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In the announcement on GeekWire that CoinLab had received seed funding, there was a statement that I found interesting:

CoinLab will pay game companies in government currency, not Bitcoin, and will use price hedging strategies to protect its own interests.

What type of hedging might they employ and why? And from where?

  • I doubt it's anything more sophisticated than selling the coins, maybe shorting in Bitcoinica. – Meni Rosenfeld Apr 24 '12 at 19:57
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Bitcoins are easy to hedge against delivery by pre-selling, provided your working capital calculations are properly sorted, and you understand timing constraints throughout the systems you're dealing with.

We will sometimes be delivering digital goods through an intermediate currency as well, and we will use existing financial markets to sort/hedge that leg.

Shorting on Bitcoinica is another possibility, although it doesn't remove the need to manage your working capital (or credit lines)

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