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Author Topic: Buying Bitcoin on margin - this could explode the market (and bank accounts)  (Read 2609 times)
Possum577
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June 07, 2015, 06:18:32 AM
 #1

http://finance.yahoo.com/news/kraken-bitcoin-exchange-launches-margin-131500929.html;_ylt=AwrBT7u64HNVkAwAZG9XNyoA;_ylu=X3oDMTByMjB0aG5zBGNvbG8DYmYxBHBvcwMxBHZ0aWQDBHNlYwNzYw--

Kraken, a San Francisco-based Bitcoin exchange, is pleased to announce the launch of margin trading. Margin is an exciting instrument that allows clients to amplify their trading profits and gain in both up and down markets.

Kraken is now one of the few exchanges allowing clients to trade bitcoins on margin. Within the next few weeks, Kraken will be offering up to 20x leverage.

There's alot of ways for the price of bitcoin to explode - one is for speculators to be able to buy it on margin. Think about it, the price is driven by supply and demand. Margin increases demand instantaneously. The downside of margin is that the people that use it can end up upside down, broke, in a very short period of time if they make the wrong position.

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June 07, 2015, 08:09:49 AM
 #2

so they raised it at the end, because x3 was really low, it seems that they raised it after my concern on it

https://bitcointalk.org/index.php?topic=290799.msg11514080#msg11514080
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June 07, 2015, 08:18:44 AM
 #3

Think about it, the price is driven by supply and demand.

The price is driven by suppy, demands and also manipulation from the traders

Margin increases demand instantaneously.

Margin increases demand but also that each time a trader buy then that means that there will be a time that he will need to sell it shortly which makes them neutral and wont affect the market at all. It is not like someone is holding after using this, someone is planning on short term which involve buying and selling simultaneously

The downside of margin is that the people that use it can end up upside down, broke, in a very short period of time if they make the wrong position.

It is a double edge sword if you dont know how this things work, in the end most people actually broke themselves with this if they are not accustomed to the way of how daily trading is. It is not about buying and holding, it is about buying and selling it back for either profit or loss at X percentage
Possum577
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June 07, 2015, 02:21:03 PM
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Margin increases demand instantaneously.

Margin increases demand but also that each time a trader buy then that means that there will be a time that he will need to sell it shortly which makes them neutral and wont affect the market at all. It is not like someone is holding after using this, someone is planning on short term which involve buying and selling simultaneously


I don't follow your thinking here - do you mean sell short or sell the bitcoin soon after buying it on margin?

Buying stock/bitcoin on margin does not mean there has to be an equal short trade opposite that buy transaction. Margin and shorting aren't equal things, or opposite. Margin is buying (or selling) on loan. Shorting is take a position on the stock/bitcoin that benefits me if the price of that stock/bitcoin goes down. I can short a stock/bitcoin while owning it or while borrowing (on margin) that stock/bitcoin.

Additionally, just because I buy stock/bitcoin on margin doesn't mean I'm only looking for a short term hodl. The margin function allows me to buy more than I could today and I can pay back the loan (or cover the margin) without having to sell my position. But if majority of people using margin are using it to facilitate quick swings in the price, then this would mute long term swings in the price. It's a question of how many traders are using margin for short term transactions vs. long term transactions, or being able to finance hodl positions.

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June 07, 2015, 05:36:07 PM
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Margin increases demand instantaneously.

Margin increases demand but also that each time a trader buy then that means that there will be a time that he will need to sell it shortly which makes them neutral and wont affect the market at all. It is not like someone is holding after using this, someone is planning on short term which involve buying and selling simultaneously


I don't follow your thinking here - do you mean sell short or sell the bitcoin soon after buying it on margin?

Of course you dont, you are not a typical day trader type it seems

Margin is buying (or selling) on loan. Shorting is take a position on the stock/bitcoin that benefits me

I know what it is.

But if majority of people using margin are using it to facilitate quick swings in the price, then this would mute long term swings in the price.

It is not But If but it is the truth of people are doing with it and that is what I meant. Seriously why would someone even hold something for a long term which he get it from a loan? people are not doing this to be honest especially when there is a significant gain in the quick swing especially in this volatile moment.

It's a question of how many traders are using margin for short term transactions vs. long term transactions, or being able to finance hodl positions.

That would be a question for you, basically Im standing with that there will be more people that use it for quick swing instead. No one is holding things that they obtain via loan, the risk is far greater than expected profit.
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June 07, 2015, 05:43:54 PM
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I don't follow your thinking here - do you mean sell short or sell the bitcoin soon after buying it on margin?

Of course you dont, you are not a typical day trader type it seems

It's a question of how many traders are using margin for short term transactions vs. long term transactions, or being able to finance hodl positions.

That would be a question for you, basically Im standing with that there will be more people that use it for quick swing instead. No one is holding things that they obtain via loan, the risk is far greater than expected profit.


First, I think you should think about what you're writing a little bit longer. Second, I know plenty about day trading. And I know plenty about investing on margin. Margin is not required to be a day trader and day trading does not require margin...this is an important point that I feel you're missing.

People hold things (investments) obtained via loan all the time, ever heard of a mortgage? 99% of homeowners obtain their home with a loan. I realize investing has higher potential returns in a shorter amount of time than real estate, but that doesn't mean that all users of margin for stock/btc purchases are looking for a 48 hour return.

More importantly, it's naive to think that giving greater access to supply (i.e., increasing the margin % available to investors) will have no effect on the price volatility simply because "what's bought must eventually be sold".

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June 07, 2015, 08:38:43 PM
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I don't follow your thinking here - do you mean sell short or sell the bitcoin soon after buying it on margin?

Of course you dont, you are not a typical day trader type it seems

It's a question of how many traders are using margin for short term transactions vs. long term transactions, or being able to finance hodl positions.

That would be a question for you, basically Im standing with that there will be more people that use it for quick swing instead. No one is holding things that they obtain via loan, the risk is far greater than expected profit.

-snip-

Good thing that you know stuff about daily trading and I was a daily trader before so I know what most daily traders are thinking

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each time you buy then that means that it will be each time that you sell as well.

More importantly, it's naive to think that giving greater access to supply (i.e., increasing the margin % available to investors) will have no effect on the price volatility simply because "what's bought must eventually be sold".

Actually you are wrong on this, Im saying that it have no effect on the demands and not on the price volatility

As for the mortgage stuff I was forgetting about mortgage anyway, thanks for pointing me to that but as a matter of fact I do think people are mortgaging because they need a house not because they are getting a loan for future investment or so ( I may be wrong on this)
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June 07, 2015, 08:43:39 PM
 #8

I am not convinced that this will have a large impact on the price of bitcoins.  Also margin trading is dangerous.  I never do it because I am not confidant enough in my abilities to not get called.  Maybe some day!
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June 08, 2015, 07:44:34 AM
 #9

I am not convinced that this will have a large impact on the price of bitcoins.  Also margin trading is dangerous.  I never do it because I am not confidant enough in my abilities to not get called.  Maybe some day!

if many unexperience players start to do it, they will only burn themselves, and we would get a new line up of people with high debit, and the very nature of leverage is encouragin those that can't cover their asses, because for the others, there is no need for it, they can burrow from themselves
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June 08, 2015, 08:07:23 AM
 #10

I'm not super experiences trader or something but margin trading on bitcoin seems like total danger madness for me..and for sure nothing, what can somehow boost the market..
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June 08, 2015, 11:38:42 AM
 #11

I'm not super experiences trader or something but margin trading on bitcoin seems like total danger madness for me..and for sure nothing, what can somehow boost the market..

any trading is dangerous. Some play on big but rare profits other play on constant but small profits. You can lose your bitcoins one way or another.

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June 08, 2015, 05:11:37 PM
 #12

I remember reading somewhere that the rich get rich investing other people's money. Trading on margin is the same thing. If you've got a strategy that is working for you, being able to add 20x leverage to that allows you to grow your holdings that much more. Then when you pay it back, your profits are greater.

10% of 1BTC is cool.
10% of 20BTC is better.
10% of 200BTC is even better.
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June 08, 2015, 10:47:10 PM
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I don't get it ... Say that leverage is 10x and I deposited €200 , and bought 10 bitcoins using 10x leverage, and I withdrew those bitcoins, what will happen?  Roll Eyes Roll Eyes  Grin

Or, you are just buying BTC/EUR pair like in a Forex bucket shop, no physical delivery of either euro or bitcoin  Huh

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June 09, 2015, 12:02:47 AM
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well margin trades loan happened at first on poloniex ,they allow you to get a loan and those btc can only be spent on the exchange cant cashout it... and yes always a concern since btc can easy go down soo they set from 2 to 60 days max lending time and the person who gets the loan can repay as cancel it anytime paying the fee from the loan.About bitcoin here at margin well can be a lost from both sides but can easy turns into a way to both profit as some experts traders can get in and make it sucess
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June 09, 2015, 01:51:37 AM
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I don't get it ... Say that leverage is 10x and I deposited €200 , and bought 10 bitcoins using 10x leverage, and I withdrew those bitcoins, what will happen?  Roll Eyes Roll Eyes  Grin

Or, you are just buying BTC/EUR pair like in a Forex bucket shop, no physical delivery of either euro or bitcoin  Huh

Once you sell the BTC (or at some defined time after you've taken the loan) you have to pay it back. So the principal of your original trade (minus what you deposited) goes back to the bank/firm. You pay a small fee and then keep the gains off all that you borrowed + deposited. You're getting most of the return off someone elses money.

Physical delivery or not is dependent on how you or the firm you work with structures the trade, but it could be either.

It's great when the trade goes in your favor. If the trade doesn't go in your favor you can blow yourself up pretty quickly.

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June 09, 2015, 02:31:46 PM
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I don't get it ... Say that leverage is 10x and I deposited €200 , and bought 10 bitcoins using 10x leverage, and I withdrew those bitcoins, what will happen?  Roll Eyes Roll Eyes  Grin

Or, you are just buying BTC/EUR pair like in a Forex bucket shop, no physical delivery of either euro or bitcoin  Huh

Once you sell the BTC (or at some defined time after you've taken the loan) you have to pay it back. So the principal of your original trade (minus what you deposited) goes back to the bank/firm. You pay a small fee and then keep the gains off all that you borrowed + deposited. You're getting most of the return off someone elses money.

Physical delivery or not is dependent on how you or the firm you work with structures the trade, but it could be either.

It's great when the trade goes in your favor. If the trade doesn't go in your favor you can blow yourself up pretty quickly.

But if I have deposited €200 and withdrew 10 bitcoin, I might never come back to this exchange, so I guess they have to limit the amount of withdraw to be less than my deposit, e.g. I could withdraw maximum 1 bitcoin in this case, the rest 9 stays in their database, waiting to be wiped out by a margin call

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June 09, 2015, 02:46:46 PM
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I don't get it ... Say that leverage is 10x and I deposited €200 , and bought 10 bitcoins using 10x leverage, and I withdrew those bitcoins, what will happen?  Roll Eyes Roll Eyes  Grin

Or, you are just buying BTC/EUR pair like in a Forex bucket shop, no physical delivery of either euro or bitcoin  Huh

Once you sell the BTC (or at some defined time after you've taken the loan) you have to pay it back. So the principal of your original trade (minus what you deposited) goes back to the bank/firm. You pay a small fee and then keep the gains off all that you borrowed + deposited. You're getting most of the return off someone elses money.

Physical delivery or not is dependent on how you or the firm you work with structures the trade, but it could be either.

It's great when the trade goes in your favor. If the trade doesn't go in your favor you can blow yourself up pretty quickly.

But if I have deposited €200 and withdrew 10 bitcoin, I might never come back to this exchange, so I guess they have to limit the amount of withdraw to be less than my deposit, e.g. I could withdraw maximum 1 bitcoin in this case, the rest 9 stays in their database, waiting to be wiped out by a margin call

I would be weird if you could withdraw more then you actually funded your account for, so should be somewhere like the way you explained.

I quess you cannot withdraw untill you paid of your margin part, so you might not even be able to withdraw the one bitcoin you funded untill your margin call is wiped out and youre back to zero on that.

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June 09, 2015, 02:55:38 PM
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I don't get it ... Say that leverage is 10x and I deposited €200 , and bought 10 bitcoins using 10x leverage, and I withdrew those bitcoins, what will happen?  Roll Eyes Roll Eyes  Grin

Or, you are just buying BTC/EUR pair like in a Forex bucket shop, no physical delivery of either euro or bitcoin  Huh

Once you sell the BTC (or at some defined time after you've taken the loan) you have to pay it back. So the principal of your original trade (minus what you deposited) goes back to the bank/firm. You pay a small fee and then keep the gains off all that you borrowed + deposited. You're getting most of the return off someone elses money.

Physical delivery or not is dependent on how you or the firm you work with structures the trade, but it could be either.

It's great when the trade goes in your favor. If the trade doesn't go in your favor you can blow yourself up pretty quickly.

But if I have deposited €200 and withdrew 10 bitcoin, I might never come back to this exchange, so I guess they have to limit the amount of withdraw to be less than my deposit, e.g. I could withdraw maximum 1 bitcoin in this case, the rest 9 stays in their database, waiting to be wiped out by a margin call

I would be weird if you could withdraw more then you actually funded your account for, so should be somewhere like the way you explained.

I quess you cannot withdraw untill you paid of your margin part, so you might not even be able to withdraw the one bitcoin you funded untill your margin call is wiped out and youre back to zero on that.

So it is only a number game in the platform to wipe out users more quickly, like those Forex bucket shop. Gamblers like it

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June 09, 2015, 03:36:42 PM
Last edit: June 09, 2015, 04:41:53 PM by Amph
 #19

I don't get it ... Say that leverage is 10x and I deposited €200 , and bought 10 bitcoins using 10x leverage, and I withdrew those bitcoins, what will happen?  Roll Eyes Roll Eyes  Grin

Or, you are just buying BTC/EUR pair like in a Forex bucket shop, no physical delivery of either euro or bitcoin  Huh

Once you sell the BTC (or at some defined time after you've taken the loan) you have to pay it back. So the principal of your original trade (minus what you deposited) goes back to the bank/firm. You pay a small fee and then keep the gains off all that you borrowed + deposited. You're getting most of the return off someone elses money.

Physical delivery or not is dependent on how you or the firm you work with structures the trade, but it could be either.

It's great when the trade goes in your favor. If the trade doesn't go in your favor you can blow yourself up pretty quickly.

But if I have deposited €200 and withdrew 10 bitcoin, I might never come back to this exchange, so I guess they have to limit the amount of withdraw to be less than my deposit, e.g. I could withdraw maximum 1 bitcoin in this case, the rest 9 stays in their database, waiting to be wiped out by a margin call

I would be weird if you could withdraw more then you actually funded your account for, so should be somewhere like the way you explained.

I quess you cannot withdraw untill you paid of your margin part, so you might not even be able to withdraw the one bitcoin you funded untill your margin call is wiped out and youre back to zero on that.

So it is only a number game in the platform to wipe out users more quickly, like those Forex bucket shop. Gamblers like it

it's nothing more than a secure loan, that exchange give to you, then you use it to make more profit, but if the price don't move you simply give back that loan, so with a 200 deposit and x10 leverage, if the price remain 200, you will end with zero profit

but if the price will raise to 210 you will get +100 usd(10 x 10) plus another $10 from your 200 deposit, so 310(200 from your deposit with a net profit of 110) in the end

essentially a thing like this aims to encourage trading
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June 09, 2015, 03:51:56 PM
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it's nothing more than a secure loan, that exchange give to you, then you use it to make more profit, but if the price don't move you simply give back that loan, so with a 200 deposit and x10 leverage, if the price remain 200, you will end with zero profit

but if the price will raise to 210 you will get +100 usd(10 x 10) plus another $10 from your 200 deposit, so 300 in the end

essentially a thing like this aims to encourage trading

So if the price drops 10 with 10x leverage you got 90 of your deposit left and lost 110. The profits are bigger and so are the loses.

If the value of bitcoin carries on like this +5-10 till -5-10 this is going to be an awesome way to make a bit more with day trading.


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