Bitfinex Users: What are you paying for margin interest?

[bitcoins5411]

I see. Even if you are using a dollar weighted average, with no limit on interest rates, you can create strange situations. Let's look at an example:

$50,000 lent total.
$49500 lent at 60% per year.
$500 lent at 88,888% per year.

Dollar weighted average: 948.28%

So, even a small 1% loan at a high interest rate can modify the average by more than 10x. There is possibility for market manipulation here.

You might want to find the standard deviation and throw out all the outliers. So, you could calculate only using a 95% interval. You throw out the top 2.5% and bottom 2.5% loan volume and calculate the average using the remaining 95% loan volume. At a current $50,000 loan volume that would require someone to borrow more than $1250 at a crazy high or crazy low rate in order to affect the market.

[myself]

I see. Even if you are using a dollar weighted average, with no limit on interest rates, you can create strange situations. Let's look at an example:

$50,000 lent total.
$49500 lent at 60% per year.
$500 lent at 88,888% per year.

Dollar weighted average: 948.28%

So, even a small 1% loan at a high interest rate can modify the average by more than 10x.

if a large portion of that 50 000 are VIR then yes

There is possibility for market manipulation here.

https://community.bitfinex.com/showthread.php/101-But-what-if-anyone-manipulate-the-VIR-making-a-loan-1000-USD-at-9999-APY check that and why wont work on the long run

[Spekulatius]

This is crazy! I had to pay 225.6% interest PER DAY!! on my loan. Guess how long I had that position open?
10 minutes before the swap interest rates ate it up (while price was rising 1% above base price in a 5:1 leveraged long position --> I should have had unrealized profits instead of a forced liquidation)



What bugs me most is that interest rates are actually wrongly displayed: See how it says 0.28%/day and 0.17%/day ? Instead when the position was opened I was hooked to a ludicrous 225.6%/day loan.

Sorry Bitfinex, but I wont risk anything then playmoney on your service until you restore my trust in it.

Raphael just sent me an email:

TLDR: He excused for the inconveniences caused and offered to reimburse me (just 3 USD anyway but a friendly turn nonetheless). He also promised to put into action some tweaks to make such erratic changes to the VIR impossible.

Hello Spekulatius,

I did see your post on the forum. Yesterday, we had a crazy run up of variable interests rates caused by the way variable interests rates were calculated. The current system allowed for a few lenders to make rates go though the roof, which is obviously what we don't want.

Just know that I changed that this morning as explained here: https://bitcointalk.org/index.php?topic=119745.msg1538998#msg1538998 (before you posted).

Now variable interests rates are pondered by the previous 60 days rates, which makes what it impossible to have what happened last (the rates of your position would have go up by a few 0.1%, not hundreds of percent.

Meanwhile, because I think what happened to you was unfair, I propose you 3 USD as mtgox code and to restore your 0.1 btc balance on Bitfinex. Do you agree with that?

Raphael
Bitfinex team

[oakpacific]

I see. Even if you are using a dollar weighted average, with no limit on interest rates, you can create strange situations. Let's look at an example:

$50,000 lent total.
$49500 lent at 60% per year.
$500 lent at 88,888% per year.

Dollar weighted average: 948.28%

So, even a small 1% loan at a high interest rate can modify the average by more than 10x.

if a large portion of that 50 000 are VIR then yes

There is possibility for market manipulation here.

https://community.bitfinex.com/showthread.php/101-But-what-if-anyone-manipulate-the-VIR-making-a-loan-1000-USD-at-9999-APY check that and why wont work on the long run

A silly situation is he can create two accounts and lend to himself, of course there is large fee to pay then but theoretically the gain could still outrun the loss, if properly designed.

Another advice is to allow users to set their threshold rate, whether they're opting for VIR or not.

[myself]

A silly situation is he can create two accounts and lend to himself, of course there is large fee to pay then but theoretically the gain could still outrun the loss, if properly designed.

it has more to do with the speed reaction from market participants, if the market participants dont react then yes that cold give quite some money and on that case is trading darwinism