Bitcoin Forum

I guess no one wants to admit it :D

I guess no one wants to admit it :D

Didn't see this til now -- yeah, my $6 was liquidated also... took a looooong time.  I learned that I am horrible (so far) at trading.  (well, horrible at predicting price without any advice from professionals [other than s3052's public info])

No its not you.  With so little liquidity, leverage, such wide spreads, a poor MtGox connection, and the potential to be zoutonged everyone loses.

@mjcmurfy: this thread is about short selling positions that have been automatically terminated (bought back) due to the rise in price today.

I have not lost a penny of my money, because I have not gambled any of it away.

I have obtained the total contents of my wallet through some early attempts at mining and then (the majority) by earning it through the provision of a service to the bitcoin community. So no matter the exchange rate to fiat, I still will have a net increase in my wealth quantified by the present and future purchasing power of bitcoin.

Bitcoin margin traders will learn the hard way how NOT to make money.

I've not really seen any complaints about Bitcoinica, except a few withdraw problems in the main thread. What's the deal?

The $6 I put into Bitcoinica to play with it, I had converted from mined BTC  ;D

I see. I am a lunatic supporter of Bitcoin but I don't give two shits about the exchange rate or stability. Maybe I should avoid these sub-forums.

...
I think your percentage is pulled out of your ass, no offense. I would assume some of the more fanatic Bitcoin fans actually enjoy low prices, allowing them to acquire more at this stage of the game.

I think your percentage is pulled out of your ass, no offense. I would assume some of the more fanatic Bitcoin fans actually enjoy low prices, allowing them to acquire more at this stage of the game.

[...]
And my 'portfolio' is already heavy in some of the alternatives that I feel to be more sound than a lot of 'mainstream' investments.
[...]

You are obviously missing the point. If you don't care about "making money" through trading Bitcoin, why could you possibly care about how "many" coins you have?

The exchange rate will always take care of calculating how many you need for your uses. My point is about how 99% of people on this forum will decry speculative behavior in some form, whether it's complaining about price declines, short-sellers, or bot trading, etc., and then exhibit that behavior by discussing how great it is buying low, rallies, etc.

Can you see the cognitive dissonance?

I would be interested in more specific info about these alternatives...  gold? real estate?

I don't.  I don't really see the usefulness of the Satoshi block chain as a replacement for our current fiat systems at this time as they are working fine and have a much more well developed supporting infrastructure (though I could imagine that changing rapidly at some point in the future.)  So, speculation in it's various forms plays a huge role in keeping Bitcoin alive and QA'd and developing.

Then I wasn't talking to you, was I? I guess I just have to spell it out for you guys. I am railing on Cypherdoc because he is  a hypocrite.

Then I wasn't talking to you, was I?  I guess I just have to spell it out for you guys. I am railing on Cypherdoc because he is  a hypocrite.

A market where everyone loses doesn't seem very realistic to me.

Welcome to the United States of America. Oh, wait. What were you talking about there?

Bitcoin is a project that supersedes national borders. It was created by a japanese guy, so please don't presume that american schools of thought have a monopoly on the bitcoin economy. There is no place for nationalistic sentiment on these boards.

Firstly, lol@thread title. 4real

Secondly, I'm always liquidated because I treat bitcoinica like a magical money gambling machine and pay absolutely no attention to the charts or market news. I've never thought to call it zhoutonged though. Almost sounds like tongue. I don't want to be zootongued. Not a big fan of beastiality.

i'll ask again; has anyone heard from Zhou since Friday?  i wonder if he's in trouble with this latest ramp in the price?

https://bitcointalk.org/index.php?topic=42267.msg566153#msg566153

when a leveraged entity needs to depend on such a small electric device to get your money on quick notice you know you're in trouble.

Please do not stereotype.

Only a few people were shorting at that time, less than 10% of Bitcoinica's BTC holdings.

Your posts don't have any evidence to back your claim, and I didn't have time to care about them.

Dang this 17yr old just styled on you ;)

BTW, I do like the term 'You got Zhoutonged!"

I got a MASSIVE Zhoutonged...

I mean: I got my BTC deposit liquidated (not a normal position, be it short or long).

Without warning, and it does not show on the logs.

300+ BTC :(

I got a MASSIVE Zhoutonged...

I mean: I got my BTC deposit liquidated (not a normal position, be it short or long).

Without warning, and it does not show on the logs.

300+ BTC :(

I got a MASSIVE Zhoutonged...

I mean: I got my BTC deposit liquidated (not a normal position, be it short or long).

Without warning, and it does not show on the logs.

300+ BTC :(

If you just leave your BTC deposit like that everything will be fine. When you owed Bitcoinica over $1,000 and your BTC deposit is dropping in value, why would you expect a warning.

I have already apologized for the logging problem. (The ledger was not designed in our system yet.) If remembered correctly, your deposits were liquidated at the price higher than $3. You should buy now instead of complaining.

It may not be a good price, but what were you doing when there was a good price?

Bitcoinica is not the place for you to owe USD and hold BTC indefinitely. It may be wrong to you, but the market is always correct.

BTW, when i trade Bitcoin at mtgox, i need to use my Yubikey to get into my acct to accomplish this; not just for withdrawals.  are you different than this?

API.

does the API require the use of the Yubikey to trade?  it seems it does so for withdrawals.

It doesn't make sense to use Yubikey via API.

If you just leave your BTC deposit like that everything will be fine. When you owed Bitcoinica over $1,000 and your BTC deposit is dropping in value, why would you expect a warning.

I have already apologized for the logging problem. (The ledger was not designed in our system yet.) If remembered correctly, your deposits were liquidated at the price higher than $3. You should buy now instead of complaining.

It may not be a good price, but what were you doing when there was a good price?

Bitcoinica is not the place for you to owe USD and hold BTC indefinitely. It may be wrong to you, but the market is always correct.

I expected a warning because it was nowhere informed that his could be done, only that.

And sorry being being a asshole, I am upset of how you handled stuff, but this does not give me the right to keep annoying you.

when i get into an margin call situation with Fidelity that might be due today for example, i get a telephone call in the morning warning me to settle my acct up on my own by the end of the day, or else they'll do it for me. 

You all are clearly n00bs to econ and trading. It is simple math. Don't trade leveraged 5 to 1

If you do not know what you are doing, no don't use it!

even if you do know what you're doing the leverage, Zhou's power to liquidate you, lack of signif reserves, lack of direct continuous co-location to mtgox makes it unviable when volatility strikes.

and b/c Zhou won't directly say he does not need that little plastic Yubikey to trade his accts at mtgox, i must assume he does need it and all your accts depend on it.

This is why trading options is better than shorting. With option trading, your loss is limited and you don't get margin calls.

I don't know about you guys, but I like to short straddle my BTC. All the time. Unlimited profit!

Bitcoin is so volatile I really don't see why people want to short it.  Today we saw the price go from $2.83 to $2.44 to $3 and back to $2.64 within 2 hours.  One super spike can wipe out most positions. 

Pick any moment in time and bitcoin could be worth 20% less or 20% more within minutes.  Impossible to predict.

Bitcoin is so volatile I really don't see why people want to short it.  Today we saw the price go from $2.83 to $2.44 to $3 and back to $2.64 within 2 hours.  One super spike can wipe out most positions. 

Pick any moment in time and bitcoin could be worth 20% less or 20% more within minutes.  Impossible to predict.

Because some of those who got in early on the short, and truly believe Bitcoin will tank, stand to make a lot of money if they're right.

How is this any different than those who go long, besides the usual SKY'S THE LIMIT! thinking (which is stupid and unrealistic)?

Because some of those who got in early on the short, and truly believe Bitcoin will tank, stand to make a lot of money if they're right.

How is this any different than those who go long, besides the usual SKY'S THE LIMIT! thinking (which is stupid and unrealistic)?

vol is way up///

the other thing you're up against is being Zhoutonged.  with all this volatility at this relatively low price level, shorts will be taken out and shot at each spike in volatility.  its you or him.

Like I said, your hopes of seeing $30 are unrealistic. You certainly have more to gain in an upswing, but that's only if bitcoin actually survives.

Second, you really, really need to stop acting like you know what you're talking about. It's extremely easy for an inexperienced trader to calculate relative volatility over the last month, and figure out how far they should be leveraged to avoid a margin call. Margin calls are the mistake of the investor, not the evil of the broker.

i don't suppose you're feeling the Squeeze are you?

mtgoxlives's connected = 918

somethings brewing...

I set all the university computers' homepages to mtgoxlive.  I think you're right that something's brewing, but it's more likely a bunch of people are tuning in for the entertainment of the exchange value falling back to where it started.

Zhou:  how's this volatility affecting your clients?

Those who trade on margin have already been wiped out long ago.

I don't see any significant problems even if the price increase to $4 or decrease to $1.5.

how about BitMagic who's been bragging about his margined acct?

how about BitMagic who's been bragging about his margined acct?

I am doing just fine, thanks! Never had a margin call, because I know what I am doing with my leverage.

Do you enjoy looking like an idiot, cypherdoc? I'm trying to figure out if it's just masochism or what.

i usually stay away from the Spec forum to avoid idiots like you but its kinda fun to mess up all the planned Bear raids.

Keep it coming, friend. You may yet reach Atlas status.

said like a true short seller.

Uh, I'm holding a long position. Don't you look like an idiot.

obviously, but 10:1 you're net short otherwise you  wouldn't be getting so angry at a Bull like me who keeps messing up your grand plans.

What "grand plans" do I have that you don't, exactly? I'm not angry at anyone. Your predictions are fine, I'm only showing the hypocrisy of your position: If you care about the price rising, you care about making money on your investment. If you care about making money, you shouldn't care about making it on the way up, or on the way down. You have always been the "childish" speculator you so deride.

hey, read what you write.  you're the one who started the childish personal attacks.  not me.  all i've done is state the bullish case and stuck to it.  you can't handle it.

Zhou:  you'd better get your algorithm tightened up for the upcoming volatility.

I don't think you know anything.

Do you really think it'll go to 6 cents again?!  ::)

I think a year from now the price will be closer to 6 cents than to $20 (probably even $5).

I think a year from now the price will be closer to 6 cents than to $20 (probably even $5).

OMG, we get it, you dont like bitcoin and you want to see it fail...

Drop it.

If you put in the same amount of effort into your life and job and so forth, as you do in bashing bitcoin you could be rich..

have u ever considered bashing Bitcoin could be his job?

oh no, was it...... THE MANIPULATOR?!?!?!?!?!?

This might be unpopular, but given the level of volatility I don't think you should be able to trade on the margin/leverage to protect traders and the longterm health of Bitcoinica.  A margin of 1:1 (no margin/leverage) makes more sense.

What are you, my mother?

i have not yet been zhoutonged and i hope i never will. (worst case i can be stopped out with a spike, would be bad enough)

everytime i see this thread i have to smile, "zhoutonged" is just a great word for getting knocked out with a huge loss :)

btw, @ zhou tong: i appreciate your work very much, don't take it to serious that we make fun of you, for usual funny-fun is a sign for sympathy ;)

..so don't forget to set your stop-losses wisely to avoid getting zhoutonged  8)

So the little spike up to $2.50 that we just saw, did that take out a bunch of short orders? Maybe Bitcoinica caused it, since the price has now dropped back down almost to where it started 15 minutes ago.

Nah, that was someone trying to troll all the shorts. I hope none of you were liquidated and that you're hanging on.

I hope that a few of the people praying for $1 BTC were liquidated. Other than that I hope everyone else was ok though. That was quite the little rally though.

Nah, that was someone trying to troll all the shorts. I hope none of you were liquidated and that you're hanging on.

We have decreased the default leverage, so volatility like this doesn't hurt most people. But some guys requested a change-back...

About 1/4 to 1/3 of the trades you see are from Bitcoinica. We tried to randomize our price and amount, but the pattern is still quite obvious. There are a lot of limit orders and stop orders at the price range, so we didn't hedge too much.

When will people learn not to use their maximum leverage? Max leverage = lower risk tolerance. Leave some breathing room, guys! Jeeze..

It's kind of sad that most brokers encourage their clients to use leverage, simply for more commission profits. We're terribly trained by our bankers and brokers.

Well then I guess its a good thing I dont trust bankers nor do I have a broker. The bankers used to make a lot of money off me but as of 2 weeks from now it will be a net loss to them and for the last several months it has been less than $3. If you do not have the currency to spend then you should not be spending it. Period.

The problem is, savings is evil (inflation), and credit is also evil (interest rates).

Fiat currencies are for economic growth, but they are invented for the rich.

Taking money from the poor and distribute it to the rich is good for economic growth, because the rich is good at making money for the country, therefore they technically deserve more economic power. We all hate it but it's just a sad truth.

It's hard to come up with an alternative. That's why government is a mess.

...
Taking money from the poor and distribute it to the rich is good for economic growth, because the rich is good at making money for the country, therefore they technically deserve more economic power. We all hate it but it's just a sad truth.

It's hard to come up with an alternative.  That's why government is a mess.

The problem is, savings is evil (inflation), and credit is also evil (interest rates).

Fiat currencies are for economic growth, but they are invented for the rich.

Taking money from the poor and distribute it to the rich is good for economic growth, because the rich is good at making money for the country, therefore they technically deserve more economic power. We all hate it but it's just a sad truth.

It's hard to come up with an alternative. That's why government is a mess.

After the whole craziness, a dead cross appeared. (15-min)

http://charts.bitcoinica.com/charts/getchart?TickerSymbol=BTCUSD&TimeRange=1&ChartSize=L&ParabolicSAR=0&LogScale=0&PercentageScale=0&ChartType=CandleStick&Band=None&avgType1=SMA&movAvg1=10&avgType2=SMA&movAvg2=25&Indicator1=RSI&Indicator2=MACD&Indicator3=None&Indicator4=None&Button1=Update%20Chart&

Hourly is still fine.

http://charts.bitcoinica.com/charts/getchart?TickerSymbol=BTCUSD&TimeRange=2&ChartSize=L&ParabolicSAR=0&LogScale=0&PercentageScale=0&ChartType=CandleStick&Band=None&avgType1=SMA&movAvg1=10&avgType2=SMA&movAvg2=25&Indicator1=RSI&Indicator2=MACD&Indicator3=None&Indicator4=None&Button1=Update%20Chart&

I just think we need some modern day robin hoods. Kill and steal from the rich to give to the poor (yes the historical version is much more brutal than the disney one). Maybe then they will think twice about supressing their subjects and subjecting them to abject poverty. Either way I am on neither side of the fence for now unless you count my RPP in which the rich bastards I work for match 100% of my contibutions which I would be stupid not to max out lol.

I missed this when you posted it. I suppose you are inferring that the market sentiment is now going bullish?

It's hard to believe, bit in Bitcoin nothing is impossible.

http://en.wikipedia.org/wiki/Collectivization_in_the_Soviet_Union

It was pretty messy, caused much suffering and death, didn't make the poor any richer and the rich (those who lived on through political connections) didn't get any poorer.

time to get this thread going again.

so who got Zhoutawnged today?

Me...sonofabiatch.  Attempt to play down:  Wasn't leveraged more than 1:1, didn't get a margin call, just liquidated at 12% loss...dangit.

Chinese slang... ?

If getting 'zhoutonged' means getting reamed using Bitcoinica, what would be a good word for doubling one's money on the same platform?

If getting 'zhoutonged' means getting reamed using Bitcoinica, what would be a good word for doubling one's money on the same platform?

That of course would be referred to as "Being zhoutong".

first link when searching for "zhoutonged" on google is this thread.

Nice! We've made him a star gentlemen.

If getting 'zhoutonged' means getting reamed using Bitcoinica, what would be a good word for doubling one's money on the same platform?

What is it if you quadrupled your money in 2 weeks and ended up being liquidated out of stubbornness?  

What is it if you quadrupled your money in 2 weeks...

and ended up being liquidated out of stubbornness?   

How many?

A lot, seriously.

zhoubling your money?

<chuckles>

So when all these forced buy bitcoins are actually bought in Mt.Gox market at any price around $4.1-4.5, the all difference goes into Bitcoinica's pocket?

With those fast movements and shallow order book they _have_ to have big spreads, or Bitcoinica risks losing a lot of money on spikes. They would effectively be Zhoutonging themselves! I agree that those big spreads suck as a trader, though  :(

Why not liquidate at Gox and give the customer whatever price they actually got?

I have a lot of cash in my account. Is the only way I can get it out is by a wire or can I just use it to buy bitcoin?

If I have to use a wire... WTF....  If not, tell me how to do it:)

Thanks

I have a lot of cash in my account. Is the only way I can get it out is by a wire or can I just use it to buy bitcoin?

If I have to use a wire... WTF....  If not, tell me how to do it:)

Thanks

Because although it will work most of the time, sometimes when the prices moves too fast, they aren't able to liquidate on time, which would effectively cause the account of that person who was liquidated to have a negative balance. And they can't be sure that person is honest enough to deposit more funds to make the balance go to zero or positive again. And if they don't deposit more, Bitcoinica would have lost money themselves.

And it seems that doesn't always work either.  After my position was liquidated, I still had a -$69 balance.  I deposited some money to cover it, but I can't imagine that everyone would do that.

Yeah, spreads only reduce the risk. They don't completely eliminate the risks. That's why they must find a good balance between dampening their risk and providing smaller spreads to stay competitive. That's exactly why the spread is increased in situations when there's more risks (High volatility and/or shallow order book) because they need to protect themselves against those risks, and later reduced again once the dust settles down.

Let me get this correct... So when the price spiked up and people were trading on Mt.Gox at $4.5,  Zhoutong's genius matching algorithm put the buy price at a $1 spread and force liquidate people's position at $4.9 ?????  >:(

So when all these forced buy bitcoins are actually bought in Mt.Gox market at any price around $4.1-4.5, the all difference goes into Bitcoinica's pocket?

I've been Zhoutonged good!!!

Can you send an email to support@bitcoinica.com about this? We'd like to compensate you on this.

While it's true that our algorithm sets the price by balancing and predicting the benefit and the risk, after all the trading, there's no point of predicting, and we can clearly see that the prediction was wrong. So we are perfectly okay to refund you the "unexpected profit" we made from you.

I hope this explanation makes sense.

come one come all, Zhoutong proposes to refund you all?

Can you send an email to support@bitcoinica.com about this? We'd like to compensate you on this.

While it's true that our algorithm sets the price by balancing and predicting the benefit and the risk, after all the trading, there's no point of predicting, and we can clearly see that the prediction was wrong. So we are perfectly okay to refund you the "unexpected profit" we made from you.

I hope this explanation makes sense.

to be honest, i don't see any explanation as to why or how you determined "unexpected profits".

If we liquidated the customer's assets at $4.50 but we charged the customer $4.90 for it, I would say $0.35-$0.39 should be the unexpected profit.

On the other hand, if the customer's assets shouldn't be liquidated at the price of $4.50 instead of $4.90, the better solution is to reverse it.

how did your algorithm make this mistake?

This is why trading options is better than shorting. With option trading, your loss is limited and you don't get margin calls.

Bitcoin is so volatile that some random spike is likely to wipe out a leveraged short position.  With an option, you only care what the price is when the option matures.

Bitcoin doesn't have options, of course. 

It's important to know that currently we always have a chain of forced liquidations, because forced liquidations will push the price to trigger more forced liquidations. We will just make sure that they are fully hedged in the market and the prices are reasonable.

Options recently came out on vircurex.

so how do you define "reasonable"?

no offense but your business model is doomed.  especially since mtgox, the major exchange, is going to be offering similar hedging options.  you will always be one step behind them in reacting to volatility as they will be the HFT and you will be the retail equivalent.

not to be mean but i think you're offering to reverse trades for those customers wiped out in the last ramp b/c if you don't your client base will never return and you need to keep them alive and in the game.

this is going to keep happening over and over again. 

The point is "going to". I'm going to build breakthroughs too, and you forgot this. Bitcoinica is already using Redis to track prices, and we already have the back-end engine to process 10,000 trades per second. Who will be the first to do HFT?

The business model may be doomed in the future but definitely not now. Bitcoinica has always been changing more quickly than our competitors.

Also, I didn't reverse any trades that happens under $4.55. Sorry but the "reasonable" price range is only the obvious personal feeling. $4.55 is reasonable, and $4.89 is not. I'm the guy coding and I know the price is wrong, that's why I'm reversing. I don't claim profits that shouldn't be mine.

<snip>  mtgox IS the exchange and will be competing with you in the option business.  you will never be able to measure up to their service.

Wait a tic... options? where?

Bitcoinica may be threatened when mtgox adds options/margin trading.  That doesn't mean that will happen any time soon.  MtGox is a slow moving beast.  Why discourage Zhoutong when he is providing a valuable service not available elsewhere?  He has clearly demonstrated (IMHO) better responsiveness and more agile development.  Unless you have inside info you're not sharing, MtGox hasn't said anything about this since they posted it on their site over 6 months ago.

He's always been a hater.  Probably just jealousy. 

He's always been a hater.  Probably just jealousy.  

He actually gave some good advice on the stock market rally last week, so I do have some respect for him.  Too bad for him, but he chickened out on his positions a few days before.  I'm too small of a player to be wasting trade fees, plus I didn't see how anything had changed, so I hung in there and made a nice profit.

typical comment from a guy who's missed a 217% ramp off the bottom that i called 2d before it happened  :)

and you're a moderator?

actually i'm not trying to discourage Zhoutong.  i'm trying to warn him about what i feel is a flawed business model which i agree is debatable.

but if mtgox does offer options he WILL be at a significant disadvantage.  there is no question about that.

maybe he can adjust but i'm not sure how.

also i feel that by offering shorting in an immature market such as Bitcoin, he has contributed to an artificially suppressed price over the last several months since he's been in biz.  its too late to help that but now we're seeing the market compensate in the other direction; UP.

actually i'm not trying to discourage Zhoutong.  i'm trying to warn him about what i feel is a flawed business model which i agree is debatable.

but if mtgox does offer options he WILL be at a significant disadvantage.  there is no question about that.

maybe he can adjust but i'm not sure how.

also i feel that by offering shorting in an immature market such as Bitcoin, he has contributed to an artificially suppressed price over the last several months since he's been in biz.  its too late to help that but now we're seeing the market compensate in the other direction; UP.

if you read my blog carefully, i replaced my stock positions with additions to my TBT  which did even better.  I had caught the majority of the stock rally since the 10/4 bottom if you recall.  and it won't be too late to add to stock positions.

I do ready your blog carefully and was well aware of where you moved your funds.  I'm sorry if I offended you, I didn't mean to call you a chicken.   I just get frustrated every now and then with all the "this is not perfect so let's throw it out" talk on these forums.

well thanks for reading.  its hard putting oneself out on the line day after day esp. when i and everyone around here reads the same stuff like Zerohedge, Mish, etc all of whom are doom and gloomers.  one day i'm sure i'll make a complete fool of myself with one of my calls.  i actually miss the back and forth dissertation with miscreanity back on the Gold thread i started back in August.  at least he kept me on my toes and continuously made me question myself.  it was hard work though and i'm a very busy person.  we'll see how long i can keep it up.

Merry Christmas!

Doc, do you think this is all fun and games for Zhou? Don't you think he's put himself on the line as well?

What do you think? Net gain for Bitcoin because of Bitcoinica? Or net loss because of Bitcoinica?

tl;dr bitcoinicas quote algo screws leveraged users

I'll start off this post with some full disclosure.  I am Patrick from Intersango (https://intersango.com/) so take what I have with whatever size grain of salt you would like.

I have been warning people against trading on margin in general for a long time now, because the market is really very thin (yes even on MtGox).

This post is specifically about the quoted prices on bitcoinica. While they are reasonably close to market rate most of the time they remain in the complete control of bitcoinica. (I'm sure most of you already understand this)

They employ an algorithm which is clearly taking into account market velocity to protect themselves from falling behind the market, I can understand why they do this, really it makes perfect sense from their perspective; however this results in spikes which force liquidations which are really not necessary.

I only have detailed information for about 15 days, but if the relatively small amount of data I have shows this behaviour I can only imagine it would be even more clear in a longer data series.

tl;dr bitcoinicas quote algo screws leveraged users

I'll start off this post with some full disclosure.  I am Patrick from Intersango (https://intersango.com/) so take what I have with whatever size grain of salt you would like.

I have been warning people against trading on margin in general for a long time now, because the market is really very thin (yes even on MtGox).

This post is specifically about the quoted prices on bitcoinica. While they are reasonably close to market rate most of the time they remain in the complete control of bitcoinica. (I'm sure most of you already understand this)

They employ an algorithm which is clearly taking into account market velocity  VOLATILITY to protect themselves from falling behind the market, I can understand why they do this, really it makes perfect sense from their perspective; however this results in spikes which force liquidations which are really not necessary.

I only have detailed information for about 15 days, but if the relatively small amount of data I have shows this behaviour I can only imagine it would be even more clear in a longer data series.

http://beast.intersango.com/bitcoinica-forum.png (http://beast.intersango.com/bitcoinica.png)

So...make a better algorithm. This is obviously the best that's available right now.

They did drop the leveraging from 5:1 to 2:1, IIRC. There is always uncertainty in predicting the future, and businesses exist to make themselves money, not to make you money.

They actually increased leverage to 10:1.

The real issue here is that their previous quote history is not public.

The reason my data isn't complete is that there is no way to get the full quote history.

Someone simply checking the charts provided would not see the spikes as these show averages.

tl;dr bitcoinicas quote algo screws leveraged users

I'll start off this post with some full disclosure.  I am Patrick from Intersango (https://intersango.com/) so take what I have with whatever size grain of salt you would like.

I have been warning people against trading on margin in general for a long time now, because the market is really very thin (yes even on MtGox).

This post is specifically about the quoted prices on bitcoinica. While they are reasonably close to market rate most of the time they remain in the complete control of bitcoinica. (I'm sure most of you already understand this)

They employ an algorithm which is clearly taking into account market velocity to protect themselves from falling behind the market, I can understand why they do this, really it makes perfect sense from their perspective; however this results in spikes which force liquidations which are really not necessary.

I only have detailed information for about 15 days, but if the relatively small amount of data I have shows this behaviour I can only imagine it would be even more clear in a longer data series.

Edit: I would like to add that this data is *not* readily available to normal users, thus the limited data series.

http://beast.intersango.com/bitcoinica-forum.png (http://beast.intersango.com/bitcoinica.png)

I'd recommend that you add in the actual Mt. Gox price to your graph, and then generate this file as an SVG so that people can zoom into the image without loss of resolution, and see how wide the spread becomes.  At least one person posted saying they'd been liquidated at $4.93, even though the price never went $0.40 near that.  The algorithm makes sense for bitcoinica, but not for users.

I find it's far easier to make money on the price spikes or dips when idiots (er, non-price sensitive individuals) buy or sell 10-20k+ coins at once, rather than slowly buying or selling over time.  Catching big coin dumps with pre-placed orders is more profitable then attempting to short the market, as the market clearly jumps right back up within minutes of a sell-off.  Also, catching these spikes reduces the magnitude of the spike, helping bitcoin stability and increasing liquidity, whereas a liquidated short will spike the market again (short squeeze), which isn't good for bitcoin.  So not only is it safer and more reliable money to actually buy & sell bitcoins on mtgox, rather than betting on the price through the (mostly) bucket shop (https://en.wikipedia.org/wiki/Bucket_shop_%28stock_market%29) that is bitcoinica, it's also better for bitcoin (the hedged percent on bitcoinica's front page is the percent that they are a bucket shop that day).

I'd recommend that you add in the actual Mt. Gox price to your graph

At least one person posted saying they'd been liquidated at $4.93, even though the price never went $0.40 near that.  The algorithm makes sense for bitcoinica, but not for users.

I find it's far easier to make money on the price spikes or dips

In response to phantomcircuit, and various other participants:

I'm aware of this issue and that's why I have reversed some of the forced liquidations that are deemed inaccurate. In the following days, I will do these two things:

1. Improve the pricing algorithm to prevent the unnecessary spikes.

2. Make charts for history quotes available, for every day since we launched. The chart will look similar to phantomcircuit's, showing both buying prices and selling prices.

I apologize for not doing enough to protect our customers' interest in terms of system engineering.

If only for casual browsing, the Mt. Gox price rarely goes outside of the bitcoinica spread. Bitcoinica spread just expands like bollinger bands.

Surely you are referring to Mt. Gox and not Bitcoinica?

The MtGox prices are shifted (i think i have a tiemzone issue).
http://beast.intersango.com/bitcoinica.svg (http://beast.intersango.com/bitcoinica.svg)

Though saved as SVG, Ttis is still a bitmap image. A true SVG image is vector (Scalable Vector Graphics), and zooming into the image allows the viewer to see details. Here's what an SVG graph should look like, where you can zoom in and still see details:
https://upload.wikimedia.org/wikipedia/commons/9/96/Graph_of_example_function.svg

Zooming into your image shows zoomed-in mush:
https://i.imgur.com/YEHBN.png

SVG is essentially like a graphics vector language: "draw line from 0,0 to 100,100", which works very well independent of screen resolution, rather than a bitmap that records the values of individual pixels, and will show pixelation when zoomed.

For example if you have no stop loss you can only trade 1:1 the closer your stop loss is the more margin you can use. That way there really shouldn't be any forced liquidations.

I've wondered why/how anyone gets liquidated at all. People set a highly leveraged unprotected position and go on vacation (called sleep in the bitcoin world)?

I don't recall my rationale for this ingenious idea.

I think it was just to keep track of my various positions experiments, or in protest for my trailing stops not working, or ...

I'm now setting my position on Mt. Gox and then moving coins and codes over to Bitcoinica for more leverage and stops. So far that's not working brilliantly either.

Want to try Bitcoinica someday.

Nice to see the mother of all short positions :)

http://charts.bitcoinica.com/daily_quotes?date=2011-09-06

Sorry, i don't follow you.

Done. Now Bitcoinica officially provides daily quotes charts.

Also, the new pricing algorithm is already running in production after testing against all historical data.

Available at: http://charts.bitcoinica.com/ (http://charts.bitcoinica.com/)

Off-topic: The most exciting day since Bitcoinica's launch.

http://charts.bitcoinica.com/daily_quotes/getchart?date=2011-9-11

People set a highly leveraged unprotected position and go on vacation (called sleep in the bitcoin world)?

https://bitcointalk.org/index.php?topic=55563.msg665312#msg665312

Wow if this true Bitcoinica really is doomed.

Another big dump, spiked down to 4.65  Hope you guys are being careful with your leverage. 

i smell a lot of dead bodies...

i won some coins and $ :)

Nope, I'm in your club.

I was force liquidated with funds still in my account, isn't the margin call meant to deplete your funds before you're force liquidated?

I was force liquidated with funds still in my account, isn't the margin call meant to deplete your funds before you're force liquidated?

thats what i thought too.  since when has this been the case?

There's 4% maintenance. Obviously we can't allow anyone to deplete funds and cause uncollectible debts.

http://i40.tinypic.com/30m1xjk.png

Nice guys, nice.

http://i40.tinypic.com/w6tf0l.png

Amazing how stupid people are...  >:(

A bear's call woke me up this morning, and before I could clear my head I bought bought bought, bought so much that I zoutonged myself:) My last buy and my liquidation was at the same time lol!

I timed it right (buying at $4.8) but failed on the 10 to 1 leverage rule. When are we going to get 50 to 1?   :)

Hi, my name is old_engineer, and I got liquidated yesterday at 3:1 leverage.  I saw the squeeze coming, and had enough margin available at Mt. Gox and on home wallet to drop this to 1.5:1, but couldn't move the funds from MtGox to bitcoinica due to daily limits, and the speed of the crash which kept me from transferring coins from my home wallet in time.

As my posts have probably made clear, I'm not a fan of leveraged trading, so what was I doing at bitcoinica?  Well, when Zhou announced he was having a one-day-only special with no spread (Jan 14th), I thought I'd lock up some of his cash using my long coins to reduce funds available to silly speculators, and then not close the position until this summer.  The long coins were just sitting there, not doing anything, and so I put the asterisk on the site by taking out a large long position using them as collateral.  And it backfired.  I lost 1400 btc + $2k USD, but I'm not too sore since I'm still up by a little bit ($1k) since I started trading in June, so I basically gave back most of my winnings.  Meh.

But what annoys me more than the loss of winnings is that I've been spending a lot of time daytrading to reduce volatility, catching spikes up and down, with the goal of creating a spread of less than 3% (the typical fee on VISA). Not only has it taken a lot of time, but because I've been setting my orders close to the current selling price, I'm left holding bitcoins whenever the price drops significantly (like now, when I bought all my coins at $6.5), and I sell out completely and am holding USD whenever there's a big rise.  This has obviously not been a good profit-making strategy, requiring both more time and with reduced profits in a bull market, but I've been intentionally doing it anyway.

And the big market maker (The Manipulator) pissed all over my efforts by slyly built up all bid walls and removing sell walls so that there were 4x as many buys as sells visible, intentionally driving the price up to $7 timed with the prime-time TV exposure, then initiated the sell-off with multiple 20k+ btc sells to $6.50, removing the bid walls, and adding huge sell walls. The result?  $6.5 to $4.8 and back to $6.9 in the span of 20 minutes.  Fuck.  Bitcoin can't be taken seriously for months after an event like that.

I know it's a rigged market, and I'm fine with that - the implementation of bitcoin or any new digital currency pretty much guarantees whale players -  but it's the intentional volatility to maximize his/her stake that chafes me.  Just because he can, doesn't mean he should.  One would hope that early adopters would be benevolent rather than malevolent with a fragile and precious new market, but alas, this just isn't not the case.  Why can't he just be satisfied with the the natural increase in value as usage expands, and nudge the market subtly whenever it gets too bullish or bearish?  There's no need to intentionally lead on the market, then shake market confidence with wild swings.  I think I'll take my coins and go home, at least for a while. </rant>

tl;dr: lost 1400 btc + $2k, pissed at manipulator roughly manipulating fragile market rather than caressing it tenderly

Damn, I'm sorry to hear that. I don't think it's an early adapter, though. Most likely a person with deep pockets who entered the game months ago and is here only for his personal gains by speculating and manipulation. Too bad :(

I believe it's someone that picked up a shit-ton of coins when the Mt Gox hack happened.

ohhh. that's very possible... I hear they withdrew 100k BTC.

Whoever the manipulator is has at least $500k USD + 100k btc.  Which do you think is more likely: someone depositing $1M into MtGox to play in a highly risky market like this, or someone that got 200k btc back when they were $0.01 each = $2k investment, and are toying with the market willy-nilly?  I surmise the latter is more probable.

KnightMB is an obvious suspect, with a claimed 370k btc, and his apparent lack of morality in securing his bitcoins from his former employer leads me to believe he'd also be fine with jerking the market around for his own gain.

Hi, my name is old_engineer, and I got liquidated yesterday at 3:1 leverage.  I saw the squeeze coming, and had enough margin available at Mt. Gox and on home wallet to drop this to 1.5:1, but couldn't move the funds from MtGox to bitcoinica due to daily limits, and the speed of the crash which kept me from transferring coins from my home wallet in time.

As my posts have probably made clear, I'm not a fan of leveraged trading, so what was I doing at bitcoinica?  Well, when Zhou announced he was having a one-day-only special with no spread (Jan 14th), I thought I'd lock up some of his cash using my long coins to reduce funds available to silly speculators, and then not close the position until this summer.  The long coins were just sitting there, not doing anything, and so I put the asterisk on the site by taking out a large long position using them as collateral.  And it backfired.  I lost 1400 btc + $2k USD, but I'm not too sore since I'm still up by a little bit ($1k) since I started trading in June, so I basically gave back most of my winnings.  Meh.

But what annoys me more than the loss of winnings is that I've been spending a lot of time daytrading to reduce volatility, catching spikes up and down, with the goal of creating a spread of less than 3% (the typical fee on VISA). Not only has it taken a lot of time, but because I've been setting my orders close to the current selling price, I'm left holding bitcoins whenever the price drops significantly (like now, when I bought all my coins at $6.5), and I sell out completely and am holding USD whenever there's a big rise.  This has obviously not been a good profit-making strategy, requiring both more time and with reduced profits in a bull market, but I've been intentionally doing it anyway.

And the big market maker (The Manipulator) pissed all over my efforts by slyly built up all bid walls and removing sell walls so that there were 4x as many buys as sells visible, intentionally driving the price up to $7 timed with the prime-time TV exposure, then initiated the sell-off with multiple 20k+ btc sells to $6.50, removing the bid walls, and adding huge sell walls. The result?  $6.5 to $4.8 and back to $6.9 in the span of 20 minutes.  Fuck.  Bitcoin can't be taken seriously for months after an event like that.

I know it's a rigged market, and I'm fine with that - the implementation of bitcoin or any new digital currency pretty much guarantees whale players -  but it's the intentional volatility to maximize his/her stake that chafes me.  Just because he can, doesn't mean he should.  One would hope that early adopters would be benevolent rather than malevolent with a fragile and precious new market, but alas, this just isn't not the case.  Why can't he just be satisfied with the the natural increase in value as usage expands, and nudge the market subtly whenever it gets too bullish or bearish?  There's no need to intentionally lead on the market, then shake market confidence with wild swings.  I think I'll take my coins and go home, at least for a while. </rant>

tl;dr: lost 1400 btc + $2k, pissed at manipulator roughly manipulating fragile market rather than caressing it tenderly

http://i40.tinypic.com/30m1xjk.png

Nice guys, nice.

http://i40.tinypic.com/w6tf0l.png

Bitcoin can't be stable at this exchange rate.

It's going to need magnitudes more people involved, a much higher exchange rate, and a much greater distribution of coins.

When one (I don't even want to say rich here, because you don't need to be "rich" to move this market) slightly well off individual can push the market by a large percentage, it can't be stable.

Expecting good will from people trying to make money seems naive to me.

Edit: Don't get me wrong, I applaud anyone trying to bring stability. Unfortunately, you not only failed, you contributed to the opposite.

Expecting good will from people trying to make money seems naive to me.

Edit: Don't get me wrong, I applaud anyone trying to bring stability. Unfortunately, you not only failed, you contributed to the opposite.

Yeah, perhaps I'm projecting to think that there are others here for ideological reasons rather than trying to maximize profits.  The pyramid scheme aspect of bitcoin rather turns me off, to tell you the truth, though I see no other solution to the distributional issues of a new currency system.

And at least some (presumably greedy) speculators are needed to increase liquidity, and I have no problem with that. It's intentional large-scale market manipulation that turns me off.  It might sound like a comic book, but with power comes responsibility, and someone is playing god in a sandbox.  I expect more, and I am disappoint.

Yep, I did contribute to the problem - as I said, the plan backfired. :(  My self-prescribed penitence is that I sold off all my coins at a loss, and have orders in the $4.x range help catch another fall, if there is one.

Also, I feel like I need a break as I'm also annoyed with the whole bitcoin trading infrastructure:
* MtGox orders sat in the queue for 5-10 minutes.  Hundreds of traders shouldn't be able to bring a server to it's knees.  This isn't like serving up 1Gbps video to thousands of people; it's just a few numbers moving around, and a 386 could handle their order volume if written correctly.
* MtGoxLive going down or stuttering (which was actually kind of funny).  Even under light load, there's a lag of 10-20 seconds between when I make an order, and when it appears on Mt. Gox.  Not to mention the huge CPU load
* Moody's being down much of the day
* bitcoinity is still down
* and I don't even need to mention the issues with bitcoinica.

The whole system is rinky-dink and immature, but I suppose I shouldn't be surprised given that bitcoin is barely 3 years old.

tl;dr: lost 1400 btc + $2k, pissed at manipulator roughly manipulating fragile market rather than caressing it tenderly

ZHOUTONGED!!  >:(

That's what I thought too!

theres only so much leverage to go around and most of the players who had it the last couple of days just coughed it over to the stronger hands with deeper margin accts who won't be giving it back.

The sad thing isn't that you lost the coins because of the margin; but because you lost them from an artificial limit (the mtgox daily withdraw limit).

You sure about that? If that's the case I'm definitely pulling totally out until they get off mtgox. Damn php hack that it is!

Doesn’t look like it, man.

I wish you would have been, though.

https://i.imgur.com/PZ5jw.png

Bitcoinica, moar leverage please!  I want to short at 9000:1.  K, thnx.

I want to short sell all Bitcoins in existence!

Most early adopters are geeks though. They won't have the know-how nor the guts to play the market with these huge sums of money and BTC to manipulate the market in a way which earns them money. I just can't see that happening to be honest.

I have feelings between angry and amused everytime I see the asterix.

The constant bitcoinica starfish amuses me now instead of annoys me.  Instead of 8.2 million bitcoins, it's like there are 8.3 million, where 100k are always loaned out (Zhou said at one point he had 5 digits worth of btc).  So long as the site is starfished fairly constantly, it's a non-factor, or rather, the extra ~100k btc has already been factored into the current price.

I have feelings between angry and amused everytime I see the asterix.

ok, this video is hilarious and although i didn't make it i'm going to have to stand up and take a bow now for coining the term "Zhoutonged"!

never thought it'd get this popular.  can i copyright it?  ;)

http://www.youtube.com/watch?v=kdvTkddp1F0

Lots of 'tonged people today. ;D

Keep in mind bitcoinica was paying people to go short for the last few weeks.

cypher: https://bitcoinica.com/pages/interest

Well, short you can only gain 100% and lose 100%, long you can gain unlimited profits and lose 100%.

Which is better?

Hi,

We just experienced a system error that caused a few bad ticks. Everything is back to normal.

We are deciding on the compensations for affected customers. Compensation will be in the form of cash credits. So feel free to re-establish your positions if you're affected.

We apologize for the error and we will get back to you shortly. Thanks for understanding!

That's not bad, if your stop order was filled so fast you can be glad, in most cases there is another race in that direction, not enough to take advantage of it but you would have taken higher losses.

Anyway, I'm just fooling around, trying to understand how it all works, but I'm sad I got short now, when I would like to stay long, and even became longer...

My account was -80USD so I never used it again, luckily.

My account was -80USD so I never used it again, luckily.

as in liquidated. ???

Pretty sure I've been telling you why you're a hypocrite with your "short-seller attacks," and you've come back with nothing of substance. I just wanted to document this for everyone else. If you don't want it public, feel free to edit your posts. I'm bored proving your anti-short position wrong.

i see this little weasel is now claiming he created the name Zhoutonged:

http://m.youtube.com/watch?v=HLzX97MQEBQ
 
what an unscrupulous liar. 

I hope that a few of the people praying for $1 $100 BTC were liquidated. Other than that I hope everyone else was ok though. That was quite the little rally though.

time to get this thread going again.

so who got Zhoutawnged today?

LOL!  Way to go Zhoutong.  I'm rooting for you. ;)

so how do you define "reasonable"?

no offense but your business model is doomed.  especially since mtgox, the major exchange, is going to be offering similar hedging options.  you will always be one step behind them in reacting to volatility as they will be the HFT and you will be the retail equivalent.

not to be mean but i think you're offering to reverse trades for those customers wiped out in the last ramp b/c if you don't your client base will never return and you need to keep them alive and in the game.

this is going to keep happening over and over again. 

during the 2 mo i pounded on Zhou's ass during Oct-Nov, i kept identifying red flags everywhere. the way he had set things up was flawed from the beginning.  i pointed out problems like "slippage" with mtgox.  anytime he had to hedge an already executed customers order and got delayed due to a bad connection with mtgox i'm sure it set him up for a catastrophic loss.  i told him i could set up accts at both places and short and buy simultaneously to "frontrun" his hedging.  i could tell by his lack of response or immature responses that he was thinking about what i was saying and then he would change his algorithm suddenly.  this was a huge red flag and from that point on i knew i had him. interspersed throughout this time, small outbursts and screams would occur from customers complaining about being Zhoutonged (another term i coined) from a malfunction of his algorithm. in response he would change the algorithm yet again, apologize, say a few nice things, and reimburse customers which again is a huge red flag of someone trying to perpetuate the ponzi.  Zhou kept changing his stories and explanations.  he writes a ton but says very little.   

then there was the time when Zhou publicly came out and tried to influence the market by stating that there were no more USD reserves and that it would be a good time to sell BTC.  oh i pounded his ass good for that one and he finally apologized.  what owner of an exchange attempts to influence the market direction unless it benefitted himself in some way?  i could tell that the whipsaws and volatility were costing him and customers money yet the Zhoutonging continued.  this was his way of stripping money at customers expense.  he actually had to to stay profitable. 

and then the culmination of my efforts came from the "double ramp" (my term) from $3.50-$4.90 in a couple of minutes that i personally orchestrated.  if you'll remember that down in the dumps of those times it had become fashionable to short every ramp with leverage from Zhou as inevitably the price would turn back down and go lower. the Bears were making money like crazy doing this and were partying it up.  I had already helped turn the tide @ $2 by being over a third of that bid wall and i could see the trend had changed to upwards but the Bears didn't see it and were still shorting each ramp.  so i waited for someone else to perform the first ramp from $2.90 to $3.90 or so (fuzzy on the exact start price).  the Bears predictably came in shorting with leverage and the price came back in to $3.50.  and then i hit the BUY button with a massive order.  i'm sorry but i smiled big as the price took off up to $4.90 and the screams from the Bears was loud, clear and palpable.  there was blood everywhere.  so many ppl got Zhoutonged from that one.  see the problem with his setup was that his algo, the way it was written, was  hyperreactive to those buying spikes madly trying to hedge while buyers madly tried to buy while shorts madly tried to cover while everyone else was being Zhoutonged. it was beautiful.

in the end, nobody listened and i gave up taking criticism from everyone for attacking a 17 yo, especially from the Bears defending Zhou.  God bless them. may they rest in peace.

I bought on the way down. I dont have a lot of money but i am trying to build a position. I have lost hard and I am now trying to fight my way back