The complete loss of a trader’s total invested capital, specifically as a result of shorting Bitcoin.
What is ashdraking?
The term “ashdraking” was coined following the activities of Lord Ashdrake — a pseudonymous Romanian Bitcoin trader who was prominent in the mid-2010s.
He enjoyed significant success between 2014 and 2015, a period of precipitous losses in which Bitcoin lost nearly half its value, and he became a prominent voice encouraging traders to adopt short positions.
When Bitcoin broke $300, Lord Ashdrake again shorted the currency — but this time the market was not in his favor.
Prices rose rapidly, breaking $500 and nearly touching $600 — just a few weeks after the $300 milestone. Ashdrake continued to exclusively hold an aggressively short position, which ultimately caused him to lose his entire invested capital.
Ashdraking remains a concern for traders. In 2017, the Chicago Board Options Exchange (CBOE) became the first major exchange to offer traders an opportunity to trade Bitcoin futures — that is, to place bets on the price of Bitcoin without having to actually hold any crypto themselves.
The CBOE launch was considered a key test for Bitcoin, and the generally crypto-skeptic mainstream financial press strongly predicted that institutional investors would take large short positions en masse.
This did not happen, with the futures posting huge rises within just a few hours. This caused some prominent brokers to completely forbid their clients from taking short positions because of a fear that they too would be “Ashdraked.”
Lord Ashdrake (or someone claiming to be him) remains a prominent voice in the crypto community. In October 2020, he gave an interview to blogger zoomerjd, in which he talked extensively about the notorious incident.