Hey man! I'll answer a few of these.
2) To get started, I decided to put a portion of my money as a loan. Wasn't sure about the rate, though. The statistics say the current average rate is 130% p.a., but most loan offers are higher. Can someone fill me in what the max rate is any respectable trader would take? I'm not planning on putting out a loan at that rate, I'm just trying to get a feeling for what the maximum profit is traders expect when they trade on margin (sorry if I get the terminology wrong ... like I said, I'm a noob
)
There is no "max rate any respectable trader would take". It all depends on supply and demand, which is affected by market conditions. In a very bullish market, as is the case at this very moment, most people want to go long, hence the high lending rate at which funds are available. Are traders able to make a profit in spite of this? Yes, profit is possible.3) I think I sort of get the exchange/meta-exchange model of bitfinex, but not entirely: right now it says "not enough USD on bitstamp". I thought most of the bitfinex volume was actually coming from trades executed on bitstamp. So how come there aren't enough funds on bitstamp? In fact, I don't get *whose* funds those are: are they funds of bitfinex traders, or is it USD bitfinex itself places on bitstamp in order to execute trades on bitstamp?
Bitfinex has an account opened at Bitstamp through which the routing of orders directly to Bitstamp takes place. At this moment, Bitfinex's account at Bitstamp is at a shortage of USD because of the large number of traders that had their long orders being routed to Bitstamp. I assume Bitfinex's account at Bitstamp is one of the largest accounts on Bitstamp, so you can imagine the amount bought. But even at this moment, extra funds are on it's way to the big account, from what I was told by Raphael.4) A more practical question: I'm usually trading on bitstamp, and got used to its quirks (relatively shallow market depth, although that's changing in the last weeks), but I don't know about the bitfinex market: do you guys trade on bitfinex itself, or do most of you execute trades on bitstamp? What's the market depth on bitfinex on average? Can you execute moderately large trades without too much spread?
Short answer is geared towards yes. For example, more than half of my trades have been executed at BFX, reducing my average fee to roughly 0.175% and I trade between 1000 and 5000 BTC per month at Bitfinex.
Also, if you look at the Level 2 Orderbook, you will see some BFX orders put "in front" of BSTP orders that have "better prices". Bitfinex is sorting the orders like this taking the smaller BFX fees in consideration. So if you were to place a market order, that "higher" BFX price at which your order would be executed is actually better for you because you would end up paying less with fees included.EDIT: I've just checked your bitcointalk account, and you have registered one minute after I did, back in April this year. I think I am starting to believe in unicorns as well!
Thanks for the good explanation 8fold.
You are great in making complicated things easy to understand.
To add some transparency to how Bitfinex operates I would like to explain in details why we sometimes incur in a liquidity crunch on our Bitstamp account.
It might sound strange (not!) but the world is driven by 2 mayor feelings: fear and greediness.
I believe I said nothing new so far, but what might surprise you is that people tend to get extremely greedy when the market goes up a lot and extremely scared when the market goes down a lot.
Also this concept might not be unknown to you, as you all have been around for a while now.
;-)
The two above mechanisms determine the fact that when the market is in bear mode the usd liquidity is good, say about 50% of our total customers assets are in usd.
But when the market is bullish (as it is now) people tend to buy all the bitcoins they can and then some more (they borrow to get some extra).
This determines 2 things: interest rates on loans are jumping and it becomes really difficult for us at Bitfinex to keep both our domestic and Bitstamp market fueled with enough fiat funds.
Even half a million dollars liquidity can disappear in a matter of minutes if a big order for 2/3,000 bitcoin is placed and executed on Bitstamp (which is normally the case, given the fact that their orderbook is for the moment thicker than ours).
Believe it or not we start to have such big "whales" among our customers.
They used to be swimming only in the japanese sea, but they recently migrated south towards Hong Kong and we'll try our best to keep them happy and to add some more
When our Bitstamp account gets dry we have to wire money to them, but this might take a couple of days if there is no weekend in between or even more (4 days) if there is one.
Banks love to sit on their customers money and this is not a secret.
Furthermore we also like to keep our customers dollars as safe as possible and even though we trust Bitstamp to be a very reliable organization we know that shit happens and therefore tend to minimize the risk by keeping the vast majority of your dollars safe in our account (I hope you will appreciate this).
I hope this explanation helps your understanding and will mitigate some of your frustration when the small sign saying "no more funds on Bistamp...." appears on the order book.
Feel free to ask any question that might come to your head.
Now the last thing: how to improve the current system?
- Talk to your friends about us, get some more people to know Bitfinex and its unique features.
- When you place an order consider choosing the "Bitfinex only" option (advice: place a limit order and not a market order to avoid price slippage), this will save you about 60% in commissions and improve our orderbook depth.
- The more we become independent from other markets, the more your money and coins will be safe.
Bitfinex is not even 1 year old (it will be soon, in a few days...) and we already managed to be among the top 5 bitcoin trading websites in the world.
Silently.
We keep a low profile as we keep working on our compliance, knowing that lightnings tend to strike tall trees.
We are trying to improve our loans liquidity and we are adding more market makers.
We don't want every customer, we want just the good ones.
I believe Bitfinex has a great business model and provide great customer support, especially because of Raphael and Patricia that work endlessly to add new features and eliminate bugs.
I try my best to help with some of these posts, not always obtaining good results.
Our goal is to be within the biggest 3 within a year and with your help we can do it.
Vires ex numeris!
Have a good day
Giancarlo
Bitfinex Team
