Topic: This Bitfinex Credit Bubble cannot end well - page 30. (Read 62099 times)

How do you know that? Can anybody but Bitfinex insiders have any idea? That would heavily depend on swaps "age", not only their number.

10% and freeze trading,that would be an outrageous bias move. Lenders (many taking loans) are fighting to offer low rates( 0.16% ) considering the level of risk which is currently higher than ever.
I think the only way to discourage high level of margin is for a crash to happen, some positions get liquidated and few traders/lenders lose money so that a precedent of High Risk lending/trading is set.

We have to recognize qualities to Bitfinex. They decided fast and, more or less, well.

However, if this measures (that in fact limit the leverage to 1.5) will be in force only on the 21 and even then won't affect existing positions, only after this date we shall see a decline on the grow of the swaps volume, but even then not necessarily a fast decline of the amount of swaps.

At current pace of grow of about 300,000/400,000 per day (see http://www.bfxdata.com/bitfinexLiquidityUSD.php), the volume will be at 34 million on the 21.

These measures don't solve the already existent problem. Having 31 million of swaps is a problem now. Having 34 millions will be worst. For those measures to have any real effect (like making the swaps go to about 20/25 millions), unless there is a crash, it will be necessary to wait perhaps more than a month.

The problem isn't the new interest collecting policy. Those are peanuts.

If bitcoin keeps going up, there won't be a crash. But what if it starts to decline? Will there be enough chairs (bitcoins bids at an acceptable price) when the music stops playing?

Bitfinex did the right thing when announced the new measures. We can't point fingers when they don't announce in anticipation new measures and point again fingers when they do announce them.

The question is: do we have a problem? And, if yes, as I think, is it an urgent problem? If it is urgent, 24h most be enough.

We can say that the urgency of the problem depends on the evolution of bitcoin. It is real urgent if bitcoin's price is about to decline. Well, about that it's anyone guess. But if we agree that the consequences can be severe, the simple serious risk should make something urgent.

 I think it's not overreacting to defend that the new measures should apply sooner and new swaps should be frozen, unless they were to renew old ones, for the sake of the lenders, the traders, the exchange and the community/bitcoin. If there are serious problems with Bitfinex, that will hurt bitcoin.

Anyway, Bitfinex most follow the situation very close, because it can escalate from urgent to an emergency. And should be prepared to adopt drastic measures, like freezing trade, if bitcoin drops more than 10% on Bitfinex alone.

In what situation could a person trading on margin possibly make money if the price of the asset he's long doesn't increase faster than the interest he's paying to long that asset.

It was true during 90s Asian financial crisis and 07 housing bubble

But isn't this true in pretty much every situation ever?

Sounds like a textbook "Minsky moment"  if its true what this thread says about the margin trading.

Long positions on margin need the price to rise greater than the interest or else price will crash.

This is unlikely. The amount of BTC that would need to be sold as a result of bitfinex's new policy would be minimal

That's a good point. People were painting it like they would auto liquidate the BTC at a set time everyday or something. They may do it more like Bitpay. They could wait for orders to fill in, or sell it off exchange, or they could hold more BTC speculatively, if their operational costs allowed.

True. Plus, I'm not convinced they will dump immediately. This is just operational books for them. They were previously floating the loans and paying out the USD. They don't HAVE TO sell the BTC they take from trading accounts. And if they do sell it, or a % of it, they don't HAVE TO do it immediately or at some set time.

I was confused by the way they worded it... does this mean you cannot go 3.5:1 leverage long btc if you only have btc in your margin wallet now? Also, does anyone want to speculate the amount of total hidden orders above 100 or so? I don't think it would be more than the amount of not-hidden orders above that amount. I just want to get an idea about how much liquidity they actually have, because I'm finding the likelihood of a flash crash more and more likely as the interest the longs have to pay continues to pile on while the price continues to go nowhere.

This dump will be sub 50BTC which is meaningless.

Sounds like they want to start finally addressing this over-leveraging issue, and cut down people's margin a bit (at least the amount they were floating for people against their future closed position P/L).

Expect flash crash in next days at least on 21th. Ever day after 21th there will be a small dump because of daily btc to usd swap. I am dumping right now first 200BTC

Well they've been effectively allowing more leverage than intended by calculating swaps this way. Bitfinex never was very good at math. Maybe they're finally starting to worry about the risk they are exposing themselves to by having such a shallow book while allowing so much leverage.

imo people here dont understand the loans interest exposure here a example

a trader borrow 1000$ to go long and he goes buy and hold over time the borrowing cost go up to 100$ now the market crash and the trader got a 100% loss the total loss for bitfinex is not just 1000$ but is 1100$ because the loan interest is charged then the position is closed

i say that bitfinex have over 2 mill usd exposure from loans and the recent change was done to avoid loses on top of the the leverage change is a step to kill the bubble and reduce risk

get your pop corn this will be fun 

Considering the current growth rate of $ swaps, by the 21st July there should be about 34M$ total,
and with an average buying price of 600$, and the start of 16M$ on the 19th May (start of local uptrend),
about 30k BTC would have been bought on credit. The stage is going to be set for a nice flashcrash.

what do you  mean?
if one has no usd in his wallet, but a btc long position, bfx will:
-sell btc to cover the swap cost
-make a margin call.
haha, if that results in a margin call, we will have a lot of fun an 21st

Lenders need to be paid in USD, the BTC will thus be sold.

does that mean that as of that deadline, they are going to chop people's trading wallet's down by their total outstanding swap, up to $10k daily? that will up people's margin requirement / margin call level. might drive Bitfinex price down.