Never?
Why it should implode? Especially now that it is having huge success?
The fact that you cannot long what you want on them doesn't means they are "broken". It's like saying your internet connection is broken because you are limited in speed and you cannot download faster. Or the hard disk is broken because it only allow you to put 2TB of data on them (it's a 2TB one of course)
You obviously speak from a rich set of metaphors built from a broad life experience. I am awed by your attempt at reasoning. Awed. Never mind that such an act by a licensed broker-dealer in the U.S. or U.K. could result in shutdown by the relevant regulatory agency. Of course, from the viewpoint of an investor in Bitcoinica it could certainly be construed as a technical act of bankruptcy, which would give them some out. I don't know what the equivalent legal requirements would be in Singapore, would the operators of Bitcoinica be caned if they couldn't pay off the right officials? We don't have a fully developed money market in the Bitcoin world, so technically we're not equivalent to a brokerage in the real world. We're brokerage-like. Also, being shut down is not equal to bankruptcy, at all. We are still making profits everyday and we are more solvent than ever. The red flag is a promised thing at the very beginning. |
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what happens if i as a new customer of Bitcoinica deposit $50K right now? does it just sit there until i decide to do something with those USD's or will they be siphoned off to allow shorts to cover or other longs to buy?
I think they will be siphoned off. you better hope not b/c that would be a total ass rape for customers. not being able to buy in a Bullseye situation with your own money? why do you tolerate this? you're losing money by not being allowed to participate in an uptrend. thats just as bad as the shorts not being able to cover. you need to be able to make those gains now so as to cushion the downswings which will inevitably come. Since i can't get an answer to this question, i might as well ask an even more difficult question assuming ineedausernames answer above is correct: why is Zhou giving preferential treatment to the shorts? as in giving them USD's before longs who may in fact have gotten their long bid orders in first and who missed out on this last ramp? since when should Bitcoinica be choosing the winners vs. the losers? its just as much of a loss for a long to not have been able to climb on board this train a few days ago as it is for the short who wasn't able to cover. Summary: any trading platform that prevents its customers from trading when (4 sec or more after they initiate an order which may or may not execute at the displayed price as well as forcing Bullseye situations) and how they want (forcing limit vs market orders) is no trading platform at all; its a rigged game. Bitcoinica is a pool of shared resources. If you deposit USD, you can short if you want. This is a quid pro quo thing, some people with USD want to go short and some people with BTC want to go long, and without Bitcoinica, they can't do that elsewhere. We can now guarantee this: If you can open your position or enlarge it, you can close it or reduce it any time.
This is not a different treatment to shorts. When the market is downtrending and we used up all our BTC reserves, same "treatment" will be given to the longs who lost. It's not a winner or loser thing. You can buy at Mt. Gox if you have money, but you can't close your Bitcoinica short position elsewhere. I think this makes sense. It's more of a matter of freedom and choice. Anyway, Bitcoinica never runs out of reserves - They're a bucketshop! It's crime in US!Bitcoinica runs out of reserves - They're broke! Get away from them!In conclusion, Bitcoinica is doomed, to people who don't appreciate it. I listen to all your constructive suggestions and comments, but seriously, I don't care about the FUD(s). |
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Thanks for not adding anything to my understanding... Only Zhoutong can tell me what I want to know. Essentially it boils down to what percentage of positions are able to liquidate? Is this percentage constant, or does it vary? If it varies, how is it calculated?
It's a constant percentage of open positions in a certain direction with an absolute minimum threshold. There are variations such as withdrawals and currency conversions, but I have tested the feature against past data to ensure effectiveness. The risk is actually very minimal, but we won't publish the exact numbers in order to prevent abuse. |
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- Free to close any previous positions regardless of direction and order type (until the critical quantity, which should almost never happen).
Can you please describe what this is so I can make my own decision as to the robustness? All positions are backed unless we go critical isn't very comforting. How do you differ from the full setting aside of every position I have described and you continue to ignore? I honestly would like to come back to bitcoinica as I have been profitable with it, but first I need my concerns addressed. Well, you can completely ignore this at the moment. We are confident enough to eat all the risk beyond this point. We set our reserves based on all open positions, but they are not backed. So we basically hook up with our hedging system to efficiently manage all positions. Just like the guaranteed liquidity stuff - we take neutral risk. |
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Update
Just now our clock server went down when I was pushing updates when the message queue was just emptied. It turned out to take a much longer time than usual. So all price ticking and order matching were paused.
I apologize for the issue.
Now everything is working fine!
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By the way, in my opinion what he did should be called market manipulation and is criminal.
I though Zhou did a pretty good job with Bitcoinica, up until that point. I don't think I'll ever use it after that. Not that there was a high chance I would have used it anyway. Someone in his position should not be saying some of the things that were said, whether it was obvious to the market or not. I apologize for the words that shouldn't come from the mouth of a broker. I was too angry (or maybe excited) dealing with the flood of non-sense and unreasonable arguments. Really, it was beyond my logical control. Please do not take it as a market recommendation. I just wanted to tell everyone that I was not going to take advantage of the possibility, and anyone who did would be out of my responsibility. you know what? i'm tired of being nice to you just b/c you're a 17 yo kid. f*ck you prick! i've rooted out several valid problems with the way Bitcoinica functions. while i had to do some catching up with exactly how your service works b/c its so opaque, it turns out that most of my suspicions are real. and i would posit that NO ONE around here knew that your service could freeze up like this and prevent shorts and longs from covering or buying due to a red flag event. too bad your short clients will have to be liquidated. its either you or them who will take losses Zhou. who will you choose? the fact that you're constantly having to "revise" your algorithm is testament to this. the fact that i was able to jam your algorithm as up to 4.95 10d ago is fact, not fiction. you need to keep your mouth shut. I really appreciate your feedback. However, all the problems you pointed out had already been pointed out by someone else. All in all, just a few issues in recent month: - Transparency (pointed out by mjcmurfy, I already released the hedging volume data, and continue improving.) - The spike algorithm (pointed out by phantomcircuit with solid data support. I reversed all wrong trades and apologized to affected customers. Fixed the issue in 3 days. Plus I released a nice chart to show all history prices to be fully transparent. You pointed out this problem after everything has been fixed.) - Can't close position problem (pointed out by some customers, and further suggested by Mushoz. Fully fixed, plus some nice little features.) - My "recommendation" (I regret saying that, and I'm really sorry.) I feel sad that you felt that I was disrespectful to you. But really, there's almost no value to repeat others' valuable feedback and turn them to negative comments like angry complaints without being a customer at all. And removing all the repeating issues that you brought up, you had these original things to tell me: - Bitcoinica's business model is doomed. - Short selling is harmful. - cypherdoc never used Bitcoinica before. - Bitcoin leverage trading is like speculative derivative paper tower. - Bitcoinica is always losing money! These don't help me at all. We're a community that makes everyone better off. We need creative solutions and innovative ideas, not superficial complaints. Bitcoinica is a proven viable business and we have attracted a lot of interest from investor-like people. Bitcoinica believes in free market spirit and economic liberalization. Bitcoinica aims to push up the web-based development standard and professionalism of the whole community. No disrespect here. I'm always listening. You just have to make sure what you said actually made a difference rather than merely making someone upset. |
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I agree. Those long-squeeze statements were out of character and a bad move on his part. Doesn't change anything for me with regard to Bitcoinica. I haven't used it and don't have any intentions to, not because I think it's necessarily a bad service, but because I simply don't want to get involved in that sort of leveraged trading.
Same here, although I thought about buying Bitcoins with all my Bitcoin savings as margin, but ended up leaving it at a test of 2 BTC for 2 BTC, which are up from 3.5. I’m not going to use it because it’s too risky for me, but if you are really certain about a move (or certain about a bottom), it should be a great tool. I wonder if the ability of buying BTC on margin will have the same disastrous effect upwards as shorting had downwards? For every BTC shorted at Bitcoinica, a BTC was needed by Bitcoinica. How did Bitcoinica get those BTC? By buying them. You are correct it can have an upward effect though. (The investors of) Bitcoinica provided USD that can be used to buy more BTC, which in turn will drive up the price. And I must say I agree that the "market advice" Zhoutong provided was unprofessional and out of line for someone in his position. I'm glad he apologized and hopefully such a thing won't happen again  Actually our BTCs come from customers. Since the first week of launch, we allowed BTC deposits until now. BTC deposits are worth about 45%-55% at today's price in Bitcoinica's total portfolio. Basically Bitcoinica is a pool of shared resources for everyone to utilize. There are limits sometimes (like today, once again, :-/ ), but generally we are very well balanced. |
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Update on the OP's suggestion
Now whenever Bitcoinica is out of reserves (either USD or BTC), everyone can expect:
- Free to close any previous positions regardless of direction and order type (until the critical quantity, which should almost never happen).
- Not able to establish new positions (or increase existing positions) in certain direction until the reserve has been re-established (by others' deposit, or opposite trading).
- The price will show like *4.70594 (with the asterisk) to indicate trading restrictions.
- All pending orders are shown as "No reserve" and they will be "Active" again once the reserve has been re-established.
It's highly recommended to place limit orders when trading restrictions are imposed, so that there won't be surprise execution prices after the removal of restrictions.
Now you can safely place stop loss orders because any trade restrictions will have no effect on these orders!
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I can see both sides of it. Overall I think Zhou does a good job of presenting himself and maintaining a good character, though I still think he shouldn't have made the explicit recommendations he did. It's better to do a public "recommendation" explaining the reason for it, rather than secretly betting against own customers. Now I think both are wrong. I'm really sorry about the explicit "recommendation". |
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By the way, in my opinion what he did should be called market manipulation and is criminal.
I though Zhou did a pretty good job with Bitcoinica, up until that point. I don't think I'll ever use it after that. Not that there was a high chance I would have used it anyway. Someone in his position should not be saying some of the things that were said, whether it was obvious to the market or not. I apologize for the words that shouldn't come from the mouth of a broker. I was too angry (or maybe excited) dealing with the flood of non-sense and unreasonable arguments. Really, it was beyond my logical control. Please do not take it as a market recommendation. I just wanted to tell everyone that I was not going to take advantage of the possibility, and anyone who did would be out of my responsibility. |
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LOL! please think of a fix that will make everyone money.
Well, the best way for you to make money right now is to take advantage of the imminent long squeeze. Price at the time: ~4.2 That's not a market recommendation. I was just saying that I was not going to take advantage of this. And I didn't think anyone would. You can assume that it's a good opportunity to manipulate the market when Bitcoinica is out of reserves. We had no way to hide the "insider information". |
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 No insane prices. No unreasonable spikes. We delivered our promise! The spread is still large but acceptable. Glad to see some of you are making huge profits before New Year! |
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I wondered that myself after all the criticism I slung at him a few weeks back. Not bloody likely! Heh. I'm almost convinced that he has blocked my IP range somehow. I can't access bitcoinica from my home ISP connection anymore, just get server not found errors. I have to go through a proxy to find out bitcoinica's daily volumes!  Just to be clear, I'm being facetious again. I'm not accusing zhou. But it is pretty weird. I'm not sure what happened, but several people reported this to me. (I never block anyone from accessing Bitcoinica.) You can use Google DNS 8.8.8.8 / 8.8.4.4 to get domain resolution correct. It's your ISP DNS problem. I guess it's because of our Anycast DNS not working properly, and I will try to fix that. |
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do you think he'll still let me setup an acct?  Sure, you can try that. But in order for your to sell your 100 BTC to Bitcoinica at a profitable price (at least $4.4), you have to meet the following criteria: - Have a few sizable bids over $4.4 - Maintain them for at least 8 seconds (two 50 BTC blocks) - Not being eaten by major market players Since the launch day, there were a lot of people speculating about the possibility of a financial attack, but so far only one guy has done it successfully (due to a bug in the algorithm in the early days). You can try anything you want. But please be aware of the potential risk. |
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We have virtually no risk.
The market doesn't slip every 5 seconds. And during most of the violent moves previously, we received no or only a few orders. The high volume was always generated after the violent moves.
Now thankfully, Zhoutong, you seem to have the risks of slippage covered as explained above this quote, but your reasoning in this quote is flawed. Never _ever_ think something is not going to happen because it hasn't happened before. Always expect the worst and then some. This applies to anything, not just slippage risks. If you haven't made simulations in which there was heavy trading _during_ price movements, you should! Even though I don't have any practical experience to prove this (because it never happened before), I do have theoretical consideration. The main problem of any system with guaranteed liquidity is adverse selection. We are exposed to the systematic risk of customers trading only when they have opportunities to take advantage of price differences. A similar example is exchange quotation. TradeHill gives users 5 seconds to confirm a Instant trade quotation. But since there's no cost to get a quotation, theoretically there's one possibility: a user gets a quote every 5 seconds, and confirm only when there's huge slippage. What I have done here is to delay all order execution by 1-4 seconds. This makes sure that when you click Buy/Sell button exactly during the slippage, the actual execution will happen after the major price move. And this is still considered as "guaranteed liquidity" because we update prices globally, not just for individual pending orders. Mushoz: can u translate this? It means he is protecting himself against slippage due to random moves by using spreads, but the biggest risk is people trying to exploit slippage. Let's say the price is at 4$ on Mtgox and suddenly a spikes causes it to go down to 3.60. Someone wanting to exploit slippage could quickly sell at Bitcoinica, where the prices wouldn't have been updated yet. That's what the 1-4 second order execution delay is for. It allows the price on Bitcoinica to catch up to the market price, so that people aren't able to exploit slippage. what if the spike comes at exactly 4 sec after the customer pushes his button? what if a series of ramps occur? i know, i know; he says he only executes 50 BTC at a time but in his explanation above he says 50, 100, sometimes 150 BTC. which is it? If the spike comes exactly 4 seconds after order placement, we can be sure that the customer was not intending to exploit the spike because no one actually knew. So it can be 0, or 50. 100 and 150 are possibilities when multiple customers place order at the same time, and it's extremely rare. |
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We have virtually no risk.
The market doesn't slip every 5 seconds. And during most of the violent moves previously, we received no or only a few orders. The high volume was always generated after the violent moves.
Now thankfully, Zhoutong, you seem to have the risks of slippage covered as explained above this quote, but your reasoning in this quote is flawed. Never _ever_ think something is not going to happen because it hasn't happened before. Always expect the worst and then some. This applies to anything, not just slippage risks. If you haven't made simulations in which there was heavy trading _during_ price movements, you should! Even though I don't have any practical experience to prove this (because it never happened before), I do have theoretical consideration. The main problem of any system with guaranteed liquidity is adverse selection. We are exposed to the systematic risk of customers trading only when they have opportunities to take advantage of price differences. A similar example is exchange quotation. TradeHill gives users 5 seconds to confirm a Instant trade quotation. But since there's no cost to get a quotation, theoretically there's one possibility: a user gets a quote every 5 seconds, and confirm only when there's huge slippage. What I have done here is to delay all order execution by 1-4 seconds. This makes sure that when you click Buy/Sell button exactly during the slippage, the actual execution will happen after the major price move. And this is still considered as "guaranteed liquidity" because we update prices globally, not just for individual pending orders. |
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I think credit instruments in Bitcoin should be avoided like the plague. Getting away from the bankster-issued, debt-backed funnymoney is imho the *prime* benefit of Bitcoin. For the same reason, am I very apprehensive about leveraged trading, since this is conventionally done with "margin"="credit"=debt/paper money. Clearly, you can't (and thus don't) sell "paper" Bitcoins on mtGox - yet, so for now it might be ok, but what if credit (promise-to-pay) Bitcoin starts appearing for real within Bitcoin?? I think mtGox credits are a step in that dangerous direction. Please people - never forget the difference between real Bitcoin and promisary notes! That leads to the dark side  -practical question: Does Bitcoinica follow the uptic-rule? If not, why not? Basically no one can really control the outcome. The free market chooses the better option in case of different needs. If there are people willing to pay for margin trading, it could exist for the common good. (Unless you argue about the potential negative externalities of margin trading, which will be a totally different thing.) Margin trading should exist in the Bitcoin world, because either - it's good for everyone, or - it's tragedy of the commons. Either way, we can do nothing about it. To me, the most appealing feature of Bitcoin is the deregulation of money. Uptick rule is a typical regulation to protect some investors' interest while causing unintended consequences which are against the free market spirit. Also, in mature markets, research has found very insignificant link between rate of price decline and imposition of uptick rule. (I wanted to find citations for this, but SSRN is not available at the moment. FYI, Alexander, Gordon J.; Mark A. Peterson (2006-03-15). (How) Does the Uptick Rule Constrain Short Selling?. Social Science Research Network. SSRN 891478. Working Paper Series) |
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if Zhou ran out of USD reserves yesterday, where did all the USD's come from to allow the longs to sell their btc? an avalanche of new customer deposits?
That makes no sense cypher... Why would they need USD for the longs to sell. the longs liquidate their btc for USD's, no? When the longs liquidate, we sell Bitcoins for them. Then we have USD to give to them. You don't understand Bitcoinica accounts at all. The account balance is just a number fully or partially backed by the Bitcoinica reserve. The market maker never has to send money to his users' accounts. |
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Two, steal money (BTC or USD) from the accounts of his customers to allow others to cover.
he just said that the USD accumulated in short sellers accts was already used to buy bitcoins. did i get that right, Zhou? so what do you call that Smickles? Well, we don't really have the second way. Unless Mt. Gox gives us line of credit like real-world exchanges do. But very unlikely. |
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if the market went to $5 today and you were short yesterday and wanted to cover but couldn't b/c Zhou is under reserved in USD's, your entire acct would have been liquidated.
This will not happen in the future. We will only restrict new positions, not existing positions in the future. |
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