Topic: ICBIT Derivatives Market (USD/BTC futures trading) - LIVE - page 42. (Read 97688 times)

Right now I think the main problem is too few customers, resulting in a rather large spread and low volume.  When I email customer service, I got quick replies, and Fireball usually responds here too.  The user interface still leaves something to be desired, my main gripe is that I cannot withdraw bitcoins without closing all contracts (see earlier in this thread).  I trust that will be fixed soon.

PS. I like your blog

I like the concept a lot.
What has your experience with them been like in terms of liquidity and customer service?

I don't think this is entirely correct.  It looks like the maximum variation of 10% on BUZ2 is implemented as a limit on how low/high bids/asks the system accepts.  So if the BTC/USD price changes by more than 10% in one day, the BUZ2 price will try to follow, but will be limited to 10%.  The next day, the remainder of the change will happen.

So in a perfect world, you arbitrage possibility is clearly there.  But there are of course risks.

1) In case of sudden price movements, some of your contracts may be closed at a price that is profitable but less profitable than if they had been allowed to run, in case somebody else receives a margin call, and the system cannot find buyers/sellers for their contract.  I assume this could happen in reality if the BUZ2 price cannot follow the BTC/USD price due to the 10% rule.  In that case noone may be willing to sell or buy, and a margin call may enter the "worst case scenario": https://icbit.se/margincall

2) A hacker or an ICBIT insider may run with the funds.  See the discussions above in this thread.  After all, ICBIT does not publish their identity or where they operate from - perhaps wisely, considering the political climate in some countries. :-)

Finally, I suspect that the cause of the price difference is that many people expect the BTC to increase in value, and believe they can earn more by holding a long position in BTC (on ICBIT and in their wallets) rather than holding a neutral position as arbitrage would imply (long position in the wallet, short on ICBIT).  Of course, if you have funds to spare you can buy extra BTC, short on ICBIT, and get the arbitrage profit on top of whatever you gamble with the ordinary exchange rate.


EDIT:  And when you rush off to do the arbitrage, you should be aware that a BUZ2 is not a futures contract for 1 BTC, it is a futures contract for -10 USD (minus ten dollars).  In reality, you are trading futures on the USD, but since we all think of the price of BTC in USD, not the other way round, ICBIT has wisely inverted the price.  You therefore need to match the dollars used to buy BTC with the amount of contracts on ICBIT, not the amount of BTC when doing an arbitrage.  It helps that the system indicates how many BTC you contracts correspond to, but that number changes as the rate changes!  Just do the math carefully, otherwise risk number three appears: bad math 

A discussion on this:

Why are bitcoins in december better than bitcoins today? (ICBIT)
 - https://bitcointalksearch.org/topic/why-are-bitcoins-in-december-better-than-bitcoins-today-icbit-110583


I thought the answer to that was due to the maximum price change specified for BUZ2;
"Maximum price change within one trading session: 10% in each direction relative to the close price of the last trading session"

But I am missing a piece of information to answer that.  I don't know if the maximum change in clearing price from one day to the next is 10%, or does that 10% just reflect the price as far as what is used simply for computing margin variance?

So, using your example,

OCT-05-2012 - TRADE: BUY 1 BTC at $12.83
OCT-05-2012 - TRADE: SELL 1 BUZ2 at $14
Then let's say that was the last trade of BUZ2 on that day and thus the clearing price would also be $14, and as a result there is no margin variance paid.

Then let's say on OCT-06-2012 a crash happens, the BTC/USD drops nearly $4 in a day, $12.83 to $9.

So the margin variance paid to you is based on a maximum of 10%, so from the $14 then the margin variance paid is $1.40.

OCT-06-2012 - BTC/USD $9, Last BUZ2 trade $10.  Margin variance +$1.40  (as prior clearing was $14, but max 10%)

But normally the clearing price uses the last trade, and let's say that last trade occurred at $10.00.  So does that become the "prior clearing price" used for calculating the margin variance on the next day?

So then let's say the BTC/USD exchange rate rises, $1 a day for the next five days, and the BUZ2 "last trade" rises exactly at the same $1 a day rate.

OCT-07-2012 - BTC/USD $10, Last BUZ2 trade $11.  Margin variance -$1 (as prior clearing was $10)
OCT-08-2012 - BTC/USD $11, Last BUZ2 trade $12.  Margin variance -$1 (as prior clearing was $11)
OCT-09-2012 - BTC/USD $12, Last BUZ2 trade $13.  Margin variance -$1 (as prior clearing was $12)
OCT-10--2012 - BTC/USD $13, Last BUZ2 trade $14.  Margin variance -$1 (as prior clearing was $13)
OCT-11--2012 - BTC/USD $14, Last BUZ2 trade $15.  Margin variance -$1 (as prior clearing was $14)

Then, for simplicity sake, let's say on OCT-12, BUZ2 trades exactly at the BTC/USD exchange rate.
OCT-12-2012 - BTC/USD $14, Last BUZ2 trade $14.  Margin variance +$1  (as prior clearing was $15)

And then nothing happens through December 15th ... the BTC/USD stays at $14, and BUZ2 has no more activity after October 12th.

DEC-15-2012 - TRADE: SELL 1 BTC at $14

Now let's review:

So you bought 1 BTC at $12.83 and sold it for $14, so you gained $1.17.

You sold 100 BUZ2 at $14, and got the following margin variance adjustments:
OCT-06-2012: +$1.40
OCT-07-2012: -$1
OCT-08-2012: -$1
OCT-09-2012: -$1
OCT-10-2012: -$1
OCT-11-2012: -$1
OCT-12-2012: +$1
Total: -$2.60

You lost more on the BUZ2 ($2.60 loss) than you earned from the gain on the BTC ($1.17 gain).   Your net loss on this set of transactions was $1.43.


Now, this is with my possibly flawed understanding of what happens with the clearing price when a change of more than 10% occurs.  If the clearing price for October 6th should actually have been the $12.60, and not the $10 from the last BUZ2 trade, then my whole analysis is wrong, and you are exactly right at selling BUZ2 at $14 and buying BTC at $12.83 incurs no risk.

Can somebody explain me why there is open risk free arbitrage on BUZ2?

If I sell 100 BUZ2 @ 14 and buy 100 BTC @ 12.83 I will get 117 USD risk free profit.

You're dodging the issue. No one asked you to reveal your location. We're not interested in that. We're interested in security practices.

Proper security practices don't become less valuable if they are properly implemented.

If I were running an exchange with lots of people's money, I'd look into the following: the login page - and any page where a password grants access to a restricted feature - should generate a private key from the password, client-side via Javascript, and sign any requests to move money with that private key. The first time a user registers his account - and on subsequent password changes - the corresponding public key to this private key is stored on an offline transaction-signing box connected to your online server.

This separate box, connected to the online box but not connected to the internet, should store the users' password-derived public keys, and the private keys required to sign the Bitcoin transactions that send users the money they choose to withdraw. This box would only sign transactions if a request from the online box is properly signed with a user's private key.

I am trying to withdraw a part of my BTC, but I get the message "Please close your open futures positions before withdrawing Bitcoins!".  I currently have more than 100 contracts open, with the current spread closing and reopening them would cost me a larger amount than the one I am trying to withdraw!

I really hope you can fix this soon, otherwise it is going to be a bit too expensive to use ICBIT  

EDIT: If I sell a few BTC for USD, can I then withdraw them as a VouchX code (and buy the BTC back in another account / on another exchange)?  Or am I prevented from withdrawing a VouchX code while I have open futures positions?  Or prevented from selling BTC?

As I said, we are talking to lawyers regarding this, but without any hurry.

What thoughts do you have on the legal circumstances for ICBIT? Does it require certain licenses to broker in futures contracts?

Of course, that's planned for the next update which is about WebTrade authentication improvements.

Are there plans to add multi-factor authentication like OTP to the trading site?   Right now I can add OTP to the website but that doesn't do anything to stop a replay attack to get unauthorized access to my trading account (where only username and password are still required):

 - https://icbit.se/WebTrade

The system is back to working state.
Google Authenticator is officially supported now for logging in to the website(it's optional: if you don't set it up, you can use the website just with your password, if you want to feel more secure - enable GA authentication).

Website is down for 20-30 for maintenance. A notification here will be issued when it's on again. Sorry for any inconvinience.

Scammers have built awesomely elaborate websites. Some really amazing ones.

-MarkM-

While there is a good chance that no scammer would want to build such an elaborate web site as icbit.se, and a good chance that seeing it become a success is both more fulfilling and more profitable than running with the bitcoins, I must admit that it is worrying that the domain name is registered to Mr. vnnber1106-00001   

In any case, suing somebody in Russia (or Japan for that matter, if MtGox runs with our money) is pretty hopeless.  Never leave more money on any exchange that you can afford to loose.  On icbit, I am afraid that leverage makes it more likely to loose the money on the market than in any other way.  On the other hand, it is more fun than Satoshi Dice.

Or tell us your real Name Thats a nice start too!

You need to stop offering securities to the general public and move to registered share brokers in that case.

We are consulting lawyers regarding ICBIT project incorporation. This may take more time than planned due to specifics of having income in Bitcoins.

Indeed. I'm pulling off the color-coding of order statuses for now, it needs some discussion first.
Instead, rejected and canceled orders will be shown with a strike-through line, filled orders will have a gray text color to visually distinguish their "inactive" state.

At what corporate address can I sue you guys at if you run off with my money?