Bitcoin Forum

Greetings,

The Bitcoin Trading Group is now open for business.  The BTG is a trading organization which allows individuals to follow a bitcoin trader’s transactions in the Mt. Gox market.  The Bitcoin Trading Group has been managing a few accounts for a testing period and is now ready to open to the general public.

The BTG is not a hedge-fund or investment service, but rather it is an opportunity for individuals to mimic a bitcoin trader’s trades for a performance fee (10%) based on a high watermark.   The objective of the BTG is to maximize the bitcoin in a follower’s account and assess a performance fee based on the bitcoin generated.  We value your privacy, so we do not require anything but API details through email.

How it works:
1.   Open an account with Mt. Gox and fund it with bitcoin
2.   Create an API key to both get_info and trade and email this key to us
3.   We will trade your account and assess a performance fee based on profits generated

What we do:
1.   We will enter trades in a master account which will be mimicked in all participating accounts
2.   We will trade in the hopes of growing the bitcoin balance of individual participants
3.   We will invoice clients through the email which they provide requesting a 10% performance fee on all gains from trading activities.  We will operate on an investment cycle – typically a week to a month (depending on market conditions).  During the investment cycle we will, for the most part, not add new accounts to be traded.  At the end of the cycle we will send invoices to clients
4.   If an individual will not pay performance fees, we will remove him from the program
5.   We will post our performance metrics from time-to-time

How to create an API key and give access:
1.   Create a new account with Mt. Gox and fund it with as many bitcoin as you wish to participate in the program.
2.   Within your Mt. Gox account, click on your username in the top right
3.   Click on “Application and API access”
4.   Scroll to the bottom and in the “Advanced API Key Creation” header, type a name of your choosing, and click “create key”
5.   Select “Get_Info” and “Trade”
6.   Send the “Key” and the “Secret” to BitcoinTradingGroup@gmail.com

Market and Operational Risks:
1.   We make no guarantee of profit, loss, or even activity.  We trade when a market opportunity arises both on a systematic and discretionary basis.  This means that we may have a buy or sell signal generated daily, weekly, or even monthly.  This said, any funds that an individual wishes to follow our trading methodology with must be speculative by nature.
2.   We trust the general public to pay the performance fee.  The burden of honesty is in the hands of the public.  If a large percentage of the public proves to be dishonest or reselling our trading signals, we will discontinue the program and trade private accounts.
3.   We trust the security of Mt. Gox.  If Mt. Gox is compromised, your accounts may be as well.
4.   We are not a hedge-fund or investment service.  We are an organization which allows individuals to follow a bitcoin trader by paying a percentage of profits generated.  We make no claim of being an investment advisor or a fund manager.  Any profit/loss that you experience through this program is your responsibility and you can hold us liable for nothing.
5.   By participating you agree to the above terms.

Interesting. I have a few questions:
- Would you mind to show your past performance in Bitcoin trading?
- Can you explain how the 'mimick' part works?
- How much control would one have with the Mt.Gox API key? They would be able to execute trades, but couldn't possibly make withdrawal/deposit, right?

Thanks

Edit: yeah forget to ask about this 'high-watermark' point.

So do you charge 10% of profit gained at the end of the investment cycle? Or charge 10% of the profit at the moment where the account's value is highest in the investment cycle?
For example, if the account did well and gained 20% early in the month, but didn't do so well afterward and ends the cycle with 10% loss, would you still charge fees from the unrealized gain at the peak, or won't charge anything because the account actually loss value at the end.

1.  Past performance - 9.85% return this month in my personal account.  In my other trading activities I made 2.5% in July and 2.6% in August.  As a trader my first priority is to manage risk, so I only enter trades with the exit already located and sufficient liquidity in the market.

2.  The mimic part is run through a program created by a prominent developer in the bitcoin community.  Basically the software gets an account balance of all the individuals who are participating in the program and lets me know how much bitcoin or USD I'm trading.  When I enter a trade, it divides the quantity I am trading out to all the accounts which are participating based on a percentage ownership. 

Example - I have 3 customers.  Two customers have 10 bitcoin, and one has 100 bitcoin for a total of 120 bitcoin under management.  I enter a trade to sell 60 bitcoin.  The first two customers with 10 bitcoin each have an 8.33% stake while the large customer has an 83.33% stake.  My order is divided proportionately so the two customers each sell 5 bitcoin while the larger customer sells 50 bitcoin.  The percent gain or loss I make on this trade will be mimicked across every account.

3.  The control you give me is that I can read the information about your account and I can trade your account.  You are allowed to deposit and withdraw exclusively from your account.  The only change in BTC in your account should be from you or from trading.  This is YOUR account, not mine.  I will just request a fee for any profit I generate on a high watermark which you will voluntarily send me.

What is the 'high watermark'?

Sometimes, I feel more lazy than I feel paranoid. Would it be possible to give you api access to withdraw/deposit, so that I would not have to pay invoice manually?

Why don't you give me your API access to withdrawal, and I'll manually pay the invoice on your behalf  ;D ;D ;D

A high watermark is basically a term which says, "I have to make money for you before I get paid".  It's a point equal to the highest value your account has been under my management.

Example - You start out with 10,000 bitcoin.  I trade your account up to 11,000 bitcoin and I take a 100 bitcoin performance fee, so your balance is 10,900.  The high water mark is 11,000.  I will not receive any bitcoin from you until I push your account above 11,000 bitcoin.

No.  This is an operational risk I don't want to be exposed to.  Later down the road, possibly but until I can manage the risk of it, this is a trade I don't want to take :)

Reply to edit:

At the end of the investment cycle, I charge a 10% fee of (final balance - initial balance) if it is greater than 0.  Your high watermark is set at the highest level I put your account.  So let's say we go from 1,000 bitcoin to 2,000 bitcoin and back down to 1,100 bitcoin - my performance fee is 10 (10% of 100 profit) bitcoin and your high watermark is 2,000 bitcoin.  I will not make another bitcoin from your account until I push you above 2,000 bitcoin.

Given there might be losses, how does one manages the maximum loss alowed for you to have?

The maximum loss really is determined by you since it is your account in the first place.  If the drawdown exceeds a comfort level, feel free to close the account and move your bitcoin back to your main account.  This said, all BTC in management should be speculative by nature.

Or I could simply revoke access to the API token you have on hand from within the MtGox interface.

Is this performance in USD or in BTC?

Is initial funding of the account only in Bitcoins?

Yes, that is a way to close the account.  The platform I trade on will automatically reflect your withdrawn bitcoin so I will immediately trade as though that bitcoin were no longer in the balance.

Other trading activities is in USD.  The BTC trading is currently a 9.85% profit in USD with a floating profit of 29% in bitcoin.

It does not have to be.  My personal preference is that it is in bitcoin, but a USD account is fine as well.

What happens if I add/withdraw funds or even trade while you are at the trading phase? Just asking.

Is there a difference in your commission for a higher volume account?

For example, Id I gave you my api key to one of my accounts, letting you trade with 10k USD to start, will you take the same commission from me as you would an account with $500.00 ?

-Charlie

At this stage, I will more than likely just remove that account from participation until the next cycle.  If I have a position on and the account holder disagrees with it and sells out, at the end of the cycle, there could be a debate of who actually generated any profit or loss.

Charlie,

I will answer this question for both performance and account commission:

1.  Performance commission - My performance commission is based on the bitcoin I was able to generate in your account.  I am trying to generate BTC profit for individuals who are following our trading account.

2.  Mt. Gox commission - this is for your account and varies with your volume, but my performance commission is after your Mt. Gox commission.  So my performance incentive is your gains net Mt. Gox commissions.

I prefer accounts to be opened in bitcoin.  My performance commission is based on the bitcoin I generated in your account.  At the end of a trading cycle, I will "flatten" my positions by buying bitcoin so if your objective is to maximize USD, I would suggest different trading programs.

Ok, I may open a new account and buy 1000 BTC to start, have you started the cycle yet?

The first investment cycle will begin in the next 48 hours.  The first trade will happen as soon as the market presents a trading opportunity.

Cycle begins in 48 hrs? I'm interested too.


But one more question, is your goal to maximize the USD value of the account, not the number of Bitcoin in account, right?
For example, if BTC/USD are to slide down to $2 over the next month, it wouldn't be consider a profit even if you manage to double the amount of bitcoin we have.

The objective of the program is to maximize your BTC, not your USD.  If the exchange rate slides $2 over the next month, I will seek to be out of BTC and in USD.  By so doing, we will ultimately be preserving your buying power in whichever currency you chose to use, but that is secondary to our primary objective - maximize your BTC wealth.

So, this means that I cannot add or withdraw BTC during a cycle right? I assume the length of a cycle depends on the market conditions? How long do you typically expect these cycles to last?

Another question. If the amount you control across all accounts starts to become fairly large, the gains/losses experienced by each account will start showing differences, since you can't enter and exit the market at exactly the same price on all accounts (buying driving the price up, for example). Accounts where the order is placed first may have the advantage. How do you distribute this gain/loss across customers?

Yes, I would highly prefer it if you did not add or withdraw during a cycle.  It is your BTC and you may do what you wish with your coin.  The issue for me is for profit and loss reporting.  If I make a trade and you disagree with my trade and exit out of it, at the end of the cycle there can be a debate as to who actually made the profit in your account.

A typical cycle will be about 1 week to 1 month.  It depends on the volume and volatility in the market.

My way of mitigating liquidity risk:
1.  My orders are broken among all the accounts.  If I say sell 1,000 bitcoin, every account will sell their share of the bitcoin depending on their share of the overall master account.
2.  Depth of market: I utilize the current depth of market to avoid price spikes and slippage.  If I sell 1,000 I ensure that there is sufficient liquidity to absorb my trade.

Signed up for the first cycle.

When the first cicle starts?

L.

Wait wait wait hold on.
How do we know you're not just going to take everyone's bitcoins and sell them at a low price to yourself or something?  I'm surprised everyone's so eager to join this group.

The first cycle has begun.

To directly answer your question: you have no way of knowing.  However, since I only earn a profit when you earn a profit, my interests are aligned with your interests.

That's not how markets work.  He could sell them, but it would be to whoever has the best bid price.  So they only way he could sell them to himself is if he was paying the prevailing market rate.

What are your working (trading) hours like? 9-5, Monday to Friday? 24x7? Profitable opportunities could show up at any time in this market.

I'm always looking for opportunities so I have an eye on it outside of a fixed schedule.

Profitable opportunities are almost always present but I don't chase them.  I try to only enter trades with a high probability of success.

In the last few hours there was an easy recognizable 15% raise followed by a 10% fall.
http://bitcoincharts.com/charts/mtgoxUSD#rg2zvztgSzm1g10zm2g25zxzi1gMACDzi2gRSI (http://bitcoincharts.com/charts/mtgoxUSD#rg2zvztgSzm1g10zm2g25zxzi1gMACDzi2gRSI)
Why didn't you trade those?

Timeframe, volume, and slippage.

A bigger picture is front-running and market-moving, as a function of volume.

This consortium is practically an inevitable phenomenon in the Bitcoin trade biz.

The need, always, is for healthy competition.

Otherwise it's just a game between market-moving and suckers.

All,

Thank you initial traders for participating in the program.  We are ending the first cycle early and there will be no immediate subsequent investment cycles.

For those who participated, your bitcoin are now worth 20.8% more in your base currency.  Since our only viable trade is to sell bitcoin for dollars and bitcoin has appreciated against the dollar during the entire cycle, no trade was taken.

In the future we may re-create the investment program in a different format.  For now, please revoke all API keys related to this program.

Thank you once again

BTG

Just for the record, FX, my commentary was more objective and anecdotal to the trade biz than your venture personally. Indeed, from my limited viewing of your material, you seem legit and sincere and I applaud your efforts.

Given the volatility of bitcoin prices, I really believe there must be a market for a service that manages bitcoin holdings. Will look forward to any future programs that you might offer.

Quite right.