Bitcoin Forum

Original post:
Since there's too many mining and pirate related securities I'm curious if there would be a demand for something like this.
I'm considering creating a security for my MtGox volatility trading bot I created recently. Bot is very secure, never makes a loss, makes money on volatility. The bigger the market volatility, the bigger the returns. But according to my calculations ROI is pretty low. On a high volatile market (like the one this week and last week), it would yield up to 0.6-0.8% per week (I already substracted 10% management fees from that), but usually less than 0.5%. Profits should improve if there's bigger trade volume, currently bot pays 0.6% fee per trade as the trade volume is less than 100 BTC. For trade volume > 100 BTC, MtGox charges only 0.55% etc.
Bot is working on EUR/BTC market and has orders in the range between 3 EUR/BTC to 10 EUR/BTC (current price is around 7 EUR/BTC). If the price is swinging in this range bot is making money. If the price will go upwards of 10 EUR/BTC that shouldn't be a problem because all the profit is always on the BTC side (bot is always buying first if there's available EUR balance) and each order is valued at the EUR price, so I can move the range upwards without losing money. If price will go downwards of 3 EUR/BTC there will be a decision to make if to move the range downwards and lose some profit or close down the operation and return the money.
MtGox account will of course be protected by 2-factor authentication and withdrawals through API will be blocked.
I will setup this as a company with voting rights. I plan to issue 1000 2000 shares at 0.1 BTC, total 100 200 BTC, for starters.
Any questions, ideas?

http://s18.postimage.org/5vn1qta0l/Screenshot.jpg (http://postimage.org/image/5vn1qta0l/)

Bots funds:

Bot	Approximate value of funds	Current Trade Fee
-----------------------	---------------------------------	-----------------------
MtGox USD	150 BTC	0.53%
MtGox EUR	50 BTC	0.55%
BitcoinCentral EUR	70 BTC	0%

Bots performance:

Week	Start Date	End Date	Profit (BTC)	Management Fee (10%)	Dividend per share	ROI per week
---------	------------	------------	----------------	---------------------	---------------------	-----------------
1	13.7.2012	19.7.2012	0.201616	0.020162	0.000726	0.73%
2	20.7.2012	26.7.2012	0.173569	0.060423	0.000625	0.62%
3	27.7.2012	2.8.2012	0.029527	0.002953	0.000106	0.11%
4	3.8.2012	9.8.2012	0.076204	0.007620	0.000274	0.27%
5	10.8.2012	16.8.2012	0.231258	0.023126	0.000139	0.14%	<= added bot working on MtGox USD market
6	17.8.2012	23.8.2012	13.974017	1.397402	0.006288	6.29%	<= market crash and very high volatility
7	24.8.2012	30.8.2012	1.523698	0.152370	0.000686	0.69%
8	1.9.2012	6.9.2012	0.779619	0.077962	0.000351	0.35%
9	7.9.2012	13.9.2012	0.892514	0.089251	0.000298	0.30%	<= added bot working on Bitcoin-Central
10	14.9.2012	20.9.2012	0.605584	0.060558	0.000202	0.20%
10	21.9.2012	27.9.2012	0.40708	0.040708	0.000136	0.14%

Note that some weeks were very volatile. I expect the average dividend to be below 0.5 % per week (maybe below 0.3% unless there'll be higher trade volumes).


Contract:
GMVT Trading Bot asset (GMVT-BOT) was created with the intent to give investors the opportunity to participate in operation of a trading bot. GMVT Trading Bot is operating on bitcoin exchanges (currently at MtGox only but may expand to other in the future). Each share in this asset represent share in the ownership of funds the bot is operating with and share on the revenue. 10% of the profits bot makes will go to the asset operator who will cover all operating costs (electricity, management etc.). Operator will also cover any loss that may result from unexpected bot behaviour. On the other hand, operator is not responsible for funds that may be lost due to particular BTC exchange default and funds blockage.
The operator reserves the rights, regardless of the amount of shares owned, to raise a motion, and close down the operation. At least 60% of the shareholders will need to agree for a motion to be valid. In the event of liquidation, all available funds the bot is operating with will be converted to BTC and will be distributed to shareholders.
Dividends will be paid at least once per month.

I like the idea, I've thought about making something like that myself before, but never got the time for it.
For when the range have to be moved down I thought about only using a part of the total money for each range.
That way you won't lose money when the range goes down, but you can use less money to trade.

People claiming "never makes a loss" make me very nervous.....

Just saying.

interesting, I am looking to invest in a bot, I have extensive financial experience and wouldn't mind both investing and helping you out in a project like this.

What would the algo do if the price went straight up?

The code itself is very simple. Bot is just inserting orders when he finds out that the gap between maximum EUR and minimum BTC order is bigger than it should be. He's always buying low and selling high, he cannot make any loss by design. There are no complicated calculations for orders placing. I can put into contract, that I will personally cover any losses that will be caused by unexpected bot behaviour. Of course there is a chance that MtGox itself will close down and block the funds, that case I cannot cover.
I will run the bot for a couple of weeks more to see how it performs. Then I plan to issue shares for just 100 BTC for starters, then maybe expand to other markets (USD, GBP) or maybe to other exchanges. Depends on decision of shareholders, if it will come to that.

It will just place buy orders from money he got at selling when price went up. Currently bot is always keeping 300 active orders covering the whole range from 3 to 10 EUR/BTC, when some order is matched, he either places buy order or sell order depending on available balance.

This bot is very simple by design. There's nothing to tune except for the EUR amount of one order and desired profit. Downside of this is that it is not earning a lot. There are different trading strategies, that can yield more but are much more risky and you can lose money. This bot will "never make a loss" in BTC by design. The only possibility he could behave unexpectedly is when he gets wrong information from MtGox about his active orders which is not very likely and there are checks implemented like for example if there's too few active orders (less than 250, which can actually happen when there'll be crazy levels of volatility), bot will stop operation and I will have to inspect and restart it. Also he can place maximum of 1 order per 10 seconds and maximum of 30 orders per hour. I'm sure bot will never lose money and I can cover this possibility in contract. Also I don't expect that bot will ever work with more than 300 BTC amount under one account on one market, so the risk of loss for me is very low.

I added some performance statistics for MtGox bot working on EUR market for first two weeks of operation. I payed 8 BTC for asset creation (was 2 days ago, still not on IPO page though). IPO is planned for 10-Aug-2012. I will issue 2000 shares for 0.1 BTC each. Around 250-300 will I buy myself, rest will go for public sale. I will run 2 bots at starters, one at MtGox EUR market with 50 BTC and one at MtGox USD market with approximately 150 BTC.
I already created 3rd bot that is working on Bitcoin Central currently, but that one needs more testing and performance statistics gathering before I can release it. There's no trading API at Bitcoin Central and I have to parse HTML pages, so it needs more testing for safe operation. Also I didn't figure out yet how to secure that account with 2-factor authentication and let the bot work on that exchange at the same time. On the other hand, Bitcoin Central charges no fees, so profits are potentially higher. I will definitely not release this bot before the IPO. There will need to be a motion if we will issue more shares to raise funds for this bot or not.

I would be very interested in such an asset. As you said, glbse is all about mining and pirate asset right now, we could use a little diversification.

Did you see what happened to TYGRR-BOT? Fees ate most of the profits.

Your bot can lose BTC if the price goes up a large amount and never returns to the price level you initially sold at.
Example:
Bid is $8.50 and ask is $9.00.  This is a nice spread so your bot places and ask at $8.99 and a bid at $8.51.  Your ask gets hit, selling for $8.99, and then the price continues to increase, never returning to <$9. You how hold some dollars from selling BTC for cheap and the value of your account in BTC is lower overall.

So this bot basically waits for a wide gap and tries to be the winning bid on both sides of the spread?

That was an arbitrage bot that needed to move fiat between exchanges to function, entailing all the fees etc that go with that. I don't think the cost of the trading commissions were really the problem.

This would be true in case we decided to close down the operation and spent all dollars to buy BTC and pay them to shareholders. But if the bot is working and price swings in the range he is covering, he is making money, no matter what is the price of BTC. Also when I move the range upwards, no money is lost, cause the dollar value of each order is constant and bot is keeping revenue on BTC side (always spending available dollar balance first).

He's making money on volatility. Always having gap between orders on the USD side and the BTC side, buying low and selling high. The higher the volatility (up and down swings), the higher the returns.

I added stats for the third week of running bot at MtGox EUR market. In this period price went just straight up, there were only a few swings back, so the dividend is quite low. Tomorrow I will add weekly stats for bot running at BitcoinCentral, so far it has earned almost 0.4%.

Added stats for the forth week of running bot at MtGox EUR market. First 2 days were pretty volatile, price went down, so bot made some coins when buying lower then he sold last week. The rest of this week was calm, except for today, when MtGox had some problems with disappearing orders on ask side (bot made some advantage of the price swings, though his orders were also vanishing most of the time).
Tomorrow is IPO so you may grab some shares if you want. Money from IPO will primarily go to bot that will work on USD market. If enough shares are sold than bot working on EUR market will get additional funds to work with. BitcoinCentral bot is still being tested, I will post his stats tomorrow, so far he's made 0.89%. After all IPO shares are sold and bot will be ready for some real trading I will raise a motion to sell additional shares to get some coins for him to work with.

Absolutely key.

Quick suggestion for a feature to add to your bot that I've seen be very VERY successful on MtGox bots:

Look at bid/ask spread - if looking to make a buy order place 0.01BTC sell orders very close to the buy price.
There are a surprising number of people on MtGox who will look at a spread like that, see the most recent sale price and place an order at that, because they're making a regular exchange rather than speculating and they just want it to go through quickly.

Then, as soon as sell volume appears at that price, you buy into it.

You can do the exact same thing in reverse when making sales. Taking advantage of the lack of "depth perception" of "casual" traders can make you a fairly tidy profit on the exchange, whereas a bot as simple as yours seems more likely to see steady growth eventually followed by catastrophic loss.

What do you mean by catastrophic loss?  :D All the revenue bot makes is kept on the BTC side, so he will not make a loss until after operation is closed down at the high price and I will need to convert fiat to BTC. Your  proposed strategy is risky and on MtGox your bait order will be consumed faster than anyone will notice. BTW, I have currently around 1500 very small orders (around 0.01 BTC each) covering the whole range, so I don't see how I could even implement your suggestion. It's not easy to fool the market. This is volatility bot, taking advantage of price movements and it will stay so. You're free to create your own bot and compete with mine  ;)

Added stats for BitcoinCentral bot. This week bot managed to make a profit of 1.81%  :o Price swings were huge, at one time price was as low as 7.34 EUR/BTC at other time almost 10 EUR/BTC  ;D Note that this bot is not working for shareholders yet.

There are 2 bots, one on BitcoinCentral and one on MtGox.
He's talking about the BitcoinCentral now, the MtGox is the one for the shareholders I think.

Yep, if shareholders will agree I will issue some more shares for BitcoinCentral bot. IPO was for bot working at MtGox (now there are actually 2 bots at MtGox, one at USD market and one at EUR market). BitcoinCentral bot needs more testing and also there are some additional risks, like it's a small less known exchange that can close down more likely maybe, there's no API for trading (I need to parse HTML which is pain in the ass), and I don't have 2-factor authentication for this bot.

First dividend was paid. It is rather low 'cause the price went most of the time straight upwards. But good news is that with recent market crash and huge volatility we are profiting a lot. Also we breached 100 BTC trade volume barrier and having only 0.55% trade fees as of now. Next trade volume barrier to 0.53% is close (92.74% - almost there). Also BitcoinCentral bot is almost ready and working nicely, I have fed him with 70 bitcoins and plan to implement 2-factor authentication this week. If remaining shares from IPO will not be sold this week I will buy them myself. The week after I plan to raise a motion to issue additional 700 shares (70 BTC) for BitcoinCentral bot. Have a nice weekend.

Awesome. Your bot must have had a hell of a good time yesterday ;)

Out of curiosity how did you do in the two flash-crashes? This weekend has been a pretty good test of bots  :D

If market's going down we are buying coins cheaper, so profit in BTC is high now. What I'm worried though is that the price will go downwards too much and it will slip out of the range the bots are covering. So I'm slowly extending the range downwards which may cut down our profit a bit if price recovers quickly upwards but I would rather have this as a long term project. If the price will go below around 8 USD and below 5 EUR quickly and will not recover in under a week I will  raise a motion if  investors want to wait a bit longer for markets to stabilize or liquidate the asset or move the range downwards (this third option will be costly but may make us more profit in longer term). I will let you know exact figures if that will happen for you to decide.

Second dividend was paid. This week was hugely volatile, started with a market crash, then volatility continued due to uncertainty around pirateat40. This is probably the highest dividend for a while. I didn't expect this bot will perform above 1% weekly, now we got 6.29%  ;D Enjoy the dividends. 8)

Yes sir, thank you very much.

Thanks Geo :)

Good for you, and I am also considering making a short-term BTC/USD trading bot for my fund. In the meantime, I will consider investing here... but one big problem:


There are many ways to scalp volatility, but I've never ever heard of a system that doesn't have any losing trades. Could you please elaborate?

The secret is keeping the range large enough, so that the price will not slip out of it and in case price is approaching the end of the range start moving the range. I don't want to explain everything in detail (so everyone will just start to copy it) but I set it up so that moving range upwards is much easier than moving it downwards. Even after the market price slips out of the upper range boundary I can still move it upwards and cost will be minimal (this may be considered as a loss but is so small that it will be quickly covered when normal operation resumes). The last market rally and crash was quite a test and we passed it very comfortably, just for one day price went below 8 USD which was the lower range boundary but it quickly recovered back to around 10.

Thanks for the prompt reply!

So, lets assume that the volatility suddenly spiked far beyond what we saw even on the crash day - in this case, you could potentially have a large loss as you continuously attempt to get in at lower and lower prices awaiting a rally, correct? Because even by having a very large range relative to recent price action, the potential to go far outside that range still exists (and in many studies, these types of volatility spikes have been proven to occur far more often than would be expected by random chance). At what point will you cut losses? There must be an exit strategy here both for winning trades and for losing trades.

I'm not saying I won't invest if you admit to the potential for losses exists; rather, I'm saying the exact opposite. I know that it's impossible to avoid them, so I'd feel much more comfortable knowing what the scenario is that would causes loses so I can properly judge the risk here. Saying "never loses money" doesn't ring right with me at all, it makes me imagine that the volatility bot is doubling down as prices move farther and farther out of the bbands (or whatever you use for volatility measurement), which means no losses for sure until one day it goes poof...

Sorry if my questions are harsh but I must do some due diligence here (it's just business), I mean no harm :). Thanks GeoRW!

If the price goes downwards out of the range we will end up with only bitcoins and no fiat money. In that case I would raise a motion if we want to wait for the price to go back upwards into our range, and/or to spend all the profit we made during that week to extend the range downwards or to shut down the asset and distribute bitcoins to shareholders. That's the exit strategy if price goes below the range. In this case we will end up with more bitcoins because we bought them lower than we sold them.
It may happen also that price will go steeply upwards and bot will not be able to catch up moving range upwards. This scenario less likely because I made it so that the range can move upwards faster (and much less costly) then downwards. In such scenario, bot is spending (some) profit for moving the range upwards. Also if bot will not be able to catch up moving range upwards and price will slip out of the range and will remain at higher levels for several weeks and forseeable future (looking at the MtGox market depth), we may extend the range upwards and continue trading at that higher prices as well but in this case the dividends/profits will be lower as the trading amount will be lower (I may raise a motion to spend let's say 50% of profits for strengthening the range). In this case investors will still not lose a single bitcoin but may expect lower dividends until we catch up with the price increase or until the price correction occurs. Right now we USD bot covers range approximately between 8.5 and 18 USD.

Also I would note now that at higher prices we have smaller orders and (at MtGox) we pay higher fees, so expect lower profits at higher prices if volatility stays the same. And also I don't understand why this asset is traded as high as 0.25. That's 2.5 times higher then was the IPO price and unless you expect such huge volatility as was last week to occur often don't buy it at that high price  ::)

Motion was raised to issue 700 additional shares for operation of BitcoinCentral bot. Please vote.


You can see the BitcoinCentral bot performance stats in the original post.

I notice you mention that percentage commission on trades somewhat limits you, but then I also notice you like to place huge numbers of tiny trades.

So I am wondering whether the fee structure used by Open Transactions, in which there are no percentages but there is instead a "usage token" fee per API call, would tend to seem better or worse than the "traditional" commission-percent type fee structure?

-MarkM-

I don't know what's Open Transactions  ;D Any links?

http://devtome.org/wiki/index.php?title=Open_Transactions

http://open-transactions-tv.github.com/

https://bitcointalk.org/index.php?topic=53329.0

-MarkM-

Sorry nothing to see here just subscribing

You mean the thing you can do with the watch button?

I will think about this for a while before I go in big. In the meantime I purchased a small quantity of shares. It is really great to see something like this appearing; it's a good alternative to the usual bonds and mining shares (or overvalued equities).

Just to let you know, the motion to issue additional 700 shares has passed:

% to pass motion: 60
Voted Yea:563
Voted Nay:79

But I still don't have those additional shares in my account. I have opened support ticket on GLBSE and it is assigned to Nefario right now. Hopefully, it will be resolved soon. I will put an ask at 0.1 afterwards. Some of those shares (around 200) I plan to buy myself if they won't be sold.

Any word on the new shares? Are they still held up by Nefario?

Yep. Still no response from Nefario on that support ticket.

Did you click on "issue more security" in your asset portfolio page?

I'm interested in this and commend you for your bot sir! Well done!

I didn't have that item under Security administration panel. Now Nefario responded to the ticket and it is there. But still I'm not able to issue those shares. When I try, I get the "You need to get your security holders to vote to allow you to issue." error message.

So, finally Nefario fixed it and 700 additional shares were issued.

Very interesting concept. Have you looked into arbitrage opportunities and creating a security for that? If you can move quickly, especially between exchanges, grabbing 1%+ seems possible on a somewhat regular basis since this is a fairly slow moving market (compared to, say, NYSE, where there's thousands of AIs looking for arbitrage opportunities all the time and milliseconds make or break them)?

Maybe some time in the future when I will have a lot of free time to develop, fine-tune and test such a bot. Goat had failed with his arbitrage bot, beacause of the amount of fiat money he had to move between exchanges and had many other problems because of that (money laundering accusations, terrorism). You may check TYGGR-BOT thread somewhere here on these forums.

This is a great tool for the market. Profiting from volatility leads to overall market stability. We have a need for more bots like this one, especially since attempts at arbitrage trading haven't been successful.

So how is this going?

I'm interested. Get verified!

So how is the GLBSE closure going to affect GMVT-BOT?

I haven't decided yet. After Nefario provides a list of investors there are some options:

1. Close down the operation, i.e. move bitcoins from exchanges (including buying bitcoins for current fiat balances) and distribute bitcoins to investors. This is the easier option for me.
2. Move to other exchange. It depends if this can be easily done, if some other exchange owner allows to move asset there and if we will have to pay additional costs for this move. I'm not sure if some other exchange can be safe enough.
3. Administer the dividend payouts by myself. I'm not sure if this option is feasible if there are many small investors. The frequency of payouts would change to once per month or once per 2-3 months maybe. Maybe I would buy back shares from small investors to continue like this if they will agree.

What are opinions of my investors?

Edit: Bots are still working meanwhile and profits are being accumulated.

As much as I'd love to retain the revenue that my shares of this bot produce, I probably qualify as a small investor anyway and I would figure that closing up for now would be the easiest. Even if you're later listed at another exchange getting all the current owners their shares  back would probably be tedious at best, and possibly expensive. If you do reopen somewhere else you can always just reissue the shares and start over.

For larger accounts (probably an arbitrary distinction that you'd have to make) you might give them the option of continuing or shutting down as running things manually for five people with 100 shares each is a lot easier than 50 people with 2-20 shares each.

Even through you don't have any investor information, I commend you for your efforts and actually BEING THERE for us. Even if you are powerless for now.  :P

What do you mean being there? I'm still here  8) I have my own bitcoins invested in bonds/shares on GLBSE. So I hope Nefario will send assets information to issuers as soon as possible. Don't know why it's taking so long.

Just quick update for my investors. I ran some calculations, how the bots were performing since closing of GLBSE and what the liquidation of asset would mean for investors.
Since last dividend was paid at the end of September bots performed as follows:

Start	End	Profit	Man. Fee	Dividend	%
28.9.2012	27.11.2012	7.259981	0.725998	0.002420	2.42%

So if everything was as usual, the dividend at this time for past 2 months would be 0.002420 per share. As I'm considering to close down the operation (as per contract I'm allowed to do it), I calculated how much BTC would we have after liquidation of bot accounts and after conversion of fiat money that bots are working with. At this time at current prices that would bring us 262.776739191142 BTC (this includes unpaid dividends as calculated above). With 17.00892 BTC that was already paid as dividends before shut-down of GLBSE, I consider this project a success even after liquidation as I initially planned to run this for longer. I got 270 BTC from investors and total value produced for investors is at this time 279.785659191142 BTC.
After liquidation, each share is (at this time) entitled to 0.09732471821894 BTC. IPO price per share was 0.1 BTC. I expect that not all shares will be claimed so I will pay 0.1 BTC per share, which I think is a fair deal. Even after all shares are claimed I can pay 0.1 BTC per share as the difference is minimal.

I plan to continue to run bots with my own money afterwards (hopefully I will get as much BTC as possible from various assets I owned on GLBSE and invest them here). If there's a strong opposition to my plan of closing down the operation, I may consider to move this asset to some other exchange (BTCT.CO?) and continue to pay dividends from there. Paying dividends on my own is not something I would like to do as it is prone to errors :)

------------------

Unfortunately I didn't receive the shareholders information from Nefario yet, so nothing can be done at this time  :-\

I hope you don't close this down! I prefer things like this vs investing in a mining operation. The project was a huge success. I started trading on www.cryptostocks.com and it's not bad.  It just don't have the amount of volume that GLBSE had.

I do feel that if more companies such as yours found their way over there, that it would become a better place!

Either way, I appreciate the updates!

I would personally also love to see this continue going, though I understand the other reasons for wanting to close down. For what it's worth I believe both cryptostocks and btct.co are both offering to take in GLBSE assets in for free. I'm less familiar with cryptostocks, but btct.co has a tool setup to help with import, will refund the 5 BTC setup fee, and person to person transfers are free.

Dear investors,

I have received a list of shareholders from Nefario. Please verify the list below if your BTC address is included and if the number of shares is correct. Almost all shares were claimed (the list below contains some dummy rows so that the total is 2700). I give it a week or two and then will send 0.1 BTC per share to these addresses.

Yay, I'm on the list! First thing that has gone right with this GLBSE fiasco.

Thanks for running a good service, I enjoyed owning GMVT-BOT shares. I hope you do well in your volatility trading in future.

Yay me too! ... kinda embarrassed that I have so few shares.

Yup, looks right to me as well  ;D

Coins were sent to the above addresses. Transactions are being confirmed a sI write this, so everything looks fine. Check your wallets and if something's went wrong, let me know.

I can confirmed that payment was received.

Just sad you won't be continuing the asset, it really was nice while it lasted  ;D

Oh and thanks for doing such a good job  8)

Confirmed mine on blockchain.info, while it's sad to see this closed down, it was great while it lasted. Thank you.