Topic: [OFFICIAL]Bitfinex.com first Bitcoin P2P lending platform for leverage trading - page 257. (Read 723903 times)

No, see previous post,
You're exactly right, I'm a realist.

Sure,

I looked at just lending on BitFinex,
only problem with that is that a Trader can go Belly-Up
and the lender can still loose, at least that's what I read
when starting with BitFinex, but that does not appear to
be the case, there was nothing mention to the effect of
a "Circuit Breaker" to halt trading to "Protect" Liquidity Providers, a "Fail Safe".

Meanwhile I've got to get back to the Market, the bills don't stop coming in
when BitFinex decides to stop the trading engine, but as previously stated,
That Lender's Side is beginning to  look more and more attractive to me, but
of course there is competition there, everyone competing to see who can offer
the lowest rate, which is another reason that it turned me off.

Don't be delusional, its only hypothetically up to 14%.
Actual rates goes over 1% only when insane rally and for a few hours only, rarely 1%, and is averaging 0.3%.
It is currently at 0.178%. Are you ready to lose 95% of your funds for that rate?

If you think about it, the insurance funds, by their very DEFINITION, cannot be at the same level as the lent funds.
Otherwise, if BFX would have 16 million lying around, they would be smarter to trade or lend them than to insure your funds right?

Also, let's assume in 1 year they have 160 millions lent...how will that be insured?

In the regulated markets, money for margin trading is provided at a cost by the banks to the trading platforms, and that cost is reflected in your spread.
You need to be regulated by the financial authorities though, in order to get such a treatment from the banks as a trading platform. And that ain't gonna happen soon for the BTC exchanges.

That insurance fund is a relatively stupid thing to begin with - there are probably however people who do not want to be able to loose a single cent. While I would accept to loose a few percent of the money I lend out (which is quite a bit more than what you claim to have lost) I don't think that liquidating at beloww 100 USD when BTC are traded at 600 USD a few minutes before is something that should happen.

If people don't want to be able to loose a single cent - pay for insurance. If you want some risk - lend uninsured. If you want to snatch up sub 100 USD BTC just because the BTC funds at Bitstamp are depleted and the order book gets thin at the bottom... maybe go elsewhere.

In other news, I'm up a few 100 USD from the trade I announced before in this very thread. If you did what I did, you'd be celebrating right now instead of hatin' on lenders. I can show you some data from last April, I'm sure I would be happy to lend at THESE rates, which will come back if you scare away the current lenders with the stuff you propose.

I don't see a problem even if Bitfinex put lender in a favorable condition.

The market force will do the trick and adjust the interest rate accordingly. If all of us (including you) think that being a lender is more favorable , why not just lend out the fund instead trade in a such a high risk environment?

That's the risk-reward benefit of being a "Trader"




That exact risk is why I did not become a "Lender" from the start.

I guess the lenders are still exposed to risk of default from trader, as a trader may have a negative balance in an event like this. The trader may just go away with a negative balance account.

I guess this makes the difference on offering insurance (btw, the amount of insurance funds are actually very small when compare to the total active swaps)

So, taking your argument further, when a trader has more than 14% profit per day (not uncommon in this market), we should call it "Predatory Profit-making"?

Regardless of whether Bitstamp's api was down or Bitfinex's connection to Bitstamp's api was down, my point still stands regarding the lenders point of view.

Yes that is the way things are
suppose to work, but the scenario that
you just explained does not appear to be the
case.

As previously mention,
The Lender's side of BitFinex is beginning to Look
more and more attractive, 14% interest compounded Daily ?,
that would be 420% monthly, not a bad deal, especially if one
adds in the fact of the Platforms heavy hand in protecting lenders,
it's a "No-Brainer", or in the U.S.A. it's called "Predatory Lending".

Not sure if it's just me or not, but that "Swap Interest Rate"
appears to be moving faster than should be when in a Leverage Position,
almost like a "StopWatch", never seen interest accrue at such a fast rate in my life.

I'd like to ask a new question....

Is Bitfinex also using transaction IDs as a primary key for their withdrawal accounting.  IE. Are they possibly impacted by the same type of double withdrawal exploit that Gox and Coinbase seem to be vulnerable to?

I'm not sure if you are aware, but there IS a cap on the profit of the lenders: it's at 14% per day. Try it yourself to put an offer higher than that and you will see.

Also, the risk of the Lender is not the same as the Trader's, and they should not be compared. What you want to compare is the risk PROFILE.
To explain: as a Trader, when you put a long or a short you have the theoretical opportunity to have unlimited profits (if the price goes up), or an extremely high but none the less limited opportunity if it goes down (to 0.00001). So your risk is quantifiable (and manageable with a Stop Loss), whereas your profits can grow very, very much. Whereas for a Lender, you have ALWAYS a limited profit opportunity (the rate you charge, with a max at 14% per day), whereas your risk is more or less complete loss of funds (the insurance pool is almost always depleted, as it's just $50k+ vs the 18+ MILLION in lent funds recently), at any point in time when and if the market crashes.

If we were in a regulated market, the lenders would be protected, and your costs for funding would also be lower. But, as we are in an unregulated market, the Lenders are actually, from a business POV, MUCH MORE important to protect, keep and increase their numbers than are the Traders. Put another way: there are lots of Traders around, but very very few Lenders.

So, my humble opinion is that BFX did the right thing by stopping the trading momentarily. Of course, the right thing for their business and for the Lenders; but not the right thing for the short sellers.
Pragmatically speaking, they can find short sellers (Traders) any time they want, whereas if they lose 16 million USD from Lenders, their platform will be dead tomorrow.

Hope it makes sense for everyone on this forums, especially for those amongst us bickering over pennies lost here and there in "potential" winning trades.

It is debatable whether Bitfinex are favoring the lenders over the traders. The connection to Bitstamp's api was down during the flash crash to 100, so the lenders would argue that the flash crash to 100 should never have happened (therefore the lenders are not liable to losses). The liquidation crash would have been far more orderly had the liquidated trades been made on Bitstamp with a price floor of no less than 450 judging by Bitstamp's bid depth at the time.

Lenders money is safe.

Giancarlo
Bitfinex Team
[/quote]



Fortunately,

I was in Fiat at the time,
However it would Appear that BitFinex
is willing to go to any means necessary to "Protect Lenders",

But the other side of the coin is that just as Traders know the assume risk
when taking a position we assume that Lenders also take the same risk.

Stopping trading to protect lenders clearly screws the Traders that were in a
Short Position, and any other Traders that may have just wanted to pick up Cheap Coins.

Lenders profit from the incredibly high interest rates they charge and now would appear to
also be at very little risk themselves, one would think that the equation is that they are able
to charge such high interest rates because of the risk that they take, if that risk is going to
be minimized now by BitFinex everytime the market crashes then it would only be logical to
also put a cap on the interest rates that the Lenders are able to charge.

Otherwise it would behoove of all of us to quit being Traders and all become "Lenders" with
the un-equaled  amount of "Protection" that BitFinex is affording to it's Lenders.

Unfortunately one will not function without the other, actually Traders can trade without Lenders,
but Lenders can't lend it they don't have an Traders willing to take their loans.

After price rose above 700 I was planning to short the drop, fortunately for me the power went out
in my house, when it came back up one hour later I saw BitFinex price has dropped to 100 and was
currently at 598 (halted price), immediately went to  http://www.mrspeaker.net/btc/  and saw that
all other Exchanges were working fine.

I guess my only question would be one of if Traders in short positions were screwed out of their profits,
and Traders just wanting to pick up some cheap coins, then were the Traders that were in Long Positions
also rolled-back or adjusted in any manner ?

Also at just what price was trading re-initiated ?
I'm looking at BitCoinWisdom and it shows the next lowerest prices after 100 was $527.40,
But that's not correct, when I got my system back up and running the price was frozen / halted at $598,
now price is at $675,
Lost profits and opportunities for all.

No need to implement the "Circuit Breaker" idea,
seems that it's already in effect, manually.

Takes the "Wind out of the Sails"
of the dream of having that Super Short Position one day,

Guess BitFinex won't be making any "Georges Soros" any time soon, lol

http://en.wikipedia.org/wiki/George_Soros

Currency speculation

On September 16, 1992, Black Wednesday, Soros' fund sold short more than $10 billion in pounds, profiting from the UK government's reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency.

Finally, the UK withdrew from the European Exchange Rate Mechanism, devaluing the pound, earning Soros an estimated $1.1 billion. He was dubbed "the man who broke the Bank of England", In 1997, the UK Treasury estimated the cost of Black Wednesday at £3.4 billion.

Should the trading not be halted,Only a handful few would win it all,  the cascading effect would continue and new swaps closed and so on, till the winner takes it all at $0.001 per btc.

Most lenders would lose all their funds and over 99% of margin trades would get liquidated.

Bitfinex put some rules on when trading should be halted to be fair and square for all.

No, I am a lender in Bitfinex and receive daily interest payments. I may reduce my lending exposure after this incident but will continue to lend. If Bitfinex has to pay everyone (like yourself) for the profits that never belonged to them in the first place, then the lenders will be first to lose out.




You were obviously not around in 2012 when btc-e was attacked overnight and reversed trades which were made over several hours:


https://btc-e.com/news/81


Few complained back then because most agreed reversing was in the best interest for everyone. The reversing of trades with Bitfinex a few days ago is no different.

If you look at my posts, I target events, not people. The past can't be changed but we can learn from it where necessary and improve on the system for the better. I am providing feedback for your considerations to improve the system.

At where I stay, the interest rate per annum for deposits is even less than your swap rate per day. Why is this so? I attribute it to the risk attached for the premium. If protection of the liquidity swaps is justifiable, how do you justify the sky high swap rate?

There must be clear rules in the game. Players must understand the rules. Exchange owners must uphold them. With that, there will be no justification of crying fouls due to trading losses.

For your consideration.

Well at any rate, it looks like your going to have to find a different exchange if you want to play out the real interesting swings.

It seems for the time being the max you should expect to make from any BFX position is around 5-7% after that its a safe bet they'll halt trading.

so the bottom line is there is no point in margin trading is there