A Bitcoin trading platform has announced this week that it is the world’s first fully-licensed advanced trading platform for Bitcoins. Bitcoinica was developed by a 17 year old Chinese student named Zhou Tong. After 7 and a half months his advanced trading platform had traded 8.5 million Bitcoins (currently worth roughly 44 million USD).
Advanced trading platforms perform many functions in the modern world. Theoretically, allowing those who are better informed to double down or put even large multiples of their funds down, helps ease the volatility created by one-off events.
This platform announced today, a new contract signed with the Bitcoin Consultancy Ltd. Bitcoin Consultancy will be taking a dominant role in the operations of Bitcoinica, ushering forward its continued safety and stable operation.
Many Bitcoin exchanges exist to facilitate the buying and selling of Bitcoins. Bitcoinica, however, is a more advanced trading platform that allows users to make speculative bets on the fluctuations of Bitcoins. In particular, the ability to leverage trades allow users to reap higher rewards if the market turns their direction. This unique feature is enabled by automatic lending of funds between accounts behind the scenes. As a result, depositors can also make a sizable return on investment in the form of interest. The current yearly interest on Bitcoinica for Bitcoin deposits is over 6 percent.
Advanced trading platforms perform many functions in the modern world. Theoretically, allowing those who are better informed to double down or put even large multiples of their funds down, helps ease the volatility created by one-off events. If a large business purchases or sells a huge amount of a currency at once, the price can fluctuate wildly. Having investors there with the ability to put down sizable bets on margin allows both the company and the general population to transact at lower costs and retain the benefits of a more reliable and more stable currency.
Unfortunately, theory isn’t always practice.
“[N]obody who has read a business magazine in the last few years can be unaware that these days there are investors who not only move money in anticipation of a currency crisis, but actually do their best to trigger that crisis for fun and profit. These new actors on the scene do not yet have a standard name; my proposed term is ‘Soroi’.”
~ Paul Krugman, economist
Krugman’s remarks are a jab at the business magnate and investor George Soros who, following the admittance of Myanmar into the Association of Southeast Asian Nations, used his enormous wealth to sell short the Thai baht and the Malaysian ringgit.
“The financial crisis that originated in Thailand in 1997 was particularly unnerving because of its scope and severity…. By the beginning of 1997, it was clear to Soros Fund Management that the discrepancy between the trade account and the capital account was becoming untenable. We sold short the Thai baht and the Malaysian ringgit early in 1997 with maturities ranging from six months to a year. (That is, we entered into contracts to deliver at future dates Thai Baht and Malaysian ringgit that we did not currently hold.) Subsequently Prime Minister Mahathir of Malaysia accused me of causing the crisis, a wholly unfounded accusation. We were not sellers of the currency during or several months before the crisis; on the contrary, we were buyers when the currencies began to decline – we were purchasing ringgits to realize the profits on our earlier speculation. (Much too soon, as it turned out. We left most of the potential gain on the table because we were afraid that Mahathir would impose capital controls. He did so, but much later.)”
~ George Soros
Following suit, Bitcoinica allows users the freedom to react to market movements and Bitcoin related news. While Bitcoin’s biggest weakness has arguably been the volatility of its price, market data shows that the Bitcoin’s value is more stable then ever.
Wikipedia tells us that the nominal U.S. dollar GDP of the ASEAN fell by $9.2 billion in 1997 and $218.2 billion (31.7%) in 1998.
Years later, Prime Minister Mahathir told Soros that he recognized Soros did not cause the currency crisis. Some would argue that the ASEAN conglomeration was spread across diverse and incohesive geo-political lines and that Soros’ actions provided a vital role in disincentivizing an untenable economic union. Many today have similar arguments toward the Euro. Others, such as Krugman state that such free market speculation breed a level of market manipulation that profits on the destabilization of markets and leaves the general populace worse off.
Whichever is true, Bitcoin itself is surely an experiment in total financial freedom. Bitcoin is the world’s first free economy and currency. Unlike other digital currencies which mimic fiat currencies but for their abstraction into a digital medium, Bitcoin truly resides only in cyberspace. The economy functions freely and independently of any human intervention. Accounts cannot be shut, funds cannot be reversed or printed into existence. Its digital database cannot be manipulated.
Following suit, Bitcoinica allows users the freedom to react to market movements and Bitcoin related news. While Bitcoin’s biggest weakness has arguably been the volatility of its price, market data shows that the Bitcoin’s value is more stable then ever.
While Bitcoinica had some previous security concerns, namely where the attack on the Linode cloud hosting provider generated them a loss of 40k BTC, Bitcoinica has fully recovered from the loss and no longer depends so heavily on 3rd party platforms. The Bitcoinica reigns have been taken up by the recognized development group called the Bitcoin Consultancy which have a record of solid security in the tumultuous world of Bitcoin. Despite their growth and their recent announcement, Tong is still a developer for Bitcoinica.
“I was surprised by the amazing growth of the platform. Honestly, I was designing a trading platform that processes thousands of dollars worth of trades everyday, but the volume reached millions in a few weeks!”
~ Zhou Tong
The Bitcoin economy currently sits at just over 40 million dollars, too small for the highest caliber of professional forex traders to want in on the action just yet. Perhaps Bitcoinica will make a good playground for those looking to take a serious foray into advanced trading without feeling daunted. It may also provide a great way to study the development and early stages of speculation markets.
To contact the Bitcoinica team please email:
press@bitcoinica.com
press@bitcoinconsultancy.com
The Zhoutonging will continue until morale improves!
http://www.youtube.com/watch?v=kdvTkddp1F0 (audio NSFW)
the admins on that place need to get on their a** and program some of the most basic features of a trading platform, that is a stop loss and take profit. They have developed the platform so much and obviously went through different versions and the lack of such basics is obviously a sign that it benefits them to not have those basics set up.
The article mentions that the cap is too low for professional traders to get on bitcoin, well i gotta tell you Donald even the stupidest forex trader will not be willing to trade with no stop loss. It has been suggested to them back in january and they did nothing about it.
http://help.bitcoinica.com/discussions/suggestions/72-stop-loss-take-profit
Instead of placing a limit order for an absolute value, you can place the limit order for a profit as a % of number of pips but you can do the same thing with a normal limit order.
It’s just a way to lock-in profits.
So if you’re going long, you would place a sell at the point where your profits would lock-in.
If you’re going short, you would place a buy.
That being said, I hope to see tons of developments as well.
Zhou states that he has implemented stop orders which could be used as a trailing stop order to protect profits or as a stop-loss order to limit losses. It’s also mentioned on the bottom half of his home page.
‘racko’ wasn’t asking about a limit order. A stop order differs from a limit order in that a ‘sell stop’ is placed below the current market price and a ‘buy stop’ is placed above the current market price.
See: https://en.wikipedia.org/wiki/Order_%28exchange%29#Stop_orders
Limit orders placed in such a way perform the same function acting as a stop order. Reread the post, it is described.
I don’t believe that they do, Donald. Please read my comment just below here.
Yes but that just adds to the complexity, in order to create two different orders one for long one for short in case the price moves in either of the directions, and to have a take profit and stop loss for each you need to make 6 different orders. Even over a very short period of time the situation becomes very complex to even be able to interpret your own orders, it becomes overwhelming and doesn’t encourage anybody. you’re right that yes the option to do it is there, but it looks more like a hack to me and the situation also restricts you to having only 1 position open
Not only that, but using limit orders in that manner changes the definition of a ‘stop’ order.
Suppose I’m long BTC at $5.00 and the price moves to $5.80 so I want to protect myself if there is a future retracement to $5.50. Unfortunately, a limit sell order placed at $5.50 would get executed immediately because current market price is $5.80 (a limit sell has to be above current price and a limit buy has to be below current price).
Traders DON’T want their stops to get hit because they want profits to run. That’s why people use stops — a synthetic stop would be a contingency order where ‘if price declines to $5.50 then execute limit sell order at $5.50′. Then, that synthetic might not get filled because a $5.50 limit order means $5.50 or better and the price decline might have already blown through that number trapping your long position for the unenjoyable ride down.
there is no question, the proposed solution is indeed a ‘hack’.
Bitcoinica not being a 1 man operation anymore, is hopefully this is a harbinger of future development.
http://www.investopedia.com/terms/s/stop-lossorder.asp
For the clueless
I did not know what stop orders were until I read this post (better links from comments).
Funny thing is I actually programmed a while ago a simple trading bot, which has simple support for so called open orders also.
https://github.com/rokj/bitcoin_dealer
I’m not sure if day trading is of real benefit to society, I’m not sure what can be done about it, free market rules etc,but the way to make money from bitcoin long term is not to day trade, whichh really just manipulates the price up and down for advantage to a few, the real way to make money or wealth from bitcoin is to set up online bitcoin businesses that attract the public in.
The public are not interested in day trading, they are interested in buying DVDs, clothes, food, booking holidays,as more and more people take up using bitcoin, a limited commodity, it’s Price will rise, tat’s how to make money from bitcoin,by providing services that people want and that benefit society.