[thehardsphere]

"without market risk"

> Blackbird doesn't sell but actually short sells Bitcoin on the short exchange.

Because nobody ever faced risk short selling. That big market crash that was part of the worst recession in 60 years had nothing to do with short selling. Long Term Captial Management totally came out of that just fine. Bear Sterns is alive today and doing swell.

Jesus.

[galacticpony]

What does that have to do with anything? You don't understand the point.

You go short on one market, while simultaneously going long on the other market. That's how you profit (arbitrage).

[thehardsphere]

"Going short on one market" = "I can expose myself to losing a sum of money that I don't have if it goes tits up"

[galacticpony]

Not if you simultaneously BUY ON THE OTHER MARKET.

Jesus.

You also can't lose money beyond what you put in (on the exchanges that allow for this), your position just gets terminated.

[whack]

The liability from short-selling on exchange A is balanced by the buy order on exchange B. The failures you described in LTCM and Bear Sterns bear no relation whatsoever to what the OP is describing. I suggest reading more on long-short arbitrage before disparaging someone's ideas with such condescension.

[thehardsphere]

I am familiar with long-short arbitrage. I'm sure that long-short arbitrage is swell for the hedge funds that use it and have the resources to manage their shorts very carefully and millions of dollars to absorb losses when they screw up.

I think it's completely irresponsible to present that as "without market risk" to an audience that doesn't have similar resources and in some cases doesn't even understand what a short is. I think that presention should be disparaged.

[galacticpony]

You're cleary not familiar with the context at hand. You don't know how exchanges like Bitfinex operate, what the terms of use are, etc.

Everything you said so far is just wrong in context.

[user5994461]

> https://en.wikipedia.org/wiki/Short_%28finance%29

First line: Potential loss on a short sale is theoretically unlimited.

[galacticpony]

Second Line:

"However, in practice, the short seller is required to post margin or collateral to cover losses, and inability to do so in a timely way would cause its broker or counterparty to liquidate the position."

That's exactly what the Bitcoin exchange will do, as well. Since the exchange actually holds the assets (i.e. bitcoin and dollars), it can also determine whether such liquidation is backed by orders.