Topic: My prediction (Read 2806 times)

i strongly disagree

it is not the financial instruments that make it fail, but rather lack of rationality (if you leverage all your coins on a risky position WIHTOUT a stop-loss, you are acting pretty crazy) and greed. you can't blame the instruments, as long as there are people using them. sure, this are mighty and dangerous instruments, and playing around can fuck up alot, but don't mix this up with information asymetry - cause this is what makes the real difference: if everybody knows that there is the possibility of beeing knocked out (aka receiving a margin call) cause of a manipulation, hardly anyone will allow this happening to him.

what i think is important for now: there are certain factors crippling the free financial bitcoin market:

A) bitcoinica has a monopol on shorting
B) bitcoinica is only linked/hedged to mtgox
C) volumes are still to low to rule out manipulation with 10.000+ BTC

wait for another bucket shop to come up, wait for bitcoinica diversifying there hedging, wait for higher volumes: no problem with advanced trading instruments at all. not making use of leverage is irrational. why shoul'nd you borrow bitcoins to sell them higher, if you have the information, that they will fall? and because it is so important: IF you have that information!

the market should coordinate time and interest.

it happens often, that INFORMATION is INTEREST at a given TIME ..

They trigger the screw ups anyway. The 'manipulators' are capable of determining the points where the bitcoinica orders are placed, and casual traders on MtGox are not. You simply give manipulators a new tool to better manipulate the markets you hedge on.


If (or should I say, when) they can buy these things directly with bitcoin, then they will not rely on fiat currencies to work. This is something that we should be encouraging along.


Yes, but operating an invisible instrument that trades on MtGox, which might at any point kick you in the face by accident, is certainly not a good idea either.


And there you have it... you are simply offloading that risk onto the shoulders of the users of the exchanges. How noble of you.
Without risk, there should be no reward.

1. Opening our books means opening our books to manipulators. They will trigger the screw-ups. Other traders will run to buy or sell all at once, and you will see even worse outcome. At least no one knows where the support or resistance is, so everyone will trade according to his needs instead of speculating about the prices. Isn't that good for you?

2. Some businesses rely on fiat currencies to work (to buy raw materials or to hire people). They don't want to put all their Bitcoins in an exchange just to be able to exchange. So we only require 20% of their Bitcoins as mortgage and they can trade 100% to hedge their risk. Isn't not keeping everything in Mt. Gox a good idea?

I suffer almost no risk from providing credit without asking for identification. It just works.

Could you not bring light to the darkness of the bitcoinica pool and open your order books the way MtGox does? That way people who don't use your service wouldn't get instanlty screwed when your 'dark' limit or stop orders kick in unexpectedly.


Do you think it is a good idea to give someone with just an email address, who you have no idea the identity of, instant credit at will; allowing them to leverage themselves against bitcoins that might not even exist? Those leveraging themselves might not have the bitcoin required to pay their margin calls, and how would you enforce their payment without a compliant legal system?

Well, not just speculators, many miners and business owners use Bitcoinica too. They use Bitcoinica to hedge risk. It's currently the cheapest way to short sell.

Most of the time, our portfolio is very balanced. I can't see Bitcoinica driving prices up or down unless the prices are already fluctuating.

Bitcoinica is a dark pool with a lot of limit orders. This reduces instability. There may be huge walls inside Bitcoinica system and no one can find out unless the price reaches the point. Manipulators will simply be surprised why our bots are throwing 50 BTC orders at them at certain prices.

The way I designed the system ensures that the bot always removes liquidity against the price movement. More people use Bitcoinica, the more balanced portfolio we have, the larger reserves we have, the more dark pool limit orders we process, and the more stable our economy is.

In the short term, it make look at gambling, I must admit, but in the long run, it's just how economy grows. At least, this is the first time you can access to credit in BTC with just an email address.

And this is the true manipulation. Everyone shorting on bitcoinica is going to be in for a bit of a surprise once their positions are closed and margin calls come rolling in.

Having bitcoinica around inherently results in instability in the bitcoin market. How many people are going to lose their bitcoin investments before they learn this? It is precisely these sort of financial instruments that are causing the problems in our existing monetary system.

The best way to deal with the short term instability of bitcoin, and to best protect your investment, is to stop using bitcoinica. The fewer users leveraging themselves at will with ease the better. Just buy and sell on mtgox directly or invest in bitcoin businesses. You will do better in the long run than by gambling with money that isn't yours.

He said he was more concerned about Bitcoinica users being targetted because of it's the only margin exchange and it has a known leverage. So if the price is $3 and everyone is leveraged 5:1. Someone with a lot of bitcoins knows that if they can drop the price to a certain level they can liquidate those positions and buy them on the cheap.

He is very concerned about people just throwing their money away.

Zhoutong lowered it for everyone.  See other thread in this subforum by him.  He seemed kinda upset that his system was partly to blame for pushing the price down so far with 1:5 leverage.

https://bitcointalksearch.org/topic/m.621746

HRm well now it appears I am only able to do 2.5x leverage on bitcoinica... anyone else still can do 5??

Most definitely go long until 2.9 Just don't leverage so bad that you can't take a few bumps on the way.

Yeah, makes me wish I had started my latest short position at something higher than 2.17.  Well, at least by holding on tight and keeping my lunch down, I was able to keep all my limbs during the ride.  Now, whether to take a long position from here...

First half of prediction... check.

If someone else wanted out of bitcoin, we'd see a huge dent taken out of one of the bidwalls that were at 2.50, 2.20, and now 2.10.  Maybe there was at one point - I wasn't paying that close of attention - but I don't think there was.

No, there can only be a handful of entities that are holding 100k+ bitcoins and want to sell out.  But I think the number is exactly 1, and this is a one-time dump/opportunity.

I agree about the 24hr volume. That was huge!
The 40k was the initial sell-off. The majority of the rest was panic selling/opportunistic buying. The rest of the day was nothing compared to the butt-hurt of the first $0.50 drop, followed by the aftershock $0.30 drop a short time later.   

I still believe the initial drop was a buyer who wanted to double down at a discount.  Dump your holdings, then buy all the panic sells.

I don't think people who buy BTC now are the kind to waste them in insane dumping moves.

There's also no profit in trying to anti-arbitrage by buying elsewhere if Mtgox price is particularly low. There is no magical mechanism that makes one market reduce prices on another.

And finally, it wasn't a volume of 40k, it was over 360k BTC. Even if quite a bit was traded twice, that is extremely large and does not have much room to get even larger.

This price dumping while the market is being flooded with BTC volume is stupid. There are and will be people buying who do not join this party, and these people are the ones ending up with coins in the end. Then, the selling just stops. The lower the price goes, the easier it is for bulls to just buy everything and end the strange show.

That's made up on the spot.

Wild speculation presented as fact.

and if you take into account some of them will acquire btc by other means, otc and such, and then sell on mtgox just to drop the price...