Author Topic: Max Short Holding Period  (Read 4887 times)

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Offline tonyk

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Re: Max Short Holding Period
« Reply #30 on: October 01, 2014, 01:39:05 am »
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...
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Agent86

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Re: Max Short Holding Period
« Reply #31 on: October 01, 2014, 01:51:25 am »
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

Offline Agent86

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Re: Max Short Holding Period
« Reply #32 on: October 01, 2014, 02:00:37 am »
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.

Offline tonyk

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Re: Max Short Holding Period
« Reply #33 on: October 01, 2014, 02:02:15 am »

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
« Last Edit: October 01, 2014, 02:06:51 am by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline tonyk

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Re: Max Short Holding Period
« Reply #34 on: October 01, 2014, 02:04:56 am »
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
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Agent86

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Re: Max Short Holding Period
« Reply #35 on: October 01, 2014, 02:10:45 am »
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.

Offline bytemaster

Re: Max Short Holding Period
« Reply #36 on: October 01, 2014, 02:12:45 am »
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.   
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline tonyk

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Re: Max Short Holding Period
« Reply #37 on: October 01, 2014, 02:15:04 am »
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?
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline tonyk

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Re: Max Short Holding Period
« Reply #38 on: October 01, 2014, 02:15:54 am »
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
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline bytemaster

Re: Max Short Holding Period
« Reply #39 on: October 01, 2014, 02:23:59 am »
Quote
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.
« Last Edit: October 01, 2014, 02:26:19 am by bytemaster »
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline Simeon II

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Re: Max Short Holding Period
« Reply #40 on: October 01, 2014, 02:31:51 am »

I like Agents86's proposal.

It screams 'free trade' and 'price discovery' from every angle you look at it!

Now, back to my cave....

Offline santaclause102

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Re: Max Short Holding Period
« Reply #41 on: October 01, 2014, 06:10:48 am »
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.
« Last Edit: October 01, 2014, 07:15:28 am by delulo »

Offline starspirit

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Re: Max Short Holding Period
« Reply #42 on: October 01, 2014, 10:02:20 am »
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?

Offline liondani

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Re: Max Short Holding Period
« Reply #43 on: October 01, 2014, 11:13:41 am »
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....
« Last Edit: October 01, 2014, 11:25:01 am by liondani »

Offline starspirit

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Re: Max Short Holding Period
« Reply #44 on: October 01, 2014, 09:31:39 pm »
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...