Another good indicator of market activity

[zhoutong]

Besides the Mt. Gox Live online users count, now you can use Bitcoinica's system status to monitor market activity. It provides a nice 24-hour chart of throughput, which is the number of requests served by the server.

https://www.bitcoinica.com/pages/status

Estimated online users = Throughput (rpm) / 40

Since Bitcoinica contributes 1/4 - 1/3 of the trades to Mt. Gox, this indicator should be quite reflective. And it can be more accurate than Mt. Gox Live because the online users are actual people with Bitcoinica accounts.

Enjoy your trading!

[Mushoz]

Thanks! Looks great! Are there any plans for implementing either SMS authentication or Yubikeys? I think security is still a big priority for any serious Bitcoins corporations and would make me deposit more funds to Bitcoinica. I'm sure there are others thinking the same.

[czebrda]

It would help, if I knew in which timezone are the times there.

[mjcmurfy]

Im sorry, I just don't see how bitcoinica's website & database response times nor it's throughput has anything to do with the exchange rate on mtgox. Care to walk me through the logic or give me some examples showing the price correlation? I only have 24 hours of data to work on.

Frankly, what I found far more informative is your statement that bitcoinica is responsible for up to 1/3 of the trades on mtgox.
That came as a bit of a surprise. I thought bitcoinica was supposed to have a balanced internal orderbook?

A daily volume chart and a chart displaying the number of daily trades on your platform would be of far greater use to the community. Would you be willing to provide this data? As it stands now, bitcoinica is a darkpool in every sense of the word. Nobody has any idea of these numbers except you Zhoutong. This is not a sustainable position to expect to hold into the future.

Releasing this technical website data as a 'financial metric' is dishonest. It is nothing more than a glorified page-hit counter. There seems to be a distinct unwillingness on the part of bitcoinica to share any information regarding its books.

[Dan The Man]

1/3 sounds like an awful lot. Shouldn't The majority of Bitcoinica positions cancel each other out? Leaving only the net resultant positions to be hedged against the market? Any chance we will ever see what that net position is?

[teflone]

Im sorry, I just don't see how bitcoinica's website & database response times nor it's throughput has anything to do with the exchange rate on mtgox. Care to walk me through the logic or give me some examples showing the price correlation? I only have 24 hours of data to work on.

Frankly, what I found far more informative is your statement that bitcoinica is responsible for up to 1/3 of the trades on mtgox.
That came as a bit of a surprise.

A daily volume chart and a chart displaying the number of daily trades on your platform would be of far greater use to the community. Would you be willing to provide this data? As it stands now, bitcoinica is a dark pool in every sense of the word. Nobody has any idea of these numbers except you Zhoutong. This is not a sustainable position to expect to hold into the future.

Releasing this technical website data as a 'financial metric' is dishonest. It is nothing more than a glorified page-hit counter. There seems to be a distinct unwillingness on the part of bitcoinica to share the market information you have accumulated over the past weeks.

Yes... how the hell does this help ?

[phorensic]

When I ran my mining pool I put as much stats about the server as I could up for users to see.  I also had Cacti monitoring every performance metric under the moon that I logged into from the background.  It had no effect on how fast we could mine a block, but it showed how well the server was running and how much load was on it.  This gives the end user an idea that work is being performed and that I, as the admin, was trying as hard as I could to improve server performance.  These stats from Bitcoinica do not relate to price, they relate to showing how hard the server is working and how well zhoutong can design, tweak, and maintain performance.

[zhoutong]

Im sorry, I just don't see how bitcoinica's website & database response times nor it's throughput has anything to do with the exchange rate on mtgox. Care to walk me through the logic or give me some examples showing the price correlation? I only have 24 hours of data to work on.

Frankly, what I found far more informative is your statement that bitcoinica is responsible for up to 1/3 of the trades on mtgox.
That came as a bit of a surprise.

A daily volume chart and a chart displaying the number of daily trades on your platform would be of far greater use to the community. Would you be willing to provide this data? As it stands now, bitcoinica is a dark pool in every sense of the word. Nobody has any idea of these numbers except you Zhoutong. This is not a sustainable position to expect to hold into the future.

Releasing this technical website data as a 'financial metric' is dishonest. It is nothing more than a glorified page-hit counter. There seems to be a distinct unwillingness on the part of bitcoinica to share the market information you have accumulated over the past weeks.

We quote 24-hour rolling volume and number of orders placed on the front page, along with the average spreads, etc.

Also, it's not just me that knows the hedging information, Mt. Gox also knows. Dark pool is our feature, not our evilness. We are totally open about this issue, releasing financial information potentially hurts our business and customers. People feel safe trading at a dark pool.

For the same reason, we have no plans to release these data in premium data reports for advanced traders as well. We have no intention to capitalize on the secret data that we have.

Perhaps you just want such information, but please face it, every trader has his right to not tell you the position he is holding. If there are good alternatives to Bitcoinica, we are glad to compete on transparency. But for now, unfortunately, we have no ideas how to release financial information without risking our customers.

[zhoutong]

1/3 sounds like an awful lot. Shouldn't The majority of Bitcoinica positions cancel each other out? Leaving only the net resultant positions to be hedged against the market? Any chance we will ever see what that net position is?

That's only during the peak trading periods, sorry for the inaccurate data.

You are right, but we have a number of huge accounts that simply have to trade directly to the market because the quantities are too large for P2P transaction within Bitcoinica. These accounts are active during peak trading periods, or they create peak trading periods and price spikes.

[Dan The Man]

1/3 sounds like an awful lot. Shouldn't The majority of Bitcoinica positions cancel each other out? Leaving only the net resultant positions to be hedged against the market? Any chance we will ever see what that net position is?

That's only during the peak trading periods, sorry for the inaccurate data.

You are right, but we have a number of huge accounts that simply have to trade directly to the market because the quantities are too large for P2P transaction within Bitcoinica. These accounts are active during peak trading periods, or they create peak trading periods and price spikes.

Do you ever run out of capital for these big traders? at 10:1 you might need to have quite a lot on hand.

[zhoutong]

1/3 sounds like an awful lot. Shouldn't The majority of Bitcoinica positions cancel each other out? Leaving only the net resultant positions to be hedged against the market? Any chance we will ever see what that net position is?

That's only during the peak trading periods, sorry for the inaccurate data.

You are right, but we have a number of huge accounts that simply have to trade directly to the market because the quantities are too large for P2P transaction within Bitcoinica. These accounts are active during peak trading periods, or they create peak trading periods and price spikes.

Do you ever run out of capital for these big traders? at 10:1 you might need to have quite a lot on hand.

We have at least 10 of them having significant positions, so one trader can't run out of capital. Also, they won't choose 10:1 because their trading activity will increase the spread to about 4% very easily (removal of liquidity). They can be liquidated with just 2% of price movement after considering the spread.

[mjcmurfy]

These stats from Bitcoinica do not relate to price, they relate to showing how hard the server is working and how well zhoutong can design, tweak, and maintain performance.

The title of the topic: "Another good indicator of market activity". I can see why people might want to know how well coded the platform is, how the server tolerates large loads etc, but Zhoutong was presenting this data as a market activity metric when it is patently not. I expected more than a glorified hit-counter after reading the title. I was actually getting ready to applaud Zhoutong for his great work until I read it's contents!

We quote 24-hour rolling volume and number of orders placed on the front page, along with the average spreads, etc.

I was talking about charts, not a spot quote. Would it not make more sense to quote the spot on the server performance data and use the fancy charts for actual financial metrics such as trade volume, capitalization etc? Why have you devoted an entire page to this and a single line to the most important stats, with no historical charts available?

Also, it's not just me that knows the hedging information, Mt. Gox also knows.

Mt. Gox is not capable of ripping their clients off as easily as you could yours, if you wanted to, as you and I both know. It is a nonsense to suggest that just because a small number of other bitcoin 'elites' have access to the information, that it is ok to keep it from everyone else.

Anyway, this is not about releasing the positions of your clients. I was referring to historical volume charts and data relating to the financial health of the bitcoinica platform. Keep the rest of your data secret if you like, but users who are invested with you are entitled to know how healthy your operation is when they are putting their money at risk on your site.

If you were to become insolvent tomorrow, how long would it take for anyone to even find out about it?

Dark pool is our feature, not our evilness.
People feel safe trading at a dark pool.

A simple dark pool that just executes orders on the market is one thing, but a leveraged darkpool that allow it's clients to trade (pretty much anonymously) on margin is something altogether more insidious.

When the rest of the market avoids darkpools, you are single handedly moving the nash equilibrium to a point where ALL of the exchanges will have to go dark in order to compete with you. So you are putting pressure on the others to restrict the data they provide.

Who feels safe trading at a dark pool, the normal everyday trader or the bigfish market movers? Your platform allows the latter group to bend the market to their will more easily, lose less money in the process and ultimately increase their profits. Yes, I can see how they would feel much safer using bitcoinica for this purpose. We definitely must ensure that underhanded traders are able to maximize their profits by squeezing purchasing power from everyone else! That is of prime importance.

What would you say are the top advantages to trading on a darkpool rather than on MtGox directly? I'd like to hear your rationale.

For the same reason, we have no plans to release these data in premium data reports for advanced traders as well.

How noble of you. Little point selling the information to the chumps, when you can keep it all for Zhoutong's eyes only and reap 100% of the benefit yourself. You would profit magnitudes more by keeping it secret. Why sell it or (heaven forbid) give it away, when you would just be taking money out of your own pocket?

I'm being facetious to illustrate my point.

Perhaps you just want such information, but please face it, every trader has his right to not tell you the position he is holding. If there are good alternatives to Bitcoinica, we are glad to compete on transparency. But for now, unfortunately, we have no ideas how to release financial information without risking our customers.

I don't necessarily want the information personally but I definitely wouldn't turn down a glimpse... we all know how tempting it is, you most of all I would imagine. Is your name Frodo Baggins by any chance? Because he is the only person that would be impervious to temptation on this scale. Unless you are a deity or something and are in fact not of this planet.

What worries me is that a small number of people, yourself included and whoever else you grant access to in the future without our knowledge, have the information and the rest of us do not. This creates a market of imperfect information to which you alone have perfect information. This is an extremely unfair trading environment with significant moral hazard, and since your company is not audited and your platform is solely under your authority, we must rely completely on your word that you will not use the information against your clients. And unfortunately, your promises are NOT good enough, no matter how nice of a guy you appear to be.  

You say that if there were good alternatives to bitcoinica that you would be willing to compete on transparency, so then you are only willing to budge on the issue when you are forced to do so by competition? That does not inspire much confidence in bitcoinica nor yourself, and more than that, it suggests that you are capable of doing it but are not willing to do the work required until someone twists your arm. If you do not know how to release financial information, you should not be operating a highly complex trading platform. MtGox can handle it, Tradehill can do it, as with many of the other exchanges. It's not like it is something awfully complicated, it could be easily achieved if you wanted to do so.

But you are, apparently, not motivated enough to do anything about it however. I wonder why that might be?

[zhoutong]

These stats from Bitcoinica do not relate to price, they relate to showing how hard the server is working and how well zhoutong can design, tweak, and maintain performance.

The title of the topic: "Another good indicator of market activity". I can see why people might want to know how well coded the platform is, how the server tolerates large loads etc, but Zhoutong was presenting this data as a market activity metric when it is not.

We quote 24-hour rolling volume and number of orders placed on the front page, along with the average spreads, etc.

I know, but would it not make more sense to quote the spot on the server performance data and use the charts for actual financial metrics such as trade volume?

Also, it's not just me that knows the hedging information, Mt. Gox also knows.

Mt. Gox is not capable of ripping their clients off as easily as you could yours, if you wanted to, as you and I both know. It is a nonsense to suggest that just because a small number of other bitcoin 'elites' have access to the information, that it is ok to keep it from everyone else.

Anyway, this is not about releasing the hedging information. I was referring to historical volume charts and data relating to the financial health of the bitcoinica platform. Keep your hedging data secret if you like, but users who are invested with you are entitled to know how healthy your operation is when they are putting their money at risk on your site.

If you were to become insolvent tomorrow, how long would it take for anyone to even find out about it?

Dark pool is our feature, not our evilness.
People feel safe trading at a dark pool.

A simple darkpool is one thing, but a leveraged darkpool is something altogether more insidious.

When the rest of the market avoids darkpools, you are single handedly moving the nash equilibrium to a point where ALL of the exchanges will have to go dark in order to compete with you. So you are putting pressure on the others to restrict the data they provide.

Who feels safe trading at a dark pool, what group? The normal everyday trader or the bigfish market movers? Your platform allows the latter group to bend the market to their will more easily, lose less money in the process and increase their profits. Yes, I can see how they would feel much safer using bitcoinica for this purpose. We definitely must ensure that underhanded traders are able to maximize their profits by squeezing purchasing power from everyone else! That is of prime importance.

For the same reason, we have no plans to release these data in premium data reports for advanced traders as well.

How noble of you. Little point selling the information to the chumps, when you can keep it all for Zhoutong's eyes only and reap 100% of the benefit yourself. You would profit magnitudes more by keeping it secret. Why sell it or (heaven forbid) give it away, when you would just be taking money out of your own pocket?

Perhaps you just want such information, but please face it, every trader has his right to not tell you the position he is holding. If there are good alternatives to Bitcoinica, we are glad to compete on transparency. But for now, unfortunately, we have no ideas how to release financial information without risking our customers.

I don't want the information personally, but what worries me is that a small number of people, yourself included and whoever else you grant access to in the future without our knowledge, have the information and the rest of us do not. This creates a market of imperfect information to which you alone have perfect information. This is an extremely unfair trading environment with significant moral hazard, and since your company is not audited and your platform is solely under your authority, we must rely completely on your word that you will not use the information against your clients. And unfortunately, your promises are NOT good enough, no matter how nice of a guy you appear to be.  

You say that if there were good alternatives to bitcoinica that you would be willing to compete on transparency, so then you are only willing to budge on the issue when you are forced to do so by competition? That does not inspire much confidence in bitcoinica nor yourself, and more than that, it suggests that you are capable of doing it but are not willing to do the work required until someone twists your arm. If you do not know how to release financial information, you should not be operating a highly complex trading platform. MtGox can handle it, Tradehill can do it, as with many of the other exchanges. It's not like it is something awfully complicated, it could be easily achieved if you wanted to do so.

But you are, apparently, not motivated enough to do anything about it however. I wonder why that might be?

Bitcoinica is currently the only player in market making. We're not like a Forex brokerage which only represents 0.01% of total trading volume. When we are small or Bitcoin is too big, we can afford to release information because there's no threat of running the stops.

You're right that I have the ability to steal money and take advantage from customers. This applies to everyone who operates a Bitcoin service. But please don't compare Bitcoinica with Mt. Gox or TradeHill. Bitcoinica is just a trading bot that provides liquidity for everyone.

Unfortunately, we are just big enough to trigger your alarm. Introducing a competitor will be helpful for both of us, because I don't have to worry too much about my customers because they have choices, and you can request whatever you want in a competitive environment. The status quo is, Bitcoinica is just a monopoly that decides for everyone. We have decided that orders should be secret. You don't tell everyone that when the price increases to exactly $3.1 you will buy 10,000 BTC no matter what. You also don't tell you will buy every sell order up to 10,000 BTC below $2.9 as you're not willing to put up a wall.

The financial health is very good, and it's better and better everyday. Just look at our volume and average spread, you have the idea of the revenues that we're getting. Our customers trust Bitcoinica with their money and we're really serious about this.

Bitcoinica is a private business and we have the rights to choose the business model that helps our customers the best. I know you don't like dark pools or market manipulators, but this is the free market. It doesn't even matter if you put up "I hate Bitcoinica! Don't use it!" in your forum signature.

I can completely understand the trust issues in the Bitcoin community. When I first started the service, I faced a lot more of such issues. It just takes time to prove everything. Again, I promise not to trade for 24 hours after looking at customers' order data. If that's not enough, sorry, please hate Bitcoinica.

[mjcmurfy]

Bitcoinica is just a trading bot that provides liquidity for everyone.

Understatement of the year.

Bitcoinica is a lot more than a simple trading bot. It is a trading platform that lends money to newbies and allows them to take extraordinarily risky speculative positions on the bitcoin:usd exchange rate, and which operates a trading bot which actively trades on the exchange to hedge these risky positions so that the net risk of the entire operation is placed squarely on the shoulders of the market participants at MtGox rather than on itself.

I have my own homebrew 'bot' that calculates liquidity and prices on either side of the active trading zone, and allows me to place my own 'dark' orders, but it is not bitcoinica!

You're right that I have the ability to steal money and take advantage from customers.
...
Unfortunately, we are just big enough to trigger your alarm.

This really puts my mind at ease. Now I can sleep easily.  

You don't tell everyone that when the price increases to exactly $3.1 you will buy 10,000 BTC no matter what. You also don't tell you will buy every sell order up to 10,000 BTC below $2.9 as you're not willing to put up a wall.

I of course understand this. But the only reason for wanting to do this in an environment where all the exchanges order books are open is to profit from unexpected market movements that you yourself are likely to be the cause of. Do you not see what power you are giving to speculators? I don't want to have to spell it out.

The financial health is very good, and it's better and better everyday. Just look at our volume and average spread, you have the idea of the revenues that we're getting. Our customers trust Bitcoinica with their money and we're really serious about this.

If you are truly serious about it, then you should publish the numbers. Simples.

Bitcoinica is a private business and we have the rights to choose the business model that helps our customers the best. I know you don't like dark pools or market manipulators, but this is the free market. It doesn't even matter if you put up "I hate Bitcoinica! Don't use it!" in your forum signature.

Just to be clear... I do NOT 'hate' bitcoinica, and I do not 'hate' darkpools. Bitcoinica worries me because of the potential risks and moral hazard involved, and darkpools only serve one purpose - to hide information that will allow you to profit off decisions made by others who are basing them on an incomplete set of data. Yet I do not hate either, and do not intend to slander your good name.

It is a private business, and I sincerely congratulate you on what you have achieved to date despite being relatively young. I also respect the fact that you address these issues maturely and unemotionally. However, I DO expect at least some level of transparency with your clients (who pay your spreads) and indeed the wider bitcoin economy (your loyal risk-takers).

While this is a free market, and you are free to take whatever action you see as best for your clients you must also understand that your decisions impact on the wider bitcoin economy too. Since it is the MtGox market participants who pay for the mistakes of your clients, you have a clear duty of care and responsibility to not just your clients but also the wider community. We shoulder the risk of your operation, the least you can do is be responsive to our wishes.

If you expect to be able to remain unaccountable for your decisions, you are in for a wakeup call.

Again, I promise not to trade for 24 hours after looking at customers' order data. If that's not enough, sorry, please hate Bitcoinica.

I will repeat... your promises are MOST DEFINITELY NOT enough. But I won't hate bitcoinica.
I have no reason to hate a computer program. It is what some people are capable of using it for that I strongly disapprove of.

[phorensic]

If you don't like it, don't use it.  And you shouldn't care if we lose our asses using it.  Make your trades somewhere else and profit off our mistakes.  You can make money whether the market goes up or down.

[mjcmurfy]

If you don't like it, don't use it.  And you shouldn't care if we lose our asses using it.  Make your trades somewhere else and profit off our mistakes.  You can make money whether the market goes up or down.

You are failing to understand the point. Whether I want to use bitcoinica or not, it's effects are felt in the wider market independently of whether I use it or not, as bitcoinica hedges (i.e. shrugs off) its risk onto the market participants.

When Zhoutong states that bitcoinica hedges it's net position on MtGox, what he really means is that the net burden of risk is foisted onto the shoulders of the markets when it is unable to be balanced internally. Essentially, if Zhoutong's clients make large collective mistakes, YOU and ME and anyone else who holds bitcoin will end up paying for these mistakes whether we use the bitcoinica platform or not.

The 'vote with your wallet' rhetoric does not really apply. If I am not given a choice, how can I make a decision?

[phorensic]

Hahahaha...dude, listen.  Buy high, sell low.  It doesn't matter *what* makes the price go up or down.  It doesn't matter how fast, it doesn't matter how much.  It doesn't matter which exchange you use.  All that matters is that your trades are set up in the right spots.  Not every trade will be positive, nor every trade negative just because of Bitcoinica.  Set limit orders, set stop losses, watch all the charts.  Do whatever you have to do, but don't blame Bitcoinica for your loses.

[mjcmurfy]

Do whatever you have to do, but don't blame Bitcoinica for your loses.

Just to be clear, I have not lost anything. In fact I am up 48% in the past few weeks, largely in part thanks to the fact that I avoided using leverage and was therefore able to sit out a few unexpected movements which returned to their original levels after a few days. I did not use bitcoinica for any of my trades. I did open an account a few weeks ago, but just poked around for a couple hours and tested a few minor features to satisfy my intellectual curiosity. I have only returned to the site on a few occasions since.

Hahahaha...dude, listen.  Buy high, sell low.

Ummm... thanks for the advice but I think you have got it on it's head. Maybe that explains how you managed to get yourself 'zhoutonged' last week. Still haven't learned your lesson yet though I see. Or have you just lost so much that you now intend to try and play the catchup game with some ridiculous leverage ratio? If that is what you are planning, I feel sorry for you.

It doesn't matter *what* makes the price go up or down.  
It doesn't matter how fast, it doesn't matter how much.
It doesn't matter which exchange you use.

You sound like a stereotypical testosterone fueled stock-market meathead from wall street in the 70s, who doesn't bother with such trifling things like fundamentals, causality, or the real world in general. Do you just invest blindly in anything based on what the technical indicators tell you to do? Prices can be manipulated, charts and trends made to look persuasive, indicators made to give false signals, all in order to lull people like you into creating real (but artificially caused) price movements.  
  

It doesn't matter which exchange you use.

Of course it does. Some are trustworthy and reputable, others are not. Some have high fees, others are more reasonable. Some are thinly traded, others have high volume. Some support certain currencies, others do not. Must I go on?

All that matters is that your trades are set up in the right spots.  
Not every trade will be positive, nor every trade negative just because of Bitcoinica.  
Set limit orders, set stop losses, watch all the charts.  
Do whatever you have to do, but don't blame Bitcoinica for your loses.

This is the bones of your argument.

I agree that the most important thing is that trades are set up in the right spot. But, how are we to determine what the right spot is when potentially 1/3 of the orders are invisibly sitting on bitcoinica waiting to kick you in the nuts. Likewise with the stop losses and limits. But thankfully, I don't need to use either of these as I do not trade on leverage and can make those decisions on my own time.

If you think that my post is motivated by losses, you are probably just projecting your own instinctual behavioral reactions. What motivates me to talk ardently on this issue is not that I have a vendetta against Zhoutong or Bitcoinica, rather it is the riskiness of the operation as I have clearly outlined above, the moral hazard of darkpools and the unforeseen effects that all of this can have on the btc:usd market. Wise men talk because they have something to say; fools talk because they have to say something (Plato).

If you think there is absolutely nothing to worry about, you are a fool.

[mjcmurfy]

Zhoutong, just so I can get a definitive answer here and now, I want to ask you directly. Do you have any intentions whatsoever, either presently or in the not too distant future, to provide us with the following data?

1) Total deposits in BTC and USD
2) Daily ratio of internal 'balanced' trades to direct market trades
3) Total daily hedging volumes in btc
4) Some indication of the net balance of your orderbook (e.g. 48% buy, 52% sell etc) as is often customary

This information really is the minimum required for us to be able to assess in some shape or form the solvency of your operation if we are to be able to go on anything other than your promises and personal guarantees that you will not fall victim to moral hazard. The hedging volume data does not need to be specific. Trading levels and the positions of your clients are not necessary, we just need the overall totals to ensure that your platform is solvent and viable. That should not be anywhere near enough information to allow users to run your users stops. You could delay the information by 24 hours if you still felt the need.

It will shut me up if you do, and others with similar concerns. If you have nothing to hide, the trust that you have established to date can only be reinforced by this. I see no disadvantages here.

If you intend to refuse, please furnish us with some hard facts as to why it is exactly that providing this information would harm your clients.

I would recommend to everyone reading this, not use bitcoinica's services until either the data is provided or 100% valid and detailed reasons are given as to why this specific information can not be revealed to the bitcoin community.

Obviously, everyone is free to make up their own minds on the issue but I think it is important enough to be doggedly persistent in our requests for transparency from bitcoinica. If you agree, please say so.

[Crypt_Current]

Even though I DO enjoy losing small amounts of money on Bitcoinica ALMOST as much as I enjoy recreational drug use, I definitely see mjcmurfy's point.

Question:  Is creating an alternative to Bitcoinica a viable alternative to boycotting it, and if so, what (in theory at least) would be the necessary capital to get the ball rolling on that?