The awkward mathematics of booms and bubbles

When short and long aren't opposites.

One of the most common responses in the many, many comments to my pieces on Bitcoin over the last couple of weeks has been to ask me why, if I'm so sure it's a bubble, I don't short it.

The simplest answer is that journalism isn't a career which leaves a huge amount of money left over after the bills are paid with which to gamble, and that I'm not entirely sure it's ethical anyway. There's also the fact that the two main Bitcoin meta-exchanges aren't particularly liquid, which leaves me doubtful that I'd get the best value for money on any shorting contract,

Then there's the problem that being pretty certain the bubble is going to pop doesn't leave me any surer about when it's going to pop – something which most methods of shorting require you to know.

Shorting usually involves borrowing the thing you want to short for a fixed amount of time, selling it straight away, and then buying it back just before your loan is up. Ideally, the commodity has dropped in value, and so you make a profit by you pocketing the difference.

In a normal commodity, going short and going long – buying the commodity to sell at a higher price – are roughly symmetrical. If a share in Apple goes up $1, the people who are long make a dollar a share; if it goes down, the people who are short do.

But that symmetry breaks down when you're dealing with a commodity on the sort of parabolic trend that Bitcoin is shooting along now.

If I spend £100 on Bitcoin, then the most I can lose is £100. Conversely, if the trend continues, I could have £1000 in a month. And the maximum possible payoff is basically uncapped. Suppose I'm catastrophically wrong, and Bitcoin becomes the world currency by the end of the year – anyone who'd bought in to it, even at today's inflated prices, would be a millionaire.

But what if I short it, by borrowing £100 of Bitcoin? Well, then the most I can earn is £100, if the price drops to zero. But the amount I could lose is potentially uncapped, for the exact same reasons that make buying in to it so appealing.

That lack of symmetry – which is an innate feature of, well, maths – serves only to goose the bubble higher and higher. And at the other side, when the down swing comes, it will be vicious; with no shorters ready to step in and buy the coins of people trying to cash out, the volatility will have nothing dampening it.

So that's why I'm keeping my money where it is. But don't think I'm not pretty damn confident when I say that if I had any extra, it still wouldn't be in Bitcoin.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Thanks to social media, ordinary people can now influence elections more than tabloids

The Conservatives spent £1.2m on online adverts – but the internet came up with anti-Theresa May memes for free.

Who or what spread the single most influential message of the 2017 general election? Was it Britain’s top-selling tabloid, the Sun, which chose 7 June to chastise us all with: “Don’t chuck Britain in the Cor-bin”? Was it Facebook, home to Theresa May’s £1.2m anti-Labour adverts that pleaded: “Don’t risk Corbyn in charge of Brexit”? Or was it Jennifer ­Agnew, a 21-year-old administrative assistant from East Kilbride?

You’ve probably heard of the first two. Since the newspaper first claimed as much in 1992, it has been a popular idea that it’s the Sun wot wins elections. This year, much has been made of “dark ads” on Facebook – paid-for messages that political parties can spread across the social network, beyond the gaze of the Electoral Commission. You’ve probably not heard of Agnew, but you might have seen her viral tweet.

After Theresa May disclosed the “naughtiest” thing she ever did on ITV’s Tonight, Agnew took to Twitter to mock the revelation. “Never have I ever ran [sic] through a field of wheat,” she wrote above a picture of May drinking from a glass of water, riffing on the student party game in which one drinker confesses to a misdeed and others take a sip if they, too, are guilty. Her tweet was shared more than 24,000 times and gained an additional 60,000 “Likes”.

“It was just a joke, really, but also poking fun at the difference in classes,” says Agnew, whose post went on to be retweeted by the pop star Ellie Goulding. “I can’t say I’ve ever run around in a field of wheat as a child being chased by farmers. It seems rather middle class.”

On 8 June, Agnew voted for the SNP. She didn’t intend for her tweet to have political ramifications but describes herself as “a big fan of Corbyn”, saying: “As far as politicians go, he’s honest.” Yet, regardless of Agnew’s intentions, her tweet was political. It was a powerful anti-May message – and it didn’t cost the Labour Party a penny.

Since Barack Obama’s first presidential campaign, it has been widely understood that elections are fought across social media. Algorithms, some claim, boosted the fake news that propelled Donald Trump to office. By adding like-minded people as “friends” and deleting any dissenters, we all became entrapped in filter bubbles, unable to see the 2015 election result coming.

Face­book adverts that were micro-targeted to spread specific messages to specific people helped to bolster the vote for Brexit. All of these analyses are true, but each misses the most transformational aspect of social media. You know: the actual media part.

As of December 2016, the Sun had 1,611,464 readers every day. That’s a lot. But nowadays, people don’t need Rupert Murdoch and a printing press to wield political influence (they do, however, still need a witty pun). According to Twitter’s ­analytics tool, Agnew’s tweet reached over 2.9 million people. Everyone now has the potential to have the reach and influence of a tabloid.

Her tweet isn’t remarkable. It is merely one of thousands of viral social media posts that have spread this election, many of which generated headlines (“This Facebook comment about Jeremy Corbyn is going ­viral” read one on Indy100, the Independent’s sister site).

Hannah Thompson, a 24-year-old PR officer from Surrey, is another meme-maker. When the concept was introduced by Richard Dawkins, a meme was “an idea, behaviour or style that spreads from person to person within a culture”. Now, it most commonly means “funny internet picture”. Yet memes might be just as influential as Dawkins’s original definition implied.

“I pretty much exclusively use Twitter as an avenue for my lame political jokes,” says Thompson, who tweeted a zoomed-in picture of Theresa May with the caption: “Nice wheat field you’ve got there. Would be a shame if somebody . . . ran through it” (7,243 retweets, 22,450 Likes).

“It would be helpful if more politicians understood the ‘social’ element of social media,” she adds. “Then, instead of spending hundreds of thousands just getting views for their posts, they can create things that actually engage people and help shift the narrative in people’s minds. I was really impressed by how Labour encouraged their members and activists to share things online. Seeing posts by actual human beings, rather than a party, is way more convincing than seeing a paid-for ad.”

There is a chance that, by the next election, politicians will have realised that a picture is worth a thousand words. Astro­turfing, the practice of masking the origin of a message to make it seem like a grass-roots opinion, is already common online. Advertisers frequently create profiles for fake teenagers, who then tweet about how much they “love” a product in order to make it seem popular.

After the shock election result, analysis by BuzzFeed revealed that stories published on the websites of right-leaning news­papers (such as the Daily Telegraph, the Daily Mail and the Sun) failed to reach large audiences on Facebook and Twitter. BuzzFeed’s headline read: “Not even right-wingers are sharing positive stories about Theresa May on Facebook”. The most shared stories on social media were pro-Corbyn.

For all of the Conservatives’ power and wealth, their social media campaigns did not take off. Why? Because they weren’t inherently social. Theresa May relied on pounds to push her message, while Agnew and those like her relied on people.

As one social media user put it (receiving 8,790 retweets and 19,635 Likes): “Tories spent £1,200,000 on negative anti-Jeremy Corbyn social media adverts ... And the internet came up with anti-Theresa May memes for free.”

Amelia Tait is a technology and digital culture writer at the New Statesman.

This article first appeared in the 15 June 2017 issue of the New Statesman, Corbyn: revenge of the rebel

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