Bitcoinica has paid out the first day's interest!

[zhoutong]

Check your Account Ledger for your first interest payment! Now both USD and BTC have noticeable interest rates.

[1714041168]

1714041168

[1714041168]

1714041168

[finway]

If i took this interests,
does that mean you can use my coins ?

 

[Spekulatius]

You fucking genius, I lift my hat to you! You really got it figured out. I just hope the men in black won't close your ass down before you get all licensed (if so, ill make a good buck on that terror news).

Good luck,
Spekulatius

[rebuilder]

So you're paying around 0.0615% interest.. daily?

edit: this on USD

[RandyMarsh]

I thought the max daily pip was 5.0?

[molecular]

So you're paying around 0.0615% interest.. daily?

edit: this on USD

awesome!

That's about 25% yearly roi. almost as good as shares in MergedMining (38%), JLP-BMD, or FPGA.contract (30%) on http://glbse.com (ROIs calculated on current market prices).

I wonder which investment has lower risk associated.

[chsados]

i dont get this..

i can deposit btc or usd and bitcoinica gives me interest?  what risks are involved?

[molecular]

i dont get this..

i can deposit btc or usd and bitcoinica gives me interest?  what risks are involved?

oh, not much risk really, just the usual risk involved with trusting a random stranger on the interwebs which you should be accustomed to by now as a serious bitcoiner. (disclaimer: don't take too serious)

[Cluster2k]

i dont get this..

i can deposit btc or usd and bitcoinica gives me interest?  what risks are involved?

+1.  USD interest rates are way above anything anyone could get anywhere in the world (without the risk of losing your money).  

What's to stop someone depositing $10k, never trading and collecting 8%pa?  High reward = high risk.  No ifs, no buts.

[da2ce7]

+1.  USD interest rates are way above anything anyone could get anywhere in the world (without the risk of losing your money). 

What's to stop someone depositing $10k, never trading and collecting 8%pa?  High reward = high risk.  No ifs, no buts.

as the exchange gets more liquid the rates go down...

Swaps mean that those buying bitcoin or USD on leverage pay the interest to those providing the liquidity.

What will happen in the future is that the starfish will never exist again as those trying to buy new long (or short in a bare market) positions will be facing extremely high swap costs.  (meaning there is a huge intensive for people to provide more liquidly to to fund those positions).

It is really win-win for everyone

[da2ce7]

(meaning there is a huge intensive for people to provide more liquidly to to fund those positions).

This could be a great way to attract new $$$ into the bitcoin economy...  above market rate interest rates

[chsados]

+1.  USD interest rates are way above anything anyone could get anywhere in the world (without the risk of losing your money).  

What's to stop someone depositing $10k, never trading and collecting 8%pa?  High reward = high risk.  No ifs, no buts.

as the exchange gets more liquid the rates go down...

Swaps mean that those buying bitcoin or USD on leverage pay the interest to those providing the liquidity.

What will happen in the future is that the starfish will never exist again as those trying to buy new long (or short in a bare market) positions will be facing extremely high swap costs.  (meaning there is a huge intensive for people to provide more liquidly to to fund those positions).

It is really win-win for everyone

it just seems...too good to be true!  ive been warry of bitcoinica from the start, not in terms of shady practices but i just dont understand margin trading.  this seems like something that i would benefit from....seems like an un-shade-ified version of bitscalper.

is it as simple as just depositing some money or do i need to do something special....i guess its time for me to register an account there and look around.

EDIT:



is anyone willing to explain what the above informs us? does this mean I have to deposit money and essentially try to predict a direction (long/short), this must be wrong because its essentially the same thing as margin trading...what am i missing?

i see zhoutong slowly bringing some really exciting things.  if he does indeed start his own exchange he could potentially allow people to gain interest with their zhoutexchangeUSD credits

[M4v3R]

The first two paragraphs in there explain the situation when you have no positions and some balance deposited in Bitcoinica. Considering figures from the screenshot you get 0.64% yearly for your BTC balance and 8.45% yearly for your USD balance

[muyuu]

I guess someone gets "sacrificed" to Zhoutong every now and then to finance that 

[M4v3R]

I guess someone gets "sacrificed" to Zhoutong every now and then to finance that  

No. As zhoutong explained somewhere else this gets financed by people who are charged for their positions. For example, right now people who are long are being charged to get the funds for paying up the interest rates. It's not much, but it adds up pretty well I guess.

[muyuu]

I guess someone gets "sacrificed" to Zhoutong every now and then to finance that  

No. As zhoutong explained somewhere else this gets financed by people who are charged for their positions. For example, right now people who are long are being charged to get the funds for paying up the interest rates. It's not much, but it adds up pretty well I guess.

Duh. It was a joke.

Thanks for the info anyway.

[RandyMarsh]

Here's the official thread: https://bitcointalk.org/index.php?topic=63694.0

I hope Z addresses all these questions, because quite frankly we're all confused about this

[zhoutong]

+1.  USD interest rates are way above anything anyone could get anywhere in the world (without the risk of losing your money).  

What's to stop someone depositing $10k, never trading and collecting 8%pa?  High reward = high risk.  No ifs, no buts.

as the exchange gets more liquid the rates go down...

Swaps mean that those buying bitcoin or USD on leverage pay the interest to those providing the liquidity.

What will happen in the future is that the starfish will never exist again as those trying to buy new long (or short in a bare market) positions will be facing extremely high swap costs.  (meaning there is a huge intensive for people to provide more liquidly to to fund those positions).

It is really win-win for everyone

it just seems...too good to be true!  ive been warry of bitcoinica from the start, not in terms of shady practices but i just dont understand margin trading.  this seems like something that i would benefit from....seems like an un-shade-ified version of bitscalper.

is it as simple as just depositing some money or do i need to do something special....i guess its time for me to register an account there and look around.

EDIT:



is anyone willing to explain what the above informs us? does this mean I have to deposit money and essentially try to predict a direction (long/short), this must be wrong because its essentially the same thing as margin trading...what am i missing?

i see zhoutong slowly bringing some really exciting things.  if he does indeed start his own exchange he could potentially allow people to gain interest with their zhoutexchangeUSD credits

You don't have to do anything to earn the interest. Just deposit money and hold.

(I'm not going to start an exchange for now. We will continue using Mt. Gox until a better exchange comes out.)

[zhoutong]

i dont get this..

i can deposit btc or usd and bitcoinica gives me interest?  what risks are involved?

There are no risk at all. We collect swaps from traders and distribute a (large) fraction of them to depositors through interest payments. This is not a ponzi scheme or any risky investment. It's similar to a money market fund. (In fact, Bitcoinica is the first ever Bitcoin money market.)

We have a notable history of running a large-scale trading system with high security and availability.

It's important to also know that the interest rate will go down if there are a lot of spare deposits, and we can't guarantee any interest rates. According to my experience and understanding of the system, realistically the long-term APY interest rates for USD should be between 3% - 8%. (But again, this is not a guarantee, just a personal opinion.)

[notme]

There are no risk at all.

False.  There is very little risk, IMHO, and I trust you with my money, but there is nothing with no risk.

I guess someone gets "sacrificed" to Zhoutong every now and then to finance that 

No. As zhoutong explained somewhere else this gets financed by people who are charged for their positions. For example, right now people who are long are being charged to get the funds for paying up the interest rates. It's not much, but it adds up pretty well I guess.

Duh. It was a joke.

Thanks for the info anyway.

Don't quit your day job, you suck at jokes.

[muyuu]

Don't quit your day job, you suck at jokes.

I must suck very badly, that even with the smiley someone thought I was serious.

[P_Shep]

Very clever

The more people put $/B in, the more there is in reserve for the leverages folk to play with and less startfishes.

[Otoh]

www.gs.com now points to www.zt.com

[M4v3R]

If you didn't notice this by yourself then I'll enlighten you: these figures are directly associated to current market conditions and, most notably, to size of shorts/longs on Bitcoinica. -$0.08 means that many folks on Bitcoinica are short now. Basically - if the interest is negative, there are more shorts than longs, and because it gets lower and lower, I feel that in very near future we'll see another downside.

[Technomage]

If you didn't notice this by yourself then I'll enlighten you: this figures are directly associated to current market conditions and, most notably, to size of shorts/longs on Bitcoinica. -$0.08 means that many folks on Bitcoinica are short now. Basically - if the interest is negative, there are more shorts than longs, and because it gets lower and lower, I feel that in very near future we'll see another downside.

This is funny to me. When people are long like crazy it's about to go down with a long squeeze right around the corner. Now that a lot of people are short it's also going down with apparently no fear of a short squeeze. Especially now that the ask side is very thin near the current price compared to what it was before, I would honestly worry if I was short right now.

I wouldn't be at all surprised if there is a bigger buyer simply waiting for a few more people to go short and then BOOM he drops a $250k bomb on the market, which would have some very interesting results with so many going short right now. It's still a bit risky but if a few more go short it might just be too tempting. We'll see what happens.

[zhoutong]

Z are fucking kidding me ?

Long Position    -$0.17
Short Position    -$0.08

We have no shortage of either currency, and we still have to pay deposits to people. The only way will be to collect position swaps.

[cypherdoc]

Zhou,

just be aware that if you're paying out interest you could be running into some concocted international banking regulations.

at this point i only wish you spectacular success as this is what the community needs; another honest go to option.

[SkRRJyTC]

Why do you need to continue paying interest if you have no shortage of funds?

[zhoutong]

Why do you need to continue paying interest if you have no shortage of funds?

Because we want to offer our customers a consistent payout. Our interest rate is calculated every 30 minutes based on our funds. There's no guarantee that we won't have a shortage of funds if people start to open positions in the same direction.

Our aim is to avoid the asterisk permanently. And we have to charge arbitrary swaps to fund the interest system.

[zhoutong]

Zhou,

just be aware that if you're paying out interest you could be running into some concocted international banking regulations.

at this point i only wish you spectacular success as this is what the community needs; another honest go to option.

We have already consulted financial and legal professionals about this. Please refer to our latest press release for details.

We are fully licensed, but it's a strategic move so we don't want to disclose the details too early.

[stochastic]

Why do you need to continue paying interest if you have no shortage of funds?

Because we want to offer our customers a consistent payout. Our interest rate is calculated every 30 minutes based on our funds. There's no guarantee that we won't have a shortage of funds if people start to open positions in the same direction.

Our aim is to avoid the asterisk permanently. And we have to charge arbitrary swaps to fund the interest system.

I see.  Most FOREX money markets will charge the swap for any position held overnight.  Since Bitcoinica is 24/7 they need to charge constantly.

[zhoutong]

just to make my point clear
lets say only 20% of USD deposits (i mean ppl who put money in bitcoinica i dont talk about reserves) are used then you bitcoinica have to much money, the interest rate should be next to zero you want this ppl to use the moneys, the cost for maintaining a position should be next to 0 and if you can should be positive

now lets say 80% USD deposits are used then you should give a incentive so ppl make more deposits by increasing interest rates and also increase the cost for maintaining open a position

Well, it's different. The position swap is the difference between the buying rate of one currency and the selling rate of the other.

When we have enough USD, the buying-selling spread is larger, because more depositors share the fixed amount of interests (from position holders). Same thing applies to BTC.

Now, when you start a short position, you are selling BTC and buying USD. So you are paying the BTC selling interest and collecting the USD buying interest. In terms of BTC, what you pay will be used to pay the people who provide the BTC for you to sell. In terms of USD, you are collecting payments from people who use the USD you bought to trade.

However, the interest you collect can be less than what you pay, hence the negative swap.

We have the absolute incentive the stimulate trading activity so that we can earn more spreads (which earns us over 100x more than interest), but we have carefully considered the interest system to be the best solution to the reserve problems that we had in the past. In Economics terms, the demand for funds (position holding) is relatively price-inelastic and the supply of funds (deposits) is relatively price-elastic. Our aim is to ensure sufficient reserves while not affecting trading too much, and the base interest that we set exactly achieves this aim.

[zhoutong]

lets take a look at current situation, the market is stupid seams ppl dont want to trade, orders are ridiculously low(no depth), i have low incentive to enter the market, you add on top of that the position fees, leverage restrictions, well guess what i better stay out of the market with my moneys and gain a nice interest, from your end can look different but from my end is like that 20% APY is awesome

Trading carries risk, so people trade only when they are confident about their decisions. A few cents of swap don't affect their decision much.

Deposit is risk-free, so there's a lot of difference between no returns and some returns.

By the way, you are not getting 20% APY. You always get the buying interest rate.

[cypherdoc]

lets take a look at current situation, the market is stupid seams ppl dont want to trade, orders are ridiculously low(no depth), i have low incentive to enter the market, you add on top of that the position fees, leverage restrictions, well guess what i better stay out of the market with my moneys and gain a nice interest, from your end can look different but from my end is like that 20% APY is awesome

sure you can take that position. but there will be plenty of ppl willing to borrow your deposits despite the swap fee and leverage up their positions to speculate on the BTC price.

this is indeed a clever way to shore up the reserve accts.

[notme]

lets take a look at current situation, the market is stupid seams ppl dont want to trade, orders are ridiculously low(no depth), i have low incentive to enter the market, you add on top of that the position fees, leverage restrictions, well guess what i better stay out of the market with my moneys and gain a nice interest, from your end can look different but from my end is like that 20% APY is awesome

Right, you need to strike a balance that doesn't excessively punish the people who give you 99% of your profits.  There should be little to no interest for a position unless the reserves are running low on that side.  I understand the need for consistent returns for depositors, but you don't need to consistently return over 5%.

Also, @myself, you don't earn the sell, you earn the buy, so it's only ~5.27 APY.

[cypherdoc]

Zhou has already said that he's effectively trying to create a money market fund that attracts additional reserves to Bitcoinica upon which he will pay interest.  most money market depositors are conservative investors just looking for safety and stable return.  the last thing they expect is to lose their money.

a traditional money market only invests in "safe" securities like US Treasuries or other assorted short term debt both of which are highly liquid with fairly stable prices.  they try to not "break the buck" by maintaining a 1:1 value of the money you deposit to the money you can take out.  this all changes during times of stress.

as you can see, we have here a different model which takes these funds into a money market to invest in a start up highly volatile currency with leverage.  this money market should and needs to pay a high interest rate to compensate for the risk of losing its depositors money.

the parallel example we see in the real economy is that many US money market funds decided to reach out for higher yields via gov't debt in Europe the last couple of years and have paid the price dearly in the form of losses when the PIGS interest rates soared and the bond prices fell.  there is now talk of the US gov't requiring collateral posting by the money market funds which would effectively destroy the industry.  why would the financial regulators do this?  answer: to encourage a shifting of USD's from money mkts to the banking system.  don't forget; its always about saving the banks.

so while the interest rates being offered by Zhou look juicy and a no brainer, don't forget you could still lose it all.

[molecular]

zhoutong, I think the interest to pay for borrowing is way too high.

I planned to wait for my long position to become profitable again (could take months), but with such enourmous cost, waiting doesn't seem to be such a good option any more so it's probably best for me to take the losses and run.

I'm not even leveraged (if I include my BTC balance also), but the interest I receive is way less (no interest on my 50 BTC at all) than what I pay for holding the position.

Two questions:

• Do you plan to lower the swap points (as in change the formula to calculate them)?
• If I put enough USD in my account to put leverage below 1:1, will I still pay to lend money for my positions?

other than that: keep up the great work, I think what you're doing for bitcoin is good and you're doing it in a respectable way.