Bitcoin Forum

Pirate likes to buy high and sell low, with other people's money.

if you buy at 8.00 or below, and sell at 9.00 or above, you can make money trading against pirate too.  I've done that x6000 coins this week, earning me about a 25% return on my investment trading against pirate.

EDIT: if anyone wants to buy some goxUSD from me to take advantage of the buying opportunities, email me at tony@bitpay.com

Wait........

....


Hold the fuck up



You make money by buying low and selling high?


WHAT THE FUCK IS THIS SHIT! I've been doing it wrong all this time



I'm assuming your original post was sarcastic, this is sarcasm in return...

how does pirate make money if he buys high and sells low ???

How does a ponzi make money? :)

even assuming he runs a ponzi, buying high and selling low still doesn't make any sense )

Agreed.  But he admits he buys above 9 and sells below 8. It really doesn't matter what he's doing with other peoples money, when it's so easy to profit yourself just by trading against him.

he only admitted to one crush sale few days ago, the first one following the huge rally, in terms of warnings as far as i know. everything else was senseless spec by others.

there are other large players on the market now except pirate

I presume he's the volatility maker...things need to move  a certain amount up and down for anyone to make money in a system where there is no intrinsic safety buffer provided by short selling. He needs to recycle his cash on each swing.  He makes each swing happen by using a small amount of funds to drive the price down and a larger amount to drive it up. The hyper-reactive lemmings do most of the dirty work for him by accepting the new price he sets and push the trend up or down farther than pirate has funds for. Then he capitalizes by trading against himself, much like the OP has been doing. I made 10% in one day by following similar logic (I used 8 and 8.75 as targets).

Ooooooo... It's game on now.  Good luck!

I am thinking if it goes up, pirate buys driving it up more creating hype.  Hype will cause other people to jump on the bandwagon and buy too.  Then after they buy he sells.  This hype and psychology also works when bitcoin goes down, and then pirate causes panic by selling it down further..

Hey, Pirate, do me a favour, keep it high till you see me in Vegas, Im doing a btc trade to cash on Thursday morning with Tuxavant.. 

Thanks brother.. :)   Love your work! See ya soon!

Whatever the cause, there sure is some absolutely idiotic trading occurring.  A good chunk of the sell volume occurred at the price at the bottom when it was dumped followed shortly by buying occurring mostly at prices at the top end when there was the spike.  Volatility of 15% in a matter of hours is not sane trading by anyone, if that was the same party pushing both directions.

https://i.imgur.com/xzI1j.png
 - https://ferroh.com/chart?t=24h

Also, left completely out of all of this were the other exchanges.   The trading at Intersango. BTC=e. BitFloor, CampBX. etc. was minimal.  None of them spiked to levels anywhere near what the markets on Mt. Gox did.  This is wasteful lunatic selling and buying.   It is making great money for anyone that didn't panic though (and who panics nowadays anyway, with no leveraged trading options after Bitcoinica is gone, the exchange rate seems to always return to a certain trajectory).

ha! i've been had, took OP too seriously, the whole buy high, lol

It looks like I sold a large number of BTC on the spike above 9.  so that will probably put my return for the week closer to 35%.  thanks pirate!

I've made about a good 35% in the past week trading. Only difference is I've sold at $9.20 and i refuse to buy back in any higher.

I've made my profit for now, if another opportunity presents itself I may buy back in. But until then GOOD LUCK pirate!

Thanks for the profit!

Edit: If there is not opportunity, then I'm happy anyway because total profit for me is close to 900% since march. Of course I leveraged in with LTC when the price was much lower and btc was much lower...

As if the game was never on? LOL....

This looks like Bit-pay Merchant Solutions (bull) just caught pirateat40 (bear) in a short squeeze. Very nicely done.

This was going to happen sooner rather than later.  People see one large trader's tendencies and start betting against them, reaping a nice return.  Let's face it, when the market is stagnant and moving up or down in 1 cent increments every hour no one is really making any money.  Now that someone has come in who is willing to pump the price up by 50c instantly it's just a case of setting range trades and reaping the rewards.

The main question now is will pirate change his tactics or continue on?

Will you also come and brag about it when you lose 25%? lol

His strategy is sell high first, then buy low. This was very profitable in the great Bitcoin bear market of July 2011 - December 2011. Now the situation is different and he can end up sell low first then, buy high.

Pirate-Pay on the horizon? :p

I thought the idea was that he sells bitcoins low on MtGox, so he can keep prices low for his clients that he sells coin to for a high premium?

Whether this is a ponzi scheme or not, I don't see why someone would buy high and sell low... just to buy high and sell low.

I suppose the question here is, are you infact trading against pirate?

This

If that address is SR escrow + savings, since escrow should be <100K, did the SilkRoad EARN ~400 kBTC???

If so, the silkroad is definitely the second-most-profitable bitcoin business, if not the most profitable one.

I somehow doubt it's SR's address. Gox?

EDIT: sorry guys, wrong thread. thanks for pointing it out, myself

I just like that no matter how much we chatter, he takes it all in stride and with a sense of humor.  Good on ya Pirate!

I love how nobody's learned to keep their damn trading secret...

Two giants, fighting against each other.
Who will win the battle and has the last laugh in the end ?
Only forum post will tell.

It's the ultimate showdown of ultimate destiny (http://www.youtube.com/watch?v=4WgT9gy4zQA).

Short squeeze?

There's no Bitcoinica. Where would pirate have been shorting?

BTCST, obviously. He is hundreds of thousands of Bitcoins in debt to his creditors, at ~3000% yearly, Bitcoin denominated interest.

But! He can short sell the Bitcoin borrowed from his lenders, "with the intention of buying identical assets back at a later date to return to that third party".

What can go wrong?

---

(Or he can short sell their assets without any such intention, for that matter. He's got a pretty cool setup.)

Selling borrowed stuff == shorting

Looks like pirate needs more money.  He has lifted the referral requirement so now anyone can invest again in this BCTST.  I am speculating this usually happens when business goes bad so more capital is require to remain "profitable."

He needs more BTC in order to keep shorting. He has plenty of USD. The way to squeeze a short is to simply take delivery of the asset being shorted and then sit on it.

So you are saying he sold the BTC he was holding for other members and now he has a lot of USD.  pirate wants BTC to drop so he can buy more BTC than he started with.  But, the way to make BTC drop without Bitcoinica is to sell BTC, and since he has little or no BTC he needs more BTC to do so.  That is why he is asking for more BTC from members.

And you are suggesting that the way to beat pirate is to sit on our coins and keep the price stable and/or continue to buy BTC so the price goes up?

Right?  Interesting theory.

...Nope, can't see any reason why he'd want to pull in as many people as possible right now  ;)

Correct, he is suggesting to hold / buy and hold.

Yes that is exactly what I am suggesting. Also if those invested with pirate withdraw and insist on settlement in BTC and not in USD this can force pirate to have to buy BTC at market. The latter could easily set off a buying panic in this market. So yes I consider pirate in a short squeeze to be very bullish for the BTC price.

Sure, it would be bullish but I've seen no evidence he is in a short squeeze.  Just a bunch of wild imaginations.

Okay okay how much do you have invested with pirate currently?

no hard evidence yet

He has lifted the referral requirement. The end is nigh.

He's got a few BTC of mine.  So where's the evidence?

Dunno...asking the wrong person...

"a few"...like > 1000 BTC?

Why does it matter?  Why are you refusing to back up your accusations?

Where did I make accusations of a short squeeze?

Oh sorry, you jumped the middle of my reply to ArcticMine.  Way to pull a notme :P.

LOL...that's funny...and I'm trying to look in my post history of where I might have put up a post like that...lol guess I never did.

NOTME! hahaha

The next time he drops his walls he's going to have another thing coming, just watch.

You talking about his buy walls?

Buying high pushes the price extremely high, allowing someone who can corner the market to profit by selling. Selling low pushes the price extremely low, allowing someone who can corner the market to profit by buying. If you're the one doing the high buying and low selling, you know when it's going to start and when it's going to stop, allowing you to time your trades until after the walls re-appear. Some lucky and/or wise counterparty recognizing this happening can both profit during the buy up or sell down (when you're buying high and selling low) by taking your trades and they can also profit during the buy low and sell high phases by taking the trades of the walls that other people put up.

For example, say that Bitcoins were trading at $9 or so and are stable there. And then say that last Thursday night, someone wanted to push the price down to $7 so they can buy low. In order to do that, they have to sell coins. So first they sell at $9. But then they have to keep selling all the way down to $7. So they have to sell below market price. Since the price will go back to $9 when they're done, a counter-party can profit. Now, while that someone is buying at $7.80, others can buy at $7.80 too. Since the price will go back to $9 when they're done, again a counter-party can profit. If people with sufficient resources recognize this manipulation and move on it, the person doing the manipulating will lose because they'll have to sell shares below market price and they will hardly get to buy any shares back below market price. Heck, they might not even be able to get all the way to $7, getting stuck just under $8. It could have happened .. last Thursday night.

http://s14.postimage.org/ufgsh4j01/img.png

No. His strategy is to sell high and then buy low. The reason he may end up selling low and then buying high is because selling high and then buying low is a bear market strategy that does not work in a bull market.

How do you know his strategy?

Right, but in order to sell high, the market must first be high. He can't afford to wait for the market to rise on its own, so he has to buy to push it up. And in order to buy low, the market must first be low. Again, he can't afford to wait for the market to drop on its own, so he has to sell to push it down. In order for this to work, he has to wait for the walls to be replaced before he can change direction. Anyone who recognizes this strategy can buy into the walls on a change from down to up or sell into the walls on a change from up to down and take the profits the manipulator intended for themselves.

Because he is paying a premium 7% a week to borrow BTC rather than say 2% a year to borrow USD. So it is pretty obvious we are talking about a bear rather than a bull here. 

He's paying 7% weekly, so his strategy is to lose money?  Makes perfect sense ::).

In a bear market Pirate's strategy makes a lot of sense. It just does not work very well in a bull market.

Joel Katz hit the nail on the head.

With one exception (though he might have implied this when he said 'walls need to be replaced') --

Pirate is the one putting up the walls.

After a rally, Pirate places a buy wall.  Why does he do this if he doesn't intend to keep buying?  He is simply waiting for additional buy orders to fill in around the support wall.  When a sufficient amount of buy orders fill in, then he will sell like mad and crash the price.

After a crash, Pirate places a sell wall, even though he does not intend to keep selling.  Why does he do this?  He is simply waiting for additional sell orders to fill in around the sell wall.  When a sufficient amount of sell orders fill in, Pirate erects a true buy wall as a blockade for additional sellers and then starts buying to fuel a rally.

And why do you assume this is Pirate's strategy?  Do you really think he's that stupid?  I've discussed his risk profile with him and he's not as dumb as you assume.  Again, I'll ask: Where is one scrap of evidence that your claims have anything to do with reality?

We already know his strategy works very well in a bear market. The proof in that he has not missed a payment. Let us see how he does in a bull market particularly one where the BTC / USD price rises sharply.

Read through Pirate's posts.  If you read inbetween the lines you will know exactly what he's doing.

Way to ignore the question.  We will see, but in the mean time can you quit with the strong assertions without a shred of evidence to back them up?  If you want to say "I think that...", fine, but going around acting like you know Pirate's every move/position makes you look like an idiot.

The evidence is there in plain view including in Pirate's own posts and comments to anyone willing to spend the time and effort to do their own research using publicly available information. I must say all I have seen for the most part is either it is a very profitable propriety business method that cannot be disclosed in order to maintain its profitability (supporters) or it is some kind of illegal ponzi or money laundering scheme (detractors). I am quite prepared to let time and the markets judge who is and who is not an idiot on both sides of this matter.

Cool.  So you'll stop trying to decide for the market?

This is too generalized a statement.

Rising 'sharply' isn't necessarily the issue -- it's when it rises sharply, and if that rise holds.

Keep in mind that unless he's retarded (and improbably lucky), he will never have 100% USD or BTC.  But, suppose that he is holding mostly BTC -- this BTC is what is needed to be sold and drive the price down so he can repurchase BTC for interest payments.

If the price rises sharply while he is holding BTC, this is a non-issue.  In fact, it rocks for him.  He will simply sell at a higher price and profit like crazy.

If, however, the prices rises sharply AFTER he cashes out his BTC, then this becomes a problem.  Pirate now needs to go to a secondary approach -- sparking a rally with hes newly acquired USD so that he will once again have an opportunity to sell higher than his purchase price.

So, Pirate will try to spark a rally in the same manner that he has before.  Typically, when Pirate sparks a rally, he initiates a sell-wall in order to invite more traders to create their own sell bids.  This sell-wall has 2 advantages -- 1)  It helps accumulate more sell orders around his sell-wall, or 2) it may encourage other traders to drop the price for him.  

Knowing this, there is a main, general way to fuck with Pirate, but it requires an insane amount of capital.  You will need an amount of capital equal to Pirate's capital.  But, the community at large has such capital.

Buy.  Buy like fucking mad.  This needs to begin after a crash.  You need to buy and keep buying.  You need to buy all of his sell walls and drive the price up.  BUT, you cannot fill in new orders in the order book.  There needs to be a permanent margin between the price at which this post-crash rally begins and the new price.  If this margin persists for 1 week, Pirate will eventually default on his interest payments.

For example, lets say the price is at $9 when Pirate crashes it to $8.  This is when you need to buy.  Buy buy buy up to $9, $10, $11, etc.  But, there needs to be a near empty order book on the buy side between $8 and the new price or else Pirate will be able to generate a profit still.  After all, Pirate will, of course, be among the first to buy once he sees a rally is occurring, so he will convert back to BTC.  But, if there are so few orders in the order book, he will not be able to profit.  The final icing on the cake would be an absolutely massive bid wall at $8, a wall so large that Pirate would lose all BTC holdings if he were to attempt to try to crash the market below $8 to spark a new crash and buy at even lower prices.

In other words.  Wherever the next crash stops, that needs to be where an insurmountable bid wall forms.  After that bid wall forms, go all in and Pirate will default.

The problem with this, of course, is that unless only a few people could pull off this massive bidwall stunt, it could never be coordinated with so many people involved, and some people would end up losing a whoooole lot of money.

There are many ways for even a small player to trade successfully against Pirate. One of the simplest is to arbitrage his MtGox trades on one or more of the smaller exchanges. This is simplest if both exchanges trade in USD. The net effect is to leverage the smaller market against him.

Beyond taking on debt at rates that even a love child of Warren Buffett and Bill Gates couldn't repay?

Fascinating quote though, where and when is this from?


Why doesn't he keep his mouth shut, if he's going to burn it to the ground?

I mean, if you're George Soros and you're about to  break the Bank of England (http://en.wikipedia.org/wiki/George_Soros#Currency_speculation) by shorting the pound,
surely you wouldn't be letting people know in advance? Dun dun dun. (http://dundundun.net/)

It's from the middle of January.

https://bitcointalk.org/index.php?topic=58609.msg690372#msg690372 (https://bitcointalk.org/index.php?topic=58609.msg690372#msg690372)

I looked at the George Soros case because as with Pirate he was also a short. I am not convinced; however that George Soros had anywhere near the influence over GBP than Pirate has over BTC. A much closer case although in this case the manipulators were bulls is when the Hunt brothers tried to corner the silver market in 1979 - 1980. http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt (http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt) and http://en.wikipedia.org/wiki/Silver_Thursday (http://en.wikipedia.org/wiki/Silver_Thursday)

I still can't see sign up button on BCTST (without referral), only Login button.
https://btcst.com

Do you really think someone as pirate would be stupid enough to tell everyone he is short if he wanted the price to go down?

They seem to think that, yes...

Puppets being played. lol

I guess that explains what pirate is doing with the borrowed funds. He thinks he can daytrade the borrowed funds and beat the market.

That is indeed feasible, but not forever. That kind of activity been compared to "picking up nickels in front of a steamroller". Its profitable until the day he is wiped out.

Actually many smart and successful investors make no secret of what their positions are, long or short, once they have invested. Pirate is more along the lines of keeping his overall strategy secret while dropping hints here and there so that someone willing to "connect the dots" can get a fairly good picture of what he is really up to.

Youre probably right.

Is there any way to know if pirate is finding success, with this strategy. BitPay seem to think not.

And secondly, what will pirates exit look like? A large dump? Or distribution of winnings back to the investors, in BTC.

Of course!. The strategy is to sell tulip bulbs short after they peaked in value in February 1637. http://en.wikipedia.org/wiki/Tulip_mania (http://en.wikipedia.org/wiki/Tulip_mania)

I guess it takes one to know one eh...SC sockie  ;)

Druckenmiller and Soros were already very well invested in both the German and British economies. It was when Druckenmiller realized that Germany was raising their rates and Britain had absolutely no intention to that he realized he could make a decent amount. He had already put a few million into the German mark prior to reunification, because he saw it was far more devalued than it should have been. At the time Soros basically said if he believed it would have a specific time frame for recovery, he should put in billions, not just millions, so he did, sure enough, the wall came down and Soros and Druckenmiller made hundreds of millions. People forget this.

After their sale, they had significant amounts of British pounds, but Germany was growing quite well, and their economy actually seemed more stable than even Britain's at the time, so when Germany thought it was a good idea to raise interest rates, and Britain basically said it wasn't going to, Druckenmiller saw another opportunity. Again, as the previous time, when he told Soros, Soros indicated that a few hundred million wasn't enough, and they should put in billions since it was basically a sure bet and they knew they had the British pounds to make it happen.

So they did. And more importantly, they told everyone about it, because they knew they had enough to do it. It was a psychological thing for the long term benefit of the pound. They needed the pound to be stronger so that when they bought back into it, it was stable. Perhaps not as stable as the US dollar at the time, but stable enough that it could be a safe store of value for the coming decade or more. In essence, when someone controls significant amounts of your money supply like Soros or other large traders, you're trusting them to decide public policy, because they can use the bulk of their money to voice a concern and make good on it.

Pirate may have a huge investor wanting a significant amount of Bitcoin, but he probably just aims to use vast amounts of cash to do what he is trying to do. He'd never puts up ask walls, instead he only plays the buy side, when he sees how weak the buys are, he drops his walls and uses borrowed funds to sell into it. This solution works if you are the major market buyer but stops working if another major market buyer steps in and sets up their bot to wait for the buy wall to drop then BUYS INTO the sells done USING BORROWED COIN. At that point, like everyone here says, they have to cover their short.

Like I said, I'm looking forward to the next time he does this. It looks like BitPay may have caught him a bit this time, too, he clearly didn't cause a beneficial sell off if that was his intention. Of course revealing that he controls the buy walls indicates he always trades in such a fashion so as to turn his cash back into USD, or like I indicated, he really does have a huge investor that wants/needs a lot of coin and wants it for the cheapest price they can get it.

http://www.investopedia.com/articles/forex/08/greatest-currency-trades.asp#axzz21ZKmUIcG

This is a great and very profitable strategy in a bear market, especially when combined with the borrowed BTC. Let us not forget that during the bear market in Bitcoin between July 2011 and December 2011 the effective inflation rate for Bitcoin in terms of the USD price was over 7% a week. But in a bull market?

No, it works best because you play emotions of everyone who bought when the bids were very thin and hope they sell based on those emotions. They often do, and at lower prices. In fact, if the buys are weak, you only have to spend ~5k to send it down in price $2 and then buy as the emotional investors sell it back to you at less than what they paid.

Anyone that was watching the level IIs that night saw that someone spent less than 5k in sells to get about 30k in buys at a much lower cost average in the same time frame. This is why traders should never use stop losses, people like pirate could take advantage of them. On the other hand, if that 30k purchase was actually BitPay, then kudos to them, they figured out what he was doing. That's why I think it'll be interesting if he tries this again, I imagine several of us may have our bots set to take advantage of it.

It works because it plays on the weakness of the bulls. This can be because of thin bids, lack of substantial buyers, lack of competition on the buy side etc. It can also work very well against bulls subject to a margin call. It also takes advantage of stop losses by the bulls very well. The impact on the ask side is to induce either the movement of an ask to a lower price or even better induce sale at market thereby further lowering the price. It is fundamentally a good bear market strategy sell high and later buy low.

There's nothing bear market about this chart.  Any pullback to around 8 is bought aggressively.  

http://bitcoincharts.com/charts/mtgoxUSD#rg90ztgSza1gSMAzm1g20za2gSMAzm2g50zi1gVolzi2gMACDzi3gRSI (http://bitcoincharts.com/charts/mtgoxUSD#rg90ztgSza1gSMAzm1g20za2gSMAzm2g50zi1gVolzi2gMACDzi3gRSI)

Also, Mt. Gox does not support stop orders.  nor do they allow any leverage.  So buying high in hopes of triggering others to buy higher, or selling low in hopes of triggering others to sell lower, just does not work in this market.  The act of "stop hunting" is also illegal in regulated markets, but it does occur regularly.

Anyone issuing a market-buy or market-sell order for 30,000 BTC will guarantee themselves the worst possible price on that trade.  That's ok, because you can trade against those people and profit quite handsomely.

The biggest buy I made was 3200 BTC below 8 the first time pirate pushed it down there, and bragged that he had the 8.00 ask wall.  I sold all of those coins over $9.00 within 24 hours.  

Congrats?

I agree that we are not in a bear market; however my analysis of Pirate's trading strategy and borrowing structure is that it is very appropriate for a bear market such as the Bitcoin market from July 2011 - December 2011.

Oops!  Anyone who sold at $9 expecting to buy back at $8 now has to buy back at $8.8. :)

Don't speak too soon.

And... that's still a profit. Even more so if they bought back at 8.4 or who-knows-where.

Very big wall at 8.66?

Yes, looks like pirate is already tired of bitpal's game.
We'll see who's the winner tomorrow.

And rightfully so. Anything that got sold at $9.50+ came back down.

Just made a new bet, for those who are willing to bet for/against the pirate short term - in the wake of these new-trading strats.

Bitcoin Savings and Trust will default before the end of September 2012 (http://betsofbitco.in/item?id=521)

glad to see the bitpay guys can spot this giant ponzi too.  They seemed sharp when I met them at CES.

1)  https://bitcointalk.org/index.php?topic=50822.1480  why the hell is this locked?

2)  I am keeping (wow there a ton of them) a list of obvious BTC ponzis & will expand to other lending-based or high-yield scams.  -->  https://bitcointalk.org/index.php?topic=94900.0  to hopefully convince these kids to save their BTC and hopefully stop these run away train ponzi's that may have over $1M USD in them... gonna be a huge story when it goes boom... which ain't long at these levels.

In fairness to pirateat40 if a currency in inflating at more than 7% per week (compounded) as was the case for Bitcoin with respect to the USD between July 2011 and December 2011 paying 7% a week in interest is very close to the proper rate and not a ponzi. One needs to consider the real rate of return not the nominal rate of return when considering where something is a ponzi or not. The trouble here is that that an interest rate appropriate for 7% inflation per week does not work for deflation with a significant chance of hyper deflation. By the way the start of https://bitcointalk.org/index.php?topic=50822.1480 (https://bitcointalk.org/index.php?topic=50822.1480) is so close to the recent bottom of the market in the 2 USD range that it makes it look like pirateat40 is a very good contrarian indicator on the BTC / USD price.

But but but..
He's supposed to pay the invested Bitcoins plus 7% in Bitcoins!
Its not like he is borrowing USD, secretly buying into Bitcoin, and paying back USD with 7% USD on top..

Ente

If he did the exact reverse between July 2011 and December 2011 it would have worked.
Borrow BTC
Sell BTC for USD
Watch BTC drop in value with respect to USD at a rate greater than 7% compounded weekly
Buy back BTC
Pay back investors principal plus interest in BTC
Keep profit in USD (The greater the drop in the BTC / USD price over the 7% interest compounded weekly)

bitpay's little game is going up in flames as we rocket up to $10 ;D

Since their main business is selling btc for usd I think they'll be okay ;).

of course they'll be ok, but they're missing out on this.  I bet Steve sold at $9 already.

It seems nobody is paying attention to the fact that Pirate has other operations that can supply BTC for BTCS&T, not to mention the select few whom have mentioned the potential for arbitrage across exchanges. There's also no way of knowing how much activity occurs off exchange.

Most seem to think the intention is simply to accumulate as much as possible, at all costs. What if the plan is to maintain stability so the entire Bitcoin economy can grow, appealing to businesses and those who would be frightened off by events like the 2011 bubble?

One thing I realized today is that part of the recent rally in BTC price might be ponzi victim wannabes purchasing bitcoins in order to "invest" in Pirate's scheme (either directly or through some passthrough services).

Historically many Ponzi schemes have gotten extremely big even though everyone should have known them for what they are from the very start. Pirate's scheme does seem to have enough momentum to cause an unprecedented bubble in Bitcoin price.

Do not take this as investment advice. I'm just thinking aloud.

I also suspect this.  No one is offering 7% a week on USD deposits.

If you were an early oil baron what would you pay to corner the oil market by buying saudi arabia ? 7% seems cheap  :)

It almost always costs more to corner the market than you can possibly make after having cornered it. If you try to corner the market on something people don't need, nobody will care that you've cornered it, you still won't make any money. And if you try to corner the market on something people need, you'll wind up having to pay more and more over fair market value to corner the market, and people still won't pay more for something than it's worth to them.

Creating the market is different from cornering the market on an existing good.

And the potential market for Bitcoin (https://bitcointalk.org/index.php?topic=97158.0) is as big as that of the major fiat currencies. That's quite a market that can be created, or more accurately - replaced.

Given that only 21 million coins will ever exist... If the bitcoin economy were to grow, the path to becoming a giant may not be to corner some market, but at whatever you do... acrue bitcoins over time.

It would only take around 2 million USD to purchase 1% of all the bitcoins that will exist. Of course if you tried to buy these all at once, the market would reflect your interest.

The idea that Pirate is selling coins to people wishing to acquire them without reflecting the market is certainly feasible.

seriously (http://en.wikipedia.org/wiki/Silver_Thursday)

Hypothetically, what do you think would've happened if silver were instated as a currency at that point?

The Hunt brothers would have become rich, owning 1/3 of the currency's wealth.  That would be a retarded move by any government.

Even after over 32 years the price of silver has not reached the 1979 - 1980 peak of 49.45 USD an ounce. As a currency initially hyper inflation. The key difference with Pirate is that Pirate is a bear and the Hunts were bulls. So if Pirate were to try the same thing as the Hunts did in 1979 - 1980 but as a bear, the initial impact on Bitcoin would be hyper deflation.

Exactly. No government would sign on to that, but with Bitcoin they may not have a choice.


By hyper inflation, do you mean the relative value of silver would rise? How do you know Pirate is a bear?

Because he puts too much faith in the random musings of various forum members ::).

This is based on the far-fetched idea that he's intending to pay back all his BTC-denominated debts. Didn't he lower his rates? If he's paying 3% weekly (I don't know the exact current rate and I don't care) that comes to 465% annual interest when compounded. No one in their right mind would commit to pay that kind of interest unless they were pretty damn certain the currency is going to lose at least 80% of its value every year (i.e. 400% yearly inflation, which would make the annual real interest rate 13%, which is in the consumer credit card or insolvent nation state range).

Unless he fears the USD debt default scenario (guys with guns kicking him out of his house) more than the BTC default scenario (gnashing of teeth on a forum).  Then it makes more sense to have bitcoin denominated debt than USD debt, especially if his business requires holding large amounts of bitcoin and he can't discount the possibility of a large drop in bitcoin prices.

People always say this and I'm not too sure where they're coming from.
Sure it works when the bitcoin price is declining rapidly, as pirate can hoard USD and pay back extra BTC.
But with prices going in the other direction however, then what?

Say market price is $8.50, and someone decides to be a bit charitable and buy 100000BTC from pirate for $9.

Okay, so now he's got $900000, and has given away 100000BTC from his "investors".
He still needs to buy back that currency, which is going to shift the price upwards, so he'll struggle to make any significant amount of coin at all, as pirate making 100000BTC worth of buy orders is going to shift the price upward just as much.

How does the "buying large quantities of something without moving the market at all" thing work  ???

Because he can do off market trades from his personal connections on bitcoin-otc.  There are big fish on both sides, and neither side wants to deal with slippage.

This is the problem though - bitcoin trading via OTC or the exchanges is a zero-sum game, somebody's losing.
Let's be optimistic and assume that he manages to buy back through OTC at 5% below market price - this is crazy, because nobody on there will sell you BTC that cheaply if you're buying bulk, but I digress.

Using this fanciful 5% guaranteed profit, you'd need to make something like 550,000BTC in transactions over OTC every single week in order to just barely cover interest payments. So yeah, Pirate would need to be doing trades equal to some multiple of the entire MtGox volume  ::)

In your example, price is 8.5.  He got paid 9.  Someone wants to sell a shit ton of bitcoins at current price.  Pirate makes $0.5/bitcoin.

What's the problem?

It's not a zero sum game if you aren't just trading.  Some people actually want to trade something they have for something they don't have.

No. Silver is the currency in this example. In hyperinflation the relative value of the currency will fall drastically. That is what happened with sliver in 1980. As to why Pirate is a bear, my conclusion here is based mostly on Pirate's own threads and comments and some of the comments from his supporters. I then compare this with the market data and have reached my conclusions from the relationship between the pro Pirate comments and the market data.

Yay!  Hearsay and assumptions!

Let's bet the farm!

Hyperinflation was averted for the currency (USD) in the period you're referring to. The Hunt brothers were forced to liquidate their holdings, so there was an excess of supply over a short time. It was also a known quantity, not unrestricted production at an exponential pace. Finally, I posed the hypothetical because silver was not an official currency in 1980. Without monetary demand, there wasn't enough industrial or investment demand for the quantity available.

I'm not sure how you've determined Bitcoin market data is bearish. There's been every effort at maintaining stability, especially in light of the $9+ spike a few weeks ago which was cut down before it became a bubble. Followed by a stable basing range and resumed gradual ascent offering no easy entry points, it looks exactly the opposite of a bear.

What posts led you to believe Pirate is bearish? Everything I've seen indicated that he thinks Bitcoin has great potential, with some risks that could cause it to fail. Why would anyone hold or invest in bitcoins if they expected them to decline, let alone accumulate large quantities and build several services based on the system? I could see the case for a pump & dump, but where's the pump - are we witnessing a slow, multi-year pump that'll dump when everyone is using Bitcoin?

How about the fact that:

-He'd have to buy the coins back to have bitcoin to pay his investors, which would increase the price and eliminate some of that $0.5/BTC profit.

-Assuming he was able to buy back at $8.75 (unlikely, a 100000BTC buy order would move the market more than $0.25) then he'd have made a net profit of $0.25 per coin, or about 2.8%.

Lovely.
Now assuming those margins, he'd have to trade 1 million BTC per week, or about half the base of the entire currency every month, in order to just pay his interest. More if he actually wanted to take any profit for himself. I think I'm right in saying that's more than the entire volume at the various exchanges? Of course, trades on OTC are hard to quantify, but I have a very hard time thinking it's anything close to that...

Why wouldn't he make both sides of the deal before agreeing to it?

Why does every anti-pirate FUDster assume pirate is retarded?

I don't get it.

There is in excess of 200,000 BTC exchanged per day (http://blockchain.info/charts/estimated-transaction-volume?showDataPoints=false&show_header=true&daysAverageString=7&timespan=&scale=1&address=), so easily more than 1.4mm per week.

Large trades are not made all at once. To move billions of dollars, the orders are broken up and run in stages. The same applies here.

A spider plans ahead, and the fly stumbles in. You're the fly, Pirate's a spider. There are many flies and few spiders.

He's not "retarded". He is just going to default on his debt, and likely profit quite handsomely from stealing all the funds.

This is a mathematical certainty, and if you don't get it then you shouldn't really be doing any kind of wealth management. Because if you don't get it, it implies you don't understand the exponential function.

Okay fine, then if you assume he makes 5% on every BTC trade he does (not outwith the realms of possibility) then he'd still have to trade somewhere in the region of 550k-600k BTC per week to break even...

And that's this week.
By october with trust accounts at the current rate he'd owe over a million BTC...

So, nobody will withdraw any money or get the interest paid? ALL Compounding Morons^TM?
Is that what you're saying, or am I misunderstanding you?

You're thinking of this in terms of bitcoins:

http://www.onlineinvestingai.com/blog/wp-content/uploads/2009/07/exponential-curve.gif

We're thinking of this regarding rate of return:

https://controls.engin.umich.edu/wiki/images/c/c5/Standard_Exponential_Distribution_R.jpg

Which results in this as the assets under management by Pirate:

https://en.bitcoin.it/w/images/en/e/e3/Total_bitcoins_over_time_graph.png (https://en.bitcoin.it/wiki/File:Total_bitcoins_over_time_graph.png)

His average interest rate is roughly 2/3rds of the top tier and he has lowered his rate for many members multiple times.


Or I don't assume constant terms like you do.  Pirate can, has, and will change his terms as necessary to keep himself profitable.  If this becomes no longer possible, I believe he will return the funds and enjoy the large amounts of money he has already made.  Too many people know how to find him and he doesn't want to abandon everything he knows.  Also, people take profits.  In fact, everything he holds of mine currently is profit.  I've withdrawn more than I've deposited by now.

To be honest, all this would make a lovely story. Man runs a big scheme to have as many bitcoins under his control as possible... When he can no longer keep it running he makes a post saying that he defaults, then destroys all the keys to his coins and any other form of access, and kills himself. I believe that if he only destroyed access to the coins, would this truly have a permanent effect on the bitcoin economy as a whole, the suicide would just be the icing on the cake.

I'm in no way suggesting that I would enjoy or benefit from this happening... I just have a dark and twisted mind. Please don't kill yourself Pirate. Oh and don't run away with everyone's money either.

Reeses, is that you?

Afraid not.

Where do you get this from? There's a huge amount of cash tied up in "trust" accounts...

I could imagine the pitch... We're the new Pirate, but different!


I don't know how to take that. So I'll take it as a compliment. :3

Okay, 2/3rds was slightly low, but here's the post I was thinking of (thanks for making me wast half an hour):

See.  When you ask him reasonable questions instead of spewing accusations he's actually a pretty reasonable guy.

So,Pirate says  hes consistently making 10.65% a week ........;D

http://gifsoup.com/webroot/animatedgifs/29807_o.gif

Quit being so blatantly facetious! That was back in May anyways. :P

If you're going to troll, at least learn how it insert it properly into a posting.  Img tags aren't that hard, they're in that little toolbar each time you post.  :o

very touchy guys .....

anyone would think you guys hadnt gotten your principals back out yet ..... :D

We're all using smileys, none of us can be taken seriously.   ;D

 ::)

Even if Pirate can make 10.65% per week (up to what amount? These never scale up infinitely. Actually, at that kind of return rate the limit should be reached very quickly.), it makes absolutely no sense to borrow such huge amounts of bitcoins at several-hundred-percent annual interest rate. He should have gotten a loan in fiat. He says he knows rich investors etcetera. He could have borrowed a million dollars and bought at least 250kbtc when they were cheaper.

And the argument that he can't buy bitcoins because he'd move the market is ridiculous. As if other people acquiring and tying up bitcoins in his scheme doesn't move the market exactly the same way.

I've answered this 3 times already in various threads.  Check my posts if you really care.  Or try reading the BTCST thread, where you can hear it from the horse's mouth.  Seriously, do some reading.  It's all here.

TL;DR: he needs to have a large bitcoin reserve to operate and he prefers to not be at risk to a large drop in price

Thanks!  I edited my post and I feel better now :).

Exactly. Here is the Bitcoin Savings and Trust | Home thread and it is all there. https://bitcointalk.org/index.php?topic=50822.0 (https://bitcointalk.org/index.php?topic=50822.0). He is not prepared to accept exposure to a drop in the BTC / USD rate; however he is prepared to accept exposure to a sharp rise BTC / USD rate as no hedging strategy is 100% perfect. This is why I keep saying Pirate is a bear.

If you have 2.5 million USD in liabilities denominated in BTC and the BTC / USD rate rises to 10000 USD per BTC your 2.5 million USD in liabilities have now become 2.5 billion USD in liabilities at 0% interest and given the past history of BTC that is possible.  

I don't have a business plan that would generate such ridiculous returns. These kinds of extremely high growth businesses occur very rarely, and almost never they grow at 10% weekly rate (which ends up to 14,000% annually. For percent-growth-challenged, this means the business grows 140-fold in size during the period of one year). And the growth phase lasts only until the business fills its "ecological niche", at which point the growth dies out.

Let's make a thought experiment: What if Pirate had such a high-growth scheme, and had done as I suggested? 10% a week. In bitcoins. Let's say he'd have taken a $1M loan at 5% interest rate (to be paid twice a year) and monthly repayments of $50k (at the end of each month). Let's again assume he keeps $200k as a dollar reserve initially, so that he can make the first four payments no matter what. So. Within the first two months, he buys, little by little, $800k worth of bitcoins (at the price of $5 per bitcoin), and at the same time, sets up his business, which starts to generate revenue in the beginning of the third month.

For the sake of simplicity, let's just assume each month has exactly four weeks, and that BTC price is stable at $5.

2 months: $100,000; BTC200,000; loan principal balance $900,000
3 months: $50,000; BTC292,820  - sell BTC10,000 to cover the loan repayment, and do this each month from now on
3 months: $100,000; BTC282,820; loan principal balance $850,000
4 months: $100,000; BTC404,077; loan principal balance $800,000
5 months: $100,000; BTC581,609; loan principal balance $750,000
Every 6 months, sell an additional BTC 5k to make the interest payment (is more than enough). Spend rest on drugs&whores.
6 months: $100,000; BTC836,534; loan principal balance $700,000
7 months: $100,000; BTC1,214,769; loan principal balance $650,000
8 months: $100,000; BTC1,768,543; loan principal balance $600,000
9 months: $100,000; BTC2,579,311; loan principal balance $550,000
10 months: $100,000; BTC3,766,369; loan principal balance $500,000
11 months: $100,000; BTC5,504,341; loan principal balance $450,000
12 months: $100,000; BTC8,043,906; loan principal balance $400,000

Okay, at this point he has 40% of all bitcoins that ever will exist, and retires, pays of his debt and enjoys his eight million BTCs.

And of course I had to make the simplest possible error in the calculation in my thought experiment. At $5, $800k gets you BTC160k, not 200k. The point still stands, just get a bigger loan.

Pirate takes in 100k (or whatever) btc from lenders. Sells them to client A at 10% (or more) markup. Because client A needs to be anon (thus off exchange) and needs to send large sums across borders to person B. This does not affect price.
Person B receives btc, but needs fiat, and sells it on exchange. Pushing price down. Pirate buys back cheaply.
Or pirate puts up bid wall, and B sells into it, because they want to cash out fast.
So I don't see why him buying it back needs to push the price up.
And it seems this money can be made because of bitcoins unique nature.

The thing is, this whole thing is much easier to do without using any lenders (except perhaps for the first few transactions). Just keep your profits in Bitcoins, pay off the lenders, and then keep all the profits.

Also, there's no evidence that the constant, large Bitcoin transactions necessary for this to work (from A to B in your example) are actually happening. And it makes sense that they wouldn't be happening. There's advantages to dealing with Bitcoins, but not enough to justify a 10% cost on the buy side followed by selling on an exchange and withdrawing fiat to buy more Bitcoins.

This is really just a variation on "Pirate is so rich he can afford to borrow at a huge loss even in the absence of a business reason for doing so".

It's not easy if you don't have a bunch of bitcoins to begin with. He might have a lot now, but might not have had a lot from the get go.
As long as the profits are bigger than the interests, it makes sense to borrow. If he's making X% (given X is higher than btcst avg rates), it doesn't make sense to buy back his debt which yields less. Not until he sees profit margins dwindle (at which point he can buy back debt or lower rates).

Remittance, tax evasion, international trade, weapons, terrorism, drugs are a few examples where moving money across borders anonymously might be worth a lot.  And whether the transactions are large or split into many small ones does not change alter the business model at all. Neither does it matter whether A is 1 or 100 people, or whether B is 1 or 1000. Or whether B sells their bitcoins on an exchange directly or through N number of middlemen.

While this is true qualitatively, it's insane quantitatively. Even if 7% were explicable, which they aren't IMO, he should be long past the point where he scales down. With 400k BTC, you can shuffle the entire Bitcoin market cap around many times in a single day. There exists no fund flow in Bitcoin that could require such giant size of transaction/escrow/whatever.

Pirate has never promised 7% forever.

He also never promised to provide his service forever either...

I'm not expecting either.

Then if you are invested with him and know this you are taking a huge risk because he could run with your bitcoins.

Why, because we all know 7% isn't sustainable forever (exponentially especially) and Pirate has already stated he will be adjusting interest rates for savings accounts? Or because he's currently operating under a certain model that allows him to profit off of the current situation bitcoins and the bitcoin economy are in? He might be able to offer interest rates at any amount down to 0%, but I doubt to see him operating past then. He could turn around and become a more typical bank at that point I suppose.

Just because 7% isn't sustainable and because he's playing off of the economy and currency, doesn't mean that he will default or run. Him ending services wouldn't mean that he is defaulting or running either.

I'm taking a huge risk anyways, the two observations above are inconsequential.

Hey do what you want with your money.  I'll stop there...

Yes, it is. You borrow some bitcoins at slightly above market and pay them back as soon as possible.

Exactly. So what's his profit model now?

No, it makes sense to do the deals even if that means you need to borrow. But also, it makes no sense to borrow if you don't need to -- unless you have no intention of paying back. With your model, he'd have no need to borrow. Thus, either he doesn't make sense or he doesn't intend to pay back.

It absolutely does make sense to buy back debt which yields less because buying back that debt in no way affects his profit margins. It is comically absurd to argue that his business volume is limited by his capital.

Grow Bitcoin itself.

Seriously guys, think about the bitcoin ecosystem, and read all the history post of pirate. And think again.

sssshhh

We're all in it for that. Some are better than others :)

So, Pirate is not motivated by self-interest, but he's a rich kid who's throwing away a fortune to make some gullible bitcoin enthusiasts rich, who would otherwise fall for a get-rich-quick scam? Allow me to not be convinced.

Did I say that?

You did not, but this is what you imply. Not taking a huge profit for oneself and instead distributing it to those who are irresponsible enough to invest in an enterprise that has all the markings of an obvious scam is effectively the same thing as having a shitload of money in the first place and distributing it the same way.

No I did say that if you understand what he does you understand why he need to have such interest rates.
This is bitcoin.
Bitcoin is a very small market/economy.
Bitcoin is an emerging, shoud I say booming economy (GDP likely to be in the hundreds of percents annually, there are signs everywhere that bitcoin is spreading)
Bitcoin a free market, a true one, without any government interference.
All of these make it a scammer paradise (although defenses are emerging), true, but it also make some insane profits possible.

Now I'm not 100% sure (or I would be have all my coins in pirate's), but enough to trust him.

But whatever, time will tell. I'd say that by the end of 2013 we should "for sure" :)

pirate at it again....sell low and buy high LOL