
Who’s Afraid of Bitcoin? The Futures Traders Going Short - thisisit
https://www.wsj.com/articles/whos-afraid-of-bitcoin-futures-traders-going-short-1513036234
======
thisisit
There is another story behind this too:

[https://finance.yahoo.com/news/interactive-brokers-
launches-...](https://finance.yahoo.com/news/interactive-brokers-launches-
bitcoin-futures-162800693.html)

This particular broker IB has accounted for nearly 50% of the traded
contracts. But, they are not allowing any shorts at all. They wont even allow
market orders

 _Due to the extreme volatility of cryptocurrencies, clients will be unable to
assume a short position. In addition, only limit orders will be accepted._

~~~
ISL
Not allowing market orders can be reasonable.

Trading with market orders is generally like playing with fire. If you're
comfortable with the current market price, just place a limit order at or
slightly above market price, and it will usually fill.

Telling the market: "I want to trade _now_ , and price is _completely
irrelevant_ " can be a recipe for a bad time.

~~~
thisisit
> Not allowing market orders can be reasonable.

How do you figure? People in cryptocurrency are already not afraid of the
rampant volatility so this move seems to protect the broker and not market
participant.

This also raises another question - whether these guys have stop orders?
Because stop orders actually become market orders once triggered and help
people get out at whatever price possible. Turn this into stop limit and it
tries to find the "best" price possible and many people left holding the bag
if things go south.

~~~
pikchurn
So set a limit order at half the current price, or whatever.

Placing a market order is equivalent to saying "I'll accept $0 for this asset,
so long as that was the best price available." Only most people assume it
means "I'll pay the number shown, or something close to it" which is only true
of relatively stable assets on markets with plenty of liquidity. Making only
limit orders available _forces_ the market participant to choose what range of
prices they would find acceptable.

~~~
bryanbuckley
I rarely trade but have enough times to learn the various types of orders one
might place, order books, spread, and a few other things.

Why doesn't an order type exist like: > "I'll pay the number shown, or
something close to it"

? Like: acquire/lock all units to fulfill me market trade and if it is
less/more than what i expect, cancel.

~~~
pikchurn
A limit order. Specifically a fill-or-kill limit order for the cancellation
part.

Most people don't realize a limit order isn't "buy at this price" but rather
"buy at the best price in my favor, but don't spend more than this much."

Fill-or-kill means don't put it on the books, just get it now or cancel. You
can also typically specify whether it is a partial fill-or-kill too (get it
all or none at all).

~~~
bryanbuckley
TIL! Much thanks. Are you sure this (buy at best price in my favor) is how it
is implemented commonly (e.g. the limit order is not just rejected for being
an invalid liquidity maker order?)? I guess it is the Fill-or-Kill that is
key; I suppose you can add an additional factor to that limit order to give
yourself a range of acceptable prices (obviously you could program it, but is
it a common order type on something like E-Trade?)?

~~~
pikchurn
"In your favor" is how it is required to be implemented by law. You get the
absolute best price on the books at the time it hits the exchange.

Of course that doesn't stop low-latency firms exploiting information
differentials to get their bids in before your order makes it to the exchange,
a process called front-running. It would be illegal for your own brokerage to
frontrun you, but pretty much all discount brokerages sell information to
third parties, which enables those third parties to front-run. Ever wonder why
your Robinhood trades are free?

------
meritt
Shorting futures does not necessarily mean there's negative sentiment. There's
a large arbitrage opportunity right now. Futures are going for about $1,000
more than BTC itself right now and you can make risk-free* (assuming you know
how to securely store your private key) profit. Doing so requires selling a
future.

[https://www.bloomberg.com/view/articles/2017-12-12/bitcoin-a...](https://www.bloomberg.com/view/articles/2017-12-12/bitcoin-
arbitrage-and-tax-math)

* edit: See option_greek's excellent comment below.

~~~
option_greek
Usually there isn't any risk in this scenario but thanks to cboe rules that
cap volatility at 20%, there is quite a bit of risk hidden here. Say, you buy
btc and short the future. If btc drops by 30% in a day, future trading will be
halted at 20% which means that you can lose money if it is an expiry day.
Also, CBOE and your btc exchange aren't linked. So you will have to put up
additional margin when btc goes up and your future is losing money.

~~~
meritt
Expiry day is going to be very interesting then. I had no idea their
volatility rules would apply to expiring contracts too, that's insane. Why
would anyone want to trade that instrument?

~~~
option_greek
I wish I know :). Its not really a derivative if volatility is capped while
the underlying is free to move around.

~~~
snowAbstraction
Just some kind of capped option.

------
aviv
Litecoin is the new Bitcoin. People are realizing there is nothing special
about Bitcoin, and I'm saying this as a HODLer. Stores of value will come and
go. Bitcoin will eventually lose its supremacy. It's not like people use it as
a currency at this point. And if they did - Litecoin is far more efficient.

~~~
cantrip
I would argue that Ethereum is where it's headed. Ethereum does everything
that Litecoin/Bitcoin does along with a smart contract programming layer built
into it, and a great team of incredibly smart people iterating on the
platform.

Millions upon millions of dollars are being poured into companies built around
Ethereum for a reason. If you look at the open positions for Consensys you can
see just how many positions and projects one company has going on.

~~~
juanmirocks
Less not forget the competitors to Ethereum too, such as EOS or Cardano. These
should provide better scalability.

~~~
cantrip
As soon as I can experiment with programming an EOS or Cardano smart contract
I'll be happy to comment on their viability, but as far as I can figure out
you can't, or at least no one is doing it.

Ethereum has a working smart contract on the foundation website, as well as an
online compiler to test with.

~~~
andrethegiant
The EOS testnet launched last week. You can play with it using eos.js:
[https://github.com/eosio/eosjs](https://github.com/eosio/eosjs)

EOS looks like the most developer-friendly crypto I've seen. If you can write
in a language that can compile to WebAssembly, then you can create a DApp on
EOS.

------
nerfhammer
Wall Street being able to buy Bitcoin might increase demand, but they might
also do things that would at least at times amplify sell pressure like panic
selling, shorting it, leveraged shorting, margin calls

~~~
westurner
Shark futures traders here to save the mf'in day!

------
sillysaurus3
Non-paywalled: [http://archive.is/aCcos](http://archive.is/aCcos)

------
h43z
the article is pay walled

------
wehadfun
I respect wsj paywall so did not read article.

I was reading that the fees to short it are really high.

------
MandieD
As Keynes might or might not have said, “the market can remain irrational
longer than you can remain solvent.”

~~~
ktta
The weird thing here is, Bitcoin is clearly a shitshow. There's not much
debate about it. It has no redeeming qualities compared to other coins except
the global hashrate. And it is worse off on so many aspects.

~~~
sp821543
How many times has bitcoin hard-forked because of the protocol being
compromised? How much daily volume is it currently supporting? How does the
velocity of the codebase compare to other coins?

~~~
ktta
>How many times has bitcoin hard-forked because of the protocol being
compromised?

Looks like there were some.
[https://news.ycombinator.com/item?id=15907735](https://news.ycombinator.com/item?id=15907735)

>How much daily volume is it currently supporting?

Doesn't matter. Any other coin can support the same daily volume (and many
others usually do)

>How does the velocity of the codebase compare to other coins?

Terrible. Constant in-fighting. This is what is hurting bitcoin right now.

Edit: added hard forks link.

~~~
sp821543
>Terrible. Constant in-fighting. This is what is hurting bitcoin right now.

Anyone who's paying attention to the bitcoin repo can see your statement has
no basis in reality. For instance, compare the number of closed pull requests
between btc/eth/ltc...and bch if you want a good laugh.

