Shorting Bitcoin
- Thread starter demoivre
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Very good point! I already wonder when is it best to start shorten Bitcoins.
elacsaplau
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Nice one, Demoivre
Economics 101: When in doubt, ask yourself what did Keynes say about it!
elacsaplau
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........well at least unless you are extremely well versed.
[For example, Gordon Gekko explained how leverage works and the lack of curiosity and interrogation regarding what was a very incomplete description is noteworthy in my opinion. This is not intended to be a criticism of GG - generally, a very fine poster. It's just an observation - be very careful trying this at home!]
Gordon Gekko
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I’m trying to short Bitcoin, but the problem is that there could still be upside to ensure that I’m carried out before being proven right.
Has anyone come across any Bitcoin put options or alternative short strategies?
Things are getting ridiculous at this stage; the proverbial shoeshine boys are chatting about it.
Has anyone come across any Bitcoin put options or alternative short strategies?
Things are getting ridiculous at this stage; the proverbial shoeshine boys are chatting about it.
elacsaplau
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Does this imply that there was a time when bitcoin's valuation was not ridiculous? If so, at what level?
[Comment: Not a single poster (in the multiple threads) who believes that bitcoin is in a bubble has provided a valuation (other than zero!) of what Bitcoin is reasonably worth - let alone the basis for this valuation. There's a lot of the price is too high and it will all end in tears - but no one has said what is a reasonable price (range) and why - apart from Brendan's absolute zero.]
Serious question(s) Gordon -
- do you agree with Brendan's valuation of zero or do you think it falls into another valuation range (and if so, what's the range and why)?
[Comment: I not sure if it's a good idea for anyone to start playing the "shorting" game until he has answered these questions.]
Elacsaplau,
I think there is a value in Bitcoin, but I have absolutely no idea how to go about trying to value it.
I see it as having a value based on it's acceptance and use as an international, low cost, instant payment method. Clearly, on that basis the more vendors that accept it as a payment method, the more it will be used etc.
For speculative purposes alone, I wouldn't touch it with a barge pole, unless it was available for purchase at sub €500 per unit of Bitcoin, if it was under that price point, I might be tempted to gamble.
Unfortunately, as things stand, I think excess 99% of people holding Bitcoin are gambling with it and not because they see its value as being excess $9k-$10k for payment purposes.
So, are you saying we should all go long in Bitcoin instead ?
I think there is a value in Bitcoin, but I have absolutely no idea how to go about trying to value it.
I see it as having a value based on it's acceptance and use as an international, low cost, instant payment method. Clearly, on that basis the more vendors that accept it as a payment method, the more it will be used etc.
For speculative purposes alone, I wouldn't touch it with a barge pole, unless it was available for purchase at sub €500 per unit of Bitcoin, if it was under that price point, I might be tempted to gamble.
Unfortunately, as things stand, I think excess 99% of people holding Bitcoin are gambling with it and not because they see its value as being excess $9k-$10k for payment purposes.
So, are you saying we should all go long in Bitcoin instead ?
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Yesterdays historic launch of Bitcoin on the CBOE futures market has largely been deemed a success. In another 6 days, it's expected that CBOE rival - the much bigger CME will launch their Bitcoin futures offering. Cantor Fitzgerald and the Nasdaq have indicated plans to follow suit. NYSE have expressed regret in not launching same.
@Brendan : If you fundamentally believe strongly that BTC is vapourware, futures offer you the perfect opportunity to put your cash on the table and bet against the cryptocurrency.
Just to add, the CBOE have partnered with Gemini to create this offering. The Winklevoss twins are behind Gemini and they're believed to be the first BTC billionaires. They have made a number of attempts to get a Bitcoin ETF approved (but so far, they've been turned down by the SEC). However, with BTC futures now established, the thinking is that it's only a matter of time before a Bitcoin ETF is approved. An ETF will really open the door to hedge fund and institutional money.
All of this adds legitimacy to the currency.
@Brendan : If you fundamentally believe strongly that BTC is vapourware, futures offer you the perfect opportunity to put your cash on the table and bet against the cryptocurrency.
Just to add, the CBOE have partnered with Gemini to create this offering. The Winklevoss twins are behind Gemini and they're believed to be the first BTC billionaires. They have made a number of attempts to get a Bitcoin ETF approved (but so far, they've been turned down by the SEC). However, with BTC futures now established, the thinking is that it's only a matter of time before a Bitcoin ETF is approved. An ETF will really open the door to hedge fund and institutional money.
All of this adds legitimacy to the currency.
Brendan Burgess
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Can I clarify how this works? Here are the prices from
I believe that Bitcoin are worthless.
So I sell one Bitcoin on 14th March for $18,070.
If Bitcoin has fallen to zero by 14th March- then the exchange pays me $18,070
If Bitcoin rises to $118,070 on 14th March, I have to pay the exchange $100,000.
So my maximum gain is $18,000 - but my potential loss is unlimited? (Presumably, I can put in some form of stop loss)
Brendan
I believe that Bitcoin are worthless.
So I sell one Bitcoin on 14th March for $18,070.
If Bitcoin has fallen to zero by 14th March- then the exchange pays me $18,070
If Bitcoin rises to $118,070 on 14th March, I have to pay the exchange $100,000.
So my maximum gain is $18,000 - but my potential loss is unlimited? (Presumably, I can put in some form of stop loss)
Brendan
Brendan Burgess
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Deribit is the only forum I can find where I could do a put option. I have no idea who they are and what the counterparty risk is.
Does anyone understand this:
Take the following one:
Someone has paid $5,376 to sell one Bitcoin on 30th March 2018 for $20,000.
If Bitcoin rises to $25,000 - the option is worthless.
If Bitcoin is $19,000, then the option becomes worth $1,000 i.e. they lose $4,376
If I understand that correctly, I would buy a put option on Bitcoin.
Update: One must deposit Bitcoin with Deribit to buy an option and if one wins, one gets paid in Bitcoin! So if they fall to zero, it would be pointless.
Brendan
Does anyone understand this:
Take the following one:
Someone has paid $5,376 to sell one Bitcoin on 30th March 2018 for $20,000.
If Bitcoin rises to $25,000 - the option is worthless.
If Bitcoin is $19,000, then the option becomes worth $1,000 i.e. they lose $4,376
If I understand that correctly, I would buy a put option on Bitcoin.
Update: One must deposit Bitcoin with Deribit to buy an option and if one wins, one gets paid in Bitcoin! So if they fall to zero, it would be pointless.
Brendan
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Gordon Gekko
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That isn’t fair. I too believe that Bitcoin is going to zero, or as good as. But that doesn’t mean I can call the top. Someone who shorts it can still get carried out. So I’m just avoiding Bitcoin completely.
RichInSpirit
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At a spread betting seminar years ago they advised to only put about 1% of your available trading fund on any trade.
In the case of shorting bitcoin I wouldn't risk any more than 1%.
In the case of shorting bitcoin I wouldn't risk any more than 1%.
D
Dan Murray
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That's fair enuff RichinSpirit,
but.........they would say that wouldn't they?!
This is akin to PPOW telling folk to gamble responsibly and Diageo advocating the moderate consumption of alcohol. Yeah, right!
The market reaches its top when the last bear has surrendered. You can see the bears being defeated in this forum day by day. Now we have BB seriously discussing bitcoin options. Out in the wider world things are moving more slowly but in the same direction.
Duke of Marmalade
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Fascinating! It is fair enough to chose BTC as the settlement currency, you will get paid at the spot price and can then convert to your chosen fiat currency. Of course if it is truly zero then you will get zero. The way that would work is that the exchange could set whatever price it likes by being the only buyer on the settlement day. Thus it will spend a dollar to buy BTC at a price higher than the strike thus rendering the PUT proceeds as zero. This would be legitimate.
Of more interest is the IV (Implied Volatility). The IV of a March PUT is 144%. Using the standard lognormal model that means that in 1 year's time there is a 25% chance that BTC will fall by 62% or more and a 10% chance it will fall by 84% or more. But of course the model is log symmetric so the chances on the upside are the mirror image of these.
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Brendan Burgess
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Hi Duke
This model might well work for shares in IBM or CRH. But does it have any relevance to Bitcoin?
Bitcoin is worth nothing.
The bit we don't know is how long it will take to reach that end result, and what the path there will be.
Brendan
Duke of Marmalade
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Yes Boss you are probably right. These are small individual transactions and probably driven by more fundamental considerations than an IV play. Thus you might want a stop loss short position and your counterpart might want to make some fees. IV is some weird mathematical property of your transaction that the Exchange has calculated.
But they are quoting the IV. In deep options markets IV is everything; it is not just an observed measure of the transaction it is the primary input into the market makers' models for coming up with a price. Fundamentals are irrelevant. That isn't a criticism. Indeed many institutional participants regard options as investments in volatility. If the market perception of riskiness increases then options increase in value and vice versa.
