Hedging against the bubble popping - where's the leverage?



My friend has a rather large store of bitcoins that he bought about a month ago. I think it makes sense for him to hedge his recent gains, since the price run up looks like a bubble.

What is a high leverage way of doing this?

I looked at ICBIT but the counter-party risk in the face of a market blowup is large.

I was thinking Intrade, but they are apparently blowing up. Settlement in fiat preferred. My friend lives in the US.

John Shedletsky

Posted 2013-04-02T18:07:02.897

Reputation: 119

"Settlement in fait" What does that mean? Google doesn't seem to know. – Nick ODell – 2013-04-02T18:34:55.007

How droll. It's clearly a typo for "fiat" – John Shedletsky – 2013-04-02T18:57:24.150


possible duplicate of How exactly does short selling with Bitcoins work?

– Stephen Gornick – 2013-04-02T19:14:47.193

Possible duplicate of an old question that references a service that no longer exists - IMO the old question (and maybe this one) should have been closed as too localized... I personally think this is an obvious shopping list question that needs to be closed, but I'll leave it up to the community I guess... – David Perry – 2013-04-02T21:46:25.280


It's not a duplicate because I'm not limiting the scope to shorting Bitcoin. For instance, the 9/1 bet offered here provides good insurance, if you're not in the US and if it were still being offered: http://www.finextra.com/News/FullStory.aspx?newsitemid=24665

– John Shedletsky – 2013-04-02T22:12:37.027

1Why hedge? Hedging is really only a useful strategy if there is a liquidity or tax reason for not selling the original asset. i.e. You don't buy AAPL stock and short AAPL stock at same time. There are exceptions, such as partial hedges like covered calls, but it seems that the proper "hedge" in this case might be to just sell a portion of his Bitcoins. – David Ogren – 2013-04-02T22:34:58.213

"hedge" is the exact right terminology http://en.wikipedia.org/wiki/Hedge_(finance) and risk mitigation strategy is the only difference between speculation and gambling. If you guys have a large number of bitcoins, you should look into it.

– John Shedletsky – 2013-04-03T18:29:21.420



Bitshrub.com can be added to that list. Settlement is not in Fiat, and liquidity is low currently, but Puts and Calls can be bought and sold. A lot simpler and cheaper than MPEX.


Posted 2013-04-02T18:07:02.897

Reputation: 31


Like @David Ogren suggested, you are just supposed to sell part of those coins.

Dunno why are you trying to make it so much more complicated.


Posted 2013-04-02T18:07:02.897

Reputation: 5 220

It's called leverage. – John Shedletsky – 2013-04-03T18:26:18.687

@JohnShedletsky so you want to both sell your coins and short some more, basically? – o0'. – 2013-06-09T16:24:56.817


MPEX has the MPOE (options exchange) in which CALLs may be written or bought, and PUTs which may be sold or bought.

ICBit offers trading of futures contracts.

CoinSetter might be the first U.S. exchange to offer options when it launches (expected Spring 2013).

Kraken is expected to be launching at some point, in which short selling using leverage will be possible.

There may be other approaches that work for you, including methods from:

Stephen Gornick

Posted 2013-04-02T18:07:02.897

Reputation: 26 454