Topic: Bitcoinica: How it works - page 4. (Read 15492 times)

go for it 

Ummm Zhoutong,

Last time you recommended a long squeeze 

What are your thoughts on a short squeeze atm?

You're 17 now, so are you telling us you have been trading since you were 12?
Pokemon cards do not count.


Who is your advisor, any relation to you? Are you paying him for his advice or does he work pro-bono? What exactly is his role?
Is he involved in the technical, financial, legal or PR aspects of bitcoinica? All of the above?

I have 5 years trading experience.

And I have access to my advisor, who is a forex broker himself.

Wonder if that 38k BTC guy is still playing on Bitcoinica... I'd ragequit if I were him

I just have to say:
ouch.

zhoutong: you haven't thought Bitcoinica through, which is why surprise problems keep poping up.

I haven't accused you of being a bucket shop: I am saying when your positions become significantly imbalanced you will have to stop people from closing positions and from withdrawing funds... or you will have to _become_ a bucket shop.  Your recent change was a band-aid, you kicked the can down the road to some future date.

You can prevent that degree of imbalance by stopping people from opening new postions (which your customers will consider acceptable), however people closing positions and/or withdrawing funds can also bring about 'critical imbalance' - i.e. a position you can not hedge, where you will have to either prevent people from closing positions and withdrawing funds (which they will react very badly to) or _become_ a bucket shop (you were trying out the former, now it looks like you will try out the latter).

I understand Bitcoinica perfectly, apparently you and your customers don't (your system works within certain statistical parameters, outside that it will blow up)... but for a modest fee I will help you out.

My prediction for the end of Bitcoinica: the latest volitility that broke Bitcoinica was a rise which tends to be slower moving than crashes, at some point in the future we're going to get a crushing panic selloff (maybe when the US gov tries to shutdown bitcoin), then Bitcoinica will go under.

If one day the longs all panic sell to cover and people with BTC as magin start withdrawing their funds, you will have to either prevent people from closing positions and withdrawing funds or become a bucket shop - either way it's the end of Bitcoinica.

Cypher: Every time you ask a question, someone answers it, then you ask new questions and make many more posts saying nobody is answering you.  Can you write out your unanswered questions clearly and grammatically, and stop whining about being ignored, so we can actually find your questions and respond to them? 

(Mushoz answered well, but here is my take)

3. Probably.  The 50K should be lent to other customers once deposited.  If the entire system is skewed long, for example, that user would not be able to buy until it rebalances.

4. What does this mean?  That is barely English.

What do you mean by "hits"? (Sees?)

What is a displayed ask?  Do you mean the current market buy price (seen in the "Instant Execution" tab)?

If you want to lock in a price, you should use a limit order, not market.  If you want to place a market order, you should not be upset if the price moves a bit.  The purpose of a market order is to be fast, not precisely priced. 

Here's my proposition zhoutong: for a 10,000 BTC consulting fee, I will tell you the solution to this that will reduce the chance of Bitcoinica's collapse to 0.  (Payable in advance... and that's at a discount because it makes me smile that a 17 y/o is parting these fools of their money.)

You can prevent that degree of imbalance by stopping people from opening new postions (which your customers will consider acceptable), however people closing positions and/or withdrawing funds can also bring about 'critical imbalance' - i.e. a position you can not hedge, where you will have to either prevent people from closing positions and withdrawing funds (which they will react very badly to) or _become_ a bucket shop (you were trying out the former, now it looks like you will try out the latter).

My prediction for the end of Bitcoinica: the latest volitility that broke Bitcoinica was a rise which tends to be slower moving than crashes, at some point in the future we're going to get a crushing panic selloff (maybe when the US gov tries to shutdown bitcoin), then Bitcoinica will go under.

i'm glad you turned off  the ignore button.  now would you please answer my legitimate questions?

Any downward spike will be even worse for all the people who's margin balance is leveraged up from BTC Currency.

As BTC price drops the 'margin balance' also drops forcing quicker liquidations for anyone who was leveraged up.

I still have a few hundred bucks parked over there for a speculative leveraged up buy at knockdown prices but I don't fancy risking much more than that for now.

you didn't answer my question about whether you had a financial link to Bitcoinica.