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

[blueberry]

However it would Appear that BitFinex
is willing to go to any means necessary to "Protect Lenders",

But the other side of the coin is that just as Traders know the assume risk
when taking a position we assume that Lenders also take the same risk.

It is debatable whether Bitfinex are favoring the lenders over the traders. Bitstamp's api was down during the flash crash to 100, so the lenders would argue that the flash crash to 100 should never have happened (therefore the lenders are not liable to losses). The liquidation crash would have been far more orderly had the liquidated trades been made on Bitstamp with a price floor of no less than 450 judging by Bitstamp's bid depth at the time.

Bitstamp API was NOT down during the crash. Me and many people where trading on QT Trader in Stamp.

Perhaps BugFinex connection to the Stamp API was down. That's easy to believe... it would be just one more thing that's wrong with them to add to all the others.

Regardless of whether Bitstamp's api was down or Bitfinex's connection to Bitstamp's api was down, my point still stands regarding the lenders point of view.

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[aragalie]

As previously mention,
The Lender's side of BitFinex is beginning to Look
more and more attractive, 14% interest compounded Daily ?,
that would be 420% monthly, not a bad deal, especially if one
adds in the fact of the Platforms heavy hand in protecting lenders,
it's a "No-Brainer", or in the U.S.A. it's called "Predatory Lending".

So, taking your argument further, when a trader has more than 14% profit per day (not uncommon in this market), we should call it "Predatory Profit-making"?

[whatthesith]

Lenders profit from the incredibly high interest rates they charge and now would appear to
also be at very little risk themselves, one would think that the equation is that they are able
to charge such high interest rates because of the risk that they take, if that risk is going to
be minimized now by BitFinex everytime the market crashes then it would only be logical to
also put a cap on the interest rates that the Lenders are able to charge.

Otherwise it would behoove of all of us to quit being Traders and all become "Lenders" with
the un-equaled  amount of "Protection" that BitFinex is affording to it's Lenders.

Unfortunately one will not function without the other, actually Traders can trade without Lenders,
but Lenders can't lend it they don't have an Traders willing to take their loans.

I'm not sure if you are aware, but there IS a cap on the profit of the lenders: it's at 14% per day. Try it yourself to put an offer higher than that and you will see.

Also, the risk of the Lender is not the same as the Trader's, and they should not be compared. What you want to compare is the risk PROFILE.
To explain: as a Trader, when you put a long or a short you have the theoretical opportunity to have unlimited profits (if the price goes up), or an extremely high but none the less limited opportunity if it goes down (to 0.00001). So your risk is quantifiable, whereas your profits can grow very, very much. Whereas for a Lender, you have ALWAYS a limited profit opportunity (the rate you charge, with a max at 14% per day), whereas your risk is more or less complete loss of funds, at any point in time when and if the market crashes.

If we were in a regulated market, the lenders would be protected, and your costs for funding would also be lower. But, as we are in an unregulated market, the Lenders are actually, from a business POV, MUCH MORE important to protect, keep and increase their numbers than are the Traders. Put another way: there are lots of Traders around, but very very few Lenders.

So, my humble opponions is that BFX did the right thing by stopping the trading momentarily. Of course, the right thing for their business and for the Lenders. But not the right thing for the short seller, of course.

Pragmatically speaking, they can find short sellers (Traders) any time they want, whereas if they loose 16 million USD from Lenders, their platform will be dead tomorrow.

Hope it makes sense for everyone on this forums, especially for those amongst us bickering over pennies lost here and there in "potential" winning trades.

What's the point in offering an insurance for the lenders then? If BifFinex it's not enforcing it, it means they are just pocketing the money the lenders pay for insurance... together with the other million dollar a months that comes from their trading fees.

I guess the lenders are still exposed to risk of default from trader, as a trader may have a negative balance in an event like this. The trader may just go away with a negative balance account.

I guess this makes the difference on offering insurance (btw, the amount of insurance funds are actually very small when compare to the total active swaps)

[CambioBTC]

As previously mention,
The Lender's side of BitFinex is beginning to Look
more and more attractive, 14% interest compounded Daily ?,
that would be 420% monthly, not a bad deal, especially if one
adds in the fact of the Platforms heavy hand in protecting lenders,
it's a "No-Brainer", or in the U.S.A. it's called "Predatory Lending".

So, taking your argument further, when a trader has more than 14% profit per day (not uncommon in this market), we should call it "Predatory Profit-making"?

That's the risk-reward benefit of being a "Trader"

I guess the lenders are still exposed to risk of default from trader, as a trader may have a negative balance in an event like this. The trader may just go away with a negative balance account.

I guess this makes the difference on offering insurance (btw, the amount of insurance funds are actually very small when compare to the total active swaps)

That exact risk is why I did not become a "Lender" from the start.

[whatthesith]

Lenders profit from the incredibly high interest rates they charge and now would appear to
also be at very little risk themselves, one would think that the equation is that they are able
to charge such high interest rates because of the risk that they take, if that risk is going to
be minimized now by BitFinex everytime the market crashes then it would only be logical to
also put a cap on the interest rates that the Lenders are able to charge.

Otherwise it would behoove of all of us to quit being Traders and all become "Lenders" with
the un-equaled  amount of "Protection" that BitFinex is affording to it's Lenders.

Unfortunately one will not function without the other, actually Traders can trade without Lenders,
but Lenders can't lend it they don't have an Traders willing to take their loans.

I'm not sure if you are aware, but there IS a cap on the profit of the lenders: it's at 14% per day. Try it yourself to put an offer higher than that and you will see.

Also, the risk of the Lender is not the same as the Trader's, and they should not be compared. What you want to compare is the risk PROFILE.
To explain: as a Trader, when you put a long or a short you have the theoretical opportunity to have unlimited profits (if the price goes up), or an extremely high but none the less limited opportunity if it goes down (to 0.00001). So your risk is quantifiable (and manageable with a Stop Loss), whereas your profits can grow very, very much. Whereas for a Lender, you have ALWAYS a limited profit opportunity (the rate you charge, with a max at 14% per day), whereas your risk is more or less complete loss of funds (the insurance pool is almost always depleted, as it's just $50k+ vs the 18+ MILLION in lent funds recently), at any point in time when and if the market crashes.

If we were in a regulated market, the lenders would be protected, and your costs for funding would also be lower. But, as we are in an unregulated market, the Lenders are actually, from a business POV, MUCH MORE important to protect, keep and increase their numbers than are the Traders. Put another way: there are lots of Traders around, but very very few Lenders.

So, my humble opinion is that BFX did the right thing by stopping the trading momentarily. Of course, the right thing for their business and for the Lenders; but not the right thing for the short sellers.
Pragmatically speaking, they can find short sellers (Traders) any time they want, whereas if they loose 16 million USD from Lenders, their platform will be dead tomorrow.

Hope it makes sense for everyone on this forums, especially for those amongst us bickering over pennies lost here and there in "potential" winning trades.

Yes that is the way things are
suppose to work, but the scenario that
you just explained does not appear to be the
case.

As previously mention,
The Lender's side of BitFinex is beginning to Look
more and more attractive, 14% interest compounded Daily ?,
that would be 420% monthly, not a bad deal, especially if one
adds in the fact of the Platforms heavy hand in protecting lenders,
it's a "No-Brainer", or in the U.S.A. it's called "Predatory Lending".

Not sure if it's just me or not, but that "Swap Interest Rate"
appears to be moving faster than should be when in a Leverage Position,
almost like a "StopWatch", never seen interest accrue at such a fast rate in my life.

I don't see a problem even if Bitfinex put lender in a favorable condition.

The market force will do the trick and adjust the interest rate accordingly. If all of us (including you) think that being a lender is more favorable , why not just lend out the fund instead trade in a such a high risk environment?

[Sukrim]

What's the point in offering an insurance for the lenders then? If BifFinex it's not enforcing it, it means they are just pocketing the money the lenders pay for insurance... together with the other million dollar a months that comes from their trading fees.

That insurance fund is a relatively stupid thing to begin with - there are probably however people who do not want to be able to loose a single cent. While I would accept to loose a few percent of the money I lend out (which is quite a bit more than what you claim to have lost) I don't think that liquidating at beloww 100 USD when BTC are traded at 600 USD a few minutes before is something that should happen.

If people don't want to be able to loose a single cent - pay for insurance. If you want some risk - lend uninsured. If you want to snatch up sub 100 USD BTC just because the BTC funds at Bitstamp are depleted and the order book gets thin at the bottom... maybe go elsewhere.

In other news, I'm up a few 100 USD from the trade I announced before in this very thread. If you did what I did, you'd be celebrating right now instead of hatin' on lenders. I can show you some data from last April, I'm sure I would be happy to lend at THESE rates, which will come back if you scare away the current lenders with the stuff you propose.

[aragalie]

I guess this makes the difference on offering insurance (btw, the amount of insurance funds are actually very small when compare to the total active swaps)

If you think about it, the insurance funds, by their very DEFINITION, cannot be at the same level as the lent funds.
Otherwise, if BFX would have 16 million lying around, they would be smarter to trade or lend them than to insure your funds right?

Also, let's assume in 1 year they have 160 millions lent...how will that be insured?

In the regulated markets, money for margin trading is provided at a cost by the banks to the trading platforms, and that cost is reflected in your spread.
You need to be regulated by the financial authorities though, in order to get such a treatment from the banks as a trading platform. And that ain't gonna happen soon for the BTC exchanges.

[gizmoh]

Yes that is the way things are
suppose to work, but the scenario that
you just explained does not appear to be the
case.

As previously mention,
The Lender's side of BitFinex is beginning to Look
more and more attractive, 14% interest compounded Daily ?,
that would be 420% monthly, not a bad deal, especially if one
adds in the fact of the Platforms heavy hand in protecting lenders,
it's a "No-Brainer", or in the U.S.A. it's called "Predatory Lending".

Not sure if it's just me or not, but that "Swap Interest Rate"
appears to be moving faster than should be when in a Leverage Position,
almost like a "StopWatch", never seen interest accrue at such a fast rate in my life.

Don't be delusional, its only hypothetically up to 14%.
Actual rates goes over 1% only when insane rally and for a few hours only, rarely 1%, and is averaging 0.3%.
It is currently at 0.178%. Are you ready to lose 95% of your funds for that rate?

[CambioBTC]

I don't see a problem even if Bitfinex put lender in a favorable condition.

The market force will do the trick and adjust the interest rate accordingly. If all of us (including you) think that being a lender is more favorable , why not just lend out the fund instead trade in a such a high risk environment?

Sure,

I looked at just lending on BitFinex,
only problem with that is that a Trader can go Belly-Up
and the lender can still loose, at least that's what I read
when starting with BitFinex, but that does not appear to
be the case, there was nothing mention to the effect of
a "Circuit Breaker" to halt trading to "Protect" Liquidity Providers, a "Fail Safe".

Meanwhile I've got to get back to the Market, the bills don't stop coming in
when BitFinex decides to stop the trading engine, but as previously stated,
That Lender's Side is beginning to  look more and more attractive to me, but
of course there is competition there, everyone competing to see who can offer
the lowest rate, which is another reason that it turned me off.

[CambioBTC]

Don't be delusional, its only hypothetically up to 14%.
Actual rates goes over 1% only when insane rally and for a few hours, rarely 1%, and is averaging 0.3%.
It is currently at 0.178%. Are you ready to lose 95% of your funds for that rate?

No, see previous post,
You're exactly right, I'm a realist.

[Sukrim]

Don't be delusional, its only hypothetically up to 14%.
Actual rates goes over 1% only when insane rally and for a few hours, rarely 1%, and is averaging 0.3%.
It is currently at 0.178%. Are you ready to lose 95% of your funds for that rate?

Well, I already successfully lent out money at over 4000% APR on bitfinex on multiple occassions. These times will come back, if you continue to act like lenders might agree to receive worthless sh*t (I certainly would NOT want to get any LTC for example and I have no control over how USD I lend out are used - they could be buying BTC or LTC) or that traders are in any way supposed to get some 100 USD Bitcoins just because someone didn't deposit enough BTC over at Bitstamp.

[CambioBTC]

Don't be delusional, its only hypothetically up to 14%.
Actual rates goes over 1% only when insane rally and for a few hours, rarely 1%, and is averaging 0.3%.
It is currently at 0.178%. Are you ready to lose 95% of your funds for that rate?

Well, I already successfully lent out money at over 4000% APR on bitfinex on multiple occassions. These times will come back, if you continue to act like lenders might agree to receive worthless sh*t (I certainly would NOT want to get any LTC for example and I have no control over how USD I lend out are used - they could be buying BTC or LTC) or that traders are in any way supposed to get some 100 USD Bitcoins just because someone didn't deposit enough BTC over at Bitstamp.

At 4000% APR,
what was that for like 2-hours ?

[aragalie]

That Lender's Side is beginning to  look more and more attractive to me, but
of course there is competition there, everyone competing to see who can offer
the lowest rate, which is another reason that it turned me off.

And THAT is exactly the reason you need to protect the Lenders before you protect the Traders: the Lending game is a losing one by it's nature: competing to get the least amount of money you can; very ironic if you think about it. So whoever decides to risk his hard-earned cash should come before whoever decides to speculate with other people's funds.

On a side note, this used to be the attitude on Wall Street as well before the 90's, and we all know what happened when things changed.

[Sukrim]

At 4000% APR,
what was that for like 2-hours ?

Try 2 weeks...
You apparently weren't on Bitfinex in April 2013

[CambioBTC]

At 4000% APR,
what was that for like 2-hours ?

Try 2 weeks...
You apparently weren't on Bitfinex in April 2013

Nice one, 

[urwhatuknow]

Guys

before you start any post please think about the following:

1) Bitfinex is not an exchange. It is a complex trading platform and this is why it made it to place itself among the top 4 BTC/USD platforms in the world for volume in 15 months.

2) Bitfinex also allows trading on Bitstamp via metatrading.
This lowers volatility during market crashes, but it is subject to keeping ALWAYS an amount of BTC and of cash on their platform.
There must be a balance between efficiency and third party related risk ( Gox is teaching us that trading platforms can actually have problems).
Therefore we cannot keep too much money or too many coins on Bitstamp.
When I say too many I mean more than a certain number of million dollars equivalent (either cash or BTC x price).

3) Forced liquidations can trigger cascading prices and also a rapid consumptions of coins on Bitstamp.
It takes time to replenish coins, this is not our fault, it is related to how Bitcoins are transferred.
Today for example more than 10k BTC were sold in a matter of minutes.

4) When we don't have coins on BSTP anymore (that is what happened today, we run out of coins on Bitstamp, we had a lot of them but they were all sold within seconds) we just rely on our orderbook and people tend to panic when the price crashes, therefore thinning even more the bid side of the book.

5) Whenever we see any market abnormalities we halt trading.
We don't make money when we halt trading, we just try to cover the funds given by liquidity providers.
(Today we resumed trading as soon as other coins landed on our Bitstamp account)

6) Any trader with more than 3 neurons should understand why we try to protect liquidity providers.
They are the reason why traders can take leverage.
No liquidity providers, no swap, no margin trading.
Every trader should think about this before he starts considering the liquidity provider as a blood sucker.
The liquidity provider is the one that makes it possible, and therefore he should be protected for the sake of the leverage, not because we think they are more beautiful than the traders.

We are not perfect.
We will keep having problems, this is part of the game called "being in business".
But please try to understand each of our moves is made for the sake of our community.
Letting a bunch of traders walk with their opportunistic strategy ( placing a buying order at 100 can possibly be defined differently?) and by doing this hurt the real funders of our platform will never be an option for us.

I hope that this helps

Have a good day and sorry if I lost it for a couple of posts, I apologize about it.

Giancarlo
Bitfinex Team    

[mooncake]

What I observed from above posts.

Lenders: My capital must be protected as I am more vulnerable than traders. Furthermore, traders usually profit more than me.

Traders: We need to follow the rules of the game at all times. That means no halting of trading engine to protect lenders.

I say: Establish clear rules to demarcate the boundaries. With the rules, let us decide our trading decisions.

Earlier on, there was a post asking whether Gox's problem affects BFX as well. This is important. We need to know.

[nmersulypnem]

.....

I hope that this helps

Have a good day and sorry if I lost it for a couple of posts, I apologize about it.

Giancarlo
Bitfinex Team    

Thank you for that - hopefully it will end the pointless debate going on here.


An unrelated question:  MtGox has an issue with people double withdrawing coins because they use the txid as a primary key in their internal accounting system.  Can you tell us if Bitfinex is protected from this specific issue?

[urwhatuknow]

What I observed from above posts.

Lenders: My capital must be protected as I am more vulnerable than traders. Furthermore, traders usually profit more than me.

Traders: We need to follow the rules of the game at all times. That means no halting of trading engine to protect lenders.

I say: Establish clear rules to demarcate the boundaries. With the rules, let us decide our trading decisions.

Earlier on, there was a post asking whether Gox's problem affects BFX as well. This is important. We need to know.

Gox claims that their problems is giving back BTC are related to their proprietary system to store coins.
We don't use their system and we have no problem with it.
We also don't comment on our competitors.

I hope this is a clear enough

Giancarlo
Bitfinex Team

[Sukrim]

We need to know once it has been fixed...

Just to be sure that people understand what the problem is:
Make sure that TXID is NOT a key in your database - TXID can be (and now for sure will be, just to mess with you) changed after you broadcast the transaction. The set of (Amount, destination address, timestamp) however will not be changed by this, so make sure you either hash this data (to have something of constant size) or use it in plaintext as key to look up if transactions actually took place.
This can (and maybe does!) affect Bitfinex too, bitcoind/bitcoin-qt and probably armory also don't really expect TXIDs to change after broadcast. Please don't just dismiss this as a screwup of gox or something specific to them, this can very well affect a good part of existing services, despite it being known for some time that transactions are malleable.