[hangonhn]

Hang on. Isn't that just a matter of someone setting up a market and contracts for it? What you mean is that no one has setup bitcoins margins market yet right? Or am I misunderstanding something fundamental about BTC that prevents margins?

[vidarh]

You can trade contracts for difference (CFDs) on Bitcoin with 1:10 leverage, including shorting them, at places like Plus500

Great way of taking the risk created with the volatility of Bitcoin and multiplying up the risk massively so you can lose money even faster...

[roel_v]

How are those contracts validated and enforced on sites like that? The SEC used to watch naked shorts relatively closely before 2008 and it's been banned since then; but how is that arranged in practice with a currency whose primary selling point is its anonymity?

[jfb]

I know I'm risk averse, but even still this seems like the basest insanity to me.

[pjc50]

Transaction irreversability makes it a lot riskier, combined with the lack of support from the legal system. If you lend bitcoins to someone, and they run off with them, how do you recover your loss?

Conversely, unlike stocks, you don't need a broker, so there's nobody who would take on that dealer role.

Nobody has setup a "buy bitcoin on margin" service yet, and the first person to do so will lose a fortune to nonpayment of margin calls.

[vidarh]

You can protect against the risk by only providing the service between wallets held and controlled by you on your own exchange.

There also are brokers providing indirect Bitcoin shorting with 1:10 leverage in the form of CFD's (contracts for difference). Of course they could opt to always or sometimes not actually trade the coins - to their clients it makes no difference, as no actual coins can be moved in/out of the accounts.

[Sheepshow]

Hang on I almost read that as meaning bitcoin has less financial capability as fiat currency, which we all know is patently false because the premise of bitcoin is centered around an increased flexibility compared with fiat currency.

[dogecoinbase]

You're quite wrong -- BTC is strictly less flexible than fiat. I have my own opinions, but this is inarguable and is presented as an advantage of Bitcoin, for example Bitcoin cannot be created arbitrarily by a government, Bitcoin transactions cannot be reversed, untraceable transactions cannot occur in Bitcoin, et cetera. All of these are clear restrictions upon existing currency systems.

Some possible ways that it might be interpreted to be more flexible are scripting, n-of-m transactions, and so on.

[bdonlan]

The reversibility of bitcoin is no different from passing around physical dollar bills. If you want to reverse a transaction involving actual cast, you must convince the other person to give it back, or physically wrest possession of the currency from them.

Reversibility shows up when you do transactions in a bank or other third party that can reverse the transaction on its own accord. There's no theoretical reason why this can't happen with bitcoin instead - you give your BTC to a hypothetical, highly regulated bank or broker or whatever, and then the transaction is exactly as reversible as any electronic transaction using dollars. The confusion sets in when you compare Bitcoin transactions with electronic transactions using fiat currency, when they're closer in many ways to physical cash transactions in nature.

[dogecoinbase]

> when they're closer in many ways to physical cash transactions in nature.

I very much agree with you. This is also the right way to think about BTC exchanges -- an unregulated website that you ship cash to.

There are some subtleties around the specific nonphysical transaction mechanism of BTC that differentiate it from a cash transaction, which are sort of difficult to quantify currently because the technical and legal aspects have not been fully explored... as a hard example, imagine a BTC wallet coupled with a memorizable private key (or an effective substitute). This is essentially a cash store that cannot be confiscated, and which can be communicated verbally, i.e. within a protected (attorney-client) setting. There are some interesting implications there.