Keiser Report: Getting Zhoutonged and Paying Salaries In Bitcoin
Episode 272 of the Keiser Report (@KeiserReport) is nearly entirely Bitcoin related. Stacy Herbert (@StacyHerbert) describes points brought up in the recent Reuters article and increases our vocabulary by sharing what is meant by getting “zhoutonged” (wiped out financially). In the second half of the show Max (@MaxKeiser) interviews Michel Bauwens (@MBauwens) of the P2P Foundation (@P2P_Foundation) after the organization started offering to pay salaries to its staff located around the globe using bitcoins. Bauwens describes this action as being something that is pragmatic.
The Reuter’s reference to being “Zhou Tonged” is actually a case of the term somewhat being misapplied. Getting Zhoutonged means losing an entire trading position due to forced margin trading. This occurs when trading on Bitcoinica using leverage at levels such that the wild swings in the exchange rate that Bitcoin frequently experiences cause forced automated margin selling to occur. Forex traders are very familiar with this risk but many of those those using Bitcoinica had not previously had the opportunity to trade using margin and are gaining an education the hard way. The default leverage at Bitcoinica is 2.5:1 but the trader has the option to increase that to 10:1 leverage.
Bitcoinica is open to all, has no minimum deposit level and allows bitcoins themselves to be used for funds that can be used to gain leverage so a trader with just 2 bitcoins (worth about $10 USD) can enter either a long or short position that controls BTC/USD contracts worth $100.
Concerns remain regarding Bitcoinica and the service also took nearly a quarter million dollar hit following the Linode hack a few weeks ago, but the service remains in operation and trading continues. The lyrics sung in the music video referenced by Stacy might not be appropriate in some work environments.