[BETA]Bitfinex.com first Bitcoin P2P lending platform for leverage trading

[unclescrooge]

Hi PAPASO,

As Myself said, you took a loan at a great rate (congrats) for 15 days.

Thus you have to select a period of 14 days or less to be able to use the funds.

Can you confirm us that this is ok?

Best regards
Raphael

[1715081821]

1715081821

[1715081821]

1715081821

[myself]

my bad I totally forgot to post the link to the fees calendar :|
https://community.bitfinex.com/calendar.php?c=1&do=displaymonth

[Ichthyo]

A big Warning to everyone on Bitfinex

During the sprint right now, some lenders have crunched up their lend rates to an insane level. Please be sure to close any positions relying on to expensive loans as quick as possible. Since VIR loans react to the currently used fixed rate loans, also the VIR rates went through the ceiling. So please watch your steps and beware of automatic orders!

[Ichthyo]

Unbelievable....

Even now, after the dust has settled down a bit...

[nrd525]

I'm borrowing BTC at 2% and loaning out USD at 1800%.  Bears win again!

[ThaddeusB]

Unbelievable....

Even now, after the dust has settled down a bit...

There has got to be some sort of problem with the way the variable rate is calculated (unless maybe 90% of all loans are variable) as the rate has now dropped to 712% on a <$2000USD loaned difference... 

If there is truly nothing wrong with the calculation, I strongly suggest traders stop using variable rate loans as you can really get screwed by small amount of USD lent at very high rates it seems.

[Ichthyo]

...so to draw some conclusions.

I think, it is fine that we have a market for loans here, an when there is high demand e.g. for USD lenders should be able to make a profit, since at such times the price is going up and they would loose out if just sitting on their USD.

But as it stands now, I see some weaknesses in the mechanics, which allow to game the engine and harm other traders.

• for one, the VIR rates. I still think it is dangerous to prefer those automatically. We discussed that some weeks ago. I still keep my stance that there should be some damping factor and some cap built into the automatically determined variable rate. Earlier this day, during the rally, we had the situation that a large fraction of the overall offered money was in VIR loans. This allowed a smaller amount of fixed rates to drive up the overall rates. I know for sure, because I was burnt by it. I was one of them accidentally taking one of those insane offers, thereby promoting it into the effective average rate. The VIR rates shoot up to over 6000% during that rally
• an important effect to consider are automatic orders. This is what happened to me. Since there was not only a huge wall, but a lot of additional Asks below 27.5, I actually didn't expect that rally to set in so soon. So I had some automatic offers right above the wall. I guess other people did the same. Before the rally, there were way enough "sane" offers in the pipeline. When I came back, all of them were taken (or more likely just retracted) and instead there was a whole pile of exaggerated offers. This way, lenders manage to "sneak" into getting accepted. No one would deliberately open a position when the loan rate is 300% per day! But the orders execute automatically.

I think these two circumstances greatly reinforce the effect. "Free market" would mean that there are offers, and that these offers are actually taken. But in this case the high rates get into effect indirecly (either through the VIR rate shooting up, or though automatic offers grabbing overpriced offers).

Now I'm not sure what could be the best way to address such problems. One possibility would be some kind of cap / damping. Another possibility would be to allow the trader to limit his rates somehow. Personally, I consider the second approach problematic, since it complicates the handling of the platform and bears the danger of overlooking this limiting capability. Any thoughts?

[Ichthyo]

There has got to be some sort of problem with the way the variable rate is calculated (unless maybe 90% of all loans are variable) as the rate has now dropped to 712% on a <$2000USD loaned difference...  

If there is truly nothing wrong with the calculation, I strongly suggest traders stop using variable rate loans as you can really get screwed by small amount of USD lent at very high rates it seems.

I think the effect is really insidious.
I don't know if I'm missing out some feature here, but as far as I know, you can't control the loans you pick when opeining a trade. The only other possibility is to borrow beforehand, which works, but is tedious. Thus, basically if you just have some market or limit/stop order placed, you  get the "best" lending offer.

Now, yesterday a huge pile of VIR offers were on market, thus you allways got the VIR loans first. They were cheap, thus no problem. But now you're holding a position based on a VIR offer, and now the VIR rate shoots through the ceiling. Just because some traders accidentally take one of those exaggerated offers. These really poison the average. Especially when those lenders offering for fixed rate cancel their offers and place higher offers instead. This way, a tiny fraction of the offerings can influence the whole lending market.

Actually I witnessed this happen. When I came back, almost all of the fixed rate offers were gone. Only one $400 for 1 day at 40% and about $6000 at VIR were left. Then, during some minutes, my swap literally counted up. First I didn't even realise what was going on and thought this was a technical problem, until I looked on the order history and lending page and realised that one of my limit orders had executed and I had gotten one of those poisoned offers.

[ThaddeusB]

There has got to be some sort of problem with the way the variable rate is calculated (unless maybe 90% of all loans are variable) as the rate has now dropped to 712% on a <$2000USD loaned difference...  

If there is truly nothing wrong with the calculation, I strongly suggest traders stop using variable rate loans as you can really get screwed by small amount of USD lent at very high rates it seems.

I think the effect is really insidious.
I don't know if I'm missing out some feature here, but as far as I know, you can't control the loans you pick when opeining a trade. The only other possibility is to borrow beforehand, which works, but is tedious. Thus, basically if you just have some market or limit/stop order placed, you  get the "best" lending offer.

Now, yesterday a huge pile of VIR offers were on market, thus you allways got the VIR loans first. They were cheap, thus no problem. But now you're holding a position based on a VIR offer, and now the VIR rate shoots through the ceiling. Just because some traders accidentally take one of those exaggerated offers. These really poison the average. Especially when those lenders offering for fixed rate cancel their offers and place higher offers instead. This way, a tiny fraction of the offerings can influence the whole lending market.

Actually I witnessed this happen. When I came back, almost all of the fixed rate offers were gone. During some minutes, my swap literally counted up. First I didn't even realise what was going on and thought this was a technical problem, until I looked on the order history and lending page and realised that one of my limit orders had executed and I had gotten one of those poisoned offers.

Yes, I meant by manually borrowing.  It did not even occur to me automatic buy orders were occurring.  Automatic buy order+unknown interest rate is potential suicide, so a feature to pick maximum loan rate would seem essential.  (Or maybe system should block, or at least warn, about to use of "stop" orders to open positions... They really are intended for closing a position, hence the name stop as in "stop losses".)

But as it stands now, I see some weaknesses in the mechanics, which allow to game the engine and harm other traders.

• for one, the VIR rates. I still think it is dangerous to prefer those automatically. We discussed that some weeks ago. I still keep my stance that there should be some damping factor and some cap built into the automatically determined variable rate. Earlier this day, during the rally, we had the situation that a large fraction of the overall offered money was in VIR loans. This allowed a smaller amount of fixed rates to drive up the overall rates. I know for sure, because I was burnt by it. I was one of them accidentally taking one of those insane offers, thereby promoting it into the effective average rate. The VIR rates shoot up to over 6000% during that rally
• an important effect to consider are automatic orders. This is what happened to me. Since there was not only a huge wall, but a lot of additional Asks below 27.5, I actually didn't expect that rally to set in so soon. So I had some automatic offers right above the wall. I guess other people did the same. Before the rally, there were way enough "sane" offers in the pipeline. When I came back, all of them were taken (or more likely just retracted) and instead there was a whole pile of exaggerated offers. This way, lenders manage to "sneak" into getting accepted. No one would deliberately open a position when the loan rate is 300% per day! But the orders execute automatically.

I agree it is stupid that VIR loans get preference.  For example, I noticed that a 200%/year 60 day offer was just sitting there while a 1000+% VIR offer was being bought up at some point.  At minimum, the fixed rate should be preferred if it is lower than the VIR (which in turn would lower the VIR for later buyers.)  I am shocked that is not the case - I assumed it was a technical glitch, not a feature, when I saw it happen.

[myself]

There has got to be some sort of problem with the way the variable rate is calculated (unless maybe 90% of all loans are variable) as the rate has now dropped to 712% on a <$2000USD loaned difference...  

there is no problem simply VIR loans >> fixed IR loans


also why ppl dont post demand for credit ?

[myself]

now what no more post ?  well i post for you

[unclescrooge]

Hello everyone,

I agree with you on one thing: VIR can move up and down like that. It needs to have some kind of stability if it is to be chosen first.

So, starting from today (in a few hours), the way variable rate is calculated will be different:

It will be a pondered average of all opened loans (VIR or not). If fixed rate, then this rate is taken into account). If VIR, then the rate used for the calculation will be an average of the VIR of the last 60 days.

This way, if something like yesterday happens, where most of loans are VIR, then the rate will stay very stable, because only some marginal loans will be at high rates while most of the others will stay at "normal" one.

This is a first step. The second will be to allow you to set a max daily rate for your orders.

I think this will have a great stabilizing effects on rates.


I'll still let the VIR get chosen first, if only because they will now probably be the most interests offers during price increase.

If you have any more suggestions don't hesitate to post

Best regards
Raphael and the Bitfinex team

[myself]

imho all happen because some ppl are "lazy" and dont want to reserve their loans before hand and  just take loans on the spot, and the result is economic/trading Darwinism

[Ichthyo]

imho all happen because some ppl are "lazy" and dont want to reserve their loans before hand and  just take loans on the spot, and the result is economic/trading Darwinism

This is not about lazyness. A platform like Bitfinex encourrages day trading. In order to make profit there, you need to be quick. The whole process for reserving loans is fine, but it is simply too slow for that purpose (and right now the depth of offers in relation to demand is too shallow).

Besides, the pre ordering has some shortcomings, like you're not able to use a 1-day loan you reserved, and you are not able to use a 7-day loan for a 7-day order. So they are penalized.


But of course, I can also just encourrage to prepare one's loan, if you got the time to do so.

[Ichthyo]

So, starting from today (in a few hours), the way variable rate is calculated will be different:

It will be a pondered average of all opened loans (VIR or not). If fixed rate, then this rate is taken into account). If VIR, then the rate used for the calculation will be an average of the VIR of the last 60 days.

This is a first step. The second will be to allow you to set a max daily rate for your orders.

Thanks, this is indeed an important first step.


After thinking this issue over, the root of the problem is that under some circumstances, the market balance is affected. That is what allows some people to game the system.

When the market is functioning properly, there are two forces balancing each other: (1) you can offer and (2) you can choose not to accept an offer.

The force (2) is affected, and this allowed these excessive rates to become effective


So what we need to solve the probleme at the root are means to reinforce (2)

Thus my proposal:

Give the user the power to set a global limit. This limit is then picked individually up by each order, in the same way the lending period is picked up. The limit sets the point where a user prefers treatment as if there was "no reserve", instead of taking higher offers. And, alongside with that there should be a toggle to allow or disallow using VIR at all.

(If it is too complicated technically to store a limit this way with each order, then at least have one global setting affecting orders the moment they are exectuted)

If you do it this way, we give the market forces a chance to kick in.

[myself]

But of course, I can also just encourrage to prepare one's loan, if you got the time to do so.

many times i reserved loans 2 and 3 days in advance before the actual trade and if you check again the image i posted on this https://bitcointalk.org/index.php?topic=144461.0 thread you will see that i had allot of low rate loans and many times i close a position and instantly re borrow all the loans i had before and i keep them and pay IR for some time and then use again

[ThaddeusB]

I'll still let the VIR get chosen first, if only because they will now probably be the most interests offers during price increase.

If you have any more suggestions don't hesitate to post

Best regards
Raphael and the Bitfinex team

If VIR is always chosen first (i.e. even when higher than the lowest fixed rate), over time nearly all lenders will switch to VIR.  In fact, this is what already has happened apparently, and is what caused the huge surge in interest charged when a few traders (accidentally or otherwise) accepted very high fixed rates.

[Ichthyo]

If VIR is always chosen first (i.e. even when higher than the lowest fixed rate), over time nearly all lenders will switch to VIR.

yes, that seems to be what's happening. Those VIR loans create some kind of a wall, which effectively cut you off the loan market (unless you deliberately borrow before trading).

And an especially annoying problem is: often there are enticing offers for 1 day. Even yesterday, during those extreme rates, there was an 1-day offer for just 40% percent. But unfortunately, there is no way of getting into a position using those. Since the VIR offers are preferred always.

Just as an example, recently the offers were as follows:


But when attempting to open long for 1 day, you get an offer over 0.17 %
which shows that we're using VIR solely, which were at that time at 60%



Now the question is, do you think this would change if users could set a toggle that they don't want VIR, and set a limit for their rates? Would that change the market behaviour and help to move the rates down more quickly when there is not so much demand?

[myself]

and now is on the list 

[ThaddeusB]

and now is on the list  

  What is on what list?


On a side note, it occurs to me that since VIR is no longer equal to the average rate of loan in use that it can no longer be (directly) looked up.  Is that correct?