Topic: Do you think shorting of Bitcoins should be allowed? - page 2. (Read 2880 times)

By now if you've read this thread with a sharp eye you can see the point I was making in the OP.  Let me make it more clear for you speed readers.

Suppose TradeFortress (TF) is indeed shorting the bitcoin market with other people's money--what's the problem with that?  Actually, nothing, for the community as a whole.  As I said in the OP, finance theory says shorting a stock leads to better 'price discovery' and a more stable bitcoin price.  So TradeFortress is doing everybody but his customers (let's assume he's a guy) that he stole from a favor--bitcoin prices will drop, TF will buy back what he sold at a lower price, and the price will rebound, which makes for a stable price (ups and downs is stable, while exponential growth or 'rocket ship to moon' growth is unstable).  But what about those Inputs.io customers?  Well chances are, since TF probably had a standard agreement saying he's not liable for anything, at any time--and these customers presumably read the fine print-- and since he did not report any crime to the Australian police (a nice excuse was that the crime cannot be solved, but a better reason is that if he were to report a crime to the police, that report itself would technically be a crime, the crime of false reporting of a crime), then since bitcoin contracts are not regulated, then Inputs.io customers really have no cause of action against TF.  The perfect crime (or un-crime if you will).  If you're OK with no regulation, then you should be OK with the above.  If you don't like the way TF treats his customers, then move on to another online bitcoin wallet service.  No crying for you crypto-anarchists! :-P

You're right BurtW. If you really are like the Vandervoss Twins then whatever I say means nothing.  

As for beta software, I think bitcoin stuff is really alpha software.  It's basically some quant PhD thesis put into practice, and it might end up failing badly.  But, like modern art, it might be insanely profitable--for the hoarders.  The scarcity value of bitcoins and their cache in the popular imagination makes for an interesting investment proposition.  Not unlike perhaps the fable of the Emperor's New Clothes, hopefully without the embarrassing ending for us Bitcoin longs.  As for the shorts?  TradeFortress is putting my theory in the OP into practice IMO.  He/She is basically shorting the market--with other people's money.  A king-sized (emperor-sized?) naked short, pun intended. Which perhaps explains the huge trade of exactly the amount that was supposedly stolen, a few days after the alleged theft, as well as the huge drop in bitcoin prices recently.  See the other thread for details on this caper (and while you're at it, note the amusing Stockholm Syndrome replies by the Inputs.io victims, which cracked me up but if I was in their shoes I'd be saying the same thing).

Happy trading.

Thanks anth0ny.  But surely you confuse "can" with "should"?  I *can* enter into an illegal gambling agreement with a bookie--but unless the agreement is enforceable, *should* I?  The bookie can honor the bets I make most of the time, let's say 99% of the time, and pay out.  But one day I make a really big bet, and the bookie decides they don't want to pay me.  Instead the bookie takes my money and shorts some stock called TradeFortress (TF), pun intended, and promises to pay me 'someday', while I end up on this forum, with Stockholm Syndrome written all over my face and keyboard, hoping and praying the price of TF does indeed drop so the bookie can make tons of money off the short and then pay me back (sorry for the hijack thread but I had to get that in, LOL).  So I sue the bookie in Hong Kong and ask the communist judge about making me whole, about enforcing the illegal contract I had with the bookie.  The judge mutters something about 'unclean hands' or something legal like that (yes I Googled that phrase), and refuses to honor my contract with the bookie.  That's what might happen with an unregulated market.  Against that, a magistrate in Brooklyn last month I believe did say bitcoins are 'money' and, for money laundering purposes (they were trying to convict some guy laundering money, that's why the government bent over backwards to say bitcoins were money), bitcoins are money and presumably therefore a contract in bitcoins is enforceable in court (whether short or long).

The counterargument to the above is that a lot of diamond dealers in Belgium and elsewhere never have any kind of formal contract, but it's understood that they will not be dishonest with one another.  But that only works in a small, close-knit community, of which the bitcoin community is increasingly not.

Yes, as long as naked shorting is not allowed

I don't appreciate being called a liar by a noob but it does not really matter if you believe me or not.  I know I have lent thousands of USD and thousands of BTC on BitFinEx.  In fact, I was one of the first to do it and those were the days!  Because there were only a few of us lending the interest rates were much higher than they are today.

WARNING, WARNING TonyT:  Take a good look at the about screen on your Bitcoin-QT wallet, it says "Bitcoin version v0.8.5-beta".  And, worse yet it goes on to say "This is experimental software"!!!

OMG it is still beta!  You should stop using it until such a time as it is out of beta because according to your statement above you believe that beta is just Greek for "bad".

EDIT:  With respect to unclescrooge/Raphael, he has always done the right thing.  Every single time there was a glitch in the system he has refunded losses due to the glitch.  If you cannot trust unclescroodge/Raphael then you really cannot trust anyone here - which is great advice for the risk adverse.

It demonstrates the mechanism of pushing the price down, so newbies sell, and then buying back the stock ,below cost, to close the position at profit. If you cannot see the similarity with what happened this weekend you have no sense of humor.  

Thanks for your and the others replies.  It seems one of the posters discovered Bitfinex, which is still beta after thinking a bit more about the OP (I am skeptical of this member's claim that they use Bitfinex, but that's just my intuition), but keep in mind Bitfinex is beta and "The Bitfinex Exchange and Trading platform is currently in a beta phase (testing phase). The company is incorporated in Hong Kong with limited liability and once the beta phase is completed the system will go live under the company name."

So if Bitfinex goes under, who are you gonna sue?  You will not get sympathy for collecting on a short trade in bitcoins from a communist country court (Hong Kong). See here for what can happen if a cybercoin site shuts down:  http://www.coindesk.com/phenixcoin-ashes-developer-goes-awol/  And one word: "TradeFortress" anyone?

I work in a developing country as a programmer, but have experience with the politicians of a developed country; I used to work for them.  This country will soon be having hearings on whether or not to regulate bitcoin.  When and if bitcoin goes mainstream, you can be assured that bitcoins will be regulated.  That's the "should" in my title.  Bet on it.  Actually I think it would be a plus, not a minus, for the bitcoin community as it would attract the suburbanites and family people out there, who own the bulk of the money anyway.

Cheers

TonyT

For the trading newbies..

this is how a short stock market really works (0:00-1:33)

https://www.youtube.com/watch?v=AQ8HjDRrHt0

Funny but true!

i have shorted on bitfinex. got out with some profit never doing that again. almost had a heart attack when the market moved against me for a bit, couldnt wait to exit. i will stick to holding btc and selling if i get a whiff of a correction. no leverage for me!

No different than shorting anything else.  You can't short a stock without someone lending shares.  Usually (not always but usually) you don't lend your shares (or Bitcoins) to the counterparty you lend them to the broker or exchange who lends them to the person going short.  Granted this doesn't eliminate the counterparty risk but it does allow shorting to exist if both parties trust the broker or exchange even if they don't trust each other.

Sounds like a win-win situation to me

There is no "allowed" in Bitcoin.

People do short Bitcoins, people will continue to short Bitcoins.   There is absolutely nothing you could to prevent people from shorting Bitcoins.

Welcome to the decentralized future.

you can short on bitfinex. i see no reason why not. leverage in theory does mitigate volatility, BUT in an illiquid market like bitcoin there is the fear of margin call. regardless of anything, yes, it should be allowed.

You can vote with your coins by not loaning them.  I will continue to loan them out at a great daily rate to those traders that want to short the market.

I don't see how this could work without entrusting your coins with someone else.  If you're doing that, you should expect the worst; anyway, shorting is not something you can simply "ban", just avoid by disallowing people from borrowing your coin.

To short you have to borrow. Last time i checked gox doesn't lend bitcoins to anyone...

Shorting bitcoins is "allowed" and you can do it on any exchange.

Check it out.  You can also lend out USD to traders who want to borrow USD to buy BTC for a long position.  Same deal - if they are right I get back my USD plus interest, if they are wrong I also get back my USD plus interest.  Always win-win for the lender.

You can borrow BTC and short sell them to your heart's (and pocketbook's) content on BitFinEx.  Not sure why you say there is no tool to do this.  I guess you are saying it is not 'official' since it is not run by a big wall steet firm?  It is not 'official' because it is not regulated by the government?

However, there currently does exist places where 'shrewd' investors can short the BTC market for as many BTC as they can borrow.  I have lent many BTC for this purpose and it works great.  If the trade goes well for the short seller I get all my BTC back plus interest.  If the trade goes against the short seller their position is automatically closed out and I get all my BTC back plus interest.  I win either way - it is a great way to make money.

My beef with the OP is the entire "forbid it" or "should be allowed" mindset.  Who is going to do the forbidding or allowing?  How is this forbidding or allowing going to be implemented?  The entire question/poll is flawed from the opening title.

Really the naked short market is best used by Farmers and Miners who can sell forward their own future production to guarantee todays price for their commodities.

When people say, "oh it's manipulation because more than a years supply of gold/silver is sold short into the market", I have to explain to them how futures markets work and you can sell forward 10 years!