Author Topic: buying and selling bitusd vs. borrowing bitusd and then short selling?  (Read 2742 times)

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Offline legend018

To buy one bitUSD will cost about $1.00 (the actual cost will fluctuate above or below this about, depending on how well the peg is holding).

To short sell one bitUSD, you first have to put up at least $1.75 worth of BTS as collateral.  The BTS network then issues you one bitUSD, which you can then sell.   You have to maintain your collateral above a certain level (currently 175% of the value of your bitUSD short positions), or you will face a margin call.

You buy bitUSD when you want a currency whose value and volatility will closely follow the dollar.

You short sell bitUSD when you're bullish on the prospects of Bitshares, and you think that BTS will be worth more in the future--relative  to the dollar--than it is now.   

To illustrate, let's suppose that you borrow one bitUSD from the network, and put up $2 worth of BTS as collateral.  Once issued, you sell that bitUSD for $1.  Now suppose that BTS rises in price so much that a dollar is now worth only 1% of the BTS it was worth before.  You can buy back bitUSD to close out your short position using only $0.01 worth of BTS.  In other words, you've bought low ($0.01) and sold high ($1.00), thereby making $0.99 for each bitUSD you shorted.

I had posted another post with a question, but wondering since you explained this to me.   When using this graph on the bottom of this page: https://www.finder.com/bitshares
It always looks like the price is going up? So that means the dollar value for 1 bts is moving up right? If I'm reading that correctly then if this continues and BitShares does well it will be hard to really short out a position right? I was using an example I found where it said If BitUSD/BTS decreased (dollar has declined in relative value to BTS) - then you can buy BitUSD and then close out making a profit.  Is that the same or similar to your example?  What is the graph in the link actually telling me?  I just see everything going up so I think that means it would make no sense in borrowing BitUSD to short in the future because the value keeps going up right?

Offline legend018

when you short sell bitUSD, you place your account in debt for that amount of bitUSD.

It's the fundamental difference between selling something you own, and selling something you've borrowed; if you have a concept of short selling at all; voila.

ok this is what I needed - thanks. So in a sense, one could lose more money if they short sell right since you are borrowing plus the collatal. If you already have it, and you lose then well you just lose a piece of what you have.  AT least that is how I'm seeing it.

Offline chamber

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To buy one bitUSD will cost about $1.00 (the actual cost will fluctuate above or below this about, depending on how well the peg is holding).

To short sell one bitUSD, you first have to put up at least $1.75 worth of BTS as collateral.  The BTS network then issues you one bitUSD, which you can then sell.   You have to maintain your collateral above a certain level (currently 175% of the value of your bitUSD short positions), or you will face a margin call.

You buy bitUSD when you want a currency whose value and volatility will closely follow the dollar.

You short sell bitUSD when you're bullish on the prospects of Bitshares, and you think that BTS will be worth more in the future--relative  to the dollar--than it is now.   

To illustrate, let's suppose that you borrow one bitUSD from the network, and put up $2 worth of BTS as collateral.  Once issued, you sell that bitUSD for $1.  Now suppose that BTS rises in price so much that a dollar is now worth only 1% of the BTS it was worth before.  You can buy back bitUSD to close out your short position using only $0.01 worth of BTS.  In other words, you've bought low ($0.01) and sold high ($1.00), thereby making $0.99 for each bitUSD you shorted. 
« Last Edit: January 02, 2018, 03:20:45 am by chamber »

Offline Methodise

when you short sell bitUSD, you place your account in debt for that amount of bitUSD.

It's the fundamental difference between selling something you own, and selling something you've borrowed; if you have a concept of short selling at all; voila.

BTS: methodise

Offline legend018

I'm trying real hard to understand some basics and came across the following dilemma.  If I have BTS in my account, what is the difference between
1. Buying some bitusd.  Just going in and finding a buy and buying bitusd with my BTS. Then say selling it later
vs.
2. Borrowing bitusd and then short selling it that way.

I was trying to learn some of the basics around borrowing bitusd (giving bts as collateral) and short selling it.
But then I realized you can just outright buy and sell.  So what is the difference?  You can do the same thing either way right, possibly make a small profit? Or are there some differences that are not clear to me at this time?  Obviously there are differences or benefits or else there wouldn't be both methods.  I can't wrap my head around the differences.