
Case Study: Using Bitcoin Derivatives in Global Trade - edward
https://blog.bitmex.com/case-study-using-bitcoin-derivatives-in-global-trade/
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cstanley
> This is mainly due to the fact it is hard for them to settle payment between
> the Kenyan Shilling (KES) and Renminbi (CNY).

Why? Let's solve that problem. Not complicate it with bitcoin
futures/derivatives to hedge volatility (which should not be a factor in small
international trade to begin with).

I think there exists more established markets/exchanges/escrow accounts for
currency exchange than there exists for bitcoin futures/derivatives.

What about just trading in USD over paypal?

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dons
KES and CNY have capital controls preventing some forms of contracts and
offshore delivery.

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gavazzy
> The biggest issue with using Bitcoin is the price volatility. In the time
> between when Robin sends Joseph payment for goods in Bitcoin and they arrive
> in Kenya, the price can fluctuate wildly and cause losses for Joseph. To
> eliminate the price risk, Joseph hedges Bitcoin payments by selling BitMEX
> futures contracts that lock in the USD value.

Someone shorting Bitcoin will buy the contract, while someone going long will
just buy Bitcoin directly. How do they guarantee that enough people will be
shorting Bitcoin to cover all transactions? And how do they convince others to
buy Bitcoin through their site?

This is very important, because if the volume of merchant transactions exceeds
the contracts, then they really won't have reduced volatility

Finally, how do they enforce/verify contracts?

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davidgerard
The hardest thing with shorting Bitcoin is expecting the exchanges to actually
cough up when it comes due ... because exchanges have been failing left, right
and centre this year, if not just taking everyone's money. Statistically,
trusting Bitcoin exchanges is a terrible idea.

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Animats
Right. That's especially bad for a futures exchange. A cash Bitcoin exchange
doesn't have any trading risk exposure. It can fail only through incompetence
or criminality. A futures exchange/broker has trading risk - they have to be
able to collect from losing traders.

They say "BitMEX stands behind all trades." That will probably break when
someone suffers a big loss and doesn't pay up. The exchange is in the
Seychelles, or at least claims to be. Collecting may be difficult.

There's no exchange control problem buying goods from China - that's both
allowed and encouraged.

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STRML
Hey Animats - Sam here, CTO of BitMEX.

We don't assume that anyone suffering a big loss can or will pay up - instead
we proactively take steps in real-time to liquidate traders in a controlled
manner to ensure that no trader can reach bankruptcy. This way, traders are
force-exited from their positions well before they are able to reach anywhere
near negative equity.

We are indeed incorporated in the Seychelles, but we are open about who we
are, unlike some others. Arthur Hayes (our CEO) and I are very proactive about
risk, and we use our team's significant experience in finance to ensure that
our exchange is constantly minimizing its risk.

This is a gain for our customers as well. If BitMEX does not sustain any
systematic loss, it can guarantee settlements. And since it guarantees
settlements, it is finally an exchange where businesses and traders can
actually hedge risk in Bitcoin, without having to simply sell coins.

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SCAQTony
Bitcoin is unregulated, rife with exchange fraud, unappreciated by most
governments, and practically impossible to tax. Arguably this is the
"LimeWire" of currency, it's not going to survive if it does not make
compromises and become regulated, traceable, and taxable.

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spectrum1234
No. Bitcoin will survive because it invented a system you can trust without
having to trust anyone else using the system. This literally had not been done
before. All your arguments are irrelevant because they are missing this
central point.

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SCAQTony
The technology is brilliant, perhaps I should have used "Napster" as an
analogy which was eventually replaced with iTunes, Spotify and others.

I do not believe the digital currency known as Bitcoin will survive unless
governments and government regulation is installed. I do believe digital
currency is the future.

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bdcravens
The simpler possibility is that Bitcoin will get suffocated due to market
disappointment. Digital currencies that don't have the memory of November 2013
carved into the psyche would be able to succeed purely on technical and market
merits.

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spectrum1234
Yay technology + markets in action!

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aminok
This is pretty exciting stuff.

