Adventures in Shorts

CRYPTODAY 104

1. Yesterday evening, I had the pleasure of accepting a “Blockchain Champion” award at the inaugural Philippine Block Awards held by the Philippine Blockchain Week. I started my acceptance speech with this joke: “In the metaverse, no one knows you’re not wearing any pants.” As always, I was delivering this joke to a room full of blazers, gowns, and Oxfords and, as always, I was doing it in a pair of shorts.

2. There have been a few times in the last couple of months where I’ve gotten into trouble for being so anti-pants. At a government-sponsored event, the building security wouldn’t allow me to enter the venue until one of the organizers came out to confirm that I was one of the speakers. At a graduation ceremony, the organizers begged me to buy a pair of pants before delivering the commencement speech. In both situations, I was simultaneously embarrassed at, and amused by, how much hassle my shorts were causing. I’m not entirely sure why I keep dressing this way. Part of it, admittedly, is that I’m just lazy. The other part is that I’m trying to make a statement about how the open culture of crypto encourages us to dress any way we want.

3. If you thought this whole newsletter was about my shorts … well, technically, yes it is. But not those types of shorts! This week I’ve been reintroducing myself to leveraged trading via the young decentralized exchange, ApeX. Given that FTX is no longer an option, there are probably a lot of folks out there looking for a new way to scratch their derivatives itch and ApeX came along at a perfect time. If you don’t know what “leveraged trading” or “derivatives” means, consider this your brief introduction to the crazy side of the crypto casino.

4. When you all started in crypto, your first experience in trading was probably the traditional method, wherein you would exchange one asset (PHP, maybe) for another (BTC, ETH, etc). Every trade has a specific price and quantity, and once the trade is completed, the user receives the asset they want, and someone else has the other. This was called the “spot” market, and nearly every major exchange (including the Philippine Stock Exchange) runs a market like this. It’s the most straightforward way for a user to convert one of their assets into some other asset that they want more of.

5. But many traders don’t necessarily care about owning BTC or ETH; all they want to do is bet on its price movement. That’s where derivatives come in, which is a style of exchange that allows users to make money both when the assets are going up in value AND when they’re going down. Not only can they bet on the ups or downs, but they can also *borrow* money and temporarily expand their betting capacity. For example, even if you only had $100, you could borrow (or “leverage”) your funds and use that to bet on the ups or downs of 1 whole ETH, even though its real price was $1200. Of course, the downside to this is that you could lose your entire $100 (“liquidation”) if the price goes in the opposite direction of your bet. As you can probably imagine, this is a very exciting and dangerous side of the crypto world, so if you’re interested, I would recommend committing only a very small amount of your personal funds just to try it out.

6. Back to my shorts. The crypto market has been in a “cautiously optimistic, but mostly sideways” trend for a week now, with everyone waiting for the final 2022 Federal Reserve meeting on December 13th. I committed $1,000 to my fledgling ApeX account on Wednesday, while prepping for this newsletter, and by the next morning I had already managed to lose nearly 10% of my balance. How did I do that? Mostly by betting that BTC was going to go down in price (we call this “shorting” or “short-selling” BTC). Instead the BTC price stubbornly hovered in the $16,800-$17,100 range, and I watched my balance slowly get eaten away over the next 36 hours.

7. By Friday afternoon, I had given up on my shorts, and went “long” for the first time, i.e., betting on a near-term price increase instead. My reasoning wasn’t particularly scientific. I knew that there was one more trading day for the North American markets, opening at 9pm Friday Philippine time. If there was going to be a final price rally this week it would happen then. So I set up my long bet when the price was at $16,900, and then added an automatic-close if the price ever exceeded $17,100. Even if I was asleep when the price rally occurred, my long position would automatically lock in its profit. I did the same thing for Ethereum ($1270 to $1295), and then I went to bed.

8. Overall, ApeX has been a joy to use. It’s not as overwhelming as other derivative exchanges like BitMEX; there’s only 5 cryptos available to choose from. The mobile app is really solid too. And probably most importantly, the entire platform is decentralized, so you don’t have to worry about your funds being stolen like on FTX. All that being said, you should still be conservative with your initial steps into this world, as this is arguably the single most dangerous corner of the crypto universe (outside of the rug-pulls) if you don’t know what you’re doing.

9. It’s now Saturday morning, and my total balance on ApeX is back above $1,000. I made $14! That’s not even enough to pay for my gas to La Union, but at this point I’m just glad I’m not in the red anymore. Lesson learned: we can’t stay in shorts all the time.

Stay safe out there cryptofam!