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

[QwertyCore]

I would also mention, BFX is no longer the only game in town when it comes to P2P margin lending.  And the other sites doing it don't have any kind of FRR to manipulate the market.  I've always been a huge fan of BFX's, but business is business, and if they don't do something to fix the broken system they have in place with FRR, I'm pretty sure at least some of my $ will be moving on soon.

Great to hear another exchange is getting into p2p lending.  I just messaged OKCoin and they are charging 20% fees on earned interest.  I asked for a justification for the high rate in comparison to Bitfinex, but they didn't offer anything. 
Considering I think 15% is a little high already I may think twice about sending money over to OKcoin in the short term.
Peace

What are the current lending rates?

[nrd525]

Bot selling 0.1 BTC every 6 seconds or so.

[medicine]

I would also mention, BFX is no longer the only game in town when it comes to P2P margin lending.  And the other sites doing it don't have any kind of FRR to manipulate the market.  I've always been a huge fan of BFX's, but business is business, and if they don't do something to fix the broken system they have in place with FRR, I'm pretty sure at least some of my $ will be moving on soon.

Great to hear another exchange is getting into p2p lending.  I just messaged OKCoin and they are charging 20% fees on earned interest.  I asked for a justification for the high rate in comparison to Bitfinex, but they didn't offer anything. 
Considering I think 15% is a little high already I may think twice about sending money over to OKcoin in the short term.
Peace

What are the current lending rates?

Currently the order book is non existent.  There are no bids.  Let's try to keep this thread on the topic of Bitfinex again here.

[gog1]

total swap at $21.8 million but rates continue to slide - I guess someone just lend about $500k at 0.02+ (6.2% after fees)

things are getting ridiculous

[toddtervy]

OKCoin only allows large accounts to do P2P lending - they took that ability away from the small time investors.

Interesting, I will take a looks at their site.  I can remember when bitfinex interest was much different.

[Barabbas0]

total swap at $21.8 million but rates continue to slide - I guess someone just lend about $500k at 0.02+ (6.2% after fees)

things are getting ridiculous

Things will get interesting when they compete with bonds. Right now, I think it's only a combination of people who don't want to move USD from Bitfinex (awaiting BTC entry) or folks who haven't moved their money, yet. Still no word from BFX. Last I heard "they're working on a solution", lol. But we're still just greedy lenders, right? They're going to be screwed when no one will margin trade because there's no liquidity left.

[atlosas]

Can you explain what is the problem with lending? I see people talk about it a lot but i didn't understand (i only trade, not lend).

[Mythoughts]

Can you explain what is the problem with lending? I see people talk about it a lot but i didn't understand (i only trade, not lend).

In a nutshell:
Rates go down more and more. Soon, there will be better options to invest the dollars in. That will lead to lenders withdrawing their money from BFX, leading to fewer available swap funds for margin traders to use.

All that is no problem under current market circumstances, there will still be enough available.

But as soon as demand for funds increases (i.e. when volatility increases or the bear market turns into a bull market), there will be WAY more demand for swaps. But not enough funds available to be lent. That will lead to traders being unable to use leveraged trading until swap-money comes back to BFX, which could take quite some time.
That will make traders unhappy and will make BFX miss a lot of fees from traders/lenders. Possibly traders will leave for other sites where they can use leverage in volatile times.

They should probably plan for a time with high demand.

[atlosas]

Well low rates are good for traders. There is too much of supply atm so the rates are very low. But i guess when demand increases and rates shoot up there might be some shortage but it won't last long, market should stabilize it.

[Barabbas0]

Well low rates are good for traders. There is too much of supply atm so the rates are very low. But i guess when demand increases and rates shoot up there might be some shortage but it won't last long, market should stabilize it.

It's terrible for traders. Right when you hit buy to jump in on the next rally, there will be no liquidity to lend from. You end up having to pay XXX% (annualized) for a leveraged position which eats into your P/L. It amplifies the time value of your position, immensely. For example, if the market trends sideways for a little bit, you'll be paying out the ear for the time of holding an outrageously expensive loan.

It's a ticking time bomb, BFX really doesn't understand liquidity and the importance of stability in fixed income markets. Things like interest rate risk really shouldn't factor into traders' decisions.

[oyvinds]

Well low rates are good for traders. There is too much of supply atm so the rates are very low. But i guess when demand increases and rates shoot up there might be some shortage but it won't last long, market should stabilize it.

It's terrible for traders. Right when you hit buy to jump in on the next rally, there will be no liquidity to lend from. You end up having to pay XXX% (annualized) for a leveraged position which eats into your P/L. It amplifies the time value of your position, immensely. For example, if the market trends sideways for a little bit, you'll be paying out the ear for the time of holding an outrageously expensive loan.

It's a ticking time bomb, BFX really doesn't understand liquidity and the importance of stability in fixed income markets. Things like interest rate risk really shouldn't factor into traders' decisions.

1) Put a USD Swaps demand offer for 30 days at the rate you want.
2) Buy all the Bitcoins
3) Enjoy the knowledge that you won't be paying more than 0.278% (like 10%/year) the next 30 days
4)
5) Take loss (or profit if this thing actually moves up)

See, the secret that is used so successfully by the trader elite is to reserve the USD at low rates for long periods before buying all the bitcoins. You may actually end up paying interest for USD you don't use for some hours or a day but that's life.

As for those who say "these rates are too low": People are, for some reason, willing to lend out at these rates. If you are a lender and you find these rates to low then go find something else to do with your digital american toilet-paper.

And there is generally no reason to worry about "Bitfinex running out of USD". If there is little USD available then rates go up and millions of fresh USD magically appears. It's supply and demand, it's that simple.

[Barabbas0]

digital american toilet-paper.

/thread

That's why we can't have good conversations. When you use language like that, you demonstrate that you have no grasp on what currency actually is.

[heyanoseiri]

hi

how about amount I can deposit USD and exchange toBTC?
1000000USD OK ?
1000k USD a month?
too big amount need more  vertification?
my account aleady vertified

[gabbello]

Newbie questions here:

1. I see that Okcoin is offer a 10% insurance option, is there something similar offered by Bitfinex?
2. My understanding is that If I'm lending bitcoins the offers  are being matched by people who want to borrow bitcoins for them to open short BTC positions. The system is designed to close positions if traders are loosing and don't have enough money in their own account to cover the loses. However If the BTC price suddenly goes up is there a risk the system can not react fast enough and trader defaults on the borrowed amount?


Basically I want to understand what are all the risk involved for lending bitcoins (beside the obvious one of keeping them at a 3rd party).

 

[Anastasios]

Hello bitfinex,

I have some suggestions to make regarding the lending service and FRR.

There is a limit on how high the interest rate is allowed to be, but not how low. Of course there are reasons to put a cap on how high one can set the interest rate. People may get into a position where the only available option is 10000% interest per year, either by someone manipulating it, or by the demand increasing too suddenly. This would obviously make the margin trading platform look bad as profits may get diminished by interest. But, if the platform recognizes this, then why does it not recognize that interest rates may go too low, either by manipulation, or suddenly decreased demand, or - an unfortunate truth - the FRR pushing the rate lower than the actual decrease in demand.

The last part regarding FRR pushing the interest rate is true and is evidently something many are complaining about. There are several reasons why there should be a lower limit, since we recognize limits are necessary (there is an upper limit). I will make a list below

• Lending is risky. If someone gets margin called but there is not enough liquidity on the orderbook, the lender loses out.
• Added risk: lending is done on the bitfinex platform. Considering MtGox lost 600k BTC and tens of millions of USD, one is wary about leaving their funds on an online exchange
• Lending has to compete with other investment vehicles, and risk has to be considered here.
• The profitability of lending vs borrowing has to be balanced. Too high interest rates cuts traders profits, but too low rates make it almost free to borrow (a $10,000 loan at 0.03% costs a measly $3 per day)

I think 0.1% per day is a reasonable lower limit.

The second suggestion is my vote on how the FRR algorithm should work. Here is what is exactly happening now. If there are an equal amount of USD being lent and borrowed each day, say $20m, and $3m waiting to be lent, some people will by default try to get under the $3m FRR wall to get things going, and the FRR algorithm will see this as a signal to lower the rate - despite the fact that the demand or supply never changed. Once the rate drops a little, the FRR adjusts existing loans, making those who want to lend their USD quickly go even lower. Then this cycle repeats. There are charts showing that the demand and supply hasn't changed yet the rate drops consistently.

My suggestion is that the FRR algorithm should not be based on the average rates of previously lent money. Instead it should be based on the demand and supply of USD for margin trading. I mean this type of logic:
Let X be supply (available USD), Y be demand (new swaps per day and/or sum of swaps), Z be the lending rate

• If X increases while Y increases less, remains unchanged, or decreases, then the rate decreases proportionally
• If Y increases while X increases less, remains unchanged, or decreases, then the rate increases proportionally
• If both remain unchanged, the rate remains unchanged

Surely both lenders and borrowers would agree on a system which says "I'll loan to you at a rate depending on how much demand there is for my money". Having the ability to adjust the variables for this would be a plus, as some people would like their money lent as fast as possible while others want the highest rate.

[Mythoughts]

Newbie questions here:

1. I see that Okcoin is offer a 10% insurance option, is there something similar offered by Bitfinex?

Okcoin offer 20x leverage, so there it can happen quite easily that a position cant be fully liquidated when the price changes fast (a 5% move can force-liquidate, and 5% isnt much in bitcoin-world). An insurance helps then.
BFX offers 5x leverage. So the price would have jump by 20% to force-liquidate. No need for an insurance. Plus every insurance costs money.

(snip)
I think 0.1% per day is a reasonable lower limit.
(snip)

I dont see how there can be a lower limit. Apart from disturbing a free market even more than the FRR-wall, I see practical problems:
What if there is a hypothetical 3M swap demand and 15M swap offers at a lower limit: which funds get lent out then? 20% of all available offers? In practice, you only have 1/5th of the interest rate of the lower limit then. This doesnt solve any problem.

[Anastasios]

Newbie questions here:

1. I see that Okcoin is offer a 10% insurance option, is there something similar offered by Bitfinex?

Okcoin offer 20x leverage, so there it can happen quite easily that a position cant be fully liquidated when the price changes fast (a 5% move can force-liquidate, and 5% isnt much in bitcoin-world). An insurance helps then.
BFX offers 5x leverage. So the price would have jump by 20% to force-liquidate. No need for an insurance. Plus every insurance costs money.

(snip)
I think 0.1% per day is a reasonable lower limit.
(snip)

I dont see how there can be a lower limit. Apart from disturbing a free market even more than the FRR-wall, I see practical problems:
What if there is a hypothetical 3M swap demand and 15M swap offers at a lower limit: which funds get lent out then? 20% of all available offers? In practice, you only have 1/5th of the interest rate of the lower limit then. This doesnt solve any problem.

Regarding limits, I am either on the side of having no limits at all, or having both upper and lower. If the lending platform proves to offer stable rates without upward or downward spikes, as a result of manipulation or the inability to balance itself during times with high volume, then obviously there is no need for limits.

Which funds get lent out when bids and ask meet, if they are at the same price? Obviously, the moment there is an offer and a demand placed at the same rate, it gets executed.

[Sukrim]

The upper limit is also not "enforced", it just requires manual interaction. Requiring manual interaction for loans outside of a certain range of percentages could be a viable option. Currently there's only an upper limit - if you want to borrow funds above 1%/day, you need to go to the respective tab and manually accept the offer(s), then you can trade with these funds. Usually this is not necessary, as opening a position automatically grabs the necessary amount of the cheapest funds available for lending.

Lower limits concern lenders more, so e.g. Autolend could stop working if it would lend out funds below 0.1%/day. I don't see how this would work out in practice to limit traders to a certain automated offer-taking (imagine some funds being available at 0.05% and some at 0.11% - would traders now no longer be able to automatically fund their positions, would they just get the 0.11% despite a cheaper option being available or something else?). This also would offer some DoS/annoyance attacks, such as offering small amounts of USD at low rates to force borrowers to manually process their funds.

[Anastasios]

The upper limit is also not "enforced", it just requires manual interaction. Requiring manual interaction for loans outside of a certain range of percentages could be a viable option. Currently there's only an upper limit - if you want to borrow funds above 1%/day, you need to go to the respective tab and manually accept the offer(s), then you can trade with these funds. Usually this is not necessary, as opening a position automatically grabs the necessary amount of the cheapest funds available for lending.

Lower limits concern lenders more, so e.g. Autolend could stop working if it would lend out funds below 0.1%/day. I don't see how this would work out in practice to limit traders to a certain automated offer-taking (imagine some funds being available at 0.05% and some at 0.11% - would traders now no longer be able to automatically fund their positions, would they just get the 0.11% despite a cheaper option being available or something else?). This also would offer some DoS/annoyance attacks, such as offering small amounts of USD at low rates to force borrowers to manually process their funds.

Didn't know upper limits weren't enforced! Then I change position on this. No limits at all.

[Mythoughts]

Did the algorithm change already, somehow?

Yesterday, while there was HUGE demand for BTC-swaps in the selloff to ~$260, the BTC-FRR sharply DROPPED from about 0.11% to 0.07%.

The only way this could possibly explain that imo is:
- FRR calculation model changed or
- someone accidently lent out a big amount of BTC for 0.01 instead of 0.1, or some similar mistake.