I have made a 25% return this week trading *against* the pirate

[imsaguy]

very touchy guys .....

anyone would think you guys hadnt gotten your principals back out yet .....

We're all using smileys, none of us can be taken seriously.   

 

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[mp420]

Even if Pirate can make 10.65% per week (up to what amount? These never scale up infinitely. Actually, at that kind of return rate the limit should be reached very quickly.), it makes absolutely no sense to borrow such huge amounts of bitcoins at several-hundred-percent annual interest rate. He should have gotten a loan in fiat. He says he knows rich investors etcetera. He could have borrowed a million dollars and bought at least 250kbtc when they were cheaper.

And the argument that he can't buy bitcoins because he'd move the market is ridiculous. As if other people acquiring and tying up bitcoins in his scheme doesn't move the market exactly the same way.

[notme]

Even if Pirate can make 10.65% per week (up to what amount? These never scale up infinitely. Actually, at that kind of return rate the limit should be reached very quickly.), it makes absolutely no sense to borrow such huge amounts of bitcoins at several-hundred-percent annual interest rate. He should have gotten a loan in fiat. He says he knows rich investors etcetera. He could have borrowed a million dollars and bought at least 250kbtc when they were cheaper.

And the argument that he can't buy bitcoins because he'd move the market is ridiculous. As if other people acquiring and tying up bitcoins in his scheme doesn't move the market exactly the same way.

I've answered this 3 times already in various threads.  Check my posts if you really care.  Or try reading the BTCST thread, where you can hear it from the horse's mouth.  Seriously, do some reading.  It's all here.

TL;DR: he needs to have a large bitcoin reserve to operate and he prefers to not be at risk to a large drop in price

[notme]

I really should get paid for all the time I've spent tying this shit all together in various threads.  Instead, I'm reducing my long term profits by putting the picture together for people who may want to compete and drive down pirate's margins.  But if I can cut down on pirate FUD by 15% it will be worth it.  I spend a lot of time on these forums and frankly I'm at my FUD limit.

There, I sent you 1 BTC.

Now delete all these posts just in case someone gets any big ideas.  It's inevitable, but you're lowering the bar such that any retard can attempt to do this, and then we'll really have a mess when they crash out and lose the coins/get hacked/skip town.

"Oooh, I have 1,000 BTC from people.  I'm going to go bye-bye now and buy a...crappy car!"

Thanks!  I edited my post and I feel better now .

[ArticMine]

Even if Pirate can make 10.65% per week (up to what amount? These never scale up infinitely. Actually, at that kind of return rate the limit should be reached very quickly.), it makes absolutely no sense to borrow such huge amounts of bitcoins at several-hundred-percent annual interest rate. He should have gotten a loan in fiat. He says he knows rich investors etcetera. He could have borrowed a million dollars and bought at least 250kbtc when they were cheaper.

And the argument that he can't buy bitcoins because he'd move the market is ridiculous. As if other people acquiring and tying up bitcoins in his scheme doesn't move the market exactly the same way.

I've answered this 3 times already in various threads.  Check my posts if you really care.  Or try reading the BTCST thread, where you can hear it from the horse's mouth.  Seriously, do some reading.  It's all here.

TL;DR: he needs to have a large bitcoin reserve to operate and he prefers to not be at risk to a large drop in price

Exactly. Here is the Bitcoin Savings and Trust | Home thread and it is all there. https://bitcointalk.org/index.php?topic=50822.0. He is not prepared to accept exposure to a drop in the BTC / USD rate; however he is prepared to accept exposure to a sharp rise BTC / USD rate as no hedging strategy is 100% perfect. This is why I keep saying Pirate is a bear.

If you have 2.5 million USD in liabilities denominated in BTC and the BTC / USD rate rises to 10000 USD per BTC your 2.5 million USD in liabilities have now become 2.5 billion USD in liabilities at 0% interest and given the past history of BTC that is possible.  

[mp420]

Even if Pirate can make 10.65% per week (up to what amount? These never scale up infinitely. Actually, at that kind of return rate the limit should be reached very quickly.), it makes absolutely no sense to borrow such huge amounts of bitcoins at several-hundred-percent annual interest rate. He should have gotten a loan in fiat. He says he knows rich investors etcetera. He could have borrowed a million dollars and bought at least 250kbtc when they were cheaper.

And the argument that he can't buy bitcoins because he'd move the market is ridiculous. As if other people acquiring and tying up bitcoins in his scheme doesn't move the market exactly the same way.

Sounds as if you have a solid business plan to kick Pirate's ass out of the market.  Take a run at it.

I don't have a business plan that would generate such ridiculous returns. These kinds of extremely high growth businesses occur very rarely, and almost never they grow at 10% weekly rate (which ends up to 14,000% annually. For percent-growth-challenged, this means the business grows 140-fold in size during the period of one year). And the growth phase lasts only until the business fills its "ecological niche", at which point the growth dies out.

Let's make a thought experiment: What if Pirate had such a high-growth scheme, and had done as I suggested? 10% a week. In bitcoins. Let's say he'd have taken a $1M loan at 5% interest rate (to be paid twice a year) and monthly repayments of $50k (at the end of each month). Let's again assume he keeps $200k as a dollar reserve initially, so that he can make the first four payments no matter what. So. Within the first two months, he buys, little by little, $800k worth of bitcoins (at the price of $5 per bitcoin), and at the same time, sets up his business, which starts to generate revenue in the beginning of the third month.

For the sake of simplicity, let's just assume each month has exactly four weeks, and that BTC price is stable at $5.

2 months: $100,000; BTC200,000; loan principal balance $900,000
3 months: $50,000; BTC292,820  - sell BTC10,000 to cover the loan repayment, and do this each month from now on
3 months: $100,000; BTC282,820; loan principal balance $850,000
4 months: $100,000; BTC404,077; loan principal balance $800,000
5 months: $100,000; BTC581,609; loan principal balance $750,000
Every 6 months, sell an additional BTC 5k to make the interest payment (is more than enough). Spend rest on drugs&whores.
6 months: $100,000; BTC836,534; loan principal balance $700,000
7 months: $100,000; BTC1,214,769; loan principal balance $650,000
8 months: $100,000; BTC1,768,543; loan principal balance $600,000
9 months: $100,000; BTC2,579,311; loan principal balance $550,000
10 months: $100,000; BTC3,766,369; loan principal balance $500,000
11 months: $100,000; BTC5,504,341; loan principal balance $450,000
12 months: $100,000; BTC8,043,906; loan principal balance $400,000

Okay, at this point he has 40% of all bitcoins that ever will exist, and retires, pays of his debt and enjoys his eight million BTCs.

[mp420]

And of course I had to make the simplest possible error in the calculation in my thought experiment. At $5, $800k gets you BTC160k, not 200k. The point still stands, just get a bigger loan.

[MoneyIsDebt]

Pirate takes in 100k (or whatever) btc from lenders. Sells them to client A at 10% (or more) markup. Because client A needs to be anon (thus off exchange) and needs to send large sums across borders to person B. This does not affect price.
Person B receives btc, but needs fiat, and sells it on exchange. Pushing price down. Pirate buys back cheaply.
Or pirate puts up bid wall, and B sells into it, because they want to cash out fast.
So I don't see why him buying it back needs to push the price up.
And it seems this money can be made because of bitcoins unique nature.

[JoelKatz]

Pirate takes in 100k (or whatever) btc from lenders. Sells them to client A at 10% (or more) markup. Because client A needs to be anon (thus off exchange) and needs to send large sums across borders to person B. This does not affect price.
Person B receives btc, but needs fiat, and sells it on exchange. Pushing price down. Pirate buys back cheaply.
Or pirate puts up bid wall, and B sells into it, because they want to cash out fast.
So I don't see why him buying it back needs to push the price up.
And it seems this money can be made because of bitcoins unique nature.

The thing is, this whole thing is much easier to do without using any lenders (except perhaps for the first few transactions). Just keep your profits in Bitcoins, pay off the lenders, and then keep all the profits.

Also, there's no evidence that the constant, large Bitcoin transactions necessary for this to work (from A to B in your example) are actually happening. And it makes sense that they wouldn't be happening. There's advantages to dealing with Bitcoins, but not enough to justify a 10% cost on the buy side followed by selling on an exchange and withdrawing fiat to buy more Bitcoins.

This is really just a variation on "Pirate is so rich he can afford to borrow at a huge loss even in the absence of a business reason for doing so".

[MoneyIsDebt]

The thing is, this whole thing is much easier to do without using any lenders (except perhaps for the first few transactions). Just keep your profits in Bitcoins, pay off the lenders, and then keep all the profits.

It's not easy if you don't have a bunch of bitcoins to begin with. He might have a lot now, but might not have had a lot from the get go.
As long as the profits are bigger than the interests, it makes sense to borrow. If he's making X% (given X is higher than btcst avg rates), it doesn't make sense to buy back his debt which yields less. Not until he sees profit margins dwindle (at which point he can buy back debt or lower rates).

Also, there's no evidence that the constant, large Bitcoin transactions necessary for this to work (from A to B in your example) are actually happening. And it makes sense that they wouldn't be happening. There's advantages to dealing with Bitcoins, but not enough to justify a 10% cost on the buy side followed by selling on an exchange and withdrawing fiat to buy more Bitcoins.

Remittance, tax evasion, international trade, weapons, terrorism, drugs are a few examples where moving money across borders anonymously might be worth a lot.  And whether the transactions are large or split into many small ones does not change alter the business model at all. Neither does it matter whether A is 1 or 100 people, or whether B is 1 or 1000. Or whether B sells their bitcoins on an exchange directly or through N number of middlemen.

[Vandroiy]

The thing is, this whole thing is much easier to do without using any lenders (except perhaps for the first few transactions). Just keep your profits in Bitcoins, pay off the lenders, and then keep all the profits.

It's not easy if you don't have a bunch of bitcoins to begin with. He might have a lot now, but might not have had a lot from the get go.
As long as the profits are bigger than the interests, it makes sense to borrow. If he's making X% (given X is higher than btcst avg rates), it doesn't make sense to buy back his debt which yields less. Not until he sees profit margins dwindle (at which point he can buy back debt or lower rates).

While this is true qualitatively, it's insane quantitatively. Even if 7% were explicable, which they aren't IMO, he should be long past the point where he scales down. With 400k BTC, you can shuffle the entire Bitcoin market cap around many times in a single day. There exists no fund flow in Bitcoin that could require such giant size of transaction/escrow/whatever.

[boonies4u]

Pirate has never promised 7% forever.

[smoothie]

Pirate has never promised 7% forever.

He also never promised to provide his service forever either...

[boonies4u]

Pirate has never promised 7% forever.

He also never promised to provide his service forever either...

I'm not expecting either.

[smoothie]

Pirate has never promised 7% forever.

He also never promised to provide his service forever either...

I'm not expecting either.

Then if you are invested with him and know this you are taking a huge risk because he could run with your bitcoins.

[boonies4u]

Pirate has never promised 7% forever.

He also never promised to provide his service forever either...

I'm not expecting either.

Then if you are invested with him and know this you are taking a huge risk because he could run with your bitcoins.

Why, because we all know 7% isn't sustainable forever (exponentially especially) and Pirate has already stated he will be adjusting interest rates for savings accounts? Or because he's currently operating under a certain model that allows him to profit off of the current situation bitcoins and the bitcoin economy are in? He might be able to offer interest rates at any amount down to 0%, but I doubt to see him operating past then. He could turn around and become a more typical bank at that point I suppose.

Just because 7% isn't sustainable and because he's playing off of the economy and currency, doesn't mean that he will default or run. Him ending services wouldn't mean that he is defaulting or running either.

I'm taking a huge risk anyways, the two observations above are inconsequential.

[smoothie]

Pirate has never promised 7% forever.

He also never promised to provide his service forever either...

I'm not expecting either.

Then if you are invested with him and know this you are taking a huge risk because he could run with your bitcoins.

Why, because we all know 7% isn't sustainable forever (exponentially especially) and Pirate has already stated he will be adjusting interest rates for savings accounts? Or because he's currently operating under a certain model that allows him to profit off of the current situation bitcoins and the bitcoin economy are in? He might be able to offer interest rates at any amount down to 0%, but I doubt to see him operating past then. He could turn around and become a more typical bank at that point I suppose.

Just because 7% isn't sustainable and because he's playing off of the economy and currency, doesn't mean that he will default or run. Him ending services wouldn't mean that he is defaulting or running either.

I'm taking a huge risk anyways, the two observations above are inconsequential.

Hey do what you want with your money.  I'll stop there...

[JoelKatz]

It's not easy if you don't have a bunch of bitcoins to begin with.

Yes, it is. You borrow some bitcoins at slightly above market and pay them back as soon as possible.

He might have a lot now, but might not have had a lot from the get go.

Exactly. So what's his profit model now?

As long as the profits are bigger than the interests, it makes sense to borrow.

No, it makes sense to do the deals even if that means you need to borrow. But also, it makes no sense to borrow if you don't need to -- unless you have no intention of paying back. With your model, he'd have no need to borrow. Thus, either he doesn't make sense or he doesn't intend to pay back.

If he's making X% (given X is higher than btcst avg rates), it doesn't make sense to buy back his debt which yields less. Not until he sees profit margins dwindle (at which point he can buy back debt or lower rates).

It absolutely does make sense to buy back debt which yields less because buying back that debt in no way affects his profit margins. It is comically absurd to argue that his business volume is limited by his capital.

[miscreanity]

He might have a lot now, but might not have had a lot from the get go.

Exactly. So what's his profit model now?

Grow Bitcoin itself.

[unclescrooge]

Even if Pirate can make 10.65% per week (up to what amount? These never scale up infinitely. Actually, at that kind of return rate the limit should be reached very quickly.), it makes absolutely no sense to borrow such huge amounts of bitcoins at several-hundred-percent annual interest rate. He should have gotten a loan in fiat. He says he knows rich investors etcetera. He could have borrowed a million dollars and bought at least 250kbtc when they were cheaper.

And the argument that he can't buy bitcoins because he'd move the market is ridiculous. As if other people acquiring and tying up bitcoins in his scheme doesn't move the market exactly the same way.

Seriously guys, think about the bitcoin ecosystem, and read all the history post of pirate. And think again.