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Author Topic: Bitcoinica's "guaranteed liquidity"  (Read 2247 times)
rebuilder
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January 16, 2012, 09:21:57 PM
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What exactly does it mean when Bitcoinica say they have 50BTC guaranteed liquidity both ways for market orders? I thought it is a way for them to guarantee you get the price quoted if you use the instant buy function, but I placed a market order around 6.8 (it was moving pretty wildly) and had it execute for values between 6.6293 and 7.1312 during that big spike. Basically I tried to catch the downspike but before the order got executed in the queue, the upspike came.


So anyway, what exactly does the guaranteed liquidity stand for?

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rebuilder
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January 16, 2012, 09:25:14 PM
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Or maybe I should think of the obvious explanation first - it's 50 BTC combined, for all trades on Bitcoinica. Is this correct?

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January 16, 2012, 09:25:24 PM
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What exactly does it mean when Bitcoinica say they have 50BTC guaranteed liquidity both ways for market orders? I thought it is a way for them to guarantee you get the price quoted if you use the instant buy function, but I placed a market order around 6.8 (it was moving pretty wildly) and had it execute for values between 6.6293 and 7.1312 during that big spike. Basically I tried to catch the downspike but before the order got executed in the queue, the upspike came.


So anyway, what exactly does the guaranteed liquidity stand for?

It just means any order larger than 50 BTC gets executed in 50 BTC chunks.  Each subsequent chunk may be executed at a different price, especially in a quickly moving market.

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January 16, 2012, 09:26:58 PM
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It just means any order larger than 50 BTC gets executed in 50 BTC chunks.  Each subsequent chunk may be executed at a different price, especially in a quickly moving market.

That doesn't seem to have held. My order was under that limit.

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January 16, 2012, 09:27:47 PM
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What exactly does it mean when Bitcoinica say they have 50BTC guaranteed liquidity both ways for market orders? I thought it is a way for them to guarantee you get the price quoted if you use the instant buy function, but I placed a market order around 6.8 (it was moving pretty wildly) and had it execute for values between 6.6293 and 7.1312 during that big spike. Basically I tried to catch the downspike but before the order got executed in the queue, the upspike came.


So anyway, what exactly does the guaranteed liquidity stand for?

From http://www.bitcoinica.com/pages/faq:

How do you guarantee liquidity?
Bitcoinica is similar to a Forex brokerage. Besides accepting orders from our wonderful users, we also trade with other exchanges (primarily Mt. Gox) to balance our portfolio. So that we always have something for you to do margin trading or short selling without always being forced to bet against you. Currently we guarantee up to ฿50 of liquidity for market orders in both directions.

Not sure that explains it, but thought I'd share.

https://www.bitcoin.org/bitcoin.pdf
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January 16, 2012, 09:31:14 PM
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What exactly does it mean when Bitcoinica say they have 50BTC guaranteed liquidity both ways for market orders? I thought it is a way for them to guarantee you get the price quoted if you use the instant buy function, but I placed a market order around 6.8 (it was moving pretty wildly) and had it execute for values between 6.6293 and 7.1312 during that big spike. Basically I tried to catch the downspike but before the order got executed in the queue, the upspike came.


So anyway, what exactly does the guaranteed liquidity stand for?

From http://www.bitcoinica.com/pages/faq:

How do you guarantee liquidity?
Bitcoinica is similar to a Forex brokerage. Besides accepting orders from our wonderful users, we also trade with other exchanges (primarily Mt. Gox) to balance our portfolio. So that we always have something for you to do margin trading or short selling without always being forced to bet against you. Currently we guarantee up to ฿50 of liquidity for market orders in both directions.

Not sure that explains it, but thought I'd share.

Not that it says this on the website but I think all that goes out the window when the mighty ( * ) appears.
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January 16, 2012, 09:33:31 PM
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Hm. Now that I think about it (my short term memory isn't the best...) I may have placed several smaller orders in quick succession. It's a bit weird that the orderbook only shows a price for one of them, 6.841, executed at 6.6293, and the ones that got executed higher have no price listed.

Well, it may well be my fumble, but I do remember first hitting buy, then a few seconds later seeing the sell price skyrocket on the charts, and sure enough I was the proud owner of several bitcoins with a base price of over 7 USD. Can the "no reserve" situation cause market orders set at one price to execute at a higher price if they get held up? Do the orders get a price set if the bull's eye is winking, or do they simply get executed at any price as soon as buying becomes possible?

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January 16, 2012, 09:35:38 PM
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Hm. Now that I think about it (my short term memory isn't the best...) I may have placed several smaller orders in quick succession. It's a bit weird that the orderbook only shows a price for one of them, 6.841, executed at 6.6293, and the ones that got executed higher have no price listed.

Well, it may well be my fumble, but I do remember first hitting buy, then a few seconds later seeing the sell price skyrocket on the charts, and sure enough I was the proud owner of several bitcoins with a base price of over 7 USD. Can the "no reserve" situation cause market orders set at one price to execute at a higher price if they get held up? Do the orders get a price set if the bull's eye is winking, or do they simply get executed at any price as soon as buying becomes possible?

If you leave a market order waiting during no reserve it will get filled at whatever the price is when the winking eye goes away.
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January 16, 2012, 09:35:52 PM
 #9

They get executed at any price as soon as buying becomes possible. Therefor you have to be very careful when using market orders when the asterisk is active, but even without it you have to be very careful. As you already noted, there's a 1-4 second delay on orders executing depending on a lot of things, so you might not get the price that you want to pay. Therefor I suggest you use limit orders to make sure your prices don't pass a certain limit.

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January 16, 2012, 09:36:50 PM
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They get executed at any price as soon as buying becomes possible. Therefor you have to be very careful when using market orders when the asterisk is active, but even without it you have to be very careful. As you already noted, there's a 1-4 second delay on orders executing depending on a lot of things, so you might not get the price that you want to pay. Therefor I suggest you use limit orders to make sure your prices don't pass a certain limit.


It tends to blink on and off a lot, doesn't it... But yes. Lesson learned. Only use limits (and stops of course)

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January 16, 2012, 09:42:28 PM
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Bitcoinica's "guaranteed liquidity" = unless they run out of money.
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January 17, 2012, 01:35:16 AM
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Hm. Now that I think about it (my short term memory isn't the best...) I may have placed several smaller orders in quick succession. It's a bit weird that the orderbook only shows a price for one of them, 6.841, executed at 6.6293, and the ones that got executed higher have no price listed.

Well, it may well be my fumble, but I do remember first hitting buy, then a few seconds later seeing the sell price skyrocket on the charts, and sure enough I was the proud owner of several bitcoins with a base price of over 7 USD. Can the "no reserve" situation cause market orders set at one price to execute at a higher price if they get held up? Do the orders get a price set if the bull's eye is winking, or do they simply get executed at any price as soon as buying becomes possible?

Multiple orders may be executed at different prices.

A large order will give you the market price at the exact moment, and even larger orders will be split into ฿50 chunks.

Multiple orders and "chunks" are treated equally.

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January 17, 2012, 01:40:53 AM
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Zhou why does your algorithm allow for these red flag events to happen so often?  If you are making money on every trade why do you run out of money so often?
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January 17, 2012, 01:53:51 AM
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Why not disclose Bitcoinicas reserve balances?

Stan?! STAN?!?!
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January 17, 2012, 02:02:15 AM
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Zhou why does your algorithm allow for these red flag events to happen so often?  If you are making money on every trade why do you run out of money so often?

More importantly when these red flag event occur then the market always seems to move in the opposite position (cant short = market goes up, cant go long = market decrease). Is Zhou trading against these flags and if he says no why should we believe him? He would definitely have the capital and the means to do so with bitcoinica.
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January 17, 2012, 02:10:34 AM
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In true Forex fashion when you click that button and they cant get that rate for you it should read "Rates Changed".  Now Bitcoinica just decides to treat it like a stock market order and place it when they can.  Which is really not right and the reason I only use Limit orders.

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January 17, 2012, 02:31:25 AM
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Why not disclose Bitcoinicas reserve balances?

Probably for the same reason I don't like to share my margin balance  Tongue

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January 17, 2012, 02:42:44 AM
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Zhou why does your algorithm allow for these red flag events to happen so often?  If you are making money on every trade why do you run out of money so often?

More importantly when these red flag event occur then the market always seems to move in the opposite position (cant short = market goes up, cant go long = market decrease). Is Zhou trading against these flags and if he says no why should we believe him? He would definitely have the capital and the means to do so with bitcoinica.

+1. It now had become the dreaded ‘Bitconica law’ and seems to limit all sudden market movements (which is a good thing, arguably). This is until Gox wakes up and starts to provide proper services.
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January 17, 2012, 03:03:02 AM
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In true Forex fashion when you click that button and they cant get that rate for you it should read "Rates Changed".  Now Bitcoinica just decides to treat it like a stock market order and place it when they can.  Which is really not right and the reason I only use Limit orders.

I used Forex.com's trading panel before, and actually they allow you to set a percentage limit for "Instant Execution". So basically you're placing a limit order, but if it can't be executed immediately (due to "Rates Changed"), the order is abandoned.

However, market order is market order. If you specifically place a market order, it shouldn't be canceled due to "Rates Changed".

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January 17, 2012, 04:13:48 PM
 #20

Zhou why does your algorithm allow for these red flag events to happen so often?  If you are making money on every trade why do you run out of money so often?

More importantly when these red flag event occur then the market always seems to move in the opposite position (cant short = market goes up, cant go long = market decrease). Is Zhou trading against these flags and if he says no why should we believe him? He would definitely have the capital and the means to do so with bitcoinica.

Huh
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