A Theory on what pirateat40 is doing

[Vandroiy]

It's probably investing in HYIP sites.

I doubt it.  Why operate a HYIP passthrough when you could be the HYIP yourself?

Yes. In addition, his paper volume is too large -- illiquid exchanges would hinder buying back from Fiat.

Also, for a pass-through to a larger HYIP, the starting phase with forced withdrawals and general growth limiting would make no sense. And he'd profit less.

It's direct.

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[Otoh]

OK - it's Otoh time to speculate on what pirate is up to again:

He runs or facilitates a high stakes gambling op, every week he sells about 21,000 BTC as chips to the participants, ie atm about $248,000 which with a couple of dozen or less professional & high rollers doesn't seem at all unfeasible to me, these players can be based anywhere in the world but are most likely local just as he states, can be anon, no paper trails or tax issues, no needing to have $0.25M cash sitting around & needing private security plus risking confiscation, pirate arranges the exchange to BTC for each weekly session & manages the cash/deposit handling from each of the participants individually & also cashes out any BTC winnings that they may wish to make, note these sorts of games are usually played at weekends, happy pirate day is right after that on Mondays.

This also explains why other ppl can & apparently do offer similar services based in other parts of the world & are not in direct competition because they have their own pool of punters, maybe locally/culturally sourced.

He sells the chips/BTC for spot plus 10% + to cover his banking/facilitating/overheads etc & so a 7% per week pay out is np as long as the games continue, he doesn't want to borrow or use (LOL @) "not USD or any other random ponzi fiat funny money" (TY BurtW) which makes sense as perhaps some of these players may get rather upset if anything were to happen with that, but this way he can keep the risks down while still playing Wall Street II.

It's just another wild speculative guess at what this might be or partly be, I haven't even looked in to how this would pan out longer term than he's run it so far or with increasing BTC price, he says that the next 6 months are looking good I believe so I'll let you guys take it from here if you'd care to give any feedback on this - welcome from fans & detractors both.

BTW - I'm celebrating my first 100% of pirate returns last Monday, having started modestly on 1st March & now have been seriously participating for a while.

Actually I believe that it's much more likely to be closer to Serge's guess, wealthy Texan oil barons planning a letter day Hunt bros on BTC:

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?

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

Edit: I've now read the whole thread for the first time & also like ArticMine's theorem:

This is very true, but only for the last 7 months. Why? What changed in the market?

Let me explain: pirateat40 is fundamentally a bear. He has however built a business that involves selling BTC to his clients who are bulls. In order to run his business he needs an inventory of BTC estimated from more than one source to be say 250000 BTC. Now like any business he needs to finance his inventory. He has two choices:
1) Borrow USD
2) Borrow BTC
(1) is cheap; however he runs the risk of a sudden drop in the BTC price leaving him with a warehouse full of worthless BTC and 2.5 million USD in debt. Let us remember we are dealing with a bear here. So instead he chooses option (2) and pays a premium rate of 7% a week to borrow BTC. He has now effectively hedged his downward risk. If the price of BTC were to drop to zero tomorrow he can repay his lenders in the now worthless BTC together with the 7% per week interest also denominated in BTC.

Now when a buyer comes along he sells the buyer BTC from his inventory and then goes into the market buys back the sold BTC. He needs to generate say 10% a week in commissions in a flat market in order to pay his lenders and make a profit. This is actually not that hard to do. In a bear market July 2011 - December 2011 he makes an additional profit because he is effectively short the market between selling his BTC from inventory and buying them back in the market in order to replenish his inventory. Now in a bull market is where the situation starts to get interesting. I suspect he can tolerate a small rise in the market, but not a sharp sudden rise so he has to use ask walls in order to moderate a rise in the market and apparently has been doing this quite well for the last 7 months. There is a serious risk here. A long term well capitalized investor who does not mind paying a small premium say 10% - 15% over market comes is out of the blue and buys out his ask wall. Now he is effectively short not only the BTC sold to the client but also the BTC from the now sold ask wall in a rising market. This is when the fun and the real risk of a short squeeze starts.

There is no need here for a ponzi or any kind of money laundering to explain this theory.

By the way I have deduced all of this from pirateat40's own comments, the comments of both his supporters and detractors and correlating these comments with the historical market behavior, as part of my own due diligence on Bitcoin.

Very plausible explanation how it could be done without it being a ponzi.

[mp420]

Makes zero sense. You suggest he's giving away money to those who would otherwise fall for scams.

Also, congrats to managing to be early adopter enough to actually profit from the scam. In case you're withdrawing your initial investment, of course.

[zyk]

Can´t one view the potential of bitcoin as the new world reserve currency ?

There is the precious truth which lies in the heart of any ponzi ( spoken by Amsel Mayer Rothschild himself( the old Frankfurt school of monatary theory tyranny) :-)

"Let me control the money supply of a nation and i don´t care about any law or rule". --  Because the "elected" cronies are all bought up.

In Bitcoinworld nobody even pretends to be elected, everybody should and is worshipping pirate cause he now controls the moneysupply and is at the helm

to decide when how and who is busted and who is been saved....everybody to the rows!! 7 % newbies a week in bitcoinland should be attainable for quite a while...

and after that coming down from 3600 % interest to 0.6 % yearly may take easily another 100 years before the best ponzi in town needs to bust...but by the there is still some quantitative easing invented to transfer in the blockchain.


Long live pirate....let us built him a memorial!!

Zyk

[markm]

Is it possible that having all this HYIP activity might be driving up the price of bitcoins?

I have long had the impression that being used for HYIPs can be quite effective promotion for an online currency, albeit as in e-gold's case it can also maybe have a downside eventually.

Could it be that Pirate, or the powers behind pirate, have a few million bitcoins, or maybe more than a few millions, and hit upon the idea of giving some of them away as "interest" as a way to increase interest in bitcoins and actually drive up the price of them as more and more people buy some in order to get in on these high "interest" rates?

I haven't checked all his exact terms; if I was free to pay back everyone at any moment and shut down cleanly thereby, and had a way to make over 7% a week, maybe it would be useful to borrow at 7%, make over 7%, taking my cut of the profit in fiat, then do so again next week rather than risk any of my own profit, safely stored as fiat, in the next week's operation? As soon as I hit a bad week I could shut down or decide I have enough reserves built up to risk another week...


-MarkM-

[Gyrsur]

i guess with his volume he is always sell high at peaks putting the price down and then buy back at a lower price, he will do it again and again. this approach push the price up for bitcoin which is not so bad at all.

[adamstgBit]

his would be dump, turned into a rally

pirate40 must be shitting bricks!

[rebuilder]

[ldrgn]

Is it possible that having all this HYIP activity might be driving up the price of bitcoins?

There's another thread about this exact same topic with a title along the lines of "The current bubble is a Pirate bubble."  Personally, I agree but I don't have anything to back it up other than speculation.

Could it be that Pirate, or the powers behind pirate, have a few million bitcoins, or maybe more than a few millions, and hit upon the idea of giving some of them away as "interest" as a way to increase interest in bitcoins and actually drive up the price of them as more and more people buy some in order to get in on these high "interest" rates?

This is a cool idea but it still doesn't beat just opening a business or investing in a business.  In the plan you've described he can come out ahead but only because the value of the BTC he didn't give away as interest increased.  If he started a BTC business not only would the BTC price go up from increasing the BTC economy but he'd be able to make back the BTC he gave away/invested.

make over 7%

I think I've found the flaw in your plan.  I'm not saying earning 7% a week is impossible but it's pretty hard.  You've still got to handle temporary swings in supply and demand.  Pirate's never (until yesterday!) fiddled with the interest rates to account for these short-term swings (something a legitimate business would have done often, probably every week or day).  Finally, his debt is denominated in Bitcoins and the price has doubled in the past three months.  That means he's got to bring in more and more new business just to pay the interest for a constant amount of customers.  His customer base hasn't been constant, though - it's been rapidly increasing.  No business can run with this terrible of an outlook so Pirate gets around those limitations by running a Ponzi.

[waspoza]

LOL this is just perfect. 

[Tomatocage]

Anybody know what happened to MtGox's dark pool book after it ceased operating? Gosh, I wonder.

[Bigpiggy01]

Or it could be that both moves were his to get him "the weekend off" by slowing everything down a bit

[smoothie]

I will say this again:

All of these PPT's and interest earning "schemes" that are going on will likely not end pretty.

Someone will get burned and will lose big time in their bitcoin investment.

And the funny thing is people on this forum are so willing to send their bitcoins to said-operator of the "scheme" with no signed contract/paperwork.

Mark my words, someone will get burned.

[aq]

I will say this again:

All of these PPT's and interest earning "schemes" that are going on will likely not end pretty.

Someone will get burned and will lose big time in their bitcoin investment.

And the funny thing is people on this forum are so willing to send their bitcoins to said-operator of the "scheme" with no signed contract/paperwork.

Mark my words, someone will get burned.

Great, now continue repeating it, until you start to believe it yourself

[zby]

I will say this again:

All of these PPT's and interest earning "schemes" that are going on will likely not end pretty.

Someone will get burned and will lose big time in their bitcoin investment.

And the funny thing is people on this forum are so willing to send their bitcoins to said-operator of the "scheme" with no signed contract/paperwork.

Mark my words, someone will get burned.

They are kind of preselected for that.

[Gyrsur]

I will say this again:

All of these PPT's and interest earning "schemes" that are going on will likely not end pretty.

Someone will get burned and will lose big time in their bitcoin investment.

And the funny thing is people on this forum are so willing to send their bitcoins to said-operator of the "scheme" with no signed contract/paperwork.

Mark my words, someone will get burned.

Great, now continue repeating it, until you start to believe it yourself

it did work for me. i now believe in it! 

[smoothie]

I will say this again:

All of these PPT's and interest earning "schemes" that are going on will likely not end pretty.

Someone will get burned and will lose big time in their bitcoin investment.

And the funny thing is people on this forum are so willing to send their bitcoins to said-operator of the "scheme" with no signed contract/paperwork.

Mark my words, someone will get burned.

Great, now continue repeating it, until you start to believe it yourself

LOL and why would I not believe it?

I have 0..i repeat...0 bitcoins with any PPT or other "scheme".

Can you say that same?

[cypherdoc]

I will say this again:

All of these PPT's and interest earning "schemes" that are going on will likely not end pretty.

Someone will get burned and will lose big time in their bitcoin investment.

And the funny thing is people on this forum are so willing to send their bitcoins to said-operator of the "scheme" with no signed contract/paperwork.

Mark my words, someone will get burned.

Great, now continue repeating it, until you start to believe it yourself

it did work for me. i now believe in it! 

here's that link you asked for back on some other thread:  https://bitcointalk.org/index.php?topic=68655.msg1078140#msg1078140

[Epinnoia]

I can guarantee however that not one coin of interest will be the result of any criminal activity.

That says quite a bit right there... 

[zvs]

i spent the $20.32 i had in gox on a market order with ask @ $7.75, commencing this dead cat bounce