<p>Bitcoin is subject to high volatility with little means of hedging. The available ways of hedging being to be short or buy puts on VERY ILLIQUID exchanges that contain no market participants, no market makers, or any order book depth.</p>

<p><b>could a hedged bitcoin fund with redeemable shares act as a stabilized security?</b></p>

<p>This, of course, creates a quasi-central banker role, where proper management can lead to stability, but proper management may not always be. But it is more inline with commodity hedging, where a producer (of crops for instance), hedges his output with futures. Such a quasi-hybrid role being fit for a quasi-commodity currency.</p>

<p>As such, an Exchange Traded Fund (ETF) or Exchange Traded Notes (ETN) can be created on existing exchanges. Securitization is practically the wild west even amongst the myriad of regulators, making the leverage and hedging possibilities endless.</p>

<p>Anyway, thoughts on why this would or would not work for bitcoin as the underlying asset?</p>

<p>proper tags: securitization, securities, etf, etn, hedging</p>

CC BY-SA 3.0
2013-03-06T06:03:04.320Z
CQM, could you edit your question to include a clearer question, especially in the title?
Nick ODell
CC BY-SA 3.0
2013-11-01T19:03:19.457Z
so I wonder, did my question here predict the future or inspire the future
CQM
CC BY-SA 3.0
2014-02-17T21:50:10.037Z
@Gracchus it does doesn't have to be. With derivates, the "tail can wag the dog", this is a phenomena we see in many other markets where the derivatives effect the price of the underlying asset (instead of the other way around), such as on options expiration days
CQM
CC BY-SA 3.0
2014-02-18T13:37:20.330Z
@Gracchus like... in the current equities and commodities markets? I think bitcoin can attract that level of liquidity
CQM
CC BY-SA 3.0
2014-02-18T15:22:22.440Z
@Gracchus I respectfully disagree, in the year since I've posted this there have been a lot of developments. I am confident that the answer to this question is "yes". There are liquid ways to short bitcoin, there are also CFDs and there are bitcoin futures and there is a bitcoin investment trust. None are very liquid, but correlated is the fact that bitcoin volatility has decreased.
CQM
CC BY-SA 3.0
2014-02-18T15:26:24.237Z
@Gracchus all the derivatives products I mentioned trade on their own centralized exchanges. They do not require blockchain confirmations, they are instantaneous database entries from a centralized matching engine. I am confident that colored coins will change this reality (unlike mastercoin, xcp etc) and create a decentralized instant-enough bitcoin-settled derivatives market
CQM
CC BY-SA 3.0
2014-02-18T15:41:16.290Z
@Gracchus US brokers have 24 hours to let the customer meet a margin call before closing trades. One hour is a 95% improvement .. or .. 2400% faster.
CQM
<price-volatility><bitcoin-etf><securities>
is bitcoin stability by securitization possible?
CQM
# is bitcoin stability by securitization possible?

(Asked by: username_0 on 2013-03-06)

Bitcoin is subject to high volatility with little means of hedging. The available ways of hedging being to be short or buy puts on VERY ILLIQUID exchanges that contain no market participants, no market makers, or any order book depth.

**could a hedged bitcoin fund with redeemable shares act as a stabilized security?**

This, of course, creates a quasi-central banker role, where proper management can lead to stability, but proper management may not always be. But it is more inline with commodity hedging, where a producer (of crops for instance), hedges his output with futures. Such a quasi-hybrid role being fit for a quasi-commodity currency.

As such, an Exchange Traded Fund (ETF) or Exchange Traded Notes (ETN) can be created on existing exchanges. Securitization is practically the wild west even amongst the myriad of regulators, making the leverage and hedging possibilities endless.

Anyway, thoughts on why this would or would not work for bitcoin as the underlying asset?

proper tags: securitization, securities, etf, etn, hedging

**Tags:** price-volatility, bitcoin-etf, securities

> **Comments:**
> **username_1**: CQM, could you edit your question to include a clearer question, especially in the title?  
> **username_0**: so I wonder, did my question here predict the future or inspire the future  
> **username_0**: @Gracchus it does doesn't have to be. With derivates, the "tail can wag the dog", this is a phenomena we see in many other markets where the derivatives effect the price of the underlying asset (instead of the other way around), such as on options expiration days  
> **username_0**: @Gracchus like... in the current equities and commodities markets? I think bitcoin can attract that level of liquidity  
> **username_0**: @Gracchus I respectfully disagree, in the year since I've posted this there have been a lot of developments. I am confident that the answer to this question is "yes". There are liquid ways to short bitcoin, there are also CFDs and there are bitcoin futures and there is a bitcoin investment trust. None are very liquid, but correlated is the fact that bitcoin volatility has decreased.  
> **username_0**: @Gracchus all the derivatives products I mentioned trade on their own centralized exchanges. They do not require blockchain confirmations, they are instantaneous database entries from a centralized matching engine. I am confident that colored coins will change this reality (unlike mastercoin, xcp etc) and create a decentralized instant-enough bitcoin-settled derivatives market  
> **username_0**: @Gracchus US brokers have 24 hours to let the customer meet a margin call before closing trades. One hour is a 95% improvement .. or .. 2400% faster.  

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