Topic: bitcoinica get my money out thread! (Read 4132 times)

(let me first admit that I too have no idea how this kind of trading works)

I think everyone needs to have the same mentality you might of had your first time in a casino, or the stock market... Prepared to learn a few hard lessons!


But this isn't just OP being a troll; as bitcoin gets more and more mainstream, there will be an exponential FLOOD of people, just like OP, coming in with the same blind expectations (*this is my money! I don't understand what I'm doing with it*).

I'd say OP has been pretty nice compared to all the confused people to come...people with no computer knowledge at all...no financial knowledge... Get ready

It is like forex, for instance those with leverage of 200x, you put in $5000, you can buy up to a million dollars, but should the losses exceed the $5000, margin calls, you have to top up or be liquidated.

I don't understand what do you mean by "holding the funds". Of course we are holding customers' funds when they deposit into their margin account. We are just not holding the full amount of funds required for trading.

For example when you buy at 5 using full leverage, when the price drops to 4, your whole position gets wiped out, and that's it. We force you to sell at 4 no matter what, just because you don't have enough money to back your losing trade.

I hope this makes sense to you.

But how can you liquidate when you are not actually holding any funds. Please explain how you ensure the user pays you? It seems that you don't quite understand that if you are not actually in control of the users funds then you have no power. Sure you can make their account go to 0 on your platform, but this doesn't actually mean anything for their real money.

Admitted troll, report user and ban?   I have not seen such douchbaggery on these forums in quite a while for no reason but ignorance.

It is so bad I am having a side theory that he is just zhoutong under a different name using some form of ultimate viral promotion for Bitconica.  I have never desired to use the service until now, but I'm being motivated by spite lol

I will ask. But if not, we will absorb the losses.

It's generally okay because forced liquidation usually happens at extreme prices with large spreads. So most likely we have already made enough profits to offset such losses.

But what if even after liquidation, the account is negative?  You have to absorb the losses or do you ask the customer to top up?

Why we never hold the funds?

We always require some margin from customers. If they lose too much to a warning level, we will issue margin calls. Soon after that, their positions will be liquidated automatically.

So how do you ensure that anyone ever pays? Lets say I make a losing trade, what makes me pay? You are never holding the funds, so you cannot control the funds and thus ensure the transaction. Correct?

If the pool is large, it's almost impossible to have them create same positions at the same time without affecting the price.

We are always trading at (market equilibrium prices + spreads). It's more likely to cause the price to spike than to use up the reserve. Also, there's virtually no reason for Bitcoinica customers to place orders at the same time while other exchanges don't move at all. Bitcoinica will buy up very quickly if this happens. (Based on available reserve, we can influence the price of Bitcoin by about $0.5 in any direction.)

That's why the circuit breaker has never been triggered. We have launched the service for a month, and we have seen so many spikes and crashes.

The real danger here is modeling error, not sampling error.  You are already big enough that if the pool of traders have balanced positions, you will, too.  My concern is what do you do when the pool itself is skewed.  "We'll stop trading if we're moving to a position we can't hedge" is a good start, but also unsatisfactory, since most people want to shift their position quickly in response to a crisis. 

Anyway, we've covered this before.  I know there are no simple solutions to these questions.

The problem is, the crisis can't happen without a change in price.

Here's my reply to a customer's similar questions:

"We have this circuit breaker in place. Execution will stop at one direction if the available funds are not enough for us to hedge. However, it has never been triggered since we launch our site.

What really makes sense is, if everyone wants to buy, the price would already have been risen. Every instant, we are trading at market equilibrium prices. It's highly unlikely that everyone on Bitcoinica wants to buy while everyone on Mt. Gox wants to sell. The best thing we can do is to have a large pool of traders to prevent sampling error. The higher volume we have, the more balanced our position is."

People have been asking that since its inception.  Zhoutong's answer is that Bitcoinica's bitcoin/USD position, summed over its users, is relatively small.  I.e., there is a relatively symmetric distribution of positions among its users, and bitcoinica can effectively arrange trades between its users which roughly cancel out.  This is a decorrelation argument, so I find it fairly unsatisfactory, because in a crisis all correlations tend to go to one.  (E.g., "What if every bitcoinica user decides it's time to sell short?")  Relying on this kind of cancellation will probably work for day to day usage, but for trading on a volatile commodity like bitcoin, you really care about how your counterparty will handle a crisis.

I still don't understand how bitcoinica is supposed to work. How can you trade on a platform that isn't holding any of your money? Do you give them access to your account at MtGox? Or do they let you trade with their funds? If they let you leverage, then they probly don't understand the risks involved.

Face it man, you don't get how it works and you lost money trying to figure it out.  Take your loss and go play somewhere else.

 Sorry if I offended you guys, this was just a troll thread for attention, I got my money back but learned a valuable lesson. Anyways I still think we website needs a better FAQ for noobs like me. All your elite jibberish is hogwash to me... Your website is like selling a race horse ticket and then never disclosing that the viewing seats cost 1,000 dollars.

No spending limits, no transaction time limit, no guarenteed processing time for transaction (in case i want to know how fast u can wire transfer) no liability at all. Only specs i can see on website is the 15 minute delayed ticker off mt.gox. Like going to walmart only to discover 50 people in 2 lines.

That's a funny picture!

Thanks for your feedback.

-Jonathan

Wow Jonathan,

while there is no defending the OP, Id find your post even harder to defend.

zhoutong,

Don't worry about an apology from the OP. Anyone who matters, or anyone that has used your site and has some knowledge of trading accounts, we all know that the allegations were based on a lack of objectivity on OPs part. I'm sure that those 8 Bitcoins are his only treasure. He's just a 'lowly miner' trying to put another 8 Bitcoins into circulation. Certainly he doesn't have a lot of money, and is probably lower middle class. His libelous claims are obviously without merit, and we all know that. Everyone knows. You don't need an apology from him. I'm certain that he's too prideful and ashamed of his own ignorance to stand up and admit that he was wrong. You know what? That's ok. We've all done it, though perhaps not in such a public and google indexed forum.

It's clear that this miner was simply looking for the highest price he could get for his mined coins. He didn't understand what Bitcoinica is, and also clearly had no understanding of bid/ask and how those correlate to his actual price. I'm sure he tried to sell at Bitcoinica because he believed that the higher ask would yield him a higher USD sale price. I can see how someone who has no experience trading could get it wrong.

Perhaps the best thing to do is to consider the lack of regulation and oversight at the moment as an opportunity to self govern, and with an 800 member count at Bitcoinica, I do believe that it's safe for you to impose a basic questionnaire that asks new members a series of questions to verify that they have an understanding of what service Bitcoinica provides.

Example Questions:

1. Bitcoinica is an exchange where individuals can buy or sell bitcoins directly [true / false]
//If answer is 'true', give a descriptive text identifying the key differences between an exchange and a market maker. If answer is false, go to Question 2.

2. When you buy or sell BTCUSD at Bitcoinica, you are engaging in a direct purchase or sale of Bitcoin to a counter party. [true / false]
//If answer is 'true', give a descriptive text identifying the key difference between the BTCUSD trading pair and BTC. If answer is false, go to Question 3.

3. I have experience trading stocks, commodities and / or forex using leverage [true / false]
//If answer is 'false', provide a link to a video and written 1 page tutorial about how Bitcoinica works, including simple explanations of the order types, spreads and margin calls. If answer is true, go to Question 4.

4. etc..

I also think it would be good for you to start a 'Newbies' thread for Bitcoinica, with a living FAQ as #1 post, where you and others in this community can answer newbies questions about how they can use Bitcoinica, with use case examples.

I think Bitcoinica is great, and will be even greater one the lowly miners have a better understanding of its uses and limitations. So no, don't bother with an apology. Just work towards giving everyone an opportunity to understand and use Bitcoinica properly!

Regards,
Jonathan

http://webcache.googleusercontent.com/search?q=cache:eYz_H6yQVmgJ:https://www.bitcoinica.com/pages/faq+bitcoinica+FAQ&cd=1&hl=en&ct=clnk&gl=sg

Google Cache: It is a snapshot of the page as it appeared on 22 Sep 2011 12:26:51 GMT.

Nothing has changed.

Thank you for the idea about the proof.

So, to OP: False accusation detected. Possible attempt of defamation. Apology is demanded.