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Question: is bitcoinica dead ?
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notme
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January 23, 2012, 09:14:31 PM
 #21

The fact that they even need/use reserves tells us all we need to know about how sustainable the business is.
Wait, wait. How do you run leveraged trading at all without a reserve?
The whole idea of going long is, "I'm buying BTC now, under the assumption that the price will rise."
The whole idea of going short is, "I'm selling BTC now, under the assumption that the price will fall."
These are things you can do on a market yourself!

Not quite.  Going long is not the same as buying BTC.  Going long is buying BTC when you only have BTC.  Going short is selling BTC when you don't have any BTC.

You use the security you do have as collateral on a loan to borrow the thing you don't have.

It doesn't necessarily need a reserve since you can offset a long against a short.

But when trading on leverage, what that means is that someone is loaning you USD to buy your BTC, or BTC to buy your USD. And if your investment does badly, that's what forced liquidation is for - to ensure that whoever gave you that loan gets back the money they loaned out.
The only thing "unsustainable" about Bitcoinica is that Zhou doesn't have as much money to lend as people seem to want. He's not betting against his customers - he's not losing money when people guess right.

If you read the thread I pointed at you'll see that I'm arguing that the offsetting that can be done only works up until one party is forcibly liquidated.  At that moment the matching is done; as there is no party to supply any further profit.  Since that is not what Bitcoinica is doing -- stopping the game for the profitable half as well -- they must be taking on the unprofitable position; or speculating in sync with the profitable position.  Either way, they must start using their reserves for speculating.  What do they need their customers for if all they're doing is speculating?



Um... you're wrong.  Going long/short does not necessarily have to be a loan on leverage.  Buying BTC with USD is correctly termed as taking a long position.

Also, Bitcoinica doesn't have to take the other side.  They just have to reserve the assets for the remaining position so they have any moves covered.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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piotr_n
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January 23, 2012, 09:20:32 PM
 #22

But they should be taking a risk if they want this service to grow - to earn more money.
Or, if they don't want to take a risk, they need to offer an interest on unused deposits - like bitscalper, just with the trust to mr Z.
And I think you can even make it risk free: just distribute half of your every-day profits among the customers, proportionally to their unspent deposit.
That I think would be my business plan here Tongue

Check out gocoin - my original project of a bitcoin client written in Go, with some unique features.
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notme
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January 23, 2012, 09:23:18 PM
 #23

But they should be taking a risk if they want this service to grow - to earn more money.
Or, if they don't want to take a risk, they need to offer an interest on unused deposits - like bitscalper.
And I think you can even make it risk free: just distribute half of your every-day profits among the customers, proportionally to their unspent deposit.
That I think would be my business plan here Tongue

I'll give a damn about your business plan as soon as you put in the effort to build it.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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piotr_n
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January 23, 2012, 09:24:58 PM
 #24

But they should be taking a risk if they want this service to grow - to earn more money.
Or, if they don't want to take a risk, they need to offer an interest on unused deposits - like bitscalper.
And I think you can even make it risk free: just distribute half of your every-day profits among the customers, proportionally to their unspent deposit.
That I think would be my business plan here Tongue

I'll give a damn about your business plan as soon as you put in the effort to build it.
Why only then?

Check out gocoin - my original project of a bitcoin client written in Go, with some unique features.
PGP fingerprint: AB9E A551 E262 A87A 13BB  9059 1BE7 B545 CDF3 FD0E
realnowhereman
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January 23, 2012, 09:26:50 PM
 #25

Um... you're wrong.  Going long/short does not necessarily have to be a loan on leverage.  Buying BTC with USD is correctly termed as taking a long position.

Fair enough.

Also, Bitcoinica doesn't have to take the other side.  They just have to reserve the assets for the remaining position so they have any moves covered.

Someone has to take the other side; the profits won't come from nowhere.  One man's profit is another man's loss.  The problem I'm referring to is that they have to reserve every position; they can't just reserve the imbalance.  That means they're just speculating in sync with all of their customers.  If the customers are wrong, then Bitcoinica will lose too... at the leveraged rate.  Ouch.

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piotr_n
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January 23, 2012, 09:32:59 PM
 #26

But they should be taking a risk if they want this service to grow - to earn more money.
Or, if they don't want to take a risk, they need to offer an interest on unused deposits - like bitscalper.
And I think you can even make it risk free: just distribute half of your every-day profits among the customers, proportionally to their unspent deposit.
That I think would be my business plan here Tongue

I'll give a damn about your business plan as soon as you put in the effort to build it.
Why only then?
My business plan is flawless.
I'm just to lazy to build it.
But it doesn't mean that I'm stupid.
And - I don't know your age, but from my experience; the smarter a person is, the more lazy it tends to be Smiley

Check out gocoin - my original project of a bitcoin client written in Go, with some unique features.
PGP fingerprint: AB9E A551 E262 A87A 13BB  9059 1BE7 B545 CDF3 FD0E
notme
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January 23, 2012, 09:34:05 PM
 #27

Um... you're wrong.  Going long/short does not necessarily have to be a loan on leverage.  Buying BTC with USD is correctly termed as taking a long position.

Fair enough.

Also, Bitcoinica doesn't have to take the other side.  They just have to reserve the assets for the remaining position so they have any moves covered.

Someone has to take the other side; the profits won't come from nowhere.  One man's profit is another man's loss.  The problem I'm referring to is that they have to reserve every position; they can't just reserve the imbalance.  That means they're just speculating in sync with all of their customers.  If the customers are wrong, then Bitcoinica will lose too... at the leveraged rate.  Ouch.

They do reserve every position.  And if the customers are wrong, Bitcoinica liquidates them and eats their margin.  Slippage is the only way for Bitcoinica to lose, but so far their profits have covered the very limited instances where slippage has proved to be a problem.

But they should be taking a risk if they want this service to grow - to earn more money.
Or, if they don't want to take a risk, they need to offer an interest on unused deposits - like bitscalper.
And I think you can even make it risk free: just distribute half of your every-day profits among the customers, proportionally to their unspent deposit.
That I think would be my business plan here Tongue

I'll give a damn about your business plan as soon as you put in the effort to build it.
Why only then?

Because until then, you're just another idiot making noise.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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notme
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January 23, 2012, 09:36:02 PM
 #28

But they should be taking a risk if they want this service to grow - to earn more money.
Or, if they don't want to take a risk, they need to offer an interest on unused deposits - like bitscalper.
And I think you can even make it risk free: just distribute half of your every-day profits among the customers, proportionally to their unspent deposit.
That I think would be my business plan here Tongue

I'll give a damn about your business plan as soon as you put in the effort to build it.
Why only then?
My business plan is flawless.
I'm just to lazy to build it.
But it doesn't mean that I'm stupid.
And - I don't know your age, but from my experience; the smarter the person is, the more lazy it tends to be Smiley

That's just it... it's less of a business plan and more of a collection of words that can barely hang together.
I think you're trying to say they should pay interest on unused margin, but your grammar is terrible.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
12jh3odyAAaR2XedPKZNCR4X4sebuotQzN
piotr_n
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January 23, 2012, 09:38:18 PM
 #29

That's just it... it's less of a business plan and more of a collection of words that can barely hang together.
I think you're trying to say they should pay interest on unused margin, but your grammar is terrible.
Only because I am polite and I don't want to spoil the content of this forum, I am not going to answer you.
Which doesn't mean that I respect you - imagine the rest Smiley

Check out gocoin - my original project of a bitcoin client written in Go, with some unique features.
PGP fingerprint: AB9E A551 E262 A87A 13BB  9059 1BE7 B545 CDF3 FD0E
notme
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January 23, 2012, 09:40:35 PM
 #30

That's just it... it's less of a business plan and more of a collection of words that can barely hang together.
I think you're trying to say they should pay interest on unused margin, but your grammar is terrible.
Only because I am polite and I don't want to spoil the content of this forum, I am not going to answer you.
Which doesn't mean that I respect you - imagine the rest Smiley

Good... hold that head high.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
12jh3odyAAaR2XedPKZNCR4X4sebuotQzN
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