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[myself]

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[naima53]

what the point of bitcoinica if they have no reserves ?

There are no stocks because go downwards...
Otherwise not than will cover already open positions imo

[bittenbob]

I see the starfish too. When this first happened Zhou said it was a freak occurrence and something that shouldn't normally happen. Ever since then the site has been starfished on a daily basis in one direction or another. Normally when this happens there is a smackdown in the opposite direction which magically fixes it. I suspect this might be why a lot more market depth has made itself known on MTGox. The gox has its problems too but at least they keep their order books open.

[legitnick]

Who will take my money now? 

[bittenbob]

It is still starfished on the buy (long) side. It has been like that at least all day and if I were a regular user of bitcoinica I would be upset about this. Interestingly I have not seen Zhou show himself on these forums during this period which he usually does to reassure users. I would say that this is probably the most post worthy topic of discussion on these forums right now but I do not see a whole lot of it.

[teflone]

Zhou is busy coding the new and improved bitcoinica I would presume..

The public spoke, he tends to listen..

[bittenbob]

Zhou is busy coding the new and improved bitcoinica I would presume..

The public spoke, he tends to listen..

The last I heard from him he actually admitted to losing some money during the big swing last week. Ever since then there appears to be a liquidity issue at the site. Usually he listens to the users but with the inability to go long and purchase bitcoins for so long I now have to question the financial feasibility of the site.

[bittenbob]

Liquidity might not be the right word but he doesn't seem to have the reserve(a kind of liquidity imo) to cover any long positions. If he does create his own bitcoin exchange what would prevent these starfishes from occurring? This would in turn force the price down since no one would be able to buy them or sell them. I just don't see how an exchange is going to help him with this problem.

[teflone]

Zhou is busy coding the new and improved bitcoinica I would presume..

The public spoke, he tends to listen..

The last I heard from him he actually admitted to losing some money during the big swing last week. Ever since then there appears to be a liquidity issue at the site. Usually he listens to the users but with the inability to go long and purchase bitcoins for so long I now have to question the financial feasibility of the site.

Yes, good points.

But I would theorize ANY amount of "liquidity" that he makes available for leveraging would not be enough..   What Im seeing people do lately is ridiculous, if they only realized what it means for all of bitcoinica longs, shorts, whatevers, have to translate down to orders on mtgox..   It scares me actually..

[teflone]

Liquidity might not be the right word but he doesn't seem to have the reserve(a kind of liquidity imo) to cover any long positions. If he does create his own bitcoin exchange what would prevent these starfishes from occurring? This would in turn force the price down since no one would be able to buy them or sell them. I just don't see how an exchange is going to help him with this problem.

Bitcoinica using mtgox, is liken to betting against yourself.  He has to hedge against his own market to protect himself and everyone. 

Eventually he has to adjust positions..

[caston]

maybe one day bitcoinica will become a competing exchange

[stochastic]

what the point of bitcoinica if they have no reserves ?

I think they are doing it wrong.

[realnowhereman]

I think Bitcoinica is eventually doomed:

https://bitcointalk.org/index.php?topic=60836

The fact that they even need/use reserves tells us all we need to know about how sustainable the business is.

[Qoheleth]

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!
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.

[vokain]

...just goes to show how misguided almost anyone who has an opinion here is

[naima53]

Forgive for foolish transfer, I tried to write a simple language. I here that see in this fine small market: steady NOT speculative demand. Notice, how many thousand and thousand coins are bought constantly and in regular intervals! Sluggishly, with rare "БУУM"! And the party of the ask does not decrease! The quantity of coins on sale and remains approximately identical. I think, there is a plot of large holders not to sell "a dump of a shit", and to sell sluggishly and in regular intervals. Then, after time, coins will end at them, and the price will go upwards faster. But it is not favourable to large holders. Because there will be very strong correction. As in June 11г. Selling on not many but it is constant, it is possible not to bring down the price and to sell it is much more.
And to receive not such terrible correction. Then in June who did not know that will be, and now all have made working on by the errors. Especially large players. Into the  BITCOINICA - it is simple at it all money for one side. 2... 4 large clever players have made BUY in a range 2. 3 dollars, have added in a range 4. 5 dollars, also have added possibly now. Grind all stock...Also do not sell... For "early". (They and only they know, when time has come)  

[vokain]

Forgive for foolish transfer, I tried to write a simple language. I here that see in this fine small market: steady NOT speculative demand. Notice, how many thousand and thousand coins are bought constantly and in regular intervals! Sluggishly, with rare "БУУM"! And the party of the ask does not decrease! The quantity of coins on sale and remains approximately identical. I think, there is a plot of large holders not to sell "a dump of a shit", and to sell sluggishly and in regular intervals. Then, after time, coins will end at them, and the price will go upwards faster. But it is not favourable to large holders. Because there will be very strong correction. As in June 11г. Selling on not many but it is constant, it is possible not to bring down the price and to sell it is much more.
And to receive not such terrible correction. Then in June who did not know that will be, and now all have made working on by the errors. Especially large players. Into the  BITCOINICA - it is simple at it all money for one side. 2... 4 large clever players have made BUY in a range 2. 3 dollars, have added in a range 4. 5 dollars, also have added possibly now. Grind all stock...Also do not sell... For "early". (They and only they know, when time has come)  

Even though I can't understand it, he sounds mostly right. Coins are just traded back and forth now and the prices and fluctuations of we see today are pretty inconsequential to what it will be. "It's a bull market, you know"

[piotr_n]

If there is no incentive for people to keep deposits there yet without using them..
And the service owner is doing everything to make sure that his risk is literally zero at any time, in any circumstances ever - i.e. by introducing features like forcing immediate settlements of any negative balance... which obviously minimizes his risk, but also very effectively clears up the deposits...

This couldn't end up otherwise than with the one big NO RESERVE at both sides - which we are currently observing.

[stochastic]

Things collapse gradually, then suddenly.

[realnowhereman]

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?