I do know how to use wikipedia. But thanks for being so kind in providing those paragraphs for my benefit. Have you somehow gleaned from my posts that I am a proponent of economic intervention by the regulators? Your copy-pasted wikipedia and merriam-webster definitions do not contradict my argument one iota.

Even when regulation is limited to tax collection and enforcement of private contracts, how do you think that the authorities know how much tax to collect? Because the businesses they collect from are required to disclose their accounts and other financial activities.

The only thing that truly defines a free market is the former (unbolded) part of your wikipedia definition, where prices are determined by supply and demand in a competitive market only and not by economic intervention by states or other financial institutions.

Again, as I already said, we as a community don't need to have the ability to impose sanctions on bitcoinica or otherwise intervene in the market to prevent them from operating, HOWEVER (I am copy and pasting my own statements now) we should at least have the ability to raise awareness of potential problems in the market that would be otherwise hidden, so that the market participants themselves are made aware and can correct the issues themselves by voting with their feet, or more appropriately, their bitcoin.

In order for this to work, then we need transparency on at least some of the data. If a business is unwilling to provide this data, then the logical reason for not wanting to do this is that they are trying to hide something that they do not want their clients to know about.

Even a completely 'free' market requires some amount of oversight. The fair and efficient operation of markets requires that monopolies such as bitcoinica are not allowed to abuse their dominance, and that competitors participate in the market in ways which do not restrict, prevent or distort competition.

Regulators do not have to be given any actual powers, but should at least have the ability to raise awareness of potential problems in the market that would be otherwise hidden, so that the market participants themselves are made aware and can correct the issues themselves by voting with their feet, or more appropriately, their bitcoin.

I don't like boiling anything down to simplistic statements. But I digress. Yes, bitcoinica might commit fraud and take your money, and you probably wouldn't even realize it had happened. Therefore we need to make sure that it can't happen. Very 'nice' argument indeed. Also, how am I to produce any evidence when no data is published and none can be obtained? All I can do is point to lessons that were HARD learned in the real financial sector. We ignore these lessons at our peril.

It's absolutely hilarious that you are trying to typecast ME as the thug, when I have literally ZERO power to do anything but try and convince others that there is a significant potential issue here. I'm not saying bitcoinica IS a scam or that zhoutong is not an honest guy, but there is significant potential moral hazard as I already explained.

There ARE 'thugs' who 'kidnap' you in the free market if you refuse to show them your books. They are called financial regulators. All financial institutions have to document for them exactly what they are doing with their depositors money. Pesky, aren't they? Since we don't have their help here, we need to do the job they normally do ourselves.

If you do not want to heed caution, then throw it to the wind for all I care, and deposit all of your coin with bitcoinica. I have no vendetta against bitcoinica, I do not use their services, and have no reason otherwise to continue this line of argument other than for the good of the bitcoin economy. You are entitled to disagree with me, but I have no obligation to save you from your own stupidity.

1) No  2) No and 3) No, they owe me nothing.

If you want a more thorough explanation of why I think an overview of this data is necessary, then maybe you should actually read my previous posts. Just because they have not defrauded anyone to date, does not mean that they might not in the future. The only way to monitor the platform is with this information. I'm not saying bitcoinica is a scam or that zhoutong is not an honest guy, but there is significant potential moral hazard as I already explained.

If bitcoinica were operating in the financial system proper, do you think they would be able to evade these questions the way they are able to currently? And do you think people would be jumping to their defense on the issue? Would you deposit your money with a bank who would give two fingers up to the financial services regulators?

Cool site cunicula. I think that would be a very effective method of advertising indeed! hehe.

I ran my own home IP address through it and it found a few torrents I downloaded a while back. Then I ran the ip address of bitcointorrentz.com through it and zilch, nada. It's good to know that the steps I have taken to prevent torrent data sniffing on the server are working.

Despite the deliberately opaque and complicated way this system is operating, I'll try and explain my concerns as clearly as I can, without knowing more about the inner workings of bitcoinica, it's financial status, how it's trading bot works and how it hedges.

Basically, it all comes down to the fact that it can become very expensive to hedge a leveraged position (i.e. more than the initial deposits), on an exchange that does not allow you to also leverage the hedge position. This is the case we find ourselves in with Bitcoinica and MtGox. One offers leveraged positions but the other does not.

On bitcoinica, you make nominal profits in usd for your trades, not bitcoin. Let's say that I decide to leverage a large bitcoin holding at 2.5:1 on bitcoinica.  If I decide that the market is going to move up, and it does, I am entitled to 2.5 times the profit in usd than I would if I were trading directly on the exchange. Where exactly does this cash come from?

Some of it will come from investors who have taken losing opposing positions at bitcoinica, but it is easy to conceive of a huge leveraged position being held for a long time which has accumulated a lot of profit. It is possible that bitcoinica would not have the volume on its own orderbooks alone to pay the winnings. So once the trader closes out his position, bitcoinica may have a significantly acute deficit to meet which may make them insolvent.

When bitcoinica's orderbook becomes internally out of balance, the overspill from any huge positions closing out will require bitcoinica to foot the bill which is denominated in USD. Because bitcoinica does not pay this bill from it's own funds, the money necessarily has to come from the btc deposits on its books. Bitcoinica can 'hedge' the position, but since they can not leverage it, they would have no option but to try and use the bitcoinica depositors bitcoin on mtgox to speculate on the market proper for a profit. Considering the fickle nature of the market, this is very risky and could potentially be a double edged sword for bitcoinica traders.

So bitcoinica now has a strong incentive (almost a requirement) to profit on the MtGox platform. And since they are privy to a hell of a lot of market position data and other market information, they have an unfair level of insight into the market - even if this insight is only coming from a derivative platform as long as there is enough people making predictions it is extremely representative of what is going on in the market proper as everyone is speculating on the primary market itself. So what I am saying is that there is a strong likelihood that zhoutong would be forced to use this data to manipulate traders on the exchanges. Another potential scenario is that he would attempt to minimize the amount to be 'hedged' or put at risk, by actively trading against his clients directly on the bitcoinica platform. Neither scenarios are pretty.

When you consider that a lot of high volume traders are starting to take leveraged positions, you have to wonder how bitcoinica is supposed to foot the bill if a net majority of them happened to wind up significantly in the green at some point in the future.

Also, consider that someone with a lot of capital could take up a large position on bitcoinica using lots of leverage then pop over to MtGox, take a huge bite out of the market, maybe even at a loss, and still wind up hugely in profit because of his bitcoinica position.


Why should zhoutong protect his clients who are taking extremely risky positions at the expense of the market proper? Doesn't sheltering a section of the market participants go against everything the free market is supposed to achieve? People who take risky positions and lose deserve to have their money taken away as they would have been perfectly entitled to the profit had the trade gone the other direction. They should not be trading with more than they can afford to lose.

Why does MtGox or TradeHill not feel the need to do this? Zhou must just value his clients so much more than everyone else. It of course motivated out of self interest. Work your own way through to the logical conclusion of that one.

Zhoutong, just so I can get a definitive answer here and now, I want to ask you directly. Do you have any intentions whatsoever, either presently or in the not too distant future, to provide us with the following data?

1) Total deposits in BTC and USD
2) Daily ratio of internal 'balanced' trades to direct market trades
3) Total daily hedging volumes in btc
4) Some indication of the net balance of your orderbook (e.g. 48% buy, 52% sell etc) as is often customary

This information really is the minimum required for us to be able to assess in some shape or form the solvency of your operation if we are to be able to go on anything other than your promises and personal guarantees that you will not fall victim to moral hazard. The hedging volume data does not need to be specific. Trading levels and the positions of your clients are not necessary, we just need the overall totals to ensure that your platform is solvent and viable. That should not be anywhere near enough information to allow users to run your users stops. You could delay the information by 24 hours if you still felt the need.

It will shut me up if you do, and others with similar concerns. If you have nothing to hide, the trust that you have established to date can only be reinforced by this. I see no disadvantages here.

If you intend to refuse, please furnish us with some hard facts as to why it is exactly that providing this information would harm your clients.

I would recommend to everyone reading this, not use bitcoinica's services until either the data is provided or 100% valid and detailed reasons are given as to why this specific information can not be revealed to the bitcoin community.

Obviously, everyone is free to make up their own minds on the issue but I think it is important enough to be doggedly persistent in our requests for transparency from bitcoinica. If you agree, please say so.

Just to be clear, I have not lost anything. In fact I am up 48% in the past few weeks, largely in part thanks to the fact that I avoided using leverage and was therefore able to sit out a few unexpected movements which returned to their original levels after a few days. I did not use bitcoinica for any of my trades. I did open an account a few weeks ago, but just poked around for a couple hours and tested a few minor features to satisfy my intellectual curiosity. I have only returned to the site on a few occasions since.


Ummm... thanks for the advice but I think you have got it on it's head. Maybe that explains how you managed to get yourself 'zhoutonged' last week. Still haven't learned your lesson yet though I see. Or have you just lost so much that you now intend to try and play the catchup game with some ridiculous leverage ratio? If that is what you are planning, I feel sorry for you.


You sound like a stereotypical testosterone fueled stock-market meathead from wall street in the 70s, who doesn't bother with such trifling things like fundamentals, causality, or the real world in general. Do you just invest blindly in anything based on what the technical indicators tell you to do? Prices can be manipulated, charts and trends made to look persuasive, indicators made to give false signals, all in order to lull people like you into creating real (but artificially caused) price movements.  
  

Of course it does. Some are trustworthy and reputable, others are not. Some have high fees, others are more reasonable. Some are thinly traded, others have high volume. Some support certain currencies, others do not. Must I go on?


This is the bones of your argument.

I agree that the most important thing is that trades are set up in the right spot. But, how are we to determine what the right spot is when potentially 1/3 of the orders are invisibly sitting on bitcoinica waiting to kick you in the nuts. Likewise with the stop losses and limits. But thankfully, I don't need to use either of these as I do not trade on leverage and can make those decisions on my own time.

If you think that my post is motivated by losses, you are probably just projecting your own instinctual behavioral reactions. What motivates me to talk ardently on this issue is not that I have a vendetta against Zhoutong or Bitcoinica, rather it is the riskiness of the operation as I have clearly outlined above, the moral hazard of darkpools and the unforeseen effects that all of this can have on the btc:usd market. Wise men talk because they have something to say; fools talk because they have to say something (Plato).

If you think there is absolutely nothing to worry about, you are a fool.

You are failing to understand the point. Whether I want to use bitcoinica or not, it's effects are felt in the wider market independently of whether I use it or not, as bitcoinica hedges (i.e. shrugs off) its risk onto the market participants.

When Zhoutong states that bitcoinica hedges it's net position on MtGox, what he really means is that the net burden of risk is foisted onto the shoulders of the markets when it is unable to be balanced internally. Essentially, if Zhoutong's clients make large collective mistakes, YOU and ME and anyone else who holds bitcoin will end up paying for these mistakes whether we use the bitcoinica platform or not.

The 'vote with your wallet' rhetoric does not really apply. If I am not given a choice, how can I make a decision?

Understatement of the year.

Bitcoinica is a lot more than a simple trading bot. It is a trading platform that lends money to newbies and allows them to take extraordinarily risky speculative positions on the bitcoin:usd exchange rate, and which operates a trading bot which actively trades on the exchange to hedge these risky positions so that the net risk of the entire operation is placed squarely on the shoulders of the market participants at MtGox rather than on itself.

I have my own homebrew 'bot' that calculates liquidity and prices on either side of the active trading zone, and allows me to place my own 'dark' orders, but it is not bitcoinica!


This really puts my mind at ease. Now I can sleep easily.  


I of course understand this. But the only reason for wanting to do this in an environment where all the exchanges order books are open is to profit from unexpected market movements that you yourself are likely to be the cause of. Do you not see what power you are giving to speculators? I don't want to have to spell it out.


If you are truly serious about it, then you should publish the numbers. Simples.


Just to be clear... I do NOT 'hate' bitcoinica, and I do not 'hate' darkpools. Bitcoinica worries me because of the potential risks and moral hazard involved, and darkpools only serve one purpose - to hide information that will allow you to profit off decisions made by others who are basing them on an incomplete set of data. Yet I do not hate either, and do not intend to slander your good name.

It is a private business, and I sincerely congratulate you on what you have achieved to date despite being relatively young. I also respect the fact that you address these issues maturely and unemotionally. However, I DO expect at least some level of transparency with your clients (who pay your spreads) and indeed the wider bitcoin economy (your loyal risk-takers).

While this is a free market, and you are free to take whatever action you see as best for your clients you must also understand that your decisions impact on the wider bitcoin economy too. Since it is the MtGox market participants who pay for the mistakes of your clients, you have a clear duty of care and responsibility to not just your clients but also the wider community. We shoulder the risk of your operation, the least you can do is be responsive to our wishes.

If you expect to be able to remain unaccountable for your decisions, you are in for a wakeup call.


I will repeat... your promises are MOST DEFINITELY NOT enough. But I won't hate bitcoinica.
I have no reason to hate a computer program. It is what some people are capable of using it for that I strongly disapprove of.

The title of the topic: "Another good indicator of market activity". I can see why people might want to know how well coded the platform is, how the server tolerates large loads etc, but Zhoutong was presenting this data as a market activity metric when it is patently not. I expected more than a glorified hit-counter after reading the title. I was actually getting ready to applaud Zhoutong for his great work until I read it's contents!


I was talking about charts, not a spot quote. Would it not make more sense to quote the spot on the server performance data and use the fancy charts for actual financial metrics such as trade volume, capitalization etc? Why have you devoted an entire page to this and a single line to the most important stats, with no historical charts available?


Mt. Gox is not capable of ripping their clients off as easily as you could yours, if you wanted to, as you and I both know. It is a nonsense to suggest that just because a small number of other bitcoin 'elites' have access to the information, that it is ok to keep it from everyone else.

Anyway, this is not about releasing the positions of your clients. I was referring to historical volume charts and data relating to the financial health of the bitcoinica platform. Keep the rest of your data secret if you like, but users who are invested with you are entitled to know how healthy your operation is when they are putting their money at risk on your site.

If you were to become insolvent tomorrow, how long would it take for anyone to even find out about it?


A simple dark pool that just executes orders on the market is one thing, but a leveraged darkpool that allow it's clients to trade (pretty much anonymously) on margin is something altogether more insidious.

When the rest of the market avoids darkpools, you are single handedly moving the nash equilibrium to a point where ALL of the exchanges will have to go dark in order to compete with you. So you are putting pressure on the others to restrict the data they provide.

Who feels safe trading at a dark pool, the normal everyday trader or the bigfish market movers? Your platform allows the latter group to bend the market to their will more easily, lose less money in the process and ultimately increase their profits. Yes, I can see how they would feel much safer using bitcoinica for this purpose. We definitely must ensure that underhanded traders are able to maximize their profits by squeezing purchasing power from everyone else! That is of prime importance.

What would you say are the top advantages to trading on a darkpool rather than on MtGox directly? I'd like to hear your rationale.


How noble of you. Little point selling the information to the chumps, when you can keep it all for Zhoutong's eyes only and reap 100% of the benefit yourself. You would profit magnitudes more by keeping it secret. Why sell it or (heaven forbid) give it away, when you would just be taking money out of your own pocket?

I'm being facetious to illustrate my point.


I don't necessarily want the information personally but I definitely wouldn't turn down a glimpse... we all know how tempting it is, you most of all I would imagine. Is your name Frodo Baggins by any chance? Because he is the only person that would be impervious to temptation on this scale. Unless you are a deity or something and are in fact not of this planet.

What worries me is that a small number of people, yourself included and whoever else you grant access to in the future without our knowledge, have the information and the rest of us do not. This creates a market of imperfect information to which you alone have perfect information. This is an extremely unfair trading environment with significant moral hazard, and since your company is not audited and your platform is solely under your authority, we must rely completely on your word that you will not use the information against your clients. And unfortunately, your promises are NOT good enough, no matter how nice of a guy you appear to be.  

You say that if there were good alternatives to bitcoinica that you would be willing to compete on transparency, so then you are only willing to budge on the issue when you are forced to do so by competition? That does not inspire much confidence in bitcoinica nor yourself, and more than that, it suggests that you are capable of doing it but are not willing to do the work required until someone twists your arm. If you do not know how to release financial information, you should not be operating a highly complex trading platform. MtGox can handle it, Tradehill can do it, as with many of the other exchanges. It's not like it is something awfully complicated, it could be easily achieved if you wanted to do so.

But you are, apparently, not motivated enough to do anything about it however. I wonder why that might be?

Im sorry, I just don't see how bitcoinica's website & database response times nor it's throughput has anything to do with the exchange rate on mtgox. Care to walk me through the logic or give me some examples showing the price correlation? I only have 24 hours of data to work on.

Frankly, what I found far more informative is your statement that bitcoinica is responsible for up to 1/3 of the trades on mtgox.
That came as a bit of a surprise. I thought bitcoinica was supposed to have a balanced internal orderbook?

A daily volume chart and a chart displaying the number of daily trades on your platform would be of far greater use to the community. Would you be willing to provide this data? As it stands now, bitcoinica is a darkpool in every sense of the word. Nobody has any idea of these numbers except you Zhoutong. This is not a sustainable position to expect to hold into the future.

Releasing this technical website data as a 'financial metric' is dishonest. It is nothing more than a glorified page-hit counter. There seems to be a distinct unwillingness on the part of bitcoinica to share any information regarding its books.

Hehe. I'm up about 48% (in bitcoin) over the space of 3 weeks or so. If you are cautious, rational and understand market psychology and the emotions of the players, you can win. Sometimes... If not, you will probably lose more money than you gain and spend most of your time 'catching up' to try to get back to what you started with. This is a bad trading position to be in, because you are constantly 'on-tilt' emotionally, and prone to irrational decisions.

I think the best way to deal with that is to step back from the market for a few days and compose yourself. You should consider all of the money/bitcoin you invest already lost, since you should not invest nor trade with more than you can afford to lose. Then you can trade more rationally. If you are trading with excessive levels you should withdraw to whatever position you are comfortable with and trade with a smaller balance for smaller returns. That way you can learn the market, and suffer less punishing losses when you make a mistake.

It also helps hugely if you have not actually paid a lot of money for the coins, such as by buying them directly on the exchanges. Earning them by exchanging goods and services for them or mining them, means you are only losing your time (and maybe a little of your money if you are a bad trader, but far less).

I have earned all the coins I am trading with, and it helps you see bitcoin in a very different light.
I am trading solely for profit in bitcoin, not fiat.

You have to have a clear goal as to whether you want more bitcoin or more usd. In a falling market, it is easier to profit in bitcoin than in fiat. You should not be buying in a falling market if you want to make fiat profit. All you will likely be able to do is maintain your existing fiat value by accumulating more coins. But this in itself is not a bad strategy, because when the selling forces eventually run out and the market turns to a rising one or the purchasing power of the coins otherwise rises in the future, they will still have value of magnitudes greater. That is what a lot of people hope for I would imagine.

Also, I don't use leveraged trading platforms such as bitcoinica, because you can be far too easily hoodwinked out of your money. I trade on MtGox directly. The returns might be less, but the losses are more easy to live with and easier to correct and hold your nerve through. When you use leverage, you are sometimes not able to sustain the deep volatility of the bitcoin marketplace without a significant amount of capital behind you and a lot of balls. If you are trading smaller amounts, it is much safer to trade directly on the exchange.

What, so you are trying to say that the crash is your fault? Hmm...
How many btc are you trading with? Either a hell of a lot, or else you might need to get some more sleep.

Is anyone else having problems viewing MtGoxLive right now?
The price information is not updating properly, but the orders on the bid and ask side seem to be fine.
Damnit! Right when you need realtime information the most!

Yeah, the wall was eaten alive. It wasn't taken down.
I wasn't watching it at the time, because mtgoxlive was (and still kinda is) playing up.
We'll be sailing back down to $2.60 now I would imagine.

This is what I was thinking.

There is a rational reason for wanting to hold the $2.90 range strongly; to keep the price afloat to offload coins that were purchased lower. It is a risky play though, and I can't imagine that it would hold all the way down. Any rational actor would pull out once 50% of it is gone (probably sooner), and try again from a lower range. Whoever is doing this has bought in at < $2.50, so can afford a bit more slippage and still be in profit. Of course, they may hold out to the end to give the market confidence. This would be simply reinvesting profit to ensure future returns. It's difficult to know the exact strategy and who is winning or losing.

 


I posted this in another thread, but thought it might be more appropriate here.

There was $144,500 worth of selling in the past 24 hours (48,000 btc). The $2.90 range is certainly being tested. The $2.90 bidwall has shrunk about 15% to 35,000 btc, and a 10,000 btc askwall has emerged up at about $2.92. The price is going to stick between $2.90 and $2.92 for a while now, and the $2.90 wall will slowly be eroded (if it's real) or completely pop once a significant chunk of it is eaten away, and will probably be replaced somewhere in the mid $2.xx. Once that happens we will likely be sliding back to about $2.60. I am going on $2.60 level based on the fact it was a highly active trading point based on the 60 day heatmap I posted a few days ago.

Questioning the solvency of a highly risky operation, in which many people are invested, isn't too proper? Are you actually serious? Screw your orthodoxy, we should be asking more questions - not less. And since Bitcoinica does not publish it's numbers, how could there be any evidence or proof anyway? It is exactly this type of attitude that has poisoned our existing financial institutions.

We need to be constantly on top of zhou to ensure that his books are in order, because I would imagine that there is a considerable amount of money at risk. As it stands now, nobody has any idea of the financial health of bitcoinica. Frankly, I'm amazed that he is not coming under more pressure than he is.

Anyway, it was clear that netrin was being facetious.

What I mean though is that 2160 more coins were sold over the past 24 hours than were bought, but the price is still somehow higher than it originally was. That just does not seem right to me.

Could it be a result of covering up larger volume 'dumps' with smaller volume rebuys? In other words, sneaky profit taking?

EDIT: Correction, make that 2997btc ($8315) more selling than buying.
EDIT2: That last spike to $3.12 reduced the gap again to 2308 btc / $6175