Warning: How many of you Bears have ever been a victim of a Short Squeeze?

[anu]

cypherdoc, Bitcoin is pretty much tied to the USD at the moment.. if people want to get away from the USD why buy bitcoin?  If I buy X amount of bitcoins with AUD and the USD falls, my bitcoins will buy back less AUD (because the exchange rate is based on the USD/AUD exchange rate)

Huh? Bitcoin fluctuates more in a day against the $ than $ flutuates in a year against any other real currency.

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[cypherdoc]

cypherdoc, Bitcoin is pretty much tied to the USD at the moment.. if people want to get away from the USD why buy bitcoin?  If I buy X amount of bitcoins with AUD and the USD falls, my bitcoins will buy back less AUD (because the exchange rate is based on the USD/AUD exchange rate)

b/c i think Bitcoin has bottomed.  we are at sentiment lows and at the very final tip of a long measured descending wedge that has been created and significantly contributed to by short selling on Bitcoinica. 

study your technical analysis.  descending wedges, esp ones this well formed and long lasting, most likely break UP and HARD.  this wasn't your typical tulip bulb crash ala straight down.  this slow decline has been measured and manipulated.  NOW is the time to buy if you believe in Bitcoin fundamentals and look at the facts objectively. 

it would be easy to create a huge short squeeze here.  i pity Zhoutong when it comes.  all he is is a leveraged market maker go between from mtgox and short sellers.  we could wipe him out.

[cypherdoc]

Looks like it's over.  Wrong timing and wrong scale is my take.  Cleaned out a handful of wet-behind-the-ears starters maybe, but only big enough to instill a bit of caution into the majority of potential victims.

Now maybe we'll head down deep into the $1.nn's, and wait for the next go-around (and hopefully the last one in this phase.)

have you ever heard of waves my son?

[cypherdoc]

i'm currently studying Zhoutong's model.  my conclusion so far is that he's very over exposed.  his accts are setup within mtgox AND he's complained about intermittent interruptions in his access to that same acct just like the rest of us.  he's also admitted that he's not 100% hedged.

in a massive short squeeze, especially one where he can't get access to liquidate clients accts or hedge quickly enough, Bitcoinica will suffer massive losses.  his problem is that mtgox's trading platform is outdated and not fast enough for a large ramp in the price. 

now is not the time to be shorting.  the bursts in price will come intermittently and unpredictably.

[cypherdoc]

the other problem i see is how is Zhoutong going to get all these kid short sellers to send more USD to their underwater accts when they get in trouble and a clear uptrend in the price gets well established?  he has no legal processes to enforce deadbeats in any way shape or form to recover his losses.

[cypherdoc]

most market makers like Zhoutong will locate themselves on the exchange itself or co-locate their servers in the next room or next door to be able to efficiently send/receive data to the exchange so that they can rapidly respond to big shifts in price.  HFT's anyone? 

the fact that he communicates with mtgox just like the rest of us with all of our connection headaches of the last 6 mo, just imagine him trying to hedge when volatility sets in like it did in June?  it'd be ugly.

[BitMagic]

Dude, you having a conversation with yourself? Summarize it all and post in a new thread.

You sound like the crazy lady down the street (though I like where it's all going).

[cypherdoc]

this is not a conversation.  these posts are called warnings.

as i study Bitcoinica, i'm formulating a plan and that's a thought process.  you will not be able to say you've not been warned.

[cypherdoc]

https://bitcointalk.org/index.php?topic=42267.msg529645#msg529645

Lol.  imagine this happening in reverse.

[cypherdoc]

this is great:  https://bitcointalk.org/index.php?topic=42267.msg530004#msg530004

you or Zhoutong?

[DeathAndTaxes]

the other problem i see is how is Zhoutong going to get all these kid short sellers to send more USD to their underwater accts when they get in trouble and a clear uptrend in the price gets well established?  he has no legal processes to enforce deadbeats in any way shape or form to recover his losses.

There is no "credit" extended.  If you exceed marginal call you get your posistion closed to cover any negative balance.  The only risk would be if a margin call and forced close couldn't happen fast enough.

[tvbcof]

Looks like it's over.  Wrong timing and wrong scale is my take.  Cleaned out a handful of wet-behind-the-ears starters maybe, but only big enough to instill a bit of caution into the majority of potential victims.

Now maybe we'll head down deep into the $1.nn's, and wait for the next go-around (and hopefully the last one in this phase.)

have you ever heard of waves my son?

Yes, but have not studied them (or palm reading for that matter.)  But it is quite true that I am thinking of someone's Elliot-wave chart (yours?) when I tapped that out.

I'm hopeful of my 'maybe' projection of the $1.nn prices and just re-loaded in case because, barring network exploits, I would likely choose to do another round of accumulation if we were so lucky.  If not, I've got enough BTC hoarded away to be happy, and will burn up the funds on short duration donations and purchases if someone is selling something I happen to want.  I don't like my funds sitting in someone else's bank account, but the risk is a cost of doing business I guess.  If Tradehill would have followed through with their statement to the effect of more transparent books, I'd have wired them more money.

[zhoutong]

i'm currently studying Zhoutong's model.  my conclusion so far is that he's very over exposed.  his accts are setup within mtgox AND he's complained about intermittent interruptions in his access to that same acct just like the rest of us.  he's also admitted that he's not 100% hedged.

in a massive short squeeze, especially one where he can't get access to liquidate clients accts or hedge quickly enough, Bitcoinica will suffer massive losses.  his problem is that mtgox's trading platform is outdated and not fast enough for a large ramp in the price. 

now is not the time to be shorting.  the bursts in price will come intermittently and unpredictably.

Hi,

I've experienced the 9/11, and several many spikes and crashes in prices. Bitcoinica can completely handle 50% change in price within 1-3 seconds. Mt. Gox's system is so slow that our servers can definitely react before the prices move to an unreasonable level.

It's true that some trades are not hedged 100%, because we have a sophisticated internal matching system. That's the only channel for our profits. The spreads are simply the sum of Mt. Gox fees and market spread. Only when we match orders internally, we can make profits from the trades.

We maintain absolutely zero net position as a whole. Our prices reflect instantaneous liquidity, volatility and they always account the risk of Bitcoinica.

Also, for forced liquidations, we don't have to hedge to recover the losses. For example, someone places a limit sell order at $4, and we expect a short seller to be liquidated at $4.1 to cover. (Assuming same quantities.) Then we can safely assume that both orders will be executed during a major short squeeze. Even if our system can't react at all, Bitcoinica will still make $0.1 profit. Our high volume and large amount of limit and stop orders have ensured this to happen most of the time if hedging is not possible at all.

In reality, we apply all the algorithms together. Our interface is extremely simple and intuitive, but the back-end is not that simplistic. Our servers process more than 50,000 database requests per minute, just to be able to calculate all the metrics in real time.

[Vladimir]

i'm currently studying Zhoutong's model.  my conclusion so far is that he's very over exposed.  his accts are setup within mtgox AND he's complained about intermittent interruptions in his access to that same acct just like the rest of us.  he's also admitted that he's not 100% hedged.
...

Zhou will be fine in the event of coming up volatile short squeeeeze. Trust me, I know. lol. The shorts on the other hand may not find it being that nice to them. Being 5:1 leveraged short in a short squeeze is going to be quite a lesson for some.

[cypherdoc]

We maintain absolutely zero net position as a whole. Our prices reflect instantaneous liquidity, volatility and they always account the risk of Bitcoinica.

thats not what you've said before.  you said you take risk and that you are 90% hedged which means by definition you aren't fully net zero.  and noting the numerous complaints on your thread about illiquidity also make your claims disingenuous.

[cypherdoc]

i'm currently studying Zhoutong's model.  my conclusion so far is that he's very over exposed.  his accts are setup within mtgox AND he's complained about intermittent interruptions in his access to that same acct just like the rest of us.  he's also admitted that he's not 100% hedged.
...

Zhou will be fine in the event of coming up volatile short squeeeeze. Trust me, I know. lol. The shorts on the other hand may not find it being that nice to them. Being 5:1 leveraged short in a short squeeze is going to be quite a lesson for some.

Hi Vlad,

good to hear from you.

altho its possible what you say is true i suspect in a major short squeeze both Zhoutong and the shorts will be hurt.  but you're right; Zhoutong has the power to deflect the majority of the pain onto his clients.

[BadBear]

You seem really butthurt over everything.  Bagholder?

Ouch you are, https://bitcointalk.org/index.php?topic=49159.msg586961#msg586961

So sorry, good luck with that. 

[cypherdoc]

You seem really butthurt over everything.  Bagholder?

no. just believe there's an opportunity here.

[OgNasty]

I've experienced the 9/11, and several many spikes and crashes in prices. Bitcoinica can completely handle 50% change in price within 1-3 seconds. Mt. Gox's system is so slow that our servers can definitely react before the prices move to an unreasonable level.

Nobody is doubting that your system can handle it on your side... In a true short squeeze though, you'll be as helpless as everyone else to cover as major orders are processed at Mt. Gox.  The odds are pretty remote that a single order would be so huge it would wipe out Bitcoinica, and ultimately the danger falls on your clients as I doubt you're carrying any kind of insurance.  Still, if your operation holds up long enough to build a substantial cushion of funds, I think Bitcoinica could be a very useful and much needed tool for the bitcoin community.

I'm routing for you zhoutong and applaud you for bringing this service to the bitcoin community, but I think you're being a little dishonest when it comes to the potential risks involved.  You give more guarantees than my brokerage.

[fivebells]

Zhou will be fine in the event of coming up volatile short squeeeeze. Trust me, I know. lol. The shorts on the other hand may not find it being that nice to them. Being 5:1 leveraged short in a short squeeze is going to be quite a lesson for some.

  How do you know?  What is your connection to bitcoinica?