Topic: [OFFICIAL]Bitfinex.com first Bitcoin P2P lending platform for leverage trading - page 179. (Read 723861 times)

Cui prodest?

Ask yourself this simple question and if your IQ is not lower than your shoe size you'll come up with the right conclusion.

https://bitcointalksearch.org/topic/m.7533611

Interesting discussion going on.

Swap rates is jumping up in spite of calm market!
Is everyone preparing for tomorrow’s auction?

Giancarlo, I went back and checked, and the crash I had in mind did occur on Feb 10th, and there was no mention at the time of it being caused by a bug with the ticker price. Your description of the ticker price bug corresponds much more closely with the episode on Feb 6th, where the ticker price was stuck super high and so everyone has huge 'profits' and tradeable balances. See this screenshot for example:


Feb 10th was when Gox made their bullshit transaction malleability announcement. There was a huge long squeeze at one point which drove the price down to 100. Afterwards, Raphael said:



And earlier that day, you yourself had said that the reason for the flash crash was running out of funds on Bitstamp.



So actually it looks like my characterization of the flash crash on Feb 10 was correct. Feb 6th was the ticker bug.

Thanks for the wise analysis.
What you write makes a lot of sense.
For the sake of clarity: on February 10th transactions were not cancelled because Bitfinex run out of funds on Bitstamp, but because a smart ass found out a way to artificially push the ticker price to very high levels ( over 10,000 usd per btc) and this caused some people to take leveraged positions that should never have occurred.
As this erratic behavior was due to a technical problem and not to a normal market condition we decided to revert the transactions.

This is common practice also in major markets, such as the NYSE or the NASDAQ.

You can find more details about it if you go back to that date on this thread.
 

Hey everyone,

I guess it'll be my last message here for today, sorry I can't answer to every individuals requests. Requests made to our email support will be treated in the next few days, including those who lost money because of our trading halt.

So my point will be these: the liquidations that happened and took the price to 100 were less than 25% of the total leveraged long positions. A lot of traders also have collaterals in BTC. Which means that nor Bitfinex nor Bitstamp had enough depth to absorb the cascading liquidations that would have occured and drag the price to near 0 as ALL long would have eventually be liquidated.

So yes, halting the trading engine saved 15+ millions of dollars. Yes, we will be fair to traders that got caught in a short during these time (again, on support email, not in the thread). If you think we should have let liquidity providers lose everything and close the margin trading for good, I understand. Maybe we halted the trading engine a bit too long. But we do not regret this decision and think this was the fairest decision to take.

One last thing: we are not impacted by the problem of Bitcoin withdrawals MtGox have. When a withdrawal seems to have failed, we use the bitcoin address to do a manual double check. So far this is not an issue.

Thank you all for your comprehension and have a good day
Raphael

Guys

before you start any post please think about the following:

1) Bitfinex is not an exchange. It is a complex trading platform and this is why it made it to place itself among the top 4 BTC/USD platforms in the world for volume in 15 months.

2) Bitfinex also allows trading on Bitstamp via metatrading.
This lowers volatility during market crashes, but it is subject to keeping ALWAYS an amount of BTC and of cash on their platform.
There must be a balance between efficiency and third party related risk ( Gox is teaching us that trading platforms can actually have problems).
Therefore we cannot keep too much money or too many coins on Bitstamp.
When I say too many I mean more than a certain number of million dollars equivalent (either cash or BTC x price).

3) Forced liquidations can trigger cascading prices and also a rapid consumptions of coins on Bitstamp.
It takes time to replenish coins, this is not our fault, it is related to how Bitcoins are transferred.
Today for example more than 10k BTC were sold in a matter of minutes.

4) When we don't have coins on BSTP anymore (that is what happened today, we run out of coins on Bitstamp, we had a lot of them but they were all sold within seconds) we just rely on our orderbook and people tend to panic when the price crashes, therefore thinning even more the bid side of the book.

5) Whenever we see any market abnormalities we halt trading.
We don't make money when we halt trading, we just try to cover the funds given by liquidity providers.
(Today we resumed trading as soon as other coins landed on our Bitstamp account)

6) Any trader with more than 3 neurons should understand why we try to protect liquidity providers.
They are the reason why traders can take leverage.
No liquidity providers, no swap, no margin trading.
Every trader should think about this before he starts considering the liquidity provider as a blood sucker.
The liquidity provider is the one that makes it possible, and therefore he should be protected for the sake of the leverage, not because we think they are more beautiful than the traders.

We are not perfect.
We will keep having problems, this is part of the game called "being in business".
But please try to understand each of our moves is made for the sake of our community.
Letting a bunch of traders walk with their opportunistic strategy ( placing a buying order at 100 can possibly be defined differently?) and by doing this hurt the real funders of our platform will never be an option for us.

I hope that this helps

Have a good day and sorry if I lost it for a couple of posts, I apologize about it.

Giancarlo
Bitfinex Team   

Wow bitfinex added DRK!!!!

Does anyone have difficulties with withdrawal using phone authentication?

Ah whoops sorry in that case I was referring to the windback after the post Gox-FUD announcement crash. The one where price spiked down to 100. That must have been later in Feb.

I remember the other crash, when BFX was bugged and we all had insane tradeable balances, and some kook decided to use it to try and squeeze the order book, becuase I made a tonne of money trading LTCUSD and BTCUSD as it random-walked all over that thin order book. Then watched it all get handed back with the rollback

I still supported the rollback even though it cost me a couple grand, it was clearly some whack shot going on and being deliberately perpetrated.

I also remember the flash crash post Gox. That one was pure terror - I has an open margin position and watched it going heavily into the red, praying we wouldn't go below 400 or so (we started at 800ish!) . I remember watching that spike down to 100 and feeling my gut lurch with it as I knew I must have been totally wiped out. I supported that rollback too; though I thought it was a bit more dubious, I was very glad not to have lost 5 figures to the crash!

In general I think BFX management have made admirable decisions.

I don't think you understand what I wrote. Of course they have ability to auto liquidate - it is a key component of margin trading. There is no guarantee that prices cannot fall so fast that when the liquidation is triggered, they haven't already falling past the point where liquidating would recover the lent amount. In fact this has already happened once, on Feb 10 2014.In that instance BFX rolled back the trades, justifying this action by the fact that they had lost the additional liquidity of Bitstamp (I think they ran out of BTC on stamp) and that the cascading margin calls on the resulting thin order book would have taken the price on BFX to zero and wiped everybody out.

Because the price on other exchanges (ie Stamp) never went so low, but remained around the 500s, after a trading halt BFX were able to resume at prices that did not result in underwater margin positions, so the liquidations could be avoided. However, if all exchanges had tanked, this would not have been possible, and many margin positions would have been liquidated, possibly at a loss.

There is nothing preventing a similar flash crash to that of 10 Feb from occurring. Bitcoin is incredibly volatile as we have seen, and nothing is off the table. Reversing trades is not a panacea - not only that but BFX will only do it when it is in THEIR interests to do so. They rolled back trades in Feb because doing otherwise would have killed the entire platform - as Raphael said at the time liquidating every position in the platform and filling the orderbook down to zero.

In the case of a real, market-wide crash, don't expect BFX to roll back trades (how can they when the market has moved on without them?). And don't expect them to reimburse out-of-pocket lenders. They simply don't have the money to be able to do so, and their extremely vague promise to insure loans appears nowhere in the site terms and conditions or other binding contract. This would leave lenders to enforce such a promise through legal action (hint: google promissory estoppel), but then tell me, who do you sue? And where?

I see the promise to insure all loans as motivated by two reasons:
1) To remove the hassle of offering the (mostly useless due to extremely small pool size) optional insurance on loans
2) Needing to justify their desire to capture a greater share of the lending business profits, aka GREED
It is not a promise that is backed up by anything.

Finally, all this is before you even consider counterparty AND regulatory risk - there is still a very real possibility that something could go badly wrong at BFX, a hack, mismanagement, a court case, termination of banking relationships, government crackdown; the list goes on. This could lead to insolvency and loss of funds a la Gox and numerous other exchanges. This additional risk should not be understated.

So AGAIN: DON'T LEND (OR KEEP ON BFX) MORE THAN YOU CAN AFFORD TO LOSE.

PS: BFX staff, I am just trying to highlight the risks inherent in dealing with a platform such as yours, no offense intended. I am actually quite a fan, and have used the platform for trading and lending for some time and am yet to find one better. But I always deal in amounts I'm willing to lose.

I don't think you understand what I wrote. Of course they have ability to auto liquidate - it is a key component of margin trading. There is no guarantee that prices cannot fall so fast that when the liquidation is triggered, they haven't already falling past the point where liquidating would recover the lent amount. In fact this has already happened once, on Feb 10 2014.In that instance BFX rolled back the trades, justifying this action by the fact that they had lost the additional liquidity of Bitstamp (I think they ran out of BTC on stamp) and that the cascading margin calls on the resulting thin order book would have taken the price on BFX to zero and wiped everybody out.

Because the price on other exchanges (ie Stamp) never went so low, but remained around the 500s, after a trading halt BFX were able to resume at prices that did not result in underwater margin positions, so the liquidations could be avoided. However, if all exchanges had tanked, this would not have been possible, and many margin positions would have been liquidated, possibly at a loss.

There is nothing preventing a similar flash crash to that of 10 Feb from occurring. Bitcoin is incredibly volatile as we have seen, and nothing is off the table. Reversing trades is not a panacea - not only that but BFX will only do it when it is in THEIR interests to do so. They rolled back trades in Feb because doing otherwise would have killed the entire platform - as Raphael said at the time liquidating every position in the platform and filling the orderbook down to zero.

In the case of a real, market-wide crash, don't expect BFX to roll back trades (how can they when the market has moved on without them?). And don't expect them to reimburse out-of-pocket lenders. They simply don't have the money to be able to do so, and their extremely vague promise to insure loans appears nowhere in the site terms and conditions or other binding contract. This would leave lenders to enforce such a promise through legal action (hint: google promissory estoppel), but then tell me, who do you sue? And where?

I see the promise to insure all loans as motivated by two reasons:
1) To remove the hassle of offering the (mostly useless due to extremely small pool size) optional insurance on loans
2) Needing to justify their desire to capture a greater share of the lending business profits, aka GREED
It is not a promise that is backed up by anything.

Finally, all this is before you even consider counterparty AND regulatory risk - there is still a very real possibility that something could go badly wrong at BFX, a hack, mismanagement, a court case, termination of banking relationships, government crackdown; the list goes on. This could lead to insolvency and loss of funds a la Gox and numerous other exchanges. This additional risk should not be understated.

So AGAIN: DON'T LEND (OR KEEP ON BFX) MORE THAN YOU CAN AFFORD TO LOSE.

PS: BFX staff, I am just trying to highlight the risks inherent in dealing with a platform such as yours, no offense intended. I am actually quite a fan, and have used the platform for trading and lending for some time and am yet to find one better. But I always deal in amounts I'm willing to lose.