Sounds like your strategy failed because you bought more with the profits, which left you with zero margin.  With zero margin, the tiniest downward movement will cause forced liquidation (aka margin call).

You need to maintain margin, always.  The more margin you have, the bigger a swing you can handle without getting force liquidated (aka "dreaded margin call").

Read babypips.com to learn more about margin trading.  Not a playground for kids; its a very dangerous game.

Is it safe to assume that a market order liquidation on bitcoinica will, at worst, be filled with the visible depth on mtgox?



OK, so orders can be partially closed.  Its just that the realized P/L of a position isn't available for withdrawal or for opening a new position until the entire position is closed (can only have one position per account on bitcoinica).

Also, if I understand this right, gains partially realized are then moved into the margin for the open position.  So if a market order is only partially filled, but then swings the other way before being completely filled, one could be facing forced liquidation if it moves far enough against the position.

Can you change the margin of an open position?

OK, but I keep reading that there's no way on bitcoinica to partially close one's position.  So if guy sets a limit order, it will close all or none, but never partially?

Anyone know what happens when the guy presses "Liquidate" on his 20k BTC position?  The sell price is $6.06, but that's only 50 BTC of liquidity, right?  How does he know what price he will get on the other 19,950 BTC and where the spread will end up?

Glad that there's at least a couple of people who share my view.  To look for an "underlying economy" of merchants is looking at the thing upside-down.  Just as with dollars, the volume of speculative exchange far exceeds the volume of commercial trade (trillions each day in Forex, while real GDP is only trillions each year).  And that's with a "real currency".

What if bitcoin is, as that Wired article suggests, a "meta-currency".  The term implies that its primary use will be as a go-between for the real-world currencies.  Price is determined by speculation, which then forms the base for commerce.  Again, speculation supports commerce, not the other way around.  The volume of commerce is just a fraction of the bitcoin economy, which is the huge exchange volume (speculative or otherwise) staring everyone in the face.

Is there any reason or historical precedent that the commerce should come before the speculation?  That seems backwards.  Which came first: that bullion became valuable because it could be used to buy things, or that bullion could be used to be used to buy things because its inherent properties were conducive to storing value?

I'm also concerned about topping at $10, but not overly concerned for a couple of reasons.  First is that the vast majority of the "profit taking" will be USD that stays in play; sellers will use it to accumulate more bitcoins on a dip.  Secondly, I think the market is much healthier now (compared to April-June 2011), because there is much more automated market making.  I'm not sure to what extent there was any back then.  The market makers now are smarter, more experienced, and very well funded.

Additionally, this time the market already has a history with a range of an all-time-high of $32 and had the time to find its bottom at $2.  Those were two completely unknowns before.  If the long-term trend is up, then the new bottom will be higher than $2, take $5 or $10 as low estimates.  If this wave doesn't bring a new all-time-high, then I would expect the market to trade in the $5/$10-$32 range for a while before it makes a longer-term decision.

Another factual difference is that the April-June 2011 rally started from a new all-time-high of $1.10.  This rally is simply reversing a downtrend that started at $32, so in all likelihood it should pass $10 even easier than before.  And I would expect it to make new highs sooner or later, if the long-term trend is up.

One other thing: the weekly dollar volume.  The current week has already surpassed recent ones by going over $2m.  But it just started on Jan 2.  By the time the week is over, the dollar volume could be in the top three for the year.

Looks like the rise is starting to accelerate; we'll probably gap up.  Too much faster and we'll go parabolic (even on a log scale).

Its at the end of a trend when the sentiment is a contrarian indicator.  That's when you get the fifth and final wave before the reversal.

Right, not yet.  S3025 explained that when sentiment matches the trend, you get third wave behavior.  He's talking about a wave down in his example, but its equally true for waves up.

I agree, that's weird.  Sometimes when there's a big buy, a bot will do an equally big sell immediately after.  I don't understand that strategy.

This time the sell was relatively puny (~2600 btc sold after ~20k btc bought), and it was minutes afterward, so probably not a bot.

[12:43] <bitcoinRT> Jan04 17:39:35 | Bid: 5.29     | Ask: 5.321    | Last: 5.32098  | Volume: 108690
[12:45] <bitcoinRT> Jan04 17:41:11 | Bid: 5.33847  | Ask: 5.7      | Last: 5.69619  | Volume: 125090
[12:46] <bitcoinRT> Jan04 17:42:43 | Bid: 5.6972   | Ask: 5.7      | Last: 5.7      | Volume: 127795
[12:49] <bitcoinRT> Jan04 17:45:47 | Bid: 5.39216  | Ask: 5.39327  | Last: 5.39664  | Volume: 130249
[12:51] <bitcoinRT> Jan04 17:47:20 | Bid: 5.39077  | Ask: 5.39327  | Last: 5.23     | Volume: 130462
[12:52] <bitcoinRT> Jan04 17:48:52 | Bid: 5.35035  | Ask: 5.39327  | Last: 5.39327  | Volume: 130700

In bitcoinica's defense, it seems to be able to track the mtgox price when none of the other tickers can.

I emailed them about accepting bitcoin a couple of months ago.  Their response was that they had looked into it, but the legality of doing so was too unclear.  They operate under the same regulations as a lot of the offshore casinos, and won't accept deposits from U.S. credit cards. 

U.S. customers that want to deposit and bet on inTrade have to get a NetSpend prepaid card (from any number of retail chains) because although the NetSpend cards are sold in the U.S., they have a non-U.S. issuing bank.  Or a U.S. customer needs to use a service like EntroPay to transfer the funds from their US cc to an international cc.  The same hoops as for any online casino which tries to abide by US law and prevent US customers from playing.

The worst part is that they have an API which makes it technically possible for a third party to operate an inTrade broker sevice where customers could deposit funds with bitcoin and then trade on inTrade.  But doing so would be a violation of their ToS agreement for their API, and they would close the inTrade account of said service.

If you look carefully at the "mining factor" chart, in the month of May there are two spikes.  Both spikes were the price rising, but the valley between them was not due to a dip in price, but to a rise in difficulty.  The second spike in May, may not have happened without the prior rise in difficulty (cum hoc).

Similarly, the current rally is blowing past the SMA45, which topped at $20 and bottomed at $3.  But if you compare price to the difficulty, which topped at 2.0m and bottomed at 1.1m, its still only catching up.  

Lately I've been thinking of difficulty as having a "pull" effect on the price, rather than a "push".


It makes good sense to me that difficulty has predictive power.  If the network had decayed and difficulty plummeted much more than the ~50% from its peak, wouldn't that have made the recent price reversal all the less likely?

If price is a measure of demand, then difficulty is a measure of supply (high difficulty = low supply).  But its also a measure of the network security and robustness.  The higher it gets, the less chance there is of, e.g. a 51% attack.  If the "value" of bitcoin is the resilience of its distributed sytem, then difficulty is its best measure.

I price bitcoin according to its ability to store value in a decentralized system where no central authority can seize, freeze, or inflate my coins.  I care much less about the ability to do everyday commerce with bitcoins.  I want an alternative to PMs, real estate, and shares of public companies in which to invest/trade my money.  So more important to me than the number of merchants, is the liquidity (which need not be enormous since I don't have a ton of money).

So an idealized formula for my fundamental price P_f would factor in difficulty, exchange volume (or net volume) and bid depth, and maybe bitcoin days destroyed (another measure of decentralized activity - I look at it as bitcoins exchanged between exchanges).

Because I'm mostly interested in trading dollars/euros for bitcoins, not bitcoins for stuff, the bitcoin "economy" I'm concerned with is primarily the exchange volume.  Somebody else might care more about the number of merchants.

I said as much a long time ago:

Its straightforward to quantify the difficulty, matter of fact its built into the protocol.  And not coinicidentally, its mich higher now at $5.


Try computing the value using difficulty as one of the variables.  Prices at the moon are only justified if difficulty follows.  When it doesn't, there are spikes in the price:difficulty ratio, and it stays grounded at realistic prices.

I agree with Revalin's interpretation of what happened on Nov 14.  Two big market makers went head to head, one drew a line in the sand, and the other lost.

The relation between price and difficulty is a two-way causality.  The fact that difficulty exploded before there was even a market or price for bitcoin falsifies the one-way hypothesis.

As for a fundamental, your definition only makes sense if you assume that the utility of bitcoin is strictly supporting commerce.  I assume that the utility also includes the buying and selling of dollars, euros, etc. (speculation).  Its a value storage and transfer system; a risky asset a la gold.  Its not purely a transactional medium, its an actual commodity.

Difficutly is not a byproduct of the bitcoin.  It is the essence of the bitcoin.  But we're beating a dead bear now.

And whats the quantitative "fundamentals"?  I suggest looking at difficulty, which if you compare to the last time bitcoin was at $2-$5, say that its currently undervalued.

nice wall at $4.5  

And MtGoxLive connected is about to pass 500.  Haven't seen that in a while.


EDIT:  wall just moved to $4.0.  *shrugs*

$5 has more fight in it than I thought, I'm impressed.   Wow, are we really gonna see all 12 rounds of this?