Bitcoin Trader Ponzi or Not?

Bitcoin Trader Ponzi

Bitcoin Trader offers bitcoin arbitrage trading services along with mining services.  Their trading service basically focuses on price differences among different bitcoin exchanges and tries to monetize on the difference.

Their returns have been in the range of 13-20%/month, and the natural question that everyone has been asking is 'Is Bitcoin Trader a Ponzi Scheme?'

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Our answer to this is that 'We have no idea.  We hope not!' - it may not be very helpful, but we have 2 reasons to believe that Bitcoin Trader or any bitcoin trading company could be achieving the kind of results that Bitcoin Trader is claiming.

 

UPDATE (2014/10/17) : It's Official - Bitcoin Trader Closes Operations, Plans to Declare Bankruptcy in Panama!

 

(1) Even today, there is SIGNIFICANT PRICE DIFFERENCE among major bitcoin exchanges 

Bitcoin Trader Ponzi

To illustrate this point, this is Bitstamp's price at the time of this posting - 393.33USD.

BTC-e's price, taken within 30 seconds of the 1st shot is 381.417USD.

Bitcoin Trader Ponzi

The price difference here is 11.91USD.  If you buy bitcoins for 381.417USD and sell on bitstamp, you will have made at least 11USD after withdrawals fees.  That's about 2.9% in profit.

So at least in theory, trading arbitrage is very much possible, and the kind of numbers that Bitcoin Trader is reporting - 0.5-0.8% per day of trading - seems realistic.

(2) There is at least one audited public company - DigitalBTC - that is making healthy profits in bitcoin trading

DigitalBTC is a bitcoin services company listed on the Australian Stock Exchange.  They have bitcoin mining as one pillar of revenues and bitcoin trading as another.

Their trading includes 'arbitrage, buying long positions, selling short positions, futures contracts and market making operations' - so it's a full blown trading operation in bitcoins.

Bitcoin Trader Ponzi

Is it profitable?  We know that their trading division yielded 34% for funds invested up to May 31st 2014.  Although we don't know exactly when their trading began, if it began around the same time as their mining operations, which started on March 20th, 2014, then that's about 2.4 months of operations.

Bitcoin Trader Ponzi

34% in 2.4 months is about 14.2%/mo., which is about par with Bitcoin Trader's recent performance - 14.73% in August, 2014.

Since digitalBTC's results that have been audited, and the apparent price difference between bitcoin exchanges that still exist today, it's safe to assume to bitcoin trading arbitrage is possible, and the kind of returns that Bitcoin Trader is also realistic at this point in time (Sept. 2014).

However, whether Bitcoin Trader or any individual bitcoin or crypto trading company is actually solvent or not, or whether it is a ponzi or not, is a question that can only be properly answered if audits are made public.

Without the audits, everything else is just 'opinion', including ours.

 

UPDATE (2014/10/17) : It's Official - Bitcoin Trader Closes Operations, Plans to Declare Bankruptcy in Panama!

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2014/10/17