Kraken's a little ridiculous but I don't know of any other exchange that lets you short vs fiat AND has no deposit/withdrawal issues. https://www.kraken.com/help/fees
Just learned that Polo doesn't let you margin trade BTCUSD or BTCUSDt pairs using BTC as collateral, pretty fucking stupid. Had to liquidate BTC and convert it to tether. That carry cost also is absurd, thats like 20%+ a year right? Goddamn, for simplying the world and making it 'cheap' to transfer funds, this bitcoin nonsense is sure hell expensive, the fees just keeping adding up, for everything
These things are looking like shit now, free falling. I have been short-term trading them this week and it sure hell beats trying to trade stocks lately
A trade that I'm considering, short GBTC and long BTC at the right ratio. GBTC is at a large premium, that should decrease as the hype settles down. The borrow rate is 24% a year right now on GBTC (IB has shares), so its a little expensive to have it on but assuming this market cools down within 1 month, it shouldn't cost much But I dunno, its such an obvious trade that there has to be a catch
There are the "standard" two catches of: * 24% borrow cost that you identified * the risk of the short position being bought in but in addition to this, GBTC has traded at a premium of 20% to 130% for most of its life. Until there is a specific catalyst for it to decline closer to NAV, it may be safer to only short it when the premium gets back above 100%. Also there is the question of what ratio to use with this pair trade. You used the phrase "at the right ratio" in your post - but what is the right ratio? Suppose you are long 9.3 Bitcoin for each 100 shares of GTBC to short. Let's use today's prices of 2275 for Bitcoin and 370.00 for GBTC. If Bitcoin doubles, your 9.3 Bitcoin are now worth 4550. You gain 9.3 * 2275 = $21,157.50 on the Bitcoin long. But even if GBTC rallies by "only" 60%, it rises to $592. (370 * 1.60 = $592) You lose 100 * 222 = $22,200 on the GBTC short. Net loss 22,200 - 21,157.50 = $1,042.50. Even though GBTC went up by a much smaller % amount, you still lose on the trade, before considering the cost of the GBTC borrow. .
@Daal I'm heavily biased towards Kraken with all their issues because Kraken allows for fiat trading pairs. Some the the better exchanges functionality wise only accept crypto, which has the a numeraire problem you posed.
I'm with ya, I thought polo was going to be great but it sucks due lack of margin trading with USD or USDtether. So far Kraken is the better one I found, I just wish I could be more secure with my cash in there. The whole thing can go bust at any second
Good points, perhaps the right ratio is to use the same $ amount in both positions. So if you are short $10,000 GBTC, get long $10,000 worth of BTC. If BTC becomes worthless overnight, you lose 100% in both. If it doubles, and the premium stays the same, you are protected. you would only lose more to the extent that GBTC 'outperforms' BTC in a % basis. And you would bank to the extend that it would underperform in a % basis There still be the cost of borrow and buyin issue but perhaps the way to go is to do tactical shorting of GBTC, when the price action indicates weakness to come, like this week. The BTC hedge in that case, might or might not be needed but its a interesting addition to reduce risk
Amazing resilience by BTC and ETH, these things had all the opportunity to blow up really hard in a large selling climax but they keep finding buyers. Maybe these things need another big buying surge at ATH before they are ready to pull a big correction. I traded them this week with day and swing trades but this journal is no place to mention these. I got no long-term positions in coins right now