Author Topic: Aren't BitAssets sort of like naked short selling?  (Read 4475 times)

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Offline matt608

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This is interesting.  As far as I can see bitUSD is competing with the USD just as much as DOGE or EUROs.  All these competing currencies lessen demand for each other.  People who were holding USD sold it to buy bitUSD, or BTC or CNY or any other currency. 

Therefore bitUSD is inflating the USD by lessening demand for it, the same as any currency.  When a country stops accepting USD for oil that lessens demand for it in that country causing USD's to find their way back to the USA where they cause inflation.  Hence the petrodollar being forced on people at the point of a gun (one of the first things the US did after invading Iraq was switch their oil back to USD from EUROs).  That's why we don't here horrible things about Saudi Arabia (despotic regime) from the mainstream media, because they still price their oil in USD so we like them.  So yes I would say it is inflating it, but no more than any other currency. 

This is if we say that inflation is the weakening of a currency due to the demand vs unit ratio decreasing.

If you think about it, if half of the users of the USD suddenly died (lets hope not) and for some reason all the other users carried on using USD the supply would have effectively doubled without printing any more USD, resulting in inflation.  So inflation isn't just about money creation but is about demand vs number of units.
« Last Edit: September 27, 2014, 06:05:05 pm by matt608 »

Offline fussyhands

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BitUSD are not USD. They are a dynamic bundle of BTSX. BitUSDs increase the supply of USD as much as mining BTC does. In other words, they don't. More BitUSD doesn't even directly affect the market cap of BTSX, since all BitUSD are not created "out of thin air" and are collateralized by BTSX. (However, since they are collateralized by 200%, this increases the demand for BTSX, thus having the effect of driving up the price :) )

I said the EFFECT is to create USD.  I know that it doesn't actually create USD, but it creates something that can serve as USD and thus dilutes the demand for USD.  Supply and demand determine price.  If you create something that can serve interchangeably with USD that increases the supply and dilutes the demand, reducing price.

Offline tonyk

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Let's say I create a BitAsset called BitOverstock.  Lots of people start shorting BitOverstock into existence creating a big quantity of the asset.  Now many people who would have gone long actual Overstock stock instead choose to buy BitOverstock spreading the demand for Overstock stock over a larger supply and thus depressing the price.

You make a very interesting point. But there are so many places that create "parallel" assets, so BTSX is hardly unique in that respect.

-Banks do it all the time through fractional reserve lending.
-Spread betting companies let you take a position without going into the market (theoretically until they hedge).
-Gold is almost completely fictional.

Why cant BTSX get in on the game as well?

Haven't you guys figured it out yet? - There is no place for anything else but BTC. Cause it does not. Even talking about anything else is blasphemy...
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline speedy

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Let's say I create a BitAsset called BitOverstock.  Lots of people start shorting BitOverstock into existence creating a big quantity of the asset.  Now many people who would have gone long actual Overstock stock instead choose to buy BitOverstock spreading the demand for Overstock stock over a larger supply and thus depressing the price.

You make a very interesting point. But there are so many places that create "parallel" assets, so BTSX is hardly unique in that respect.

-Banks do it all the time through fractional reserve lending, again spreading out the demand for dollars or whatever.
-Spread betting companies let you take a position without going into the market (theoretically until they hedge).
-Gold trading is almost completely fictional.

Why cant BTSX get in on the game as well?
« Last Edit: September 27, 2014, 05:43:28 pm by trader »

Offline fluxer555

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BitUSD are not USD. They are a dynamic bundle of BTSX. BitUSDs increase the supply of USD as much as mining BTC does. In other words, they don't. More BitUSD doesn't even directly affect the market cap of BTSX, since all BitUSD are not created "out of thin air" and are collateralized by BTSX. (However, since they are collateralized by 200%, this increases the demand for BTSX, thus having the effect of driving up the price :) )

Offline fussyhands

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Isn't there a difference between bitAssets for currencies such as USD, EUR, ... and bitAssets for companies such as overstock, ebay?

imho it does not make ANY sense to have a bitAsset for overstock or ebay, because they do not have "ONE" price ..

you may mix this up with user-issued assets that can be used for IPOs of companies .. but in theses you cannot 'short"!!

See the following wiki link which discusses BitAAPL:  http://wiki.bitshares.org/index.php/BitShares_X#Please_explain_BTSX_vs._BitAssets_again

I don't know the status of non currency BitAssets that track real assets like AAPL, but it seems to be something that the community is considering.

But regardless, what about my overall point?  Doesn't BitUSD have the effect of increasing the supply of USD?  Will that be a regulatory issue?

Offline xeroc

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Isn't there a difference between bitAssets for currencies such as USD, EUR, ... and bitAssets for companies such as overstock, ebay?

imho it does not make ANY sense to have a bitAsset for overstock or ebay, because they do not have "ONE" price ..

you may mix this up with user-issued assets that can be used for IPOs of companies .. but in theses you cannot 'short"!!

Offline fussyhands

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Naked Short Selling

Let's say I create a BitAsset called BitOverstock.  Lots of people start shorting BitOverstock into existence creating a big quantity of the asset.  Now many people who would have gone long actual Overstock stock instead choose to buy BitOverstock spreading the demand for Overstock stock over a larger supply and thus depressing the price.

Isn't this the same as naked short selling?

The only difference is that with a naked short sale you are actually making a promise to deliver the real stock, whereas with a BitAsset you are only promising to deliver enough BTSX to buy the real stock.  In practice there isn't much difference.  The effect on price discovery is the same.  Naked shorting artificially increases the supply of a stock thus decreasing its price by frustrating price discovery through supply and demand.  BitAssets would appear to do the same thing.

Legality of Creating Parallel USD

If US gov determines that BitAssets are equivalent to naked short selling will that lead to trouble considering that naked short selling is illegal?

Now, if Bitshares became very widespread, and lots of people were holding BitUSD instead of actual USD, wouldn't this in effect increase the pool of USD, thus driving down the value?  How would the various agencies of the US government think about this?  Would it be something they want to stop?  It has some similarities to fractional reserve banking which also increases the money supply.  But there are differences too...  Are banks allowed to print GoldmanDollars pegged to the value of USD?  I don't think so.  Is this going to result in regulatory troubles?