Silk Road forums
Discussion => Silk Road discussion => Topic started by: soulcandy on April 03, 2012, 07:12 pm
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Hey guys,
New seller here and new to the world of bitcoins, however I do have experience trading more conventional currencies. So here is my thought:
There is a 4% charge to hedge coins in escrow and that's not just on your profits!!! So, we're taking serious hits on every transaction. While the peace of mind is nice, does it really make sense? I know bitcoins swing a lot, but unless there is a consistent loss of value, I'm having a hard time justifying the 4% hit. Sure, some transactions will lose, but others will win and unless there is a consistent devaluation of the currency, these wins and losses should balance out.
Thoughts?
-SC
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Bitcoins can vary greatly. Unless you have a crystal ball, like taking risks or don't want to pay the fee, i'd hedge
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I would say that of course there is a risk, but as yourname says, it should balance itself out, unless there is a constant depreciation of btc.
Basically, with a simple risk analysis, and viewing bitcoin charts for some insight, you should be able to estimate the increase or decrease in profits based on your sales volume. With a steadily rising rate, there would be no need to hedge, as for a steadily decreasing one, you may want to hedge (depending on the depreciation rate). For a forecast that looks very bumpy, it's more or less a gamble, and many people would rather pay a fixed 4% than a variable +/- 10%.
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I agree, hedging definitely hurts profits and/or prices in the long run, it could be worth it from a vendors perspective if customers place a high value on the service which I'm not sure they necessarily do. You could even list items twice, one of which has hedging that is priced in, just in case there are customers who won't purchase non-hedged items. Or alternatively request an option in the order form to add hedging where the fee would then be added, in the same way postage costs work.
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Lately if BTC is below 5 I expose escrow, if higher I hedge. That's what I go by, obviously the numbers will always be changing but at time of this post those are the ones I use.
The most I ever lost without hedging is about 12% value over night. Since it wasn't hedged there were only a few orders actually put in at the highest price before it dropped, so overall it was a small loss. I've gained more than I've lost in the long run, but not by much.
Hedging is a fair service as long as you use it correctly.