Bitcoin Forum

Currently there are 11.8 Million dollar of USD swap demand, and only 1.1 Million of offers.

http://www.bfxdata.com/

Is this bad or good ?

Nick.

what is USD Swap anyways?
is bitfinex an exchange, right?
swap USD <--> BTC ?

It's bearish. The amount of money loaned out to take longs is now at an all time high meaning prices have been supported on fake money. Now the supply of real money to lend out has dried up which results in the supply/demand you mentioned. This is going to cause interest rates to rise. The higher interest rates will force people to dump as it is no longer profitable to hold with the way the trend currently is. This could end up turning into a cascade of stop losses and margin calls as 40,000BTC purchased with loaned money are dumped.

Thankyou for the explanation TERA.
Technically the market was supported on a bubble that will burst if no more money is put in and this will make the price fall?

Correct ?

Duke

I'm not really sure. There may have been some offline block purchasing also.

I use bitfinex mainly to lend money, in the last two weeks interest rates grew hi and I was able to gain up to 0.32% daily... this is good news for me   :D

Nick.

TERA, is it possible to guesstimate when the (mass?) forced closure of longs will happen?
I believe that the market still has about a week of consolidation before deciding on major direction.
BFX could be the market leader, in a bearish way, ultimately meaning it could trigger capitulation.

It just means people are generally bullish and think the price is going to rise again soon so the demand to borrow USD and find a good spot to go long is very high. The opposite happened when we fell from 800 to 340. The demand to borrow BTC was at an all time high back then and people were generally bearish. Of course this can't go on forever and at some point the tide will turn again but this fact tells us nothing when this is going to happen so this is neither bullish or bearish.

When we were at $680 I originally predicted a drop to $560 followed by a month of consolidation at $600 before picking direction. Of course everyone laughed at me then, called me an uberbear and thought that was ridiculous and impossible. Instead it turned out even worse than I predicted. It dropped to $537 ($522 on finex) and its been about a week of consolidation but 600 cant seem to hold. I'm not sure what will happen. I still think the trendline will be somewhat tough to break. It might be like the premtgox action at $800. Who knows. Also the longs probably wont all be dumped at once - many will hold for bounces in the 400s.

Pre-gox failure there was this other trendline that broke and 1 day MACD went down but we didn't start crashing right away. Instead the bulls were stubborn and held the fib line at 800 for a month. Longs went to an all time high until they were finally dumped in February - bfx data confirms.

We have a similar situation now but with a bigger trendline and with the 3 day MACD instead of the 1 day MACD and longs are at an all time high. Once the trendline breaks and the 3 day MACD goes down the longs might still hold the 550 fib for a month before they dump.

https://i.imgur.com/d6mElEH.png

https://i.imgur.com/QZy8JR4.png

It has to be clear that the trendline is broken; not just that it's being tested.

Hello, please never ever take advice from trolls like Tera. She is known here for her doom predictions. Basically all she does on this forum is telling people we will go down. Just like she did with you.
She will manage to turn ANY situation into something bearish. It's beyond pathetic but that's the life of bear trolls.

The only difference between tera and fonzie/falling is that tera includes charts.  She is a very good troll

Tera knows how to subtly instill fear and doubt in people, I think he secretly likes it. I am convinced he's not a she though, another way he's got you all wrapped up into his enigmatic appearance. ;)

No idea where this he/she stuff came from in the first place. Did he make subtle inferences to timing the markets to his menstruation cycle?

Anyway, it has been ignored for quite some time. I'm interested in untainted opinions. Anyone who constantly peddles the same, tired angle regardless of what's happening isn't worth my time.

I just point out TA, patterns, and fractals. No agenda. If technicals were more bullish, my charts would be too. KEep in mind also they are not predictions but possibilities. There is a possibility also of a rally, if the right events develop.

The lending part is pretty interesting concept. Of course there are a lot of people by now who think that they should borrow money to buy bitcoins. Now they are waiting to break even and the only way for them to default would be a longer than expected consolidation. The lenders must feel uncertainty and fear before they turn successful, otherwise it would be too easy.

A whale who knows that a lot of bitcoins have been bought with borrowed money will keep the prices down until the lenders are under water and forced to start paying back the loans. When lenders have turned unsuccessful a new rally begins as it is now profitable for the whales.

Tera just to point out your bias, notice that you did not respond to the piece of data that the OP highlighted and do not seem to be aware of that.  Your comments refer to the fact that a lot of USD has been borrowed on bitfinex ($25M).  However the OP was talking about the DEMAND for borrowing, which also looks like it is quite high ($12M).  A high borrowing DEMAND is clearly bullish, whereas a high borrowed amount is open to interpretation.  Its bearish because as you have pointed out at some point these positions need to be unwound which could put a lot of coins on the market, assuming the borrowing was used to purchase coins -- bullish if you believe in the wisdom of the crowds.

You often stress the bearish possibilities and ignore the bullish ones or mention them very briefly as if unimportant. Also you say the demand for USD loans is a bearish indication which is false and you should know that. The current technicals aren't bearish at all, just because the recent correction went a bit deeper than you initially thought (disregarding Chinese exchanges) doesn't mean the entire uptrend from $340 is over now. We saw the same pattern after the initial spike from $340 to $548. I can even see bullish divergences forming on the shorter timeframes, so your bearishness looks all in all very biased and one-sided to me.

"No agenda"

Hilarious.

I'm seriously wondering if he's trying to fool himself or us at this point.
Either way it looks amazingly stupid.

I wouldn't read too much into it: the direct comparison of swap demand vs. offer is just a snapshot, so it's difficult to put it in context. Or am I missing how to get a historic view of it?

More relevant imo is a historic comparison like active swaps and average rate of active swaps. And that view, despite what some bulls in here like to think, is slightly bearish, with USD swaps pretty much maxed out.

Add to that a falling average return rate (better view perhaps by looking at FRR). Approaching a low point that we last saw ~10 days ago, shortly before the drop from ~650 to ~550.

I'll go out on a limb and guess good. If you look at the longer term history of total USD swaps at the site http://www.bfxdata.com/ (http://www.bfxdata.com/), back during the bitcoin price jump last year the USD swap amounts outstanding were pretty much continuously hitting new highs. The higher interest rates attracted more and more USD lenders and this IMO partially fueled the overall bitcoin price rise. So I'm hoping to see something similar happen here and the interest rates and swap demand stay high enough to suck in a bunch more USD lenders.

TERA if there would be a lot of demand for shorting BTC would you think this is bullish?

if bitfinex was more trusted, we would see the sawp demand fulfilled, not saying bitfinex is not legit or trustworthy, but i'm sure the shady look and feel to the bitcoin exchanges is holding back alot of money.

Why would that be slightly bearish? I think it's neutral, but maybe I'm missing something here so I'm willing to learn. I just don't see the connection knowing only this piece of information.

Good point.  The silk road coins auction will likely be a better indication of real demand, especially by larger, more established players... it depends on how close to spot those coins are sold.

Sure, I don't mind explaining how I arrive at that conclusion. I'm not an expert on reading swaps, but my perspective on them is as follows: I read this one similar to spotting divergences on a price derived indicator -- the "divergence" here is that price is falling, or at least stagnating, but USD swaps make new highs. In my experience, this is an early bearish signal. Example: February 6 this year.

I don't get it. The average rate on active USD swaps is actually pretty low. Doesn't that mean that the supply of USD that can still be lent is high? So not bearish.

But price isn't falling? We corrected to $537 and even $522 on Finex because of margin calls. USD swaps actually went down during that correction by a few million USD. Then the price started rising up to $610 again together with USD swaps, and now we're consolidating/flagging in $580-610 area until we see another breakout. The most likely way forward looking at the technicals here is a continuation of the trend, which is upwards. I don't think I can agree with your reasoning here that the number of USD swaps is a bearish indicator, but good luck if you decide to trade based on this. :)

I didn't say anything about trading based on this. It's a small piece inside a larger puzzle, and I am slightly more bearish as a result of it. That's all.

The USD swap peaks I mean are on June 18 (crossing 26M USD), with price at the time ~$80 below the $680 top. Like I said: I think of it as a "divergence". Not the same as a stand-alone sell signal (which rarely exists anyway :D)

BTC shorts are generally maxed out at or approaching bottoms. Go see for yourself:

http://www.bfxdata.com/bitfinexLiquidityBTC.php

Total sum of active $ swaps is still 25M$, just below the peak, average rate has dropped.
I don't know, is BFX supposed to have all the $, or can they operate with a fractional reserve (this may be a silly question  ::) )?

The argument that bitcoin is being held up by borrowed money in false. I am planning money, money id otherwise have in btc.

No! Not Possible!

The Bitfinex exchange operators, with access to all BFX trader positions, stop losses and limit orders, and with absolutely no regulatory oversight, would never dare to start trying to Jimmy the numbers and/or operate fractional reserve systems in order to multiply their profits by an order of several magnitude. Only bad exchanges like MtGox would even dream of attempting to dabble in those sort of black arts!

Not that it matters either way, but are you a man or woman? People around here are speculating...


For the record though, you were pretty accurate on the latest market correction after this most recent rise to near $700 (and back down), I remember reading it as we were near the top..

Well, all that money is supposed to be in the "deposit" accounts of lenders. After the contract is up, you are free to move the money..... so I certainly hope no fractional reserve. :)

if the history repeats itself as in $10->$2 collective short by bitcoinica, we would see a slow decline to $100 for half a year, then bitfinex would run with customer's money and the rally to 10000 starts :)

PS this comment obviously is a joke, as is any thread trying to predict future price based on tea leavesbitfinex

PPS somebody here actually lends money through bitfinex? Brave souls, my hat off to you. I also have a nigerian prince inheritance we need to discuss with you, PM me.

It's not a demand for bitcoin. It's actually a demand for USD. It's called "USD swap demand" is a market for people to borrow USD, based on the interest rate.

i actually think tera made a good point this time, but i don't think it will go down to the 400s. i think we have a few more weeks of sideways trading. a lot of people aren't moving until the fbi sale. i hope the price stays down for a while so i can buy more though, so i guess I'm biased.

I concur Maker.. I'm looking at a similar fractal completing like the one we just passed..  I'll start making some purchases around $540.

So true. That's the reason swap is expensive, inherent risk for the lenders that the site suddenly disappears with all the money.

 ::)

https://encrypted-tbn2.gstatic.com/images?q=tbn:ANd9GcSDnk9kkxQJkbCgkrSE4Zuoq1LMX7MhqDCiqadLcvbjMIJCYar5

I read OKCoin has re-enabled margin trading/lending (http://www.coindesk.com/okcoin-international-markets-margin-trading-launch/ (http://www.coindesk.com/okcoin-international-markets-margin-trading-launch/)) - anyone know of a site that tracks their usage data like bfxdata does for Bitfinex? Also I'm curious if the other Chinese exchanges are going to reverse course and re-enable margin.

As far as I know you can't borrow USD and pay the rent or food. The only purpose is to buy BTC.

If even half of the USD even actually exists in the exchanges lending account. If it isn't all just a fractional reserve number game that the exchange is playing with it's traders safe in the knowledge that they know where the stop losses are and they have the ability to front run the market.

certainly, BFX insiders have the ability to do this. and nothing they have done in the past has shown me that they are ABOVE doing this. but do you have any evidence that they are front running?

So would you guys recommend lending money to Bitfinex to take advantage of the interest? Are they trustworthy? Do you have to provide documentation to verify your account?

It is not recommended unless you are already trading on bitfinex and sold near a top and are waiting for a few days for the market to go down. Lending out for the long term is too risky due to flash crashes and exchange goxings.

To be honest, I'm too scared to lend there now that they don't route orders through Bitstamp. Book is scary thin. I used to lend whenever I sold (unless I was very, very sure and went short), but not anymore.

Nope. Like the hapless poker player who was cheated by an elaborate operation involving hidden cameras and wireless tapping communication device, I have absolutely no evidence whatsoever but know when I have been had. Without having any concrete evidence or any understanding of precisely how BFX might fuck traders over, I just think that this exchange stinks of pish and shit.... I have had some gut wrenching experiences on Bitfinex, where I was conned out of a stunning short trade with my stop order being the very top of the market as a result of a last minute FU rally after all the other exchanges had gone of in other direction. After that, I stopped trading with a stop on BFX as I just seen a stop order as a means of assisting the exchange in ripping me off. I came to regret that particular practice later on to the tune of several thousand dollars.

Obviously, everyone looks to Bitstamp when analysing Bitcoin, but make a point of also checking out Bitfinex. You will soon begin to twig on that the Bitfinex basically follows Stamp, except it is a lot more rough round the edges seldom forming any clean chart formations, it breaches important trendlines often as though they never mattered, and full of fakes outs on just about every consolidation phase. You will therefore soon also twig that it is much easier charting the future course of Bitcoin with Stamp than through Bitfinex. This is because Stamp isn't lying to us about market psychology/action whereas Bitfinex does lie to us. Look at the trading today. Stamp stays within the logical triangle formation pattern whilst Bitfinex is acting like it is about to break out to the upside. It is not about to break to the upside, but is farming a whole lot of stop orders, or at least trying to push the market into doing so on the exchanges behalf. I am guessing there must be some hefty real sell orders in between $595 and $600, otherwise Bitfinex would have spiked away above that as short stop loss after short stop loss is triggered by the crooks who know where they are and whose algorithms tell them when it is profitable to farm them or not. Pay attention to Bitfinex or indeed Huobi, and you will notice all manner of peculiarities in their chart actions that you just don't see with Bitstamp.

I have no proof. But I know that Bitfinex is a fucking sewer rat of an exchange.

I would wager that the next grand scale BTC daylight robbery a la Bitcoinica, MtGox etc, happens with Bitfinex.

it's also possible a big whale with fiat  has a few accounts taking loans cheap .; and lending his own fiat more expensive..
which means nothing is wrong with bfx :) 

which also supports my theory why the swap doesnt realy go down even in big sellofs.. 

I must agree with TERRA here.

Luckily there are many other reasons to be bullish :)

If something bad happen to bitfinex, you have the identity of their CEO and CFO and know who to go after.

Naturally, because I am an international hitman and man of mystery. Capable of striking my prey like a lightning bolt before fading back into the shadows never to be seen again.....or maybe not, so how about this:

"if something bad happen with MtGox, you have identity of their CEO and know who to go after"

"if something bad happen to MtGox, you have picture of Mark Karpeles you can stab with a pen as you mourn the wealth that you thought you had, that has all went up in smoke"

Mark Karpeles probably gamble using customer money and lose a great deal of money shorting bitcoin (and claimed hack/malleability attack). MtGox was worth at least 300M given the volume and the fee the company charged per trade.

If you ask any sane person (non-gambler), most people will think this guy is an idiot for ruining a sound business.

After seeing the amount of legal trouble Mark got into, I seriously doubt the current batch of exchange owners will make the same idiotic mistake.

not quite yet
"if something bad happen to MtGox, you have the twitter of Mark Karpeles you can taunt mad insults on while you gawk at a /r/bitcoin about how you found out which luxury apartment his photo of a sunset was taken from."

Did you know that Karpeles has a history of committing fraud?

Seeing as one of his fake volume trading bots, Willy, was set to make constant Bitcoin purchases regardless of price every 10 minutes or so, I would seriously doubt he would be into shorting Bitcoin. All he would be doing was buying and holding Bitcoin, ramp it with fake volume, sell expensive Bitcoin, crash market with the intent of equalizing all the fake Bitcoin trade he used to ramp market in first place (i.e. buying units back for fraction of what he sold for and keeping the mark-up for himself) and then wash, rinse, repeat. Obviously though, things ran out from under his control. You think none of the current batch of exchange owners would take the same risks as Karpeles? What is stopping them? If you ran your own exchange and you could multiply your earnings by an order of several magnitude, by using your inside knowledge to trigger stop orders, squeeze out margin traders, and generally front run the market, wouldn't you be tempted? You wouldn't have to go apeshit crazy like Karpeles did and you could still make a killing through taking liberties with your customers funds and trust whilst exposing yourself to only minimal risk. What Karpeles done was had a bot that just kept on buying and buying and buying. The man was either an idiot, delusional, or both. What shrewder and/or more risk adverse corrupt exchange operators could do is simply use their inside knowledge of trader orders and their ability to front run the market to skim a steady and continual layer of extra cream out of the market when things are relatively stable, and then take big extra chunks of meat out the market when things are volatile without exposing their manipulation to the dangers of going against the overall trend.

I was lending all the money I have on BFX the day of the crash, I think it was Feb 10th, and I did not had any loss. The only thing that happened was: many of my lend lots where closed very rapidly (i think because of people were automatically forced to sell).

The only real risk tat I see with BFX is the fact that the company is really small and not incorporated, so they can simply vanish with not so much consequences for them.

Nick.

uh, what?

it means that people want to borrow 11 million USD, (to buy Bitcoins, what else?), but they can only get 1.1 million

isn't that extremely bullish?!

No. Loan demand is not bullish because in order to fill the loan, someone else has to front the USD, which means that those USD cannot be used to buy bitcoins. It all sums out to zero. The only thing that really causes growth is when new fiat is wired in, which actually increases the amount of USD which can be used to bid on Bitcoins at a given time. Actually I would prefer no loans were given out at all and that all USD were directly used to obtain real bitcoins. The margin state is actually more bearish than the non margin state. Here are some more reasons why:

1. The margin positions only exist on paper in the user's account. The only thing he can possibly do with his position is dump it to take the shiny green profit figure shown next it. The user cannot withdraw those bitcoins or participate in the bitcoin ecosystem.
2. The user is subject to an interest rate which means it is most likely intended only to do a short term trade, and if the trend is not rising fast enough to be worth interest rates then he will dump.
3. The above factors reveal the psychology of a margin user which is just to do short term trading, dump, and make profits rather than being a long term investor in Bitcoin.
4. The rising interest rates entice bitcoin holders to dump their bitcoins to obtain USD to fulfill the loan demand.
5. The margin user can be liquidated and forced to dump if the price drops too low.
6. If people with real USD decide to leave the exchange after the margin contract period is up, this will also force liquidate the margin users.

FYI actually the loans can also be used to buy Litecoin and Darkcoin (duh) but the points above are stronger / more relevant.

Good analysis.

But the final point is not right. Trader can't margin trade darkcoin yet.

Not accurate, this assumes that all the USD lenders would otherwise buy BTC. In fact there are many lenders who are only interested in staying in USD and using Bitfinex as a way to earn a higher "risk free" return on their USD than they can find elsewhere.

This is also true. Not everyone has a bullish view on bitcoin and want to stay away.

Loan demand is bullish.  That said, it just disappeared and the $5-$10 million might have been related to exploiting a slight bug in bitfinex with the goal of increasing the swap rate.

Compare Bitfinex swap rates with icbit.se futures.  Both expect the price to increase.  You can make 20-30%/APR guaranteed (assuming no hacks / scams) by buying a bitcoin now, getting a contract on icbit.se and selling it in December.  Why?  Because speculators think it will increase by more than 10-15% by December and are paying a heavy premium to bet on this.

There is no evidence that bitfinex swaps will decline significantly.  The historical record is that they keep increasing (and supporting an increasing number of long positions). I start using bitfinex when the swaps were only $100k-$300k or so (back in Jan/Feb 2013).

Speculators can convert their margin position to a real position with the "claim" feature.  I know I did.

Can someone please explain how exactly total return swaps work on bitfinex with USD. What type of risk is the offerer exposed to? Is the rate of return per day really .1469%? I dont understand how the rate of return could be so high without there being effective risk for the person offering the swap.

Does it make more sense to low ball bid on Bitfinex or BTC-e? I ask because BTC-e seems to be responding more aggressively to price shocks due to a thinner order book. That said, it is my understanding that the leverage problem is on Bitfinex. Any thoughts on this matter?

It seems like something is wrong because something is wrong. There is no way that you can collect that much interest unless that is the cost of risk OR the market is really poorly functioning.

A couple of holes in this analysis.

Without the benefit of any hindsight, those conditions do not necessarily represent a zero sum game or negate a bullish trend.
You are assuming that both parties have the same risk profile and they'd necessarily use the same money to bid on bitcoin so that they always swing to either side. Otherwise, if what you are saying is true, one half of the USD swap's order book would always be empty or largely empty.
I could just as easily wire in USD to lend it without being interested at all in bidding bitcoin and absorbing larger volatility. It's precisely the order book imbalance AND different risk profile that makes it a NON-zero sum game.

Rising interest rates are normally accompanied by rising bitcoin price , which can produce  vastly larger returns than the collected interest rate after selling the those coins and lending USD. In this case you are again making a similar assumption as before: that the higher-risk profile of a bitcoin speculator can just as easily be converted to the low-risk, low-return lender. Even after giving the benefit of the doubt why would they not instead lend bitcoins at a locked high rate if  they start to see price stagnation or foresee a decline?? It doesn't necessarily have to be USD lending.

It's not apples to oranges so in sum: I think the data and charts we see is so convoluted and represents different people with different interests and different investment horizons that it doesn't necessarily mean a move in any particular direction.

Better use and return of time spent in understanding the REAL fundamentals and valuation modeling  of bitcoin.

Risk is the exchange might go bankrupt.

The rate was high because the expected return of bitcoin investment is high. If investor is expecting more than the rate being taken, they will have no problem paying the lending rate.

Where did you get the 0.1469%? Today it's 0.04% so it's not high but low and it's low because the USD lender faces virtually no risk (other than systemic exchange issues, etc).

For the offerer , there's low risk-return. It's high-risk (and potentially high return) for the USD BORROWER because if the bitcoin spent with the USD moves down too much, he might not be able to cover his debt fully.
So even if if you were referring to an old, higher lending rate, that's still low risk compared to the bitcoin holder/USD borrower's.

What the heck is going on with all those swaps? I really wonder sometimes whether those credits are the reason for Bitcoin having trouble recovering at the moment. It's like the only ones who are profiting are the bears who are shorting correctly!

Firstly, they don't really insure lenders' money. If all positions had to be liquidated based on the order book, USD lenders would lose dearly -- very dearly. And Bitfinex makes no legal guarantees there.

But yeah, they could certainly go bankrupt... or simply run off with the money. I'd be weary to keep too much permanently parked in USD lending there, as I've heard more than one programmer remark that their platform is not coded well, and even that they don't understand the issues around floating point arithmetic. That would, in turn, make me worry about their security protocols. We know very little about the identities of Bitfinex's operators, and if they were to lose significantly in a hack, it may be easiest for them to simply cut and run.

Just a hypothetical...

They've got problems with floating point arithmetics? Geez, that doesn't sound good at all. A badly programmed exchange may lose money without the operators even realizing it! I guess something similar happened in Japan until about half a year ago...

so you must have lost so much $$$ :D

The crash in mid August really seems to have wiped out a lot of the long swaps. We're down quite a bit now, with no imminent recovery in sight! It's interesting, this could be a healthy sign for the economy. Unfortunately a lot of bulls may have lost their money...  :-\ :'(

you see the downfall of bitcoin, lower and lower!