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Comment by jnordwick | Hacker News Reader

How? What are the carry costs?

This would essentially be a bitcoin loan - I've never heard of such a thing, but i don't follow them very much (I do work in finance and trading though).

Literally, what is the bitcoin interest rate?

Is there even enough volume ooh these lower tier exchanges to support shorting the spot on them?

EDIT: i didn't find the interest rates but i did see that Bitfinex offers the ETH-BTC cross which is good so somebody can bet the relative value. I still think a futures market weighs be really useful for hedging purposes and reduced shorting fees and slippage.

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Yeah, you can lend out your bitcoin. for a daily interest rate and set the loan length to between 2 and 60 days. Lenders principle is in theory protected by a margin account. Interest rate is between 0.1% and up per day, which probably reflects the risk. I believe market depth is about 4,000 btc, so enough for an amateaur to play but not a hedge fund.

So that means you are essentially having to go to the market at least every 2 months and pay the spread and tx costs to roll your position?

And the way they describe how they automatically choose the loan with the lowest rate they could pick one where you need to return BTC in 2 days even. That sounds horrible.

Yes, even 'random' spikes and dips in obscure exchanges can force-close positions on some other exchanges.

'We use the average price of 5 difference exchanges to calculate the current BTC price' - then one of those random exchanges goes haywire and BTC trades near 0 on them for a few seconds. Ooops, the average BTC price just dropped 20% so we had to close your position due to lack of margin. Sorry! (This has happened several times in the past few months, for instance...)

Bitmex.com has a market determined borrow rate, in times of market rallies it gets as high as +1% per day and can be as low as -1% when panic hits. They relay it without any markup, so there's only the bitmex credit risk left.

When you say "per day" you mean annualized right? You don't really mean i borrow 1 BTC today and pay you back 1.01 BTC tomorrow, right?

not annualized. literally, per day. its crazy, i know.

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