Topic: Warning: How many of you Bears have ever been a victim of a Short Squeeze? - page 28. (Read 43772 times)

Bitcoinica won't lose regardless of what happens. We're a brokerage, not a bucket shop. I build Bitcoinica with passion, so I won't under-utilize my financial knowledge and run for money.

It's either long positions win and short positions lose, or vice versa. They're not going to win/lose at the same time.

in other words, you are a colossal douchebag that wishes ill on complete strangers for no reason. got it.

We have profits left in our accounts and wallets. Even only 90% hedged is still zero net position. We're risking our own profits, not the clients' money.

Bitcoinica owns a lot of both USD and BTC, from the profits it generated. With respect of the other currency, whether it's short squeeze or long squeeze we don't really have to care. Since we are talking about Bitcoin's value in USD right now, we are going to be better-off if short squeeze truly happens.

Short sellers will be hurt, definitely. But that's it all. I respect everyone's trading direction and opinion, and I don't represent my company to comment about the future.

We are not going to "deflect the majority of the pain" to our clients because we have no pain. I'm going to explain in a separate reply about this.

I understand your concern. By strict definition, perhaps I'm over-confident when it comes to counter-party risk. But Bitcoinica is very simple - I have been running a mathematical model to simulate what will happen to Bitcoinica and Bitcoinica's clients when the price suddenly increase/decrease 50%, 100%, 200%, 1000%, etc. Even if Mt. Gox is absolutely unable to process any orders from us, I'm going to say that Bitcoinica will still be fine.

I'm very clear that how many short positions are there, and who are the clients. I'm not disclosing any numbers but I can say that the situation is very comfortable for us and our clients. Unless someone hacks into Bitcoinica and takes our financial data, a short squeeze will most likely fail if it's targeting Bitcoinica.

Bitcoinica is extremely lean. We take profits in both USD and BTC. A short squeeze will increase the value of our BTC profits (since we pay for all the resources in USD), and we can completely cover our clients' loss with the extra profits. As I promised in the interview with BitTalk, 50% of the profits will be set aside to compensate any financial losses. And this 50% is not a "limited liability", but a promised "minimum liability" - we don't pay ourselves anything if we are unable to set aside the profits even if nothing bad happens.

Bitcoin is an experiment. It has proven itself to be a real challenge for central banks. So why can't a Bitcoin trading platform to be designed to stand on par with your brokerage as well?

regardless of what bitcoinica says can he prove it?

Many forex brokers swear up and down that they are not bucketshops and have no interests against their clients while they really do, a few words on a message board changes absolutely nothing in my eyes.

Oh and the whois points to the operation being run inside the USA which is a massive red flag.


I hope the NFA,SEC come down on your ass for running an illegal unlicensed operation.


Oh and a simple google search reveals that the man representing to be behind bitcoinica is a 17 year old


his website:
http://www.zhoutong.me/about

twitter(with photo)
http://twitter.com/#!/zhoutong


I have no sympathy for anyone who loses all their money when the site suddenly goes down


 

Lol. You've got to be kidding me. You really think they'll enforce that for anything but to increase charges for drug distribution? There is no way in hell they'll risk a massive court battle trying to shut down craigslist, or tell people they are not allowed to have a garage sale anymore. That has to be the dumbest support for projecting bitcoin demand I've ever seen around here.

[/derail]

The amount hedged will vary based on the volume necessary to be drawn from Gox after internal matching has been done.

So x longs vs. y shorts are matched up through Bitcoinica's system and anything remaining that can't be directly correlated to cancel out is then covered by Bitcoinica tapping Gox.

If all of the shorts are liquidated in a squeeze, I assume the Bitcoinica system will then automatically become fully hedged using Gox.

This doesn't change the fact that over a 90% decline in USD/BTC valuation is extreme and the shorts are in dangerous waters. Bitcoin's value is not derived from other currencies. Short-term, there's just not much more downside. Longer-term, if Louisiana's effective ban on cash transactions is followed more widely, Bitcoin's utility will explode.

I know. I'm with you. And the more unidirectional customer positions get, the more trouble he will be in. This is why you assume you're playing with fire in Bitcoinica. This, and the fact that probably 10% of transactions happen on the actual exchanges, we can't be sure of anything that's happening behind the scenes.

Despite this, every business request I've had with Zhoutong has been extremely professional, resolved to 100% satisfaction. If all we have to go on is his personal reputation since beginning on the forums, he's in a great spot, from my opinion. I would like to trust him.

His claim is that bitcoinica always wins, because his customer's orders are decorrelated and he takes the spread on trades he can resolve internally.  He has made arguments in the past that his business is robust to the kind of correlated order book you would expect to see in a massive price swing, but they haven't been clear/convincing to me.

Well either Zhoutong loses and short-sellers win, or vice versa. They're not going to lose at the same time.

  How do you know?  What is your connection to bitcoinica?

Nobody is doubting that your system can handle it on your side... In a true short squeeze though, you'll be as helpless as everyone else to cover as major orders are processed at Mt. Gox.  The odds are pretty remote that a single order would be so huge it would wipe out Bitcoinica, and ultimately the danger falls on your clients as I doubt you're carrying any kind of insurance.  Still, if your operation holds up long enough to build a substantial cushion of funds, I think Bitcoinica could be a very useful and much needed tool for the bitcoin community.

I'm routing for you zhoutong and applaud you for bringing this service to the bitcoin community, but I think you're being a little dishonest when it comes to the potential risks involved.  You give more guarantees than my brokerage.

no. just believe there's an opportunity here.

You seem really butthurt over everything.  Bagholder?

Ouch you are, https://bitcointalksearch.org/topic/m.586961

So sorry, good luck with that. 

Hi Vlad,

good to hear from you.

altho its possible what you say is true i suspect in a major short squeeze both Zhoutong and the shorts will be hurt.  but you're right; Zhoutong has the power to deflect the majority of the pain onto his clients.

thats not what you've said before.  you said you take risk and that you are 90% hedged which means by definition you aren't fully net zero.  and noting the numerous complaints on your thread about illiquidity also make your claims disingenuous.

Zhou will be fine in the event of coming up volatile short squeeeeze. Trust me, I know. lol. The shorts on the other hand may not find it being that nice to them. Being 5:1 leveraged short in a short squeeze is going to be quite a lesson for some.

Hi,

I've experienced the 9/11, and several many spikes and crashes in prices. Bitcoinica can completely handle 50% change in price within 1-3 seconds. Mt. Gox's system is so slow that our servers can definitely react before the prices move to an unreasonable level.

It's true that some trades are not hedged 100%, because we have a sophisticated internal matching system. That's the only channel for our profits. The spreads are simply the sum of Mt. Gox fees and market spread. Only when we match orders internally, we can make profits from the trades.

We maintain absolutely zero net position as a whole. Our prices reflect instantaneous liquidity, volatility and they always account the risk of Bitcoinica.

Also, for forced liquidations, we don't have to hedge to recover the losses. For example, someone places a limit sell order at $4, and we expect a short seller to be liquidated at $4.1 to cover. (Assuming same quantities.) Then we can safely assume that both orders will be executed during a major short squeeze. Even if our system can't react at all, Bitcoinica will still make $0.1 profit. Our high volume and large amount of limit and stop orders have ensured this to happen most of the time if hedging is not possible at all.

In reality, we apply all the algorithms together. Our interface is extremely simple and intuitive, but the back-end is not that simplistic. Our servers process more than 50,000 database requests per minute, just to be able to calculate all the metrics in real time.

Yes, but have not studied them (or palm reading for that matter.)  But it is quite true that I am thinking of someone's Elliot-wave chart (yours?) when I tapped that out.

I'm hopeful of my 'maybe' projection of the $1.nn prices and just re-loaded in case because, barring network exploits, I would likely choose to do another round of accumulation if we were so lucky.  If not, I've got enough BTC hoarded away to be happy, and will burn up the funds on short duration donations and purchases if someone is selling something I happen to want.  I don't like my funds sitting in someone else's bank account, but the risk is a cost of doing business I guess.  If Tradehill would have followed through with their statement to the effect of more transparent books, I'd have wired them more money.