BitShares Forum
Main => General Discussion => Topic started by: starspirit on October 18, 2014, 05:00:02 am
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I am now a fan of the 30 day expiry on shorts because I believe that it will dramatically improve confidence for buyers and traders that they can get in and out without a large haircut when selling, with flow-on effects to overall market liquidity and marketability of BitUSD. I think it was right to grandfather existing positions, because nobody likes the rules changed on existing positions. But my question is what do shorts with these positions actually lose by voluntarily rolling them over to the new expiry regime?
If BTSX rises substantially, their collateral position will increase in value, and to maintain leverage it would actually be beneficial at that stage to roll anyway.
If BTSX falls substantially, the shorts can only be retained to the point where there is a forced margin call.
In the interim, instead of sitting and waiting for a year for the grandfathering to roll off (an eternity in the competitive crypto landscape), if the shorts were rolled this might increase liquidity and the peg in BitUSD, increasing the value of BTSX to their gain.
Maybe such voluntary rolls are happening, I'm not sure how to check. But if there are shorts reluctant to do this, I'm just curious to know what your reasons might be.
This is just an open question, not a criticism by any means, because it is not for me to question subjective rationality.
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most shorts are at a loss right now...
re-entering a short position will require them to pay interest... grandfathered shorts get an interest free position for 1 year.. no point in locking in profits.
So the only reason for them the "roll them over" is to exit BTSX entirely and cut their losses, to take a profit if BTSX rises again and gain compounding, or via a margin call.
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Leverage is higher when your collateral is lower. When you're at a loss below the minimum collateralization ratio required to enrer a new position that is when you have the highest expected return per btsx for any given long btsx position.
Sent from my SCH-I535 using Tapatalk
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My understanding is that a short can only run with the higher leverage until the BTSX price falls by 25%, at which point the collateral coverage is 1.5x and there is a call. So does that mean that based on the recent declines in BTSX price (in terms of USD), we may soon start seeing a lot more of these losing shorts covered? Or is there a mechanism where shorts can just add incremental amounts of collateral to maintain their leverage in existing shorts? (I'm not aware of one).
Regarding BM's point that grandfathered shorts have the benefit of not having to pay interest, is it feasible to offer an interest credit on new shorts to that wallet where grandfathered positions are voluntarily covered, so that this benefit is retained for some fair period after they cover? As an example, a credit could be set to X% of the value of the covered grandfather-short, X being some reasonably set fixed level. Interest that would be payable on future shorts in that wallet will instead be zero and eat into this credit until it is consumed. Other approaches can be imagined. However no such benefit will accrue where grandfather-shorts are forcibly-covered, encouraging shorts with these positions to consider whether its worth holding out and potentially losing this benefit.
If we expect that most shorts will be covered soon if the BTSX price drops much further, there would be no point with this added complexity. But if we are looking at grandfathered positions being substantial for a prolonged period, is it worth considering?
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Once the rules are established we will be buying up enough USD to provide liquidity for all of the shorts that were grandfathered. So it really isn't an issue.
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Once the rules are established we will be buying up enough USD to provide liquidity for all of the shorts that were grandfathered. So it really isn't an issue.
OK, sounds promising, but I'm not sure what this means exactly...
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Once the rules are established we will be buying up enough USD to provide liquidity for all of the shorts that were grandfathered. So it really isn't an issue.
OK, sounds promising, but I'm not sure what this means exactly...
It means we will have a buy wall to provide liquidity for any existing BitUSD longs.
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one problem I had, is if you pay off a small amount of a legacy short position, the new call price logic kicks in, and it may even trigger a margin call on the entire order.
last night, the feed was at 42 BitUSD / BTSX, I had a legacy short with call price at 45 BitUSD, I payed off 1.7 BitUSD. unintuitively the call price recalibrates below 42 BitUSD, and it was forced to cover.
(http://i.imgur.com/kINIFF3.png)
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Once the rules are established we will be buying up enough USD to provide liquidity for all of the shorts that were grandfathered. So it really isn't an issue.
OK, sounds promising, but I'm not sure what this means exactly...
It means we will have a buy wall to provide liquidity for any existing BitUSD longs.
Should we wait till further is announced, or is this discussed elsewhere? I'm curious who is the 'we' to provide the buy wall, and how. I understood how this was to be effectively created through the 30 day expiry rule.
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Once the rules are established we will be buying up enough USD to provide liquidity for all of the shorts that were grandfathered. So it really isn't an issue.
OK, sounds promising, but I'm not sure what this means exactly...
It means we will have a buy wall to provide liquidity for any existing BitUSD longs.
Should we wait till further is announced, or is this discussed elsewhere? I'm curious who is the 'we' to provide the buy wall, and how. I understood how this was to be effectively created through the 30 day expiry rule.
Right...if USD supply wants to go below 300K without long term shorts exiting we will hold the USD. It isn't an issue otherwise.
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Once the rules are established we will be buying up enough USD to provide liquidity for all of the shorts that were grandfathered. So it really isn't an issue.
OK, sounds promising, but I'm not sure what this means exactly...
It means we will have a buy wall to provide liquidity for any existing BitUSD longs.
Should we wait till further is announced, or is this discussed elsewhere? I'm curious who is the 'we' to provide the buy wall, and how. I understood how this was to be effectively created through the 30 day expiry rule.
Right...if USD supply wants to go below 300K without long term shorts exiting we will hold the USD. It isn't an issue otherwise.
So a buy wall will stand in the market equivalent to the grand-father shorts in size? If that's the plan, it sounds doable given the value of grandfathered shorts is not enormous relative to BTSX, and you know that for any USD you absorb you will be eventually be bought out by the grandfather-shorts. I may not have your plan exactly right, but I think something like this is good - it is important to resolve the liquidity problem asap so buyers can have confidence. Once this is finalised, I think it should be very clearly explained to potential USD buyers why they can have utmost confidence in getting their value back on exit through the combined mechanisms of the short-expiry rule and the buy wall, and not remain hidden in threads somewhere for people to piece together. I am worried there is a window of opportunity to prove beyond doubt the successful functioning of BitUSD (peg + liquidity + security) before competition potentially heats up.
Thanks for the response BM, I know how busy you must be with critical decisions going on.