The leveraged part has to be borrowed from somewhere, it can't just be matched up. I assume that comes out of the reserve too.
I guess this from this reasoning (assume a $5 BTC price):
- Alice has $100; and leverages at 1:3. She shorts against her $100 margin, meaning she needs to borrow (100*3/5) = 60 BTC (which she then instantly sells of course)
- Bob has 10 BTC; and leverages at 1:6. He goes long against his 10 BTC margin, meaning he needs to borrow (10*6*5) = $300 (which he then instantly buys BTC with of course)
Where does the missing 50 BTC come from that it can be sold? Where does the missing $200 come from that it can be used for purchases? The answer must be Bitcoinica's reserves.
Presumably they've now been used up, and "*" is showing for both sides.
(I'm happy to be corrected, I don't claim to be any kind of expert).
