Quote from: 714 on December 30, 2011, 07:32:21 AM

However, IMO he should probably tread carefully around making statements such as the above, assuming he actually did. It would be best to either keep the pool dark and the customer's positions private, or to make systematic disclosures in a consistent fashion visible to the entire customer base through the web site. Statements like "most of his users are long right now" are not particularly helpful without quantitative grounding and worst case could certainly be construed as attempts at manipulation.

What he said was this:

Quote from: zhoutong on December 29, 2011, 01:38:09 AM

When Bitcoinica was first built, we included a circuit breaker feature to stop trading at one direction when we are out of USD or BTC. However, it has almost never been triggered until today.

Unfortunately, we have a lot of long positions are we're currently unable to fulfill everyone's request to buy. Even though we do not want to interrupt regular market trading activity, we have no case because we don't want to be trading against our customers in this extreme situation.

Liquidation of short positions is also affected but we had no choice. Withdrawal in USD is obviously, also affected. When some more people decided to liquidate their long positions or go short, or more USD funds are deposited, we will adjust the redflag accordingly to allow buying trades.

If he'd been craftier, he may have been able to communicate that there was a temporary problem without revealed this interesting bit of market data about market longs. But people would have, well, speculated about the reason, so it was likely fruitless to lie about the reason.

But I think you're right that his website would have been a better place for the explanation. Then again, someone else on this forum wrote up a "How Bitcoinica Works" document for him, something that should have been written long ago & made available at bitcoinica.com, so at least he's consistent about posting info here. Alas, a number of interesting tidbits of market information are only found on this forum, or on IRC as a results of semi-random MagicalTux comments. Then again, the market is so small, it's almost like non-arms-length transactions: there's only a few dozen folks that really have their hands up in this beast.

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In this example, on the one hand one could conclude that there's a lot of coins long as you do. On the other hand. the net customer positions at any brokerage are nearly always going to be long, except in the specific cases of securities that are heavily shorted. The statement could therefore be entirely true and also quite devoid of useful meaning.

As this is the first time Bitcoinica has run out of money, it appears quite meaningful. One would hope that they've amassed some profits from their operations since their grand opening several moons ago, and that they have more capital on hand now than they've ever had before, and yet, they still ran out of cash.

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One of the basic principles of successfully handing out financial analysis is to always have an explanation no matter what may actually happen. If you follow the U.S. stock market you may know of a fellow named James Cramer, he's a master of this. He often has 2 or 3 explanations such that one can be dredged up to support just about any viewpoint or outcome. At the same time he's well known for a track record that has been flat over time. Since he makes his living not from investing but as a sort of entertainer/stand up comedian/raconteur this is ideal, it makes any suggestion of manipulation hard to substantiate. He's a crafty little bastard, and no one should take him seriously other than as a data point regarding a certain type of hustle

Ah yes, I've seen him, entertaining chap, and I don't believe a word he says. Reminds me of how the nightly local newscast pronounces any movement of the stock market, up or down, to be the result of a single, easy to articulate reason, like "inflation fears" or "sunspots".