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akwfleaspirit
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June 30, 2013, 01:21:01 PM
Last edit: September 20, 2013, 05:17:07 PM by akwfleaspirit
 #1

If you have questions about the terminology or other issues involved in the complaint, please ask. I may not express myself very clearly but I am trying to reduce the number of people scammed by icbit.

A big part of their scam involves pretending that you, the trader, lose money because you do not know enough about trading. The site uses trading terminology improperly in a silly attempt to do this.

You can search this site bitcointalk.org for the terms backwardation and contango to find a group of users who defend icbit. Unfortunately for those users they are using those two words in a way no genuine trader would use them. Before you 'invest', please spend a while on legitimate futures sites getting a sense of what backwardation and contango are and how those words are used. Then please search on this site and look at the way those words are used by a group of very similar people who all post in support of icbit.

Please ask questions if you are not too familiar with derivatives and need something clarified.

The purpose of this post is to expose the practices at icbit.

Note: You can read a better description of how the scam is run at http://polimedia.us/trilema/2012/icbitse-the-bucket-shop/

If you plan to send money to icbit please read this and look at the screenshots before you send them money.

Most of this post won't be intelligible to people who haven't traded at icbit, so if you just want an example of what they are doing scroll down to the first comment under this post.

The clearing price of contracts. Every 12 hours the last single trade is used to clear or adjust all contract positions.

Because clearing price affects how much btc you have, as well as how much margin you need, manipulating this number will either give a person extra funds for the next 12 hours or remove funds. This is important later in this post, but basically if a person is short and they manipulate the price down it will a) put a squeeze on the people the manipulation went against, often forcing sales. If there are no buyers the people who were on the bad side of the manipulation are force to sell very cheap. The person who manipulated then buys these very cheap contracts and because they were bought at an unnaturally low level, the manipulator gets all of the clearing profit when they return to a normal price. This gives the manipulator even more funds to do the same.

It is very common for there to be one single trade of one contract around 11:59:59 to push the price.
http://bitcoinistan.com/spot1.jpg This is equivalent to moving the spot price of bitcoin. So what happens on icbit is that the clearing, the spot price, is shifted sometimes dozens of dollars over a few sessions without any comparable move in bitcoin itself. A person can go from a positive balance, well above margin with extra btc directly into default without bitcoin moving at all. Once the default happens and the person's position has been transferred to someone else the clearing price is usually pushed back up a little, in preparation for the next "investor" who buys a substantial position in one of the contracts offered.

That is bad enough, but it gets worse.

This unusual practice could be stopped easily, simply by using the session average as the clearing price. The issue has been raised a number of times, everyone who has been on the site more than several weeks figures out what is going on. So the question becomes why does icbit continue to do something that lends itself to obvious abuse? The two possibilities are either a) they tolerate the abuse because it churns sales, generates commissions, or b) they are themselves profiting from their "mistake", using their access to client accounts i.e., their knowledge of how much btc each person has etc to make their own trades that allow them to buy contracts cheaply.

The easiest way to establish whether this is going on would be to look for evidence that trades appear to make use of information that only management has, such as how much btc is available for purchases in specific accounts. etc.

To clarify that point, suppose a person would benefit by offering to sell an ounce of gold for $20. They do not want to actually sell an ounce of gold at that price, it would make no sense, but suppose they just wanted some benefit from making the offer, without actually selling. One safe way would be to make the offer to a target group whose financial particulars you knew would prevent a sale. If you know nobody in a room has more than $90 then it is safe to offer an ounce of gold for $100. You get whatever benefit the offer provides without having to worry about the actual sale.

Background

The first thing that needs to be clarified is the value of a futures contract. If you buy one btc today the price may be $100. If today you wanted to buy rights to a bitcoin at some time in the future you would pay a premium for that.

For example, simplifying a bit, you might buy rights to a bitcoin one month from now for $110. Of course you get no benefit from putting down $110, but with margin you could put down say 10%, thus spending $110 to get rights to 10 bitcoin in one month. If you wanted to go out two months the price might be $120 etc.

There are formulas people use to calculate premiums for derivatives and one of the obvious variables is volatility. A utility stock might have ranged between $19 and $20 over the past 20 years. There is low volatility so the premium would be low. To buy shares 1 year in the future the base price plus premium might be $21.00.

Bitcoin of course is somewhat more volatile than a utility stock so in a natural market the premium, the extra amount over spot you must pay, will be high. Nevertheless at icbit when traders are squeezed the price often goes to spot or even below spot.

Obviously one dollar above spot is an absurd price and, by itself, suggests a problem with the exchange. Usually it is called a liquidity issue, and superficially that is true. But here is another aspect of icbit that should cause concern. Whenever these unusual prices are mentioned there are a few traders who will pop up and mention arbitrage or something similar as the explanation.

Arbitrage in this case means buying on one exchange to sell on another. The problem here is that it makes no sense as an explanation. It is simply a fancy word being used to distract anyone who is suspicious of what is going on. Is arbitrage useful in bitcoin? Of course. Can a person use arbitrage to make money between exchanges? Of course. Does arbitrage explain how a bitcoin contract can be priced below spot, or even within $20 of spot? Of course not. It's silly. Another explanation used occasionally is the notion that someone wants to offer others a "good price". In other words someone sells a contract down to ridiculous levels not to squeeze out a trader but to "offer a good price" to other traders. See image of chat log for one example. http://www.bitcoinistan.com/chat1.jpg

This leads to the actual mechanism of the squeeze used at icbit.

Anyone who has been on the site has watched it happen again and again.

1) Clearing is manipulated down over consecutive sessions. Traders unaware of what is going on will suddenly see that their account is negative and they must either transfer in btc, or sell.

The usual response is to transfer in funds, since most people in that position suddenly see the opportunity to buy contracts that have become very cheap. Most people will not figure out yet that the "cheapness" is actually a deliberate event, not a market change, it has nothing to do with bitcoin.

Once this process is started it continues until one or more traders have been sheared. This you notice as a flurry of large sales followed by things settling toward normal again. If a trader does not sell as expected the position is liquidated by the website operators.

The last day that I traded I made some comments about the manipulation http://www.bitcoinistan.com/chg.jpg and http://www.nonprof.com/bitcoinistan.com/chat1.jpg and the website owners did not liquidate my position, instead, an unusual position was opened by someone to force my contracts into default.     http://www.nonprof.com/bitcoinistan.com/unlikely.jpg  Looking at the other trades before and after that it is highly likely that the person who pushed down the clearing to 107.01 and then offered to sell 102 at 107.0 knew what my positions were and knew the status of my margin. The squeeze was so precise, in a market with low volume and low open interest, that it is maybe 99.99% sure.

The time prior to that I had 70 contracts that were purchased at up to $80 above spot, a price that seemed reasonable for a far future margined bitcoin derivative, but which were squeezed out of me for within 2 dollars of spot. The website owners sold more than necessary of my contracts at this absurdly low price so I was left well into positive territory, and with btc to spare, but now I had to buy contracts at a far higher price than the website owners had sold them at. Also, notice that my account was fine, then the price was pushed down to where there was a supposed necessity to sell contracts very cheaply, but then once my contracts were sold at the artificial price the contract price rebounded. http://bitcoinistan.com/first.jpg

Just look at the evidence. Points that are not clear are explained in comments below.
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akwfleaspirit
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June 30, 2013, 02:29:04 PM
Last edit: September 20, 2013, 05:25:19 PM by akwfleaspirit
 #2

After the long comment above I took the following screenshot from icbit:

http://www.bitcoinistan.com/oddprice.jpg

Look at the image.

Mt Gox spot is 98.

The image shows a trader being stripped of his bitcoin by forcing an artificial margin call.

A September contract that is $30 above spot would be extremely cheap. $20 above would be too cheap to believe. But under spot is just absurd. Most honest people would probably say that a reasonable price for a September contract might be in the $160 to $180 range.

If you look at the image, a bunch of 1 contract trades have been made to hide some previous trades, to push them off the screen out of scrutiny.

Look at 1 minute before clearing 23:59:00. You see someone trying to push the price up, apparently the victim has figured out what is going on. But the person is not fast enough and the other who is doing that manipulation manages to push it to 91.

This will remove a substantial amount from the victim's account. Here is an example of the difference between 98.7 and 91 if the victim has 400 contracts.
4000 (400x10) / 98.7 = 40.527
4000 / 91 = 43.956

so at that clearing the victim's position would be reduced by about 3.429 btc as well as having his or her margin requirements increase.

The end result will happen probably in a few hours. The person's position being liquidated at a ridiculously low price to be bought by the site owners or others in on what is being done.

A person modestly familiar with markets will notice that as all this is going on there are people chatting on the chat board trying to lure the victim in further. The phrases and explanations used are utter nonsense. They serve only to distract the victim and make him or her feel like it was simple bad luck that happened.

updated Notice that from http://bitcoinistan.com/spot1.jpg to http://www.bitcoinistan.com/oddprice.jpg to http://bitcoinistan.com/final.jpg at least 300 shares have apparently been voluntarily squeezed out of the victim. If they don't sell and he doesn't deposit more money the price will be artificially pushed even lower, forcing him further into margin loss, and the website owners will sell his contracts to the 94 at the bottom of the screen and lower.

This is done a lot on icbit and it is a safe bet that it is what is happening on these screenshots. Most traders will not even notice that there is monkey business going on.



Stephen Gornick
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June 30, 2013, 02:32:48 PM
 #3

A September contract that is $30 above spot would be extremely cheap. $20 above would be too cheap to believe. But under spot is just absurd.

Backwardation (futures price below spot) is one of the risks, especially when using leverage.  
 - http://en.wikipedia.org/wiki/Normal_backwardation

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akwfleaspirit
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June 30, 2013, 03:20:16 PM
Last edit: September 20, 2013, 05:28:07 PM by akwfleaspirit
 #4

Thank you Steven but "spot" is not the same as "spot price at contract maturity".

If bitcoin is $100 today and some calculation arrives at a projected spot in December of $160 then a normal range for that contract today might be $150 to $170. $150 might be considered too low, i.e. $10 under expected spot, $170 too high. But there is zero chance of a September contract trading below $100, below today's spot, unless there is some severe manipulation going on.

Any potential investor is advised to spend a few minutes researching the use of the words backwardation and contango on this website. They do not apply to the futures on icbit and any suggestion that they do is dishonest.
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June 30, 2013, 07:08:15 PM
 #5

But there is zero chance of a September contract trading below $100, below today's spot, unless there is some severe manipulation going on.

Price discovery, ... too, is a bitch.

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akwfleaspirit
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June 30, 2013, 07:39:08 PM
 #6

But there is zero chance of a September contract trading below $100, below today's spot, unless there is some severe manipulation going on.

Price discovery, ... too, is a bitch.

Steve price discovery would refer to the underlying asset usually, in this case bitcoin.

A derivative, for example futures has the value of the asset as well as a time value or premium. Please read my whole post and look at the examples. I think it shows beyond reasonable doubt that the prices are being set not by any calculation that is honest but by simple manipulation.

I have to point out, and I'm sorry if it is rude, on the icbit website when a person questions something often terms similar to the ones you are using, and frequently the term "arbitrage" are used. These are all real words and phrases but they are being used to deflect attention from what is going on and they do not apply honestly. The old "dazzle 'em with bullshit" strategy.
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June 30, 2013, 09:33:21 PM
 #7

But there is zero chance of a September contract trading below $100, below today's spot
Grin
Is this new religion?
akwfleaspirit
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June 30, 2013, 09:51:13 PM
Last edit: June 30, 2013, 10:18:56 PM by akwfleaspirit
 #8

Grin
Is this new religion?

It's like the value of a one dollar bill is one dollar. But if you add value to that one dollar bill, make it so that it is worth more than one dollar, it cannot then sell for less than one dollar.

If btc spot is $100 at this moment, a contract on leveraged btc is worth that $100 plus the premium or additional value. It just is not possible for it to be worth less than one of its components, btc, and completely ignore the other. It just does not make sense. Some people try to blame liquidity but the evidence really is that people are being scammed.

I'm not an expert in anything, especially finances, but I did trade options for some time in the 80s and 90s and I know a scam.

When I say "zero chance of a September contract trading below $100, below today's spot" I'm refering to today. If tomorrow at some moment spot is $99 than the price of a contract would be $99 plus the premium.

Today with spot at $100 or so a reasonable premium might be, very roughly, $60 to $80. If it is much out of that range it is a warning that something needs to be investigated. If it is below zero than it is much more than a warning.

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July 01, 2013, 01:58:36 AM
 #9

Today with spot at $100 or so a reasonable premium might be, very roughly, $60 to $80. If it is much out of that range it is a warning that something needs to be investigated. If it is below zero than it is much more than a warning.

Or a lack of buyers at that price.   It is an open market.  You are free to put in a BUY order for contracts at that price.

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akwfleaspirit
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July 01, 2013, 02:42:43 AM
 #10

Today with spot at $100 or so a reasonable premium might be, very roughly, $60 to $80. If it is much out of that range it is a warning that something needs to be investigated. If it is below zero than it is much more than a warning.

Or a lack of buyers at that price.   It is an open market.  You are free to put in a BUY order for contracts at that price.

There are two issues at least that are relevant to your comment.

1) No person would voluntarily sell a contract far under its value unless a) the sale was forced i.e., against their will, or b) they knew it would lead to a profit because the contracts they offered for sale would not actually be bought (please read my first post to clarify this) and would lead to someone else selling even cheaper because the other person would be forced into a margin call.

2) The value of a contract can be estimated if you know several variables, including volatility (which can be quantified, made into a number), spot price at present, time remaining and so on. The value is something that is not arbitrary, it can be stated in a mathematical way. I don't have expertise in this but very generally, for example, you can say that the value of a December contract, of the type traded on icbit, today, is between $170 and $180 (by 'value' I mean strike price or whatever it's called). There is a range within which the price should fall. As it goes outside that range, above the high end or below the low end, you have to start looking at manipulation, in other words influences that are not anything to do with bitcoin.

At this point, all I can say is please look at my previous posts. I provide clear examples of deliberate squeezes that are flat out cons, in any legitimate market anywhere it would be called unethical and be illegal. Further, the evidence seems to be that the proprietors of icbit are particiipating in this using their inside knowledge of the accounts of their clients. Again read the example from the first post about selling an ounce of gold for a low price.

I have lost what I have lost, that is all done. All I can do now is sound a warning. If a person defends what they are doing, for whatever reason, a friend of theirs or whatever, it only allows more people to be victimized.
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July 01, 2013, 09:46:52 AM
 #11

in other words influences that are not anything to do with bitcoin

There definitely are trades occurring due to forced margin selling, and if there aren't enough contracts bid that selling will go low, below current spot even if that is still within the trading range.

But you can't fault ICBIT.se for there not being sufficient bids.  It's just the result of a long, protracted slide in which many traders on the long side who were margined are basically just adding more funds to hang on and not buying a greater position, regardless of the price.

It shouldn't be surprising that there isn't a huge level of liquidity in the trading of futures contracts on an exchange with properties unlike any other (specifically, the counterparty risk where your position can get closed even without you getting a margin call due to the losses of others).

There is much risk when you combine leverage with volatility, so if there's more that could be done it would be to educate traders on those risks. 

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July 01, 2013, 01:41:17 PM
 #12

it cannot then sell for less than one dollar.
So its only religion. Because it surely can.  Smiley

It just does not make sense. ... I'm not an expert in anything, especially finances
So because you dont understand something you blame for scam.  Roll Eyes


When I say "zero chance of a September contract trading below $100, below today's spot" I'm refering to today. If tomorrow at some moment spot is $99 than the price of a contract would be $99 plus the premium.
And if tomorrow spot would be 50$? If in september bitcoin would cost 20$? What futures price must be today fo one, who thinks that "zero chance of a September contract trading higher $30"?
So you simply dont understad what is a "chance" and "zero chance" Cry

Today with spot at $100 or so a reasonable premium might be, very roughly, $60 to $80.
How did you calculated this? Please, give us a formula Wink

If it is below zero than it is much more than a warning.
You are completely wrong Tongue
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July 01, 2013, 02:37:43 PM
Last edit: July 01, 2013, 10:38:14 PM by akwfleaspirit
 #13

it cannot then sell for less than one dollar.
So its only religion. Because it surely can.  Smiley  
------------------------------------------------------
In an honest market it cannot. There are enough people who know how to value that kind of derivative that if trading were above board it would not happen that these contracts would even approach spot much less go below it.


It just does not make sense. ... I'm not an expert in anything, especially finances
So because you dont understand something you blame for scam.  Roll Eyes  

My full comment was "I'm not an expert in anything, especially finances, but I did trade options for some time in the 80s and 90s and I know a scam." I traded derivatives, mostly stock options from the early 1980s to the late 1990s. I'm not an expert but I know enough.


When I say "zero chance of a September contract trading below $100, below today's spot" I'm refering to today. If tomorrow at some moment spot is $99 than the price of a contract would be $99 plus the premium.
And if tomorrow spot would be 50$? If in september bitcoin would cost 20$? What futures price must be today fo one, who thinks that "zero chance of a September contract trading higher $30"?
So you simply dont understad what is a "chance" and "zero chance" Cry  

The issue you are distorting is whether there has to be a premium to spot. In an honest market there does. If you have a one dollar bill [spot today] it is worth exactly one dollar. If you add something of value to it, a five dollar bill [the time value] then the two things together cannot sell for less than one dollar.

If you want to clarify this for yourself do the following calculation. Using initial margin requirements used at their website look at what happens if you buy 1000 September contracts today and then estimate the price of those contracts if bitcoin moved a few dollars up. If you want me to explain that further or you are not comfortable with math say so.

Today with spot at $100 or so a reasonable premium might be, very roughly, $60 to $80.
How did you calculated this? Please, give us a formula Wink  

Derivatives like this have existed for many decades. If you want the formula for this type of contract try Googling "valuing volatility in futures markets"

If it is below zero than it is much more than a warning.  
You are completely wrong Tongue


We'll see.
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July 01, 2013, 02:46:58 PM
Last edit: July 02, 2013, 02:49:27 AM by akwfleaspirit
 #14

in other words influences that are not anything to do with bitcoin

There definitely are trades occurring due to forced margin selling, and if there aren't enough contracts bid that selling will go low, below current spot even if that is still within the trading range.

But you can't fault ICBIT.se for there not being sufficient bids.  It's just the result of a long, protracted slide in which many traders on the long side who were margined are basically just adding more funds to hang on and not buying a greater position, regardless of the price.

It shouldn't be surprising that there isn't a huge level of liquidity in the trading of futures contracts on an exchange with properties unlike any other (specifically, the counterparty risk where your position can get closed even without you getting a margin call due to the losses of others).

There is much risk when you combine leverage with volatility, so if there's more that could be done it would be to educate traders on those risks.  

Steve there is a reason icbit uses the single last trade as a clearing price. There is no honest reason to do that. Even after it was pointed out several times on their chat that it was being used to fleece people they ignored it. If you look at all the evidence it is not a coincidence that they enable unusual procedures like that which have nothing to do with futures trading and are only useful in scamming.

Liquidity is being used as an excuse. There is poor liquidity, true, but that does not explain how the price of a 6 month forward future goes below spot if futures were really their business.


It is not a matter of educating people in leveraged trading. There is no 'education' that can save your position if someone knows your account balances and causes you to be squeezed. It has nothing to do with bitcoin or derivatives or margin, it is simply a scam that is in the context of those things. If someone is stealing gas from your car should you go to driving school?

Here is one very important point that I think causes some confusion. In any market that involves leverage there is the possibility of a squeeze. The important thing is whether the squeeze occurs as a result of the market or if it can be traced to a trader or group of traders.

On an honest exchange if you are leveraged and prices drop ar some point you will be squeezed. It just happens.

On a dishonest exchange dishonest traders use an artificial squeeze that has nothing to do with the underlying market. In other words in this case it has nothing to do with the price of bitcoin.

Again and again and again the clearing prices are forced down, there are screenshots above, I can provide more, then a specific trader is squeezed, his contracts are extracted, the clearing price rebounds. Because enough people have figured out what is going on it is no longer possible for the trading range to rebound to normal numbers. Again, ask yourself why last single trade is used for clearing.

It has been going on for some time
Notice the 11:59 trades at http://www.bitcoinistan.com/xx72.jpg and http://www.bitcoinistan.com/xx71.jpg when prices were higher. Those are setting up an unsuspecting person to be skinned.
They have probably extracted thousands of bitcoin from folks.
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July 04, 2013, 03:07:54 PM
 #15

In an honest market it cannot.
Tell me why on honest market just as i write this S&P500 is 1,615.41 and E-mini S&P 500 Futures Jun 2014 is 1597.75?  Huh So it surely can and all your arguments is bs Kiss

I know enough.
Grin Futures are not options! Read again http://en.wikipedia.org/wiki/Normal_backwardation

If you add something of value to it, a five dollar bill [the time value] then the two things together cannot sell for less than one dollar.
And if you substract some "time value"?
BTW, why are you not answering my questions? In is not funny to talk to a person, who only says "bla-bla-bla" and not answering straight questions Embarrassed

If you want to clarify this for yourself do the following calculation. Using initial margin requirements used at their website look at what happens if you buy 1000 September contracts today and then estimate the price of those contracts if bitcoin moved a few dollars up. If you want me to explain that further or you are not comfortable with math say so.
Please you do this calculation if bitcoin moved 20 dollars down Embarrassed

Derivatives like this have existed for many decades. If you want the formula for this type of contract try Googling "valuing volatility in futures markets"
Again no answer. Sad Looks like you simply post some random numbers that bumped into your head. Cheesy I ask you to post here the formula and all your calculations that gave you those numbers.

We'll see.
What i see is bitcoin below 80$ Roll Eyes
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July 04, 2013, 06:56:55 PM
Last edit: July 04, 2013, 07:51:34 PM by akwfleaspirit
 #16

Starik you are correct on some points, but please first start with point number one. Why is last single trade used to clear? It is used to manipulate the market and scam people. That is clear if you look at the screenshots. Why is it used? It has no reason other than to scam, you can see it is being used to scam.

Aside from that I'll try to answer your points, some of which are good.

In an honest market it cannot.
Tell me why on honest market just as i write this S&P500 is 1,615.41 and E-mini S&P 500 Futures Jun 2014 is 1597.75?  Huh So it surely can and all your arguments is bs Kiss

You are partially correct.

S&P 500 Futures Jun 2014 is 1597.75 yes
S&P500 is 1,615.41 yes

But,

1) If you look at the charts for spm14 and s&p500 for any period of time, one month, one year, whatever, the prices track. There is clearly a relationship between s&p500 and spm14.

2) s&p500 does not have the volatility bitcoin has, not even 1% of it. So the forward price reflects less of volatility than of the simple cost of carrying the contract.

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True.

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If you add something of value to it, a five dollar bill [the time value] then the two things together cannot sell for less than one dollar.
And if you substract some "time value"?
BTW, why are you not answering my questions? In is not funny to talk to a person, who only says "bla-bla-bla" and not answering straight questions Embarrassed

With bitcoin futures the biggest part of the value in futures would be volatility. If you have one bitcoin it is worth x. The right to buy a bitcoin at price x at a time in the future cannot be less than x.

If you have something worth $1 and you put it in a box with something else. The combined box with two things cannot sell for less than a dollar, because one of the two things is a dollar.

Your point with s&p is partially valid except s&p does not have anything else, it does not have equivalent volatility. If you put s&p500 futures in a box the box is basically worth the same as s&p500 except a small adjustment for financial costs and adjustments if it is considered overbought or oversold.

`~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

If you want to clarify this for yourself do the following calculation. Using initial margin requirements used at their website look at what happens if you buy 1000 September contracts today and then estimate the price of those contracts if bitcoin moved a few dollars up. If you want me to explain that further or you are not comfortable with math say so.
Please you do this calculation if bitcoin moved 20 dollars down Embarrassed

1) A person has to look at the manipulation of prices first to understand that profits or losses are not based on the price of bitcoin moving, but rather on the manipulated movements of the contract price. According to the movement of bitcoin you could have a fine position but it does not matter because the contract price will be manipulated to clear your account.

But anyway.

The following are the three contracts offered now. Each $20 down and up, 100 contracts.

Month of contract ** initial margin ** price at which 100 contracts are available
Dec 100 contracts      2.521                      85
100@85  11.7647
100@65 15.3846 profit or loss 3.6199
100@105 9.5238  profit or loss 2.2409

Month of contract ** initial margin ** price at which 100 contracts are available
Sept 100 contracts     4.7545                    90
100@90 11.1111
100@70 14.2857  profit or loss 3.1746
100@110 9.0909  profit or loss 2.0202

Month of contract ** initial margin ** price at which 100 contracts are available
July 100 contracts       2.588                     92
100@92 10.8696
100@72 13.8888  profit or loss 3.0192
100@112 8.9285  profit or loss 1.9411

So, For a $20 movement the best profit, 3.6199, at the cheapest initial margin, 2.521, is on the farthest out contracts, December.

If you look at the prices of contracts on icbit over time, I can guarantee that these strange prices are intended only to catch suckers who believe they have found a way to capitalize on a bull market.

They are not honest prices in an honest market.

Look at some of the screenshots of prices from a few weeks ago.



`~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Derivatives like this have existed for many decades. If you want the formula for this type of contract try Googling "valuing volatility in futures markets"
Again no answer. Sad Looks like you simply post some random numbers that bumped into your head. Cheesy I ask you to post here the formula and all your calculations that gave you those numbers.

Volatility can be measured, it has a value. A serious person does not ignore it. The fact that sometimes it is reflected in prices at icbit, then it is not, is a warning signs the prices of contracts on icbit are being heavily manipulated.

In any kind of leveraged contract volatility has to be accounted for. Imagine if you could buy a thousand bitcoin at spot using an exaggerated leverage of 1 to 1000. So you could put down one bitcoin and control one thousand. If the price went down .001 btc you would lose but if it went up one bitcoin your 1 would be worth a thousand. It is a no lose. Just keep doing it and 50% of the time you will get 1.000 to 1 payoff. When you see that you are seeing a scam. That example exaggerates a bit of course but anything that is leveraged must account for volatility.

`~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

We'll see.
What i see is bitcoin below 80$ Roll Eyes

Yes. It goes up sometimes, other times it goes down.

If a person wants to speculate, whether long or short, they should go to an honest exchange like bitfinex or some others. ICBIT is running a scam. There is plenty of evidence. If you like, invest there.

`~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


MPOE-PR
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July 04, 2013, 11:41:47 PM
 #17

Seems we're more or less back in 2012.

My Credentials  | THE BTC Stock Exchange | I have my very own anthology! | Use bitcointa.lk, it's like this one but better.
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July 05, 2013, 02:20:33 AM
Last edit: July 05, 2013, 04:07:52 PM by akwfleaspirit
 #18

Seems we're more or less back in 2012.

Would have saved me most of my bitcoin if I had seen that http://polimedia.us/trilema/2012/icbitse-the-bucket-shop/ before they got me.

A lot of trusting people land on that site, get fleeced and leave, never suspecting they have been scammed.
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July 12, 2013, 08:01:09 PM
 #19

akwfleaspirit, you are incredibly misinformed about futures.

In an efficient market, cash and carry arbitrage will force the futures price to equal the discounted (using a risk free interest rate) spot price net of carrying costs (btw, Fireball explicitly posted how to execute this strategy). NOWHERE does volatility enter as a parameter to valuation (that only happens in nonlinear instruments like options). Trust me, I'm a quant.

There IS the embedded "default option" ie, walking away from a bad position, when leverage is involved. This was a problem before, as admin waited too long to margin call/liquidate a trader, thus their position ended up being negative and counterparties were liquidate away from market.

However, the "life" of this default option is only the amount of time between margin call and actual liquidation of a position. This used to be (I'm guessing) 24-48 hours, now it's only 1 hour, and so it's much less valuable now.

Also, this default option would not necessarily cause a premium, as a short can default just as a long can.

Finally, since shorting spot bitcoins is difficult, it is much harder to bring a backwardated futures market back in line with spot (to do so you would have to long futures and short spot). It's much "easier" to bring contango down.

Now, it IS true that manipulation happens and that it's bad practice to use the Last Sale as the clearing price. It's unfortunate and quite frankly strange that the contract clearing price hasn't been changed to some type of average. However, I will say that I have never lost money on manipulation on ICBIT.
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July 13, 2013, 01:02:33 AM
Last edit: July 13, 2013, 01:34:56 AM by akwfleaspirit
 #20

akwfleaspirit, you are incredibly misinformed about futures.

In an efficient market, cash and carry arbitrage will force the futures price to equal the discounted (using a risk free interest rate) spot price net of carrying costs (btw, Fireball explicitly posted how to execute this strategy). NOWHERE does volatility enter as a parameter to valuation (that only happens in nonlinear instruments like options). Trust me, I'm a quant.

There IS the embedded "default option" ie, walking away from a bad position, when leverage is involved. This was a problem before, as admin waited too long to margin call/liquidate a trader, thus their position ended up being negative and counterparties were liquidate away from market.

However, the "life" of this default option is only the amount of time between margin call and actual liquidation of a position. This used to be (I'm guessing) 24-48 hours, now it's only 1 hour, and so it's much less valuable now.

Also, this default option would not necessarily cause a premium, as a short can default just as a long can.

Finally, since shorting spot bitcoins is difficult, it is much harder to bring a backwardated futures market back in line with spot (to do so you would have to long futures and short spot). It's much "easier" to bring contango down.

Now, it IS true that manipulation happens and that it's bad practice to use the Last Sale as the clearing price. It's unfortunate and quite frankly strange that the contract clearing price hasn't been changed to some type of average. However, I will say that I have never lost money on manipulation on ICBIT.

Boomerlu you are continuing the icbit tactic of "If you can't dazzle them with brilliance, baffle them with bullshit".

You know very well that the contracts on icbit are almost completely disconnected from the bitcoin market. icbit prices are most often the result of a position reacting to a trader who is not aware of what goes on, squeezing the trader and extracting the contracts cheaply. That was done to me several times, with contracts being put down against the movement of spot and apparently with knowledge of my account particulars that only icbit staff would have.

The nonsense about backwardation etc is getting old. You know it very well but I'll spell it out for anyone who might be deceived by you. The price of a contract at icbit moves for a short time with contracts bought by someone landing on the site. Once that person has some bitcoin vested all of the major price moves are artificial pushes deliberately meant to squeeze the client, force margin. There is nothing to do with backwardation, contango or anything else. Those words are used to con people plain and simple.

As far as "nowhere does volatility enter as a factor", that's silly. I've covered this in another post, you cannot have leverage that ignores volatility in valuation. It is the first signature of a scam.

You can use all the big words you want, maybe you will impress someone. I know bullshit when I hear it.



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