Warning: How many of you Bulls have ever been a victim of a Long Squeeze?

oakpacific

hero member

Activity: 784

Merit: 1000

Quote from: im3w1l on November 28, 2013, 04:15:24 PM

Inspired by https://bitcointalksearch.org/topic/warning-how-many-of-you-bears-have-ever-been-a-victim-of-a-short-squeeze-48850,
I create this thread.

The craziness has gone to such levels that people are taking out loans, re-mortgaging homes, dipping into college savings, etc. to fund their bitcoin purchases. And that has worked fine so far, while the prize has been rising. But imagine if the opposite happens: the prize starts falling. Then people will run for the exits to try to cover the their debts. This can make the prize sink even lower. It is a positive feedback cycle, one that has a potential to wipe you out if you are investing borrowed money and aren't cautious. Be careful everyone and don't invest more than you can afford to lose.

I doubt if your bank is going to allow you to make such large transfers.

byronbb

legendary

Activity: 1414

Merit: 1000

HODL OR DIE

Got stopped out in the bitcoinica days. I think for about 18 btc. That was the end of my trading adventure.

damnek

hero member

Activity: 614

Merit: 500

Quote from: BitcoinTraderFX on November 28, 2013, 04:30:31 PM

The way this is managed in the stock/futures markets is by hedging with options (think insurance policy).

So if there were such a thing, for every $1000 bitcoin, I would pay say $10 for a Put Option. Then if bitcoin crashed to $800, the Put Option would pay out $200 or so, covering my losses. Sounds like an insurance policy, right!

If bitcoin kept climbing, the $10 Put Option would be worthless, and I just look at like I paid an insurance premium.

Unfortunately, I don't see an analog to bitcoin where this can be done. Gold has been suggested, but the correlation is not secure enough. If Gold were correlated, then you could just BUY a Call Option on Gold for $10 (as an example). Then if bitcoin crashed, and gold went up, your Call Option would pay you.

For a market maker to step in an create such an option, they would need a place to lay off their risk.

But it will come soon. Until then, as always, stay vigilant.

: )

cj

mpex.co offers trading of bitcoin options. However, those markets are highly illiquid..

eternaluniverse

full member

Activity: 126

Merit: 100

There is gong to be cycles, like for any growing market. The only thing that matters to me is that if bitcoin will be around for a long time which is currently looking optimistic.

Coma

full member

Activity: 140

Merit: 100

Quote from: im3w1l on November 28, 2013, 04:15:24 PM

Then people will run for the exits to try to cover the their debts. This can make the prize sink even lower.

Awesome, cheap coins.

freethink2013

full member

Activity: 224

Merit: 100

There's going to be a correction (probably this weekend) but the issue is there is huge demand and at some point panic becomes "cheap coins!" We've had corrections and recovered and gone on stronger every time. The people who lose are the weak hands who panic at the first signs of a correction. I imagine there were plenty of people bought at 266 and sold on the way down and who are hugely pissed off now.

Hawker

legendary

Activity: 1218

Merit: 1001

http://falkvinge.net/2011/05/29/why-im-putting-all-my-savings-into-bitcoin/

Falkvinge sold his house to buy Bitcoin at $8. He must be stinking rich now.

BitcoinTraderFX

member

Activity: 98

Merit: 10

The way this is managed in the stock/futures markets is by hedging with options (think insurance policy).

So if there were such a thing, for every $1000 bitcoin, I would pay say $10 for a Put Option. Then if bitcoin crashed to $800, the Put Option would pay out $200 or so, covering my losses. Sounds like an insurance policy, right!

If bitcoin kept climbing, the $10 Put Option would be worthless, and I just look at like I paid an insurance premium.

Unfortunately, I don't see an analog to bitcoin where this can be done. Gold has been suggested, but the correlation is not secure enough. If Gold were correlated, then you could just BUY a Call Option on Gold for $10 (as an example). Then if bitcoin crashed, and gold went up, your Call Option would pay you.

For a market maker to step in an create such an option, they would need a place to lay off their risk.

But it will come soon. Until then, as always, stay vigilant.

: )

cj

im3w1l

sr. member

Activity: 280

Merit: 250

Inspired by https://bitcointalksearch.org/topic/warning-how-many-of-you-bears-have-ever-been-a-victim-of-a-short-squeeze-48850,
I create this thread.

The craziness has gone to such levels that people are taking out loans, re-mortgaging homes, dipping into college savings, etc. to fund their bitcoin purchases. And that has worked fine so far, while the prize has been rising. But imagine if the opposite happens: the prize starts falling. Then people will run for the exits to try to cover the their debts. This can make the prize sink even lower. It is a positive feedback cycle, one that has a potential to wipe you out if you are investing borrowed money and aren't cautious. Be careful everyone and don't invest more than you can afford to lose.

Topic: Warning: How many of you Bulls have ever been a victim of a Long Squeeze? (Read 1075 times)