You’re reading Economic Forces, a free weekly newsletter on economics, especially price theory, without the politics. You can support our newsletter by signing up here: Last week, there was a hack of a blockchain that resulted in the theft of over $600 million worth of cryptocurrency. The hack went mostly unnoticed for 6 days. I say that it went mostly unnoticed because some people did notice it and tried to profit off of this knowledge. Unfortunately for these people, they actually
What about Bryan Caplan’s proposed strategy from https://www.econlib.org/archives/2009/08/how_to_stay_sol.html of repeatedly shorting with a smaller amount so you can gain in expectation even if you don’t know when the price will fall? Six days isn’t that long a time frame and the people with knowledge of the hack can make it prominent with blog posts if it takes more time than that. The real problem here was that they were wrong in thinking that it’d affect the price much in the end, not that they had to lock in collateral.
What about Bryan Caplan’s proposed strategy from https://www.econlib.org/archives/2009/08/how_to_stay_sol.html of repeatedly shorting with a smaller amount so you can gain in expectation even if you don’t know when the price will fall? Six days isn’t that long a time frame and the people with knowledge of the hack can make it prominent with blog posts if it takes more time than that. The real problem here was that they were wrong in thinking that it’d affect the price much in the end, not that they had to lock in collateral.