Author Topic: A huge amount of shorts were expired. What will happen?  (Read 12711 times)

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Offline donkeypong

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Looks like everything already got covered, crisis over folks :P

BitUSD supply is now at 500k, and 24 H volume is at 200k making it number 5 on CMC :D

Still only worth a dollar, though. What's up with that?  ;)

Offline Rune

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Looks like everything already got covered, crisis over folks :P

BitUSD supply is now at 500k, and 24 H volume is at 200k making it number 5 on CMC :D

Offline Rune

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Why? The point of expiration is to provide BitAsset holders with a guarantee that they can exit into BTS within 30 days at or above the price feed (in BitAsset/BTS). That is still true. They will eventually be able to put a relative BitUSD sell order at 0% offset from the price feed and then just wait. We can guarantee that their order will be matched within 30 days. There is no need to force expired orders to buy 10% below the price feed, unless of course their collateral ratio drops below 200% in which case they should then be margin called and buy any BitUSD sells at a price that is above the price 10% below the price feed (BTW, this is probably a good time to bring this comment to the attention of the developers).

Right this makes sense. As long as they'll get margin called if the collateral goes too low then there's nothing wrong with letting their order sit at the price feed. At first I thought it was unfair they wouldn't have to pay interest, but at high bitasset demand interest rate goes to 0 anyway.
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There are good reasons why the price feed was first introduced. We don't want the short market to drive the growth of BTS priced in the underlying asset of the BitAsset, that should be done by the market between actual BitUSD holders and BTS (or actual USD holders and BTS on outside exchanges). Removing the limitation could instead break the peg and drive the value of the BitAsset to zero. Now that particular problem doesn't necessary limit us from changing the short limit to slightly above (in BitAsset/BTS) the price feed, say even 10% above (since if it does not reflect outside reality the price feed won't follow the shorts). But the worry I have with that is that it prevents existing BitAsset holders from having the guarantee to exit into BTS within 30 days by simply offering to sell at the price feed. If the shorts are very eager to short sell the BitAsset, the actual BitAsset holders may be forced to sell their BitAsset at a 10% discount from the peg.

When I say above the price feed i mean that the bitasset is overvalued (so feed is in BTS per bitasset). I get super confused when the feed is described the other way so this is how I have to think of it :P. If the feed is 100 BTS per bitUSD, then if there's a buy order at 115 BTS per bitUSD it should be possible to match that buy order and all other buy orders by shorting all the way down to the feed price for an instant expected profit (since you can expect bitasset price to tend towards the feed price). Then every time bitasset demand increases enough to make buy orders go above the feed, there will be an incentive to short the bitasset since you can be certain you will profit from the amount that the buy orders exceed the feed price. It should never be possible to short below the feed price (so short orders at 90 BTS per bitUSD should not be possible if the feed is at 100 BTS per bitUSD).

Offline arhag

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It's a bit problematic that shorts aren't punished for expiring by getting forced to cover at a higher price,

Why? The point of expiration is to provide BitAsset holders with a guarantee that they can exit into BTS within 30 days at or above the price feed (in BitAsset/BTS). That is still true. They will eventually be able to put a relative BitUSD sell order at 0% offset from the price feed and then just wait. We can guarantee that their order will be matched within 30 days. There is no need to force expired orders to buy 10% below the price feed, unless of course their collateral ratio drops below 200% in which case they should then be margin called and buy any BitUSD sells at a price that is above the price 10% below the price feed (BTW, this is probably a good time to bring this comment to the attention of the developers).

I'd assumed that would be the case to avoid situations like what we're currently seeing.

As far as I can tell, the bug has to do with the expired short cover orders (at the price feed) not matching with the short sell orders (at the price feed). If that is the case, then that would indeed be a bug. But I have already offered the shorts frustrated by this bug a solution until a proper fix is ready.


But what I really don't understand is why my short at 115 BTS per bitUSD doesn't even show up on the orderbook. I'm really hoping this is a bug and not intentional.

Hmm.. That sounds like a bug to me.

If we're not able to short bitassets at above the pricefeed (bitassets priced in BTS, so above the pricefeed == bitasset overvalued) then increased demand for bitassets will not result in increased demand for bitshares, because you will not be able to short into buy orders above the feed and thus can't profit from increasing bitasset supply by locking up BTS.

There are good reasons why the price feed was first introduced. We don't want the short market to drive the growth of BTS priced in the underlying asset of the BitAsset, that should be done by the market between actual BitUSD holders and BTS (or actual USD holders and BTS on outside exchanges). Removing the limitation could instead break the peg and drive the value of the BitAsset to zero. Now that particular problem doesn't necessary limit us from changing the short limit to slightly above (in BitAsset/BTS) the price feed, say even 10% above (since if it does not reflect outside reality the price feed won't follow the shorts). But the worry I have with that is that it prevents existing BitAsset holders from having the guarantee to exit into BTS within 30 days by simply offering to sell at the price feed. If the shorts are very eager to short sell the BitAsset, the actual BitAsset holders may be forced to sell their BitAsset at a 10% discount from the peg.


Shorts will be forced to cover 10% above the feed starting 2 hard forks from now. There was a discussion about this a few weeks ago when lots of CNY orders expired

Just to be clear, this is for margin called shorts only right? Expired shorts only buy up BitAsset sell orders down to (in BitAsset/BTS terms) the price feed, but not any lower than that, correct? I am saying this is based on this comment by bytemaster, and also just what I find to be the reasonable and sensible thing to do to not unfairly punish expired shorts.

Offline Rune

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Shorts will be forced to cover 10% above the feed starting 2 hard forks from now. There was a discussion about this a few weeks ago when lots of CNY orders expired

Is it a bug that current short orders at the feed price are not getting matched with the forced covers? I can't figure out how to help get rid of this thing, it seems to me like I'd have to sell slightly below the feed in order to get matched with it, so it would cost me money to do.

Also is it intentional that shorts above the price feed do not show on the orderbook (in BTS per bitasset, so above the price feed means bitasset is overvalued)?

Offline toast

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Shorts will be forced to cover 10% above the feed starting 2 hard forks from now. There was a discussion about this a few weeks ago when lots of CNY orders expired
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Offline Rune

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I just did a bitUSD short at a pricelimit of 115 BTS per USD. It didn't get matched even though it's within 10% of the feed,

Why would your short get matched if its price limit is 115 BTS/BitUSD (or 0.008696 BitUSD/BTS)? The current price feed is 99.63 BTS/BitUSD or 0.010037 BitUSD/BTS. This means the expired shorts should buy any BitUSD sell orders at a price of 0.010037 BitUSD/BTS or above, which your order obviously is not.

Also, expired shorts do not buy 10% below the feed (you are confusing that with margin called shorts). In this case 10% below the feed is 0.9 * 0.010037 BitUSD/BTS = 0.009033 BitUSD/BTS. Your short order has a price limit that is even below that! But even if your price limit was 0.0099 BitUSD/BTS it would still not be matched because it is below the price feed.

It's a bit problematic that shorts aren't punished for expiring by getting forced to cover at a higher price, I'd assumed that would be the case to avoid situations like what we're currently seeing. But what I really don't understand is why my short at 115 BTS per bitUSD doesn't even show up on the orderbook. I'm really hoping this is a bug and not intentional.

 If we're not able to short bitassets at above the pricefeed (bitassets priced in BTS, so above the pricefeed == bitasset overvalued) then increased demand for bitassets will not result in increased demand for bitshares, because you will not be able to short into buy orders above the feed and thus can't profit from increasing bitasset supply by locking up BTS.

Offline arhag

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I just did a bitUSD short at a pricelimit of 115 BTS per USD. It didn't get matched even though it's within 10% of the feed,

Why would your short get matched if its price limit is 115 BTS/BitUSD (or 0.008696 BitUSD/BTS)? The current price feed is 99.63 BTS/BitUSD or 0.010037 BitUSD/BTS. This means the expired shorts should buy any BitUSD sell orders at a price of 0.010037 BitUSD/BTS or above, which your order obviously is not.

Also, expired shorts do not buy 10% below the feed (you are confusing that with margin called shorts). In this case 10% below the feed is 0.9 * 0.010037 BitUSD/BTS = 0.009033 BitUSD/BTS. Your short order has a price limit that is even below that! But even if your price limit was 0.0099 BitUSD/BTS it would still not be matched because it is below the price feed.

Edit: Nevermind. These numbers are all wrong. I wasn't actually looking at the client but rather bitsharesblocks.com and apparently there was some bug on the website that made it show the state of the market two days ago.
« Last Edit: February 08, 2015, 06:49:23 pm by arhag »

Offline Rune

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I just did a bitUSD short at a pricelimit of 115 BTS per USD. It didn't get matched even though it's within 10% of the feed, and it's not even showing up on the orderbook. Looks like there is a bug of some sort. It's pretty bad because it removes the automatic incentive there'd otherwise be to get rid of these expired calls, I have a feeling that if they stay on the books for too long it'll be a major sell signal.

Looks like normal orders that are up to 117 BTS per USD are not getting matched either. What can we do? We need to get rid of this ASAP.

Yes, the 30 day limit was a terrible idea.

I would like to know if this forced 30 day cover worked in the past?

It would work perfectly if we were able to sell or short bitUSD into the forced cover at 10% above the feed. People doing this would earn an instant 10% on their trade so you'd see people rushing in to remove this giant forced cover while making a nice profit. But it seems like a bug of some kind is preventing it from happening. They were probably planning to fix this in 0.7, the market update, so it's terribly bad luck that the giant cover happened now.

Offline NewMine

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I just did a bitUSD short at a pricelimit of 115 BTS per USD. It didn't get matched even though it's within 10% of the feed, and it's not even showing up on the orderbook. Looks like there is a bug of some sort. It's pretty bad because it removes the automatic incentive there'd otherwise be to get rid of these expired calls, I have a feeling that if they stay on the books for too long it'll be a major sell signal.

Looks like normal orders that are up to 117 BTS per USD are not getting matched either. What can we do? We need to get rid of this ASAP.

Yes, the 30 day limit was a terrible idea.

I would like to know if this forced 30 day cover worked in the past?

Offline Rune

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I just did a bitUSD short at a pricelimit of 115 BTS per USD. It didn't get matched even though it's within 10% of the feed, and it's not even showing up on the orderbook. Looks like there is a bug of some sort. It's pretty bad because it removes the automatic incentive there'd otherwise be to get rid of these expired calls, I have a feeling that if they stay on the books for too long it'll be a major sell signal.

Looks like normal orders that are up to 117 BTS per USD are not getting matched either. What can we do? We need to get rid of this ASAP.
« Last Edit: February 08, 2015, 03:27:29 pm by Rune »

Offline sudo

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Offline arhag

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Sold bitusd I had. But you're right. To hit a short, you would have to sell BTS a bit under the pricefeed. To hit the expired shorts you have to sell bitusd a bit above the price feed, like BM said.

If the BitUSD short sells at the price feed are not being matched with BitUSD buy orders at the price feed (in this case cover orders from expired shorts), then that is a bug that needs to be fixed. That seems to be what is going on here. The question is when will it be fixed. Is this fix already in v0.6.0 and thus will be taken care of by block 1772200 or is another mandatory upgrade release going to be needed?

Until the fix, there is a simple way for shorts at the price feed to get matched with expired short cover orders (and thus reduce the amount of expired shorts in the process). Simply buy your own short with some spare BTS, then take the BitUSD you receive and sell it just the tiniest bit above (in BTS/BitUSD price) the price feed to match the expired shorts.

Edit: By the way, if it was designed this way on purpose so that actual BitUSD sellers exactly at the price feed could have priority over shorts so that they would be guaranteed to exit out of BitUSD within 30 days, then it is the wrong way to do it. I do think that if you have two BitUSD sell order at the same exact price (like the price feed) then the actual BitUSD sell order should have priority over the BitUSD short sell order. However, if there are no actual BitUSD sell orders at the price feed, then the expired short cover order should match with any short sell orders at the price feed.
« Last Edit: February 08, 2015, 01:15:26 pm by arhag »

Offline graffenwalder

Expired shorts do not pay fees.  They will sell to anyone with usd looking to sell at just above the feed.

So can anyone with BTS short bitUSD right now at 10% above the feed and make an instant 10% gain? Then this "backlog" should disappear very quickly.

No, I tried and it doesn't work.. There are shorts from the feed price up to +10% right now and no orders are executing.

It will be covered by Monday is my prediction. 

How? They're not buying anything atm..
Just tested it, but the expired shorts are buying bitusd when you sell a bit over the price feed. (not selling into BTS sell orders of course)

Did you sell bitUSD you already had or short it? Cause there are shorts right now at the feed price that aren't being executed..
Sold bitusd I had. But you're right. To hit a short, you would have to sell BTS a bit under the pricefeed. To hit the expired shorts you have to sell bitusd a bit above the price feed, like BM said.

Offline svk

Expired shorts do not pay fees.  They will sell to anyone with usd looking to sell at just above the feed.

So can anyone with BTS short bitUSD right now at 10% above the feed and make an instant 10% gain? Then this "backlog" should disappear very quickly.

No, I tried and it doesn't work.. There are shorts from the feed price up to +10% right now and no orders are executing.

It will be covered by Monday is my prediction. 

How? They're not buying anything atm..
Just tested it, but the expired shorts are buying bitusd when you sell a bit over the price feed. (not selling into BTS sell orders of course)

Did you sell bitUSD you already had or short it? Cause there are shorts right now at the feed price that aren't being executed..
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