Parimutuel Betting – Problem doesn’t ensure payment

Last week, when the Bitcoin drops, the investors were caught in a market that doesn’t exactly have the mechanisms they are used to.

At a point, it is difficult to hedge long positions. Unlikely, most of traditional stocks which allows investors to open a margin account with their broker that allows them to short most shares.

Still, some betting huge on bitcoin as a gamble in and new casino. However, the type of exchange that fills the gap for those seeking to bet.

Enter parimutuel betting pools

Nevertheless, it’s important to know that traders want to know what they are buying into. In other words, parimutuel pools speculates on the future price of cryptocurrencies without actually owning the coins themselves.

CEO of Level Trading Field, Lanre Sarumi says,

“Parimutuel [betting] is a group of people essentially predicting something, and the person with the most accurate prediction wins”.

Parimutuel betting isn’t the most sophisticates structure for providing short exposure.

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A simple game

Bitcoin Market Predictor, Lanre, he calls “game of skills”, is the latest evidence the parimutuel pools could add some support to the cryptocurrency market’s lack of shorting options.

Parimutuel pool of level trading field’s is less sophisticated way to short bitcoin. However, it is more enticing platform for those interested in gambling on Bitcoin.

Earlier in August all bitcoin investors got equal parts of another cryptocurrency with the group of enthusiasts split from bitcoin’s blockchain creating bitcoin cash.

Moral hazard

The bitcoin limits carry the other end of parimutuel betting pool spectrum with BitMEX’s full-blown derivatives exchange.

Parimutuel betting means that one trader’s gains are offset by loss of traders. However, every dollar you win is offset by a dollar in the parimutuel pool has lost which creates “moral hazard”.

Hazards are, if your trades are crushing it on BitMEX are not be enough equity in the system to pay out your winnings bets.

To Hayes’s credit, he’s incredibly upfront and transparent about it:

“If you want 100x leverage – which obviously you do, because that’s why you’re here – you accept that we at BitMEX can’t put our balance sheet on the line to settle these contracts”.

Although, the risk doesn’t allow traders to get a foolproof short opportunity. However, the market is struggling to offer investors refined mechanisms as they prepare for another possible plunge.

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Elena R

Elena is an expert in technical analysis and risk management in cryptocurrency market. She has 10+year experience in writing - accordingly she is avid journalists with a passion towards researching new insights coming into crypto erena.

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