Topic: [OFFICIAL]Bitfinex.com first Bitcoin P2P lending platform for leverage trading - page 252. (Read 723903 times)

I agree with most of this except for two things

1.) Trades were resumed when the market recovered and exceeded the price in which trades should have/were intended to be halted
I.E Stamp crashed to 530, BFX should have resumed at this level

2.) Those who took the proper steps were the ones who lost (stops and trailing stops), those who put in the predatory limit orders were the ones rewarded.

I wish it were as simple as this but trading is a game that needs strict and understandable rules, without them its just gambling.  That's all today was--a gamble.

Haha, 1% per day is highly unlikely, and only during insane rally's.

Right now it's 0,11%, and i'm not lending/risking my money for that low a return...

As a trader for years in FX i also agree fully with you, and i feel for all those who had as a core strategy to bet on big swings in the price. They got unfairly screwed this time, and will most likely do so in future occasions. But we all need to understand and adjust our expectations that, going forward, it's in the best interest of BFX to preserve the integrity of the Lender's money in the detriment of "proper trading etiquette". They have made this clear several times, and we need to accept that they are simply too young, too small and working in too volatile a market to be able to satisfy all sides of the trade.

So perhaps those of us who are trading for the big moves should take appropriate steps, including moving part of /all of the funds to other exchanges that allow you to trade your strategy properly. None the less, i think there are also some of us who take comfort in knowing that trading will be halted whenever the market goes crazy. Of course, this will work ONLY in case the market recovers...if not then i guess the whole BTC world will crash and burn and our discussions here (and our money) will become irrelevant

If there is any sort of stop loss/shutdown after a 20-25% daily swing, that mostly regulates trader profit.  I would just like to add that in that case there should also be more regulation for lenders.  Loaning out at 1% a day is an insanely good return for any risk profile.  So, if lender's losses are limited, the interest rates should also be capped at something smaller.

Unfortunately I think it still is a lenders vs traders problem.  I hate to sound combative, but BFX halted trades to protect lenders and I understand fully why, but had BFX followed stamp instead of halting any and all trades till recovery I would have made a significant amount from my short position even before you take into consideration the flash crash.  

I appreciate BFX's commitment to finding a middle ground but to a trader this is kind of like blasphemy.  Speaking as someone who has been trading a few years now you have to understand trading is a game of strategy, moves and counter-moves.  A trader may take on a strategy that can incur 10 minor/moderate losses in a row in an expectation that if they stick to the same strategy they will score one big win on the 11th trade.  This is kind of a simplified explanation but you have to understand.  For many of us the crash down to 530 (following stamp and other exchanges) wasn't a gamble, it was an expectation--part of a longterm strategy.  Those who aren't spreadbetting or scalping, which would be a majority b/c btc is a rough environment for short interval strategies, trade in expectation of a major swing.  The last two weeks have been full of false signals and sideways markets that most of us have been sucking up losses from and sticking to a swing strategy in expectation we would see a major and profitable swing.

To save the lenders BFX chose to halt trades and wait for a reversal to prices above where the halt began, this utterly crippled a number of traders I'm sure.  

It shouldn't be a matter of 'traders vs lenders' but unfortunately in protecting the interests of one group you harmed another.  Again I understand why, but this is something worth taking the time to consider when you make these decisions.

EDIT

To append my further post in the future BFX as a matter of policy should always resume trading after a flashcrash below the price at which it was halted

I.E. If you intended to halt trading at 600 trading should be resumed below 600 the inverse is also true for a short squeeze

as a trader i see no point in staying with Bitfinex, if they keep shutting down and rolling back with any swings.

I just pulled all my bitcoins out of there.

I think the answer is that you will be able to profit from a crash, but not from a flash crash, and you will be able to profit from a bull run, but not an flash short squeeze.

People seem to be making a "lenders versus traders" story out of this, but let's not forget that for every trader that was short or who had really low buy orders, there is another trader who was leveraged long with a liquidation price at $200 or something like that.  These longs are screwed too by flashcrashes.  

I honestly think that if there were the type of crash in which the lenders would lose like 10% of their capital, bitfinex would uphold this.  But last night would have wiped out nearly everybody.  I believe almost every liquidity provider remaining (and future ones) would have packed their bags, left, and never return. The End for margin trading.  

So really, again, I think we need to come up with a transparent plan on how these types of flash crashes will be handled in the future, because they WILL happen again.

I meant to answer this last time you asked, but I didn't get to it because, to be honest, it seemed like such an obvious answer that I wondered if you were just trolling. It appears you are in earnest, so here's my attempted answer:

When a flash crash such as this occurs, it is simply not the case that positions will be force closed before there is a possibility of lenders losing money. Say there are $16M in margin loans/open positions - when price dropped to $100 most of those positions would have passed their liquidation price, and would need to be liquidated. But the bid side has already been wiped out and so most of those positions are already deep underwater - liquidating into that order book would recover less USD than the loaned amount.

There is no way around this when leveraged positions greatly outweigh the bid depth and there is a sharp movement downwards - this is why the liquidity from Bitstamp is needed - so that the bid depth is greater. The 16M in loans, perhaps accounting for some ~25,000BTC (this assumes an avg entry price of 640, pretty conservative!) would have been backed by between 16M and 32M in collateral (assuming leverage is between 1 and 2). But some of that collateral was in BTC, not USD! Meaning that there is a double-whammy as BTC price drops - your margin balance decreases while your losses simultaneously go up!

So when price dropped from 630ish to 100, which looks to have been caused by the liquidation of around 7000 coins, for maybe $1.5 - $2M. Even if we assume that all the collateral was in USD, lenders for whoever got liquidated in that spike were already likely to be out of the money (7000 * 640 = $4.5M in loans, collateral of 4.5/2 = $2.25M plus liquidated value of $1.5-$2M. 2.25 + 2 < 4.5). Now if some of the collateral was BTC not USD, then the losses from that spike down to 100 look even worse.

But that was just the FIRST liquidation. The price drop would have triggered liquidations on most of the rest of the book. There were still 10M+ in loans, ie 15,000+ BTC, to be liquidated! With price at 100 or less, we get 15,000 * $100 = $1.5M, plus at most $5M = $6.5M, to pay back $10M in loans! And again I'm being super generous, assuming no BTC as collateral, whereas Raphael stated that a lot of users had BTC as collateral (for me it was about 50/50 when price was about 600). This makes the snap-back even worse, and could mean as little as perhaps $2-3M in recovered collateral leaving 3.5-5M only to pay back $10M+ in loans.

I have used best-guesses for a lot of these numbers, but based them on what I know of the amount of liquidity swaps, the price and the order book at the time of the flash crash so they should be ballpark. The parts I don;t know are the exact bid depth before the spike, the exact leverage ratio, and the ratio of USD to BTC collateral. But I think my analysis makes it pretty clear that there is plenty of risk for lenders to lose their money - I hope you can understand this now. Feel free to PM if you want more explanation.

Finally, it's worth mentioning that last night played out like it did because the BTC balance on Stamp ran out, meaning no more sells could be routed via Stamp. This is already a good reason to halt and wind back some of what happened. But circuit breakers, Stamp or no Stamp, may be worth having and it's good the community is discussing them.

hyphymikey, try to understand, please, that liquidation of the position is made with a market order. And there can be just not enough liquidity in the order book -> large slippage -> not enough money to return to the lender.

On a different note: i hope BFX is ramping up their servers and the team for the inherent demise of Mt Gox. I'm envisioning a mass-migration of the late adopters there (those still there who were too lazy/trustful to move until now) to BFX.

Similar to what happened when Google shut down GoogleReader and all its competing RSS services were suddenly flooded with new users..

So let me get this straight...

Go long --> crash down due to domino effect of longs closing --> saved by roll back of trades
Go short --> crash down due to domino effect of longs closing --> lose by roll back of trades (not able to close position at a profit)

Go long --> crash up due to domino effect of shorts closing --> lose by roll back of trades? Will you roll back trades in this instance?
Go short --> crash up due to domino effect of shorts closing --> saved by roll back of trades? Will you roll back trades in this instance?


So we are paying you for a service that if I wanted to profit during a crash, would be impossible?

You say you roll back trades due to lenders losing money, but I've asked multiple times how can lenders loose if positions are forced closed before the possibility of lenders loosing, with no answer.
Who cares if the price goes to zero, some people get cheap coins, lenders don't lose a thing, and the next trade after zero can be any number, possibly only a penny less than before the domino effect began.

I lost money last night because ___________?

If you can give me a legit answer to my last question, which defies everything said in this entire post, then I will give up. If not, give me my profit I should have earned. Pretty simple deal if you ask me.

Just an update on my end of things,

It seems BFX just reversed my losses for my trailing stop being closed after the halt.  I did not receive the profits from the position but I understand from there position its a tricky situation.

I feel the result was pretty fair as I can't really complain about not profiting from a situation neither party could seem coming.

I appreciate the effort and quick response from the BFX staff.

You must not be reading very clearly, the system glazed over trailing stop buys post halt.  That means according to your criteria of 'reasonable trading' those of us who wen't short in the 630 range and used trailing stops to ensure an exit still lost money even though markets not effective by the halt/cascading margins calls dropped to 530.

Congratulations, you closed your positions with a limit order, so did the guys who had bullshit limits at sub 300 pricing.

So I guess what your really saying is 'Finex is broken, and everyone else is stupid for expecting anything but limit orders to work'.

BTW trailing stop orders are server-side, not client side.  Unless they're running this entire operation off a 2002 laptop the response time of the server shouldn't have mattered.

Once again, imo the solution here is not flat 'circuit breakers' it is not the responsibility of the exchange to dictate fluctuations in price.  There will be times the market fluctuates 10-20 in very short intervals, its the game were all playing and the nature of a free market.

The real problem that Bitfinex needs to take responsibility for is the potential for their own system to sink the market.  I think the staff explained pretty clearly why they halted trading, cascading margin calls would have resulted in a temporary crash to 0.  However in my case they halted trading resulting in my trailing stop buy not triggering when it should have reasonably triggered at 545 (if BTX followed stamp exactly).

A reasonable solution here would meet 2 criteria

1.) A solution in which market activity reflected a cross all exchanges is not inhibited

- Lenders seem to have a hard time with this one, the market will swing 10-15% if part of your funds are lost on a very natural market movement that is your responsibility as a lender, and you must own it.  BFX kindly offers insurance which is an offer I think you would have to be crazy not to take.

2.) A solution in which the flaws of the BFX system are mitigated.

- The problem here is clearly that BFX sometimes must halt trading in order to protect lenders and traders.  In forex/stock markets brokers hire 'market makers' in order to ensure things like this don't happen.  In regulated markets 'circuit breakers' are also an option but I think most traders would feel uncomfortable with a centralized authority dictating when the market has 'moved too much'

As far as I've seen these are the reasonable solutions I've seen offered

1.) A breaker tied to the Bitcoin price index that will halt trading if BFX prices fall out of a certain range relative to other markets

2.) A market maker to ensure adequate buy/sell support at all time

3.) Scaled leverage option in order to encourage traders to enter a position on the less supported side of the market

4.) A simple option to temporarily turn off margin calls during periods where the system is at risk of cascading

I've enjoyed trading on finex although these system failures have manage to lose me about 2k today, the staff seems responsive and usually is able to come up with responsible and equitable solutions to these problems.  However, in order for me to continue trading at BFX this is what I feel needs to happen immediately.

1.) BFX needs to come up with some sort of order of operations handling post crash halts.  Many limit orders were executed for sub 200 dollars but b/c I used a trailing stop buy my buy order was ignored until after the halt.  This doesn't seem fair b/c if BFX had followed Stamp exactly I should have bought out of my short at 545.  They need a clear and transparent way for deciding who's orders get executed after a halt.  Just the lowball limit orders (which would be bullshit imo that would just encourage people to take advantage of the system) the trailing stops, the stops, or just whoever put the order in first?

2.)  BFX needs to come up with some way to warn customers that a halt is/may come under effect.  IMO a gigantic fucking banner a cross the top of the website saying something like 'ALERT: Trading has been temporarily halted'.  An email might be nice to.

I think these are pretty reasonable requests that should be fairly quick for the staff to implement, and would be a great service to both traders and lenders.

I've noticed now that after every time I place a liquidity offer, the page refreshes and goes back to the USD lending screen even if I was on BTC or LTC before. Up until recently, there would be no page refresh. Can we go back to having this behavior?

This!
I had set up my short a while back and had several tiers of limit buys in place to close it out at a profit, plus some stops above in case it crapped out the top.
When I woke up this morning it was already all over. All my buys had been hit and my position was closed and I made good money. No drama.
I also had some USD loans out so I was glad they were not going to just watch it all burn up. It worked out for me. I have no complaints.

It's working fine for me.

Edit: Chrome doesn't work, but works in Firefox and on my  phone

Yepper, already lost 2k as of now

Is anyone else having this problem
of not being able to close shorts ?


Don't want to get stuck in a position I can't get out of.