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154 sats \ 3 replies \ @tomlaies 27 Jul \ on: My Fantasy bitcoin
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That's not how hedges work. If you hedge an asset with a derivative you have two positions that cancel each other out. When one thing goes up, the other goes down.
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Also derivatives and securities normally (there are exceptions) cannot fall deeper than zero. If you want an entity to "cover" you need naked shorts of underlyings. Those can fall deeper than zero.
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Are you sure these companies hold hedges? Do you have a reputable source for this claim? Because that would be an odd thing to do that are only held through AUM on behalf of customers.
No doubt this is pure speculation. However, derivates are not only used as a hedge, though that would be a prudent use. That's why people laugh at the term "hedge fund. " You hear the terms net long and net short all the time. That's because these guys are often not hedging. A perfectly hedged position realizes little or no profit. They are overweight one side or the other, because that's how huge gains are made. I'm not looking at the markets right now, but I'm sure there is plenty of derivative action right now. That's the case every day.
I agree that it would be crazy for custodians like BlackRock or Fidelity. Little hedge funds? Maybe.
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You specifically said
derivates to hedge their bitcoin positions
Was this a mistake? That would be okay when you meant to write "speculation" instead. Or are you talking out of your ass without basic understanding of the topic?
What Blackrock and Grayscale do is holding Bitcoin on behalf of customers and extract a margin. They don't care about Bitcoin price - they extract this margin no matter at which price. It would be very weird to own dervatives to either speculate or hedge something here.
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You're right. I did write hedge. Regarding speculation, that would be unlikely with the big custodians. This was not meant as a seriously thought out post.
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