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Comment by malloryerik | Hacker News Reader

If the futures markets at the CBOT or CME attract volume, you could use those. Otherwise, you'd have to do it over-the-counter. Borrow a bitcoin from someone and turn it into real money. When you have to repay, if BTC is down, you'll buy back a BTC at a profit. If it's up, you'll have to buy back at a loss.

Note that this gives you a maximum gain of whatever BTC/USD is today (assuming you denominate in greenbacks), while upside risk is theoretically unlimited.

Of course the lender has to trust or be ensured (or insured) that you will repay.

There must be people using Ethereum contracts to make options on BTC, and maybe trying to minimize counterparty risk through the judicious use of open-sourced smart contracts and digital collateral? Anyone know of interesting cases?

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http://www.cmegroup.com/trading/bitcoin-futures.html http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures

Apparently they will list on 18 Dec on CME, and 10 Dec on CBOE.

I get the feeling that there will be a fair bit of selling pressure as a result. That's usually the case on lockup expiries and it would make sense for the initiation of a volatile instrument that wasn't previously shortable on a listed basis.

I wonder how hedging transactions will affect the mechanics of the bitcoin market.

> I wonder how hedging transactions will affect the mechanics of the bitcoin market.

The bitcoin market is astonishingly shallow compared to most commodities and nearly unregulated, I assume hedge funds and other smart money can and will manipulate the price up and down to their own advantage.

Why would it be particularly easier to manipulate bitcoin pricing over other stocks/securities? Simply because the authorities don't understand it yet, or something to do with the nature of crypto-currency itself?

Because there are relatively few buyers and sellers in the market and the amounts of transactions are small, so one big mover can shift the price a lot.

According to some blockchain site[0] the average transaction volume for BTC is something like $2.25m USD equivalent

For comparison, on an average day, SPY[1], which is just one security (albeit a popular one) trades something around $17,160m (e.g. $17.16b).

[0] https://blockchain.info/charts/estimated-transaction-volume-...

[1] https://finance.yahoo.com/quote/SPY

Because there's fundamental value behind most traditional securities, even if it's well below the current market price. If you hold a bond, it will (usually) pay interest and principal. Equities carry the value of the cash holding of the company, plus the potential for future dividends. These cash flows act as an anchor on the value of those securities (in both directions, up and down.)

Couldn't you say the same about penny stocks? And won't this problem go away as BTC gets more popular?

> Couldn't you say the same about penny stocks?

Sure, but there are also laws and regulations that limit what you can do with stocks on a real exchange: https://en.wikipedia.org/wiki/Microcap_stock_fraud

> won't this problem go away as BTC gets more popular?

Maybe. It would have to get a lot more popular, and a lot more legitimate and regulated. At that point, it's lost all the cyberpunk appeal, and it's just another speculative asset.

Regarding penny stocks, this does happen all the time, although its expressly illegal (look up boiler room scams).

What you mean? You can short any crypto currency on many exchanges. Bitfinex and GDAX being the biggest right now.

And when bitcoin crashes, and the exchange "gets hacked", goes bankrupt, and the owners run away to some international destination, who do you claim your USD back from?

If you're shorting, you get the $ up front and have to supply the security when you "cover". Not having to "cover" the short would actually be better.

It would take some gut to do it.

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