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

[drawingthesun]

Yes, that would also be as I imagined a function like this. Also I'd like to add that the opposite (earning interest in btc and selling them for USD) might also be interesting for others. Another potential function could be to have a cutoff value (e.g. 20 USD per day) above which everything else gets converted to btc. That way one could for example mimic a traditional 5% bank account and everything above is automatically in bitcoins.

Anyways, please look into listing the bitfinex internal exchange on bitcoincharts, it is free promotion and gives nice data as well as helping in global price discovery.

A alternative that Raphael could do instead is launch a full API for moving money between the three wallets, executing trades and such. If Raphael created a site wide API I will make a opensource program that could be run of amazon cloud or your own PC that would allow for these functions. (I'd probably write it in python)

This would also mean every time someone asks Raphael for a function, he can just point them towards a API and they can code one up themselves.

In fact if I had to chose between this function I and you want, and a API where I could implement this function and much more, I would rather a API

I did contemplate a web scraper but I'm building one of those already for another project and scraping and controlling web pages like that gives me headaches. I love website API's so much they make so so happy.

[daybyter]

If it's close enough to the other APIs, I might support such an API, too...

[Sukrim]

Yeah, an API would be really great and useful. I guess it is anyways on the to do list and probably even quite high. As soon as the risks for losses because of getting goxxed are mitigated I guess this will be one of the next things on the agenda. Hopefully it will be close to existing ones, so developers don't have to start from scratch.

In other news: it seems to be possible now to deposit and withdraw via wire transfer!

[myself]

@BFX internal fees  are like interactive brokers fees in europe https://www.interactivebrokers.com/en/index.php?f=commission&p=stocks2#europe but no min max value yet

[louisBSAS]

example for 1 usd trail stop

Anyone have any luck with trailing stops? 

No matter what I put in - it executes immediately.  As in the example above (but I entered 2 - to trail by 2btc) should have followed the upward swing and sold 2btc below the high.   It executed with less than a 0.75 price fluctuation.

[myself]

example for 1 usd trail stop

Anyone have any luck with trailing stops? 

No matter what I put in - it executes immediately.  As in the example above (but I entered 2 - to trail by 2btc) should have followed the upward swing and sold 2btc below the high.   It executed with less than a 0.75 price fluctuation.

plz can you take a look at the wiki page https://community.bitfinex.com/showwiki.php?title=Trailing-stop and make sure you make the needed steps

[louisBSAS]

example for 1 usd trail stop

Anyone have any luck with trailing stops? 

No matter what I put in - it executes immediately.  As in the example above (but I entered 2 - to trail by 2btc) should have followed the upward swing and sold 2btc below the high.   It executed with less than a 0.75 price fluctuation.

plz can you take a look at the wiki page https://community.bitfinex.com/showwiki.php?title=Trailing-stop and make sure you make the needed steps

Thanks,

That reads pretty much the same as TradeKing, Interactive Traders, Just2Trade - for stocks...

I did that twice and the orders both executed arbitrarily withing a minute or two. I was on the "exchange" tab - not sure if that's why.  The current bid price on both was around 142.62

It just didn't work.  Executed like a market order.


Chart during that half hour...



History during same half hour...

[louisBSAS]

hehe, just tried it again - see if you see the problem (executed in under 20 seconds with a 3.00 trailing stop)

I thought I would add the decimal point - if that might be the problem... not...

[louisBSAS]

This one seems to be working - I guess it only works on the 'margin trading' tab.

https://dl.dropbox.com/u/9159375/2013-04-05%2018_46_39-Bitfinex%20-%20Margin%20Trade.png

Thanks for trying to help out. 

[allten]

Love the new platform. Great job Bitfinex team!

You had mentioned that there was some money loss.

This is something that really concerns me:

Having margin accounts is never without risk to the exchange.
It's obviously a calculated risk, but I'm very concerned that you
may be stretching it a bit. How much are lenders exposed to this
same risk is yet to be seen?

There is some very real scenarios where Bitcoin prices drop (for a bull market)
or spike (in a bear market) which could coincide with a communication
failure that would put a lot of people in the red. Someone has to pick up
the tab.

MTGOX still owns a large majority of the trading volume. This is a risk for
margin trading if you are not the MTGOX! They could even use their
influence fraudulently in the market to weed out exchanges like bitfinex.

Prices are extremely speculative right now! Yet another risk if margin calls
cannot be executed in a timely fashion when it matters most.

I'm not saying I'm against margin, because it is ingenious and very needed.
I'm just saying that a 5 to 1 margin availability in the current market conditions
is really pushing it IMO. Please consider doing another risk analysis and
adjust the margin availability until condition are more favorable.

Thanks,
    Allten

[nrd525]

FYI - Looks like MtGox is ending USD codes on April 10th.   

[urwhatuknow]

Love the new platform. Great job Bitfinex team!

You had mentioned that there was some money loss.

This is something that really concerns me:

Having margin accounts is never without risk to the exchange.
It's obviously a calculated risk, but I'm very concerned that you
may be stretching it a bit. How much are lenders exposed to this
same risk is yet to be seen?

There is some very real scenarios where Bitcoin prices drop (for a bull market)
or spike (in a bear market) which could coincide with a communication
failure that would put a lot of people in the red. Someone has to pick up
the tab.

MTGOX still owns a large majority of the trading volume. This is a risk for
margin trading if you are not the MTGOX! They could even use their
influence fraudulently in the market to weed out exchanges like bitfinex.

Prices are extremely speculative right now! Yet another risk if margin calls
cannot be executed in a timely fashion when it matters most.

I'm not saying I'm against margin, because it is ingenious and very needed.
I'm just saying that a 5 to 1 margin availability in the current market conditions
is really pushing it IMO. Please consider doing another risk analysis and
adjust the margin availability until condition are more favorable.

Thanks,
    Allten

Thanks for your nice words Allten, my name is Giancarlo and I recently joined the Bitfinex team.
While Raphael will from now on focus on the technical software implementation aspects and Myself will take care of the trading developments I will take care of all the other matters, including risk management.

Coming to your question there are points we need to cover about the lending activity.
Under current operation the lender is covered if the market suddenly drops as the positions of the borrower will be forced-liquidated and the money will be given back to the lender.
If any additional losses occur because the order is not liquidated before the market drops further, Bitfinex chews it.
This mechanism worked well so far but it has been recently put under stress as the lag on MtGox, added to the fact that they sometimes re-quote their executions, made us suffer some losses as Raphael clearly and honestly documented in his post 2 days ago.
No big deal, we basically ended up the month of march breaking even and april looks pretty much the same so far.
This is also the reason why we try our best in order to implement new partnerships with other exchange sites (we are currently talking with a couple of them and very close to striking a deal with one of them) and we also try to lower as much as possible the commission applied to our customers that choose to trade on Bitfinex (currently down to 0.1% compared to the 0.5% for MtGox).
This strategy paid back in the last days as we could double the "local" trading volume to about 20% of the total and we hope (with your help) that we will be able to double it again, i.e. to take it to 40% within the end of this month.
In other words the more our customers choose to trade on Bitfinex the safer their money gets.

We have already been implementing some countermeasures insuring the risk in order to hedge our forced liquidation losses, but the amount of money lent out gets bigger by the day and what seemed appropriate this week might prove a little inadequate next week.
On the positive side our activity attracts a lot of attention, we are now talking with some deep pocketed guys that expressed interest in Bitfinex and seem to be on the same track as we are (they share the same values, don't think we are tapping into ruthless bankers) and we hope we will be able to keep covering and hedging our risks.
We will let you know in case something changes, but for the moment please sleep safe.
Last but not least the percentage of people being leveraged 5:1 is now reasonable (i.e. not that big) and doesn't represent an excessive risk for us.

On the other hand there is something that we all need to know, which is the real black swan event.
We all understand that money given by a lender is going to be invested into bitcoins by a borrower and the value of bitcoin is obviously related to the capacity of liquidate the position.
This is always possible under normal conditions, but the value of bitcoin could go down to zero in the very unlikely (but still possible) event that cryptocurrencies would be declared illegal by the United States, or any other catastrophic event.
In this case the Bitcoin price would drop to zero instantaneously and it would be impossible to liquidate any position.
In other words do not bet the house on bitcoin and be aware that the money you lent out are somehow exposed to a black swan event (i.e. the sudden death of Bitcoin).
But in this case the problem will be much bigger than the loss occurred on the lending side.
In this case it will be the end of our dream.

Hoping that this helps.

Urwhatuknow
Bitfinex Customers Relations
 

[unclescrooge]

Hello everyone,

To answer on the more technical questions:
-The API access: I'm all for it. It would bring more liquidity on bitfinex and allow external devs to develop awesome new possibilities for us. There is other features more urgent in the pipeline, but this is something that is coming to BFX.
-Trailing stops for exchange: Louis, thanks for the feedback. I'll have a look and correct the problem.

Have a nice day all
Raphael
Bitfinex Team

[Spaceman_Spiff]

Thanks for your nice words Allten, my name is Giancarlo and I recently joined the Bitfinex team.
While Raphael will from now on focus on the technical software implementation aspects and Myself will take care of the trading developments I will take care of all the other matters, including risk management.

Coming to your question there are points we need to cover about the lending activity.
Under current operation the lender is covered if the market suddenly drops as the positions of the borrower will be forced-liquidated and the money will be given back to the lender.
If any additional losses occur because the order is not liquidated before the market drops further, Bitfinex chews it.
This mechanism worked well so far but it has been recently put under stress as the lag on MtGox, added to the fact that they sometimes re-quote their executions, made us suffer some losses as Raphael clearly and honestly documented in his post 2 days ago.
No big deal, we basically ended up the month of march breaking even and april looks pretty much the same so far.
This is also the reason why we try our best in order to implement new partnerships with other exchange sites (we are currently talking with a couple of them and very close to striking a deal with one of them) and we also try to lower as much as possible the commission applied to our customers that choose to trade on Bitfinex (currently down to 0.1% compared to the 0.5% for MtGox).
This strategy paid back in the last days as we could double the "local" trading volume to about 20% of the total and we hope (with your help) that we will be able to double it again, i.e. to take it to 40% within the end of this month.
In other words the more our customers choose to trade on Bitfinex the safer their money gets.

We have already been implementing some countermeasures insuring the risk in order to hedge our forced liquidation losses, but the amount of money lent out gets bigger by the day and what seemed appropriate this week might prove a little inadequate next week.
On the positive side our activity attracts a lot of attention, we are now talking with some deep pocketed guys that expressed interest in Bitfinex and seem to be on the same track as we are (they share the same values, don't think we are tapping into ruthless bankers) and we hope we will be able to keep covering and hedging our risks.
We will let you know in case something changes, but for the moment please sleep safe.
Last but not least the percentage of people being leveraged 5:1 is now reasonable (i.e. not that big) and doesn't represent an excessive risk for us.

On the other hand there is something that we all need to know, which is the real black swan event.
We all understand that money given by a lender is going to be invested into bitcoins by a borrower and the value of bitcoin is obviously related to the capacity of liquidate the position.
This is always possible under normal conditions, but the value of bitcoin could go down to zero in the very unlikely (but still possible) event that cryptocurrencies would be declared illegal by the United States, or any other catastrophic event.
In this case the Bitcoin price would drop to zero instantaneously and it would be impossible to liquidate any position.
In other words do not bet the house on bitcoin and be aware that the money you lent out are somehow exposed to a black swan event (i.e. the sudden death of Bitcoin).
But in this case the problem will be much bigger than the loss occurred on the lending side.
In this case it will be the end of our dream.

Hi Giancarlo

Have you considered (perhaps temporarily) raising the mtgox trading fees to 0.6%, while keeping bitfinex trading at 0.1%? (can't believe I am saying this as a customer  ) This would increase the profit margin to ensure a bit of a 'war chest' in these price-volatile and gox-laggy times.  Since the amount of traded funds is growing, the profit made previously by bitfinex is probably small compared to the current swings.   Secondly, it would increase the relative benefit of making bitfinex vs mtgox trades.

[urwhatuknow]

Thanks for your nice words Allten, my name is Giancarlo and I recently joined the Bitfinex team.
While Raphael will from now on focus on the technical software implementation aspects and Myself will take care of the trading developments I will take care of all the other matters, including risk management.

Coming to your question there are points we need to cover about the lending activity.
Under current operation the lender is covered if the market suddenly drops as the positions of the borrower will be forced-liquidated and the money will be given back to the lender.
If any additional losses occur because the order is not liquidated before the market drops further, Bitfinex chews it.
This mechanism worked well so far but it has been recently put under stress as the lag on MtGox, added to the fact that they sometimes re-quote their executions, made us suffer some losses as Raphael clearly and honestly documented in his post 2 days ago.
No big deal, we basically ended up the month of march breaking even and april looks pretty much the same so far.
This is also the reason why we try our best in order to implement new partnerships with other exchange sites (we are currently talking with a couple of them and very close to striking a deal with one of them) and we also try to lower as much as possible the commission applied to our customers that choose to trade on Bitfinex (currently down to 0.1% compared to the 0.5% for MtGox).
This strategy paid back in the last days as we could double the "local" trading volume to about 20% of the total and we hope (with your help) that we will be able to double it again, i.e. to take it to 40% within the end of this month.
In other words the more our customers choose to trade on Bitfinex the safer their money gets.

We have already been implementing some countermeasures insuring the risk in order to hedge our forced liquidation losses, but the amount of money lent out gets bigger by the day and what seemed appropriate this week might prove a little inadequate next week.
On the positive side our activity attracts a lot of attention, we are now talking with some deep pocketed guys that expressed interest in Bitfinex and seem to be on the same track as we are (they share the same values, don't think we are tapping into ruthless bankers) and we hope we will be able to keep covering and hedging our risks.
We will let you know in case something changes, but for the moment please sleep safe.
Last but not least the percentage of people being leveraged 5:1 is now reasonable (i.e. not that big) and doesn't represent an excessive risk for us.

On the other hand there is something that we all need to know, which is the real black swan event.
We all understand that money given by a lender is going to be invested into bitcoins by a borrower and the value of bitcoin is obviously related to the capacity of liquidate the position.
This is always possible under normal conditions, but the value of bitcoin could go down to zero in the very unlikely (but still possible) event that cryptocurrencies would be declared illegal by the United States, or any other catastrophic event.
In this case the Bitcoin price would drop to zero instantaneously and it would be impossible to liquidate any position.
In other words do not bet the house on bitcoin and be aware that the money you lent out are somehow exposed to a black swan event (i.e. the sudden death of Bitcoin).
But in this case the problem will be much bigger than the loss occurred on the lending side.
In this case it will be the end of our dream.

Hi Giancarlo

Have you considered (perhaps temporarily) raising the mtgox trading fees to 0.6%, while keeping bitfinex trading at 0.1%? (can't believe I am saying this as a customer   ) This would increase the profit margin to ensure a bit of a 'war chest' in these price-volatile and gox-laggy times.  Since the amount of traded funds is growing, the profit made previously by bitfinex is probably small compared to the current swings.   Secondly, it would increase the relative benefit of making bitfinex vs mtgox trades.

Spaceman

yes, we have considered it.
For a short moment we even considered raising MtGox commissions to 99% (when their lag was over 1 hour), but then our anger dissolved
You see, the power of habbit is very difficult to eradicate and some of our customers just love to trade on MtGox, despite how lousy their service can sometimes be.
Therefore we believe they wouldn't like a further raise, but hey if I'm wrong just say it and we will be glad to implement your proposal  
On the other hand MtGox is for us all part of our experience with Bitcoin, they have been around for a quite a long time and they survived (unlike most others) bad and good times.
They still have more than 80% of the market and offer a wide range of currencies trading (even if some of them might prove a little illiquid).
It's sometimes easy to criticize, but being in their shoes right now doesn't have to be an easy piece of cake.
As we understand they are experiencing exponential customer growth and it's understandable that some glitches will happen.

All I can say to everybody reading my post now is: next time you place an order on Bitfinex please consider the option of just restricting it to the Bitfinex exchange.
This will greatly help us in developing our community and keeping your funds safer.

I thank you in advance for your kind cooperation

Urwhatuknow
Customers Relations
The bitfinex team

[2112]

But in this case the problem will be much bigger than the loss occurred on the lending side.
In this case it will be the end of our dream.

More people working at Bitfinex but still the same fundamental problem:

1) when going long on Bitcoin the maximum possible loss is 100% but the maximum possible gain is infinite
2) when going short on Bitcoin the maximum possible gain is 100% but the maximum possible loss is infinite

Bitfinex has no way of assigning this infinite loss to the trading entities that incurred them. Therefore the excess shorting losses will have to be spread over the Bitfinex's own capital (next to none) and the Bitcoin capital of those who lend it to Bitfinex in exchange for interest.

Long & convoluted essays will not change the above short & simple explanation.

[urwhatuknow]

But in this case the problem will be much bigger than the loss occurred on the lending side.
In this case it will be the end of our dream.

More people working at Bitfinex but still the same fundamental problem:

1) when going long on Bitcoin the maximum possible loss is 100% but the maximum possible gain is infinite
2) when going short on Bitcoin the maximum possible gain is 100% but the maximum possible loss is infinite

Bitfinex has no way of assigning this infinite loss to the trading entities that incurred them. Therefore the excess shorting losses will have to be spread over the Bitfinex's own capital (next to none) and the Bitcoin capital of those who lend it to Bitfinex in exchange for interest.

Long & convoluted essays will not change the above short & simple explanation.

2112

There must be something you are missing in the mechanism.
As a matter of fact I believe we both agree upon the fact that the possibile theoretical infinite gain of a BTC long position will not be a problem for Bitfinex
Please tell me if I'm wrong, but I believe I'm correct on this point.

On the other hand the potential infinite loss of a short position is something that will occur only if the price goes up to infinite, or to make a much more practical case to a very very very big number. Say to 1.000.000 dollars per bitcoin (God bless).
Now, being practical you must admit that it is very very very difficult that this will happen within a matter of seconds.
Only if Amazon, Ebay, the Federal Reserve, the Bank of England and the ECB would simultaneously announce that they will only accept  payments in Bitcoins from that moment on, the price of Bitcoin will probably go from the current 143 usd as we speak to 1 million within a matter of seconds. (Not even in this unlikely case a more precise reader would argue, as it will take time before the fiat money gets pumped in the system in order to buy Bitcoins).
Therefore Bitfinex would have plenty of time to forced-liquidate all the borrowers that engaged in a leveraged short position, (that is selling Bitcoin in the hope the price will go down).
As we want all of our customers to sleep at night we also publish the amounts of bitcoins currently borrowed as you can easily check on our market statistics page. This number is currently 676.52 bitcoin, which is the maximum amount of loss we can incur, even if the price for each bitcoin in usd goes to infinite.
Now, you are right when you say that we are not Bill Gates or Warren Buffett, but I hope you can believe me when I say that we have been into bitcoin for enough time to be able to face a 676 btc loss.
The risk lays only in a BTC sudden death (a black swan event) not in a BTC price raise, because we are all (and our brothers) invested in bitcoin.
And we got them kind of cheap.


I hope to have cleared all of your doubts.
In case I didn't, I believe using a piece of paper and a pen will greatly help your understanding.
Please let me know if you need further help.

Have a good day

Urwhatuknow
Customers Relations
The Bitfinex Team

[Sukrim]

Congrats to 500k active loans by the way!

[allten]

On the other hand there is something that we all need to know, which is the real black swan event.
We all understand that money given by a lender is going to be invested into bitcoins by a borrower and the value of bitcoin is obviously related to the capacity of liquidate the position.
This is always possible under normal conditions, but the value of bitcoin could go down to zero in the very unlikely (but still possible) event that cryptocurrencies would be declared illegal by the United States, or any other catastrophic event.
In this case the Bitcoin price would drop to zero instantaneously and it would be impossible to liquidate any position.
In other words do not bet the house on bitcoin and be aware that the money you lent out are somehow exposed to a black swan event (i.e. the sudden death of Bitcoin).
But in this case the problem will be much bigger than the loss occurred on the lending side.
In this case it will be the end of our dream.

Hoping that this helps.

Urwhatuknow
Bitfinex Customers Relations

Great response. Thank you!

You highlighted the root of my concern discussing a black swan event.
I don't believe it will ever go to 0, but it appears that big money has
entered the Bitcoin market and that big money is under control of the few and
not the majority. It only takes some fraudulent news, DDOS attacks, and few of
these individuals to cash out and we have a 50 to 75% drop in very short period
of time by my guestimations. Sure, this is borderline "conspiracy theory",
but I think it is a very real possibility with the current Bitcoin weather that I hope
you consider in your risk analysis.

Thanks again!

[2112]

I hope to have cleared all of your doubts.
In case I didn't, I believe using a piece of paper and a pen will greatly help your understanding.
Please let me know if you need further help.

Thanks, I don't have any doubts.

In fact I think you are doing a great job of educating young people. It is kind-of boring and fruitless to harrangue the youth to learn about bucket shops, capital at risk, financial audit and other such obscure stuff.

While participating in Bitfinex they can learn with their own lunch money about the basics of finance, e.g. capital cannot be simultaneously safely stored in a cold wallet and profitably invested in an exchange trading.

Bitfinex will also teach people how to be their own bank and their own accountant, e.g. how to reconcile the statements like "676.52 bitcoin borrowed" and "500k active loans".

Yeah, nearly 100 years of various consumer protection laws contributed to the creation of generations of irresponsible people. Let them learn how to have a cake and eat it too.