enact a law banning short sellers from selling shares during a downtick; this was known as the uptick rule, and this was in effect until 3 July 2007 when it was removed by the Securities and Exchange Commission (SEC Release No. 34-55970).

So one is actually entitled to wonder if regulations are not needed. While the article fail to explain categorically in which way it is "incredibly important".

It might a question of point of view. Maybe you focus more on tulip frenzy financial opportunities while I focus more on people that have been burned by it...

And yeah if you want to trace it back to 1500 no problem with that, old does not always equal good. It like copyright laws written prior to widespread of computers. Is it right to let them unchanged because they are old while humankind could technically share knowledge and arts at a scale never envisioned just 10 years ago?

For exemple just look at the shape of AAPL in the long run, instead of a steady curve associated with profit growth, you have an unstable mess for no reason. And people that place selling stop (that brokers recommand because they it's "safer") happens to sell/buy at worst possible moment. And this is where profit from HFT actually comes... Not thin air random people getting burned.

If investing in a company mean more thinking because you could effectively bein burned by investing in bad stock I call that the normal state. Because currently the mindset of trader is more that even if it's non-sensical to invest in Unicorn-ass-corp, it still worth supporting it because they can make profits with options anyway as long as there is movement.

I'm not radically against regulation -- precisely because too often there are information asymmetries that markets (not only in capital but labor, consumer goods, etc.) can't penetrate -- but most people who think market economics should make things good (and be repressed otherwise) also think reality can be sustainably manipulated by good will, hope and faith in unicorns.

All money is funny money. The US government regularly invents phantom cash out of thin air in order to maintain the desired 3% annual inflation. That's hundreds of billions of dollars every year that just poof into existence.

I'm basically with you though, but just out of having not had any need for it yet.

If a need arises, I'll get some just like I had to get 8 different currencies while traveling Europe before the EU. Those leftover bills feel pretty much like funny money to me. There are lots of people who would trade me US currency for them, but I still subjectively value them as basically worthless because ... well it doesn't really matter why (truth is, I'm too lazy/"busy" to go to the bank).

The value of a currency, any currency, (like any other object) is subjective to the holder.

Let's stay with purely digital. There's an app on your phone that you bought for $1, which seemed like a fair deal to you at the time -- you paid $1 for something you thought was worth $1.

The author adds a feature to the app. You like the feature, and now if someone asked you what the app were worth to you, you'd say $2. In effect, a dollar of value just appeared out of thin air. No magic needed so far for this to happen, I hope.

Same situation but you don't care about the feature -- it's something you don't personally use. But now new buyers are more interested in the app, so more people pay $1 for it. Again, some extra wealth got created just by coding up the new feature. Bubble? New paradigm? It's different this time? Nope.

A new feature got added to Bitcoin. The market says it's more valuable now.

There is no need for anyone to have BCH in hand today, no reason for someone to value a BCH today more than a BCH in a week. If they thought that thousands of people selling BCH once they are able will lead to a drop in price, they would just buy at the lower price.

The same can be said for everything you own.

2. Thousands of people make trades according to foolish policy

3. Organization changes terms of foolish policy, telling nobody.

4. Organization then waits until after the fact to tell everyone that they have changed the policy, which dictate d the actions of a non trivial percentage of their customers.

If you're going to try to look like a legitimate exchange, this kind of thing looks pretty unseemly.