Topic: [OFFICIAL]Bitfinex.com first Bitcoin P2P lending platform for leverage trading - page 106. (Read 723903 times)

BFX are of the expressed and understandable opinion that they're not in the business of guaranteeing a return to swap providers.

If people leave then the remaining pool of funds will become more expensive to use... if that happens to coincide with a sudden reason for increased demand then maybe it'll get a little crazy before those who left get themselves organised to return. As someone putting money into swaps I somewhat welcome the idea; even just one mad week of stupidly high rates would renew my flagging spirits.

Whatever happens, it'll sort itself out in the end - if the demand is there without the supply to fill it then rates will rise until they're sufficiently enticing, even if there's some "stickiness" in both directions (people hanging on past the point where they start to feel unhappy with the return, or taking time to arrive as and when rates come back up).

And ultimately, if it causes lenders to leave, it's a bad idea. The whole point of all this is to provide a way for margin traders to borrow USD. If there's no lenders then there won't be liquidity when the borrowers need it. BFX needs to do something soon. The easiest would be to outright disable FRR, however that's a temporary solution at best.

there's no point debating this - hopefully, FRR hurting of their bottom line will bring them to their senses

I can vouch for that. My tracking of all my swaps includes monitoring the fluctuating GBP/USD exchange rate, and that easily makes bigger swings in my overall gain (as measured in GBP) than the daily payments do... although with a tendency to swing up and down to little overall effect in the longterm, whereas the swap payments maintain a slow ratchet upwards. But if sterling suddenly found some of its old strength I'd be looking at negative returns really quickly.

It also adds a barrier to moving money in/out - the currency exchange rates offered by the retail banks I have an account with to withdraw into are nigh-universally terrible, quite possibly costing me several percent of the total transferred. I'm getting close to the "fuck it, I'm going elsewhere" point, but I really don't want to do that international transfer more often than necessary. Probably means I'll stay longer than I should, then continue to stay out even as rates pick back up again.

Yeah, guys. We're at an all time low now in USD swap rate. The effective compounded interest rate has never before been consecutively below 10 % p.a. for more than 24 hours. And we are still at +21 m in total swap amount. I am wondering whether new lenders are still moving into business at that rate. The adjusted risk is not worth it imho. It effectively costs me about 1 % of the original amount to get USD onto BFX. An investment I would recoup in 1 to 4 days when I started lending on BFX. Now it would take more than a month with the clear possibility of the rate dropping further to like 5 % p.a.. And there are other problems to consider as well: Not everybody in Bitcoinland comes from the US so exchanging your local currency into USD incurs significant risk of change in currency exchange rates against you which either needs to be hedged (more costs) or taken into account. While currency exchange risk is virtually nonexistent at interest rates of 50% to 370 % p.a. like we are used to 10 % p.a. in profit can easily be wiped out. The Euro for example dropped nearly that in the last 6 months relative to the dollar. Who is to say that this doesn't reverse eating all lending profits.
For the upside potential, well, if bitcoin doesn't reverse its downtrend heavily interest rates won't bump for quite some time or possibly ever and any bumps will probably be smoothed long-term as long as the retarded FRR feature is in place. There is also more and more competition that lets you trade on margin (less serious, secure and well-made than BFX though (yeah, I'm talking about these disgusting chinese futures bucketshops)) so the natural swap demand might continue to decrease even if the supply stays the same.

Just a fair warning to all potential liquidity providers. BTC swaps have gotten quite a bit more attractive though (more than double the USD rate at the moment with quite the possibility of the underlying asset to drop 5 % on a bad day though).

What you will seemingly always fail to realize is that the FRR arbitrarily decides where this race to the bottom starts because it builds an upper ceiling for the practically achievable rate. When we had the btcusd run-up to 470 6 weeks ago the swap offer orderbook was completely wiped out up to 1 % per day. The FRR that had previously given out millions for scraps (0.08 %) without scaling upwards a single bit because of the increasing demand then continued to shell out the lenders' money for scraps anyway barely adjusting to the vastly different market conditions. The FRR maximum was at like 0.13 % quickly dropping down to 0.09%.

Why in the world would I as a swap provider want an algorithm to lend out my money for 0.1 % when I could get 0.9 % at that time? What if the FRR which never rose beyond 0.13 % didn't pile up at 0.09 % (it only did so because of the faulty algorithm it uses) but at 0.6 %? Maybe then we would now be at 0.15 % and not at 0.03 % having wasted 90 % of our upward potential (0 % - 1 %).

This exactly. Bonds are showed separately for a reason. Money has time-value. Money 2 days from now is worth different than money 30 days from now or 30 years from now. There's a whole science of trading yield curves.

At this USD lend rate, it's hard to justify having the money there. It's time to look for a better investment.

The order book would be easier to read if you separated out the time preferences into different order books. I.e. have a 2-day order book, a 30-day order book, etc. This would also make it more resemble conventional fixed-income instruments.

To some extent, I'm happy to see the rate collapse - hopefully, it'll make BFX realize everything that is wrong with FRR as their cut from the lending fee is drastically reduced as well despite total swaps only being reduced by a small fraction!  Hopefully, that'll get the ostrich's head out from the sand!

A lot has changed in a year...I would recommend taking a look again.

I'm not sure I follow you there - fixed rate swaps above FRR don't get taken unless there's enough demand to get the amount offered at FRR down to near-zero. After a big rise in demand that pushes the going rate up high, the FRR might continue to stay high for a while as the average slowly descends, but it wouldn't be able to resist downward motion.

Hm, unless there were a huge body of swap demands placed at FRR, enough to keep all the 'passive' swap providers' funds occupied and make it difficult for a trader to get funding unless they go over the top and place their demand higher than FRR. But I feel like that's an unlikely scenario in all but the most extreme cases. Would only be a possibility in the absolute hyper-manic phase of a bubble (or the equally hyper-manic period during the 'first bounce' out of a crash, where people line up to place bets on the bubble resuming), whereas FRR as-is seems to have it's typical rate-depressing effect even in times of small-to-moderate price rises.

I've had that issue a few times, make sure your mobile is set to automatically update the time. There have been issues where the code won't work exactly when it refreshes. Also, Authy works a lot better than the google authenticator as well.

Used them to send coins more than a year ago, total disaster, bitcoins went missing, had real trouble to sort things out with the party that should receive coins. Highly NOT recommended, use with caution.

And than you have pure genious who clear 1,5m of lend wall without any kind of cycle effectivly stopping the market for X hours/days.

Uh, I think you confused my use of "market maker" with an authorized market participant at an exchange. Market maker = limit order, market taker = market order. They are market makers in that they are adding orders to the book, not taking them.

I disagree, when rates get too low...it seems you think people will choose to stop offering, which lowers the supply, which leads to...higher rates. So, the rates will be always just higher than the bare minimum necessary to incentivize people offering a swap (I think that if you can find a bank account that offers 0.03 or around there compounded daily please let me know where), similar to mining. If 20 million of the 25 million currently actively being used were to say "I can do better elsewhere", and given that the demand still exists for 25 million in swaps, the rates would have to rise dramatically...

I do agree that the FRR acts as a damper...but who is to say it wouldn't work the same way in reverse? It is not inherently downward pressure, it is simply a damper on movements in general. If we were in a huge bull market, a real one, like the rise to 1200, wouldn't the FRR stop the rates from falling as more and more fixed rates were taken above the FRR? Or alternatively, if people acted rationally and if they didn't know which way it was going to move, they would simply choose the cheaper option, shorting. Wouldn't the FRR act in the opposite manner on the BTC market? I haven't really looked at how it might play out, but I think in general that any large sluggish pool of money isn't inherently downward or upward motivated, and a lot of the factors would really influence decisions of everyone.

I think that because we have been in a bear market for a LONG time, the speculative interest (as you astutely pointed out) has somewhat dwindled. More people perhaps are realizing that while bitcoin may go to the moon, I am not so sure that that trip will happen within the next 30 days. I, personally, find that on the streets, locally, demand is incredibly high, and usually if you want to buy, you are paying a pretty big premium. I for one have a standing buy order for 2% above bitfinex from someone I know. He sells the coins to others for 8-10% above, but his main issue is getting enough coins to satisfy the demand. So, I think that a lot of what you pointed out is correct.

Either way, if you removed the FRR, you would still have the exact same rate, because the people choosing the FRR aren't getting filled. Everyone is competing with the people around them, and I think many people are simply looking for a more stable return after maybe getting burned in the bear market. After losing 20%, you tend to be a little more cautious, and 10% starts looking pretty good.

I do think there is a shift occuring, maybe the last gasps of the crazy speculation that was the hallmark of 2013...but I am very hopeful, because I see more real services that are using bitcoin, many of which rely on a deep, liquid market where they can actually obtain bitcoin, or dollars, rather than simply gambling on some 20X contract with no actual delivery, pegged to an index.

Some of the services that I really love, and feel free to suggest others that you like are:

1. Coinapult (not available in the US, unfortunately), but I used to work for them, and helped build their locks product
2. Piiko - One of the most realistic and potentially amazing uses for bitcoin, 66% of cell phones are prepaid...allowing you to recharge their balance, easily and without worrying about local currencies is a HUGE feature.
3. Leetcoin - I wish this were bigger, but I think that eSports is going to be HUGE in the years to come and competitive cash games seem like a really cool idea. I absolutely LOVE League of Legends, and I think that community has so much synergy with bitcoin, only a matter of time before Riot starts accepting them.
4. Purse.io - Helping people buy things with a discount, while allowing them to basically place limit orders...
5. Changetip - Content monetization and tipping are going to be a killer app
6. Localbitcoins - I paid for my rent in Colombia using a localbitcoins buyer, was far faster and cheaper than a wire...

Not sure if I am missing any obvious ones, but if we are seeing a shift from speculation to usage, that is a good thing in my eyes. Not that there is anything wrong with speculating, it is a valuable activity and provides liquidity, but the usage of bitcoin (and note that almost none of those services really care what the price is) is the reason that the speculation exists.

I think that eventually, if bitcoin does what it is capable of, it will be more like the forex markets than the pink sheets, and you will be looking at pips, not tens of dollars in movements. At the end of the day, I really believe that bitcoin is a better system, and I hope to see adoption increase. To be honest, I rarely look at the price, because I think that once usage increases, the price will follow, but then again, I am a very typical buy and hold type of guy.

I disagree, but mainly with your terminology. A market maker is literally "making a market" meaning that they are willing to take either side of a trade. So market making in this instance would mean that I am willing to take a swap at rate X, or offer a swap at rate Y. Placing limit orders is not solely the act of a market maker. That being said, they are not placing limit orders, in that technically a limit order is an order to be filled at a given price. If they aren't setting a price, it isn't a limit order. It probably has more in common with an opening or closing cross, in that it is kind of like a large auction at a price TBD, but it isn't exactly like that. It is also similar to a market order, in that they don't care what the price is.

Either way, overlap happens, usually, due to differences in time preferences. All that is offered is 2 days, all that is requested is 30 days, for example, so no match occurs.

Thanks for your comment though. And we will be changing it, but it will probably just be to make it more responsive and less liable to dampen the price movements.

I'll respond to some other comments below, which might have some relevance.

All of this, combined, is whats killing the rates right now.  The market is just too flat to pull in many new investors, people just aren't excited about bitcoin anymore.  Even in my Local sales, I'm only getting repeat customers, whom I mostly attribute to black market buyers.  I haven't had any real investors show interest in months.  And most of the people I talk to who are invested are moving to safer investments than buying coins on margin.  A lot of that money is getting pumped into margin lending, which increases the supply even more, and lowers the rate even more.



Exactly this.  The problem with FRR is that it creates an artificial downward wall, not a fair value market.  In times of low demand people set low prices, and the market goes down like it should.  But in times of mid to high demand, the low priced orders get taken, then we work into the FRR.  The money is still getting taken at FRR rates, so the average doesn't go up and because a few orders still slip in below FRR, the average actually is still going down, despite high demand.   Only in times of HUGE demand do rates ever go up, and then they quickly sink back down once the HUGE demand period is over and FRR loans start returning.  If you look at the historical rate charts this is painfully obvious.



In a normal, unmanipulated market prices should naturally go up and down, not always down or into a wall.  I am actually fully convinced at this point the only way bitfinex margin lending is going to survive is to completely get rid of the FRR.  If you look at the chart, we're actually hitting new lows after every wall break, and the wall breaks are happening less and less frequently.  Soon rates will be lower than a good bank savings account, and when that happens, well, nothing good will come as a result.

Good!


I respectfully disagree. They are being treated as market makers (placing limit orders) but are not "setting" any prices. I might say, one way to deal with the massive backlog of lenders is by filling orders on the bid side. Actually, as I post this, there's overlap in both sides of the lend book. Also, I did tweak your quote a little bit. I did not mean to change any wording.

It is impossible to "peg" yourself to the FRR...that was the solution I had offered, to allow a delta value so you could peg your order to the FRR but choose to price it more aggressively. You can place it lower than the current rate, but that rate can change, and if you want to manually adjust it...you can do that as frequently as you want. If you say, "but I can get a bot to do it", I agree, and you bot will always compete against the other fixed rates, as well as the FRR. You have active traders using fixed rate, vs people who are not managing it directly. You think that by forcing the people who don't care to actually start caring it would lower competition?

As it stands, noggin-scratcher is right, there is more and more swaps chasing a fixed (or even decreasing) amount of volume. I am not sure if it is christmastime or people gun shy about a bull trap, but at the end of the day, there is a finite amount of demand, call it X. The people who choose to lend for the lowest amount, regardless of FRR, until X is exhausted are the only ones who will get ANY return. If you remove the FRR, you either have no change, because you will still compete against the other fixed rates for the same fixed amount of trading volume (as noggin-scratcher pointed out, very few FRR swaps have been taken), or, more likely, the money that is currently sitting on the sidelines just pushes rates lower.

I really do have to agree with one post, which says that because a rate taken at the FRR cannot itself influence the FRR, we have a poor feedback mechanism. We are working on a change, but with the entire margin system and quite a few users who currently have funds in the swap market, caution is appropriate. We also are really focusing on this upgrade, and I made a pretty big milestone today, so I am hoping to be able to announce more soon. Anyway, I agree with you guys that the FRR is NOT implemented in the best way, but I don't think that some people are looking at it objectively. If rates are higher, we make more, so why does it seem like we are forcing rates lower, especially given that it seems most traders are relatively insensitive to the swap cost? Because our core business is being the best bitcoin exchange we can be! The swap market exists to facilitate and enable margin trading. As opposed to trying and boost rates, we would rather just let the market do as it wills, and let the rates be set naturally, even though it may not be as profitable in the short term, we would rather that it is a somewhat good price discovery method. I mean, at any point, we could have just gotten rid of the "market" portion and made it into a fund as was suggested a while ago. That is not our goal, and not what we see as the purpose of the swap market. It exists to facilitate traders, and whoever is willing to accept the least return will get their swaps filled (or their bitcoins bought), that is just the nature of the market.

So, this is a little longer of a post than I had intended, and I really don't want to fan the flames on the FRR issue, because we are going to change it, I understand what has been said, and if you look at things from an objective point of view (not as a person seeking the highest return possible), I think you will see that markets are useful at setting prices, and we'd rather let the price be discovered organically instead of having some sort of agenda. Even the FRR, it may not be great, and it can definitely be better, but it is very simple, and based on numbers that we don't create. It was originally conceived to hopefully allow liquidity providers the ability to benefit from rising markets, and at the same time, ensure a constant supply of swaps to fuel trading. It has done that, but it is showing some cracks at the seams, and those are what we are addressing.

So, Happy Holidays to everyone, I hope you guys get lots of bitcoin for Christmas, Hanukkah or whatever festivities you celebrate! Rest assured, we are working on some really nice new things for 2015 that will hopefully reward you guys for your loyalty and patience.