Who’s Afraid of Bitcoin? The Futures Traders Going Short
wsj.com
wsj.com
https://finance.yahoo.com/news/interactive-brokers-launches-...
This particular broker IB has accounted for nearly 50% of the traded contracts. But, they are not allowing any shorts at all. They wont even allow market orders
Due to the extreme volatility of cryptocurrencies, clients will be unable to assume a short position. In addition, only limit orders will be accepted.
Trading with market orders is generally like playing with fire. If you're comfortable with the current market price, just place a limit order at or slightly above market price, and it will usually fill.
Telling the market: "I want to trade now, and price is completely irrelevant" can be a recipe for a bad time.
How do you figure? People in cryptocurrency are already not afraid of the rampant volatility so this move seems to protect the broker and not market participant.
This also raises another question - whether these guys have stop orders? Because stop orders actually become market orders once triggered and help people get out at whatever price possible. Turn this into stop limit and it tries to find the "best" price possible and many people left holding the bag if things go south.
Placing a market order is equivalent to saying "I'll accept $0 for this asset, so long as that was the best price available." Only most people assume it means "I'll pay the number shown, or something close to it" which is only true of relatively stable assets on markets with plenty of liquidity. Making only limit orders available forces the market participant to choose what range of prices they would find acceptable.
Things work in these limited conditions and then people claim victory, like they are doing with the bitcoin futures. We haven't seen the full market force out yet.
Why doesn't an order type exist like: > "I'll pay the number shown, or something close to it"
? Like: acquire/lock all units to fulfill me market trade and if it is less/more than what i expect, cancel.
A couple markets have had flash crashes down to pennies. Imagine placing a market sell order right before that happens, selling your bitcoin for $0.15 instead of $15,000.
In reality you're usually somewhat safe, but market orders are always a small gamble for this reason.
Most people don't realize a limit order isn't "buy at this price" but rather "buy at the best price in my favor, but don't spend more than this much."
Fill-or-kill means don't put it on the books, just get it now or cancel. You can also typically specify whether it is a partial fill-or-kill too (get it all or none at all).
Of course that doesn't stop low-latency firms exploiting information differentials to get their bids in before your order makes it to the exchange, a process called front-running. It would be illegal for your own brokerage to frontrun you, but pretty much all discount brokerages sell information to third parties, which enables those third parties to front-run. Ever wonder why your Robinhood trades are free?
https://www.bloomberg.com/view/articles/2017-12-12/bitcoin-a...
* edit: See option_greek's excellent comment below.
Not really. You have to post margin against your short position, which is costly and could rapidly lead to a margin call where you are forced to close your short position at the worst possible time (futures price surges, you are closed out in the futures but still long the cash Bitcoin, and then the spot price crashes before you can sell your cash position). Furthermore, there is a non-trivial cost of carry - properly securing your Bitcoin private key involves a costly cyber security infrastructure and operation. Then there is the massive counter party credit risk that you take on when facing the cash Bitcoin exchange (eg Mt. Gox). Finally, there are the unknown unknowns ... this is the first week of trading for a brand new type of futures contract created on the back of a bleeding edge technology bubble, things could go wrong in all kinds of unforeseen ways. So I would submit that a $1000 cash vs. futures spread is in fact not some huge arbitrage opportunity (or, in other words, there is no free lunch here in front of this steamroller).
Millions upon millions of dollars are being poured into companies built around Ethereum for a reason. If you look at the open positions for Consensys you can see just how many positions and projects one company has going on.
I don't know much about ethereum though, does it offer anonymity functions of some sort?
But ... it may be a long time before that theoretical superiority translates to practical. Ethereum has been plagued by a hard fork and semi-regular thefts that exploit hard-to-write contracts, plus the Parity bug:
https://arstechnica.com/information-technology/2017/11/with-...
None of this inspires confidence. Only after ETH can go for a while without these nightmares can it regain its well-deserved spot in the lead. (And imho that would involve a migration to a less error-prone language.)
The closest Bitcoin had was the database code in a client implementation that had to be fixed (and had major consensus).
If I make a vulnerable website it's not nginx/Django/Postgres's fault.
The reason Ethereum hasn't taken over the dominant position yet probably has more to do with Bitcoin's superior brand penetration. Most Bitcoin holders that I know personally have very little actual understanding of how any of the crypto currencies work under the hood, so they follow the general sentiment of the community/press and do not invest based on technical merits.
I agree that Parity was merely an application on top of ETH, but it was widely used and indicates that users can innocently get snagged by something like that.
>If I make a vulnerable website it's not nginx/Django/Postgres's fault.
If nginx/Django/postgres/PHP have defaults and syntax that make it extremely easy to open up vulnerabilities, then yes, that is a strike against them, and a valid reason to build on a less flaky platform or wait for them to iron that out.
>The reason Ethereum hasn't taken over the dominant position yet probably has more to do with Bitcoin's superior brand penetration.
Or they're people like me, who were excited, then saw the nasty warning signs.
Ethereum has a working smart contract on the foundation website, as well as an online compiler to test with.
EOS looks like the most developer-friendly crypto I've seen. If you can write in a language that can compile to WebAssembly, then you can create a DApp on EOS.
It's just not done like that, or show me Bitcoin's Crowdfunding calendar, let me show you the hundreds there are for Ethereum...
Not to mention, both are doomed with very high fees.
I own both, but there are many improvements to go :)
Personally I don’t give a damn about which coin is the most practical currency, just show me which one is most likely to have a meteoric rise so I could throw a few bucks into it and pull out before it all goes bust.
although, to be fair, at least with penny stocks, they actually represent some companies whereas blockchain coins are more about a store of value and a bunch of other stuff
But one to watch is https://www.telco.in/
I certainly wish I can kept putting money into it instead of selling at $4k though.
But Litecoin in particular has had crazy corrections in the past. There are also many LTC hodlers from when it was pennies on the dollar who will now want out.
Litecoin has more potential for pumping though because it can be pitched as a better Bitcoin, which will cause a mania in the masses who missed out on Bitcoin the first time, leading to a much more powerful rise in price in a shorter period of time.
I’m telling you, this is it!
Litecoin has never been about actual utility or usage. It has always just been about being a store of value, and just copying every development from Bitcoin.
There are definitely altcoin that are different and interesting in meaningful ways. But not litecoin.
They just want a better Bitcoin.
Related, but not directed at prev comment... If anyone actually cares about sound, uncensorable money, then they should look to the $300B network that has been battle tested and withstands constant attack. BTC has prioritized stability and security, and done very well in that regard. I understand that btc businesses, and the small minority that purchase from them, are frustrated that the digit cash use-case is more difficult right now. From my perspective though, the proven stability and security is far more valuable in the long run, and is something that other coins only talk about. I think btc has to go through a full financialization to complete its price discovery (eliminate the massive volatility) before any mass adoption of a cash use-case is practical. Luckily, futures and ETFs are incoming, and lightning network is testing on mainnet.
They've swallowed the poison pill of "copying everything that the bitcoin core development team does", which means they hate low fees and on chain scaling just as much as the bitcoin community does.
Litecoin has a cool name, a good position on the charts, and all of the same issues that bitcoin has.
I was reading that the fees to short it are really high.
Looks like there were some. https://news.ycombinator.com/item?id=15907735
>How much daily volume is it currently supporting?
Doesn't matter. Any other coin can support the same daily volume (and many others usually do)
>How does the velocity of the codebase compare to other coins?
Terrible. Constant in-fighting. This is what is hurting bitcoin right now.
Edit: added hard forks link.
Anyone who's paying attention to the bitcoin repo can see your statement has no basis in reality. For instance, compare the number of closed pull requests between btc/eth/ltc...and bch if you want a good laugh.
There was an unintentional fork on March 12, 2013 caused by previously disallowed number of tx inputs (?) as resolved by [BIP50][1].
[0]: https://blog.blockchain.com/2016/02/26/a-brief-history-of-bi... [1]: https://github.com/bitcoin/bips/blob/master/bip-0050.mediawi...
Likewise in the second case, where there was a temporary soft-fork put in place to limit the block size so as to not run afoul of the bug, which itself wasn't a hard-fork or a soft-fork but rather a probabilistic failure to achieve consensus under transient circumstances.
I think the point was about vulnerability + hard-fork due to disagreement a la Ethereum Classic
(for varying degrees of support where without a transaction fee of ~$5-20, your transaction may be silently dropped, and even without may require multiple hours for confirmation)
specifically, after 72 hours if it's not confirmed. but your wallet will continually rebroadcast the transaction, so it's not a hard limit.
Lightning network looks like it can do something, but the slow progress even with the current situation makes me question the future of Bitcoin.
This is the problem though. People are buying it for the price increase, rather than technical merit. It will eventually result in some middle aged couple who took out a mortgage holding the bag when it comes crashing down (if it does. If it doesn't, that's even scarier because that tells us how uninformed most people are.)
What legitimacy? It's all code. Any smart person will take something for it's technical merit. Good developers will eventually move.
>why not standardize on the one currency that has achieved the most adoption?
And where did that get us? A currency which isn't usable for daily transactions. And people give that "Oh it isn't meant for that, use Litecoin" comment. So why do we even quote adoption?
Even then, when a transaction takes $25+ dollars, you realize that there's something wrong.