Who is bitcoinica short to?

[CliffordM]

I think it's reasonable to assume that the bitcoinica book is net short, so who is long on the other side?

Does bitcoinica have deep pockets themselves so they can underwrite that position, or maybe they have a backer who is very long  ?

[DeathAndTaxes]

Why is that a reasonable assumption?

[CliffordM]

It's the only listed (non OTC) mechanism for getting short, and there are plenty of folk out there with an interest in being short.  a lot of miners would certainly be interested in hedging their output forward.

[dogisland]

It's a good question. Long or short how do they hedge their own position ?

[mizerydearia]

For reference: http://bitcoinica.com/

[zhoutong]

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!

[Stephen Gornick]

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.

[zhoutong]

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.

[hmongotaku]

you mean, "who does" not, who is?