Silk Road forums
Discussion => Silk Road discussion => Topic started by: anarcho47 on August 06, 2011, 11:17 pm
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This is the one major thing I was worried about (and half-expecting, too):
SR's escrow hedging option was enabled at a BTC value of around $14.00 - currently the value is down to $7.00. Doesn't matter to me as a standalone seller for BTC value, as I have been using escrow hedging for the majority of my transactions.
As far as I know, the current hedge system buyer-side does not force a float to cover losses - i.e. buyers aren't putting out, say, 25% premium for the duration of the transaction to ensure that if btc takes a hit it will be covered. This means that SR has been covering the entire float on their own. Great for when BTC runs up, not so much when btc runs down - at least if it's naked coverage. I hope to GOD they, or someone involved in the organization, are an old-timer miner sitting on multiple 10k's of coins or have made more than enough money to leave a large float of BTC in the escrow pool. Either that or they have been managing some sort of put/call or short-selling hedge.
Otherwise, if the btc price keeps falling off, we might have a problem with the float running dry. God forbit, but it's a reality that might be very near to us as buyers and sellers.
This is of grave concern to me - I understand SR's reason for keeping the nuts and bolts of the hedging mechanism under wraps, but I pray that you have kept aside a reserve (based on past BTC fluctuations) to weather a storm such as this......
Anarcho47
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Yeah I'm not sure it was ever explained how they did cover this. But we all new a sell off could happen I'm sure SR new this better than most. And I'd say you're right, they are either old timer miner's or have done the math on the float--I'd say they keep careful track of the hedged (obviously) and are well aware of the bitcoin fluctuation. They also said they reserve the right to stop hedging at ANY time.
It's interesting though, what will happen in the next few days. I'm just hoping for a non-catastrophic month in BTC news!
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I think that when a seller selects this, sr takes a little off the top to cover it. just like a buy/sell is different. I would assume that there has been many transactions that have paid in to the "pot" so to speak..
I would think that SR is doing just fine, despite what the btc does. Im sure they did their homework before doing this and calculated worst case scenerio..
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lol I really hope so. i guess I have a little lest faith in forecasting for "normalcy" than most.....
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The BTC price has already regained some of its lost value, so SR's hedging will profit some btc now. It works both ways. :-)
An even worse scenario than being in debt - clients losing faith in the currency's stability. No clients, no economy.
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BTC is rising, last night it was like 6.75 and now it's 8.67 this morning.
Hopefully by the end of the week everything will be back in place and stable.
:D
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Prediction:
Normalcy (10.20) resumed in - 4 Days 13 Hours 37 Mintues
Lets see how my magic egg is working..
Peace,
DigitalAlch
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@DigittalAlch-I hope your currency futures alchemy is as good as your other alchemy. ;) A stable BTC value around 10 would just make it very easy for my addled brain to calculate pricing. :D
Considering the sophistication of the SR system, particularly in its current incarnation, I would be truly surprised if SR had any "nakedness" in his hedging system. The BTC value being cut almost in half was, sadly, not an event completely without precedent.
I'm betting hedging will stay in place, all the vendor listings will come back (and more!), and all will be grand on the Silk Road until the next time someone decides to dump a bunch of grandfathered BTC or there's another hacking/scam scandal.
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None of my sellers are responding to my messages - and I know they're getting read. ???
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I wouldn't worry about escrow problems. Simple hedging is simple: sell the total number of escrowed coins every day, and buy back as needed. Unlike most businesses, SR doesn't need to send withdrawn funds immediately, so they could even wait until _after_ withdrawal requests are made to buy bitcoins on an exchange. They don't even need a float, so they could have almost zero exposure if they wanted to.
But considering that SR also operates a tumbling mechanism, and he/she/they were very knowledgeable about bitcoins well before the run-up in bitcoin prices, I'd say there's a good chance they're sitting on a huge pile of bitcoins, and might not even bother with hedging.
For what it's worth (and being free advice, it's not worth much): I've been following the bitcoin economy closely, and I think the price will drop to $5-$6 over the next month or two before stabilizing, then go up late this year or early next year as usage picks up. I made a lot of money on the drop this weekend, which doesn't mean I'm right about the future but perhaps makes it more likely. :)
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I wouldn't worry about escrow problems. Simple hedging is simple: sell the total number of escrowed coins every day, and buy back as needed. Unlike most businesses, SR doesn't need to send withdrawn funds immediately, so they could even wait until _after_ withdrawal requests are made to buy bitcoins on an exchange. They don't even need a float, so they could have almost zero exposure if they wanted to.
But considering that SR also operates a tumbling mechanism, and he/she/they were very knowledgeable about bitcoins well before the run-up in bitcoin prices, I'd say there's a good chance they're sitting on a huge pile of bitcoins, and might not even bother with hedging.
For what it's worth (and being free advice, it's not worth much): I've been following the bitcoin economy closely, and I think the price will drop to $5-$6 over the next month or two before stabilizing, then go up late this year or early next year as usage picks up. I made a lot of money on the drop this weekend, which doesn't mean I'm right about the future but perhaps makes it more likely. :)
@nef-I use a very similar catch-phrase when I dispense free advice (free advice, worth what it costs!) and I have my own ideas from studying the BTC value graphs since inception (but more particularly since June 1 of this year, when all the Gawker people came online with BTC) so here's my take on what *might* happen: after each hack/scam/dump by a BTC early adapter the BTC hits a low of 50-60% of its previous high then pretty quickly and smoothly drifts up to 80-85% of its previous "normal" level. In this case it dumped to ~$6.50 and now it's about $8.00 so I'd be expecting it to get back to $8.80-9.35 within the next 60 days. I have NO CLUE what it might do after that. That's just my best guesstimate of its "post traumatic event" behavior.
I'll be interested to see which one of us is more accurate. :o If YOU are, I might want to talk to you about doing some BTC speculating, if you're game. :D
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So it was a little early but seems my magic egg is pretty close.
Oh yea.
Peace,
DigitalAlch
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[...]so I'd be expecting it to get back to $8.80-9.35 within the next 60 days. I have NO CLUE what it might do after that.
As is fitting for an Internet-based currency, Bitcoin is on hyper-speed Internet time, and already hit $12 today, as you probably noticed. I still think it'll drop down to $6 at some point in the next month, too, but it's really up to the whales, who control the market. There were three big buys today, with at least $250k worth of bitcoins bought, and no big sells, so up the market goes. What will the big spenders do next? Tune in tomorrow for the next exciting chapter of As The Bitcoin Turns...
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[...]so I'd be expecting it to get back to $8.80-9.35 within the next 60 days. I have NO CLUE what it might do after that.
As is fitting for an Internet-based currency, Bitcoin is on hyper-speed Internet time, and already hit $12 today, as you probably noticed. I still think it'll drop down to $6 at some point in the next month, too, but it's really up to the whales, who control the market. There were three big buys today, with at least $250k worth of bitcoins bought, and no big sells, so up the market goes. What will the big spenders do next? Tune in tomorrow for the next exciting chapter of As The Bitcoin Turns...
Yay! My favorite Soap!
They BETTER NOT cancel tomorrows installment...
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Magic Egg says drop to 7 in 2 days 18 hours
then back to 10 in 4 days 12 hours.
~DigitalAlch
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[...]so I'd be expecting it to get back to $8.80-9.35 within the next 60 days. I have NO CLUE what it might do after that.
As is fitting for an Internet-based currency, Bitcoin is on hyper-speed Internet time, and already hit $12 today, as you probably noticed. I still think it'll drop down to $6 at some point in the next month, too, but it's really up to the whales, who control the market. There were three big buys today, with at least $250k worth of bitcoins bought, and no big sells, so up the market goes. What will the big spenders do next? Tune in tomorrow for the next exciting chapter of As The Bitcoin Turns...
Just bumping the thread because I was right, as was joeblow2: bitcoin hit _both_ $6 and $12 over the course of a month. Impressive volatility!
Since I called it a month ago, I'm giving myself permission to make another prediction: I don't think it'll go down much more, and will be trading in the range of $4.50-$8 over the course of the next month. This big correction is actually good for the bitcoin economy, and I don't see the price going back up above $10 until early next year.
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All true NEF, but we better hope for a little LESS volatility for the vendors sake because if you figure the average order is in escrow maybe 7 days then last week it went down 30% while in escrow (10.50 to 8.50) and now this weeks the same thing (8.50 to 6.00 this morning) so they've got to really be hurting UNLESS they've all been hedging. :)
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Tough times for vendors indeed, but there was no escaping it, a correction had to happen at some point - the fundamentals were waaaay out of wack - and it was going to be painful no matter when it happened. And I wish we had less volatility to look forward to, but I think it'll be a year until things settle down, when the monthly inflation rate drops from 3% to 1%.
In addition to be a great way to buy drugs, Bitcoin has given me much more empathy for the Argentinians, who have had monthly inflation rates ranging from -7% to +20000% since the 80s. Can you imagine what it would be like if your fiat currency changed as much as bitcoins every month? Shudder...
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That really intense, I didn't know there flat currency had that much Volatility.
I'm thinking within two weeks we will be seeing 8 -9 though not for long.
Peace,
DigitalAlch
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Yeh, we have all been hit hard. It's a paper loss until you sell of course, but 50% is pretty huge amount.
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Yeh, we have all been hit hard. It's a paper loss until you sell of course, but 50% is pretty huge amount.
Yup I had 90 BTC when the ship began to sink. There goes that money.
Peace,
DigitalAlch
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I think we might see some sellers laying low for a while to lick their wounds after this one. My margin pretty much got destroyed on my last 10 orders, and some of them were full z's.
Keep on trucking, though. I luckily have enough of a business in the f2f world that I can subsidize phases like these, although I can't wait until they get a damned exchange going where you can actually lend BTC long and therefore SHORT the damned things to hedge myself (as opposed to waiting for a 25% drop in a fricken DAY before I confirm shipped. gah.)
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Otherwise, if the btc price keeps falling off, we might have a problem with the float running dry.
no worries. There is no danger of this. Our hedging system has held up so far and is working great. Check out the original thread for an update about this:
http://dkn255hz262ypmii.onion/index.php?topic=819.0
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Otherwise, if the btc price keeps falling off, we might have a problem with the float running dry.
no worries. There is no danger of this. Our hedging system has held up so far and is working great. Check out the original thread for an update about this:
http://dkn255hz262ypmii.onion/index.php?topic=819.0
FWIW, I'm expecting the BTC/USD exchange rate to fall near to or below 1 to 1 sometime in the next few months, maybe longer, before turning back up into a major bull run to new all-time highs. If I see any indication that the bull market has begun before reaching 1:1, I'll try to remember to post something here.
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Thank you SR, its working perfect.
Sometimes, for few hours we can not withdraw. I think that is due hedging system update and during big fluctuactions.
My understanding in all this and advice;
Buy coins only enough to make a purchase. Vendors, withdraw ASAP. Adjust prices frequently because sometimes price displayed in usd is too big or too low.
Let say I have item price of $25,00 in coins without SR fee.
26.57 = 25.00 + 6,3%( $1.57) gross price (what buyer pays)
as soon order is confirmed (marked in transit)
$25.00 exchanged in SR rate when order is confirmed is placed in escrow
$24.00 net amount, exchanged in rate when order is finalized is relased to seller (4% difference in ask bid price) Check: hedging update link
If refund is given,
$24.00 + 6,3% (SR fee is returned) = $25,57 exchanged in order when refund is given.
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I thought I was getting screwed on an item I had sold, due to bitcoin tankage, but then i checked my account and the hedged system keeps the price in US dollas stay the same
few, thank god for the hedge genius. as soon as i get the coins though, it goes straight to dollas
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i took a look at bitcoincharts.com. the history will go back as far as a year to view fluctuations. it would seem that the prices today reflect that of a year ago. i hope this is an indicator that it will not drop further, but btc is still being printed, so, who knows. i am keeping my fingers crossed.