Topic: icbit warning (Read 6228 times)
seems like the natural state of ICBIT's curve should be contango (in line with the forward curve for USD interest rates). Since bitcoin pays no interest, but USD does, a future on bitcoin should be worth more than spot, since you would always prefer to buy the future and receive interest on the dollars you kept in the bank. The right interest rate is probably only about 10 bps, which, if my bond math is correct, works out to about 7 satoshis a day, per contract, from trade date until settlement. Of course this gets compounded, but at 7 satoshis, why bother...
Two and a half months and Fireball has refused to address a single one of the issues himself.
The only reason the contracts are disconnected from the market is a lack of liquidity/market makers. And no they are not completely disconnected, the spread has come in a LOT since I first started trading there.
You can theorize WHY the contract traded away from spot, and indeed there can be many reasons. But, the primary reason for it to trade IN LINE with spot is arbitrage. Buy in one place sell in another, driving the price up in the first place, down in the other. There has to be significant capital/automated strategies in place for that to happen, and that just isn't the case with ICBIT.
I told you when leverage makes volatility a factor and when it doesn't - it all has to do with the option of the contract holder to default (as you pointed out), but both Long and Short can default, so such an effect should only increase the bid/ask spread, not spot-futures spread. Honestly, go pick up a copy of Hull (Options Futures and Other Derivatives), because you clearly have no idea what you're talking about.
I acknowledge ICBIT is being manipulated, but from where I'm sitting, it's most likely not the owners, just traders. It's just a market with orders, people are going to trade around. And besides, recently it's been pretty close to spot - not more than say 10 points off (with a wide spread).
Finally, I am not trying to impress anybody, I am just correcting some really bad misinformation. I have no affiliation with ICBIT except that I trade there and they actually got their contract design correct. I've also given them advice on how to correct some of the more glaringly bad things they do. I would like for there to be more liquidity in their market.
Here is one issue with volatility and pricing specifically as it applies to the type of contracts on icbit. The contracts are calculate by 1/price1 - 1/price2. If you enjoy math too much you can make a curve with the likelihood of a specific price being reached in the life of a contract on one axis and the profitability of a contract bought at one specific price on the other. x percent chance of the price touching a certain price, y percent profit on a contract at that price etc.
When contracts were priced $70 above spot that calculation was vaguely within an acceptable range. Both buyer and seller could be said to be in a position that made sense. A few weeks after that, the price of contracts went below spot even for contracts traded out to December. In other words someone was betting very heavily that between now and December the price of spot would not rise above the 80s.
It makes no sense unless you look at the trades and notice the unnatural patterns. I've covered this in other posts. Briefly again look at http://www.nonprof.com/bitcoinistan.com/unlikely.jpg Right before the previous clearing someone extracted 325 contracts at the ridiculous price of 104. Then clearing was pushed up to 110. Then an hour 40 before the next clearing someone pushed clearing down to 107 and put a hundred contracts on the block to prevent it being pushed up. Selling December contracts at 107 is beyond suspicious. 104 more so. In the 90s even more so. In the 80s its silly. Again, a person would not sell at those prices based on any market info. Those trades are completely apart from any bitcoin price considerations. Do you deny that? It is funny.
When you say "the primary reason for it to trade IN LINE with spot is arbitrage" you are giving up any credibility you have. You are just making stuff up.
Same when you say "I told you when leverage makes volatility a factor and when it doesn't - it all has to do with the option of the contract holder to default". Uhm "leverage makes volatility a factor"? Volatility, the degree to which the underlying equity is volatile, has to be accounted for in anything that is leveraged.
Boomerlu you are continuing the icbit tactic of "If you can't dazzle them with brilliance, baffle them with bullshit".
You know very well that the contracts on icbit are almost completely disconnected from the bitcoin market. icbit prices are most often the result of a position reacting to a trader who is not aware of what goes on, squeezing the trader and extracting the contracts cheaply. That was done to me several times, with contracts being put down against the movement of spot and apparently with knowledge of my account particulars that only icbit staff would have.
The nonsense about backwardation etc is getting old. You know it very well but I'll spell it out for anyone who might be deceived by you. The price of a contract at icbit moves for a short time with contracts bought by someone landing on the site. Once that person has some bitcoin vested all of the major price moves are artificial pushes deliberately meant to squeeze the client, force margin. There is nothing to do with backwardation, contango or anything else. Those words are used to con people plain and simple.
As far as "nowhere does volatility enter as a factor", that's silly. I've covered this in another post, you cannot have leverage that ignores volatility in valuation. It is the first signature of a scam.
You can use all the big words you want, maybe you will impress someone. I know bullshit when I hear it.
The only reason the contracts are disconnected from the market is a lack of liquidity/market makers. And no they are not completely disconnected, the spread has come in a LOT since I first started trading there.You know very well that the contracts on icbit are almost completely disconnected from the bitcoin market. icbit prices are most often the result of a position reacting to a trader who is not aware of what goes on, squeezing the trader and extracting the contracts cheaply. That was done to me several times, with contracts being put down against the movement of spot and apparently with knowledge of my account particulars that only icbit staff would have.
The nonsense about backwardation etc is getting old. You know it very well but I'll spell it out for anyone who might be deceived by you. The price of a contract at icbit moves for a short time with contracts bought by someone landing on the site. Once that person has some bitcoin vested all of the major price moves are artificial pushes deliberately meant to squeeze the client, force margin. There is nothing to do with backwardation, contango or anything else. Those words are used to con people plain and simple.
As far as "nowhere does volatility enter as a factor", that's silly. I've covered this in another post, you cannot have leverage that ignores volatility in valuation. It is the first signature of a scam.
You can use all the big words you want, maybe you will impress someone. I know bullshit when I hear it.
You can theorize WHY the contract traded away from spot, and indeed there can be many reasons. But, the primary reason for it to trade IN LINE with spot is arbitrage. Buy in one place sell in another, driving the price up in the first place, down in the other. There has to be significant capital/automated strategies in place for that to happen, and that just isn't the case with ICBIT.
I told you when leverage makes volatility a factor and when it doesn't - it all has to do with the option of the contract holder to default (as you pointed out), but both Long and Short can default, so such an effect should only increase the bid/ask spread, not spot-futures spread. Honestly, go pick up a copy of Hull (Options Futures and Other Derivatives), because you clearly have no idea what you're talking about.
I acknowledge ICBIT is being manipulated, but from where I'm sitting, it's most likely not the owners, just traders. It's just a market with orders, people are going to trade around. And besides, recently it's been pretty close to spot - not more than say 10 points off (with a wide spread).
Finally, I am not trying to impress anybody, I am just correcting some really bad misinformation. I have no affiliation with ICBIT except that I trade there and they actually got their contract design correct. I've also given them advice on how to correct some of the more glaringly bad things they do. I would like for there to be more liquidity in their market.
I'll add one point on a less hostile note.
The first time I noticed irregular activities on the site I decided to withdraw what I had and leave but I read through the comments and saw what seemed to be comments of some integrity by staff. Someone said something about using referrals and a staff person, icthy I think said "that's spammy" which struck me as a comment of some integrity. So I thought maybe I was misunderstanding something when I noticed the scam. Then it happened again several times, there was no doubt.
Most of the issues on the site, what most people in most countries in the world would call scam issues, crookedness, may well be a combination of the background of the people running the site, perhaps limited knowledge of basic standards on any financial exchange, limited experience on their part etc.
The site is well designed even if the contracts are poorly thought out, but as it is it has zero chance of success. You cannot run an operation like that and succeed.
Any person who has some knowledge of markets, and is honest, who looks at the examples I give will call it scamming.
On another post, https://bitcointalksearch.org/topic/m.2690056 Fireball says "we are constantly improving ICBIT to add transparency, to stick to the rules, etc" and "I am not interested in robbing people for a few hundreds BTCs when this thing could grow into a multimillion US dollars venture. That's the goal I wish to achieve, and our team is putting all efforts to make that happen.". If his honest intention is to run a straight ship, and he takes real steps in that direction, I'll only be helpful. But first I want half of the bitcoin that were taken from me using dirty tactics. At that point I will consider financial matters square and would be supportive of genuine efforts to make it an honest site.
The first time I noticed irregular activities on the site I decided to withdraw what I had and leave but I read through the comments and saw what seemed to be comments of some integrity by staff. Someone said something about using referrals and a staff person, icthy I think said "that's spammy" which struck me as a comment of some integrity. So I thought maybe I was misunderstanding something when I noticed the scam. Then it happened again several times, there was no doubt.
Most of the issues on the site, what most people in most countries in the world would call scam issues, crookedness, may well be a combination of the background of the people running the site, perhaps limited knowledge of basic standards on any financial exchange, limited experience on their part etc.
The site is well designed even if the contracts are poorly thought out, but as it is it has zero chance of success. You cannot run an operation like that and succeed.
Any person who has some knowledge of markets, and is honest, who looks at the examples I give will call it scamming.
On another post, https://bitcointalksearch.org/topic/m.2690056 Fireball says "we are constantly improving ICBIT to add transparency, to stick to the rules, etc" and "I am not interested in robbing people for a few hundreds BTCs when this thing could grow into a multimillion US dollars venture. That's the goal I wish to achieve, and our team is putting all efforts to make that happen.". If his honest intention is to run a straight ship, and he takes real steps in that direction, I'll only be helpful. But first I want half of the bitcoin that were taken from me using dirty tactics. At that point I will consider financial matters square and would be supportive of genuine efforts to make it an honest site.
akwfleaspirit, you are incredibly misinformed about futures.
In an efficient market, cash and carry arbitrage will force the futures price to equal the discounted (using a risk free interest rate) spot price net of carrying costs (btw, Fireball explicitly posted how to execute this strategy). NOWHERE does volatility enter as a parameter to valuation (that only happens in nonlinear instruments like options). Trust me, I'm a quant.
There IS the embedded "default option" ie, walking away from a bad position, when leverage is involved. This was a problem before, as admin waited too long to margin call/liquidate a trader, thus their position ended up being negative and counterparties were liquidate away from market.
However, the "life" of this default option is only the amount of time between margin call and actual liquidation of a position. This used to be (I'm guessing) 24-48 hours, now it's only 1 hour, and so it's much less valuable now.
Also, this default option would not necessarily cause a premium, as a short can default just as a long can.
Finally, since shorting spot bitcoins is difficult, it is much harder to bring a backwardated futures market back in line with spot (to do so you would have to long futures and short spot). It's much "easier" to bring contango down.
Now, it IS true that manipulation happens and that it's bad practice to use the Last Sale as the clearing price. It's unfortunate and quite frankly strange that the contract clearing price hasn't been changed to some type of average. However, I will say that I have never lost money on manipulation on ICBIT.
In an efficient market, cash and carry arbitrage will force the futures price to equal the discounted (using a risk free interest rate) spot price net of carrying costs (btw, Fireball explicitly posted how to execute this strategy). NOWHERE does volatility enter as a parameter to valuation (that only happens in nonlinear instruments like options). Trust me, I'm a quant.
There IS the embedded "default option" ie, walking away from a bad position, when leverage is involved. This was a problem before, as admin waited too long to margin call/liquidate a trader, thus their position ended up being negative and counterparties were liquidate away from market.
However, the "life" of this default option is only the amount of time between margin call and actual liquidation of a position. This used to be (I'm guessing) 24-48 hours, now it's only 1 hour, and so it's much less valuable now.
Also, this default option would not necessarily cause a premium, as a short can default just as a long can.
Finally, since shorting spot bitcoins is difficult, it is much harder to bring a backwardated futures market back in line with spot (to do so you would have to long futures and short spot). It's much "easier" to bring contango down.
Now, it IS true that manipulation happens and that it's bad practice to use the Last Sale as the clearing price. It's unfortunate and quite frankly strange that the contract clearing price hasn't been changed to some type of average. However, I will say that I have never lost money on manipulation on ICBIT.
Boomerlu you are continuing the icbit tactic of "If you can't dazzle them with brilliance, baffle them with bullshit".
You know very well that the contracts on icbit are almost completely disconnected from the bitcoin market. icbit prices are most often the result of a position reacting to a trader who is not aware of what goes on, squeezing the trader and extracting the contracts cheaply. That was done to me several times, with contracts being put down against the movement of spot and apparently with knowledge of my account particulars that only icbit staff would have.
The nonsense about backwardation etc is getting old. You know it very well but I'll spell it out for anyone who might be deceived by you. The price of a contract at icbit moves for a short time with contracts bought by someone landing on the site. Once that person has some bitcoin vested all of the major price moves are artificial pushes deliberately meant to squeeze the client, force margin. There is nothing to do with backwardation, contango or anything else. Those words are used to con people plain and simple.
As far as "nowhere does volatility enter as a factor", that's silly. I've covered this in another post, you cannot have leverage that ignores volatility in valuation. It is the first signature of a scam.
You can use all the big words you want, maybe you will impress someone. I know bullshit when I hear it.
akwfleaspirit, you are incredibly misinformed about futures.
In an efficient market, cash and carry arbitrage will force the futures price to equal the discounted (using a risk free interest rate) spot price net of carrying costs (btw, Fireball explicitly posted how to execute this strategy). NOWHERE does volatility enter as a parameter to valuation (that only happens in nonlinear instruments like options). Trust me, I'm a quant.
There IS the embedded "default option" ie, walking away from a bad position, when leverage is involved. This was a problem before, as admin waited too long to margin call/liquidate a trader, thus their position ended up being negative and counterparties were liquidate away from market.
However, the "life" of this default option is only the amount of time between margin call and actual liquidation of a position. This used to be (I'm guessing) 24-48 hours, now it's only 1 hour, and so it's much less valuable now.
Also, this default option would not necessarily cause a premium, as a short can default just as a long can.
Finally, since shorting spot bitcoins is difficult, it is much harder to bring a backwardated futures market back in line with spot (to do so you would have to long futures and short spot). It's much "easier" to bring contango down.
Now, it IS true that manipulation happens and that it's bad practice to use the Last Sale as the clearing price. It's unfortunate and quite frankly strange that the contract clearing price hasn't been changed to some type of average. However, I will say that I have never lost money on manipulation on ICBIT.
In an efficient market, cash and carry arbitrage will force the futures price to equal the discounted (using a risk free interest rate) spot price net of carrying costs (btw, Fireball explicitly posted how to execute this strategy). NOWHERE does volatility enter as a parameter to valuation (that only happens in nonlinear instruments like options). Trust me, I'm a quant.
There IS the embedded "default option" ie, walking away from a bad position, when leverage is involved. This was a problem before, as admin waited too long to margin call/liquidate a trader, thus their position ended up being negative and counterparties were liquidate away from market.
However, the "life" of this default option is only the amount of time between margin call and actual liquidation of a position. This used to be (I'm guessing) 24-48 hours, now it's only 1 hour, and so it's much less valuable now.
Also, this default option would not necessarily cause a premium, as a short can default just as a long can.
Finally, since shorting spot bitcoins is difficult, it is much harder to bring a backwardated futures market back in line with spot (to do so you would have to long futures and short spot). It's much "easier" to bring contango down.
Now, it IS true that manipulation happens and that it's bad practice to use the Last Sale as the clearing price. It's unfortunate and quite frankly strange that the contract clearing price hasn't been changed to some type of average. However, I will say that I have never lost money on manipulation on ICBIT.
Seems we're more or less back in 2012.
Would have saved me most of my bitcoin if I had seen that http://polimedia.us/trilema/2012/icbitse-the-bucket-shop/ before they got me.
A lot of trusting people land on that site, get fleeced and leave, never suspecting they have been scammed.
Seems we're more or less back in 2012.
Starik you are correct on some points, but please first start with point number one. Why is last single trade used to clear? It is used to manipulate the market and scam people. That is clear if you look at the screenshots. Why is it used? It has no reason other than to scam, you can see it is being used to scam.
Aside from that I'll try to answer your points, some of which are good.
So it surely can and all your arguments is bs 
You are partially correct.
S&P 500 Futures Jun 2014 is 1597.75 yes
S&P500 is 1,615.41 yes
But,
1) If you look at the charts for spm14 and s&p500 for any period of time, one month, one year, whatever, the prices track. There is clearly a relationship between s&p500 and spm14.
2) s&p500 does not have the volatility bitcoin has, not even 1% of it. So the forward price reflects less of volatility than of the simple cost of carrying the contract.
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Futures are not options! Read again http://en.wikipedia.org/wiki/Normal_backwardation
True.
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BTW, why are you not answering my questions? In is not funny to talk to a person, who only says "bla-bla-bla" and not answering straight questions
With bitcoin futures the biggest part of the value in futures would be volatility. If you have one bitcoin it is worth x. The right to buy a bitcoin at price x at a time in the future cannot be less than x.
If you have something worth $1 and you put it in a box with something else. The combined box with two things cannot sell for less than a dollar, because one of the two things is a dollar.
Your point with s&p is partially valid except s&p does not have anything else, it does not have equivalent volatility. If you put s&p500 futures in a box the box is basically worth the same as s&p500 except a small adjustment for financial costs and adjustments if it is considered overbought or oversold.
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1) A person has to look at the manipulation of prices first to understand that profits or losses are not based on the price of bitcoin moving, but rather on the manipulated movements of the contract price. According to the movement of bitcoin you could have a fine position but it does not matter because the contract price will be manipulated to clear your account.
But anyway.
The following are the three contracts offered now. Each $20 down and up, 100 contracts.
Month of contract ** initial margin ** price at which 100 contracts are available
Dec 100 contracts 2.521 85
100@85 11.7647
100@65 15.3846 profit or loss 3.6199
100@105 9.5238 profit or loss 2.2409
Month of contract ** initial margin ** price at which 100 contracts are available
Sept 100 contracts 4.7545 90
100@90 11.1111
100@70 14.2857 profit or loss 3.1746
100@110 9.0909 profit or loss 2.0202
Month of contract ** initial margin ** price at which 100 contracts are available
July 100 contracts 2.588 92
100@92 10.8696
100@72 13.8888 profit or loss 3.0192
100@112 8.9285 profit or loss 1.9411
So, For a $20 movement the best profit, 3.6199, at the cheapest initial margin, 2.521, is on the farthest out contracts, December.
If you look at the prices of contracts on icbit over time, I can guarantee that these strange prices are intended only to catch suckers who believe they have found a way to capitalize on a bull market.
They are not honest prices in an honest market.
Look at some of the screenshots of prices from a few weeks ago.
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Looks like you simply post some random numbers that bumped into your head. 
I ask you to post here the formula and all your calculations that gave you those numbers.
Volatility can be measured, it has a value. A serious person does not ignore it. The fact that sometimes it is reflected in prices at icbit, then it is not, is a warning signs the prices of contracts on icbit are being heavily manipulated.
In any kind of leveraged contract volatility has to be accounted for. Imagine if you could buy a thousand bitcoin at spot using an exaggerated leverage of 1 to 1000. So you could put down one bitcoin and control one thousand. If the price went down .001 btc you would lose but if it went up one bitcoin your 1 would be worth a thousand. It is a no lose. Just keep doing it and 50% of the time you will get 1.000 to 1 payoff. When you see that you are seeing a scam. That example exaggerates a bit of course but anything that is leveraged must account for volatility.
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Yes. It goes up sometimes, other times it goes down.
If a person wants to speculate, whether long or short, they should go to an honest exchange like bitfinex or some others. ICBIT is running a scam. There is plenty of evidence. If you like, invest there.
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Aside from that I'll try to answer your points, some of which are good.
In an honest market it cannot.
Tell me why on honest market just as i write this S&P500 is 1,615.41 and E-mini S&P 500 Futures Jun 2014 is 1597.75? So it surely can and all your arguments is bs You are partially correct.
S&P 500 Futures Jun 2014 is 1597.75 yes
S&P500 is 1,615.41 yes
But,
1) If you look at the charts for spm14 and s&p500 for any period of time, one month, one year, whatever, the prices track. There is clearly a relationship between s&p500 and spm14.
2) s&p500 does not have the volatility bitcoin has, not even 1% of it. So the forward price reflects less of volatility than of the simple cost of carrying the contract.
`~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I know enough.
Futures are not options! Read again http://en.wikipedia.org/wiki/Normal_backwardationTrue.
`~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
If you add something of value to it, a five dollar bill [the time value] then the two things together cannot sell for less than one dollar.
And if you substract some "time value"?BTW, why are you not answering my questions? In is not funny to talk to a person, who only says "bla-bla-bla" and not answering straight questions
With bitcoin futures the biggest part of the value in futures would be volatility. If you have one bitcoin it is worth x. The right to buy a bitcoin at price x at a time in the future cannot be less than x.
If you have something worth $1 and you put it in a box with something else. The combined box with two things cannot sell for less than a dollar, because one of the two things is a dollar.
Your point with s&p is partially valid except s&p does not have anything else, it does not have equivalent volatility. If you put s&p500 futures in a box the box is basically worth the same as s&p500 except a small adjustment for financial costs and adjustments if it is considered overbought or oversold.
`~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
If you want to clarify this for yourself do the following calculation. Using initial margin requirements used at their website look at what happens if you buy 1000 September contracts today and then estimate the price of those contracts if bitcoin moved a few dollars up. If you want me to explain that further or you are not comfortable with math say so.
Please you do this calculation if bitcoin moved 20 dollars down 1) A person has to look at the manipulation of prices first to understand that profits or losses are not based on the price of bitcoin moving, but rather on the manipulated movements of the contract price. According to the movement of bitcoin you could have a fine position but it does not matter because the contract price will be manipulated to clear your account.
But anyway.
The following are the three contracts offered now. Each $20 down and up, 100 contracts.
Month of contract ** initial margin ** price at which 100 contracts are available
Dec 100 contracts 2.521 85
100@85 11.7647
100@65 15.3846 profit or loss 3.6199
100@105 9.5238 profit or loss 2.2409
Month of contract ** initial margin ** price at which 100 contracts are available
Sept 100 contracts 4.7545 90
100@90 11.1111
100@70 14.2857 profit or loss 3.1746
100@110 9.0909 profit or loss 2.0202
Month of contract ** initial margin ** price at which 100 contracts are available
July 100 contracts 2.588 92
100@92 10.8696
100@72 13.8888 profit or loss 3.0192
100@112 8.9285 profit or loss 1.9411
So, For a $20 movement the best profit, 3.6199, at the cheapest initial margin, 2.521, is on the farthest out contracts, December.
If you look at the prices of contracts on icbit over time, I can guarantee that these strange prices are intended only to catch suckers who believe they have found a way to capitalize on a bull market.
They are not honest prices in an honest market.
Look at some of the screenshots of prices from a few weeks ago.
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Derivatives like this have existed for many decades. If you want the formula for this type of contract try Googling "valuing volatility in futures markets"
Again no answer. Looks like you simply post some random numbers that bumped into your head. I ask you to post here the formula and all your calculations that gave you those numbers.Volatility can be measured, it has a value. A serious person does not ignore it. The fact that sometimes it is reflected in prices at icbit, then it is not, is a warning signs the prices of contracts on icbit are being heavily manipulated.
In any kind of leveraged contract volatility has to be accounted for. Imagine if you could buy a thousand bitcoin at spot using an exaggerated leverage of 1 to 1000. So you could put down one bitcoin and control one thousand. If the price went down .001 btc you would lose but if it went up one bitcoin your 1 would be worth a thousand. It is a no lose. Just keep doing it and 50% of the time you will get 1.000 to 1 payoff. When you see that you are seeing a scam. That example exaggerates a bit of course but anything that is leveraged must account for volatility.
`~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Yes. It goes up sometimes, other times it goes down.
If a person wants to speculate, whether long or short, they should go to an honest exchange like bitfinex or some others. ICBIT is running a scam. There is plenty of evidence. If you like, invest there.
`~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In an honest market it cannot.
Tell me why on honest market just as i write this S&P500 is 1,615.41 and E-mini S&P 500 Futures Jun 2014 is 1597.75? So it surely can and all your arguments is bs I know enough.
Futures are not options! Read again http://en.wikipedia.org/wiki/Normal_backwardationIf you add something of value to it, a five dollar bill [the time value] then the two things together cannot sell for less than one dollar.
And if you substract some "time value"?BTW, why are you not answering my questions? In is not funny to talk to a person, who only says "bla-bla-bla" and not answering straight questions
If you want to clarify this for yourself do the following calculation. Using initial margin requirements used at their website look at what happens if you buy 1000 September contracts today and then estimate the price of those contracts if bitcoin moved a few dollars up. If you want me to explain that further or you are not comfortable with math say so.
Please you do this calculation if bitcoin moved 20 dollars down Derivatives like this have existed for many decades. If you want the formula for this type of contract try Googling "valuing volatility in futures markets"
Again no answer. Looks like you simply post some random numbers that bumped into your head. I ask you to post here the formula and all your calculations that gave you those numbers.We'll see.
What i see is bitcoin below 80$ 
in other words influences that are not anything to do with bitcoin
There definitely are trades occurring due to forced margin selling, and if there aren't enough contracts bid that selling will go low, below current spot even if that is still within the trading range.
But you can't fault ICBIT.se for there not being sufficient bids. It's just the result of a long, protracted slide in which many traders on the long side who were margined are basically just adding more funds to hang on and not buying a greater position, regardless of the price.
It shouldn't be surprising that there isn't a huge level of liquidity in the trading of futures contracts on an exchange with properties unlike any other (specifically, the counterparty risk where your position can get closed even without you getting a margin call due to the losses of others).
There is much risk when you combine leverage with volatility, so if there's more that could be done it would be to educate traders on those risks.
Steve there is a reason icbit uses the single last trade as a clearing price. There is no honest reason to do that. Even after it was pointed out several times on their chat that it was being used to fleece people they ignored it. If you look at all the evidence it is not a coincidence that they enable unusual procedures like that which have nothing to do with futures trading and are only useful in scamming.
Liquidity is being used as an excuse. There is poor liquidity, true, but that does not explain how the price of a 6 month forward future goes below spot if futures were really their business.
It is not a matter of educating people in leveraged trading. There is no 'education' that can save your position if someone knows your account balances and causes you to be squeezed. It has nothing to do with bitcoin or derivatives or margin, it is simply a scam that is in the context of those things. If someone is stealing gas from your car should you go to driving school?
Here is one very important point that I think causes some confusion. In any market that involves leverage there is the possibility of a squeeze. The important thing is whether the squeeze occurs as a result of the market or if it can be traced to a trader or group of traders.
On an honest exchange if you are leveraged and prices drop ar some point you will be squeezed. It just happens.
On a dishonest exchange dishonest traders use an artificial squeeze that has nothing to do with the underlying market. In other words in this case it has nothing to do with the price of bitcoin.
Again and again and again the clearing prices are forced down, there are screenshots above, I can provide more, then a specific trader is squeezed, his contracts are extracted, the clearing price rebounds. Because enough people have figured out what is going on it is no longer possible for the trading range to rebound to normal numbers. Again, ask yourself why last single trade is used for clearing.
It has been going on for some time
Notice the 11:59 trades at http://www.bitcoinistan.com/xx72.jpg and http://www.bitcoinistan.com/xx71.jpg when prices were higher. Those are setting up an unsuspecting person to be skinned.
They have probably extracted thousands of bitcoin from folks.
it cannot then sell for less than one dollar.
So its only religion. Because it surely can. 
In an honest market it cannot. There are enough people who know how to value that kind of derivative that if trading were above board it would not happen that these contracts would even approach spot much less go below it.
It just does not make sense. ... I'm not an expert in anything, especially finances
So because you dont understand something you blame for scam. My full comment was "I'm not an expert in anything, especially finances, but I did trade options for some time in the 80s and 90s and I know a scam." I traded derivatives, mostly stock options from the early 1980s to the late 1990s. I'm not an expert but I know enough.
When I say "zero chance of a September contract trading below $100, below today's spot" I'm refering to today. If tomorrow at some moment spot is $99 than the price of a contract would be $99 plus the premium.
And if tomorrow spot would be 50$? If in september bitcoin would cost 20$? What futures price must be today fo one, who thinks that "zero chance of a September contract trading higher $30"?So you simply dont understad what is a "chance" and "zero chance"
The issue you are distorting is whether there has to be a premium to spot. In an honest market there does. If you have a one dollar bill [spot today] it is worth exactly one dollar. If you add something of value to it, a five dollar bill [the time value] then the two things together cannot sell for less than one dollar.
If you want to clarify this for yourself do the following calculation. Using initial margin requirements used at their website look at what happens if you buy 1000 September contracts today and then estimate the price of those contracts if bitcoin moved a few dollars up. If you want me to explain that further or you are not comfortable with math say so.
Today with spot at $100 or so a reasonable premium might be, very roughly, $60 to $80.
How did you calculated this? Please, give us a formula 
Derivatives like this have existed for many decades. If you want the formula for this type of contract try Googling "valuing volatility in futures markets"
If it is below zero than it is much more than a warning.
You are completely wrong 
We'll see.
it cannot then sell for less than one dollar.
So its only religion. Because it surely can. It just does not make sense. ... I'm not an expert in anything, especially finances
So because you dont understand something you blame for scam. When I say "zero chance of a September contract trading below $100, below today's spot" I'm refering to today. If tomorrow at some moment spot is $99 than the price of a contract would be $99 plus the premium.
And if tomorrow spot would be 50$? If in september bitcoin would cost 20$? What futures price must be today fo one, who thinks that "zero chance of a September contract trading higher $30"?So you simply dont understad what is a "chance" and "zero chance"
Today with spot at $100 or so a reasonable premium might be, very roughly, $60 to $80.
How did you calculated this? Please, give us a formula If it is below zero than it is much more than a warning.
You are completely wrong in other words influences that are not anything to do with bitcoin
There definitely are trades occurring due to forced margin selling, and if there aren't enough contracts bid that selling will go low, below current spot even if that is still within the trading range.
But you can't fault ICBIT.se for there not being sufficient bids. It's just the result of a long, protracted slide in which many traders on the long side who were margined are basically just adding more funds to hang on and not buying a greater position, regardless of the price.
It shouldn't be surprising that there isn't a huge level of liquidity in the trading of futures contracts on an exchange with properties unlike any other (specifically, the counterparty risk where your position can get closed even without you getting a margin call due to the losses of others).
There is much risk when you combine leverage with volatility, so if there's more that could be done it would be to educate traders on those risks.
Today with spot at $100 or so a reasonable premium might be, very roughly, $60 to $80. If it is much out of that range it is a warning that something needs to be investigated. If it is below zero than it is much more than a warning.
Or a lack of buyers at that price. It is an open market. You are free to put in a BUY order for contracts at that price.
There are two issues at least that are relevant to your comment.
1) No person would voluntarily sell a contract far under its value unless a) the sale was forced i.e., against their will, or b) they knew it would lead to a profit because the contracts they offered for sale would not actually be bought (please read my first post to clarify this) and would lead to someone else selling even cheaper because the other person would be forced into a margin call.
2) The value of a contract can be estimated if you know several variables, including volatility (which can be quantified, made into a number), spot price at present, time remaining and so on. The value is something that is not arbitrary, it can be stated in a mathematical way. I don't have expertise in this but very generally, for example, you can say that the value of a December contract, of the type traded on icbit, today, is between $170 and $180 (by 'value' I mean strike price or whatever it's called). There is a range within which the price should fall. As it goes outside that range, above the high end or below the low end, you have to start looking at manipulation, in other words influences that are not anything to do with bitcoin.
At this point, all I can say is please look at my previous posts. I provide clear examples of deliberate squeezes that are flat out cons, in any legitimate market anywhere it would be called unethical and be illegal. Further, the evidence seems to be that the proprietors of icbit are particiipating in this using their inside knowledge of the accounts of their clients. Again read the example from the first post about selling an ounce of gold for a low price.
I have lost what I have lost, that is all done. All I can do now is sound a warning. If a person defends what they are doing, for whatever reason, a friend of theirs or whatever, it only allows more people to be victimized.
Today with spot at $100 or so a reasonable premium might be, very roughly, $60 to $80. If it is much out of that range it is a warning that something needs to be investigated. If it is below zero than it is much more than a warning.
Or a lack of buyers at that price. It is an open market. You are free to put in a BUY order for contracts at that price.
Is this new religion?
It's like the value of a one dollar bill is one dollar. But if you add value to that one dollar bill, make it so that it is worth more than one dollar, it cannot then sell for less than one dollar.
If btc spot is $100 at this moment, a contract on leveraged btc is worth that $100 plus the premium or additional value. It just is not possible for it to be worth less than one of its components, btc, and completely ignore the other. It just does not make sense. Some people try to blame liquidity but the evidence really is that people are being scammed.
I'm not an expert in anything, especially finances, but I did trade options for some time in the 80s and 90s and I know a scam.
When I say "zero chance of a September contract trading below $100, below today's spot" I'm refering to today. If tomorrow at some moment spot is $99 than the price of a contract would be $99 plus the premium.
Today with spot at $100 or so a reasonable premium might be, very roughly, $60 to $80. If it is much out of that range it is a warning that something needs to be investigated. If it is below zero than it is much more than a warning.
But there is zero chance of a September contract trading below $100, below today's spot
Is this new religion?
But there is zero chance of a September contract trading below $100, below today's spot, unless there is some severe manipulation going on.
Price discovery, ... too, is a bitch.
Steve price discovery would refer to the underlying asset usually, in this case bitcoin.
A derivative, for example futures has the value of the asset as well as a time value or premium. Please read my whole post and look at the examples. I think it shows beyond reasonable doubt that the prices are being set not by any calculation that is honest but by simple manipulation.
I have to point out, and I'm sorry if it is rude, on the icbit website when a person questions something often terms similar to the ones you are using, and frequently the term "arbitrage" are used. These are all real words and phrases but they are being used to deflect attention from what is going on and they do not apply honestly. The old "dazzle 'em with bullshit" strategy.
But there is zero chance of a September contract trading below $100, below today's spot, unless there is some severe manipulation going on.
Price discovery, ... too, is a bitch.
Thank you Steven but "spot" is not the same as "spot price at contract maturity".
If bitcoin is $100 today and some calculation arrives at a projected spot in December of $160 then a normal range for that contract today might be $150 to $170. $150 might be considered too low, i.e. $10 under expected spot, $170 too high. But there is zero chance of a September contract trading below $100, below today's spot, unless there is some severe manipulation going on.
Any potential investor is advised to spend a few minutes researching the use of the words backwardation and contango on this website. They do not apply to the futures on icbit and any suggestion that they do is dishonest.
If bitcoin is $100 today and some calculation arrives at a projected spot in December of $160 then a normal range for that contract today might be $150 to $170. $150 might be considered too low, i.e. $10 under expected spot, $170 too high. But there is zero chance of a September contract trading below $100, below today's spot, unless there is some severe manipulation going on.
Any potential investor is advised to spend a few minutes researching the use of the words backwardation and contango on this website. They do not apply to the futures on icbit and any suggestion that they do is dishonest.
A September contract that is $30 above spot would be extremely cheap. $20 above would be too cheap to believe. But under spot is just absurd.
Backwardation (futures price below spot) is one of the risks, especially when using leverage.
- http://en.wikipedia.org/wiki/Normal_backwardation
After the long comment above I took the following screenshot from icbit:
http://www.bitcoinistan.com/oddprice.jpg
Look at the image.
Mt Gox spot is 98.
The image shows a trader being stripped of his bitcoin by forcing an artificial margin call.
A September contract that is $30 above spot would be extremely cheap. $20 above would be too cheap to believe. But under spot is just absurd. Most honest people would probably say that a reasonable price for a September contract might be in the $160 to $180 range.
If you look at the image, a bunch of 1 contract trades have been made to hide some previous trades, to push them off the screen out of scrutiny.
Look at 1 minute before clearing 23:59:00. You see someone trying to push the price up, apparently the victim has figured out what is going on. But the person is not fast enough and the other who is doing that manipulation manages to push it to 91.
This will remove a substantial amount from the victim's account. Here is an example of the difference between 98.7 and 91 if the victim has 400 contracts.
4000 (400x10) / 98.7 = 40.527
4000 / 91 = 43.956
so at that clearing the victim's position would be reduced by about 3.429 btc as well as having his or her margin requirements increase.
The end result will happen probably in a few hours. The person's position being liquidated at a ridiculously low price to be bought by the site owners or others in on what is being done.
A person modestly familiar with markets will notice that as all this is going on there are people chatting on the chat board trying to lure the victim in further. The phrases and explanations used are utter nonsense. They serve only to distract the victim and make him or her feel like it was simple bad luck that happened.
updated Notice that from http://bitcoinistan.com/spot1.jpg to http://www.bitcoinistan.com/oddprice.jpg to http://bitcoinistan.com/final.jpg at least 300 shares have apparently been voluntarily squeezed out of the victim. If they don't sell and he doesn't deposit more money the price will be artificially pushed even lower, forcing him further into margin loss, and the website owners will sell his contracts to the 94 at the bottom of the screen and lower.
This is done a lot on icbit and it is a safe bet that it is what is happening on these screenshots. Most traders will not even notice that there is monkey business going on.
http://www.bitcoinistan.com/oddprice.jpg
Look at the image.
Mt Gox spot is 98.
The image shows a trader being stripped of his bitcoin by forcing an artificial margin call.
A September contract that is $30 above spot would be extremely cheap. $20 above would be too cheap to believe. But under spot is just absurd. Most honest people would probably say that a reasonable price for a September contract might be in the $160 to $180 range.
If you look at the image, a bunch of 1 contract trades have been made to hide some previous trades, to push them off the screen out of scrutiny.
Look at 1 minute before clearing 23:59:00. You see someone trying to push the price up, apparently the victim has figured out what is going on. But the person is not fast enough and the other who is doing that manipulation manages to push it to 91.
This will remove a substantial amount from the victim's account. Here is an example of the difference between 98.7 and 91 if the victim has 400 contracts.
4000 (400x10) / 98.7 = 40.527
4000 / 91 = 43.956
so at that clearing the victim's position would be reduced by about 3.429 btc as well as having his or her margin requirements increase.
The end result will happen probably in a few hours. The person's position being liquidated at a ridiculously low price to be bought by the site owners or others in on what is being done.
A person modestly familiar with markets will notice that as all this is going on there are people chatting on the chat board trying to lure the victim in further. The phrases and explanations used are utter nonsense. They serve only to distract the victim and make him or her feel like it was simple bad luck that happened.
updated Notice that from http://bitcoinistan.com/spot1.jpg to http://www.bitcoinistan.com/oddprice.jpg to http://bitcoinistan.com/final.jpg at least 300 shares have apparently been voluntarily squeezed out of the victim. If they don't sell and he doesn't deposit more money the price will be artificially pushed even lower, forcing him further into margin loss, and the website owners will sell his contracts to the 94 at the bottom of the screen and lower.
This is done a lot on icbit and it is a safe bet that it is what is happening on these screenshots. Most traders will not even notice that there is monkey business going on.
If you have questions about the terminology or other issues involved in the complaint, please ask. I may not express myself very clearly but I am trying to reduce the number of people scammed by icbit.
A big part of their scam involves pretending that you, the trader, lose money because you do not know enough about trading. The site uses trading terminology improperly in a silly attempt to do this.
You can search this site bitcointalk.org for the terms backwardation and contango to find a group of users who defend icbit. Unfortunately for those users they are using those two words in a way no genuine trader would use them. Before you 'invest', please spend a while on legitimate futures sites getting a sense of what backwardation and contango are and how those words are used. Then please search on this site and look at the way those words are used by a group of very similar people who all post in support of icbit.
Please ask questions if you are not too familiar with derivatives and need something clarified.
The purpose of this post is to expose the practices at icbit.
Note: You can read a better description of how the scam is run at http://polimedia.us/trilema/2012/icbitse-the-bucket-shop/
If you plan to send money to icbit please read this and look at the screenshots before you send them money.
Most of this post won't be intelligible to people who haven't traded at icbit, so if you just want an example of what they are doing scroll down to the first comment under this post.
The clearing price of contracts. Every 12 hours the last single trade is used to clear or adjust all contract positions.
Because clearing price affects how much btc you have, as well as how much margin you need, manipulating this number will either give a person extra funds for the next 12 hours or remove funds. This is important later in this post, but basically if a person is short and they manipulate the price down it will a) put a squeeze on the people the manipulation went against, often forcing sales. If there are no buyers the people who were on the bad side of the manipulation are force to sell very cheap. The person who manipulated then buys these very cheap contracts and because they were bought at an unnaturally low level, the manipulator gets all of the clearing profit when they return to a normal price. This gives the manipulator even more funds to do the same.
It is very common for there to be one single trade of one contract around 11:59:59 to push the price.
http://bitcoinistan.com/spot1.jpg This is equivalent to moving the spot price of bitcoin. So what happens on icbit is that the clearing, the spot price, is shifted sometimes dozens of dollars over a few sessions without any comparable move in bitcoin itself. A person can go from a positive balance, well above margin with extra btc directly into default without bitcoin moving at all. Once the default happens and the person's position has been transferred to someone else the clearing price is usually pushed back up a little, in preparation for the next "investor" who buys a substantial position in one of the contracts offered.
That is bad enough, but it gets worse.
This unusual practice could be stopped easily, simply by using the session average as the clearing price. The issue has been raised a number of times, everyone who has been on the site more than several weeks figures out what is going on. So the question becomes why does icbit continue to do something that lends itself to obvious abuse? The two possibilities are either a) they tolerate the abuse because it churns sales, generates commissions, or b) they are themselves profiting from their "mistake", using their access to client accounts i.e., their knowledge of how much btc each person has etc to make their own trades that allow them to buy contracts cheaply.
The easiest way to establish whether this is going on would be to look for evidence that trades appear to make use of information that only management has, such as how much btc is available for purchases in specific accounts. etc.
To clarify that point, suppose a person would benefit by offering to sell an ounce of gold for $20. They do not want to actually sell an ounce of gold at that price, it would make no sense, but suppose they just wanted some benefit from making the offer, without actually selling. One safe way would be to make the offer to a target group whose financial particulars you knew would prevent a sale. If you know nobody in a room has more than $90 then it is safe to offer an ounce of gold for $100. You get whatever benefit the offer provides without having to worry about the actual sale.
Background
The first thing that needs to be clarified is the value of a futures contract. If you buy one btc today the price may be $100. If today you wanted to buy rights to a bitcoin at some time in the future you would pay a premium for that.
For example, simplifying a bit, you might buy rights to a bitcoin one month from now for $110. Of course you get no benefit from putting down $110, but with margin you could put down say 10%, thus spending $110 to get rights to 10 bitcoin in one month. If you wanted to go out two months the price might be $120 etc.
There are formulas people use to calculate premiums for derivatives and one of the obvious variables is volatility. A utility stock might have ranged between $19 and $20 over the past 20 years. There is low volatility so the premium would be low. To buy shares 1 year in the future the base price plus premium might be $21.00.
Bitcoin of course is somewhat more volatile than a utility stock so in a natural market the premium, the extra amount over spot you must pay, will be high. Nevertheless at icbit when traders are squeezed the price often goes to spot or even below spot.
Obviously one dollar above spot is an absurd price and, by itself, suggests a problem with the exchange. Usually it is called a liquidity issue, and superficially that is true. But here is another aspect of icbit that should cause concern. Whenever these unusual prices are mentioned there are a few traders who will pop up and mention arbitrage or something similar as the explanation.
Arbitrage in this case means buying on one exchange to sell on another. The problem here is that it makes no sense as an explanation. It is simply a fancy word being used to distract anyone who is suspicious of what is going on. Is arbitrage useful in bitcoin? Of course. Can a person use arbitrage to make money between exchanges? Of course. Does arbitrage explain how a bitcoin contract can be priced below spot, or even within $20 of spot? Of course not. It's silly. Another explanation used occasionally is the notion that someone wants to offer others a "good price". In other words someone sells a contract down to ridiculous levels not to squeeze out a trader but to "offer a good price" to other traders. See image of chat log for one example. http://www.bitcoinistan.com/chat1.jpg
This leads to the actual mechanism of the squeeze used at icbit.
Anyone who has been on the site has watched it happen again and again.
1) Clearing is manipulated down over consecutive sessions. Traders unaware of what is going on will suddenly see that their account is negative and they must either transfer in btc, or sell.
The usual response is to transfer in funds, since most people in that position suddenly see the opportunity to buy contracts that have become very cheap. Most people will not figure out yet that the "cheapness" is actually a deliberate event, not a market change, it has nothing to do with bitcoin.
Once this process is started it continues until one or more traders have been sheared. This you notice as a flurry of large sales followed by things settling toward normal again. If a trader does not sell as expected the position is liquidated by the website operators.
The last day that I traded I made some comments about the manipulation http://www.bitcoinistan.com/chg.jpg and http://www.nonprof.com/bitcoinistan.com/chat1.jpg and the website owners did not liquidate my position, instead, an unusual position was opened by someone to force my contracts into default. http://www.nonprof.com/bitcoinistan.com/unlikely.jpg Looking at the other trades before and after that it is highly likely that the person who pushed down the clearing to 107.01 and then offered to sell 102 at 107.0 knew what my positions were and knew the status of my margin. The squeeze was so precise, in a market with low volume and low open interest, that it is maybe 99.99% sure.
The time prior to that I had 70 contracts that were purchased at up to $80 above spot, a price that seemed reasonable for a far future margined bitcoin derivative, but which were squeezed out of me for within 2 dollars of spot. The website owners sold more than necessary of my contracts at this absurdly low price so I was left well into positive territory, and with btc to spare, but now I had to buy contracts at a far higher price than the website owners had sold them at. Also, notice that my account was fine, then the price was pushed down to where there was a supposed necessity to sell contracts very cheaply, but then once my contracts were sold at the artificial price the contract price rebounded. http://bitcoinistan.com/first.jpg
Just look at the evidence. Points that are not clear are explained in comments below.
A big part of their scam involves pretending that you, the trader, lose money because you do not know enough about trading. The site uses trading terminology improperly in a silly attempt to do this.
You can search this site bitcointalk.org for the terms backwardation and contango to find a group of users who defend icbit. Unfortunately for those users they are using those two words in a way no genuine trader would use them. Before you 'invest', please spend a while on legitimate futures sites getting a sense of what backwardation and contango are and how those words are used. Then please search on this site and look at the way those words are used by a group of very similar people who all post in support of icbit.
Please ask questions if you are not too familiar with derivatives and need something clarified.
The purpose of this post is to expose the practices at icbit.
Note: You can read a better description of how the scam is run at http://polimedia.us/trilema/2012/icbitse-the-bucket-shop/
If you plan to send money to icbit please read this and look at the screenshots before you send them money.
Most of this post won't be intelligible to people who haven't traded at icbit, so if you just want an example of what they are doing scroll down to the first comment under this post.
The clearing price of contracts. Every 12 hours the last single trade is used to clear or adjust all contract positions.
Because clearing price affects how much btc you have, as well as how much margin you need, manipulating this number will either give a person extra funds for the next 12 hours or remove funds. This is important later in this post, but basically if a person is short and they manipulate the price down it will a) put a squeeze on the people the manipulation went against, often forcing sales. If there are no buyers the people who were on the bad side of the manipulation are force to sell very cheap. The person who manipulated then buys these very cheap contracts and because they were bought at an unnaturally low level, the manipulator gets all of the clearing profit when they return to a normal price. This gives the manipulator even more funds to do the same.
It is very common for there to be one single trade of one contract around 11:59:59 to push the price.
http://bitcoinistan.com/spot1.jpg This is equivalent to moving the spot price of bitcoin. So what happens on icbit is that the clearing, the spot price, is shifted sometimes dozens of dollars over a few sessions without any comparable move in bitcoin itself. A person can go from a positive balance, well above margin with extra btc directly into default without bitcoin moving at all. Once the default happens and the person's position has been transferred to someone else the clearing price is usually pushed back up a little, in preparation for the next "investor" who buys a substantial position in one of the contracts offered.
That is bad enough, but it gets worse.
This unusual practice could be stopped easily, simply by using the session average as the clearing price. The issue has been raised a number of times, everyone who has been on the site more than several weeks figures out what is going on. So the question becomes why does icbit continue to do something that lends itself to obvious abuse? The two possibilities are either a) they tolerate the abuse because it churns sales, generates commissions, or b) they are themselves profiting from their "mistake", using their access to client accounts i.e., their knowledge of how much btc each person has etc to make their own trades that allow them to buy contracts cheaply.
The easiest way to establish whether this is going on would be to look for evidence that trades appear to make use of information that only management has, such as how much btc is available for purchases in specific accounts. etc.
To clarify that point, suppose a person would benefit by offering to sell an ounce of gold for $20. They do not want to actually sell an ounce of gold at that price, it would make no sense, but suppose they just wanted some benefit from making the offer, without actually selling. One safe way would be to make the offer to a target group whose financial particulars you knew would prevent a sale. If you know nobody in a room has more than $90 then it is safe to offer an ounce of gold for $100. You get whatever benefit the offer provides without having to worry about the actual sale.
Background
The first thing that needs to be clarified is the value of a futures contract. If you buy one btc today the price may be $100. If today you wanted to buy rights to a bitcoin at some time in the future you would pay a premium for that.
For example, simplifying a bit, you might buy rights to a bitcoin one month from now for $110. Of course you get no benefit from putting down $110, but with margin you could put down say 10%, thus spending $110 to get rights to 10 bitcoin in one month. If you wanted to go out two months the price might be $120 etc.
There are formulas people use to calculate premiums for derivatives and one of the obvious variables is volatility. A utility stock might have ranged between $19 and $20 over the past 20 years. There is low volatility so the premium would be low. To buy shares 1 year in the future the base price plus premium might be $21.00.
Bitcoin of course is somewhat more volatile than a utility stock so in a natural market the premium, the extra amount over spot you must pay, will be high. Nevertheless at icbit when traders are squeezed the price often goes to spot or even below spot.
Obviously one dollar above spot is an absurd price and, by itself, suggests a problem with the exchange. Usually it is called a liquidity issue, and superficially that is true. But here is another aspect of icbit that should cause concern. Whenever these unusual prices are mentioned there are a few traders who will pop up and mention arbitrage or something similar as the explanation.
Arbitrage in this case means buying on one exchange to sell on another. The problem here is that it makes no sense as an explanation. It is simply a fancy word being used to distract anyone who is suspicious of what is going on. Is arbitrage useful in bitcoin? Of course. Can a person use arbitrage to make money between exchanges? Of course. Does arbitrage explain how a bitcoin contract can be priced below spot, or even within $20 of spot? Of course not. It's silly. Another explanation used occasionally is the notion that someone wants to offer others a "good price". In other words someone sells a contract down to ridiculous levels not to squeeze out a trader but to "offer a good price" to other traders. See image of chat log for one example. http://www.bitcoinistan.com/chat1.jpg
This leads to the actual mechanism of the squeeze used at icbit.
Anyone who has been on the site has watched it happen again and again.
1) Clearing is manipulated down over consecutive sessions. Traders unaware of what is going on will suddenly see that their account is negative and they must either transfer in btc, or sell.
The usual response is to transfer in funds, since most people in that position suddenly see the opportunity to buy contracts that have become very cheap. Most people will not figure out yet that the "cheapness" is actually a deliberate event, not a market change, it has nothing to do with bitcoin.
Once this process is started it continues until one or more traders have been sheared. This you notice as a flurry of large sales followed by things settling toward normal again. If a trader does not sell as expected the position is liquidated by the website operators.
The last day that I traded I made some comments about the manipulation http://www.bitcoinistan.com/chg.jpg and http://www.nonprof.com/bitcoinistan.com/chat1.jpg and the website owners did not liquidate my position, instead, an unusual position was opened by someone to force my contracts into default. http://www.nonprof.com/bitcoinistan.com/unlikely.jpg Looking at the other trades before and after that it is highly likely that the person who pushed down the clearing to 107.01 and then offered to sell 102 at 107.0 knew what my positions were and knew the status of my margin. The squeeze was so precise, in a market with low volume and low open interest, that it is maybe 99.99% sure.
The time prior to that I had 70 contracts that were purchased at up to $80 above spot, a price that seemed reasonable for a far future margined bitcoin derivative, but which were squeezed out of me for within 2 dollars of spot. The website owners sold more than necessary of my contracts at this absurdly low price so I was left well into positive territory, and with btc to spare, but now I had to buy contracts at a far higher price than the website owners had sold them at. Also, notice that my account was fine, then the price was pushed down to where there was a supposed necessity to sell contracts very cheaply, but then once my contracts were sold at the artificial price the contract price rebounded. http://bitcoinistan.com/first.jpg
Just look at the evidence. Points that are not clear are explained in comments below.
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