Just read this newbies' posts. 4 out of all 5 posts this user ever made bash the other exchanges and defend MtGox. This newbie even blames the Bitcoin Foundation and Bitcoin.

Are you are a Mt. Gox sockpuppet? All your posts were made only today.

Name:    CWestermark
Posts:    5
Activity:    5
Position:    Newbie
Date Registered:    November 23, 2013, 09:44:05 PM
Last Active:    Today at 04:15:16 PM

There is an announcement on btc-e's twitter:

https://twitter.com/btcecom

Google Translated:

Due to the upgrade bitcoin wallet may delay the withdrawal of bitcoin

MtGox caused havoc in the markets today with their dramatically worded and damaging announcement. They diverted blame from themselves and placed the full blame on the Bitcoin protocol and making a minor technical issue (that already existed for years) seem like a critical widespread panic issue by the way the announcement was started and worded throughout. Most traders are non-technical users and their first reaction would be to panic after reading such a statement. Up to 15,000 bitcoins were dumped down to 102 at Btc-e on this news resulting in millions of dollars lost. Bitfinex also had thousands of BTC dumped down to 100, mainly margin liquidations. I would be surprised if the MtGox CEO did not know beforehand the effects and impact and knock on effects that such an announcement would have on traders and on the markets in all exchanges. It is amazing and scary how one person could have had such an influence in the marketplace.

Mark and/or his friends could have easily sold bitcoins on the other exchanges such as Btc-e or Bitfinex and placed low buyback orders before making the announcement. They could have set up accounts with fake details, Tor etc. Hundreds, maybe thousands of bitcoins could have been bought back for cheap netting them potentially in excess of $1m+ gain on the traders panic.

It is no longer simply a case of being Goxed again and joke about it like in 2011 or 2012. We are now dealing with very serious amounts of money, millions of dollars worth of bitcoins were made and lost on this single announcement across all exchanges not only MtGox.

I am not even a customer of MtGox (I left them a year ago), yet I have been adversely affected (as have thousands of other non-Gox exchange users) by their negligence and adverse affect their announcement has had on the other exchanges namely Bitfinex and Btc-e. The other exchanges are operating fine and do not have the same technical issues that Gox is facing. Yet, MtGox goes and ahead and basically says that the issue affects everyone else:


I cannot believe after all that has happened with MtGox, that they would have the cheek to tell other exchanges what to do regarding this non issue that only affects MtGox

Anyone defending MtGox without acknowledging the extraordinarily negative impact their announcement has had to the entire bitcoin trading community either work for MtGox or have their head in the sand. Defending MtGox after years of endless f***ups and BS excuses is completely inexcusable at this stage.

The MtGox CEO should be investigated for negligence and for potential insider trading fraud.



Bulls***

Ideally all exchanges should have halted trading at the same time. This would prevent bitcoin price changes during the frozen period and any issues such as yours from happening. Ideally an agreement between the large exchanges to implement a common circuit breaker somehow to halt trading for an agreed period of time when one of the exchanges prices change more than 10% in the space of a minute. If you look at the trade history Btc-e was first to have a flash crash. Bitfinex's flash crash happened 5 minutes later. Had there been a common circuit breaker then Btc-e would have triggered it and halt trading on all exchanges and thus prevent both the Btc-e and Bitfinex flash crashes from happening.

However I guess implementing this would be easier said than done and would require trust between the participating exchanges.

And now as a result of Bitfinex protecting lenders, the interest rates have dropped benefiting the margin traders and meaning less interest for the lenders. How ironic.

+1

If lenders were wiped out then, the vast majority of them would no longer want to lend at Bitfinex again. No liquidity providers means no margin trading. Any high risk lenders left would be demanding daily interest rates consistently exceeding 1% per day, perhaps even up to 5% per day. This would make it so expensive and not worthwhile for margin traders that it would effectively kill Bitfinex's margin lending facility. This would not only be bad for Bitfinex, but for Bitcoin in general and the news of lenders being wiped out would no doubt spread to the mainstream and average Joe's would be given another reason to not to get involved with Bitcoin.

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.

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.

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.

I guess the Bitfinex owners are learning as they go along like anyone in business in a fledgling industry. I would put this down to growing pains and that they are learning from their mistakes and would come out stronger and more experienced after this. I doubt they are doing anything with malicious intent, they are just a small business venture with a handful of staff who are going to make honest mistakes. I can understand your frustration though if you feel aggrieved by the situation. Hopefully they will find a solution to prevent this from happening again.

I guess ultimately there will have to be increased regulations for Bitcoin exchanges in the future that all regulated exchanges must implement a concerted circuit breaker of some sort or even route their trades through an ECN where the common circuit breaker will be implemented. Right now it is still the unregulated Wild West and problems and compromises will still happen.

Also this should give yourself some time during the frozen period to fix any issues like broken Bitstamp api, trade matching etc... Set up an alert to your mobile phone when the circuit breaker is triggered. And allow for an possible extension of the frozen period but only if absolutely necessary. Make this clear in the faqs/terms.

I propose a solution to the problem in the future:

One thing that would help would be for Bitfinex to implement a circuit breaker like they have in the stockmarkets, where where trading is automatically halted for a predetermined period of time (10 to 30 minutes) when the market moves more than say 10%. By the time trading has restarted, panic would have subsided and the market would have become normalized helping to avoid a flash crash. Perhaps any traders accounts with a pending margin liquidation can be frozen for a while to prevent a liquidation domino effect.

Add this the terms and faqs so traders will be aware in advance and then cannot complain when trading halts.

+1

This.

So it was most likely Gox then. Thanks for the info!

Interesting. But to be fair, the poster at reddit doesn't mention Bitfinex specifically, so there is the chance that it was another exchange that was exploited. It could even be Gox that was exploited! (maybe that would explain why they are not allowing BTC withdrawals! They are upgrading their security so it doesn't happen again!  )

But I think Bitfinex's issue was different, it seems actually trading and borrowing was required for the exploiters to make money. Also try withdrawing 100 BTC from Bitfinex and you'll have to wait for it to be processed manually. While a 100 BTC withdrawal from Gox would likely be automatic (before they stopped BTC withdrawals).

Maybe Giancarlo can clarify whether it was Bitfinex that was contacted about this issue, if not it was probably Gox.

Yes, trading was frozen about 6 hours ago and trades executed last night during a period of exploitation and abnormal trading activity are currently being rolled back. An annoucement was made by Bitfinex. Maybe your trades haven't been rolled back yet. Hopefully this issue will be resolved today.

Probably not much, if anything. I was talking about a scenario if trades were not rolled back. Many customers accounts got a margin call and ended up in a large negative amount. That would mean that others on the other side of the trade (mainly the exploiters would end up with a hugely positive balance). The positive ill gotten amounts would be withdrawn when withdrawals are re-enabled which as I say could be well in the hundreds of thousands. Bitfinex would have to cover this and reimburse customers who lost or face the wrath of all the customers who lost with ruined repuation.

Here is one account with a negative net value balance of -$131,916.32 and this is just one account:
https://i.imgur.com/LdXwDlM.png

More examples can be found here:
http://www.reddit.com/r/BitcoinMarkets/comments/1x5jpx/psa_bitfinex_bugged_out/
http://www.reddit.com/r/BitcoinMarkets/comments/1x4tt3/possible_bitfinex_bug/

as well as earlier in this thread.

Bitfinex would lose out because they would have to cover all the negative balances if trades were not rolled back. Many customers would also be wiped out, being stopped out, margin call etc but in that scenario I am guessing Bitfinex would also have to reimburse these customers or face losing their reputation.



+1

If we allow the ones who exploited the system (hackers) to withdraw their ill gotten gains, which could be a few hundered thousand dollars worth of coins, then that would be a loss not just to Bitfinex, but to all customers, because it would affect their profit margins and the service they provide to us negatively. The few hundred thousand dollars could be used to hire new staff to improve the security of the site or hire additional customer service staff. Would you rather this money go to the hacker instead? Let's accept this as growing pains, mtgox was attacked in 2011, btc-e in 2012, now Bitfinex in 2014. What doesn't kill you only makes you stronger. Bitfinex will come out this stronger which will benefit everyone in the long run, not only users of the site but the entire Bitcoin community.