Wow , what professional opinion do you base that on?
It's just a personal opinion which may, of course, be wrong. Here is what I think: - MtGox still has 90% of the market. People don't leave because of the volume - 5 million USD/30 days - TradeHill was there when MtGox was hacked, but people didn't move - Then CampBX came along with top security, sms auth, etc. and people still didn't move - their volume is currently at 30.000 USD/30 days - Then Ruxum came along with top security, lots of currencies, etc. and people still didn't move - they're currently at 1.000 USD/30 days - Now cryptoxchange comes, again with top secutiry, and I don't see anything different yet. ExchB made a difference by allowing bank deposits (you could buy bitcoins within a few hours) and their volume increased a lot - they were at 170.000USD/month when they closed. Which brings me to the problem: these companies with low trading volume are losing a lot of money: 0.005 * 30.000 is $170 per month. This isn't even enough to pay for the servers. So, unless you have some really great features that can steal customers from MtGox (no one was able to do that yet) or unless the trading volume comes back to June/July levels, these companies are not sustainable. I agree that the network effect for Bitcoin exchange is huge. Bitcoinica has traded 493,928.8260 BTC since launch (which was 5 weeks ago). The reason why we're successful and profitable is simple: we know our limitations very well. We have chosen not to compete but to collaborate. I think all Bitcoin exchanges have to consider this if they don't want to continue losing money. Closing down like ExchB is a wise choice unless a unique business model can be found. Micro-innovation doesn't work in such a market with strong network effects. A clear-minded businessperson will know his limitations and turn them into a fortune. |
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Why are you not surprised?
If I have understood it correctly they are waiting for a new Yubikey from Mt.gox.
Hi, It seems that Mt. Gox has forgotten to send the Yubikey to us. I have already requested an account merge so that we can make use of the Yubikey of the other account. Now they are "discussing about the possibilities". We will support instant Liberty Reserve withdrawals soon. I know this is annoying, and I really apologize for that. |
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3.54031 / 3.65211. Spread is to big for 5 decimals. 3.54 / 3.65 will be better solution.
True. But we are all waiting for the spread to narrow to less than 10 pips. :-D |
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Just so you know, that strategy is very likely a large part of why the price continues to fall. If enough people are trying to do that by selling into the bids and not enough people are willing to buy into the asks, then the price will just continue on down. So, keep it up. I want you guys to run this thing right into the ground.
When I started I had $0 and thousands of coins. How could I have bought? Now you can long Bitcoin with Bitcoins, on Bitcoinica. Try it out! https://www.bitcoinica.com/but if he had $0 he wouldn't be able to fund a bitcoinica account, right? Now we support BTC deposits. Just deposit Bitcoins into the account, and trade like USD. Margin trading will make everything possible. |
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Just so you know, that strategy is very likely a large part of why the price continues to fall. If enough people are trying to do that by selling into the bids and not enough people are willing to buy into the asks, then the price will just continue on down. So, keep it up. I want you guys to run this thing right into the ground.
When I started I had $0 and thousands of coins. How could I have bought? Now you can long Bitcoin with Bitcoins, on Bitcoinica. Try it out! https://www.bitcoinica.com/ |
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Many customers use Bitcoin as their margin to trade, so we have Bitcoins to sell when there're short positions. Are you referring to having BTC to sell on Mt. Gox so that you have MTGUSD available for when those shorts cover? But that is an um, ... unique approach. With each 1.0 BTC giving $20 USD (at currency BTC/USD rate of $4) of buying power, this would help explain why the concept we know as the weekend dip may be nearing a conclusion. Yes. Net short simply means Bitcoinica holds less Bitcoins than our customers' account balances. |
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How is Bitcoinica going? I find myself getting logged out occasionaly if I click on the Bitcoinica logo. I also tried to withdraw $18.95 as mtgox code and I got errors. I was only able to withdraw $10. At the moment it's
not an ideal market because it seems pretty flat and the spreads are high.
Hi, you can actually click the "Trade" button at the top to get back. We had cache for the homepage last time but we didn't update because we're currently developing the next release. For the withdrawing issue, we are sorry about it. In fact, the Yubikey of our main Mt. Gox account had a short circuit and stopped functioning. A replacement is on the way. Currently the only way for us to access our account is through APIs (so hedging and deposit is not affected, but withdrawal is disabled). If you need to urgently withdraw money, please email support@bitcoinica.com for manual withdrawals. Thank you for your support! |
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Hi,
Can I myself have both long and short positions at the same time?
And do you have any issue that I have 2 accounts accordingly if not possible in the same?
thanks
It doesn't help anything except creating a pure illusion. We don't allow it in a single account for pragmatism and simplicity. But if you want to sign up for two accounts just to do this (no money laundering or fraud intent), you're allowed to. |
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But how can you liquidate when you are not actually holding any funds. Please explain how you ensure the user pays you? It seems that you don't quite understand that if you are not actually in control of the users funds then you have no power. Sure you can make their account go to 0 on your platform, but this doesn't actually mean anything for their real money.
I don't understand what do you mean by "holding the funds". Of course we are holding customers' funds when they deposit into their margin account. We are just not holding the full amount of funds required for trading. For example when you buy at 5 using full leverage, when the price drops to 4, your whole position gets wiped out, and that's it. We force you to sell at 4 no matter what, just because you don't have enough money to back your losing trade. I hope this makes sense to you. |
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But what if even after liquidation, the account is negative? You have to absorb the losses or do you ask the customer to top up?
I will ask. But if not, we will absorb the losses. It's generally okay because forced liquidation usually happens at extreme prices with large spreads. So most likely we have already made enough profits to offset such losses. |
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So how do you ensure that anyone ever pays? Lets say I make a losing trade, what makes me pay? You are never holding the funds, so you cannot control the funds and thus ensure the transaction. Correct?
Why we never hold the funds? We always require some margin from customers. If they lose too much to a warning level, we will issue margin calls. Soon after that, their positions will be liquidated automatically. |
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Can't...tell...if..serious... LOL.. True. Can't tell. If. Serious. But. Alright. Luckily. Good luck! |
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The best thing we can do is to have a large pool of traders to prevent sampling error. The higher volume we have, the more balanced our position is."
The real danger here is modeling error, not sampling error. You are already big enough that if the pool of traders have balanced positions, you will, too. My concern is what do you do when the pool itself is skewed. "We'll stop trading if we're moving to a position we can't hedge" is a good start, but also unsatisfactory, since most people want to shift their position quickly in response to a crisis. Anyway, we've covered this before. I know there are no simple solutions to these questions. If the pool is large, it's almost impossible to have them create same positions at the same time without affecting the price. We are always trading at (market equilibrium prices + spreads). It's more likely to cause the price to spike than to use up the reserve. Also, there's virtually no reason for Bitcoinica customers to place orders at the same time while other exchanges don't move at all. Bitcoinica will buy up very quickly if this happens. (Based on available reserve, we can influence the price of Bitcoin by about $0.5 in any direction.) That's why the circuit breaker has never been triggered. We have launched the service for a month, and we have seen so many spikes and crashes. |
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I'm the founder of Bitcoinica.
1. The assumption seems justified, but not exactly true. In the past month (since launch), we have 60% of the days of net long and 40% days of net short.
2. Initially, we only support USD deposits/withdrawals, and this imposes a problem of "no one to short to" described by the OP. However, we have added BTC deposits/withdrawals shortly after launch. Many customers use Bitcoin as their margin to trade, so we have Bitcoins to sell when there're short positions.
3. Generally, our overall position is very balanced. Our reserve is about $X0,000 and X,000 BTC at the moment. Average net position / reserve ratio is about 25%. (X > 4)
We have detailed statistics and metrics available for analysis. Currently Bitcoinica's platform is very healthy financially.
Thank you for your support!
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People have been asking that since its inception. Zhoutong's answer is that Bitcoinica's bitcoin/USD position, summed over its users, is relatively small. I.e., there is a relatively symmetric distribution of positions among its users, and bitcoinica can effectively arrange trades between its users which roughly cancel out. This is a decorrelation argument, so I find it fairly unsatisfactory, because in a crisis all correlations tend to go to one. (E.g., "What if every bitcoinica user decides it's time to sell short?") Relying on this kind of cancellation will probably work for day to day usage, but for trading on a volatile commodity like bitcoin, you really care about how your counterparty will handle a crisis.
The problem is, the crisis can't happen without a change in price. Here's my reply to a customer's similar questions: "We have this circuit breaker in place. Execution will stop at one direction if the available funds are not enough for us to hedge. However, it has never been triggered since we launch our site. What really makes sense is, if everyone wants to buy, the price would already have been risen. Every instant, we are trading at market equilibrium prices. It's highly unlikely that everyone on Bitcoinica wants to buy while everyone on Mt. Gox wants to sell. The best thing we can do is to have a large pool of traders to prevent sampling error. The higher volume we have, the more balanced our position is." |
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Good luck guys, if there's this much of a hangup over possible information, ranging on the possible stalking range, then I do not want to be involved with Bitcoins. Matthew I mean no insult to you, but you have went and found the information on several children. I may say this is quite odd. If this is how you wish to go about your business then please go ahead. But this is something that I do not wish to involve myself with.
Thank you everyone for your support.
I'm 17 years old too. There's nothing to hide. You damaged your own reputation. |
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This is so awesome... Truth never lies. |
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Here's my question for Bitcoinica
Hypothetical: the majority (let's say 90%) of bitcoinica users are long in the market (buying) and are leveraged close to the max (let's say 4 to 1).
From where do the currency funds come to fill those leveraged orders?
Same hypothetical question for large HEAVILY LEVERAGED sell orders that come from the majority of bitcoinica members?
Could you clarify that you do indeed have deep pockets with lots of money and bitcoins to fund these scenarios?
If you don't, then what mechanisms are in place so the market can't leverage past the point of no more funds?
If there are no mechanism and limited funds then the only other option would be for a fractional reserve exchange,
in that case it would be an ethical choice to clarify it to your users.
What does this mean for bitcoinica's users if there are no mechanisms and limited funds?
It means that at some point the leveraged buys or sells do no influence the market the same as a 1:1 buy or sell.
Leveraged buys and sells would merely be "placing your bets" on what way the market will go without really participating.
I would really appreciate if you could address all this.
Yes, indeed it will definitely become a problem when every trades at one direction. We have a circuit-breaking mechanism that stops order execution immediately once the surplus or deficit is so large that we can't back it. However, it has never been triggered since launch, due to these reasons: 1. Bitcoin is extremely volatile. Those who use leverage extremely heavily can be easily liquidated when market moves a lot. Therefore we do not advise users to use leverage in full unless they have 100% confidence. In fact, most of our users are rational enough and do not use heavy leverage for their trades. 2. Most of the time, there are long and short positions are the same time. If so many people are confident that Bitcoin will rise, the price would already have been pushed up. In spot exchanges, every buy order means an opposite sell order. At equilibrium price, it's highly likely that all trading in both directions. 3. Some people use Bitcoinica as a wallet. These funds are used as reserves. We have a big thing to announce soon (in 2-3 weeks), which will solve this problem permanently even without the circuit breaker. We will update you soon! |
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What do the superscripts next to the buy and sell prices mean? For example: 4.95185 / 5.11881
What do the 5 and the 1 mean there? It's just 4.95185 / 5.11881. The subscript is called a pipette. Forex brokers display quotes in this format so that clients can easily identify a "pip", which is 0.0001 for most currency pairs. |
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Thank you everyone for your support. I have credited all of you.
Also thank you johnj for the explanation.
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