Guide: How to Short Bitcoins

Mod note, this was written at 12:30am, see the current usd:bitcoin rate here here

Well, let's start this off by saying that today alone, the value of 1 BitCoin to USD has jumped $44.1 hitting a whopping $234.9 coin value and by the time I finished writing this, it went up another $3 — but of course this is due to the massive media hype and a rush to scoop these pacman pellets up at any cost hoping BitCoin value will continue to climb.

But, for all the pessimists forecasting the doom of our cryptocurrency friend, you can put money where your mouth is and bank on the falling of the BitCoin with New York startup "Coinsetter" which provides a Forex platform to bet with/against BitCoin (specifically geared to make leveraged trades on margin and short the market) but the kicker is that actually the company was started by a former Investment Banker named Jaron Lukasiewicz. But of course Coinsetter isn't the first in the space, it will be competing with a Hong Kong company named Bitfinex as well as another called ICBIT.

With margin trading introduced, obviously there's some money to be made, but I don't think now is essentially the time to even think about shorting BitCoins until the hype starts dying down and you can ride the freefall down to a plateau as soon as we can see some realistic market checks, rather than loop going on where each guy is paying more than the next to cash into the climb.

I believe the best way to emphasize the hype though is to embed the "Hype Cycle" from peinvestor2012 on the "Bitcoin - Believe the Hype" post and compare it to a chart of BitCoin price:

peinvestor2012:
Speaking of reddit, this post displays the Bitcoin hype perfectly.

Bitcoin overlayed against a hype cycle

Now, BitCoin Prices:

Hey! Doesn't that curve look familiar?

It's obvious BitCoin will be around for a few years, but it may be more obvious that with alternative cryptocurrencies reaching mainstream (such as LiteCoin and NameCoin) we may see fragmentation of the core BitCoin market because currently all that's driving the BitCoin price is the popularity of the network which drives this ever increasing value.

Although, you must remember the BitCoin relies on "miners" to extract and pull BitCoins from the system requiring an exponential rate of computing power and expensive computing rigs, eventually forcing most of the mass "miner" market who can't spend $30,000 on a dedicated BitCoin rig to switch over to these alternative cryptocurrencies with a lower computing difficulty rate allowing them to again mine in large amounts for less money that will accumulate into solid sums, thus causing them to tell their friends, who tell their friends, which causes a buzz, which drives up the price, which drives up the mining, which raises the difficulty, and which finally leads to a crash when the computing power required becomes intangible again.
(ex. mining BitCoin solo for 48 hours straight will currently only garner you around $2 - $4, which isn't worth the electricity bill you'll receive for that kind of drain.)

Any kid willing to write out a mimic BitCoin system will be able to "create" a currency and this will continue until we're saturated with cryptocurrencies and everyone realizes the aimlessness of shady cryptocurrencies.

Do I think we will adopt a "virtual currency", yes, I do. But, do I think BitCoin, or even his copycat successors for that matter is our guy? No. Personally, I believe that eventually, yes, we will develop a cryptocurrency, but most likely it will be born from a corporate effort in the F500, from the Government, or the UN who want a united form of currency for the developing world.

Comments?

 

Why would a government (or the UN) want to develop a crypto-currency that would undermine its own ability to effectively tax? It's like asking Hollywood to develop a better version of Bittorrent. Wouldn't that be counter-productive? Bitcoin is more of an open-source initiative along the lines of Bittorrent.

To be honest, I am not impressed by bitcoins yet. The day I see a fully functioning bitcoin denominated derivatives market (either available through TOR or some other service), that encompasses equity futures, options on futures, commodity futures, etc. you can call me interested.

Imagine a fully open securities market, without having to go through the hassles of all the conventional regulatory processes. Forget about scanning/faxing ID documents, etc. Just set-up an anonymous account and start trading through FIX instantly.

 

Government or the UN would develop a cryptocurrency so they can tax transaction fees, which already happens in the BitCoin mining pools. They also most likely would develop a tracking method to be able to trace the movement of individual coins back and forth, unlike now where you can use BitCoins to buy anything shady or rob a trove and get away with it because BitCoins are nearly untraceable and unpinnable to their owners.

john1:
Why would a government (or the UN) want to develop a crypto-currency that would undermine its own ability to effectively tax? It's like asking Hollywood to develop a better version of Bittorrent. Wouldn't that be counter-productive? Bitcoin is more of an open-source initiative along the lines of Bittorrent.

To be honest, I am not impressed by bitcoins yet. The day I see a fully functioning bitcoin denominated derivatives market (either available through TOR or some other service), that encompasses equity futures, options on futures, commodity futures, etc. you can call me interested.

Imagine a fully open securities market, without having to go through the hassles of all the conventional regulatory processes. Forget about scanning/faxing ID documents, etc. Just set-up an anonymous account and start trading through FIX instantly.

 
Lambie:
Government or the UN would develop a cryptocurrency so they can tax transaction fees, which already happens in the BitCoin mining pools. They also most likely would develop a tracking method to be able to trace the movement of individual coins back and forth, unlike now where you can use BitCoins to buy anything shady or rob a trove and get away with it because BitCoins are nearly untraceable and unpinnable to their owners.

To be honest, It's like asking the government to engineer a new Bittorrent protocol. Doesn't mean it will work, or anyone will be interested. How would they track it, unless they centralized it and set it similar to something like e-gold only with a fiat backing? Then, it wouldn't be a true 'crypto-currency'.

 

The smart move here would be to just keep putting on straddles. This thing is either going to the moon or hitting rock bottom-no in between. And as for time decay-this thing isn't staying still for more than 2 minutes.

Does this platform have anything available? I really don't like inheriting counterparty/platform risk, especially from China.

 

It has insurance from hacks and whatnot, just you're standard "safety" package. They received 500K for their startup costs, so I'm not sure at what the extent they can barrier.

blackthorne:
The smart move here would be to just keep putting on straddles. This thing is either going to the moon or hitting rock bottom-no in between. And as for time decay-this thing isn't staying still for more than 2 minutes.

Does this platform have anything available? I really don't like inheriting counterparty/platform risk, especially from China.

 
blackthorne:
The smart move here would be to just keep putting on straddles. This thing is either going to the moon or hitting rock bottom-no in between. And as for time decay-this thing isn't staying still for more than 2 minutes.

Does this platform have anything available? I really don't like inheriting counterparty/platform risk, especially from China.

Agree with this.

 

It's a dog with fleas.

Edit: actually I don't know what the hell it is.

"They are all former investment bankers that were laid off in the economic collapse that Nancy Pelosi caused. They have no marketable skills, but by God they work hard."
 
Best Response
Lambie]Yep, that's why I recommended we wait until the mania blows over. Until then people can invest and ride the wave up and then turn around to short or just stay away from it until we see the decline.</p> <p>[quote=Edmundo Braverman:
If you shorted BTC yesterday, you're getting your ass handed to you today.

BitCoin goes over $250 today on Fed buying (according to ZeroHedge, lol):

http://www.zerohedge.com/news/2013-04-10/bitcoin-hits-new-record-crosse…]

I concur. As investors it's always hard to let a "potential" investment go by and particularly one that has exceptionally high returns. For me though I have a hard time viewing Bitcoins as a legitimate investment. Where is the underlying value? Sure they are hard to mine and so demand is high especially as their popularity increases but if that is all it draws value from then as soon as they become unpopular or competitors pop up their value is threatened and likewise their price. I do have a friend though who bought $1000 worth of bitcoins back when they were worth $25 dollars and he still has them. Personally I'm all for the idea of a straddle as someone mentioned earlier. Just my 2 cents.

"Successful investing is anticipating the anticipation of others". - John Maynard Keynes
 
Edmundo Braverman:
If you shorted BTC yesterday, you're getting your ass handed to you today.

BitCoin goes over $250 today on Fed buying (according to ZeroHedge, lol):

And now down $50 in three hours.

 

[quote=Edmundo Braverman]If you shorted BTC yesterday, you're getting your ass handed to you today.

BitCoin goes over $250 today on Fed buying (according to ZeroHedge, lol):

http://www.zerohedge.com/news/2013-04-10/bitcoin-hits-new-record-crosse…]

Not anymore. If you shorted yesterday and are still holding, you're making a killing. Last trade at $148.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 

Can we be real here, folks? No one wants to have their wealth denominated in a currency whose purchasing power can fluctuate >30% in a matter of hours. Goodbye, Bitcoin.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 

I'd throw you a banana if the moderators could rain some down on me.

NorthSider:
Can we be real here, folks? No one wants to have their wealth denominated in a currency whose purchasing power can fluctuate >30% in a matter of hours. Goodbye, Bitcoin.
 

I wish I had more knowledge when it comes to this stuff. Called this from the beginning and I wish I could have acted on it. I always feel like my finance knowledge is everything but actual markets.

Commercial Real Estate Developer
 

I cannot wait for the correction.

The safest way to double your money is to fold it over twice and put it in your pocket.
 

This just about sums it up. Bitcoin trading for the last two weeks:

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 

Honestly guys, the downfall of BitCoin is the fact that now it's gained so much publicity, every idiot with a laptop is trying to mine them out, they quickly find out their tiny CPU's only gain a burnt out fan/cooling system, they don't gain money, and they leave BitCoin.

What's funny is that BitCoin difficulty doesn't reverse. Once all the basic users leave, power players and institutions will stack up their equipment and end up brinking the difficulty past their reach, and by then BitCoin value will be at a few dollars, those power players and institutions will go belly up and every investor who shot money into this sham will have a hole in their leg.

With no constant flow, it won't be accepted anymore on a commerce level and go back to being used in the blackmarket.

I should edit my post and just say this thing isn't going to see 2014.

 
Edmundo Braverman:
Back up to $195 off a low of the day of $105. You can call BitCoin a lot of things, but boring ain't one of 'em.

To me, this thing is over. The volatility is absurd for something that claims to be a store of wealth. It can jerk wildly back and forth for the next few weeks; but, mark my words, it will be back in its original range (couple dollars per) in a matter of time.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 
NorthSider:
Edmundo Braverman:
Back up to $195 off a low of the day of $105. You can call BitCoin a lot of things, but boring ain't one of 'em.

To me, this thing is over. The volatility is absurd for something that claims to be a store of wealth. It can jerk wildly back and forth for the next few weeks; but, mark my words, it will be back in its original range (couple dollars per) in a matter of time.

I think we're seeing some of the old timers coming out of the woodwork and getting liquid on the coins they minted back in 2010 for a penny apiece. Also, some goofball who obviously owns them for pennies was giving them away on Reddit earlier today.You gotta love how bizarre this whole subset of humanity is. It just sucks that the rest of the world got involved and probably ruined it going forward.

 
panther2k][quote=Wreak Peace]Have you guys heard of this idiot? Borrowed 30k on credit card debt to buy Bitcoins a while back on reddit... <a href=http://www.reddit.com/r/Bitcoin/comments/18f3pd/i_have_my_entire_retirement_and_savings_invested/[/quote rel=nofollow>http://www.reddit.com/r/Bitcoin/comments/18f3pd/i_have_my_entire_retire…</a>:

He bought in the low double digits and took out his initial investment at 200 and above.

What a fucking retard. Wish I were that stupid.

 

Seriously, can anyone start a legitimate thread explaining the economic reasons for this currency's existence. It seems to only be attacking the store of value definition of money. It doesn't seem to be a better medium of exchange or unit of account.

Why would someone believe in this currency over a currency backed by the faith of a nuclear missile armed superpower? No doubt I'm on the short end of this currency but I'd like to understand the irrational perspective of the people buying into it.

 

And this is most certainly the end. The trading of Bitcoins has been halted to "let the markets cool off following the drop in price". LOL. I'm sure everyone is dying to jump into a currency whose trading can be halted on a moment's notice.

Here's an excerpt from a Bloomberg article that hits the right points:

After the last few hours of Bitcoin trading, it’s hard to imagine that anyone can really imagine that the Bitcoin market is driven in any way by long-term demand for an anonymous currency. The last few hours provide an excellent demonstration that what we’re seeing here is entirely a speculative mania. Yesterday, when I started writing this post, the value of a Bitcoin spiked up as high as $266. Then it fell as as low as $105, and as of this writing trades at about $151. Mt. Gox, the biggest Bitcoin exchange couldn’t keep up with the demand–or, worse, with the selling.

If you bought Bitcoins a month ago, you’ve done very well. If you bought in yesterday it hasn’t been a very nice ride. The Mt. Gox press release explains the sudden drop as a combination of panic and technology problems. People, the release says, “started to panic, started to sell Bitcoin in mass (Panic Sale) resulting in an increase of trade that ultimately froze the trade engine!” Does that sound like a currency you’re eager to switch to for their everyday business dealings?

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 

Prediction: the price plummets as soon as trading resumes.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 
NorthSider:
Prediction: the price plummets as soon as trading resumes.

Back down in the $70s now.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."
 

For those investors who believe that bitcoin is likely to crash at some point in the future, shorting the currency might be a good option. Here are some ways that you can go about doing that. -

Margin Trading Futures Market Binary Options Trading Prediction Markets Short-Selling Bitcoin Assets

 

I know hindsight is 20/20 but knowing what I knew even at the time this was written, would have disagreed heavily...sure hope he didn’t stick with this thesis...

The point of a cryptocurrency is to decouple from large, centralized interests...people using crypto instead of fiat are literally trying to avoid exactly that. It’s fun, to watch big banks and gov’ts writhe about in pain at the consant increase in popularity and value of the crypto market as a whole, makes me very happy.

"When you stop striving for perfection, you might as well be dead."
 

Here are some ways that you can approach doing that.

Edge Trading

One of the least demanding approaches to short bitcoin is through a cryptographic money edge exchanging stage. Many trades permit this kind of exchanging, with edge exchanges considering financial specialists to "obtain" cash from an intermediary keeping in mind the end goal to make an exchange.

Fates Market

Bitcoin, as different resources, has a fates showcase. In a fates exchange, a purchaser consents to buy a security with an agreement which indicates when and at what value the security will be sold. On the off chance that you purchase a fates contract, you're probably going to feel that the cost of the security will rise; this guarantees you can get a decent arrangement on the security later on.

Paired Options Trading

Call and put choices additionally enable individuals to short bitcoin. In the event that you wish to short the money, you'd execute a put arrange, likely with an escrow benefit. This implies you would intend to have the capacity to offer the money at the present cost, regardless of whether the value drops later on.

Expectation Markets

Expectation markets are another approach to consider shorting bitcoin. They have not been around in the cryptographic money world for long, yet they can regardless be an advantage for shorting monetary standards like bitcoin.

 

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