# Shorting Bitcoin



## demoivre (1 Dec 2017)

CBE and CBOE will be offering Futures contracts on Bitcoin as early as this month. I would respectfully suggest that before anyone shorts  Bitcoin to remember that markets can stay irrational longer than you can stay solvent.


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## Merowig (1 Dec 2017)

demoivre said:


> CBE and CBOE will be offering Futures contracts on Bitcoin as early as this month. I would respectfully suggest that before anyone shorts the bejaysus out of Bitcoin to remember that markets can stay irrational longer than you can stay solvent.


Very good point! I already wonder when is it best to start shorten Bitcoins.


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## elacsaplau (1 Dec 2017)

demoivre said:


> ....remember that markets can stay irrational longer than you can stay solvent.



Nice one, Demoivre

Economics 101: When in doubt, ask yourself what did Keynes say about it!


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## ant dee (2 Dec 2017)

I was gonna say that you people with allthe clear evidence you have should just short Bitcoin and become rich. 

But, seriously, guys do NOT short Bitcoin...


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## Merowig (2 Dec 2017)

Yes because the bonanza can continue for a while till the music stops and I am not able to time the "market" - especially in it's state of mass hysteria with no underlying fundamentals.


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## elacsaplau (2 Dec 2017)

ant dee said:


> I was gonna say that you people with allthe clear evidence you have should just short Bitcoin and become rich.
> 
> But, seriously, guys do NOT short Bitcoin...



........well at least unless you are extremely well versed.

[For example, Gordon Gekko explained how leverage works and the lack of curiosity and interrogation regarding what was a very incomplete description is noteworthy in my opinion. This is not intended to be a criticism of GG - generally, a very fine poster. It's just an observation - be very careful trying this at home!]


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## Gordon Gekko (2 Dec 2017)

I’m trying to short Bitcoin, but the problem is that there could still be upside to ensure that I’m carried out before being proven right.

Has anyone come across any Bitcoin put options or alternative short strategies?

Things are getting ridiculous at this stage; the proverbial shoeshine boys are chatting about it.


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## elacsaplau (2 Dec 2017)

Gordon Gekko said:


> Things are getting ridiculous *at this stage*



Does this imply that there was a time when bitcoin's valuation was not ridiculous? If so, at what level?

[Comment: Not a single poster (in the multiple threads) who believes that bitcoin is in a bubble has provided a valuation (other than zero!) of what Bitcoin is reasonably worth - let alone the basis for this valuation. There's a lot of the price is too high and it will all end in tears - but no one has said what is a reasonable price (range) and why - apart from Brendan's absolute zero.]

Serious question(s) Gordon -

- do you agree with Brendan's valuation of zero or do you think it falls into another valuation range (and if so, what's the range and why)?

[Comment: I not sure if it's a good idea for anyone to start playing the "shorting" game until he has answered these questions.]


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## MrEarl (2 Dec 2017)

Elacsaplau,

I think there is a value in Bitcoin, but I have absolutely no idea how to go about trying to value it.

I see it as having a value based on it's acceptance and use as an international, low cost, instant payment method. Clearly, on that basis the more vendors that accept it as a payment method, the more it will be used etc.

For speculative purposes alone, I wouldn't touch it with a barge pole, unless it was available for purchase at sub €500 per unit of Bitcoin, if it was under that price point, I might be tempted to gamble. 

Unfortunately, as things  stand, I think excess 99% of people holding Bitcoin are gambling with it and not because they see its value as being excess $9k-$10k for payment purposes.



ant dee said:


> ....But, seriously, guys do NOT short Bitcoin...



So, are you saying we should all go long in Bitcoin instead ?


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## tecate (12 Dec 2017)

Yesterdays historic launch of Bitcoin on the CBOE futures market has largely been deemed a success. In another 6 days, it's expected that CBOE rival - the much bigger CME will launch their Bitcoin futures offering.  Cantor Fitzgerald and the Nasdaq have indicated plans to follow suit.   NYSE have expressed regret in not launching same.

@Brendan :  If you fundamentally believe strongly that BTC is vapourware, futures offer you the perfect opportunity to put your cash on the table and bet against the cryptocurrency.


Just to add, the CBOE have partnered with Gemini to create this offering. The Winklevoss twins are behind Gemini and they're believed to be the first BTC billionaires.  They have made a number of attempts to get a Bitcoin ETF approved (but so far, they've been turned down by the SEC).  However, with BTC futures now established, the thinking is that it's only a matter of time before a Bitcoin ETF is approved.  An ETF will really open the door to hedge fund and institutional money.

All of this adds legitimacy to the currency.


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## Brendan Burgess (12 Dec 2017)

Can I clarify how this works? Here are the prices from  





I believe that Bitcoin are worthless. 

So I sell one Bitcoin on 14th March for $18,070. 

If Bitcoin has fallen to zero by 14th March- then the exchange pays me $18,070

If Bitcoin rises to $118,070 on 14th March, I have to pay the exchange $100,000.

So my maximum gain is $18,000 - but my potential loss is unlimited?  (Presumably, I can put in some form of stop loss) 

Brendan


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## Brendan Burgess (12 Dec 2017)

Deribit is the only forum I can find where I could do a put option. I have no idea who they are and what the counterparty risk is.

Does anyone understand this:




Take the following one:



Someone has paid $5,376 to sell one Bitcoin on 30th March 2018 for $20,000.

If Bitcoin rises to $25,000 - the option is worthless.

If Bitcoin is $19,000, then the option becomes worth $1,000 i.e. they lose $4,376

If I understand that correctly, I would buy a put option on Bitcoin. 

Update: One must deposit Bitcoin with Deribit to buy an option and if one wins, one gets paid in Bitcoin! So if they fall to zero, it would be pointless. 

Brendan


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## Gordon Gekko (12 Dec 2017)

tecate said:


> @Brendan :  If you fundamentally believe strongly that BTC is vapourware, futures offer you the perfect opportunity to put your cash on the table and bet against the cryptocurrency.



That isn’t fair. I too believe that Bitcoin is going to zero, or as good as. But that doesn’t mean I can call the top. Someone who shorts it can still get carried out. So I’m just avoiding Bitcoin completely.


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## RichInSpirit (12 Dec 2017)

At a spread betting seminar years ago they advised to only put about 1% of your available trading fund on any trade.
In the case of shorting bitcoin I wouldn't risk any more than 1%.


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## Dan Murray (12 Dec 2017)

RichInSpirit said:


> At a spread betting seminar years ago they advised to only put about 1% of your available trading fund on any trade.
> In the case of shorting bitcoin I wouldn't risk any more than 1%.



That's fair enuff RichinSpirit,

but.........they would say that wouldn't they?!

This is akin to PPOW telling folk to gamble responsibly and Diageo advocating the moderate consumption of alcohol. Yeah, right!


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## cremeegg (12 Dec 2017)

The market reaches its top when the last bear has surrendered. You can see the bears being defeated in this forum day by day. Now we have BB seriously discussing bitcoin options. Out in the wider world things are moving more slowly but in the same direction.


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## Duke of Marmalade (12 Dec 2017)

Brendan Burgess said:


> Deribit is the only forum I can find where I could do a put option. I have no idea who they are and what the counterparty risk is.
> 
> Does anyone understand this:
> View attachment 2386
> ...


Fascinating!  It is fair enough to chose BTC as the settlement currency, you will get paid at the spot price and can then convert to your chosen fiat currency.  Of course if it is truly zero then you will get zero.  The way that would work is that the exchange could set whatever price it likes by being the only buyer on the settlement day. Thus it will spend a dollar to buy BTC at a price higher than the strike thus rendering the PUT proceeds as zero.  This would be legitimate.

Of more interest is the IV (Implied Volatility).  The IV of a March PUT is 144%.  Using the standard lognormal model that means that in 1 year's time there is a 25% chance that BTC will fall by 62% or more and a 10% chance it will fall by 84% or more.  But of course the model is log symmetric so the chances on the upside are the mirror image of these.


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## Brendan Burgess (12 Dec 2017)

Duke of Marmalade said:


> Of more interest is the IV (Implied Volatility). The IV of a March PUT is 144%. Using the standard lognormal model that means that in 1 year's time there is a 25% chance that BTC will fall by 62% or more and a 10% chance it will fall by 84% or more. But of course the model is log symmetric so the chances on the upside are the mirror image of these.



Hi Duke

This model might well work for shares in IBM or CRH. But does it have any relevance to Bitcoin? 

Bitcoin is worth nothing. 

The bit we don't know is how long it will take to reach that end result, and what the path there will be. 

Brendan


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## Duke of Marmalade (12 Dec 2017)

Brendan Burgess said:


> Hi Duke
> 
> This model might well work for shares in IBM or CRH. But does it have any relevance to Bitcoin?
> 
> ...


Yes _Boss _you are probably right.  These are small individual transactions and probably driven by more fundamental considerations than an IV play.  Thus you might want a stop loss short position and your counterpart might want to make some fees.  IV is some weird mathematical property of your transaction that the Exchange has calculated.

But they are quoting the IV.  In deep options markets IV is everything; it is not just an observed measure of the transaction it is the primary input into the market makers' models for coming up with a price.  Fundamentals are irrelevant.  That isn't a criticism.  Indeed many institutional participants regard options as investments in volatility.  If the market perception of riskiness increases then options increase in value and vice versa.


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## Fella (12 Dec 2017)

This might be an easier way for you Brendan


Paddy Power 7/1 on it been below 5000 on Jan 1st 2019


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## fpalb (12 Dec 2017)

Interesting to see how PP has the odds, Personally I'd still take the 5,001 or more over the 5,000 or less at those odds, if I had a gun to my head and had to choose one.


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## Fella (12 Dec 2017)

fpalb said:


> Interesting to see how PP has the odds, Personally I'd still take the 5,001 or more over the 5,000 or less at those odds, if I had a gun to my head and had to choose one.



Who wouldn't take a 1/16 shot over a 7/1 with a gun to the head! 
Bitcoin may be worthless but you cannot predict human behaviour and trying to is a quick way to the poor house , I wish Brendan well with his absolute position but I feel he's going to lose 10k trying to make a point.


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## Duke of Marmalade (12 Dec 2017)

_Fella_, that is very interesting.  I calculate the IV of that 7/1 as being 104%*.  This is considerably less (i.e. better value) than any of the IV's in the Options table.  Admittedly those options are on a shorter time horizon and we might expect IV to decrease with tenor.

Nonetheless this PP price is not out of kilter with the market.  Now if one overlays this with one's own "fundamental" assessment that the correct value is zero this starts to look like a good punt.  _Boss _if BTC is still above €5,000 on January 1st 2019 then the bubble is showing considerably more resilience than your typical household soap suds variety.

I think I'll have a piece of this action, not a life changing bet for sure, but something to allow me to say "I told you so"

_* Technical note:  validate this on Excel using EXP(NORM.INV(12.5%,0,104%)).  The answer is -70% which is what a fall from current values to $5,000 represents._


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## Firefly (12 Dec 2017)

Duke of Marmalade said:


> _Fella_, that is very interesting.  I calculate the IV of that 7/1 as being 104%.  This is considerably less (i.e. better value) than any of the IV's in the Options table.  Admittedly those options are on a shorter time horizon and we might expect IV to decrease with tenor.
> 
> Nonetheless this PP price is not out of kilter with the market.  Now if one overlays this with one's own "fundamental" assessment that the correct value is zero this starts to look like a good punt.  _Boss _if BTC is still above €5,000 on January 1st 2019 then the bubble is showing considerably more resilience than your typical household soap suds variety.
> 
> I think I'll have a piece of this action, not a life changing bet for sure, but something to allow me to say "I told you so"



Do PP have odds for say €1,000 - if it goes below 5k it will probably go below 1k too!


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## Fella (12 Dec 2017)

If you ask Betfair they will put up a market , these markets tend to be low liquidity if your patient you will get filled 
You can request Betfair to put up any market over under any price etc on any date they will put it up for you within a day generally.
Thats all they have at the moment


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## Duke of Marmalade (12 Dec 2017)

The Lay "Over $11000" at 1.18 has an IV of 170% which is less than the IV of the short options in the table. It is therefore good value by that criterion but unfortunately €18 doesn't come close to life changing for a duke.


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## fpalb (12 Dec 2017)

Firefly said:


> Do PP have odds for say €1,000 - if it goes below 5k it will probably go below 1k too!



I would say not, in fact the opposite, in all previous bitcoin growth spurts the price has never or very briefly retraced below the height of the previous one, and the previous one was at around 1000. There'll be too many old timers like me buying the hell out of it at that price I expect.


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## TheBigShort (12 Dec 2017)

Coinbase currently experiencing heavy volumes of traffic and is unable to display prices. 
Ive noticed this tends to occur during heavy sell/buy activity. My guess is the price is on its way up again


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## Brendan Burgess (12 Dec 2017)

The maximum bet Paddy Power would take was €30.  I will have a few pints on New Year's Eve 2018 with my winnings. 

How do I get Betfair to open a book on a 31 Dec 2018 date?

Brendan


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## landlord (12 Dec 2017)

TheBigShort said:


> Coinbase currently experiencing heavy volumes of traffic and is unable to display prices.
> Ive noticed this tends to occur during heavy sell/buy activity. My guess is the price is on its way up again



It’s LTC and ETH (both sold on Coinbase (and in my portfolio))  which are both on the way up.  They are skyrocketing.


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## Fella (12 Dec 2017)

If you email Betfair or ring them they will put the market up. 
You could ask Paddy power for more at lower odds or you could stick up a few thousand at 5/1 on the new market at Betfair (when they put it up) and then advertise the arbitrage oppurtunity on boards or some other gambling forums that it’s possible to back at 7/1 and lay at 5/1 for a risk free profit. People might need more encouragement though as it’s a long term market.


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## Dan Murray (12 Dec 2017)

Jeepers Fella,

I thought you were going to keep your know-how hidden on this one!!!!


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## Fella (12 Dec 2017)

Dan Murray said:


> Jeepers Fella,
> 
> I thought you were going to keep your know-how hidden on this one!!!!



I don't know whats going on anymore Dan , the whole thing is a bit crazy. 
Betway give 50/1 I suspect they believe its more of 500/1 shot that Bitcoin drops below 1$ next year.


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## Brendan Burgess (12 Dec 2017)

Hi Fella

Have you a link to those odds?

Do I have to register with Betway to see them?

50/1 on less than $1 vs 7/1 on Paddy Power for under $5,000.   

There could be some residual value which puts it at a dollar or two. 

Brendan


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## Dan Murray (12 Dec 2017)

Fella said:


> I don't know whats going on anymore Dan , the whole thing is a bit crazy.



Fella -  you'll be coming out of retirement if you keep this up! 



Brendan Burgess said:


> There could be some residual value....



Brendan - now that's just BLASPHEMY - throngs of your disciples will be convulsed..................and yes! I am just kidding


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## Fella (12 Dec 2017)

there you go Brendan

I can't see the maximum stake you can ask them before depositing by using live chat what stake they will take.


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## demoivre (12 Dec 2017)

Brendan Burgess said:


> Can I clarify how this works? Here are the prices from
> 
> View attachment 2385
> I believe that Bitcoin are worthless.
> ...



Unlikely that would happen in reality for two reasons: 

1 A futures contract can be closed out at any time and no trader who has the remotest clue would run a losing position to that extent. 

2. To trade a futures contract you put up a deposit or margin to cover losses. The margin requirement for Bitcoin is about 50% so about $9000 needed in your account if you short 1 Bitcoin at $18,070. The minute your account goes below $ 9000 the broker will liquidate your position. It goes without saying that, aside from account minimum deposits demanded by brokers and bid/offer spread, you would need more than 9k to trade 1 futures contract in Bitcoin as the slightest move against you will see the position closed !

As an aside taking a position in a futures contract other than in the front month, which is the expiration date that is closest, is inherently more risky as the contracts are less liquid. In your table the volume traded is much smaller for March expiration than in the front month which is January.

As futures contracts go the volumes traded yesterday on CBOE for Bitcoin were 3500 lots with a notional value of about $62 million, which would be very small indeed.


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## Fella (12 Dec 2017)

Dan Murray said:


> Fella -  you'll be coming out of retirement if you keep this up!



No chance , I actually don't know whose been the most erratic with there money those buying Bitcoin or those shorting it. They both look like get rich quick schemes destined to fail. If I was to go back gambling it would be the tried and trusted methods most of my bets had a value of between 5-10% it was more hard work than gut instinct.

I've met a lot of very clever people similar to Brendan one guy sticks in my mind he put 25% of his float on a 18% value bet , it lost. He was very absolute also and he eventually went broke , every bet he placed was huge value but he still lost. Nobody knows what way this Bitcoin is going to move , everyone is guessing and gambling , even if we know for certain it will eventually hit zero there's just no way to profit from it without knowing when.


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## Dan Murray (12 Dec 2017)

AAAggghh - after posts 37 & 38 - I think the humble pie with my name on it is not precisely in de oven but it looks like if certain posters wanted, in the oven it would indeed go!


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## Duke of Marmalade (12 Dec 2017)

50/1 less than $1 is an IV of 340% which on the face of it is awful value.  Of course,  when  pricing this eventuality the standard lognormal model is inappropriate as we now need to price in some big step event.  I wouldn't go for this one. 7/1 looks better.


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## Gordon Gekko (12 Dec 2017)

I don’t like the idea of shorting futures or gambling with Paddy Power.

I’d much prefer Bitcoin put options if such a thing exist. Basically where I could buy the right to sell Bitcoin at close to its current price within a fixed timeframe. If I’m right, and Bitcoin has collapsed by then, happy days. If I’m wrong, I just don’t exercise my option and all I’m down is the cost of the option.

Does that exist?


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## fpalb (12 Dec 2017)

All I'll say is that if you think bitcoin will go to $1 or even $10 as anything except a temporary flash crash on an exchange (before new deposits arrive from buyers) you probably have no idea what you're doing. That would put the market cap at $210 million. There are currently over 50 cryptocurrencies with a higher cap. For bitcoin to fall that low it will either have failed to exist or the entire crytpocurrency ecosystem and market will have basically disappeared.


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## Duke of Marmalade (12 Dec 2017)

Gordon Gekko said:


> I don’t like the idea of shorting futures or gambling with Paddy Power.
> 
> I’d much prefer Bitcoin put options if such a thing exist. Basically where I could buy the right to sell Bitcoin at close to its current price within a fixed timeframe. If I’m right, and Bitcoin has collapsed by then, happy days. If I’m wrong, I just don’t exercise my option and all I’m down is the cost of the option.
> 
> Does that exist?


Yes see post #12


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## Duke of Marmalade (12 Dec 2017)

fpalb said:


> All I'll say is that if you think bitcoin will go to $1 or even $10 as anything except a temporary flash crash on an exchange (before new deposits arrive from buyers) you probably have no idea what you're doing. That would put the market cap at $210 million. There are currently over 50 cryptocurrencies with a higher cap. For bitcoin to fall that low it will either have failed to exist or the entire crytpocurrency ecosystem and market will have basically disappeared.


I think that is where the _Boss_ is at and I’m not far behind him. It is the collapse of the whole concept, not a question of finding the right pricing level.  The huge attention BTC is currently getting as a result of its unbelievable price explosion will probably hasten the day when reality dawns.


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## fpalb (12 Dec 2017)

Sure if it's your opinion that everyone will stop finding crypto useful and/or that it will fail to function for some reason, then go ahead and bet on it getting to $10 or even $1 then. On the other hand if you're thinking it'll get there just from fallout of the oncoming crash and nothing else, I don't think it will even get close.


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## Gordon Gekko (12 Dec 2017)

Duke of Marmalade said:


> Yes see post #12



Aren’t the “winnings” paid in Bitcoin or similar nonsense?


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## Brendan Burgess (12 Dec 2017)

Hi Gordon

That is what I want as well. 

I place a bet that the price will fall to zero in the long-term, maybe 12 months.  If I bet €1,000 @10/1 and it doesn't fall to zero, I lose  €1,000.

I have asked Betfair to open a book on the price at 31 Dec 2018.

Brendan


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## Duke of Marmalade (12 Dec 2017)

Gordon Gekko said:


> Aren’t the “winnings” paid in Bitcoin or similar nonsense?


Well yes but you can cash in your BTC at spot.   It is only if the value of BTC is absolutely zero i.e. nobody at all  is trading that this would be a problem, I think on a 3 month view you can dismiss that.


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## noproblem (12 Dec 2017)

The problem is Brendan, this forum is now giving Betfair whatever info they may want to gather. It may favour them or then again it may favour you. It might be a better punt if you put a grand on Mayo for Sam '18.


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## Gordon Gekko (12 Dec 2017)

noproblem said:


> The problem is Brendan, this forum is now giving Betfair whatever info they may want to gather. It may favour them or then again it may favour you. It might be a better punt if you put a grand on Mayo for Sam '18.



Bitcoin was never cursed though so it’s probably got a brighter future than Mayo


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## noproblem (12 Dec 2017)

Oh dear, we're banjaxed then so. 
But then again, Bitcoin could have a few curses put on it very soon going on what i'm reading here


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## Brendan Burgess (12 Dec 2017)

noproblem said:


> The problem is Brendan, this forum is now giving Betfair whatever info they may want to gather



Hi noproblem noproblem - Betfair is an exchange. I would be betting against someone on the other side not against Befair.  

Brendan


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## BreadKettle (12 Dec 2017)

Brendan Burgess said:


> Hi Gordon
> 
> That is what I want as well.
> 
> ...



This is comical. I'd happily take that bet and triple the odds for you. I'm sure there is a dApp on Ethereum that could accommodate us.

It's had such an enormous rise that it is bound to correct and probably hard, followed by a bear market and eventual recovery as would be the normal market cycle.

€0 is cuckoo land though, and only someone with truly zero understanding of the technology and it's potential would come out with it.


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## Dan Murray (13 Dec 2017)

Gordon Gekko said:


> Aren’t the “winnings” paid in Bitcoin or similar nonsense?



Those that go to watch the ponies live will be familiar with the cry of the bookies: _Bets in Sterling paid in Sterling.
_
Some years ago, at my local track in South Dublin, shortly after a spectacular bank raid in Northern Ireland, one bookie shouted out a delightful variation on the standard catch-cry: _Bets in Northern Irish banknotes, paid in Northern Irish banknotes!_


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