Topic: This Bitfinex Credit Bubble cannot end well - page 29. (Read 62099 times)

THen I guess I should move away from them.. I didn't know they have this unfair policy

What about btce? Do they rollback trades too?

As someone who has lost significant gains as a result of Bitfinex's rollback a few months back, I tend to agree. However, it is what it is. This is their policy, they've done it, and they'll do it again. What I've learned is: bid accordingly. Don't aim too low on Bitfinex, or they'll take your BTC.

On a normal market, when position gets liquidated, stocks gets sold. End of story.
If bitfinex would rollback/freeze trades, isn't that market manipulation? They're interfering with "the free and fair operation of the market"
Since bitfinex promised to compensate lenders in case of losses because of a crash, they should pay them out of their own pocket. Otherwise, they should let the lenders take the risk.
Those waiting at the buy side never did anything wrong, they placed their buy orders, btc get sold, buyers get their btc.
You shouldn't undo what has been sold. Once it's sold, it's sold! If it has to crash to $1, then let it crash.

Bitfinex doesn't have necessarily to stop trading when the crash reaches 10%, they can let the greedy traders burn some more, but they will have to stop trading before 400 or they will be forced to reverse the trades with bitcoin at less than 1 usds.

Anyway, any buyer that get some bitcoins at around 400 will make this profitable trade only because of the swaps bubble. On a normal market, they would never get that price (try that on Bitstamp). Therefore, Bitfinex may decide that this abnormal circumstances most be taken in account on the decision to stop trade.

But I agree that, if they don't stop trade, they shouldn't reverse any trades unless that is necessary to pay back lenders. Therefore, if they don't stop trade at 10 or 20%, but only at 35%, they shouldn't reverse the trades. I already wrote that reversing trades undermines their reputation, so it most be a last solution. Stopping trade, no. That is an usual measure in all markets of the world, including the NYSE.

Traders/borrowers are only thinking about the money they will make if bitcoins makes a double top at 700/720 or even goes higher. They should ask themselves if they will find enough people to buy their bitcoins, even if the price reaches that value.

But, right now, this is just conjectural. The risk of a crash won't materialize without a "natural" and strong decline of bitcoin.

Apparently BitVC has 1 million CNY lent out (around 150k US).

Makes sense. Yea, I definitely wouldn't want them to be trading on their own platform regularly because, obviously, they'd have an edge not really being subjected to their own fees and that would be wanton market manipulation. At the same time, I think it'd be smart for them to have some bids in low, in case of a crash, which they could then liquidate on another market (or on their own if there is a quick bounce back) so that they could cover their obligations to their lenders. This, itself, is not a perfect solution and is a bit screwed up, but it seems much more proper than just freezing trading because some people gambled too hard. If I were them, that's what I'd do, but this is doubtful.

So they wanted higher profit and screw those people waiting patiently on the buy side if a flash crash happen?

Bitfinex raised the fees on the interest received by lenders promising in return to compensate lenders in case of losses because of a crash bigger than 40% (in this case borrowers won't have collateral enough to payback the principal to lenders because of the ratio of leverage of 1:2.5).

If bitcoins crashes to 100 usds or even 200, Bitfinex won't have money to compensate all the lenders that loss money because traders/borrowers were forced to sell at 100 and now can not return the lent money. And in case of a serious crash it won't stop at 100.

Even if Bitfinex bought coins at the same price, probably it wouldn't have profit enough to pay all lenders their principal.

Anyway, until now, Bitfinex never recognized having any bid orders in their own orderbook. Maybe it has some, maybe not.

Connecting to Bitstamp for selling bitcoins means Bitfinex sending there their USDs and we selling to Bitfinex at Bitstamp prices, with Bitfinex eating the loss in the case of a crash.

Read this: https://bitcointalksearch.org/topic/m.7775687

selling again... 150 BTC and price dropped 3 USD.  Only God can help those people who will have highly leveraged positions on 21th, when thousands of BTC will be sold. 

I am a bull,  but now i will close my position with lose and wait for flash crash below 500 USD..

What I don't quite comprehend is how exactly would they lose money on a flash crash? For one, there is no market regulation so what is to stop them from trading or having a proxy trade on the exchange to scoop up coins on the cheap? Also, the parties who are overleveraged will have already paid their fees -- there may be an issue if they cannot liquidate for enough wherein there'd be massive losses, but again, this could be offset by buying coins on the cheap. And finally, wouldn't there be a flood of volume in the race back upwards to a respectable price?

In a nutshell... how would this event not just be a redistribution of wealth as opposed to [much of a] destruction of wealth? Furthermore, if it is a destruction of wealth wouldn't the exchange still make the difference back on increased near-term volume. OR... would people shuffle their newly acquired cheap coins off Bitfinex for fear that it would collapse before they had a chance to use them?

I don't fully understand why they don't connect to bitstamp for selling BTC only, not buying.

I understand not buying there as the funds run out too fast and they need to keep wiring over millions of dollars, but selling would add the market depth on bitstamp's side in the case of a massive margin call.  This added support could greatly reduce how low the coins on bitfinex go.  It could even be only a panic switch that they turn on if the spread between the 2 exchanges is more than X%.

Or am I missing something?

They'll rollback trades if a flash crash happen? That's unfair 
I'll move away from their exchange if they do that

We all know how great are cheap coins and that some people are already lining their orders, hoping...

However, I might be wrong, but I don't think that the orderbook will support a crash bigger than 10%. More than 10% and some of the traders that are already in serious negative (some might have been kicking the can down the road for months) will be liquidated and, specially, even the risky traders will start dumping to avoid bigger loses and the risk of a liquidation.

There might be about 66,000 btcs ready to be dumped. About 40,000 borrowed, 16,000 supporting this margin (and these 56,000 can't go anywhere else to sell) and at least more 10,000 from arbitrageurs and potential sellers looking for a high price (see https://bitcointalksearch.org/topic/m.7763304).

So, more than 10% and the crash might go easily to 40% (that is about 248, taking in account current price of 724, so 376; but since many are already at a loss from 644-680, they will start blasting sooner, around 400). At this value, all hell will break loose with everyone being liquidated, and this time we won't stop at 100, we'll go straight to less than 1 usd.

But no one will win nothing with that, because all trades (lower than 400 or all?) will be reversed or else it would be the end of Bitfinex.

Anyone wanting to bet on a crash, better avoid being too greedy and concentrate the money at around 10% and 35%. Less than 400 and you will see your trades reversed. And even at 400 or 450, Bitfinex might decide to reverse it to avoid millions in losses to the traders.

Or bet on Btc-e, those guys have deeper pockets and swallowed the loses of the previous crash. You might get bitcoins for low prices and be able to keep them. Because a crash on bitfinex will scare them too and they are probably also working with high leverage.

But if Bitfinex doesn't stop things at 10% it will be incurring on the risk to have to stop and reverse things at 1usd. And every time Bitfinex reverses the market it's ruining its reputation as a well functioning market. Right now, everyone knows that people with bids lower than 375 are wasting their time. And this knowledge hurts the Bitfinex market.

More than 10% and many traders will lose a lot, not only because they took crazy risks, but also because of the defects of the Bitfinex Market. And these defects are mainly caused by this crazy swaps bubble.

But, of course, if Bitcoin keeps going up, for now, the idiots will be us, the traders will survive and richer.

that was more or less my point. We only now some btc will be sold. We cannot know whether it would be a proverbial "last straw" and would start a free fall. I agree that prices have been relatively stable but longs have been exploding. Now that Finex will finally tighten the leash it will most likely cause some decline - or at least prevent upwards movement as traders would be prepare to bargain hunt. It is anybody's guess if it will be a mild adjustment or if the situation will get out of control temporarily.

I am also not sure why Finex disconnected from Stamp? Do we know if they can re-connect if needed?

Does anyone know how much other exchanges are lending out?

For instance, BitVC (a Huobi project/partner) recently started lending out CNY, BTC, and LTC.

https://bitcointalksearch.org/topic/bitvc-a-new-trading-platform-from-huobi-662221

Traditionally, regulatory deleveraging by itself does not create much of a shock. That said, it often multiplies the destruction when coupled with a downward market event otherwise independent of the deleveraging. A quintessential example is the market reeling during the mortgage bubble when, in the grips of a liquidity crisis, the regulators suddenly demanded that the banks hold more liquidity (exacerbating the demand for the little amount of liquidity and causing margin calls that wouldn't have otherwise occurred under the previous capital requirements). In a nutshell, it is ok to tighten the leash in a relatively stable market, but not when it is reeling.

How does this situation relate? Well, bitcoin has been relatively stable of late so the timing is actually pretty good. That said, the volume has also been abysmal of late, the price is still susceptible to a big swing if Chinese regulators decided to clamp down harder again, and because this is such a small market (and Bitfinex only a moderately sized component of that smaller market) if we start to get some downward movement then there is no telling where it will stop.

Anyhow, flash crashes don't usually occur when everybody expects them to and the reason is pretty simple... parties will want to secure some of the cheap coins so they'll provide a bid that is within 10 to 20% of the market price... they are actually providing the liquidity to protect against it -- notice the big floors at 400 and 500 (if it drops to that, it would still be a big event, but it wouldn't be an end of days sort of scenario by any means). So, there'll probably be some modest excitement, but nothing big. Then again, if we somehow breached 400 then there is very little standing in the way between $400 and about $1.10.

How anybody could know what amount of btc would need to be sold to satisfy daily payments for interests, whether it would induce margin calls etc?

This would be ideal. But BFX has already created incentive for the opposite, by previously freezing the market and rolling back trades.

what