Bitcoinica - Leveraging Your Bitcoins To Buy ... More Bitcoins
Volume on Bitcoinica’s trading market has been very high – likely as the result of much forced selling on behalf of accounts that had seen their valuations plummet below the required margin maintenance levels.
However traders waiting patiently on bank transfers to move funds funds to the exchanges also have the ability to speculate on bitcoins at these levels (currently under $2.50 USD) thanks to Bitcoinica. This service provides the ability to purchase bitcoins funded with leverage available from the bitcoin balance on deposit at Bitcoinica.
With 5X leverage, a deposit of 10 BTC gives the trader the ability to purchase over $100 USD worth of bitcoins (at current market exchange rates). At the same time, if the trader is fully leveraged, a 20% drop in the market price – even one lasting a mere number of seconds, will cause forced selling which leaves the trader with almost nothing remaining.
This is a service for those who are aware of the risks and know how forex or similar trading systems function regarding the trading spread, Bitcoinica can also be used to short Bitcoin – with similar levels of risk as being margined on a long position.
Exchange rate fluction risks are not the only concerns that traders should be aware of. Bitcoinica just opened to the public in September, 2011. The site has a copyright mention referencing a xWaylab, Inc (a Delaware corporation) however the site does not yet provide a terms of service and it is not known from which jurisdiction the service operates. The service does not appear to address regulatory requirements reference in this alert from FINRA.
With no minimum deposit or balance requirement – experimentation to learn the system using trivial amounts of bitcoins can occur with no disadvantage versus larger traders.