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Author Topic: Bitcoinica: How it works  (Read 14115 times)
cypherdoc
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December 29, 2011, 09:20:59 PM
 #21

This does not do much to explain the common case at bitcoinica, as you conveniently choose scenarios where Bitcoinica always has a higher balance than the customer's trade, (and the customer uses 1:1 margin).

For example:
If Bitcoinica has a $1000 balance, and the customer executes a $1000 trade at 10:1 margin (which Bitcoinica allows), then bitcoinica does not have the funds available to fully equalize this trade against mtgox.
The trade would then require $10000 but bitcoinica only has $1000. If that trade is very profitable, Bitcoinica will have to pay the customer his earnings, or prevent him from liquidating his position until it is either not profitable, or until another customer opens an opposing position.

In all of your scenarios you say "Bitcoinica has lost money! Wrong!". It is in fact very possible for Bitcoinica to lose money -- the fact that you conveniently avoid this scenario is rather suspect.

At this moment, the reserve is larger than top three accounts combined times 10. Your reasoning might be valid at the earlier days, but definitely not now.

That's why we may occasionally halt one direction trading when we don't have money. Didn't you know what happened yesterday?

if the shorts had USD's in their accts yesterday from their shorting activity, why couldn't you let them use those USD's to cover their positions by buying on gox?
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December 29, 2011, 09:36:41 PM
 #22

This does not do much to explain the common case at bitcoinica, as you conveniently choose scenarios where Bitcoinica always has a higher balance than the customer's trade, (and the customer uses 1:1 margin).

For example:
If Bitcoinica has a $1000 balance, and the customer executes a $1000 trade at 10:1 margin (which Bitcoinica allows), then bitcoinica does not have the funds available to fully equalize this trade against mtgox.
The trade would then require $10000 but bitcoinica only has $1000. If that trade is very profitable, Bitcoinica will have to pay the customer his earnings, or prevent him from liquidating his position until it is either not profitable, or until another customer opens an opposing position.

In all of your scenarios you say "Bitcoinica has lost money! Wrong!". It is in fact very possible for Bitcoinica to lose money -- the fact that you conveniently avoid this scenario is rather suspect.

At this moment, the reserve is larger than top three accounts combined times 10. Your reasoning might be valid at the earlier days, but definitely not now.

That's why we may occasionally halt one direction trading when we don't have money. Didn't you know what happened yesterday?

if the shorts had USD's in their accts yesterday from their shorting activity, why couldn't you let them use those USD's to cover their positions by buying on gox?
Wouldn't that be equivalent to theft?

cypherdoc
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December 30, 2011, 12:59:40 AM
 #23


And that's why the trade on Bitcoinica doesn't go through before they hedged the position on Mtgox. The situation you're describing simply isn't possible. They try to hedge for 4$. When that isn't possible due to whatever situation you can come up with, and the price falls to 3,80, that's the price the costumer is going to get. Unfair? That's the risk of market orders. If the customer used a limit order instead, which he should if he cares about the risk, and places the limit order at 4$, the trade simply wouldn't go through, because Bitcoinica is unable to hedge at 4$ as the price already fell to 3,80$.


this part can't be correct.  the way i understand it is that the customer gets his order executed before Zhou has a chance to hedge on mtgox.  this is why the spreads are higher on Bitcoinica to acct for slippage or his increased risk of letting you fill first.  example:

if mtgox bid:ask is $4:$4.10 then
Bitcoinica might be $3.80:$4.30 thus

you, as a customer of Bitcoinica, can short at the ask of $3.80 with a limit order and you will get it filled immediately.  the $0.20 difference is what Zhou's algorithm has figured to be a safe cushion to give him time to hedge on mtgox and sell his btc at or somewhere btwn $3.80 and $4 so he doesn't lose money.

in your example, you state that even if you short at the ask price of $3.80 it won't be filled until and if Zhou is able to sell a corresponding amt of btc on mtgox at $3.80.  if that was the case then his spreads should never be higher than mtgox's since he doesn't assume any risk.

correct me if i'm wrong.
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December 30, 2011, 01:06:05 AM
 #24


And that's why the trade on Bitcoinica doesn't go through before they hedged the position on Mtgox. The situation you're describing simply isn't possible. They try to hedge for 4$. When that isn't possible due to whatever situation you can come up with, and the price falls to 3,80, that's the price the costumer is going to get. Unfair? That's the risk of market orders. If the customer used a limit order instead, which he should if he cares about the risk, and places the limit order at 4$, the trade simply wouldn't go through, because Bitcoinica is unable to hedge at 4$ as the price already fell to 3,80$.


this part can't be correct.  the way i understand it is that the customer gets his order executed before Zhou has a chance to hedge on mtgox.  this is why the spreads are higher on Bitcoinica to acct for slippage or his increased risk of doing it this way.  example:

if mtgox bid:ask is $4:$4.10 then
Bitcoinica might be $3.80:$4.30 thus

you, as a customer of Bitcoinica, can short at the ask of $3.80 with a limit order and you will get it filled immediately.  the $0.20 difference is what Zhou's algorithm has figured to be a safe cushion to give him time to hedge on mtgox and sell his btc at or somewhere btwn $3.80 and $4 so he doesn't lose money.

in your example, you state that even if you short at the ask price of $3.80 it won't be filled until and if Zhou is able to sell a corresponding amt of btc on mtgox at $3.80.  if that was the case then his spreads should never be higher than mtgox's since he doesn't assume any risk.

correct me if i'm wrong.

They have those spreads to protect against slippage when people get forced liquidated. When there's a sudden movement, a lot of positions might have to be liquidated. If they can't hedge against those liquidations they _still_ have to liquidate those positions, because they are forced after all. That's what the spread is for. (And for profit of course)

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cypherdoc
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December 30, 2011, 01:08:43 AM
 #25


And that's why the trade on Bitcoinica doesn't go through before they hedged the position on Mtgox. The situation you're describing simply isn't possible. They try to hedge for 4$. When that isn't possible due to whatever situation you can come up with, and the price falls to 3,80, that's the price the costumer is going to get. Unfair? That's the risk of market orders. If the customer used a limit order instead, which he should if he cares about the risk, and places the limit order at 4$, the trade simply wouldn't go through, because Bitcoinica is unable to hedge at 4$ as the price already fell to 3,80$.


this part can't be correct.  the way i understand it is that the customer gets his order executed before Zhou has a chance to hedge on mtgox.  this is why the spreads are higher on Bitcoinica to acct for slippage or his increased risk of doing it this way.  example:

if mtgox bid:ask is $4:$4.10 then
Bitcoinica might be $3.80:$4.30 thus

you, as a customer of Bitcoinica, can short at the ask of $3.80 with a limit order and you will get it filled immediately.  the $0.20 difference is what Zhou's algorithm has figured to be a safe cushion to give him time to hedge on mtgox and sell his btc at or somewhere btwn $3.80 and $4 so he doesn't lose money.

in your example, you state that even if you short at the ask price of $3.80 it won't be filled until and if Zhou is able to sell a corresponding amt of btc on mtgox at $3.80.  if that was the case then his spreads should never be higher than mtgox's since he doesn't assume any risk.

correct me if i'm wrong.

They have those spreads to protect against slippage when people get forced liquidated. When there's a sudden movement, a lot of positions might have to be liquidated. If they can't hedge against those liquidations they _still_ have to liquidate those positions, because they are forced after all. That's what the spread is for. (And for profit of course)

so you are sure Zhou fills the sell hedge on mtgox first before he fills your short order?  that doesn't make alot of sense.  why display an bid price at all if thats the case?
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December 30, 2011, 01:09:03 AM
 #26


And that's why the trade on Bitcoinica doesn't go through before they hedged the position on Mtgox. The situation you're describing simply isn't possible. They try to hedge for 4$. When that isn't possible due to whatever situation you can come up with, and the price falls to 3,80, that's the price the costumer is going to get. Unfair? That's the risk of market orders. If the customer used a limit order instead, which he should if he cares about the risk, and places the limit order at 4$, the trade simply wouldn't go through, because Bitcoinica is unable to hedge at 4$ as the price already fell to 3,80$.


this part can't be correct.  the way i understand it is that the customer gets his order executed before Zhou has a chance to hedge on mtgox.  this is why the spreads are higher on Bitcoinica to acct for slippage or his increased risk of letting you fill first.  example:

if mtgox bid:ask is $4:$4.10 then
Bitcoinica might be $3.80:$4.30 thus

you, as a customer of Bitcoinica, can short at the ask of $3.80 with a limit order and you will get it filled immediately.  the $0.20 difference is what Zhou's algorithm has figured to be a safe cushion to give him time to hedge on mtgox and sell his btc at or somewhere btwn $3.80 and $4 so he doesn't lose money.

in your example, you state that even if you short at the ask price of $3.80 it won't be filled until and if Zhou is able to sell a corresponding amt of btc on mtgox at $3.80.  if that was the case then his spreads should never be higher than mtgox's since he doesn't assume any risk.

correct me if i'm wrong.
you don't actually use bitcoinica, do you? if there is rapid price change, and you use a market order, you might not actually get that number which is displayed.

Just another reason why you shouldn't use market orders.

cypherdoc
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December 30, 2011, 01:10:57 AM
 #27


And that's why the trade on Bitcoinica doesn't go through before they hedged the position on Mtgox. The situation you're describing simply isn't possible. They try to hedge for 4$. When that isn't possible due to whatever situation you can come up with, and the price falls to 3,80, that's the price the costumer is going to get. Unfair? That's the risk of market orders. If the customer used a limit order instead, which he should if he cares about the risk, and places the limit order at 4$, the trade simply wouldn't go through, because Bitcoinica is unable to hedge at 4$ as the price already fell to 3,80$.


this part can't be correct.  the way i understand it is that the customer gets his order executed before Zhou has a chance to hedge on mtgox.  this is why the spreads are higher on Bitcoinica to acct for slippage or his increased risk of letting you fill first.  example:

if mtgox bid:ask is $4:$4.10 then
Bitcoinica might be $3.80:$4.30 thus

you, as a customer of Bitcoinica, can short at the ask of $3.80 with a limit order and you will get it filled immediately.  the $0.20 difference is what Zhou's algorithm has figured to be a safe cushion to give him time to hedge on mtgox and sell his btc at or somewhere btwn $3.80 and $4 so he doesn't lose money.

in your example, you state that even if you short at the ask price of $3.80 it won't be filled until and if Zhou is able to sell a corresponding amt of btc on mtgox at $3.80.  if that was the case then his spreads should never be higher than mtgox's since he doesn't assume any risk.

correct me if i'm wrong.
you don't actually use bitcoinica, do you? if there is rapid price change, and you use a market order, you might not actually get that number which is displayed.

Just another reason why you shouldn't use market orders.

no i don't so i am trying to understand.  i'm not talking about market orders, i'm asking about limit short orders that try to hit the bid exactly.
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December 30, 2011, 01:11:31 AM
 #28

This was a nice and simple explanation.  I'm not interested in playing the market and prefer to work on services, but thanks for the refresher.  It's been a while since my last econ class.

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December 30, 2011, 01:17:06 AM
 #29

i'm waiting for an answer...who gets executed first?
zhoutong
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December 30, 2011, 01:17:45 AM
 #30

This does not do much to explain the common case at bitcoinica, as you conveniently choose scenarios where Bitcoinica always has a higher balance than the customer's trade, (and the customer uses 1:1 margin).

For example:
If Bitcoinica has a $1000 balance, and the customer executes a $1000 trade at 10:1 margin (which Bitcoinica allows), then bitcoinica does not have the funds available to fully equalize this trade against mtgox.
The trade would then require $10000 but bitcoinica only has $1000. If that trade is very profitable, Bitcoinica will have to pay the customer his earnings, or prevent him from liquidating his position until it is either not profitable, or until another customer opens an opposing position.

In all of your scenarios you say "Bitcoinica has lost money! Wrong!". It is in fact very possible for Bitcoinica to lose money -- the fact that you conveniently avoid this scenario is rather suspect.

At this moment, the reserve is larger than top three accounts combined times 10. Your reasoning might be valid at the earlier days, but definitely not now.

That's why we may occasionally halt one direction trading when we don't have money. Didn't you know what happened yesterday?

if the shorts had USD's in their accts yesterday from their shorting activity, why couldn't you let them use those USD's to cover their positions by buying on gox?

Obviously the money has been used up to purchase Bitcoins for the longs.

You have money in Bitcoinica account doesn't mean it's 100% in reserves, it can be borrowed by someone else to buy/sell Bitcoins. At any point, Bitcoinica is a:

- Full reserve in BTC and fractional reserve in USD, or
- Full reserve in USD and fractional reserve in BTC.

(Yesterday, we had a full reserve in BTC, and a depleted reserve in USD. Users couldn't withdraw USD until the situation was resolved.)

This is how hedging exactly works to ensure that we ourselves and our customers are always having almost the same profits (or we call it internally, rate of change of asset value with respect to market price).

Founder of NameTerrific (https://www.nameterrific.com/). Co-founder of CoinJar (https://coinjar.io/)

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December 30, 2011, 01:21:08 AM
 #31


no i don't so i am trying to understand.  i'm not talking about market orders, i'm asking about limit short orders that try to hit the bid exactly.
Wait a sec. You've been slinging all this (let's just politely say) mud about bitcoinica and you haven't even used the service? You have a funny way of trying to understand things.

zhoutong
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December 30, 2011, 01:25:56 AM
 #32


And that's why the trade on Bitcoinica doesn't go through before they hedged the position on Mtgox. The situation you're describing simply isn't possible. They try to hedge for 4$. When that isn't possible due to whatever situation you can come up with, and the price falls to 3,80, that's the price the costumer is going to get. Unfair? That's the risk of market orders. If the customer used a limit order instead, which he should if he cares about the risk, and places the limit order at 4$, the trade simply wouldn't go through, because Bitcoinica is unable to hedge at 4$ as the price already fell to 3,80$.


this part can't be correct.  the way i understand it is that the customer gets his order executed before Zhou has a chance to hedge on mtgox.  this is why the spreads are higher on Bitcoinica to acct for slippage or his increased risk of letting you fill first.  example:

if mtgox bid:ask is $4:$4.10 then
Bitcoinica might be $3.80:$4.30 thus

you, as a customer of Bitcoinica, can short at the ask of $3.80 with a limit order and you will get it filled immediately.  the $0.20 difference is what Zhou's algorithm has figured to be a safe cushion to give him time to hedge on mtgox and sell his btc at or somewhere btwn $3.80 and $4 so he doesn't lose money.

in your example, you state that even if you short at the ask price of $3.80 it won't be filled until and if Zhou is able to sell a corresponding amt of btc on mtgox at $3.80.  if that was the case then his spreads should never be higher than mtgox's since he doesn't assume any risk.

correct me if i'm wrong.

Well, the system hedges right after the order execution, and that's why we call it "guaranteed liquidity". And also, the system has to figure out whether it's necessary to hedge at all.

Bitcoinica is not a Mt. Gox interface because we want to be as independent as possible.

We don't have to ensure profits and accuracy on every single trade. But much more than 99% of the time, we can hedge at exact prices that we aim to. If we can ensure these:

- Slippage is highly concentrated in a few seconds of a day
- Customers' orders are distributed across all times

We have virtually no risk.

The market doesn't slip every 5 seconds. And during most of the violent moves previously, we received no or only a few orders. The high volume was always generated after the violent moves.

Your theory of "hedging erosion" never happens in our experience. During 9/11, we lost about $10 due to slippage when the price suddenly spikes 50%. And we made 100x back later. It's peanut right?

A clear-minded person won't question the business model of the one of the most successful Bitcoin businesses ever.

Founder of NameTerrific (https://www.nameterrific.com/). Co-founder of CoinJar (https://coinjar.io/)

Donations for my future Bitcoin projects: 19Uk3tiD5XkBcmHyQYhJxp9QHoub7RosVb
cypherdoc
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December 30, 2011, 01:27:54 AM
 #33


no i don't so i am trying to understand.  i'm not talking about market orders, i'm asking about limit short orders that try to hit the bid exactly.
Wait a sec. You've been slinging all this (let's just politely say) mud about bitcoinica and you haven't even used the service? You have a funny way of trying to understand things.

hey, i don't have to trade on Bitcoinica to bring up valid concerns that nobody seems to want to address.

first of all, i short sell all the time with Fidelity and i've never been prevented from covering my shorts.  this is unheard of.  Zhou also admits that longs may not be able to sell if everyone gets short.
second, a market maker/brokerage/whatever Zhou wants to call himself should never be giving out trading advice to ppl here on the forum. what about all the longs on Bitcoinica who weren't logged in yesterday when he advised selling?
third i haven't heard a response to Ferroh's argument above
fourth, if the customers get executed first before Zhou has a chance to hedge that does indeed put Bitcoinica and customers at some risk depending on how fast mtgox is moving.
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December 30, 2011, 01:31:20 AM
 #34


And that's why the trade on Bitcoinica doesn't go through before they hedged the position on Mtgox. The situation you're describing simply isn't possible. They try to hedge for 4$. When that isn't possible due to whatever situation you can come up with, and the price falls to 3,80, that's the price the costumer is going to get. Unfair? That's the risk of market orders. If the customer used a limit order instead, which he should if he cares about the risk, and places the limit order at 4$, the trade simply wouldn't go through, because Bitcoinica is unable to hedge at 4$ as the price already fell to 3,80$.


this part can't be correct.  the way i understand it is that the customer gets his order executed before Zhou has a chance to hedge on mtgox.  this is why the spreads are higher on Bitcoinica to acct for slippage or his increased risk of letting you fill first.  example:

if mtgox bid:ask is $4:$4.10 then
Bitcoinica might be $3.80:$4.30 thus

you, as a customer of Bitcoinica, can short at the ask of $3.80 with a limit order and you will get it filled immediately.  the $0.20 difference is what Zhou's algorithm has figured to be a safe cushion to give him time to hedge on mtgox and sell his btc at or somewhere btwn $3.80 and $4 so he doesn't lose money.

in your example, you state that even if you short at the ask price of $3.80 it won't be filled until and if Zhou is able to sell a corresponding amt of btc on mtgox at $3.80.  if that was the case then his spreads should never be higher than mtgox's since he doesn't assume any risk.

correct me if i'm wrong.

Well, the system hedges right after the order execution, and that's why we call it "guaranteed liquidity". And also, the system has to figure out whether it's necessary to hedge at all.

Bitcoinica is not a Mt. Gox interface because we want to be as independent as possible.

We don't have to ensure profits and accuracy on every single trade. But much more than 99% of the time, we can hedge at exact prices that we aim to. If we can ensure these:

- Slippage is highly concentrated in a few seconds of a day
- Customers' orders are distributed across all times

We have virtually no risk.

The market doesn't slip every 5 seconds. And during most of the violent moves previously, we received no or only a few orders. The high volume was always generated after the violent moves.

Your theory of "hedging erosion" never happens in our experience. During 9/11, we lost about $10 due to slippage when the price suddenly spikes 50%. And we made 100x back later. It's peanut right?

A clear-minded person won't question the business model of the one of the most successful Bitcoin businesses ever.

ah, so i was right and Mushoz's example is wrong.  he thinks customer orders don't get filled until you've already hedged.  there IS risk when you let the customer go first.

and now you admit that you might not even hedge.  there's alot of judgement that goes into those algorithms that could be wrong in a violent market.

Zhou, how do you respond to Ferroh's argument above?
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December 30, 2011, 01:37:47 AM
 #35


no i don't so i am trying to understand.  i'm not talking about market orders, i'm asking about limit short orders that try to hit the bid exactly.
Wait a sec. You've been slinging all this (let's just politely say) mud about bitcoinica and you haven't even used the service? You have a funny way of trying to understand things.

hey, i don't have to trade on Bitcoinica to bring up valid concerns that nobody seems to want to address.

first of all, i short sell all the time with Fidelity and i've never been prevented from covering my shorts.  this is unheard of.  Zhou also admits that longs may not be able to sell if everyone gets short.
second, a market maker/brokerage/whatever Zhou wants to call himself should never be giving out trading advice to ppl here on the forum. what about all the longs on Bitcoinica who weren't logged in yesterday when he advised selling?
third i haven't heard a response to Ferroh's argument above
fourth, if the customers get executed first before Zhou has a chance to hedge that does indeed put Bitcoinica and customers at some risk depending on how fast mtgox is moving.

First, this problem has been resolved and will be prevented in the future. I have already explained how everything works and why there's a problem. I don't have access to money markets like Fidelity and I heavily rely on customer deposits to maintain reserves.

Second, I didn't advise anything. I said it was an opportunity to long squeeze, because everyone with capital knows and I just want to address the possibility. Apparently it didn't happened. I have plenty of Bitcoins and advise people to sell? If I have sold myself I can make a lot of evil profits, but instead I just want to be transparent so I shared everything.

Third, I posted already.

Fourth, please calculate the average 5-second move of Mt. Gox during the day. It's almost zero. We don't shoot 10,000 BTC buy orders when prices are spiking to infinity. The maximum we have done is like 50, 100 or 150 BTC, except for the forced liquidations which are confirmed risks already.

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December 30, 2011, 01:38:50 AM
 #36

if the market went to $5 today and you were short yesterday and wanted to cover but couldn't b/c Zhou is under reserved in USD's, your entire acct would have been liquidated.
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December 30, 2011, 01:41:08 AM
 #37


no i don't so i am trying to understand.  i'm not talking about market orders, i'm asking about limit short orders that try to hit the bid exactly.
Wait a sec. You've been slinging all this (let's just politely say) mud about bitcoinica and you haven't even used the service? You have a funny way of trying to understand things.

hey, i don't have to trade on Bitcoinica to bring up valid concerns that nobody seems to want to address.

first of all, i short sell all the time with Fidelity and i've never been prevented from covering my shorts.  this is unheard of.  Zhou also admits that longs may not be able to sell if everyone gets short.
second, a market maker/brokerage/whatever Zhou wants to call himself should never be giving out trading advice to ppl here on the forum. what about all the longs on Bitcoinica who weren't logged in yesterday when he advised selling?
third i haven't heard a response to Ferroh's argument above
fourth, if the customers get executed first before Zhou has a chance to hedge that does indeed put Bitcoinica and customers at some risk depending on how fast mtgox is moving.
I can only really address you first point right now. It may be unheard of in markets where, I'm sure, the market makers are regulated to have a line of credit -at a government defined level of sufficiency- to prevent the sort of thing that happened earlier. Without that line of credit, which is likely to be difficult, if not impossible for Zhou to get because his business involves bitcoins, there are two ways I know to deal with it.
One, do what Z did.
Two, steal money (BTC or USD) from the accounts of his customers to allow others to cover.

Personally, I think theft is simply wrong and think that Zhou had a system set up to do the right thing in such a situation. Hindsight being what it is, I bet that there is a more efficient way to set up the system, and it sound like Zhou is working on it from some of his earlier posts.

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December 30, 2011, 01:41:40 AM
 #38


And that's why the trade on Bitcoinica doesn't go through before they hedged the position on Mtgox. The situation you're describing simply isn't possible. They try to hedge for 4$. When that isn't possible due to whatever situation you can come up with, and the price falls to 3,80, that's the price the costumer is going to get. Unfair? That's the risk of market orders. If the customer used a limit order instead, which he should if he cares about the risk, and places the limit order at 4$, the trade simply wouldn't go through, because Bitcoinica is unable to hedge at 4$ as the price already fell to 3,80$.


this part can't be correct.  the way i understand it is that the customer gets his order executed before Zhou has a chance to hedge on mtgox.  this is why the spreads are higher on Bitcoinica to acct for slippage or his increased risk of letting you fill first.  example:

if mtgox bid:ask is $4:$4.10 then
Bitcoinica might be $3.80:$4.30 thus

you, as a customer of Bitcoinica, can short at the ask of $3.80 with a limit order and you will get it filled immediately.  the $0.20 difference is what Zhou's algorithm has figured to be a safe cushion to give him time to hedge on mtgox and sell his btc at or somewhere btwn $3.80 and $4 so he doesn't lose money.

in your example, you state that even if you short at the ask price of $3.80 it won't be filled until and if Zhou is able to sell a corresponding amt of btc on mtgox at $3.80.  if that was the case then his spreads should never be higher than mtgox's since he doesn't assume any risk.

correct me if i'm wrong.

Well, the system hedges right after the order execution, and that's why we call it "guaranteed liquidity". And also, the system has to figure out whether it's necessary to hedge at all.

Bitcoinica is not a Mt. Gox interface because we want to be as independent as possible.

We don't have to ensure profits and accuracy on every single trade. But much more than 99% of the time, we can hedge at exact prices that we aim to. If we can ensure these:

- Slippage is highly concentrated in a few seconds of a day
- Customers' orders are distributed across all times

We have virtually no risk.

The market doesn't slip every 5 seconds. And during most of the violent moves previously, we received no or only a few orders. The high volume was always generated after the violent moves.

Your theory of "hedging erosion" never happens in our experience. During 9/11, we lost about $10 due to slippage when the price suddenly spikes 50%. And we made 100x back later. It's peanut right?

A clear-minded person won't question the business model of the one of the most successful Bitcoin businesses ever.

ah, so i was right and Mushoz's example is wrong.  he thinks customer orders don't get filled until you've already hedged.  there IS risk when you let the customer go first.

and now you admit that you might not even hedge.  there's alot of judgement that goes into those algorithms that could be wrong in a violent market.

Zhou, how do you respond to Ferroh's argument above?

Have you ever been to Bitcoinica's home page even?

We display publicly how much we hedge during the last 24 hours. Some orders are matched internally.

Yes, we take risk, but I did a lot of experiment to simulate the worse situations possible. If you were a partner you would see a screenshot of BTC/USD rocketing to $9648.84556 when I tried to make things funny.

We execute orders in 50 BTC blocks. We always update prices globally for every 50 BTC executed. The maximum we can lose is 50 BTC times amount of slippage.

Founder of NameTerrific (https://www.nameterrific.com/). Co-founder of CoinJar (https://coinjar.io/)

Donations for my future Bitcoin projects: 19Uk3tiD5XkBcmHyQYhJxp9QHoub7RosVb
zhoutong
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December 30, 2011, 01:43:37 AM
 #39

if the market went to $5 today and you were short yesterday and wanted to cover but couldn't b/c Zhou is under reserved in USD's, your entire acct would have been liquidated.

This will not happen in the future.

We will only restrict new positions, not existing positions in the future.

Founder of NameTerrific (https://www.nameterrific.com/). Co-founder of CoinJar (https://coinjar.io/)

Donations for my future Bitcoin projects: 19Uk3tiD5XkBcmHyQYhJxp9QHoub7RosVb
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December 30, 2011, 01:44:24 AM
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Two, steal money (BTC or USD) from the accounts of his customers to allow others to cover.


he just said that the USD accumulated in short sellers accts was already used to buy bitcoins.  did i get that right, Zhou?  so what do you call that Smickles?
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