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by hft_throwaway 4391 days ago
How many do you have? What is "sufficient" collateral?

If someone has the cash, is able to withstand volatility, and the rates are low enough this trade is a no-brainer. BTCs have no intrinsic value and are propped up by speculators. Aside from speculative interest, they only have value in so much as they can be exchanged uniquely online, but they are just as useful for doing that at $0.0001/BTC as they are at $1000/BTC. Long-term I would not be surprised to see them go to 0 or some nominal amount.

ETA: Odds are nobody will loan you enough at a low enough rate to make this trade worth putting on. It's like how you can short leveraged long and short ETFs and make money due to volatility decay, but nobody will lend them cheap enough for it to be worthwhile.
2 comments
panarky 4391 days ago
People said shorting Bitcoin was a no-brainer when the exchange rate was $2. When the exchange rate rocketed to $10, many serious, smart people just knew it was a speculative bubble.

Rinse and repeat for each leg up ... $32, $90, $240, $1100. Same arguments every time.

Given historical volatility, I'd say fair collateral for a short sale would be 300% of the current exchange rate in USD, EUR, CHF or gold, with a margin interest rate of 6% per month.

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mathattack 4391 days ago
The same argument held on Amazon, as the shorts got crushed on it's rise. :-)
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conroe64 4391 days ago
In order to exchange them someone needs to buy them first. So, depending on how much they are used for trade, the amount held transitively for this purpose will vary.

Since there is a fixed number, the more popular they become as a trading platform, the higher the price will go, since if many people, P, need to trade at the same time, and they need an average of $X worth at any given time, and there are B bitcoins available, then $X * P / B is the minimum price a bitcoin can be.

So, if the amount used for trade becomes somewhat stable and/or continues to grow, it means there is some real base dollar value for a bitcoin in order to support this. Given this base value, along with its other features of easily being kept safe and transferred across national borders, it then makes them attractive to store wealth, which increases the value much more. And then, given the group of people willing to store wealth in bitcoin, it makes people even more confident in it as a store of wealth. And so on and so on...

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