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I understand your concerns. Many people coming from Forex trading have such concerns. But the Bitcoin market is very different. Many people choose to be anonymo

I understand your concerns. Many people coming from Forex trading have such concerns. But the Bitcoin market is very different. Many people choose to be anonymous. There're currently no explicit laws regulating Bitcoin transactions and Bitcoin trading. All these points apply to Mt. Gox or TradeHill as well. There are no law restrictions on this kind of trading. I use "we" because I represent my company xWaylab Inc. (registered in US). I'm the sole developer and project manager but I'm not the only shareholder. For margin part, since we offer short selling, generally the combined portfolio is quite balanced. Currently our finances are quite healthy. We will never bet against our clients. I don't really hope anyone will set a double standard in the Bitcoin market. I think everyone is a fair player. You can choose not to trust Bitcoinica if you're skeptical. But a few dozens of people have chosen to give us a try and they have deposited thousands and thousands of dollars. Believe it or not, Bitcoinica is currently the third largest Bitcoin Trading Platform, following Mt. Gox and TradeHill. (8000+ BTC traded within merely 48 hours of establishment.) I still believe in time. If Bitcoinica is still around after a few months, maybe there will be more people joining in.

steve8918 15y ago
You didn't answer the vast majority of my questions, even though they were pretty straightforward. If you want people to deposit money into your account, then they should have faith that you actually exist and that you will hold up your end of the transaction. This, in financial parlance, is known as counter-party risk. Will the counter-party to my transaction actually be able to guarantee their side of the deal? Who are you? So far, you are a 17 year old Singaporean, who registered a business in Delaware, when you were 16? How is that possible? Right now, to me there is a severe degree of counter party risk. If you stole everyone's money (not saying you will), and then I complained to the FBI, they would look at me and say "Are you stupid? You deposited money into someone's bank account 10,000 miles away, and you actually expected the money back?" "A few dozen people have deposited thousands and thousands of dollars." And yet you have enough money to offer 5:1 margin? If there are 50 people, if all accounts are of roughly equal size, then it takes just 10 people to max out their margin and the entire Bitcoinica has run out of money!!! But assuming a normal distribution of account sizes, and assuming that the ones who deposited the most are the most aggressive, then you would need much less than 10 to max out before you ran out of money. There are better ways to set up this company so that you can protect yourself and your customers. Even more surprisingly, you offer no protections to YOURSELF. This is a huge red flag. Why would you not be afraid of suffering consequences if bitcoinica melts down or if there is a huge fraud? From what I gather, you are asking people to deposit money directly into your account (another huge red flag). You are supposed to be held accountable, if there is fraud or if there is a catastrophic loss to bitcoinica, but you're not protecting yourself, at all. The only way is by remaining highly anonymous, and by living in a foreign country that could be outside the reaches of US law. If you cared about protecting your customers, you would set up a system of segregated accounts, so that one customer can't destroy people's accounts. I think bitcoinica is a fantastic piece of coding, it's slick and seems to work nicely. But in order to protect yourself, I would return everyone's money and just allow simulated trading. Even as a simulated trading account, bitcoinica is still a fantastic accomplishment. Then, once you have created a way to protect yourself and protect customers financially, by using things like segregated accounts, and by going through proper channels, etc, then it might be okay to start accepting real money.
Estragon 15y ago
If I place a short-sell order, who am I actually selling to? Do you have a huge reserve of bitcoins which you use to make the corresponding trade in the bitcoin market? If not, you are effectively on the other side of my short sell order. That the current set of trades you've brokered balances out is fortuitous, but likely ephemeral. Do you have automation which will stop trading if the set of trades goes out of balance? Having my broker also be my trading partner is a bit of an uncomfortable position to be in. If I score a huge upside, you would have a strong incentive to just disappear.
- zhoutong 15y ago
  "We never bet against our clients." - The most repeated sentence regarding Bitcoinica. There are people who long and people short. If these positions were opened at the same time and price, they can be canceled out directly. Otherwise, we will trade at other exchanges to hedge. We are partly responsible for the crash yesterday because we dumped more than 800 BTC into the market when the order book was quite thin due to large amount of short sell orders. The spreads were large due to lack of liquidity. We have roughly the same financial status regardless of our clients' profitability. We may lose some on guaranteed liquidity, but the loss will be compensated by the subsequent (small) increase in spread.
  - Estragon 15y ago
    Do you have automation in place to do such dumping, and shut trading down if you don't have the bitcoins/funds?
    - zhoutong 15y ago
      Everything is automated, of course. We can control the risk level any time. Running out of either currency has never happened since launch at least, because our reserves are huge now.
rprasad 15y ago
Actually, in the US and Europe, there are laws governing Bitcoin transactions as securities or future. It's simply that the enforcing agencies haven't yet decided which of them has jurisdiction over Bitcoin. By the way, did you know that by registering your company in the US, you became subject to all of these laws, plus US tax laws, US accounting laws, etc.?

steve8918 15y ago

You didn't answer the vast majority of my questions, even though they were pretty straightforward. If you want people to deposit money into your account, then they should have faith that you actually exist and that you will hold up your end of the transaction. This, in financial parlance, is known as counter-party risk. Will the counter-party to my transaction actually be able to guarantee their side of the deal? Who are you? So far, you are a 17 year old Singaporean, who registered a business in Delaware, when you were 16? How is that possible? Right now, to me there is a severe degree of counter party risk. If you stole everyone's money (not saying you will), and then I complained to the FBI, they would look at me and say "Are you stupid? You deposited money into someone's bank account 10,000 miles away, and you actually expected the money back?" "A few dozen people have deposited thousands and thousands of dollars." And yet you have enough money to offer 5:1 margin? If there are 50 people, if all accounts are of roughly equal size, then it takes just 10 people to max out their margin and the entire Bitcoinica has run out of money!!! But assuming a normal distribution of account sizes, and assuming that the ones who deposited the most are the most aggressive, then you would need much less than 10 to max out before you ran out of money. There are better ways to set up this company so that you can protect yourself and your customers. Even more surprisingly, you offer no protections to YOURSELF. This is a huge red flag. Why would you not be afraid of suffering consequences if bitcoinica melts down or if there is a huge fraud? From what I gather, you are asking people to deposit money directly into your account (another huge red flag). You are supposed to be held accountable, if there is fraud or if there is a catastrophic loss to bitcoinica, but you're not protecting yourself, at all. The only way is by remaining highly anonymous, and by living in a foreign country that could be outside the reaches of US law. If you cared about protecting your customers, you would set up a system of segregated accounts, so that one customer can't destroy people's accounts. I think bitcoinica is a fantastic piece of coding, it's slick and seems to work nicely. But in order to protect yourself, I would return everyone's money and just allow simulated trading. Even as a simulated trading account, bitcoinica is still a fantastic accomplishment. Then, once you have created a way to protect yourself and protect customers financially, by using things like segregated accounts, and by going through proper channels, etc, then it might be okay to start accepting real money.

Estragon 15y ago

If I place a short-sell order, who am I actually selling to? Do you have a huge reserve of bitcoins which you use to make the corresponding trade in the bitcoin market? If not, you are effectively on the other side of my short sell order. That the current set of trades you've brokered balances out is fortuitous, but likely ephemeral. Do you have automation which will stop trading if the set of trades goes out of balance? Having my broker also be my trading partner is a bit of an uncomfortable position to be in. If I score a huge upside, you would have a strong incentive to just disappear.

zhoutong 15y ago
"We never bet against our clients." - The most repeated sentence regarding Bitcoinica. There are people who long and people short. If these positions were opened at the same time and price, they can be canceled out directly. Otherwise, we will trade at other exchanges to hedge. We are partly responsible for the crash yesterday because we dumped more than 800 BTC into the market when the order book was quite thin due to large amount of short sell orders. The spreads were large due to lack of liquidity. We have roughly the same financial status regardless of our clients' profitability. We may lose some on guaranteed liquidity, but the loss will be compensated by the subsequent (small) increase in spread.
- Estragon 15y ago
  Do you have automation in place to do such dumping, and shut trading down if you don't have the bitcoins/funds?
  - zhoutong 15y ago
    Everything is automated, of course. We can control the risk level any time. Running out of either currency has never happened since launch at least, because our reserves are huge now.

rprasad 15y ago

Actually, in the US and Europe, there are laws governing Bitcoin transactions as securities or future. It's simply that the enforcing agencies haven't yet decided which of them has jurisdiction over Bitcoin. By the way, did you know that by registering your company in the US, you became subject to all of these laws, plus US tax laws, US accounting laws, etc.?