Monday, 19 September 2011

Bitcoinica - at last we can short bitcoin

As if there weren't enough bitcoin exchanges already, bitcoinica went live on 8 September. However, this service really does differentiate itself by offering 5x leverage and the ability to short. In truth it is not really an exchange but a brokerage - the site will net out opposing positions that clients take before hedging the residual on another exchange (currently MtGOX, but soon TradeHill will be a target), meaning that many if not most trades will never actually hit the open market.

There is a downside, though. Since bitcoinica acts as a middle man and is vulnerable to market-manipulation attacks, it charges a hefty fee by way of bid-ask spread. Currently this seems to fluctuate at around 5% of the price, which is pretty chunky in comparison to 0.01%, or 1bp, that is typical on MtGOX.

It seems like forever that MtGOX have been promising margined trading and shorts, will this new competition spur them on?

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