A Theory on what pirateat40 is doing

[hazek]

If pirate ends up running not a Ponzi but instead does what he says: selling BTC at high premium, Bitcoin could be taken for a nice ride within next few years.

All Ponzi speculation aside, we know this theory has a merit and high probability it may be one. Are there any other plausible explanations to pirate's operation with such great returns?

At first I couldn't imagine who would want to buy bitcoins at high premium and why. do you know?! Besides drug cartels, money laundry and some three letter agency questionable special covert ops funding?

What if there are smart and wealthy individuals who realized great potential of Bitcoin and decided to get in. Their target may be significant amount of bitcoins without driving exchange rate through the roof and they are ready to invest several million dollars. Although they could have gone through exchanges and probably buy bitcoins even at $10-20/BTC wouldn't it make sense to setup bitcoin lending operation and purchase at 10-15% premium all sub $10 bitcoins - given that they don't want to spend significant amounts of time on exchanges to acquire bitcoins at slow steady pace. They want to sign a check each week and get their bitcoins. Here comes the pirate and ready to sell at 10-15% premium. Pirate alone or conspiring with these individuals to keep bitcoin rate as sane prices (sub $10/BTC for instance) throughout their acquisition period. Bitcoin prices at $4-7 seem fair and pretty stable. Sub $4-3 prices - and everyone wants in so the rate isn't stable; over $8 and there is a risk of another bitcoin hype and explosion which could potentially get out of their control.
Once these individuals hit their target and complete acquisition they will start telling about Bitcoin to all their other wealthy buddies or simply start a new hype, or they don't even have to do anything if they have managed to acquire all available sub $10 bitcoins and the price will naturally start to rise (through the roof) to mid double or maybe even up to triple digits.

$5-6/BTC + 10-15%   better than over $10 BTC when purchasing, is it not?

Could this possibly work while providing great interest rates to lenders at the same time manipulating exchanges with great psychological walls to keep bitcoin prices as low rates for time being? Or it doesn't make any sense? What do you guys think?

The above explanation makes ZERO sense.

Here's why:
If such a group held USD and wanted to buy BTC and they went through pirate buying the BTC he borrowed, where the hell does he then get the BTC to pay back his "investors" once he sells the borrowed BTC to that group?? If he takes their USD and goes to the exchanges, well how is this going to be any different of an effect on the price of BTC than if the group went directly passed him?

Oh boy!!!  Someone is stepping close to treasure.  ATTACK!!!!!

And the fact that he pretends you're close when in fact your explanation makes zero sense is a huge red flag.

This is a good and valid question. I would imagine pirate has large BTC and USD holdings present on exchanges himself or with a side deal with his clients/investors which gives them ability to "manipulate" the exchanges to keep exchange rates at fair, stable (target) levels, as we have seen this occur plenty of times in the past with great walls on both sides.  Without ability to keep exchange rate in sane levels my theory indeed would not make any sense. I just put 1 + 1 together:  market manipulation and high interest returns on borrowed bitcoins.

I don't understand, surely he must have lost a lot in the last 30 days then since the price is up about 30% and in a span of just 4 days jumped nearly 20%? Did his "investors" experience any loses recently? They should have if you are right..

As I've mentioned in my first post in this thread, I think his comfort zone is $5-7/BTC and while moving the rate steady up and down in this $5-7 range within months he and his clients additionally are able to profit on exchange rates while keep on their Bitcoin acquisition schedule.  It would be crazy to think that pirate is exposed on USD side for more than 10-24hrs. on borrowed bitcoins, given that he has available reserves (personal or not) on exchanges.  I also suspect he has neat bots working for him on exchanges catching all the dips and doing arbitrage and profiting on short term spreads.  Basically, in my opinion pirate has largest presence on exchanges and most of his competition now is invested in his Bitcoin Savings & Trust and through various pass throughs, leaving him sole market maker and mover =)  this part is a wild speculation though  

Occam's razor..

[bitcoinBull]

I've been avoiding commenting on this stuff because it's best practice not to discuss your competition, especially with 7%/week which no-one else can possibly compete with. However, I think the above is the most reasonable explanation yet, but with 2 missing pieces.

[...]

In any event, you won't hear anything more from me on this, but I just couldn't help but give out my 2 cents into the crowd since I find the topic very fascinating. However, I'll also take this opportunity to make a shameless plug for my fund, which is 100% pirate-free so it's perfect for skeptics. As for myself, I'm agnostic on it being a scam vs being real; as with any investment, investor beware. But I never invest in things when I don't know what the business is doing as a rule, since my fund always errs on the side of prudence. Many thanks.

My god, since pirate now everyone wants to start a HYIP scam. cytokine, your "debug output" and claims about "reviewing code resolving bugs" are utterly unconvincing. Since your business (like pirate's) also has a 'secret sauce' and we don't know what its doing either, then by your own advice we shouldn't invest.

[Vandroiy]

Yea @hazek. Look at the quote inception, and it still makes no sense. Occam's Razor is on a killing spree.

Serge, try to take Pirateat's place. You're making this excessively complicated by trying to look from the outside. If he ever needs investors for such operations, then only for a short time. The actual BS&T wants exponentially more investors, even though its own assets should grow exponentially!

Once you're done with a 5-page explanation as to why it could work in theory, I'll just say it again: hedging against risk is much cheaper than 7% a week. And the whole card-house comes tumbling down, no matter how neat its theories.

[minorman]

I think OP might be onto something.
I also highly doubt that everyone will get all their Bitcoin back from pirate.

This is one show I prefer to watch from the sidelines...

[bitcoinBull]

Once you're done with a 5-page explanation as to why it could work in theory, I'll just say it again: hedging against risk is much cheaper than 7% a week. And the whole card-house comes tumbling down, no matter how neat its theories.

Yeah and it will be a welcome moment when (not if) it does because I'm getting tired of all these pirate/GLBSE/HYIP threads.

[Francesco]

Regardless of whether or not Pirate is running a Ponzi scheme, all of the posted ideas of how he could be making his money work fantastically, and I'm now living on a small Caribbean Island I own.

Just PM me if you want a 7% / week interest bearing account. This won't expose you to any risk of BS&T failing, but still provide a great return! In between sunbaking, and sipping mojitos and daiquiris, my staff and I will be only too happy to answer any questions you might have.

I can't tell you the secret of my investment strategy as this would impact it's effectiveness. I can guarantee however that not one coin of interest will be the result of any criminal activity.

Past performance is not a reliable indicator of future performance. I retain the right to any bitcoins invested with me. Caveat emptor.

I hope to god no one takes this seriously.

I guess there's only one way to know and prove that it's not a ponzi, without saying what he does. It's a massive withdrawal of deposit + profit.

Then if everyone gets his coins back, you won't have any more "ponzi bashing" from anyone, promised

+1

[Stephen Gornick]

hedging against risk is much cheaper than 7% a week.

Speaking of:

Bitcoin Savings and Trust will default on or before July 31st, 2012.
 - http://betsofbitco.in/item?id=476

Bitcoin Savings and Trust will default before the end of 2012
 - http://betsofbitco.in/item?id=433

[Vladimir]

Too bad I never do any bets (yea I know, it could be a great hedging avenue for some, but I have nothing to hedge).

The problem with those bets is, there is at least one person who knows exactly the outcome or (maybe) can change the outcome depending on the odds at any point in time. I would not want to play against such kind of house edge.

[Bigpiggy01]

This

[sadpandatech]

mmmmmm, that sriracha hot sauce is the bestest!

[hazek]

Bitcoin Savings and Trust will default before the end of 2012
 - http://betsofbitco.in/item?id=433

Hmmm I think I'll take that bet for a few BTC.

[cytokine]

My god, since pirate now everyone wants to start a HYIP scam. cytokine, your "debug output" and claims about "reviewing code resolving bugs" are utterly unconvincing. Since your business (like pirate's) also has a 'secret sauce' and we don't know what its doing either, then by your own advice we shouldn't invest.

Sigh... this is why I shouldn't have ever commented here, just to get mixed up in the morass. It was a bad move that I now regret. In any event, normally I don't respond to abuse, but I've decided to make a proper rebuttal so that I can link to it from my main fund thread if necessary.

See here for proof on where over a third of the fund is invested. Also, we will become a transparent fund when possible, and/or have a trusted auditor sign the monthly reports when the GLBSE allows for read-only logins, which is coming. Also, last month I purchased GIGAMINING shares directly from friedcat and COGNITIVE shares (in exchange for BDK.BND shares) directly from Kluge here.

So my operations are very glass-box since other members of the forum can see my activity. Nefario knows I've been pinging him with coding questions quite frequently, and of course he can view the fund's holdings himself.

[Serge]

Yea @hazek. Look at the quote inception, and it still makes no sense. Occam's Razor is on a killing spree.

Serge, try to take Pirateat's place. You're making this excessively complicated by trying to look from the outside. If he ever needs investors for such operations, then only for a short time. The actual BS&T wants exponentially more investors, even though its own assets should grow exponentially!

Once you're done with a 5-page explanation as to why it could work in theory, I'll just say it again: hedging against risk is much cheaper than 7% a week. And the whole card-house comes tumbling down, no matter how neat its theories.

Ok, I've thought a little about presented dilemma. I think for anyone to understand it better why borrowing at these rates in order to sell at high premium rates works better than do it on your own we must go back in time when pirate started offering his selling service to his clients and to remember what was happening on exchanges at that time. I don't know exactly when pirate introduced his service, I think it will be safe to assume it all started somewhere last year. Market volatility was insanely wild at the time, there were huge fluctuations within single days, no one knew to which price one would wake up the next morning.

Supposedly pirate closes a deal, back in 2011, and by the time he's ready to re-buy market moved so much leaving him little to no profits even with his high premium rates. That's where his initial client rates came from - comfortable for his clients and leaving him enough margin to get few percentages out of a deal himself. We can be sure he had some good and some bad trades all due to market fluctuation (unless he already had enough reserves to allow him some time to catch as many dips as possible more or less safely). As business started picking up with increasing volume this was hard and tedious work always monitoring exchanges and doing trades like a bot in order to stay on profitable levels while selling at premium rates to his clients; market manipulation was much riskier too even if it was accessible to him at that time. Until one day pirate realized "Hey, I can borrow bitcoins at significantly lower rates than what I'm paying on exchanges to re-buy them fueling swings and causing small panic disturbances! While this gives me an opportunity to re-buy on my own at slower pace without much of market disturbance! ARHH Brilliant!!" he exclaimed =)  BTCST concept was born.  

Before BTCST, although he had access to liquid Bitcoins, the rates were unpredictable.  After BTCST he pretty much has predictable and controlled stream of BTC available at his disposal at predictable rates (not guaranteed but more or less stable). Volatility became manageable, his competition which drove him mad at times on exchanges with unpredictable fluctuations now is on his side being his BTC suppliers/lenders. He can slowly move market up or down 20% for time being and is making lots of money for many others who lend to him at the same time. Life became less stressful and the endeavor less risky.

I maybe wrong though

[conspirosphere.tk]

Bitcoin Savings and Trust will default before the end of 2012
 - http://betsofbitco.in/item?id=433

"This assertion is true if Bitcoin Savings and Trust is unwilling or unable to pay out requested deposits on or before December 31st, 2012 according to the opinion of Bitcointalk.org members on the Bitcoin Savings and Trust Forum Thread. "

Which members? Or who counts them and how?
And how much one would win betting 1 BTC? Another BTC?

[Vandroiy]

Bitcoin Savings and Trust will default before the end of 2012
 - http://betsofbitco.in/item?id=433

Oh, what happened? Someone placed money against it?

That's strange, wouldn't Pirateat yield more? Anyway, time to make an account there!

Edit: tx underway. Bring it on, I'll face more than just even odds until I can't trust the site with more! Sadly, with a young anonymous site it's not that much but people are unlikely to bet anyway.

If more people get a trustworthy third party for this bet, I can raise more!

[kneim]

Have red the article about "Ponzi Scheme" in the Bitcoin Magazine. Wonder if there are enough stupids to have a large effect on Bitcoins. I believe in Bitcoins, but that makes me pondering silence. 3400% a year? Thought we are against Wall Street and money printing! Or is this a big lie alltogether?

[Stephen Gornick]

Thought we are against Wall Street and money printing! Or is this a big lie alltogether?

Umm ...  Bitcoin (the open source digital currency project) != Bitcoin Savings and Trust  (the topic of this thread) or any other sites and services that use bitcoin as their form of money.

This is just like how Bitcoin is not Bitcoinica, Mt. Gox, SatoshiDICE, Silk Road, Casascius, Butterfly Labs, etc.,

[elux]

Bitcoin Savings and Trust will default before the end of 2012
 - http://betsofbitco.in/item?id=433

Oh, what happened? Someone placed money against it?

Curious. Earlier today it was something like 10:1 for BTCST defaulting in 2012.

[hazek]

3400% a year?

It's because people first don't know how to annualize compound interest of 7% per week and second they have no fking clue just how ridiculous 3400% annually is. The sad part is that usually these economically and financially illiterate people can least afford to lose their hard earned money.

[hazek]

Bitcoin Savings and Trust will default before the end of 2012
 - http://betsofbitco.in/item?id=433

Oh, what happened? Someone placed money against it?

Curious. Earlier today it was something like 10:1 for BTCST defaulting in 2012.

I followed it a bit and after 10:1, someone bet ~50 against and now some bet ~20 for..

I considered betting when it was 10:50 but I'd have to lock up my funds for who knows how long so I decided against it.