Yup, good call.


Yea same here.  Any mid to large financial institutions can reach me via email or via PM.  Also, will accept BTC on retainer or for consultation.

I like having Luke-Jr around, he's our bulldog.  I'm gonna start mining on his pool.

I think you're right.  Better get short again. 

For me, its the times when those Support/Resistance slopes look like the MtGox depth that confirms the predictive value of chodpaba's charts 

Looks like you found a way to game the system.

You're right.  I meant to say stop-limit order, but I forgot that bitcoinica doesn't offer those.

Only stop orders, which will you give you the rock bottom price.  If that happens to be below your zhoutong price, you will still get zhoutonged and lose everything; regardless of where your stop order was.  And if its above your zhoutong price, well you'll only lose almost everything.

I'm going to get tired of repeating this but, stop/limit orders probably won't protect you against unexpected movements.  Stop orders execute at market price, which often jumps way past what you expect, instantly whenever someone makes a huge trade.  You won't get the price in the middle - you'll get the price at the rock bottom.

And if you have a limit order placed in the middle, it will just be skipped.  Example:  Price is $6 and you put a limit order to sell at $5.5.  But then coins are dumped instantly setting the highest bid price down to $5.0.  Your sell at $5.5 never happens because now the buying is all at $5.0 or below.

Know your zhoutong price and more importantly don't expect stop/limit orders to protect you.

Thanks, I'm somewhat relieved now.  Hopefully bitcoinica users will be better on their guard. 

A massive influx of new people is already starting.  Most will not be experienced in trading of any sort let alone margin trading.  We know you realize that when your customers are losing, its bad for your business.  So its surprising that the zhoutong price isn't calculated and visible on the user's account stats. 

Any chance you'll add this value as a field on bitcoinica, so users don't have to calculate it manually?

From the user's perspective:
Mistake 1) will assume he has a typical "maintenance margin requirement" with no idea how close to typical it actually is
Mistake 2) will assume a constant margin balance, when actually that margin balance will decrease as the price of bitcoin decreases
Mistake 3) will calculate the "zhoutonging price" based on the current bid, which will of course change.  Checks back later when the bid is lower, and suddenly their "zhoutonging price" is different than what they calculated using "current bid".  Maybe even zhoutonged already.

Three strikes and you're out.

How about a formula for the "zhoutonging price" which uses variables instead of constants?

Be careful here.  This could confuse people.

Your base price is NOT your zhoutong price.  Did you figure out the formula for that yet?

The down move from June 2011 is the overall fall from $32 to $2.  "Correcting the down move" means it retraces from $2 back up towards $32.  But it only retraces partially - hence "corrective wave" of a certain percentage of that $32->$2 fall.

The good news is, this rally is looking more like an impulse wave than a corrective wave.  Meaning it should exceed the old highs.



Of course it will be short lived.  That's fine if you're just holding BTC. 

But when you're on margin on Bitcoinica, short-lived downspikes are how you get zhoutonged.  That's what I'm trying to warn people of.

If you want to survive a downspike you had better be prepared.

Here's some more S3052.  This was in a short-term alert he sent Jan 3.  [I hope he doesn't mind that I'm sharing these excerpts, but people were asking for sources.]

"Recall, second waves can (but do not have to) retrace up to 99.9% of the
wave 1 (but never more than 100%).
Common retracements are the Fibonacci levels. Given the fact that we
seem to be in a cycle wave III up, this minor second wave may not go all
the way down to the 62% level. Another very common stopping point of
second waves is the previous fourth wave (apex of the triangle,
currently at 4.2 $).

One very short term trading scenario may be to sell above 5 $ with the
intent to buy back at 4.2 $ or at 3.3 $ (if prices go that deep)."

I guess I should broaden it to $9.5-$13.5.

Just be aware of the risk.  Do you know your Zhoutong price?


Here's some more from S3052's Jan 1 report:

“We keep our view intact that there is a good probability that bitcoin prices will at least correct the down move
from June 2011 to  Fibonacci retracements of  13.5 $ (38.2%), 17 $ (50%), or 20.6 $ (61.8%). Most typical in
corrective waves are the 50% and 61.8% retracements. This means that even if bitcoin prices were to fall again in
2012, the current rally can lead to 17 – 20 $!”

This is from S3052's latest weekly subscription report (Jan 1):

Resistances
(i) 5.7 – 6 $ (short term)
(ii) The broad 7.7  – 8.7 $ range (minor)
(iii) The 9.5 – 10.5 $ zone (strong)
(iv) The 12.0 – 13.5 $ zone (strong)
Support
(i) 3.8 – 4.3 $ (very strong)
(ii) 3.5 (strong)
(iii) 2.8 – 3.3 $ (very strong)
(iv) 2.6 $ (massive)
(v) 2.2 – 2.4 $ (strong)
(vi) 2.04 – 1.99 $ (massive)

After breaking $5, the rise to $9-$12 is happening very quickly.  If there is a correction coming before breaking into all-time-highs, in all likelihood it will be there at $9-$12.  And there's no telling how sharp the correction could be.

I'll have no sympathy for the panic sellers, but I am concerned about the common bitcoinica user.

From the screenshots people are posting, the interface is very confusing in one obvious respect: the maintenance margin requirement.

Because bitcoinica is missing a "maintenance margin calculator", the user is forced to solve a ridiculous algebraic formula to determine the lowest bitcoin price a position can suffer before you are completely zhoutonged. 

With bitcoinica there is the extra complication in that it lets you keep your maintenance margin in bitcoin.  This means it shrinks as the price drops, and you will get zhoutonged much quicker than you expect.

I'm probably as bullish as anyone here, but I wouldn't be surprised to see a correction retrace down to as low as $4.  Yes, it will definitely bounce back from $4 but only after you have lost everything.

Furthermore, stop-loss and limit orders will not protect you.  If the correction is sharp (and it most likely will be), your stop or limit order may not even get executed before you suffer a fatal margin call.  Market orders are executed at the market price, which could very well drop instantly to below your zhoutong price.  Your limit order to sell before losses only happens if there's a willing buyer, and when there's not it will never even be executed.

Analysts are predicting that $9-$12 will be a major inflection point, and a correction from there will cause many to suffer a forced liquidation.

Please be extra careful and be absolutely sure to understand the risk you are facing.  The top 1% of bitcoinica users have 50% of the wealth.  Too many of you could easily lose everything in the correction which could be coming very soon. 

The top percentile could take everything you have, and it might not even be intentional.  If too many people lose too much, $9-$12 could prove to be final top price for bitcoin.  The richest will be a lot richer and the majority will just be poorer.  It doesn't have to end that way, but it will if we are not smart enough when left to our own devices.

The world thought bitcoin was dead.  They thought we had died in a bubble of our own financial illiteracy.  The greatest risk to bitcoin is nothing and nobody more than ourselves.  Let's prove them wrong.

Please be careful.  See you on the upside.

You're right about it being like gambling.  But you're wrong about it being zero-sum.  It's only zero-sum if the price of bitcoin goes back to zero (or the market stagnates and dies).

Granted, it is pyramid-style funny money.  But so is everything else.  Companies on wall street generate profits, fine.  But that doesn't mean their shares aren't overvalued and can come crashing down at any time.  And have the gamblers on wall street ever learned their lesson?

Investments are a spectrum ranging from blatant con, to pump n dump, tulipmania or overhyped dot coms, unsustainability masked  by complexity (global financial crisis), bad ideas and good ideas, and unfortunate business ventures.  Humans aren't perfect and prescient, there's no way to know with absolute certainty what will transpire.  That's what makes markets as unpredictable as the future.

I see no reason to hold bitcoin "investors" to higher standards than any other capitalists.  Bitcoin and its market is as close to genuine generation (or preservation) of virtual wealth as one can get.  People have spent far more money on Farmville than they have on bitcoin.  Mark Cuban (to take one example) is only a billionaire because he traded a dot com for yahoo stock options and then sold them at the peak of the tech bubble.  Are these commonly respected norms equally disappointing to your righteous ethical principles?

The second thought is to doubt those supposed sales and happy customers.  Probably the scammer giving himself good feedback in order to trick people.  Where did you see these gift cards for sale, if I might ask?

It's for this reason that good vendor sites like SR are based on building a "web of trust", so that the accounts of fake customers and scammers are identified and closed before they can rip off too many real customers.  Of course some scammers will always slip through the cracks if they try hard enough, before they are caught.

Same idea with Ebay, but the scam works a little differently there.  A while back, some people were excited to sell bitcoins on Ebay, because they were selling like hotcakes at a 20% premium over the going MtGox price.  They would get with PayPal and then send the customer the bitcoins to the customer's bitcoin address.  Then PayPal reversed their payments (they were bought with stolen paypal accounts or stolen cc's), and they were out their bitcoins.  Now if you see bitcoins for sale on Ebay, its usually as BitBills or something which gets physically shipped.

You have to be on your guard with irreversible transactions like bitcoin (also international wire transfers and western union).  Its the critical ingredient in all the common scams (craigslist scams, nigerian emails, etc.).

*Eureka*.  Just realized that these are bitcoinica stop or trailing stop orders placed to sell at a higher price.  Stop orders become market orders when a target price is breached, so they just get dumped onto the thin bid depth after the upward spike.

These sellers should use limit orders instead, or (if bitcoinica offered them) stop-limit orders.

Do not buy gift codes (Amazon, iTunes, or otherwise) with bitcoins.  Those gift codes were paid for with stolen credit card numbers, and Amazon will probably kill them before you use them or before whatever you buy is shipped.  Meanwhile, the seller has run off with your bitcoins.

615 currently connected is a new recent record.  The highest I've seen was around 700 some, back in August when btc was hanging around $10-$12, iirc.

Nicely shaped ascending triangle at $6.25 plus shrinking ask depth.  I hope he closed that position.