High finance & falootin'

Thursday, 13 December, Year 4 d.Tr. | Author: Mircea Popescu

EFTi I think your exchange is top-notch...
LOMii Why ty :D

EFT So please don't let me sound too negative.
LOM O, no. What did officer say BTW ? OMG NO DO NOT DO THIS SCAM HELP

EFT In general, the better contracts you have, the healthier the currency is.
LOM That's true.

EFT No, the compliance guy pretty much says that I can't make markets in futures for a personal account that I trade at my firm. Had nothing to do with btc per se.

EFT I expected that answer, so I didn't even want to approach him, but my real life job pays me well so I didn't want to risk it.
LOM Well, look on your bright side, maybe your firm goes bust and then you'll have to.

EFT Yes, exactly!!! My firm should go bust!
LOM Lol. Just kidding. Anyway. I've added diff index, saw that ?

EFT Oh no, what's that?
LOM Further Futures on MPEx.

EFT Ooh it starts off very sexy. BRB. So who is a natural seller of difficulty? The buyer is easy.
LOM People shorting BTC synthetically.

EFT Someone who has future liabilities in BTC?
LOM Nah cause that'd add to liability. Someone who wants to insure his BTC long position against value drop through diff drop.

EFT But as miner fees supplant reward, this contract becomes less relevant? I guess the timescale is long enough that it's still a good contract.
LOM Not really. The relation between blocks solved and time is still diff and fees are in the blocks.

EFT Oh yeah, duh, sorry that was dumb.
LOM See basically, if you're long BTC you fear "btc dropping". But on analysis, "btc dropping" is really two conflated different things a) diff drop, miner failure ; b) speculative issues. They may or may not be related in practice, but this instrument allows you to separate them and target one. So it's of interest to any large holders on one side, and to any miners on the other, as far as natural interest goes.

EFT But that hedge loses money when price vs difficulty loses its correlation.
LOM Yes. It's not a silver bullet, it's just a tool. I think it nicely highlights just how complex BTC finance is. IMO it's a degree of magnitude more complex than fiat finance, just nobody realises this yet.

EFT There's a mapping onto fiat finance wrt options on mining indices.
LOM There is, but it's like a torus projection to a plane. Simplifies a lot and loses a lot.

EFT I have benefitted nicely from hedging my long BTC position with actual mining.
LOM That may work too.

EFT That's getting harder. And fuck BFL, that was easy to see coming.
LOM Right.

EFT So what's going to drive bitcoin adoption in 2013 ?
LOM Your firm going bankrupt and you having to mm for me. Times 100.

EFT Not mpex adoption. Bitcoin adoption.
LOM They're not that distinct.

  1. Evil futures trader, a character. []
  2. Little old me. Another character. []
Category: MPEx
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2 Responses

  1. Bugpowder`s avatar
    Friday, 14 December 2012

    The natural seller is all the bitcoin geeks that want to try to make a quick buck shorting a security they don't understand.

  2. Mircea Popescu`s avatar
    Mircea Popescu 
    Friday, 14 December 2012

    Lol that'd be the natural loser. Or winner, just to piss off the good old boys.

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