We are glad to announce that we have started the public test run of our interest system. We are the first website to offer interests for Bitcoin deposits. This post is intended to explain how the system works.
For prevailing interest rates, please visit https://www.bitcoinica.com/pages/interest
For interest rates charts, please visit http://charts.bitcoinica.com/interest_ratesDaily Pip vs APY
Daily Pip is the standard unit of interest rate in Bitcoinica. A pip represents 0.01% in interest rates. (e.g. 4.17 means interest of 0.0417% daily).
APY stands for Annualized Percentage Yield. It's a representative measure of interest rate that helps you to compare with similar products (bank deposits, bonds, money market funds, etc). Bitcoinica deposits are compounded daily, therefore if the interest rate is 4.17 (daily pip), the APY should be 1.000417^365 -1 = 16.44%.
Assuming you deposit $10,000 with us and the interest rate is always 4.17, you will get $4.17 every day or $1,644 every year (with compound interest).Position swap
Due to the interest rate differentials, BTC/USD positions carry some interests. When you long BTC/USD, essentially you are buying BTC and selling USD at the same time. Assuming that USD interest rate is higher than BTC interest rate, you should pay for the interest difference if you want to keep your positions. The interest difference is position swap.
Our Interest Rates page shows the effective hourly swap points for BTC/USD positions. For example,
Long Position -$0.21
Short Position $0.18
That means you have to pay $0.21 every hour if you keep a $10,000 worth of long BTC/USD position, and you are entitled to receive $0.18 every hour if you keep a $10,000 worth of short BTC/USD position.
The position swap is equal to the difference between the buying interest rate of the currency that you bought and the selling interest rate of the currency that you sold. (Long BTC/USD: BTC Buy - USD Sell. Short BTC/USD: USD Buy - BTC Sell.)
The value of a trade is the multiplication of the absolute amount and the base price. If the base price is negative, the value of the trade is zero.How to get paid?
We calculate your interest payment every hour, and we pay you every day between 00:00 - 01:00 UTC if your unsettled interest payment is at least 0.01 (in either USD or BTC).
For open positions, we calculate the swap every hour, and you will receive/pay the position swap when you fully liquidate the position.Is Bitcoinica a ponzi/pyramid scheme?
The general aim of our interest system is to encourage people to deposit their money with us so that we can provide more reserves for leveraged trading. Also, we want to design the first money market for the Bitcoin community.
All the interest rates you see are prevailing rates. They are subject to change every 30 minutes depending on actual demand and supply of money, and our reserve levels. We never guarantee a fixed earnings for your deposits.
Our general design principle is that we always pay less interest to our customers than what we receive from them as position swaps. Therefore, we will never use your deposits to pay for someone else's interest payment. This will make sure that we're not running a ponzi scheme or pyramid scheme.What's the maximum interest rate?
The maximum interest rate for now is 5.0 daily pips. That's 20.02% APY. This interest rate cap is subject to change.Is Bitcoinica licensed to run this?
Yes, we are now a fully licensed financial services provider. Unfortunately, we are not able to disclose more information at this moment. We will announce this in detail at a later date.When does the test run end?
The test run will end at February 16, 00:00:00 UTC. You don't pay/receive position swaps if you close your positions before that. But you are entitled to receive interest payments on your currency account balances. If you close your positions after the cut-off date, you will still have to pay/receive the position swaps incurred before the cut-off date.What's the interest rate now?