Quote from: omri on September 09, 2011, 02:42:47 PM

A great idea, but I have a few questions.

1) When depositing Bitcoins, you say I have to sell them first in order to use margin, but with 1:5 margin I should still have
4/5 of the buying power to buy more Bitcoins, on a margin.

2) If I sell short, and the price goes up, do I get a margin call?
How much time do I have to comply?
When will you automatically close the position?
Can the losses in the account be bigger then the initial deposit?

3) In case you suffer trading losses (e.g. from untimely hedging), what capital cushion do you have to protect my money?

1) Depositing Bitcoins is equivalent to opening a long position of BTCUSD. Actually you do get some more trading power, but you won't get the full 1:5 leverage. Your position's value is floating, so we can't allow you to trade using full leverage unless you convert them to USD, which is our accounting currency.

2) I'm sorry for the unclear specification of margin calls. Actually we have a very systematic approach: You can see your Net Value and Maintenance in your Account Overview, when NV < 2 * M, you will receive a margin call. Forced liquidation will occur when NV < M. When the market condition is extremely harsh (almost no liquidity), the losses may be bigger than initial deposit. You will have to deposit it back to resume trading using that account. (We won't/can't take legal actions anyway, because we don't aim to make profits on every single transaction.)

3) Everyone in Bitcoin community is watching the crash just now. Nothing unexpected has happened at Bitcoinica. We liquidated our clients' positions (by their Stop orders or Force) within 2 seconds of the start of the massive sell-off at Mt. Gox. (We're partly responsible for the drop.) We will use what we have earned to compensate all the customers if this unlikely event happened.

Bitcoinica has traded 3,724.12 BTC in the past 24 hours, this makes us the third largest trading platform right now (following Mt. Gox and TradeHill).