When does @woonomic theory break?
RT:
Preston, this only matters in margin spot markets. Shorting gold or BTC on spot requires someone to lend the underlying asset. Pull the asset off the exchange and nobody can borrow it to margin short.
But what I refer to is futures markets. I can put in USD collateral and sell near unlimited BTC futures contracts.
Some misunderstanding from the community here so let’s run through the mechanics with a thought experiment:
According to
@glassnode
there are 2.3 million BTC sitting on exchanges today. Let’s say the public wants to buy ALL of them and to take custody. So how much USD would I need to prevent the price from climbing?
Well for every spot BTC that is bought I need to sell 1 BTC of futures contracts. These two markets are tightly linked via arbitrage traders who make money whenever they get out of step.
Remember selling a future contract is just a bet on the price to go down. There is no limit on how many bets I can lay down apart from how much money I have to back that bet.
5x leverage is the norm so I would need $12b USD and absolutely NO BTC in my futures account to stop BTC price from moving upwards even if all the BTC available on exchanges were being bought up. (2.3m BTC * price / 5x leverage).
How much money is in the banking system? $20T of M2 money. $12b is a rounding error.
If we go into the math at more details, it’s slightly more than the $12b due to futures contracts being priced higher (called contango for those reading this), that price premium is captured as profit if you short BTC (this is called a basis trade).
In a basis trade you would normally buy spot BTC to protect from getting rekt if BTC price went up (short squeeze). But hell, if I had $12b of collateral why hedge. I’m the OG, I don’t need to buy spot BTC to protect from BTC going up as I have enough sell power to keep it down.
So in fact for an entity that has $12b of capital there is a profit incentive to short BTC on futures and keep price down.
Can this be done? Yes, because…
futures > spot
All you need to check is the daily volumes being traded on futures. It dwarfs the liquidity on spot markets. As long as this is the case, spot markets orbit the gravity of futures markets, not the other way around.
Hence you see the agenda by laid out to delay a spot ETF. For 7 years spot liquidity has been held back. While futures markets have flourished, vastly outgrowing the spot market.
https://x.com/woonomic/status/1705038126912340199
mukona /
npub1df…nfuvg
2023-09-25 16:41:00
in reply to nevent1q…93v3
Author Public Key
npub1dfnelwrj5yefug7m6f5gq6jl9gukqmtj33etc6ztrnw5gvsx5xfsxnfuvgPublished at
2023-09-25 16:41:00Event JSON
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"content": "When does @woonomic theory break?\n\nRT:\nPreston, this only matters in margin spot markets. Shorting gold or BTC on spot requires someone to lend the underlying asset. Pull the asset off the exchange and nobody can borrow it to margin short.\n\nBut what I refer to is futures markets. I can put in USD collateral and sell near unlimited BTC futures contracts.\n\nSome misunderstanding from the community here so let’s run through the mechanics with a thought experiment: \n\nAccording to \n@glassnode\n there are 2.3 million BTC sitting on exchanges today. Let’s say the public wants to buy ALL of them and to take custody. So how much USD would I need to prevent the price from climbing?\n\nWell for every spot BTC that is bought I need to sell 1 BTC of futures contracts. These two markets are tightly linked via arbitrage traders who make money whenever they get out of step. \n\nRemember selling a future contract is just a bet on the price to go down. There is no limit on how many bets I can lay down apart from how much money I have to back that bet. \n\n5x leverage is the norm so I would need $12b USD and absolutely NO BTC in my futures account to stop BTC price from moving upwards even if all the BTC available on exchanges were being bought up. (2.3m BTC * price / 5x leverage). \n\nHow much money is in the banking system? $20T of M2 money. $12b is a rounding error.\n\nIf we go into the math at more details, it’s slightly more than the $12b due to futures contracts being priced higher (called contango for those reading this), that price premium is captured as profit if you short BTC (this is called a basis trade). \n\nIn a basis trade you would normally buy spot BTC to protect from getting rekt if BTC price went up (short squeeze). But hell, if I had $12b of collateral why hedge. I’m the OG, I don’t need to buy spot BTC to protect from BTC going up as I have enough sell power to keep it down. \n\nSo in fact for an entity that has $12b of capital there is a profit incentive to short BTC on futures and keep price down. \n\nCan this be done? Yes, because…\n\nfutures \u003e spot \n\nAll you need to check is the daily volumes being traded on futures. It dwarfs the liquidity on spot markets. As long as this is the case, spot markets orbit the gravity of futures markets, not the other way around. \n\nHence you see the agenda by laid out to delay a spot ETF. For 7 years spot liquidity has been held back. While futures markets have flourished, vastly outgrowing the spot market.\nhttps://x.com/woonomic/status/1705038126912340199",
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