Quote from: Lohoris on September 07, 2013, 11:52:03 AM

Quote from: Vycid on September 04, 2013, 06:26:30 AM

I'd consider starting a hedge fund, but I have this funny feeling that the moment I take someone else's money I'd immediately lose everything and feel like a prick.

Please let us know if you reconsider the idea, it would be quite nice to invest into a fund managed by you!

I'm not sure if this is sarcasm or not (I think you may be one of the people I options from... sorry), but if it isn't I appreciate the sentiment.

The biggest motivation for me to start a fund is to more easily leverage the short side on BTC securities. That is a significant competitive edge. If the fund has lots of provable assets to cover positions, people might more willingly accept short shares in lieu of direct shares.

Very recently I have been exploring the idea of starting a "short derivatives" platform. The idea is that I would pick up large futures contracts from people seeking major AM positions - so, for example, I would offer to sell someone 100 shares in 6 months at about the current market price - say 2.2 BTC. This is an obligation, not an option, the exchange must occur, so the contracts would only be written with trustworthy individuals and would be partially collateralized in escrow to minimize counterparty risk.

Then I can repackage this as short positions for sale to the public. The derivatives work like this:

Joe opens a 5-share "short" position. The minimum initial margin requirement is 20% of the base share value, plus 0.1 BTC per share. So if the position is opened at 2.2 BTC/share, he has to put in 5 * (0.2 * 2.2 + 0.1) = 2.7 BTC.

Then, say the share price goes up, to 2.5 BTC. Joe's total loss is 0.3 BTC/share, or 1.5 BTC. The margin maintenance requirements are liabilities + 10% of base share price, so 1.5 + 0.1 * 5 * 2.5 = 2.75, which is greater than 2.7 BTC. Joe will get a margin call and will need to either add money or close his position within 24 hours. If the liabilities ever come within 10% of the balance, the position will be closed immediately.

Dividends will be subtracted from available cash, so investors are also responsible for maintaining their balances.

On the other hand, if share prices go down by 0.2 to 2.0 BTC/share, Joe is not obligated to do anything. If he closes his position, he gets 0.2/share, or 1 BTC total (minus some service fee, naturally).

Basically, I want to use futures contracts with major holders to underwrite a kind of short derivative.

All of this would require a robust webapp.

If people are interested in this let me know. This market desperately needs adequate opportunities for short interest.

Quote from: Jutarul on September 07, 2013, 09:47:32 PM

Quote from: Vycid on September 07, 2013, 09:08:02 PM

So, even if companies average 30% margin long term (I believe it will be much more competitive, 10-20%) it would only take ~3 million market cap across all companies to meet, if not exceed, fair value.

The quoted market cap only takes into account the scarcity of bitcoins and neglects the scarcity of transaction volume. A bitcoin is worth nothing if you can't transact it.

Unfortunately at the moment it is impossible to estimate the net worth of 50GB (max. ~1 year) of blockchain data. However, owning mining stocks or equipment is a way to get exposure to that speculative asset (albeit the rapid expansion of network strength depreciates equipment, making companies or intellectual property in that area a safer choice).

Thus, one may argue, a 3 million market cap for mining companies underestimates the long term worth of that sector.

I agree, but I am also ignoring factors like future competition. We cannot say "the companies are collectively worth 3M" if all of the companies that will want a piece of that pie do not exist yet, or have not entered the market yet.

If BTC turns out to be "the big thing", and transaction volumes (and fees) reflect that, that does not necessarily bode well for companies like AM, which might get crushed under the heels of behemoths like Intel or IBM.