This Bitfinex Credit Bubble cannot end well - page 25.

davidgdg

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Quote from: HarryT1923 on July 22, 2014, 04:10:45 AM

Quote from: rabsie on July 22, 2014, 03:45:54 AM

There is plenty of fiat on bitfinex, but often its better to lend it (I lend my fiat reserves for 2days at a time) than have it sitting doing nothing in an order book. I believe this is why the bid side on finex is often thin, especially at any significant distance from the current price.

Just for the record "This Bitfinex Credit Bubble could/might end well".

so there...

but how can we distinguish between fiat that's there to buy in and fiat that will stay lending? some are there only to lend, i am sure.

It's not black and white. If BTC prices on Bitfinex fell 30% below other exchanges, a lot of lenders would use their fiat to buy BTC as soon as their swaps expire.

Gargulan

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Quote from: DannyElfman on July 22, 2014, 10:35:48 AM

Quote from: FattyMcButterpants on July 22, 2014, 01:04:18 AM

Quote from: Harley997 on July 21, 2014, 10:54:23 PM

Remember that the prices and trading done at one exchange will affect the trading at other exchanges. If the price in bitfinex goes too far below the prices on other exchanges then people will buy on bitfinex and sell on BTC-e for example, attempting to arbitrage, this would create liquidity on bitfinex and cause prices to fall on other exchanges.

sure, but arbitrage takes time. in this case, you'd have to sell on BTC-E, wire out fiat, wire it into Bitfinex, then buy. that sort of arbitrage is very risky to attempt in a fast-moving market like bitcoin.

If you already have fiat at an exchange then you would not need to wait for the banking system, this could be done after the fact. This kind of arbitrage could potentially work like this:

1 - You already have 1 BTC at BTC-e and $630 at bitfinex (for this example we will say that bitcoin is trading at $630)
2 - The price on bitfinex declines 15% to $535.50 so you sell your 1 BTC on BTC-e for $630, and spend the $630 that you already have on BTC-e on ~1.176 BTC.
3 - You withdraw your 1.176 BTC from bitfinex and eventually deposit it back to BTC-e.
4 - Once you see that bitfinex is not going to try to roll back trades you withdraw fiat from BTC-e, and redeposit it at bitfinex

Not very practical as the price is usually consistently low on one exchange and high on another. After factoring in deposit fee (if using banking system), the profit is all gone.

DannyElfman

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Quote from: FattyMcButterpants on July 22, 2014, 01:04:18 AM

Quote from: Harley997 on July 21, 2014, 10:54:23 PM

Remember that the prices and trading done at one exchange will affect the trading at other exchanges. If the price in bitfinex goes too far below the prices on other exchanges then people will buy on bitfinex and sell on BTC-e for example, attempting to arbitrage, this would create liquidity on bitfinex and cause prices to fall on other exchanges.

sure, but arbitrage takes time. in this case, you'd have to sell on BTC-E, wire out fiat, wire it into Bitfinex, then buy. that sort of arbitrage is very risky to attempt in a fast-moving market like bitcoin.

If you already have fiat at an exchange then you would not need to wait for the banking system, this could be done after the fact. This kind of arbitrage could potentially work like this:

1 - You already have 1 BTC at BTC-e and $630 at bitfinex (for this example we will say that bitcoin is trading at $630)
2 - The price on bitfinex declines 15% to $535.50 so you sell your 1 BTC on BTC-e for $630, and spend the $630 that you already have on BTC-e on ~1.176 BTC.
3 - You withdraw your 1.176 BTC from bitfinex and eventually deposit it back to BTC-e.
4 - Once you see that bitfinex is not going to try to roll back trades you withdraw fiat from BTC-e, and redeposit it at bitfinex

Coinfan

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The flash crash was dependent on a decline of the price, that didn't occur. Without this, the measures that Bitfinex adopted will be effective to bring the swap volume slowly down.

But they won't be "safe" from a crash, because the swap volume will still be huge, even at 20 million, taking in account the orderbook. One has to go to 3 usds to find a total of 8000 btcs on the bid side.

HarryT1923

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Quote from: rabsie on July 22, 2014, 03:45:54 AM

There is plenty of fiat on bitfinex, but often its better to lend it (I lend my fiat reserves for 2days at a time) than have it sitting doing nothing in an order book. I believe this is why the bid side on finex is often thin, especially at any significant distance from the current price.

Just for the record "This Bitfinex Credit Bubble could/might end well".

so there...

but how can we distinguish between fiat that's there to buy in and fiat that will stay lending? some are there only to lend, i am sure.

rabsie

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There is plenty of fiat on bitfinex, but often its better to lend it (I lend my fiat reserves for 2days at a time) than have it sitting doing nothing in an order book. I believe this is why the bid side on finex is often thin, especially at any significant distance from the current price.

Just for the record "This Bitfinex Credit Bubble could/might end well".

so there...

FattyMcButterpants

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Quote from: Harley997 on July 21, 2014, 10:54:23 PM

Remember that the prices and trading done at one exchange will affect the trading at other exchanges. If the price in bitfinex goes too far below the prices on other exchanges then people will buy on bitfinex and sell on BTC-e for example, attempting to arbitrage, this would create liquidity on bitfinex and cause prices to fall on other exchanges.

sure, but arbitrage takes time. in this case, you'd have to sell on BTC-E, wire out fiat, wire it into Bitfinex, then buy. that sort of arbitrage is very risky to attempt in a fast-moving market like bitcoin.

Harley997

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Quote from: Yololintian on July 20, 2014, 11:24:14 PM

Quote from: ACCTseller on July 20, 2014, 09:53:16 PM

Quote from: thezerg on July 20, 2014, 09:41:55 PM

Quote from: Gimmelfarb on July 20, 2014, 03:15:05 PM

Quote from: FUR11 on July 20, 2014, 02:50:56 PM

Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

what they do is halt trading when the flash crash occurs, then they keep trading frozen while they wait for other markets to recover. then they unfreeze trading after rolling back flash crash trades. and lots of traders get screwed....

...and the idea that they might freeze trades to protect lenders discourages people from betting on a flash crash and so the bid order book remains thin.

I would think that a lot of people have a price in mind that they would buy bitcoin at if the price were to drop to a certain level.

Just because the order book is thin doesn't mean people will not step in to purchase if the price drops, say 10%

Under normal circumstances I would definitely step in to buy some if bitcoin drops 10% or more in a short period of time but consider that some people like me will not at this point in time because of the looming threat of a liquidation event on bitfinex if the price does drop about 10-20%; I have orders set really low and I hope that if they get filled bitfinex does not rollback trades. I'm also not sure about reports that bitfinex rolled back most trades during the last liquidation event in early February because my order at, if I remember correctly, 520~ was filled, and the flash crash happened in the low 600 range; and once trading resumed the price started higher than my order.

Remember that the prices and trading done at one exchange will affect the trading at other exchanges. If the price in bitfinex goes too far below the prices on other exchanges then people will buy on bitfinex and sell on BTC-e for example, attempting to arbitrage, this would create liquidity on bitfinex and cause prices to fall on other exchanges.

superbit

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Quote from: Newbie1022 on July 21, 2014, 01:49:46 PM

Looking at the Bitfinex stats, I haven't really seen any deleveraging activity occurring at all. Is this going to be a spread out event? Something should happen. Not really sure what that something is. But there should have been some sort of visible pulse if they really did change their policy and nada.

If it is only on new offers taken out today then it will be very gradual as current offers expire over the next 30 days.

Newbie1022

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Looking at the Bitfinex stats, I haven't really seen any deleveraging activity occurring at all. Is this going to be a spread out event? Something should happen. Not really sure what that something is. But there should have been some sort of visible pulse if they really did change their policy and nada.

FattyMcButterpants

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Quote from: Yololintian on July 20, 2014, 11:24:14 PM

if I remember correctly, 520~ was filled, and the flash crash happened in the low 600 range; and once trading resumed the price started higher than my order.

yeah, but the flash crash went down to about $100, just like BTCE.

you can still see it on the charts if you go back and look at the low of the wick. the price started that high because they halted trading and rolled back orders.

Yololintian

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Quote from: ACCTseller on July 20, 2014, 09:53:16 PM

Quote from: thezerg on July 20, 2014, 09:41:55 PM

Quote from: Gimmelfarb on July 20, 2014, 03:15:05 PM

Quote from: FUR11 on July 20, 2014, 02:50:56 PM

Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

what they do is halt trading when the flash crash occurs, then they keep trading frozen while they wait for other markets to recover. then they unfreeze trading after rolling back flash crash trades. and lots of traders get screwed....

...and the idea that they might freeze trades to protect lenders discourages people from betting on a flash crash and so the bid order book remains thin.

I would think that a lot of people have a price in mind that they would buy bitcoin at if the price were to drop to a certain level.

Just because the order book is thin doesn't mean people will not step in to purchase if the price drops, say 10%

Under normal circumstances I would definitely step in to buy some if bitcoin drops 10% or more in a short period of time but consider that some people like me will not at this point in time because of the looming threat of a liquidation event on bitfinex if the price does drop about 10-20%; I have orders set really low and I hope that if they get filled bitfinex does not rollback trades. I'm also not sure about reports that bitfinex rolled back most trades during the last liquidation event in early February because my order at, if I remember correctly, 520~ was filled, and the flash crash happened in the low 600 range; and once trading resumed the price started higher than my order.

ACCTseller

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no longer selling accounts

Quote from: thezerg on July 20, 2014, 09:41:55 PM

Quote from: Gimmelfarb on July 20, 2014, 03:15:05 PM

Quote from: FUR11 on July 20, 2014, 02:50:56 PM

Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

what they do is halt trading when the flash crash occurs, then they keep trading frozen while they wait for other markets to recover. then they unfreeze trading after rolling back flash crash trades. and lots of traders get screwed....

...and the idea that they might freeze trades to protect lenders discourages people from betting on a flash crash and so the bid order book remains thin.

I would think that a lot of people have a price in mind that they would buy bitcoin at if the price were to drop to a certain level.

Just because the order book is thin doesn't mean people will not step in to purchase if the price drops, say 10%

thezerg

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Quote from: Gimmelfarb on July 20, 2014, 03:15:05 PM

Quote from: FUR11 on July 20, 2014, 02:50:56 PM

Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

what they do is halt trading when the flash crash occurs, then they keep trading frozen while they wait for other markets to recover. then they unfreeze trading after rolling back flash crash trades. and lots of traders get screwed....

...and the idea that they might freeze trades to protect lenders discourages people from betting on a flash crash and so the bid order book remains thin.

Newbie1022

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Quote from: Habeler876 on July 20, 2014, 07:03:58 PM

So, no noticeable dumps at 00:00 UTC -- so I guess it's not going to be that predictable. Grin

I do wonder what effect this will have on the market (the new swap rules).

Anybody else notice how asymmetrical the market depth on Bitfinex is right now? Up 30 would take 2500 whereas down 30 would take 1800. Ever more noticeable, up 70 takes 6050 and down 70 takes 3680. Who in their right mind would buy at market price right now with such an imbalance even if you didn't anticipate an implosion in the next 24 hours? I think one way or another, we are going to see some real fireworks, today.

Habeler876

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So, no noticeable dumps at 00:00 UTC -- so I guess it's not going to be that predictable. Grin

I do wonder what effect this will have on the market (the new swap rules).

Gimmelfarb

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Quote from: FUR11 on July 20, 2014, 02:50:56 PM

Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

what they do is halt trading when the flash crash occurs, then they keep trading frozen while they wait for other markets to recover. then they unfreeze trading after rolling back flash crash trades. and lots of traders get screwed....

FUR11

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FURring bitcoin up since 1762

Oh wow, I didn't know that Bitfinex was in danger of such a big bubble collapse! I was thinking about lending some FIAT while it's doing nothing. I really wonder how safe their promise really is that they liquidate positions quick enough. Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

Newbie1022

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BitBits

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Quote from: Leina on July 19, 2014, 09:32:04 PM

Quote from: molecular on July 19, 2014, 11:45:31 AM

To go long you need collateral in USD.

Think the latest news update said you can use bitcoin as collateral to "self fund".

Correct me if I am wrong.

Use of BTC as collateral has always been the case, I can confirm that as I've done it myself in the past many times (backing the position swaps are in USD though). So, relative to USD funds on the account one could effectively go with 3.5:1 margin on long position. After the 21st this will change and leverage for those using BTC as collateral will become 1.5:1 (or 2.5:1 relative to USD account's value).
Just to note, use of BTC as collateral, makes one's "tradable balance" floating. If you go long and BTC price is increasing, you can add to your position. The same goes for the opposite market direction. If BTC price is falling, "tradable balance" is decreasing and if price drops a lot, the margin call would come a LOT sooner then if the position was "USD backed"

Topic: This Bitfinex Credit Bubble cannot end well - page 25. (Read 62099 times)