[arcticbull]

Never short anything cryptocurrency related.

There is simply too much counter-party risk. If the wheels fall off the Tether bus, they're going to take Kraken down with it, and you just won't get paid. Plus you're going to have to post collateral for your short position, which simply opens you up to even more loss potential.

tr0lly seems to think the market is pricing in a 50% chance of a total systemic collapse on a 1 year time horizon by working backwards from the 2% per month contango on CME futures [1].

[1] http://www.tr0lly.com/bitcoin/bitcoins-overnight-collapse-pr...

[dash2]

The argument there starts from bitcoin futures being worth more than bitcoin today. What's wrong with the simple explanation that people expect the price of bitcoin to rise?

[arcticbull]

This is actually covered in the write-up but the answer is arbitrage.

In a perfect world, I'd simply short-sell the future at a 2% premium over the spot price, then I'd buy a bitcoin on the open market. This pushes the price of Bitcoin up and the price of the future down. The gap closes to roughly zero, an I get 2% for my service.

[anonymoushn]

Hello,

The reason that people don't take the 20%/year arb is that they are taking arbs that pay more than 20%/year.

An additional reason, at some venues, is that the venue does not allow you to use 1 BTC to fully collateralize 1 short BTC future. At those venues, if you do this trade and the price of BTC goes up, you begin to pay interest to borrow dollars for your paper loss on the futures half of the trade.

Edit: for CME in particular, I don't know, but I sort of expect that you cannot post collateral in crypto.