Bitcoin Forum

del

Which is a fair point given the amount of cries and tantrums posted on the forum and irc yesterday after the crash...

My account is set to 10:1, I was long and didn't get liquidated.  In fact, I bought more and am back in the green, at acceptable leverage.  What happened today is many people learned a hard lesson about leverage.  This will lead to a healthier market.  If you lost today, just remember, we all have made a bad trade.  The volatility won't die down until we have more traders who have learned these lessons.

Zhoutong is in an ideal position for insider trading. He could easily have made BTC 50K last night from the gullibility of those gamblers. Spreads and fees are only a facade to pretend this is an "honest" business.

Got anything to back up those accusations?

No, it's mathematically impossible to prove him guilty. He'd thus be mad not to do it.

EDIT: Of course there is the possibility that he's a person of exceptional integrity. But somehow "exceptional integrity" and "derivatives trading" don't go together very well.

It's a good job Z is running it and not you then.

Sure he's making money, I'm not sure why OP is so naive to this fact. He's in win-win situation, whatever the market does he gets his spreads. The longer it goes on the more money is involved the more he makes.

Lets leave the libellous chit-chat in the playground.

I know there are evil forex brokers out there, but that's the motivation to have a change.

I feel good enough the reality isn't hurting the honest people, even in a free market. I even questioned myself whether I can justify the profits from a negative-sum game. It's the people who love Bitcoinica that make the project going.

There are a lot of both money-making and value-generating opportunities out there, and I don't want to spend my energy on exploiting other people.

The only way not to lose, is not to play.

I don't like it, I don't use it. I made my profits trying to limit volatility. Bought on spikes down, sold on spikes up. No point leveraging something so volatile. What performace do some people expect? 5-digit %?

Reality of course hurts honest people all the time. The reason I don't like your service is that it induces volatility, which hurts honest merchants. They may or may not be able to live with it but they get hurt all the same. If volatility is not going down, the future of Bitcoin looks very bleak indeed. If every night were like last night, Bitcoin would be dead in a few months. Your game is bad for almost everyone.

I really wish someone with deep pockets stepped in and imposed exchange rates by simply outgunning your service. (Can't belive I am saying that). Because only when vola goes down, businesses who don't care whether Bitcoin is cool but only want to sell their stuff without trouble with payment will be able to step in.

On the question of whether gamblers get ripped off, I don't mind at all. They deserve it. Just like online poker players who think it impossible that they play against the sysadmin who knows their hand. They too deserve it.

Bitcoin is never stable until we get to at least $100. It's not volatile on one day doesn't mean it's not volatile forever. Bitcoinica has nothing to do with volatility. I admit the correlation is there, but definitely not causation. Bitcoinica doesn't induce volatility out of thin air.

If you have $10,000 you can try to buy all you can on Bitcoinica and see what happens. The market never spikes. Any sudden spike must not come from Bitcoinica, because forced liquidation in a quiet market isn't possible. The trigger must be something else.

It seems to me that you think too short term, or are overly confident in your own pet theory. As has been said elsewhere, BTC is clearly not ready for prime time right now. The volatility attracts people who would otherwise be uninterested in it at this point, which could lead to more awareness of the cryptocurrency concept, use as currency, etc. On what, exactly, are you basing your theory that this is a long term negative? Despite numerous posts saying things like "constant volatility would lead to bitcoin being dead within a few months", your basis for this not clear to me. Have you seen the charts of the USD buying power early on? It appears to me that volatility is natural, and the artificial hampering of this has its own problems.

Bitcoinica is just a tool, much like a gun.  Let's try our best not to misuse it.

I agree they shouldn't be a nanny. I didn't understand it or the implications of margin trading with manipulators around so I didn't use it. I really don't see what is so difficult about that for some people. I also don't really understand the bitcoin protocol. If there is a flaw exposed and my BTC become worthless, I will be ok, that's just how it goes. Really I think the cryptocurrency idea is here to stay either way. Maybe people who were around before the exchanges see it differently.

This isn't correlation, this is amplification. Which is what leveraging is all about. I agree with you that forced liquidations have nothing to do with Bitcoinica and everything to do with gullible gamblers. That doesn't make business easier for merchants, though.  We'll never get to a stable $100 unless ppl start *using* Bitcoin. And merchants and their customers are those who will build the Bitcoin economy. Or not, if you keep scaring them away.


That much is obvious. But what is less obvious to me is how inducing mad volatility is helping to get there. Please explain.



That's my whole point. Bitcoinica is a tool like most weapons. They should not be used at all. To what good use can you put a gun, say, an M2 in the civilized world? Bitcoinica should be treated like an M2. Hmmm, considering leveraging, it's maybe more like Czar Bomba. As powerful, as useless.

Bitcoin will always be volatile unless it conquers the world, this shouldn't really be a problem for merchants though except for the few minutes when the market is going crazy like today.

Too many people believed the 'only way is up'.  Day after day we would see messages on this forum along the lines of '$6 tomorrow!', followed up 'here comes $7!' and finally '$8 right around the corner!'.  So many people believed in the supposed inevitability of ever higher prices following the bounce from $2 that they got ahead of themselves and used great leverage through Bitcoinica.

Many people got burned by the recent price action.  Not just people who over leveraged, but those who traded bitcoins with their own money.  It was difficult to trade when the price swung 10% within minutes and orders were executed with lag times of at times 30 minutes or more.  MtGox was choking on the volume, yet again.

My point is that a minority of Bitcoinica users can causes losses and great instability for the majority who may never use the service.  Speculators who are making profits by feeding the wild swings are defecating in the river from which they drink.

Price is only a dollar lower than yesterday, how does that hurt anyone besides speculators and people leveraged on bitcoinica?

Surely you are joking. Bitcoin lost 20% in a single day. That's bad enough - puts it in a league with pennystock in the eye of the beholder. Worse is that it was like an epileptic seizure. I mean going between 4.64 and 6.95 within minutes! Doubt this will inspire much confidence  in everyone watching.

The good news is that a number of gamblers got bloodied up good. As Vandroiy said before: That's the silver lining.

I will start using bitcoinica again when bitcoinica stops using Mtgox for its trading..

This is the problem..  Zhou, your the only man out there that can compete, better to do it now, then wait for the compitition to catch up.

Bitcoin IS a penny stock in terms of fundamentals. (Market cap is only $550MM.) So how can we expect it to perform like a blue chip?

Without price rising to above $100 (That's about $9 billion market cap), we can never have a stable day.

With or without Bitcoinica, $200K is sufficient to push the price from 4.64 to 6.95 within minutes. And without Bitcoinica, that would happen too (Bitcoinica volume was insignificant during the rally you mentioned).

It's within your power to remove some of the penny stock characteristics. Not all, I give you that. May I suggest that you introduce instruments that reduce volatility in addition to those that amplify it?

Current Market Capitalisation is more around 50 Millions and 100$ would make it around 700 millions$

Like what? :)

My bad. Math...

Speculators "feeding" the swing are what dampens it, not what creates it.

All those dirty speculators, eh?  Putting in lots of buy orders for cheap bitcoins when the price fell; driving the price back to where it was...

Bitcoin is like a penny stock? Oh, say it isn't so!  ;D

All kidding aside, it's good to see at least a couple people involved with bitcoin know the difference. Also, the point about the magnitude of the volatility should not be overlooked. I've seen quite a few comments dismissing the volatility of bitcoin on the basis that other assets exhibit volatility. You don't see this kind of volatility in much other than distressed currencies like the Zimbabwi dollar or out and out money raising scam vehicles like penny stocks. That is to say, right now bitcoin trades like a piece of crap that almost no one should take seriously.

I'm not trying to start another argument on this subject with anyone, as it simply is what it is. Zhoutong's example of how little money it takes to move the price of bitcoin should be self-explanatory.

During the 1990s I made the acquaintance of some professional penny scammers and had a hypothetical discussion about what it might take to do it. The suggestion was to look for vehicles that could be manipulated with an investment of around $500K more or less. So, by that yardstick being able to create a 50% price swing for $200K current is actually a real bargain, such a deal  :)

That is interesting. Could you elaborate?

( In my understanding the whole thing is a zero sum game. I always profited when I set orders that are ridiculously far away from the current price. Like last night, my order at $5 triggered. When I got up, I could sell it again on the way to the shower at a nice profit. I think a number of ppl use this strategy. As this is a zero sum game, someone must have made loss for our gains. In my understanding it must have been the guys who caused these spikes. How am I wrong?)

It depends on who you mean when you say "caused the spikes". If I bought at 3.50 in December, ran a promotion over a few weeks to draw in new money, then sell to the new money at prices up to 7, I'm good and the "new money" is now part of the zero-sum game. I think in the sense you mean that those "new money" buyers caused the spikes and when they sold to you they took a loss.

There was a lot of bullish talk going around, for example IIRC hyping of "The Good Wife" episode started in this forum in December. The pitch was that this would bring in "new new money", persons who hadn't bought bitcoins previously, and the pitch ( one would hope ) caused persons already predisposed to buy coins to buy more with their dirty, dirty fiat currency that no one would ever want  ;)

BTW, I'm not claiming I had any part in this, I just know the drill and saw a play going down I've seen before.

The other piece of the big swing appears to have been forced liquidations on Bitcoinica. One could make a case that the dreaded asterisks became bullseyes for sellers using relatively little capital. The details don't really matter, the important property of the set up are conditions where a little capital can trigger a big price change as Zhoutong describes.

I think bitcoinica helped squash a forming bubble, without that smackdown we would probably be at unsustainble prices now/very soon.

Well Bitcoinica is a market maker.