"No Reserve" explanation - page 3. | Bitcointalksearch.org

notme

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Quote from: zhoutong on December 29, 2011, 01:40:27 AM

Quote from: notme on December 29, 2011, 01:02:07 AM

As I understand it, you will not use the BTC belonging to long positions to allow shorts to cover themselves but you will allow the USD belonging to the short positions to allow longs to cover themselves. If this is incorrect, please explain where I went wrong. If it is correct, it is an unresolved issue.

Longs will need BTC reserves to cover themselves because they are essentially selling to cover.

Ok, so if I have a long position, and most others go short, I can get stuck in my position like the shorts got stuck today. At least you offer an equal opportunity screw job.

eldentyrell

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felonious vagrancy, personified

Quote from: zhoutong on December 28, 2011, 11:20:44 PM

It's also correct if you explain like this. All the coins belong to customers, not me.

I don't think Jon Corzine sees it that way.

zhoutong

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Quote from: notme on December 29, 2011, 01:02:07 AM

Quote from: zhoutong on December 29, 2011, 12:19:57 AM

Quote from: notme on December 29, 2011, 12:13:25 AM

Quote from: cypherdoc on December 29, 2011, 12:04:22 AM

Quote from: zhoutong on December 28, 2011, 11:42:34 PM

We are talking about running out of USD reserves.

that means you're broke.

Nah, it just means existing shorts are screwed unless they get out (which they probably can't all do) and no one with half a brain will go short until this is fixed. We'll be back to no shorting and we'll bubble again unless they can come up with the USD reserves to cover all shorts. I have removed all my funds from Bitcoinica until this is sorted out.

This is a temporary issue and we have already resolved this.

As I understand it, you will not use the BTC belonging to long positions to allow shorts to cover themselves but you will allow the USD belonging to the short positions to allow longs to cover themselves. If this is incorrect, please explain where I went wrong. If it is correct, it is an unresolved issue.

Longs will need BTC reserves to cover themselves because they are essentially selling to cover.

zhoutong

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Quote from: cypherdoc on December 29, 2011, 01:34:39 AM

if i were to have designed Bitcoinica from the beginning, i probably would have only allowed funding in USD's upon which you could then buy, sell, or short bitcoin just like regular brokerages do with their paper assets.

by allowing btc to leverage up more btc, its almost like building a derivatives tower on paper. the volatility kills you and the demand for USD is just too great.

Any broker allows you to short EUR/USD with USD.

EDIT: Remember, everything is relative, including volatility. If BTC/USD is volatile, both BTC and USD are volatile. Longing BTC with BTC (or shorting USD with BTC) and shorting BTC with USD (or longing USD with USD) are essentially the same in terms of financial risk and volatility.

Quote

by allowing btc to leverage up more btc, its almost like building a derivatives tower on paper.

I can't believe that you have any financial experience. This is exactly how leverage works. In security trading, you use purchased securities as collateral to borrow more capital to purchase more.

Or maybe you're saying that Bitcoin is paper.

Anyway, we have been running for more than 3 months, and actual risk is minimal. The out-of-reserve redflag has been implemented long ago, and today is the first time that it's triggered in a large scale. Even 9/11 was completely fine for Bitcoinica.

cypherdoc

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if i were to have designed Bitcoinica from the beginning, i probably would have only allowed funding in USD's upon which you could then buy, sell, or short bitcoin just like regular brokerages do with their paper assets.

by allowing btc to leverage up more btc, its almost like building a derivatives tower on paper. the volatility kills you and the demand for USD is just too great.

netrin

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Quote from: Keefe on December 29, 2011, 01:02:43 AM

This means when Bitcoinica customers are predominately long, you may not be able to withdraw USD or go long or cover shorts because others have borrowed your USD. Vice versa for withdrawing BTC, going short, covering longs, when most are short.

AKA a bank run

notme

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Quote from: cypherdoc on December 29, 2011, 01:05:52 AM

Quote from: notme on December 29, 2011, 01:02:07 AM

As I understand it, you will not use the BTC belonging to long positions to allow shorts to cover themselves but you will allow the USD belonging to the short positions to allow longs to cover themselves. If this is incorrect, please explain where I went wrong. If it is correct, it is an unresolved issue.

lets clarify terms. "cover" means "buy to cover" and is a term reserved for short positions, not longs. longs don't get "squeezed" per say but shorts do.

Meh... long Bitcoin is just short USD. A stupid semantics argument only detracts from the goal of getting a straight answer from Zhoutong. But to be clear, when I say cover, I mean whatever is necessary to close the position.

cypherdoc

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Quote from: notme on December 29, 2011, 01:02:07 AM

Quote from: zhoutong on December 29, 2011, 12:19:57 AM

Quote from: notme on December 29, 2011, 12:13:25 AM

Quote from: cypherdoc on December 29, 2011, 12:04:22 AM

Quote from: zhoutong on December 28, 2011, 11:42:34 PM

We are talking about running out of USD reserves.

that means you're broke.

Nah, it just means existing shorts are screwed unless they get out (which they probably can't all do) and no one with half a brain will go short until this is fixed. We'll be back to no shorting and we'll bubble again unless they can come up with the USD reserves to cover all shorts. I have removed all my funds from Bitcoinica until this is sorted out.

This is a temporary issue and we have already resolved this.

As I understand it, you will not use the BTC belonging to long positions to allow shorts to cover themselves but you will allow the USD belonging to the short positions to allow longs to cover themselves. If this is incorrect, please explain where I went wrong. If it is correct, it is an unresolved issue.

lets clarify terms. "cover" means "buy to cover" and is a term reserved for short positions, not longs. longs don't get "squeezed" per say but shorts do.

Keefe

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As I understand it, when a Bitcoinica customer goes long more than that customer has USD balance for, or goes short more than he has BTC balance for, he is effectively borrowing from the balances of other Bitcoinica customers to do so. That's what Bitcoinica is all about: pooling resources of varied customers to facilitate trading beyond their means. Of course this requires that either some customer balances aren't being fully used, or some of their positions are in the opposite direction of others'.

This means when Bitcoinica customers are predominately long, you may not be able to withdraw USD or go long or cover shorts because others have borrowed your USD. Vice versa for withdrawing BTC, going short, covering longs, when most are short.

Am I on track zhoutong?

notme

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Quote from: zhoutong on December 29, 2011, 12:19:57 AM

Quote from: notme on December 29, 2011, 12:13:25 AM

Quote from: cypherdoc on December 29, 2011, 12:04:22 AM

Quote from: zhoutong on December 28, 2011, 11:42:34 PM

We are talking about running out of USD reserves.

that means you're broke.

Nah, it just means existing shorts are screwed unless they get out (which they probably can't all do) and no one with half a brain will go short until this is fixed. We'll be back to no shorting and we'll bubble again unless they can come up with the USD reserves to cover all shorts. I have removed all my funds from Bitcoinica until this is sorted out.

This is a temporary issue and we have already resolved this.

As I understand it, you will not use the BTC belonging to long positions to allow shorts to cover themselves but you will allow the USD belonging to the short positions to allow longs to cover themselves. If this is incorrect, please explain where I went wrong. If it is correct, it is an unresolved issue.

smickles

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Quote from: cypherdoc on December 29, 2011, 12:57:38 AM

Quote from: zhoutong on December 29, 2011, 12:41:37 AM

Alright, your words proved to me that you didn't understand Bitcoinica since day seven (not day one).

well, that certainly may be so since its so hard to tell exactly what you're doing behind the curtains. but nevermind me.

i'm not so sure you know what you're doing; otherwise why are there so many problems (revisions to the code and reversing of trades) and why no USD reserves?

what was the magic solution, BTW?

It's not some big mystery.
I'm pretty sure I could set up a competing operation. (I just don't have the startup capital), but that's not the point.

Stop it with your fud already.

cypherdoc

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Quote from: zhoutong on December 29, 2011, 12:41:37 AM

Alright, your words proved to me that you didn't understand Bitcoinica since day seven (not day one).

well, that certainly may be so since its so hard to tell exactly what you're doing behind the curtains. but nevermind me.

i'm not so sure you know what you're doing; otherwise why are there so many problems (revisions to the code and reversing of trades) and why no USD reserves?

what was the magic solution, BTW?

chunglam

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Normally, sell orders and buy orders will be cancelled each other but if the market go pure bearish or bullish and everyone fully utilized leverage Bitcoinica will definitely run out of fund because essentially you are lending fund out with 0% interest rate.

zhoutong

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Quote from: cypherdoc on December 29, 2011, 12:26:11 AM

Quote from: notme on December 29, 2011, 12:13:25 AM

Quote from: cypherdoc on December 29, 2011, 12:04:22 AM

Quote from: zhoutong on December 28, 2011, 11:42:34 PM

We are talking about running out of USD reserves.

that means you're broke.

Nah, it just means existing shorts are screwed unless they get out (which they probably can't all do) and no one with half a brain will go short until this is fixed. We'll be back to no shorting and we'll bubble again unless they can come up with the USD reserves to cover all shorts. I have removed all my funds from Bitcoinica until this is sorted out.

Zhou claims that when ppl buy or sell btc on bitcoinica he just buys or sells for them on mtgox and collects the fees on the pass through.

what did he do when all the shorts shorted btc on bitcoinica since mtgox doesn't allow shorting? sounds to me he exposed himself by actually buying the shorted btc with his USD reserves?

Alright, your words proved to me that you didn't understand Bitcoinica since day seven (not day one).

Users can deposit both USD and BTC into their Bitcoinica accounts. You can short BTC with USD, and you can also long BTC with BTC (or short USD with BTC).

There's never a net short on Bitcoinica. If no one is holding any Bitcoins, you simply can't short sell. Short selling is a feature of Bitcoinica as a result of margin trading.

cypherdoc has wasted so much of his time debating a possibility that can't exist.

cypherdoc

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Quote from: notme on December 29, 2011, 12:13:25 AM

Quote from: cypherdoc on December 29, 2011, 12:04:22 AM

Quote from: zhoutong on December 28, 2011, 11:42:34 PM

We are talking about running out of USD reserves.

that means you're broke.

Nah, it just means existing shorts are screwed unless they get out (which they probably can't all do) and no one with half a brain will go short until this is fixed. We'll be back to no shorting and we'll bubble again unless they can come up with the USD reserves to cover all shorts. I have removed all my funds from Bitcoinica until this is sorted out.

Zhou claims that when ppl buy or sell btc on bitcoinica he just buys or sells for them on mtgox and collects the fees on the pass through.

what did he do when all the shorts shorted btc on bitcoinica since mtgox doesn't allow shorting? sounds to me he exposed himself by actually buying the shorted btc with his USD reserves?

Serge

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let the coins flood

zhoutong

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Quote from: notme on December 29, 2011, 12:13:25 AM

Quote from: cypherdoc on December 29, 2011, 12:04:22 AM

Quote from: zhoutong on December 28, 2011, 11:42:34 PM

We are talking about running out of USD reserves.

that means you're broke.

Nah, it just means existing shorts are screwed unless they get out (which they probably can't all do) and no one with half a brain will go short until this is fixed. We'll be back to no shorting and we'll bubble again unless they can come up with the USD reserves to cover all shorts. I have removed all my funds from Bitcoinica until this is sorted out.

This is a temporary issue and we have already resolved this.

notme

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Merit: 1002

Quote from: cypherdoc on December 29, 2011, 12:04:22 AM

Quote from: zhoutong on December 28, 2011, 11:42:34 PM

We are talking about running out of USD reserves.

that means you're broke.

Nah, it just means existing shorts are screwed unless they get out (which they probably can't all do) and no one with half a brain will go short until this is fixed. We'll be back to no shorting and we'll bubble again unless they can come up with the USD reserves to cover all shorts. I have removed all my funds from Bitcoinica until this is sorted out.

smickles

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