
Short Seller Says Naive Bitcoin Traders Open a Pathway to Profit - hamstercat
https://www.bloomberg.com/news/articles/2017-12-18/short-seller-says-naive-bitcoin-traders-open-a-pathway-to-profit
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csomar
This is not a good trade and here I’ll outline the reason.

1- You need to borrow GBTC to be able to short it. The borrowing comes at a
cost “interest rate”

2- Futures themsleves comes with a premium and require rolling over. It is
100% stupid to use futures instead of the real thing: just buy bitcoin.

3- You won’t be able to cash out until the GBTC premium dissapears. If you are
small this might never happens. 4- You might also find yourself in a bad
situation: Bitcoin price goes up. You’ll need to supplement capital to your
short. That can be an arbitrairly high amount of USD. 5- 4 can be fixed with
futures as they allow you to withdraw non realized gains. But it comes at the
price of paying for rollover premium. 6- GBTC high price might be due to
illiquidity. Not interest.

Tldr: don’t follow this guy. Very sophisticated trade and not clear if it can
be profitable.

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kgwgk
Using futures is not 100% stupid when it makes issue (4) a non-issue.

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csomar
Futures comes at a cost, however: premium and rollover costs. Premium costs is
not fix if you need to rollover. You’ll need to pay both premium and interest
on gbtc.

Also futures on CME are not easily tradable. The contract value is $100k and
liquidity is not impressive so far.

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babaganoosh89
CFE futures are for 1 bitcoin and seemed reasonably liquid for small trades.

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chipgap98
Citron's entire business is shorting investments and then trying to cause a
panic with negative PR to move the market in their favor. It is shocking that
what they do is legal.

This doesn't mean they are wrong here, but I wouldn't describe them as a
trusted source either.

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travmatt
Why should it be illegal? Muddy Waters regularly exposes fraudulent companies
by finding fraud, taking a position, exposing said fraud, then profiting from
the correction. I understand that spreading lies should be illegal, but I
struggle to understand why disseminating factually accurate information should
considered a negative thing.

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number_six
It really is the Wild West of crypto currency right now. Greed is going to
fuel a lot more arbitrage opportunities like these as people invest in crypto
"derivatives" without fully understanding what they are buying.

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pmc1
> Citron would not be pounding table if not appropriate,” he wrote. “Thank you
> for the 70 percent profit.”

So Bitcoin is up several 1000%s on the year and he is beating his chest from a
70% profit on the short side?

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stygiansonic
He's not "on the short side". If you read the article, he's talking about an
arbitrage opportunity, which if executed properly, should not be net long nor
net short.

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sedtrader
Citron is on the short side. Their entire investment strategy of the company
is to short assets, in this scenario the future is used as an arbitrage hedge,
but overall yes citron is short biased on bitcoin.

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kgwgk
It’s bitcoin-neutral, that’s the whole point of the hedge.

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pmc1
Citron is not bitcoin neutral. They are short biased bitcoin as their website
and twitter account reiterate. And a hedge doesn't mean "neutral." It simply
protects you in the event that an investment doesn't go as expected.

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kgwgk
The bloomberg piece says: “Left recommends shorting the trust, buying bitcoin
futures”. He says in the video: “I don’t even care what happens to bitcoin”.
Where is the short bias?

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fwdpropaganda
> The futures are already showing signs of efficiency. When they debuted a
> week ago, Cboe’s traded for a price as much as 13 percent higher than the
> price of bitcoin -- a wide gap indicating an immature market

Can someone explain this to me? If the market expects the price to go up a
lot, why wouldn't the futures trade at a large premium?

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ThomPete
Cant determine whether this is a PR piece or actually sound “investment
advice”

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frgtpsswrdlame
PR but it's no more PR than any other pro-bitcoin article that's been on the
front page.

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ThomPete
Well, so far the pro's have been fairly correct.

That doesn't mean there won't be a major correction but again it just sounded
disingenuous to me.

