BitShares Forum
Main => General Discussion => Topic started by: bytemaster on September 30, 2014, 07:10:41 pm
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When your short order is executed you will be given 30 days until a mandatory cover (without fee) is executed.
This is done to enhance the Nash Equilibrium that will cause shorts to take opportunities to cover at a profit anytime there is deviation from the peg. After 30 days this will create continual buying pressure on BitUSD. This will reduce the demand for shorts that are only "long-term" bullish and cause them to be more "medium term" speculators. If you want to go "long term short" then you will have to cover and re-short monthly. You maximize your profits by covering and re-shorting when there is the greatest deviation from the peg.
This is in line with traditional financial instruments such as futures contracts that always have a maturity date.
Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.
This also provides liquidity from shorts that have lost their keys and are unable to cover and forces shorts that are losing ground to "re-up" their collateral.
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When your short order is executed you will be given 30 days until a mandatory cover (without fee) is executed.
This is done to enhance the Nash Equilibrium that will cause shorts to take opportunities to cover at a profit anytime there is deviation from the peg. After 30 days this will create continual buying pressure on BitUSD. This will reduce the demand for shorts that are only "long-term" bullish and cause them to be more "medium term" speculators. If you want to go "long term short" then you will have to cover and re-short monthly. You maximize your profits by covering and re-shorting when there is the greatest deviation from the peg.
This is in line with traditional financial instruments such as futures contracts that always have a maturity date.
Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.
This also provides liquidity from shorts that have lost their keys and are unable to cover and forces shorts that are losing ground to "re-up" their collateral.
Will the GUI clearly provide the time to covering in our list of open shorts?
Sent from my SCH-S720C using Tapatalk 2
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When your short order is executed you will be given 30 days until a mandatory cover (without fee) is executed.
This is done to enhance the Nash Equilibrium that will cause shorts to take opportunities to cover at a profit anytime there is deviation from the peg. After 30 days this will create continual buying pressure on BitUSD. This will reduce the demand for shorts that are only "long-term" bullish and cause them to be more "medium term" speculators. If you want to go "long term short" then you will have to cover and re-short monthly. You maximize your profits by covering and re-shorting when there is the greatest deviation from the peg.
This is in line with traditional financial instruments such as futures contracts that always have a maturity date.
Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.
This also provides liquidity from shorts that have lost their keys and are unable to cover and forces shorts that are losing ground to "re-up" their collateral.
Will the GUI clearly provide the time to covering in our list of open shorts?
Sent from my SCH-S720C using Tapatalk 2
Yes - we will have a time till expiration next to the cover button.
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Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.
Imho this is not very fair... I was very bullish before BTSX was even launched, but could not short because of lack of information, instructions, bugs in the GUI etc.. If everything was clear and working properly I would have shorted @ 45 - 65 range instead of buying BTSX in the exchanges..
Now, people holding short positions at these levels will now have the additional opportunity to keep their orders for 1 year, when others who still experience problems shorting will have to re short within 1 month.
On the other hand I am totally on board that there should be 1 month of expiration. But 1 year to keep open positions for the ones that had the technical knowledge and the competitive advantage of shorting which normally should be people bullish with large capital is too much. In the end of the day for all of us in here it was a no brainer that since the client is launched BTSX would skyrocket.. Not much of a risk to take..The risk is higher now, with bitcoin price and all cryptos falling day by day, than 1 month ago. So why not make it max 2-3 months instead of 1 year?
The other question is, what happens if on the specific day that I have to cover my short I am on holidays and I don't have access to cover? How will the system treat my position?
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Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.
Imho this is not very fair... I was very bullish before BTSX was even launched, but could not short because of lack of information, instructions, bugs in the GUI etc.. If everything was clear and working properly I would have shorted @ 45 - 65 range instead of buying BTSX in the exchanges..
Now, people holding short positions at these levels will now have the additional opportunity to keep their orders for 1 year, when others who still experience problems shorting will have to re short within 1 month.
On the other hand I am totally on board that there should be 1 month of expiration. But 1 year to keep open positions for the ones that had the technical knowledge and the competitive advantage of shorting which normally should be people bullish with large capital is too much. In the end of the day for all of us in here it was a no brainer that since the client is launched BTSX would skyrocket.. Not much of a risk to take..The risk is higher now, with bitcoin price and all cryptos falling day by day, than 1 month ago. So why not make it max 2-3 months instead of 1 year?
The other question is, what happens if on the specific day that I have to cover my short I am on holidays and I don't have access to cover? How will the system treat my position?
It is also not fair to change the rules on shorts that are already taken out... many of those who took out shorts knowing that BTSX would be higher in 1 year may not have made the same bet under the new rules. So each individual is given the rules they entered the position under (more or less).
The market will cover your order like a margin call (accepting what ever bids for your collateral there are at the time), but it will not charge you a 5% fee for being under collateralized.
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When your short order is executed you will be given 30 days until a mandatory cover (without fee) is executed.
This is done to enhance the Nash Equilibrium that will cause shorts to take opportunities to cover at a profit anytime there is deviation from the peg. After 30 days this will create continual buying pressure on BitUSD. This will reduce the demand for shorts that are only "long-term" bullish and cause them to be more "medium term" speculators. If you want to go "long term short" then you will have to cover and re-short monthly. You maximize your profits by covering and re-shorting when there is the greatest deviation from the peg.
This is in line with traditional financial instruments such as futures contracts that always have a maturity date.
Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.
This also provides liquidity from shorts that have lost their keys and are unable to cover and forces shorts that are losing ground to "re-up" their collateral.
Thank you. I was hoping you'd change this.
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I'm a little confused because I thought that shorts are required to facilitate growth in the supply of BitAssets. By forcing them to shorter term speculative views, won't this limit supply growth, as well as making it very highly unstable? Its possible there will be times when a huge part of the short book (i.e. supply) is closed in a month and not re-opened for some time depending on the balance os supply and demand at that point.
Also, whenever shorts are forced to cover, that necessarily closes out a group of longs - doesn't that make holding BitUSD more uncertain for merchants and other potential users, if they have to keep constant tabs on whether they are holding BitUSD or BTSX? This makes BitUSD less useful?
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I'm a little confused because I thought that shorts are required to facilitate growth in the supply of BitAssets. By forcing them to shorter term speculative views, won't this limit supply growth, as well as making it very highly unstable? Its possible there will be times when a huge part of the short book (i.e. supply) is closed in a month and not re-opened for some time depending on the balance os supply and demand at that point.
Also, whenever shorts are forced to cover, that necessarily closes out a group of longs - doesn't that make holding BitUSD more uncertain for merchants and other potential users, if they have to keep constant tabs on whether they are holding BitUSD or BTSX? This makes BitUSD less useful?
Longs are never closed out.... demand for BitAssets is independent of demand to short. You cannot "create bitassets" just because someone wants to short. What this does is keeps the supply of BitAssets in check otherwise a huge increase in demand for BitAssets followed by a decrease in demand for BitAssets will leave the BitAssets undervalued until demand returns. Forcing shorts to cover after 30 days means that BitAsset holders can rest assured that there will be demand 30 days from when they purchased them.
If no one is willing to sell their BitUSD then old shorts will cover by buying from new shorts. If there are no new shorts willing to sell then BitUSD will be worth more than $1.00 which will incentives BitUSD selling and shorting.
With this rule the market is asymmetric which means that while BitUSD will never be worth much less than $1... it could be worth more than $1 if there are no sellers and BitUSD holders are not forced to sell. This asymmetric situation will be partially resolved once we allow shorting BTSX backed by BitUSD... then you will have forced covering on both sides. It will never be fully resolved because the supply of BTSX is greater than the BTSX created by shorting and thus the forced selling of USD to cover after 1 month may not be enough to bring it back down to $1.00
That said, I doubt there will be a lack of individuals willing to short BitUSD against BTSX. And once we add other markets allowing you to use any asset as collateral for any other asset then it will likely all balance out over all.
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Glad you are grandfathering "old shorts" in. It's all getting rather complicated...hope at some point there is a trading guide of sorts.
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Forced 30 day covering feels pretty aggressive to me. I feel like having it just be one year (consistent with the inactivity fee) would be fine. I'm not saying there's a right answer but it seems unnecessarily short to me. I think the main benefit of a new short window would only be achieved if current shorts were not grandfathered in - we could sort of hit the reset button on the market that may have created a bit too much bitUSD supply in the early days without short restriction. I don't think there's a moral imperative to give current shorts an exception but it is what it is… I'm just not sure having a short 30 day with grandfathering cover has a real advantage over a one year force cover.
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I think it is very important to have an expiry date of 1 month. This will definitely create confidence for liquidity of bitusd and create buying pressure for bitusd. You can always re short if you want so I don't understand what is the benefit for holding a short position for 1 year (even for the old shorts)...
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Forced 30 day covering feels pretty aggressive to me. I feel like having it just be one year (consistent with the inactivity fee) would be fine. I'm not saying there's a right answer but it seems unnecessarily short to me. I think the main benefit of a new short window would only be achieved if current shorts were not grandfathered in - we could sort of hit the reset button on the market that may have created a bit too much bitUSD supply in the early days without short restriction. I don't think there's a moral imperative to give current shorts an exception but it is what it is… I'm just not sure having a short 30 day with grandfathering cover has a real advantage over a one year force cover.
It is very necessary because without it the varying demand for BitUSD will cause the peg to suffer.... suppose there is a massive increase in BitUSD demand (BTSX Bubble) so the supply doubles pairing to shorts who don't want to cover for a year. Then all of a sudden people want out of BitUSD (Bubble is Over)... there are not enough buyers on the market and the long-term shorts don't want to cover (they have potentially lost money as BTSX was falling so don't want to realize their loss. The only solution the market has at this point is for BitUSD holders to sell at a loss large enough to motivate long-term holders. The fact that they are selling at a loss will discourage future BitUSD holders from buying.
In the long-run, you can increase the forced covering period or remove it all together... but in a young illiquid market it is certainly necessary to ensure that there is plenty of liquidity and that BitUSD will always revert to the peg within a month of any increase in supply.
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I think it is very important to have an expiry date of 1 month. This will definitely create confidence for liquidity of bitusd and create buying pressure for bitusd. You can always re short if you want so I don't understand what is the benefit for holding a short position for 1 year (even for the old shorts)...
The theoretical benefit for a short for being able to hold a losing short position is that it is effectively the same as letting you re-short with less than 200% collateral which is higher leverage.
"It's not what the shorts want, but it's what the longs need" - dan
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Forced 30 day covering feels pretty aggressive to me. I feel like having it just be one year (consistent with the inactivity fee) would be fine. I'm not saying there's a right answer but it seems unnecessarily short to me. I think the main benefit of a new short window would only be achieved if current shorts were not grandfathered in - we could sort of hit the reset button on the market that may have created a bit too much bitUSD supply in the early days without short restriction. I don't think there's a moral imperative to give current shorts an exception but it is what it is… I'm just not sure having a short 30 day with grandfathering cover has a real advantage over a one year force cover.
It is very necessary because without it the varying demand for BitUSD will cause the peg to suffer.... suppose there is a massive increase in BitUSD demand (BTSX Bubble) so the supply doubles pairing to shorts who don't want to cover for a year. Then all of a sudden people want out of BitUSD (Bubble is Over)... there are not enough buyers on the market and the long-term shorts don't want to cover (they have potentially lost money as BTSX was falling so don't want to realize their loss. The only solution the market has at this point is for BitUSD holders to sell at a loss large enough to motivate long-term holders. The fact that they are selling at a loss will discourage future BitUSD holders from buying.
In the long-run, you can increase the forced covering period or remove it all together... but in a young illiquid market it is certainly necessary to ensure that there is plenty of liquidity and that BitUSD will always revert to the peg within a month of any increase in supply.
I guess I just don't see people "dropping their pants" to unload bitUSD if they know that holding for less than a year will give them face value. I'm not saying your view doesn't have merit but I think if it's that critical the over-creation of bitUSD probably already happened and now most will be grandfathered anyway - it would be kind of nice to reset the market in the short run.
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You can always re short if you want so I don't understand what is the benefit for holding a short position for 1 year (even for the old shorts)...
If the price rose, then re-shorting the same number of BitUSD would require more collateral.
E.g. if price is at 30 BTSX / BitUSD today and you short 100 BitUSD. Then BitUSD rises to 40 tomorrow, then drops to 20 in 6 months. With one-year expiry, you have 3000 BTSX tied up for 6 months. With one-month expiry, you have 3000 BTSX tied up for one month, then you have to re-short at 40 which ties up 4000 BTSX for the remaining 5 months (unless you re-short less than 100 BitUSD).
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Quote from: mf-tzo on Today at 11:18:59 PM
I think it is very important to have an expiry date of 1 month. This will definitely create confidence for liquidity of bitusd and create buying pressure for bitusd. You can always re short if you want so I don't understand what is the benefit for holding a short position for 1 year (even for the old shorts)...
The theoretical benefit for a short for being able to hold a losing short position is that it is effectively the same as letting you re-short with less than 200% collateral which is higher leverage.
"It's not what the shorts want, but it's what the longs need" - dan
I am not sure I fully understand what you mean Toast but I think that you agree that the short position should not exceed the 1 month.
So since the old shorts are effectively keeping profitable positions open now, why would you want to keep them open for 1 year?
Can't you implement a fork that any losing short positions are allowed for 1 year to be kept open but the ones that are winning need to be covered within 1 month? Would something like this be fair, possible and make sense?
I guess I just don't see people "dropping their pants" to unload bitUSD if they know that holding for less than a year will give them face value. I'm not saying your view doesn't have merit but I think if it's that critical the over-creation of bitUSD probably already happened and now most will be grandfathered anyway - it would be kind of nice to reset the market in the short run.
I didn't make any sense from that comment but then again I am tired so I better go to sleep now..What do you mean "reset the market in the short run"?
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And so went the fees from the short holding period...
And the only reason I see (and I could ever expect to see is ) I did not come up with it. +' If you do not get it, I do not have time to explain'
as I said:
"Lord protect me from my friends, I can take care of my enemies"?
- Voltaire
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If the price rose, then re-shorting the same number of BitUSD would require more collateral.
E.g. if price is at 30 BTSX / BitUSD today and you short 100 BitUSD. Then BitUSD rises to 40 tomorrow, then drops to 20 in 6 months. With one-year expiry, you have 3000 BTSX tied up for 6 months. With one-month expiry, you have 3000 BTSX tied up for one month, then you have to re-short at 40 which ties up 4000 BTSX for the remaining 5 months (unless you re-short less than 100 BitUSD).
Ok now I follow...I need numerical examples to follow...thanks...
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I guess I just don't see people "dropping their pants" to unload bitUSD if they know that holding for less than a year will give them face value. I'm not saying your view doesn't have merit but I think if it's that critical the over-creation of bitUSD probably already happened and now most will be grandfathered anyway - it would be kind of nice to reset the market in the short run.
I didn't make any sense from that comment but then again I am tired so I better go to sleep now..What do you mean "reset the market in the short run"?
I'm just describing forced covering as "resetting the market" (all positions are opened new from scratch and excess bitassets are removed from circulation).
My point was that there is a limit to how much people will undervalue their bitassets when they know they just have to wait a bit to get the full value. Making shorts re-short every month seems like a lot of work to me.
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I guess I just don't see people "dropping their pants" to unload bitUSD if they know that holding for less than a year will give them face value.
We want BitUSD to be used for functions other than as a buy-and-hold investment. A merchant selling goods for BitUSD won't want to wait a year to get the full value of the buyer's payment. A time frame of a month or less when the system is experiencing unusual economic conditions will still be a PITA for the merchant, but much more tolerable.
I'm not saying your view doesn't have merit but I think if it's that critical the over-creation of bitUSD probably already happened and now most will be grandfathered anyway - it would be kind of nice to reset the market in the short run.
IMHO, re-writing the terms of financial derivative contracts after people have bought them is ethically perilous and will do more damage to our credibility than the alternative.
Providing some sort of demand stimulus for BitUSD would help. I propose charging new shorts interest, and using that to increase long yields [1]. We can also safely increase yields by changing the yield distribution algorithm [2].
[1] https://bitsharestalk.org/index.php?topic=9520.0
[2] https://bitsharestalk.org/index.php?topic=9072.0
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I guess I just don't see people "dropping their pants" to unload bitUSD if they know that holding for less than a year will give them face value. I'm not saying your view doesn't have merit but I think if it's that critical the over-creation of bitUSD probably already happened and now most will be grandfathered anyway - it would be kind of nice to reset the market in the short run.
I didn't make any sense from that comment but then again I am tired so I better go to sleep now..What do you mean "reset the market in the short run"?
I'm just describing forced covering as "resetting the market" (all positions are opened new from scratch and excess bitassets are removed from circulation).
My point was that there is a limit to how much people will undervalue their bitassets when they know they just have to wait a bit to get the full value. Making shorts re-short every month seems like a lot of work to me.
So if (short_order_opened(time) >= 30 days, close_order());
is a lot of work, but new rules for shorts is not?
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I'm just describing forced covering as "resetting the market" (all positions are opened new from scratch and excess bitassets are removed from circulation).
My point was that there is a limit to how much people will undervalue their bitassets when they know they just have to wait a bit to get the full value. Making shorts re-short every month seems like a lot of work to me.
So if (short_order_opened(time) >= 30 days, close_order());
is a lot of work, but new rules for shorts is not?
Why are the new rules for shorts "a lot of work"?
I don't see how they are more work. As a short, you pay less fees, you can specify your bottom line price, and can now specify collateral (I think most people prefer this over a two step partial cover).
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Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.
Imho this is not very fair... I was very bullish before BTSX was even launched, but could not short because of lack of information, instructions, bugs in the GUI etc.. If everything was clear and working properly I would have shorted @ 45 - 65 range instead of buying BTSX in the exchanges..
Now, people holding short positions at these levels will now have the additional opportunity to keep their orders for 1 year, when others who still experience problems shorting will have to re short within 1 month.
On the other hand I am totally on board that there should be 1 month of expiration. But 1 year to keep open positions for the ones that had the technical knowledge and the competitive advantage of shorting which normally should be people bullish with large capital is too much. In the end of the day for all of us in here it was a no brainer that since the client is launched BTSX would skyrocket.. Not much of a risk to take..The risk is higher now, with bitcoin price and all cryptos falling day by day, than 1 month ago. So why not make it max 2-3 months instead of 1 year?
The other question is, what happens if on the specific day that I have to cover my short I am on holidays and I don't have access to cover? How will the system treat my position?
If BTSX is trading at 30btsx/bitUSD and you shorted at 45/1 or 65/1 and you haven't taken a profit, then you have some other things to think about. You have made 25-50% of your possible gains at this point and in order to realize 100% will never be possible because it will never trade at 0btsx/bitUSD.
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I'm just describing forced covering as "resetting the market" (all positions are opened new from scratch and excess bitassets are removed from circulation).
My point was that there is a limit to how much people will undervalue their bitassets when they know they just have to wait a bit to get the full value. Making shorts re-short every month seems like a lot of work to me.
So if (short_order_opened(time) >= 30 days, close_order());
is a lot of work, but new rules for shorts is not?
Why are the new rules for shorts "a lot of work"?
I don't see how they are more work. As a short, you pay less fees, you can specify your bottom line price, and can now specify collateral (I think most people prefer this over a two step partial cover).
Do not bushtit me... explain how they(the new rules) increase the volume and / or the collateral...
You promised both they do neither, in my view. (and sorry we all know you are the only one here with a full time job)
Sorry for the high burden I put on you by asking.
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This is a price discovery killer. Introduce option contracts and sell time decay if you want expiries. Value cannot be found if markets are artificially propped.
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I'm just describing forced covering as "resetting the market" (all positions are opened new from scratch and excess bitassets are removed from circulation).
My point was that there is a limit to how much people will undervalue their bitassets when they know they just have to wait a bit to get the full value. Making shorts re-short every month seems like a lot of work to me.
So if (short_order_opened(time) >= 30 days, close_order());
is a lot of work, but new rules for shorts is not?
Why are the new rules for shorts "a lot of work"?
I don't see how they are more work. As a short, you pay less fees, you can specify your bottom line price, and can now specify collateral (I think most people prefer this over a two step partial cover).
Do not bushtit me... explain how they(the new rules) increase the volume and / or the collateral...
You promised both they do neither, in my view. (and sorry we all know you are the only one here with a full time job)
Sorry for the high burden I put on you by asking.
How can you say that prioritizing by collateral won't increase the collateral? Of course it does and this means that bitUSD will have more collateral securing it which should give bitUSD holders greater confidence.
I have said before and I think others, that when the market first opened there was almost certainly more bitUSD created then there was a legitimate use for (bitUSD is useful for commerce). This was because of the lack of restriction on shorting and caused bitUSD to be undervalued.
We haven't done anything specifically to get rid of this abundance, but this abundance is a separate issue from the new shorting rules. That's why I'm saying forcing people to cover instead of grandfathering them could help "reset" the market to get it back on track more quickly. But generally I don't think there will be a need to reset the market every 30 days.
I've stated the reason I don't like prioritizing based on fees is it makes the cost of transacting too high and increases the spread.
Think about it like arbitrage between exchanges... If one exchange was trading at a different price but the cost of transaction/withdrawal fees and moving the money between exchanges was too high you couldn't take advantage of the arbitrage opportunity to even out the price.
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How can you say that prioritizing by collateral won't increase the collateral? Of course it does and this means that bitUSD will have more collateral securing it which should give bitUSD holders greater confidence.
Sorry, for deleting the rest of your inconsistent statements (if you disagree we can argue on them separately).
Easily so, highly collateralized short lived position do not increase the overall collateralization... by much...
but this is just a tiny bit of my problems with the whole system...
BTW, this is the last time I am proving to you why your system does not work. From now on expect, you to prove why it does!
Nothing personal, I am generally not in the business of proving negative facts! Do you want me to ask the same question I asked the NuBits guy?
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I guess I just don't see people "dropping their pants" to unload bitUSD if they know that holding for less than a year will give them face value. I'm not saying your view doesn't have merit but I think if it's that critical the over-creation of bitUSD probably already happened and now most will be grandfathered anyway - it would be kind of nice to reset the market in the short run.
I didn't make any sense from that comment but then again I am tired so I better go to sleep now..What do you mean "reset the market in the short run"?
I'm just describing forced covering as "resetting the market" (all positions are opened new from scratch and excess bitassets are removed from circulation).
My point was that there is a limit to how much people will undervalue their bitassets when they know they just have to wait a bit to get the full value. Making shorts re-short every month seems like a lot of work to me.
So if (short_order_opened(time) >= 30 days, close_order());
is a lot of work, but new rules for shorts is not?
Sorry, I didn't mean that it was a lot of work to change the code. I'm saying it is more work for shorters to have to re-short every 30 days (not more work for programmers)
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How can you say that prioritizing by collateral won't increase the collateral? Of course it does and this means that bitUSD will have more collateral securing it which should give bitUSD holders greater confidence.
Sorry, for deleting the rest of your inconsistent statements (if you disagree we can argue on them separately).
Easily so, highly collateralized short lived position do not increase the overall collateralization... by much...
but this is just a tiny bit of my problems with the whole system...
BTW, this is the last time I am proving to you why your system does not work. From now on expect, you to prove why it does!
Nothing personal, I am generally not in the business of proving negative facts! Do you want me to ask the same question I asked the NuBits guy?
How "short lived" the highly collateralized positions are is irrelevant if you always have compete to put up high collateral whenever you re-short. It may not have made a huge difference overnight because there are still a lot of low collateral positions out there, but if those are forced closed or we started the system with collateral prioritization from the beginning then you would see the difference.
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I guess I just don't see people "dropping their pants" to unload bitUSD if they know that holding for less than a year will give them face value. I'm not saying your view doesn't have merit but I think if it's that critical the over-creation of bitUSD probably already happened and now most will be grandfathered anyway - it would be kind of nice to reset the market in the short run.
I didn't make any sense from that comment but then again I am tired so I better go to sleep now..What do you mean "reset the market in the short run"?
I'm just describing forced covering as "resetting the market" (all positions are opened new from scratch and excess bitassets are removed from circulation).
My point was that there is a limit to how much people will undervalue their bitassets when they know they just have to wait a bit to get the full value. Making shorts re-short every month seems like a lot of work to me.
So if (short_order_opened(time) >= 30 days, close_order());
is a lot of work, but new rules for shorts is not?
Sorry, I didn't mean that it was a lot of work to change the code. I'm saying it is more work for shorters to have to re-short every 30 days (not more work for programmers)
Back to the main topic, please.
Disagreeing with innocent enough, easy to implement suggestion, just because it does not come from you was bad enough... let's forget it for now.
So, How/Why the' improved short market' is so great? - more volume/ bigger collateralization/tighter peg, and or other good arguments of the same ink, please.
How "short lived" the highly collateralized positions are is irrelevant if you always have compete to put up high collateral whenever you re-short. It may not have made a huge difference overnight because there are still a lot of low collateral positions out there, but if those are forced closed or we started the system with collateral prioritization from the beginning then you would see the difference.
Ok, let assume for now they are highly collateralized (not the main objective of your proposal, (but I agree that finding a solution to increase collateral it is good) ,btw). How this makes the peg tighter?
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And here is the other side of the equation:
how about we restrict the longs to also buy just at the beg?
It will definitely fortify the peg. Everybody is selling and buying just and only at the peg, and the shorts compete just by the amount of collateral provided.
Perfect peg. No? What more one can ask for...
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How "short lived" the highly collateralized positions are is irrelevant if you always have compete to put up high collateral whenever you re-short. It may not have made a huge difference overnight because there are still a lot of low collateral positions out there, but if those are forced closed or we started the system with collateral prioritization from the beginning then you would see the difference.
Ok, let assume for now they are highly collateralized (not the main objective of your proposal, (but I agree that finding a solution to increase collateral it is good) ,btw). How this makes the peg tighter?
Example from new system:
You use (tie up) $10,000 worth of BTSX to post a large collateral to short 1,000 bitUSD into existance (at par)… 15mins later someone offers for sale 1,000 bitUSD for $970… would you cover?
Sure why not, you just made $30 in 15 mins, and you can get right back to the front of the shorting line by putting up your big collateral again. If you have a robot doing this you are making $120/ hr.
What is the alternative, wait for that 1:10 amount of leverage to give you a little extra gain if BTSX rises… not worth it, much better to take the easy money from people willing to sell cheap bitUSD.
In the prior system:
You used your $10,000 worth of BTSX to short 10,000 bitUSD, You only got $9,500 worth of BTSX from the buyer ($500 went to fees because you were competing on fees.)
Now you see someone offering to sell bit USD for 0.97 on the dollar (selling 10,000 bitUSD for $9,700)…
Do you buy it and cover? Of course you don't buy it because you would have just lost $200 by buying it, it doesn't even cover your fees. You will just sit and hope for BTSX to rise.
Result:
Original system: short doesn't buy bitUSD priced at 0.97
New system: short does buy bitUSD priced at 0.97
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And here is the other side of the equation:
how about we restrict the longs to also buy just at the beg?
It will definitely fortify the peg. Everybody is selling and buying just and only at the peg, and the shorts compete just by the amount of collateral provided.
Perfect peg. No? What more one can ask for...
You can't restrict free trade/exchange between BTSX and BitUSD... the trading could just move off chain.
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In the prior system:
You used your $10,000 worth of BTSX to short 10,000 bitUSD, You only got $9,500 worth of BTSX from the buyer ($500 went to fees because you were competing on fees.)
Tell me more about this fairy tale
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And here is the other side of the equation:
how about we restrict the longs to also buy just at the beg?
It will definitely fortify the peg. Everybody is selling and buying just and only at the peg, and the shorts compete just by the amount of collateral provided.
Perfect peg. No? What more one can ask for...
You can't restrict free trade/exchange between BTSX and BitUSD... the trading could just move off chain.
I agree that you should not, ... but your system just did that for one side of the trade... so what prevents us to do the same for the other counterparty? And it will inforce the peg like... ice
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And here is the other side of the equation:
how about we restrict the longs to also buy just at the beg?
It will definitely fortify the peg. Everybody is selling and buying just and only at the peg, and the shorts compete just by the amount of collateral provided.
Perfect peg. No? What more one can ask for...
You can't restrict free trade/exchange between BTSX and BitUSD... the trading could just move off chain.
I agree that you should not, ... but your system just did that for one side of the trade... so what prevents us to do the same for the other counterparty? And it will inforce the peg like... ice
It's not the same at all and the "two sides of the trade" are not equivalent. When you are in the business of shorting bitAssets there's really no limit to how much you can sell.
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Tonyk your tone and attitude does not reflect well on you or this forum.
There are reasonable people here weighing complex options and we all want the best.
Please communicate without name calling. It was not pleasant for me to read and I am sure others feel the same.
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And here is the other side of the equation:
how about we restrict the longs to also buy just at the beg?
It will definitely fortify the peg. Everybody is selling and buying just and only at the peg, and the shorts compete just by the amount of collateral provided.
Perfect peg. No? What more one can ask for...
You can't restrict free trade/exchange between BTSX and BitUSD... the trading could just move off chain.
I agree that you should not, ... but your system just did that for one side of the trade... so what prevents us to do the same for the other counterparty? And it will inforce the peg like... ice
It's not the same at all and the "two sides of the trade" are not equivalent. When you are in the business of shorting bitAssets there's really no limit to how much you can sell.
OK next question (as you like). Tell me how the two side are different and the ideology that allows to punish the sellers but not the buyer?
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Tonyk your tone and attitude does not reflect well on you or this forum.
There are reasonable people here weighing complex options and we all want the best.
Please communicate without name calling. It was not pleasant for me to read and I am sure others feel the same.
sure... I do not know which name-calling but whateverer
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OK next question (as you like). Tell me how the two side are different and the ideology that allows to punish the sellers but not the buyer?
So lets discuss Tonyk's proposal: everyone trade at the feed price or not at all.
1) the price is less fluid and doesn't track as closely
2) the price feed must be more accurate that the current system requires.
Now lets look at restrictions on "buyer vs seller".... you presume that there are restrictions on the seller, there are not. Buyer and seller on on equal footing and have no restrictions, not even a price feed.
What we are really comparing is borrower and lender and debating their relative rights and restrictions. The lender (the individual holding BitUSD) has far more rights the receive the full value of their BitUSD back than the borrower does in having freedom to borrow and not repay for an indefinite period. No one anywhere ever lends for an indefinite period that is not callable by the borrower.
So if you frame the debate about mismatching buyer vs seller rather than borrower and lender then you completely mischaracterize the nature of what is going on and the resulting price discovery.
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I like Agents86's proposal.
It screams 'free trade' and 'price discovery' from every angle you look at it!
Now, back to my cave....
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IMHO, re-writing the terms of financial derivative contracts after people have bought them is ethically perilous and will do more damage to our credibility than the alternative.
I'd say it is ethically and practically problematic only if those that entered the contract loose money on their assumption they were assured. So a grandfathering for until everyone is in a plus (above ~ 108 m market cap) would be sufficient.
Resetting the market then completely (in terms of the short holding period rule) would bring more overall balance like Agent86 suggested...
But generally I don't think there will be a need to reset the market every 30 days.
I think the max short holding period makes sense in order to incentivize people to trade more medium term. If I am a btsx long term believer I should just hold btsx. If there is no max. holding period EVERY btsx holder that is long term bullish would have an incentive to short bitusd. I'd guess that at least half of all btsx holders are long term bullish. There will not be that much demand for bitusd in the next year probably to balance this.
IMO BTSX is better viewed and analyzed as a prediction market on the one side and a stable crypto money on the other side than a bank that lends out money.
Maybe there could also be something to incentivize short term market making which is valuable for the system / peg? If it costs more (more collateral, more fees, something else) to short for max. 30 days than it costs to short for a one or two days it would incentivize profitable market making.
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What if at some point in the future the price is closely pegged, shorts do not wish to renew for whatever reason and sell-side liquidity is thin at the time of closure. Could this mechanism cause a short-squeeze on BitUSD?
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What about letting the "Short Holding Period" to be analogue/dynamic/variable depended on the "Collateral ratio" the trader chooses ?
Higher "Collateral Ratio" = Longer "Short Holding Period"
Maybe even with min(?)/max "Short Holding Period" (and maybe for Collateral ratio also min/max)
for example with MAX "Short Holding Period"= 1year, Which one "wins" the max 1year "Short Holding Period" exposure?
"Of course the short that had the bigger collateral ratio on order time...."
So what happen when somebody make a short sell order with 5x collateral (not max. @that point) and the current maximum collateral is 10x ? (for the same volume of course)
It would be the half of the max, that means max=1 year so max/2 = 6 months "Short Holding Period" since the collateral ratio was "set" to the half of the max. (10x)
PS so anybody knows at the time he "put" the "Collateral Ratio" how much "Short Holding Period" exposure he gets "from the software" before he confirms the order....
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So is there any conclusion on what date this will be implemented, and whether grandfathering will apply? Seems a bit up in the air in this discussion...