Topic: 1broker interest rates as a market indicator (Read 474 times)

I'm looking forward to market prices for BTC based financial instruments/contracts becoming part of the discussion in speculation on top of the fiat for bitcoin exchange rates. Minute by minute updates is the kind of thing for IRC, not a forum.

For example https://1broker.com/?c=btcusd was re-launched 3 weeks ago with an interest rate to keep a balance between contracts for difference (CFD) that are short BTC against USD vs those that are long BTC against USD.

For some context, see the original announcement thread:
https://bitcointalksearch.org/topic/ann-1brokercom-trade-forex-indices-stocks-and-commodities-123492

And here's the thread where the return of BTC/USD to 1broker was briefly discussed:
https://bitcointalksearch.org/topic/1broker-bitcoin-leverage-trading-is-back-218036

And read up a bit on CFD and leverage for context:
https://en.wikipedia.org/wiki/Contract_for_difference

If you look at the 1broker interest rate chart, most of the last 7 days have featured a negative interest rate for those going long on BTC and a positive interest rate for those going short. Anyone know what the other 14 days have been like there?

As a long term bull I'm prepared for a rocky ride. With my position being one I can afford to lose, I'm not planning on ever selling at a loss, I'm going to religiously hold through hell and back. If there were a decent crash I'd expand my position.

With this in mind, the risk of putting some of my BTC in a slightly leveraged instrument such as with 1broker BTC/USD made sense to me. If I'm going to buy and hold more BTC at a certain crash point, so what if my CFD position is wiped around the same time? I'm bullish enough to see it as win-win -- either I get the opportunity for significantly cheaper BTC than my original buy-in or I get some extra appreciation from my original position being leveraged.

Naturally the long-term bull in me is discounting the chances of:
 * BTC hitting extremely near zero to the point where few markets exist at low volume and stays there super-long term
 * Or going super-long term sideways at a level that continues to make it as decent as it is today as a same-day transactional/transmission currency, but too low for where I've bought in.

Given my "never sell for a loss" attitude, the "BTC hits near-zero" scenario isn't even relevant. Either I get wiped out holding just BTC or I get wiped out holding a mix of BTC and BTC CFD.

I also discount the near-zero scenario given the religious-like devotion BTC has attracted. There's going to be some pretty decent fiat out there to buy up a collapsing BTC and show up for ASIC miner fire sales and auctions.

By analogy to religion, the protestant reformation gave orthodox Christianity quite the shakeup, but hardly killed it. Possible worse case, bitcointalk.org ends up being Constantinople or Rome of Bitcoin, though some temples like MtGox might get burnt down in the process. (May I call Gavin our current pope?)

This was my attitude I started looking at BTC CFD for the first time recently. Then I actually looked at the 1broker interest rate! Woah! 0.17% daily, - for long on BTC, + for short.

The fv function in spreadsheets (I used Libreoffice) is convenient for converting that to annual:
= FV(-0.0017, 365, 0, -1)-1 = -46% interest annual for long
= FV(0.0017, 365, 0, -1)-1 = 85.89% interest annual for short

As if the major run-up in price prior to me entering wasn't enough of a signal, this interest rate says it loud and clear -- Bitcoin's chance of having big future has already been priced in by the market. As you'd expect in any financial market, returns for us more recent new comers are not going to be as spectacular as enjoyed by the 10k pizzas that came before us.

I still followed the crowd and took a long position, mildly leveraged, but not as big of one as I may have taken with more favourable interest rates.

(Come on bears on this forum from these last few weeks, look at the interest rates being offered to you!)

I realize that 1broker.com is still a fairly new place to go long or short. I'd like to see some discussion comparing how these incentives compare to costs of going long/short at other more mature Bitcoin markets with CFDs, derivitives options, futures, other etc contracts.

My browsing and searching around on this matter didn't turn up all to much. Other sites seem to be a lot more opaque in how they price these things. No doubt some don't even have proper hedges for the positions they're selling, and those are less interesting as market indicators. Others I suspect are pricing in incentives to keep things balanced through means other than interest rates.

It would be interesting to see how short/long incentives at these other markets have shifted over their history and come to understand what sentiment they've expressed recently.