Better than Options Trading? Why Bitcoin BTCUSD Shorts Do Better in Down Markets, Hedging Exposure I

hello there people the Internet I just want to say that on our first day of YouTube we had some fantastic results we have four subscribers so thank you everybody so much for the interest we had a number of views that don’t show up here on this view that they do well actually I’ll show off this first we have some suggested videos traffic which is fantastic I growth act you read it and got a bunch of clicks we got 27 percent click-through ratio what I wanted to see bill was somewhere in here we can find doo doo doo analytics so um I actually just asked a friend to pick a random number see we have 98 views I guess in real time over the last 48 hours which is less than 24 hours ago I just asked a friend to pick a random percent between a random percent actually she chose 34 percent which is about one third we have nine pending videos here and three that I published so far out of the nine pending ones the one that comes in about one-third or 34% through is why more profit only on dumps that’s what we’re doing right now shouldn’t it do well in pumps then I’m explained here the BTC USD shorts which is gonna be our hedging enclosure one video this is gonna be three or two so we’re gonna do this series now on hedging exposure and I guess we’ll open our usual notepad document to take some notes also I want to note that I made a tweet here I noticed that Khan Academy and I actually asked you guys to search up Khan Academy if you wanted to learn more about arbitrage in my last video and here’s a screenshot actually of their YouTube in the background while they then summarize their there they’re learning that I’ve learned many times through them and shared many times I guess their servers are at 250 percent load and they’re asking for tips and brave attention tokens and you can actually read more about great tenshun tokens on my blog I have a whole category for it and learn how to browse privately while earning for viewing ads and how do we do that won’t we look at my category a breathe browser here so I’m Jared daun I’m chief liquidity officer of coined xlab’s the point of these videos is to both educate and also give some a some explanation and and and coverage and publicity for our inaugural market-making bought we’re gonna have a number of different plots in the future but let’s discuss why our market maker sometimes goes down in USD sorry goes down in Bitcoin while remaining the same returns or better in USD and we’re actually seeing that in real time here with our subscriber tickers so all of these subscriber tickers here are the profits and losses in Bitcoin and then all of these here are the profits and losses in the US dollars so my friend asked me in chat or my support rep actually asked me in chat he said why does the bot do better and let me find a good example of this why does the bot do better when the price dumps so here’s a good example you can see the green line here is our Bitcoin returns in percent the black line is our US dollar returns in percent and the blue line is the Bitcoin u.s. dollar price over time now you can see here that when the price goes down significantly the green line goes up by a whole bunch and when the price goes up significantly the green line the Bitcoin returns goes down while the US dollar the black line remains about equal it had a little spike here probably cuz there was a there was a difference in the contracts that were outstanding on the account but marketing account but as you can see here as the price goes up and down the black line remains about stable we probably found a better example of the black line remaining stable while all that happens earlier after the madness looks like our short wasn’t really working the way that I expected either way the idea is and maybe I can show you the chat where this happened I want to know why does the perfect only one price goes down this is the concern of support rep patty so why does this happen first off let’s figure out what is hedging but a general sense when we have an open position on a market and I’ll show you a different example hedging to explain hedging and it may have already done this in another video and I may have closed my other three window so if you hold a position let’s say you long or buy Bitcoin on the derivatives extremes by a thousand dollars in big what happens if the price goes up and what happens if the price goes down and let’s say what if you hold a position for selling or shorting thousand bikal thousand dollars unthinkable so the price goes up if you have bought it or longed it which I’m just along if the price goes up the value goes up if the price goes down your value goes down conversely what happens if we short the Bitcoin or make a can’t make a make a position where we say that the price should go down the want the price to go down we shorted it if the price goes up your short goes down in value meanwhile price goes down the short goes up in value so knowing this how can we potentially guard against risk well I’ll show you in real time with our market making bot that we have on live map you can see that it’s short or we’ve sold these features here for about $3,000 worth and we’ve longed perpetual year now given a market where these basically for the difference in price of these features in this perpetual stay about the same so let’s say the price of Bitcoin on unspotted exchanges or where you can buy it and actually hold it goes up by hundred dollars it’s supposing these all go up in value by about a hundred dollars at that point it’s not exactly a science like that because there’s different complications that happen in efficiencies in the market and that’s actually a good thing and there’s one thing that our our bot does really well exploiting and to tell you the truth that’s why these features are short and these lungs are better than these these perpetual czar long if you take a look at the prices up here you can see that the price of the perpetual well let’s take a look at the average price here the average price of hmm maybe that’s not working away and I expected to either way what should have happened to exploit risk to exploit the inefficiencies and I’ll have to ask our CEO to have a look at why these are short and long the way they’re so let’s say futures are high higher in price than verbs we’d this is just a side note by the way and we’re gonna go into this in more detail in a different video when I create the eyebrows video for cash and carrier carry our charge we short the features we’ve long the perpetual x’ when price of features goes down and match comes closer to dividuals we realize gains on the difference in those sorts and so again we’re gonna go into that more detail in another video and I’m just gonna go ahead and copy base list into chat right quick to see why we’re on the opposite side of this right now or if I’m just understanding it correctly cuz that’s a possibility too and the potential is that these just looked recently and we haven’t caught up yet price buying and selling to be opposing be on the opposing side but either way that’s the idea with cash carry arbitrage for futures and perpetual contracts but let’s go back to how do we guard against risk so in the situation where shorts are kind of betting against the price going up and Long’s are betting against the price going down and you can see that in real time here with the trader because it’s long all of these professional contracts and in short all these futures the net difference is around about zero and the ball actually tries really hard to make sure the net difference stays around about zero and if that difference gets to be really skew we call it if and Askew gets to be too far in one direction it stops buying or selling and it forces itself back down to and that skew of or in that position Delta house zero and what that means is both hoarding and longing the same underlying I’ll call it because these are derivative markets allows us to guard against the risk that the price goes up or down while maintaining these positions individually so if the price goes up or down by a significant amount when we’re close to net zero all in all an on average the price movement won’t affect our returns all that much this is good art is profiting as you see here it’s profiting a number of different ways and I’m going over this in my other video all up the other video again here but I’m just gonna show off these fees easier that I’m earning in each of these cases for each of these orders that have executed I’m also learning positive profit Google’s move it the thing is these fees here are negative which means I’m earning the feet in every single time I trade I’m earning a little bit please and I can actually show you look like somewhere in here in my settings come on there bit I’m gonna close that up facebooking these peoples keep on dinging me so people assisting notifications where am i it’s not loading settings come on guys system sounds I should say not system in notifications dear but I don’t know what you’re doing but you’re not loading the inner guys alright well we’ll let that load if it wants to by the way on the settings page there’s a real there’s a link to statistics and insight statistics we’re gonna see our total trading volume as well as fees paid over the last few intervals so over 24 hours I’ve earned this many bitcoins and fees in total over the last seven days I’ve earned this much and over the last thirty days I’ve earned over a hundred the pub it coin and that’s not even that trivial of an amount considering the fact that we only have point 1 in this account but let’s go back to the point of this video because we’re gonna learn all about the fees and how to earn feast in a different video that’s coming up so again both shorting and longing the same underlying allows us to guard against the risk that the price goes up or down while maintaining these positions individually and that’s what hedging is hedging is guarding against risk in any case so there’s a whole bunch different kinds of hedging and this actually hold institution setup that just edge risk while maintaining a position to give you more returns and that’s what hedge funds are and that’s what I try to do so hedging is guarding against risk so the point of this video in this series we’re gonna do a few on hedging let’s take a look at there’s other ones there so we’re gonna take a look more at the purpose in short and the features long or vice versa in a different video but it’s just a good example to show you hedging on the interface while I while I create this video and will go into more detail but how that works and the the total process that is involved there in this other video we’re also going to take a look at creative order sizing and changing the size of the orders as we go and I’ll take a look what that looks like just to show you a little preview in order to hedge using the order sizes man there’s not really a good example of that here is we have a small balance they’re all about 30 huh but we can change the order sizing in a different video to show you how that works practically so this video again is how do we hedge using a short on Bitcoin US dollar against the risk but it changed downwards in Bitcoin value will negatively affect our US dollar balance so let’s think about that so if we hold BTC I want to change the hold on if we hold bdz the price goes up price goes down and what happens to our US dollar returns when so we hold Bitcoin on an exchange like that because that’s how they do deposits and that’s how they value their currency they don’t hold US Dollars and they don’t trade against US dollars so we’re holding Bitcoin same same for bit backs and a few other exchanges so when we hold Bitcoin but we’re risking US dollars if we’re risking institutional funds and commodities fund we will risk institutional funds and prayer software-as-a-service if you’re deciding whoops where am i sorry okay if if if you were running our bot and you should check out the first video to learn more about the block and their five day free trial check out our video so if you’re risking u.s. dollars then you want to hedge or protect against the risk that your US dollar value will go down while on the exchange your your your currency that you’re holding is this Bitcoin what happens to our US dollar percent returns or returns that were realizing when the price of Bitcoin goes up and the price of Bitcoin goes down well we just saw that on the chart so when price of Bitcoin goes up our US dollar returns go up to US dollar returns go down to but if we want to optimize for US dollar returns and we care less about our Bitcoin returns how can we do that how do we use a system or a process to ensure that a Bitcoin dollar epic one price movement downwards like five percent would be critical and I already told you um the answer is that we use a separate account with a separate balance too short or sell the Bitcoin for a percent of the balance of Bitcoin held in both accounts and to tell you the truth I need to fix the bot to do exactly that right now it does market making I can’t do both mmm and edging okay now housing is optional in our software so as a service model we have various directions and the emails that are set for and we had various explanations of what’s short selling the Bitcoin for a percent of the balance in both accounts would look like so if you want to optimize for US dollar returns and hedge against the risk that the coin price goes down especially significantly then we short sell the Bitcoin for a percent of the balance what does this look like in practice well at least we know in our BOTS very active come on but um I think that our hedging account right now doesn’t have a balance so I can show you what this looks like yeah it’s negative balance it’s negative equity because it had a balance and then it the price of Bitcoin went up too much and it liquidate which is not good for equity returns but it’s good for debugging the board and making sure that it’s more failsafe so if we take a look at our hedging account you can see that it has no positions if you go back to our main account we can see that we have come on debit come on David they must be under loads people are trying to get into Bitcoin when everybody’s stuck inside learning it for the velvet coin I really wish I could find out my balance gand maybe I can for my bought interface so my balance is this many bitcoins Wow in 0.09 anyway we’re gonna need dairy but to work and we’re gonna do a little transfer funds though so I hope this little this speeds up leave 0.0904 I think balance so we want to risk about 10 to 20 percent of that in our education and then our hedge will open our short account will open a short for the US dollar balance value I don’t know what is going on and all of that is automatically bought not all of it I need more of it will be an automatic in the future the bond will automatically balance the equity value of the head you can so right now we have to transfer that money in ourselves but it’s not going to work it there if it doesn’t work maybe we just hit the back button enough to get to about so I want to put 0.0904 Tom’s point to you is this many bitcoins and debits really not loading guys so we might not be able to finish showing what this looked like is it my internet that’s messing up nonce long I just times alright he’s doing stuff now I think transfer I think if I log out and log back in I might need up my bosses kyc code let’s ask him if he can transfer the balance balance balance for us and it’s working nice let’s transfer some balance to the hedge account now we’re going to notice the hedge account is going to automatically by the time we load it probably open some shorts and we have a zero point zero seven bitcoins left in our main account which is four hundred and forty six dollars and we lost connection again so we should see a short for 446 dollars in our hedging account come on dear a bit it must be a very very busy season for you or my Internet’s just not up to par how to now well I wonder if I can fund entire logs our logs aren’t as legible unfortunately I was looking at the interface but some way I’m here it should have said that it’s sold some contracts my loss my logs I have too many logs so it says our USD short now is negative 480 dollars these are in contract so you multiply by 10 so it did short sell the value and the US dollars we just can’t see it unfortunately with the debit interface well I’m gonna stop waiting and hopefully this maybe if I just logged out log by again it would work I’m sure it would I just can’t right now because I don’t have access to key YC and my CEO is that was bonding and he’s depth kyc I’m I the way we do know that it shorts out the way that we expected it to when we transferred that balance in and it would have done that across the perpetual and the three futures the two futures rather that are open here perpetual and 2625 it would be handy to be able to show you but I the way you can look at my other videos I do show the short account and a number of that other videos I can’t think of the trends right now and I show that it has a balance for the u.s. dollar balance in the main account and that’s basically the gist of this video so stay tuned we’re gonna have other videos and gonna see more performance and I hope you guys are able to subscribe and like and share this video and the other videos and then review our offer on the 5 day trial in the initial video take a look at the other two videos too because they have interesting subjects like how to set up the bit mix and sorry the bit mix and the dairy bit sample market make makers no that’s the wrong one and then also how to arbitrage in general and profit off the side and a demo FTX and that first video later hold on so thanks kindly everybody had a wonderful day I hope you guys are staying inside and staying warm and learning lots about how to trade and trade algorithmically and trade using BOTS I think that this is a lot of fun and I hope to bring you more interesting videos like share and subscribe already thank you