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.

Lifestage
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Everything that is wrong with the app Facebook doesn't want over 21s to download

Facebook's new teen-only offering, Lifestage, is just like your mum: it's trying too hard to relate and it doesn't care for your privacy.

Do you know the exact moment Facebook became uncool? Designed as a site to connect college students in 2004, the social network enjoyed nearly a decade of rapid, unrivalled growth before one day your mum – yes, your mum – using the same AOL email address she’s had since her dial-up days, logged on. And then she posted a Minion meme about drinking wine.

Facebook knows it’s uncool. It had a decline in active users in 2014, and in 2015 a survey of 4,485 teens discovered it came seventh in a ranking of ten social apps in terms of coolness. In fact, only 8 per cent of its users are aged between 13 and 19. This is the main reason the corporation have now created Lifestage, an app specifically for under-21s to “share a visual profile of who [they] are with [their] school network”.

Here’s how it works. After signing up and selecting their school, users are prompted to create a series of short videos – of their facial expressions, things they like, and things they dislike – that make up their profile. Once 20 people from any school sign up, that school is unlocked, meaning everyone within it can access one another’s profiles as well as those from nearby schools. Unlike Snapchat (and truly, this is the only thing that is unlike Snapchat) there is no chat function, but teens can put in their phone number and Instagram handles in order to talk. Don’t worry, though, there are still vomit-rainbows.

But with this new development, rather than hosting your mum, Facebook has become her. Lifestage is not only an embarrassing attempt to be Down With The Kids via the medium of poop emoji, it is also an invasive attempt to pry into their personal lives. Who’s your best friend? What do you like? What’s not cool? These are all questions the app wants teens to answer, in its madcap attempt to both appeal to children and analyse them.

“Post what you are into right now – and replace the video in that field whenever you want,” reads the app description on the iTunes store. “It's not just about the happy moments – build a video profile of the things you like, but also things you don’t like.” They might as well have written: “Tell us what’s cool. Please.”

Yet this is more than an innocent endeavour to hashtag relate, and is a very real attempt, like Facebook’s many others, to collect as much data on users as possible. Teens – no matter how many hot pink splashes and cartoon toilet rolls are used to infantilise them – are smart enough to have figured this out, with one of the 16 reviews of the app on the iTunes store titled “Kinda Sorta Creepy”, and another, by a user called Lolzeka, reading:

“I don't like how much information you have to give out. I don't want my phone number to be known nor do I want everyone to know my Instagram and Snapchat. I could not figure out how to take a picture or why my school was needed. Like I said, I don't want all my information out there.”

But Facebook already knows everything about everyone ever, and it’s not this data-mining that is the most concerning element of the app. It is the fact that – on an app specifically designed for children as young as 13 to share videos of themselves – there is no user verification process. “We can't confirm that people who claim to go to a certain school actually go to that school,” Facebook readily admits.

Although the USP of this app is that those over the age of 21 can only create a profile and aren’t allowed to view others, there isn’t a failsafe way to determine a user’s age. There is nothing to stop anyone faking both their age and the school they go to in order to view videos of, and connect with, teens.

Yet even without anyone suspicious lurking in the shadows, the app’s privacy settings have already come under scrutiny. The disclaimer says all videos uploaded to Lifestage are “fully public content” and “there is no way to limit the audience of your videos”. Despite the fact it is designed to connect users within schools, videos can be seen anyone, regardless of their school, and are “viewable by everyone”.

Of course none of this matters if teens don’t actually bother to use the app, which is currently only available in the US. Lifestage’s creator, 19-year-old Michael Sayman, designed it as a “way to take Facebook from 2004 and bring it to 2016”. Although he has the successful app 4Snaps under his belt, there is no guarantee Lifestage will succeed where Facebook’s other app attempts (Notify, Facebook Gifts, Poke) have not.

There are a few tricks Facebook has put in place to prompt the app to succeed, including the fact that users are ranked by how active they are, and those who don’t post enough updates will be labelled with a frowning or (here we go again) poop emoji. Still, this hardly seems enough for an app whose distinguishing feature is “Privacy? Nah.” 

Only time will tell whether the app will appeal to teens, but one thing is certain: if it does, your mum is totally downloading it.

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