undefined | Better HN

0 pointsderriz8y ago0 comments

Eh? The volatility is a HUGE problem for bitcoin as a currency.

If I run a small business, accepting payment in bitcoin just creates risk. The state of my business not only depends on the quality and success of my product/service but also on the volatility of bitcoin because by accepting bitcoin I am forced to effectively take a long position on BTC. The price could crash by 25% before I sell the bitcoin and now I've a cash-flow problem - struggling to pay wages and rent - even though my business is successful in that I made a profit on selling my products or services.

The purchaser of my services is effectively on the other side of this trade and is exposed to the opposite risk wrt to BTC/USD. The only way for the two parties to minimize this risk would be for the customer to convert fiat currency into bitcoin just before paying, and then for the vendor to convert the bitcoin back immediately on receipt. With high spreads and transaction costs, using bitcoin in this manner is incredibly expensive and makes no business sense.

0 comments

30 comments · 6 top-level

totalZero8y ago· 11 in thread

How does one take a short position in Bitcoin?

malloryerik8y ago

If the futures markets at the CBOT or CME attract volume, you could use those. Otherwise, you'd have to do it over-the-counter. Borrow a bitcoin from someone and turn it into real money. When you have to repay, if BTC is down, you'll buy back a BTC at a profit. If it's up, you'll have to buy back at a loss.

Note that this gives you a maximum gain of whatever BTC/USD is today (assuming you denominate in greenbacks), while upside risk is theoretically unlimited.

Of course the lender has to trust or be ensured (or insured) that you will repay.

There must be people using Ethereum contracts to make options on BTC, and maybe trying to minimize counterparty risk through the judicious use of open-sourced smart contracts and digital collateral? Anyone know of interesting cases?

totalZero8y ago

http://www.cmegroup.com/trading/bitcoin-futures.html http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures

Apparently they will list on 18 Dec on CME, and 10 Dec on CBOE.

I get the feeling that there will be a fair bit of selling pressure as a result. That's usually the case on lockup expiries and it would make sense for the initiation of a volatile instrument that wasn't previously shortable on a listed basis.

I wonder how hedging transactions will affect the mechanics of the bitcoin market.

1 more reply

LsDmT8y ago

What you mean? You can short any crypto currency on many exchanges. Bitfinex and GDAX being the biggest right now.

2 more replies

wpietri8y ago

I have the same thought myself sometimes, but then I remember this quote: "Markets can remain irrational a lot longer than you and I can remain solvent."

9935c101ab17a668y ago

I think that's derriz's point. It's very difficult, and would be prohibitive for a small business to immediately convert bitcoin to cash.

1 more reply

hueving8y ago

Very soon (next week) bitcoin futures will start trading which will be an easy legitimate way to take a short position. You just need a futures account which you can get from regular financial institutions.

conception8y ago

Most major exchanges offer margin trading.

tim3338y ago

IG will do it sometimes. (https://www.ig.com/au/forex/markets-forex/bitcoin-1)

fapjacks8y ago

You can lie to an exchange that supports it. Sign the paperwork making promises about things that aren't true.

alanfalcon8y ago

Whaleclub

topmonk8y ago

Bitfinex offers this.

nugget8y ago· 6 in thread

Do many Bitcoin boosters even care about BTC becoming a currency any more? Seems it has achieved much more success as a frenzied medium of global speculation than it ever dreamed of as a stable digital currency.

bad_user8y ago

If BTC isn't valuable as a currency, then it is in fact a speculative bubble that will suffer a dramatic collapse, just like the tulip mania in the Netherlands in the 17th century.

nugget8y ago

What about the new "digital gold" store of wealth narrative?

2 more replies

thom8y ago

I think you could fairly easily rationalise to yourself that Bitcoin _will_ one day be money, and we haven't reached its true value yet, so nobody wants to miss their piece of the pie when that happens.

criddell8y ago

A few years ago the Winklevoss' said their target is $600,000 per coin. When I heard that, I thought they were insane. Now, I'm not so sure.

1 more reply

puranjay8y ago

I remember the 2013-14 hype cycle. That's when BTC hit $1k and a lot of merchants started accepting it, mostly as a PR gimmick. That's when I bought my BTC and even bought a few domains with them.

Since then, I almost never see BTC as a payment option.

alanfalcon8y ago

You underestimate the dreams of BTC Boosters.

namelost8y ago· 3 in thread

The volatility of Bitcoin has been decreasing over time.

_Tev8y ago

Recent price jumps tell a different story.

Do you have any data to back it up?

jstanley8y ago

https://bitvol.info

librvf8y ago

It's still far too volatile to be a reasonable currency.

1 more reply

Bromskloss8y ago· 2 in thread

> The price could crash by 25% before I sell the bitcoin and now I've a cash-flow problem

Well, the parent comment said "if the transactions were quick", meaning that you would exchange the bitcoin for something else as soon as you received them (within a second or minute, say).

salvar8y ago

Wouldn't that cost a huge amount in transaction fees, making the whole thing moot?

Bromskloss8y ago

For a large enough sales volume, the transaction fee might be negligible, but I don't know the numbers.

Bromlife8y ago· 1 in thread

Exactly. Until we pay rent, wages & stock with Bitcoin, it's essentially just digital gold bullion.

You'd be an idiot to pay for any service with Bitcoin. A million dollar pizza makes for a great news story, but it would suck knowing that you effectively let go of millions of dollars just to buy a pizza.

Bitcoin holders are disincentivized from spending it.

ForHackernews8y ago

It's almost like being inherently deflationary is a negative property for a currency to have...but that can't be true, because lots of cryptobugs have explained to me at great length why this is actually Good For Bitcoin.

1 more reply

infogulch8y ago· 1 in thread

If transactions were confirmed quickly with low fees, you could just turn around the Bitcoin in a few minutes in the exchange for dollars, all automatically. The price won't change that much on the timescale of minutes, so add in a small buffer percentage to make up the leftover difference and you're done.

Double_a_928y ago

That's where IOTA and/or Stellar Lumen come into play.

j / k navigate · click thread line to collapse

0 comments

30 comments · 6 top-level

totalZero8y ago· 11 in thread

How does one take a short position in Bitcoin?

malloryerik8y ago

Note that this gives you a maximum gain of whatever BTC/USD is today (assuming you denominate in greenbacks), while upside risk is theoretically unlimited.

Of course the lender has to trust or be ensured (or insured) that you will repay.

totalZero8y ago

http://www.cmegroup.com/trading/bitcoin-futures.html http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures

Apparently they will list on 18 Dec on CME, and 10 Dec on CBOE.

I wonder how hedging transactions will affect the mechanics of the bitcoin market.

1 more reply

LsDmT8y ago

What you mean? You can short any crypto currency on many exchanges. Bitfinex and GDAX being the biggest right now.

2 more replies

wpietri8y ago

I have the same thought myself sometimes, but then I remember this quote: "Markets can remain irrational a lot longer than you and I can remain solvent."

9935c101ab17a668y ago

I think that's derriz's point. It's very difficult, and would be prohibitive for a small business to immediately convert bitcoin to cash.

1 more reply

hueving8y ago

conception8y ago

Most major exchanges offer margin trading.

tim3338y ago

IG will do it sometimes. (https://www.ig.com/au/forex/markets-forex/bitcoin-1)

fapjacks8y ago

You can lie to an exchange that supports it. Sign the paperwork making promises about things that aren't true.

alanfalcon8y ago

Whaleclub

topmonk8y ago

Bitfinex offers this.

nugget8y ago· 6 in thread

bad_user8y ago

If BTC isn't valuable as a currency, then it is in fact a speculative bubble that will suffer a dramatic collapse, just like the tulip mania in the Netherlands in the 17th century.

nugget8y ago

What about the new "digital gold" store of wealth narrative?

2 more replies

thom8y ago

criddell8y ago

A few years ago the Winklevoss' said their target is $600,000 per coin. When I heard that, I thought they were insane. Now, I'm not so sure.

1 more reply

puranjay8y ago

I remember the 2013-14 hype cycle. That's when BTC hit $1k and a lot of merchants started accepting it, mostly as a PR gimmick. That's when I bought my BTC and even bought a few domains with them.

Since then, I almost never see BTC as a payment option.

alanfalcon8y ago

You underestimate the dreams of BTC Boosters.

namelost8y ago· 3 in thread

The volatility of Bitcoin has been decreasing over time.

_Tev8y ago

Recent price jumps tell a different story.

Do you have any data to back it up?

jstanley8y ago

https://bitvol.info

librvf8y ago

It's still far too volatile to be a reasonable currency.

1 more reply

Bromskloss8y ago· 2 in thread

> The price could crash by 25% before I sell the bitcoin and now I've a cash-flow problem

Well, the parent comment said "if the transactions were quick", meaning that you would exchange the bitcoin for something else as soon as you received them (within a second or minute, say).

salvar8y ago

Wouldn't that cost a huge amount in transaction fees, making the whole thing moot?

Bromskloss8y ago

For a large enough sales volume, the transaction fee might be negligible, but I don't know the numbers.

Bromlife8y ago· 1 in thread

Exactly. Until we pay rent, wages & stock with Bitcoin, it's essentially just digital gold bullion.

Bitcoin holders are disincentivized from spending it.

ForHackernews8y ago

1 more reply

infogulch8y ago· 1 in thread

Double_a_928y ago

That's where IOTA and/or Stellar Lumen come into play.

j / k navigate · click thread line to collapse