Quote from: Jonathan Ryan Owens on September 11, 2011, 05:11:36 PM

Quote from: zhoutong on September 11, 2011, 05:07:02 PM

Quote from: Jonathan Ryan Owens on September 11, 2011, 05:03:18 PM

Quote from: zhoutong on September 11, 2011, 04:58:46 PM

Quote from: itsagas on September 11, 2011, 04:48:19 PM

Quote from: zhoutong on September 09, 2011, 08:22:36 PM

Quote from: 2112 on September 09, 2011, 07:52:17 PM

Quote from: zhoutong on September 09, 2011, 06:24:02 PM

What's so special about the country I'm living in? And what? "financial fraud"?

While I don't really understand what you mean, I have to say that the Bitcoin market is open for all, and new ideas are coming out every day. I urge you to look at the product itself instead of judging by other factors.

I'm not interested in unethically making other Bitcoin fans' money in this united community. What we want is to enlarge and enrich the Bitcoin market and Bitcoinica does the job of bringing in Forex traders.

Zhoutong, I truely think that you are a genius. It so just happens that you seem to have an innate ability to come up with evil schemes. I truely believe you when you are saying that you don't know what I'm talking about.

Wikipedia has a good introduction to bucket shop concept and why it is considered a fraud in most of the civilized world.

http://en.wikipedia.org/wiki/Bucket_shop_(stock_market)

Jesse Livermore was the most famous bucket shop promoter, although he never was a bucket shop operator. In fact the actual bucket shop operators went to the extreme to avoid being associated with him.

http://en.wikipedia.org/wiki/Jesse_Lauriston_Livermore

Your country is significant in my mind, because the South East Asia was/is a heaven for bucket shops. In not sure about Singapore, but Hong Kong and Macau have a long and continuous history of fly-by-night hole-in-the-wall financial "exchanges". You have extended the long tradition with your offer of accepting single USD accounts to allow wagering on bitcoin.

Thanks for the explanation. However,

1. Bitcoinica is not a bucket shop, it's a brokerage. All the hedging will take place if our clients place orders in a particular direction. The spread seems high now, but will be eventually lower.

2. We don't bet against our clients. We never want them to lose. There's no incentive to do that.

3. There are large scale transactions coming in Bitcoinica. First day we got 3700+ BTC, ranked number 3 among all trading platforms. Bitcoinica has more than 5% of total Bitcoin/USD trades. A bucket shop can't survive this amount of volume.

4. Because of stop orders and margin calls, we are partly responsible for the crash. Our orders are already influencing the market.

5. I'm not a Singapore citizen. I just live here. Thank you for teaching me the culture.

Contradicting answers from this post and your reply above.

"That's not really true. We hedge most of the transactions in Mt. Gox. However, I do have to use a bit of smartness to write an algorithm to manage the hedging. I can see the actual trading data of Bitcoinica - way too many people are transacting at different directions nearlyat the same time. I also checked my Mt Gox account history, even with the algorithm, I'm still selling to myself most of the time."

#3 "I'm still selling to myself most of the time" - so are you really the third largest if you are selling to yourself

The "selling to myself" means that our customers place orders at opposite directions for nearly the same amount. Usually a Forex broker will try to eliminate this. But given the volatility of Bitcoin market, we have to hedge most of the funds, which may result in repeated buying and selling orders in our Mt. Gox account.

All the transaction volumes are customer generated. I traded very little recently because I spent most of the time on the development of Bitcoinica.

Hm.. Why does high volatility require direct transactions on MtGox? It seems that you'd really want to handle competing orders synthetically when there is active trading, and directly only when there is light volume.

-Jonathan

There are four different cases:

1. Light on Bitcoinica. Heavy on Mt. Gox.
2. Light on Bitcoinica. Light on Mt. Gox.
3. Heavy on Bitcoinica. Light on Mt. Gox.
4. Heavy on Bitcoinica. Heavy on Mt. Gox.

Currently our algorithm identifies 1 and 4. And most transactions which fall into this category are executed externally.

It's one of our promise that not to make profit from our customers' losses. We can't act like any evil Forex brokerages who bet against their customers. We are aiming for the long-term growth of the Bitcoin community.

Trading externally helps increasing the liquidity in the spot market. And this is one of our most important contributions to the Bitcoin community, besides the product itself.

I understand your reasoning. Please get in touch with Mr. Karpeles @ MtGox, and the guys at Bitinstant! It seems to me that there's no good reason not to work with them to gain 1) higher volume and 2) higher liquidity.

You shouldn't have to open multiple MtGox accounts. Your platform is innovative and serious enough that they're probably just waiting for your call.

-Jonathan

Yeah sure. Thank you for your suggestion!

These days we're working with TradeHill now. And we discovered that Mt. Gox has placed AdWords on "Bitcoinica". So I guess they already have noticed us. I will contact them soon.