Bitcoin Forum

After breaking $5, the rise to $9-$12 is happening very quickly.  If there is a correction coming before breaking into all-time-highs, in all likelihood it will be there at $9-$12.  And there's no telling how sharp the correction could be.

I'll have no sympathy for the panic sellers, but I am concerned about the common bitcoinica user.

From the screenshots people are posting, the interface is very confusing in one obvious respect: the maintenance margin requirement.

Because bitcoinica is missing a "maintenance margin calculator", the user is forced to solve a ridiculous algebraic formula to determine the lowest bitcoin price a position can suffer before you are completely zhoutonged. 

With bitcoinica there is the extra complication in that it lets you keep your maintenance margin in bitcoin.  This means it shrinks as the price drops, and you will get zhoutonged much quicker than you expect.

I'm probably as bullish as anyone here, but I wouldn't be surprised to see a correction retrace down to as low as $4.  Yes, it will definitely bounce back from $4 but only after you have lost everything.

Furthermore, stop-loss and limit orders will not protect you.  If the correction is sharp (and it most likely will be), your stop or limit order may not even get executed before you suffer a fatal margin call.  Market orders are executed at the market price, which could very well drop instantly to below your zhoutong price.  Your limit order to sell before losses only happens if there's a willing buyer, and when there's not it will never even be executed.

Analysts are predicting that $9-$12 will be a major inflection point, and a correction from there will cause many to suffer a forced liquidation.

Please be extra careful and be absolutely sure to understand the risk you are facing.  The top 1% of bitcoinica users have 50% of the wealth (https://bitcointalk.org/index.php?topic=51011.msg608239#msg608239).  Too many of you could easily lose everything in the correction which could be coming very soon. 

The top percentile could take everything you have, and it might not even be intentional.  If too many people lose too much, $9-$12 could prove to be final top price for bitcoin.  The richest will be a lot richer and the majority will just be poorer.  It doesn't have to end that way, but it will if we are not smart enough when left to our own devices.

The world thought bitcoin was dead.  They thought we had died in a bubble of our own financial illiteracy.  The greatest risk to bitcoin is nothing and nobody more than ourselves.  Let's prove them wrong.

Please be careful.  See you on the upside.

Thanks; this is important and rather sobering.

Can you provide a source or link?

i find it very odd that we haven't heard from Zhou for a coupla days now.  and thats despite alot of negative talk besides mine flying around.  normally he is out defending vigorously any and all comments that even hint of problems.  is he hunkering down for something we're not aware about?  this unidirectional move may be causing problems.

I don't know why, but I see this as adding to the fearmongering masked in kind gesture. No offense. Maybe I should take my tinfoil hat off.

Of course there will be a correction.  It happened on the way up to $30, and it will happen this time.  There is no escaping the correction.  Yes, be very wary of corrections... reduce your leverage and make smaller positions.

But who the hell died and made you the Manipulator?  Where are you getting $9-12 from?

Yep, this.  Hopefully we'll hear from him soon.

Another problem with Bitcoinica is the constant limit Gox puts on them for coupons in USD.  It's only a slight annoyance -- if I want to withdraw money from my Bitcoinica account and put it in Gox, I can exchange it for BTC on Bitcoinica and THEN Bitcoinica will issue me a Gox code for BTC with no problem.  It's just kind of a hassle, and kind of curious.

but the BitPay guy was complaining that when he did this he had to pay a 5% premium above what he would have if he could used mtgox w/o the limit.

i'm guessing he pull it out of his ass... doesn't mean its not right  :P

i tend to agree with him...

That's (partly) why it's an annoying hassle -- Bitcoinica has some gouging exchange rates.

5% is huge.  you'd be happy making that in a year for a traditional investment.  just b/c you made it and more in a few days doesn't mean you should give it away to Zhou.

This is from S3052's latest weekly subscription report (Jan 1):

Resistances
(i) 5.7 – 6 $ (short term)
(ii) The broad 7.7  – 8.7 $ range (minor)
(iii) The 9.5 – 10.5 $ zone (strong)
(iv) The 12.0 – 13.5 $ zone (strong)
Support
(i) 3.8 – 4.3 $ (very strong)
(ii) 3.5 (strong)
(iii) 2.8 – 3.3 $ (very strong)
(iv) 2.6 $ (massive)
(v) 2.2 – 2.4 $ (strong)
(vi) 2.04 – 1.99 $ (massive)

I definitely agree, but at this point I have no choice if I want to get some money out.  And when I liquidate this long position, when I go to get all my profit out, I'd better be able to do it in USD straight to GOX or Zhoutong is gonna hear an ear full and then some from me.

From the looks of this report, it seems the resistance is weaker than the support.

That still doesn't mean there won't be huge downspikes though.  Is this a problem with Gox?  I mean, is it caused by Gox allowing people to exchange very large amounts of BTC all at once?  Couldn't that problem be solved?

I guess I should broaden it to $9.5-$13.5.

Just be aware of the risk.  Do you know your Zhoutong price?


Here's some more from S3052's Jan 1 report:

“We keep our view intact that there is a good probability that bitcoin prices will at least correct the down move
from June 2011 to  Fibonacci retracements of  13.5 $ (38.2%), 17 $ (50%), or 20.6 $ (61.8%). Most typical in
corrective waves are the 50% and 61.8% retracements. This means that even if bitcoin prices were to fall again in
2012, the current rally can lead to 17 – 20 $!”

Ahh, Fibonacci retracements... I see.  I'll cross that bridge when we come to it, then.  Let's wait for $9 to come before screaming about the resistance.

Sorry for my ignorance, but can anyone decipher this for me? I find it fascinating but don't really understand it.

::)
their is no chance in hell its going down, even if it dose... its going to be short lived

I'm still disappointed that we didn't reach my prediction of infinity by tonight  :'(

Here's a tip for small-time bitcoinica junkies like myself:

You can sell part of your position (assuming it's long) to lower your base price.  So if you think a downspike is immanent, you can sell down to a base price that the spike won't affect.
Then after the dust settles, buy back in.

The down move from June 2011 is the overall fall from $32 to $2.  "Correcting the down move" means it retraces from $2 back up towards $32.  But it only retraces partially - hence "corrective wave" of a certain percentage of that $32->$2 fall.

The good news is, this rally is looking more like an impulse wave than a corrective wave.  Meaning it should exceed the old highs.



Of course it will be short lived.  That's fine if you're just holding BTC. 

But when you're on margin on Bitcoinica, short-lived downspikes are how you get zhoutonged.  That's what I'm trying to warn people of.

If you want to survive a downspike you had better be prepared.

Here's some more S3052.  This was in a short-term alert he sent Jan 3.  [I hope he doesn't mind that I'm sharing these excerpts, but people were asking for sources.]

"Recall, second waves can (but do not have to) retrace up to 99.9% of the
wave 1 (but never more than 100%).
Common retracements are the Fibonacci levels. Given the fact that we
seem to be in a cycle wave III up, this minor second wave may not go all
the way down to the 62% level. Another very common stopping point of
second waves is the previous fourth wave (apex of the triangle,
currently at 4.2 $).

One very short term trading scenario may be to sell above 5 $ with the
intent to buy back at 4.2 $ or at 3.3 $ (if prices go that deep)."

Be careful here.  This could confuse people.

Your base price is NOT your zhoutong price.  Did you figure out the formula for that yet?

The base price is price from which your profits / losses are calculated.  When going long, a lower base price is preferred; however, this comes only at the trade off of a smaller position.  The only way around this trade-off is to increase your position at an opportunity where the BTC price falls below your base price.  If you increase your position by buying above your base price, this increases your base price.  When you sell above your base price to decrease your position, this decreases your base price.  If you sell below your base price, you are taking a loss.

Of course all of the above would be the exact opposite in a short position.

You can decrease your chance of taking loss by selling your position down so that your base price falls below what you think the BTC price might spike down to, however at that point you also lose the profits you would have gained from holding those coins in the case the BTC price spikes up.  But, optimally you would just buy those coins back after the downspike.

The formula, as far as I can tell right now, works according to the percentages outlined in the "settings" page.

Here's an example:  I am long 90 coins at 5x with a base price of 5.66.  Loss tolerance for 5x leverage is 16%.  So the price of BTC would have to fall such that my (5x whatever my margin is [i'm not sharing that]) minus (90 * (current BTC price)) would be greater than 16% of my (margin * 5).  But if I think the price of BTC will fall soon, I will sell off part of my position to lower my base price.

Profit will be generated if any of those 90 coins are sold above $5.66.  Loss only starts when the price of BTC falls below the base price, at which point I would be selling at a loss.

If I were to sell 50 coins right now at about $7, my base price would fall to about $3.98.  It seems odd to me that partial liquidation of a position would result in a change of the base price rather than an addition / subtraction to the margin, but then this is my first experience ever with margin trading.

That the base price can be manipulated is a fact though, and if you think there's a spike coming down, I suggest you try to get your base price below it before it happens.

I have edited this post a few times because of general typos.  This can be rather complex stuff though, especially when you start adding to / subtracting from your margin while holding a position, and increasing / decreasing your position.

Sharing this report is forbidden should you not be a paying subscriber (penalty fee: 100 BTC).

From S3052's sample weekly report, downloaded here: http://www.bitcoinbullbear.com/uploads/8/5/8/7/8587609/bitcoinweeklyupdate20110602.pdf

This is probably still true today, you should remove the quotes from his report IMO. Just warning ya ^^

Unfortunately, Zhou Tong is moving around a lot right now and last time I checked he was in Australia for a few weeks. Don't expect a high school student to live on a forum.

oh I see, yes I get it, thanks for explaining! I think I can work out the rest from that.

It's also important to note that if you are holding a lot of BTC in your currency account on Bitcoinica then this increases your downside risk when going long.

For example, if you hold 100% in BTC then you are effectively doubling your leverage. So even with the account settings at 1:1 leverage you will be force liquidated already at around 50% loss. This is because when the price drops your margin balance also drops equally with it.

um no you can't, at least not at the moment, they've reached their monthly Mt.Gox Btc code withdraw limit too, I've just waited over 12 hours & so cancelled & instead just withdrawn (withdraw to wallet) to my Mt.Gox deposit address - I think that this is correct, it was an hour ago & I'll edit this post to say when it clears, in an hour more I imagine, also as someone pointed out exchanging USD on bitcoinica for BTC means buying them at a premium of half the spread approx which ranged from 0.07 to 0.14 Btc over about the last 24hrs - actually it's not that bad just $10 for 100 Btc or $650 worth

Edit: yep np, sent in 2 parts, Btc cleared in to Gox in well under 2 hrs for a single Btc & in under 1 hr for the larger Btc balance - fast, clean & easy
Edit: corrected the price for bitcoinica's spread premium