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Author Topic: Interest Indicator on Bitcoinica – Epic Short Squeeze?  (Read 2009 times)
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April 08, 2012, 07:28:38 AM
 #1

I’ve made the experience that it has been pretty reliable to bet against the shorts when short interest was at its lowest – at the time -0.06 to -0.09, just as it has been reliable to bet against longs when the long interest was -0.21.

Now, the shorts are even heavier penalized than longs with -0.16. I have never seen it remotely this low. Are we looking at an epic short squeeze to happen?


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April 08, 2012, 08:03:49 AM
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I'd agree with you but usually claws beat hooves in straight up fight and looking at the interest on it's own I dunno.

However to me it looks like we're flipping straight from slightly overbought to more than slightly oversold at the same time, so yes this could quickly become fairly epic  Grin


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April 08, 2012, 01:52:59 PM
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I’ve made the experience that it has been pretty reliable to bet against the shorts when short interest was at its lowest – at the time -0.06 to -0.09, just as it has been reliable to bet against longs when the long interest was -0.21.

Now, the shorts are even heavier penalized than longs with -0.16. I have never seen it remotely this low. Are we looking at an epic short squeeze to happen?


I'm not sure I understand the "effective swap" shown. I took this to mean:
effective_long_swap_per10k = swap_rate * total_btc_positions_long / 10000
effective_short_swap_per10k = swap_rate * total_btc_positions_short / 10000

This sounds a little too good to be true, in that it would allow one to infer total positions long vs short. Were my assumption correct the two swap rates being equal would imply a net flat position overall on the exchange.

I mention this in part because my normal reference point for my position is short equal to my BTC currency account balance. This allows me to stay more or less net flat against BTC price movements. I will then adjust my BTC short position so that I am net long or short as suits me.

If anyone can straighten me out on this I would be most grateful.

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April 08, 2012, 05:07:39 PM
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OP dont understand 2 things
when you buy bitcoins, bitcoinica have more bitcoins, when you liquidate your long position they got less bitcoins and you get same effect like when you short
if you use the exchange feature you get the same, you can change the swap value buy just exchanging 4 digit of bitcoins, if you exchange bitcoins for USD you are selling but without taking a position, mst ppl that want to benefit from this downtrend but dont want to join the marker just use the exchange feature and now they are on USD side  


so, sell longs + shorts + btc->usd exchange = zomfg epic short squeeze
Judging from the the work we have shown so far, perhaps it just means that bitcoin, like lotteries, imposes a tax on people bad at math  Wink

"Science flies you to the Moon, religion flies you into buildings."
 - Victor Stenger

"Religion is regarded by the common people as true, by the wise as false, and the rulers as useful."
 - Seneca the Elder (ca. 54 BCE - ca. 39 CE) Roman rhetorician
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April 08, 2012, 08:40:10 PM
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OP dont understand 2 things
when you buy bitcoins, bitcoinica have more bitcoins, when you liquidate your long position they got less bitcoins and you get same effect like when you short
if you use the exchange feature you get the same, you can change the swap value buy just exchanging 4 digit of bitcoins, if you exchange bitcoins for USD you are selling but without taking a position, mst ppl that want to benefit from this downtrend but dont want to join the marker just use the exchange feature and now they are on USD side  


so, sell longs + shorts + btc->usd exchange = zomfg epic short squeeze

Sorry, I dont understand this gibberish

Pls help!
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April 09, 2012, 12:57:43 AM
 #6

OP dont understand 2 things
when you buy bitcoins, bitcoinica have more bitcoins, when you liquidate your long position they got less bitcoins and you get same effect like when you short
if you use the exchange feature you get the same, you can change the swap value buy just exchanging 4 digit of bitcoins, if you exchange bitcoins for USD you are selling but without taking a position, mst ppl that want to benefit from this downtrend but dont want to join the marker just use the exchange feature and now they are on USD side  


so, sell longs + shorts + btc->usd exchange = zomfg epic short squeeze

Sorry, I dont understand this gibberish

Pls help!
I too was trying to figure out if it actually means something. If you apply factor-label analysis to it, you will find it doesn't, and your identification of it as gibberish is quite correct.

"Science flies you to the Moon, religion flies you into buildings."
 - Victor Stenger

"Religion is regarded by the common people as true, by the wise as false, and the rulers as useful."
 - Seneca the Elder (ca. 54 BCE - ca. 39 CE) Roman rhetorician
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April 09, 2012, 01:55:13 AM
 #7

OP dont understand 2 things
when you buy bitcoins, bitcoinica have more bitcoins, when you liquidate your long position they got less bitcoins and you get same effect like when you short
if you use the exchange feature you get the same, you can change the swap value buy just exchanging 4 digit of bitcoins, if you exchange bitcoins for USD you are selling but without taking a position, mst ppl that want to benefit from this downtrend but dont want to join the marker just use the exchange feature and now they are on USD side  


so, sell longs + shorts + btc->usd exchange = zomfg epic short squeeze

Sorry, I dont understand this gibberish

Pls help!
I too was trying to figure out if it actually means something. If you apply factor-label analysis to it, you will find it doesn't, and your identification of it as gibberish is quite correct.


I understood it, but I've read hundreds of myself's posts.

Basically, he's saying that shorting isn't the only way to make shorting more expensive.  Exchanging BTC for USD via the exchange function, and closing a long position also increase the swap penalty.  He then claims both of these other things have been happening in large numbers, and if a rocket blasts off, many of these people will be moving back to the BTC side as well.

https://www.bitcoin.org/bitcoin.pdf
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April 09, 2012, 02:21:59 AM
 #8

Alright, thank you for clearing up!
1 more question (be patient with me, other than some in this forum I dont understand everything Zhou is concocting in Bitcoinica):

Why are both positions (long & short) sanctioned with interest? I know in the beginning Zhou was paying traders interest to put USD in there (ergo: to go short). Does he have so much right now, so that he can afford to ask for interest for both: BTC and USD?
Thx
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April 09, 2012, 02:33:44 AM
 #9

Alright, thank you for clearing up!
1 more question (be patient with me, other than some in this forum I dont understand everything Zhou is concocting in Bitcoinica):

Why are both positions (long & short) sanctioned with interest? I know in the beginning Zhou was paying traders interest to put USD in there (ergo: to go short). Does he have so much right now, so that he can afford to ask for interest for both: BTC and USD?
Thx

Rather than the long-winded explanation I was going to give, I'll just point you to Zhou's post about how interest is dealt with:
https://bitcointalk.org/index.php?topic=63694.msg745958#msg745958

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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April 09, 2012, 03:00:06 AM
 #10

Alright, thank you for clearing up!
Rather than the long-winded explanation I was going to give, I'll just point you to Zhou's post about how interest is dealt with:
https://bitcointalk.org/index.php?topic=63694.msg745958#msg745958
Thank you, just what I was looking for as well.

"Science flies you to the Moon, religion flies you into buildings."
 - Victor Stenger

"Religion is regarded by the common people as true, by the wise as false, and the rulers as useful."
 - Seneca the Elder (ca. 54 BCE - ca. 39 CE) Roman rhetorician
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April 09, 2012, 05:00:06 AM
 #11

Very interesting - thanks for pointing this out. This actually ties in well with some of my observations.

I apologise for the length of this post and number of images. I'll keep the analysis short and let the charts do most of the speaking. Thoughtful corrections and/or suggestions are always welcome.

Overall price activity:



On April 2nd:





At about 17:00 a large number of shorts were closed, allowing the price to spike above $5. Then a massive rush of shorting hit at just the right time to cut the longs off at the knees. The activity seems highly coordinated.

The following day, April 3rd:





Talk about raising red flags - a little before 16:00 a huge 6,000 positions flood Bitcoinica. It looks like some of them may have been covered later in the day.

Things are subtly interesting on April 4th:





Almost 5,000 short positions are covered, as can be seen by the stable price and gradual interest rate shift. The short assault from the 3rd has been cleared, freeing that ammo to potentially be used again. Later in the day that short ammunition is deployed again, exerting steady pressure.

April 5th was more of the same gradually-increasing short pressure. A couple of hundred shorts were added every few hours, apparently probing support and capping any price spikes.

Late April 6th is again intriguing:





About 5,000 positions are closed into a managed price rise, most of which were probably the shorts from earlier. Note that gold behaved the same way into its weekly close.

Looking at activity from the 7th:





The situation reverses and longs apparently pull bids around 02:00. From 06:00 to 08:00 increasing selling pressure hit for the next leg down. Then around 16:00, longs closed out again.

On the 8th, another gradual rise throughout the day; very managed. Very curious situation with the interest spreads so close. I don't know if a short-squeeze is imminent, but the tracks do seem to show that persistent efforts at managing prices are being rebuffed.
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April 09, 2012, 06:08:45 AM
 #12

I apologise for the length of this post and number of images. I'll keep the analysis short and let the charts do most of the speaking.
Very nice, good stuff. I've been stacking up the various charts the same way, it helps much in seeing movements. In fact you just gave me an idea, too bad I'm not a web developer.

"Science flies you to the Moon, religion flies you into buildings."
 - Victor Stenger

"Religion is regarded by the common people as true, by the wise as false, and the rulers as useful."
 - Seneca the Elder (ca. 54 BCE - ca. 39 CE) Roman rhetorician
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