Sunday, February 17, 2013

The Latest on Bitcoin Margin Trading

The recent volatility of the BTC/USD exchange rate has been a potentially profitable day-trading opportunity for savvy investors. But to really take advantage of the past, current and likely coming fluctuations, traders would probably like to leverage their positions and also employ short positions, both something Bitcoin exchanges typically do not offer.

So are there options available to those seeking a profit in this market that would allow them to employ these strategies? Well as it turns out, there are and soon there will be one more.

Coinsetter.com, a highly promising margin trading platform judging by the initial introduction alone, is about to enter beta testing. In the announcement thread, Jaron Lukasiewicz, CEO and co-founder, introduced himself as a former investment banker with previous experience at some of the more prominent American financial institutions. With an air of professionalism, he answered some very tough initial questions posed by the bitcointalk community. Among other things, he revealed that his company will enter beta testing towards the end of February or by the beginning of March, and that he will put up at least $50,000 of his own money towards the platform's initial margin reserves. He said he is also looking for seed capital and intends to fully comply with US financial regulations.

But traders don't have to wait, there already is another option available; BitFinex (based in Hong Kong). Although not without problems, the platform is experiencing growing success that is starting to look quite respectable, and there are even plans to incorporate in Hong-Kong, where they intend to obtain a financial licence from the SFC (Securities and Futures Commission of Hong-Kong).


One other option is ICBIT.se, recently featured by Bitcoin Magazine, a site that seems to have attracted a small group of recurring users.

Of course when talking about margin trading, let's not forget that more than nine months have passed since the owner of Bitcoinca, the infamous Bitcoin margin trading platform, made a thread on bitcointalk.org announcing they were shutting down operations. The culprit was an unauthorized transaction allegedly perpetrated by a hacker that emptied their hot wallet. It's been more than seven months since Amir Taaki, aka genjix, working for the Bitcoin Consultancy group which took over the Bitcoinca fiasco in an attempt to repay their customers with what was left of their deposits, announced that the remaining funds held on Mt.Gox had also been stolen. As was later discovered, the cause was an overlooked security issue within the source code that too was stolen during the hack and even leaked later on.

This tragedy is still unresolved and is currently in the hands of a senior insolvency administrator from New Zealand, Taslim Bhamji, who is trying to carry out the liquidation of Bitcoinca LP, at least whatever is left of it.

Meanwhile, the Bitcoin community has witnessed a few more attempts to launch a new margin trading platform. Kronos.io was supposed to be one but failed miserably before even getting out of beta; the result of a hack and theft that left them mortally wounded. Bitdaytrade.com was another one which likewise crashed and burned due to poor design leaving the site vulnerable to hacks that occurred as soon as it entered beta, forcing the site to be shut down.

These stories should be considered a huge lesson about trusting anyone to handle your bitcoins and just how costly trusting the wrong person or business can be. So although the current market conditions seem highly enticing, before investing a single bitcoin, be sure to weigh the risks of trusting the wrong company and act accordingly.

8 comments:

  1. Its good to see these new ventures springing up however I was burnt by bitcoinica when the customer funds were stolen, never to be seen again. It will be a while before I trust another trading platform such as that.

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  2. Having just read a bit more on the ICBIT website I don't have a good feeling about the sound of it, Trading algos and HFTs! Goodbye unmanipulated market

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  3. MPEx has a substantial options trading market.

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  4. There is at least one more leveraged bitcoin speculation service, Kraken, coming from a name well known to the bitcoin community. It was in this blog so I'm surprised to see it not mentioned here. http://www.thebitcointrader.com/2013/01/finally-bitcoinica-replacement.html

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    1. Yes, but as you said it yourself we already wrote about it so we didn't feel like it needs to be mentioned again.

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  5. I was just turned onto this article by a friend in the community. Thanks for writing about us, and we're working hard to offer a platform that is professional and awesome. Anyone who wants to learn more about Coinsetter can reach me directly at jaron@coinsetter.com.

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  6. Coinsetter sounds promising. I read the forum discussion from this article. Jaron is not anon, looking for follow regulation/official seeding, and seems very promising. I hope the website delivers.

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    ReplyDelete

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