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

[PYaEe]

You say you roll back trades due to lenders losing money, but I've asked multiple times how can lenders loose if positions are forced closed before the possibility of lenders loosing, with no answer.

hyphymikey, try to understand, please, that liquidation of the position is made with a market order. And there can be just not enough liquidity in the order book -> large slippage -> not enough money to return to the lender.

[PirateHatForTea]

I've asked multiple times how can lenders loose if positions are forced closed before the possibility of lenders loosing, with no answer.

I meant to answer this last time you asked, but I didn't get to it because, to be honest, it seemed like such an obvious answer that I wondered if you were just trolling. It appears you are in earnest, so here's my attempted answer:

When a flash crash such as this occurs, it is simply not the case that positions will be force closed before there is a possibility of lenders losing money. Say there are $16M in margin loans/open positions - when price dropped to $100 most of those positions would have passed their liquidation price, and would need to be liquidated. But the bid side has already been wiped out and so most of those positions are already deep underwater - liquidating into that order book would recover less USD than the loaned amount.

There is no way around this when leveraged positions greatly outweigh the bid depth and there is a sharp movement downwards - this is why the liquidity from Bitstamp is needed - so that the bid depth is greater. The 16M in loans, perhaps accounting for some ~25,000BTC (this assumes an avg entry price of 640, pretty conservative!) would have been backed by between 16M and 32M in collateral (assuming leverage is between 1 and 2). But some of that collateral was in BTC, not USD! Meaning that there is a double-whammy as BTC price drops - your margin balance decreases while your losses simultaneously go up!

So when price dropped from 630ish to 100, which looks to have been caused by the liquidation of around 7000 coins, for maybe $1.5 - $2M. Even if we assume that all the collateral was in USD, lenders for whoever got liquidated in that spike were already likely to be out of the money (7000 * 640 = $4.5M in loans, collateral of 4.5/2 = $2.25M plus liquidated value of $1.5-$2M. 2.25 + 2 < 4.5). Now if some of the collateral was BTC not USD, then the losses from that spike down to 100 look even worse.

But that was just the FIRST liquidation. The price drop would have triggered liquidations on most of the rest of the book. There were still 10M+ in loans, ie 15,000+ BTC, to be liquidated! With price at 100 or less, we get 15,000 * $100 = $1.5M, plus at most $5M = $6.5M, to pay back $10M in loans! And again I'm being super generous, assuming no BTC as collateral, whereas Raphael stated that a lot of users had BTC as collateral (for me it was about 50/50 when price was about 600). This makes the snap-back even worse, and could mean as little as perhaps $2-3M in recovered collateral leaving 3.5-5M only to pay back $10M+ in loans.

I have used best-guesses for a lot of these numbers, but based them on what I know of the amount of liquidity swaps, the price and the order book at the time of the flash crash so they should be ballpark. The parts I don;t know are the exact bid depth before the spike, the exact leverage ratio, and the ratio of USD to BTC collateral. But I think my analysis makes it pretty clear that there is plenty of risk for lenders to lose their money - I hope you can understand this now. Feel free to PM if you want more explanation.

Finally, it's worth mentioning that last night played out like it did because the BTC balance on Stamp ran out, meaning no more sells could be routed via Stamp. This is already a good reason to halt and wind back some of what happened. But circuit breakers, Stamp or no Stamp, may be worth having and it's good the community is discussing them.

[Spaceman_Spiff]

So let me get this straight...

Go long --> crash down due to domino effect of longs closing --> saved by roll back of trades
Go short --> crash down due to domino effect of longs closing --> lose by roll back of trades (not able to close position at a profit)

Go long --> crash up due to domino effect of shorts closing --> lose by roll back of trades? Will you roll back trades in this instance?
Go short --> crash up due to domino effect of shorts closing --> saved by roll back of trades? Will you roll back trades in this instance?


So we are paying you for a service that if I wanted to profit during a crash, would be impossible?

You say you roll back trades due to lenders losing money, but I've asked multiple times how can lenders loose if positions are forced closed before the possibility of lenders loosing, with no answer.
Who cares if the price goes to zero, some people get cheap coins, lenders don't lose a thing, and the next trade after zero can be any number, possibly only a penny less than before the domino effect began.

I lost money last night because ___________?

If you can give me a legit answer to my last question, which defies everything said in this entire post, then I will give up. If not, give me my profit I should have earned. Pretty simple deal if you ask me.

I think the answer is that you will be able to profit from a crash, but not from a flash crash, and you will be able to profit from a bull run, but not an flash short squeeze.

People seem to be making a "lenders versus traders" story out of this, but let's not forget that for every trader that was short or who had really low buy orders, there is another trader who was leveraged long with a liquidation price at $200 or something like that.  These longs are screwed too by flashcrashes.  

I honestly think that if there were the type of crash in which the lenders would lose like 10% of their capital, bitfinex would uphold this.  But last night would have wiped out nearly everybody.  I believe almost every liquidity provider remaining (and future ones) would have packed their bags, left, and never return. The End for margin trading.  

So really, again, I think we need to come up with a transparent plan on how these types of flash crashes will be handled in the future, because they WILL happen again.

[myb87]

as a trader i see no point in staying with Bitfinex, if they keep shutting down and rolling back with any swings.

I just pulled all my bitcoins out of there.

[alpha492]

So let me get this straight...

Go long --> crash down due to domino effect of longs closing --> saved by roll back of trades
Go short --> crash down due to domino effect of longs closing --> lose by roll back of trades (not able to close position at a profit)

Go long --> crash up due to domino effect of shorts closing --> lose by roll back of trades? Will you roll back trades in this instance?
Go short --> crash up due to domino effect of shorts closing --> saved by roll back of trades? Will you roll back trades in this instance?


So we are paying you for a service that if I wanted to profit during a crash, would be impossible?

You say you roll back trades due to lenders losing money, but I've asked multiple times how can lenders loose if positions are forced closed before the possibility of lenders loosing, with no answer.
Who cares if the price goes to zero, some people get cheap coins, lenders don't lose a thing, and the next trade after zero can be any number, possibly only a penny less than before the domino effect began.

I lost money last night because ___________?

If you can give me a legit answer to my last question, which defies everything said in this entire post, then I will give up. If not, give me my profit I should have earned. Pretty simple deal if you ask me.

I think the answer is that you will be able to profit from a crash, but not from a flash crash, and you will be able to profit from a bull run, but not an flash short squeeze.

People seem to be making a "lenders versus traders" story out of this, but let's not forget that for every trader that was short or who had really low buy orders, there is another trader who was leveraged long with a liquidation price at $200 or something like that.  These longs are screwed too by flashcrashes.  

I honestly think that if there were the type of crash in which the lenders would lose like 10% of their capital, bitfinex would uphold this.  But last night would have wiped out nearly everybody.  I believe almost every liquidity provider remaining (and future ones) would have packed their bags, left, and never return. The End for margin trading.  

So really, again, I think we need to come up with a transparent plan on how these types of flash crashes will be handled in the future, because they WILL happen again.

Unfortunately I think it still is a lenders vs traders problem.  I hate to sound combative, but BFX halted trades to protect lenders and I understand fully why, but had BFX followed stamp instead of halting any and all trades till recovery I would have made a significant amount from my short position even before you take into consideration the flash crash.  

I appreciate BFX's commitment to finding a middle ground but to a trader this is kind of like blasphemy.  Speaking as someone who has been trading a few years now you have to understand trading is a game of strategy, moves and counter-moves.  A trader may take on a strategy that can incur 10 minor/moderate losses in a row in an expectation that if they stick to the same strategy they will score one big win on the 11th trade.  This is kind of a simplified explanation but you have to understand.  For many of us the crash down to 530 (following stamp and other exchanges) wasn't a gamble, it was an expectation--part of a longterm strategy.  Those who aren't spreadbetting or scalping, which would be a majority b/c btc is a rough environment for short interval strategies, trade in expectation of a major swing.  The last two weeks have been full of false signals and sideways markets that most of us have been sucking up losses from and sticking to a swing strategy in expectation we would see a major and profitable swing.

To save the lenders BFX chose to halt trades and wait for a reversal to prices above where the halt began, this utterly crippled a number of traders I'm sure.  

It shouldn't be a matter of 'traders vs lenders' but unfortunately in protecting the interests of one group you harmed another.  Again I understand why, but this is something worth taking the time to consider when you make these decisions.

EDIT

To append my further post in the future BFX as a matter of policy should always resume trading after a flashcrash below the price at which it was halted

I.E. If you intended to halt trading at 600 trading should be resumed below 600 the inverse is also true for a short squeeze

[Rino]

Unfortunately I think it still is a lenders vs traders problem.  I hate to sound combative, but BFX halted trades to protect lenders and I understand fully why, but had BFX followed stamp instead of halting any and all trades till recovery I would have made a significant amount from my short position even before you take into consideration the flash crash.  

I appreciate BFX's commitment to finding a middle ground but to a trader this is kind of like blasphemy.  Speaking as someone who has been trading a few years now you have to understand trading is a game of strategy, moves and counter-moves.  A trader may take on a strategy that can incur 10 minor/moderate losses in a row in an expectation that if they stick to the same strategy they will score one big win on the 11th trade.  This is kind of a simplified explanation but you have to understand.  For many of us the crash down to 530 (following stamp and other exchanges) wasn't a gamble, it was an expectation--part of a longterm strategy.  Those who aren't spreadbetting or scalping, which would be a majority b/c btc is a rough environment for short interval strategies, trade in expectation of a major swing.  The last two weeks have been full of false signals and sideways markets that most of us have been sucking up losses from and sticking to a swing strategy in expectation we would see a major and profitable swing.

To save the lenders BFX chose to halt trades and wait for a reversal to prices above where the halt began, this utterly crippled a number of traders I'm sure.  

It shouldn't be a matter of 'traders vs lenders' but unfortunately in protecting the interests of one group you harmed another.  Again I understand why, but this is something worth taking the time to consider when you make these decisions.

EDIT

To append my further post in the future BFX as a matter of policy should always resume trading after a flashcrash below the price at which it was halted

I.E. If you intended to halt trading at 600 trading should be resumed below 600 the inverse is also true for a short squeeze

They didnt halt it to wait for reversal, they waited for more btc to arrive to bitstamp to liquidate on its orderbook.

[watuba]

If there is any sort of stop loss/shutdown after a 20-25% daily swing, that mostly regulates trader profit.  I would just like to add that in that case there should also be more regulation for lenders.  Loaning out at 1% a day is an insanely good return for any risk profile.  So, if lender's losses are limited, the interest rates should also be capped at something smaller.

[aragalie]

I appreciate BFX's commitment to finding a middle ground but to a trader this is kind of like blasphemy.  Speaking as someone who has been trading a few years now you have to understand trading is a game of strategy, moves and counter-moves.  A trader may take on a strategy that can incur 10 minor/moderate losses in a row in an expectation that if they stick to the same strategy they will score one big win on the 11th trade.  This is kind of a simplified explanation but you have to understand.  For many of us the crash down to 530 (following stamp and other exchanges) wasn't a gamble, it was an expectation--part of a longterm strategy.  Those who aren't spreadbetting or scalping, which would be a majority b/c btc is a rough environment for short interval strategies, trade in expectation of a major swing.  The last two weeks have been full of false signals and sideways markets that most of us have been sucking up losses from and sticking to a swing strategy in expectation we would see a major and profitable swing.

To save the lenders BFX chose to halt trades and wait for a reversal to prices above where the halt began, this utterly crippled a number of traders I'm sure.  

It shouldn't be a matter of 'traders vs lenders' but unfortunately in protecting the interests of one group you harmed another.  Again I understand why, but this is something worth taking the time to consider when you make these decisions.

As a trader for years in FX i also agree fully with you, and i feel for all those who had as a core strategy to bet on big swings in the price. They got unfairly screwed this time, and will most likely do so in future occasions. But we all need to understand and adjust our expectations that, going forward, it's in the best interest of BFX to preserve the integrity of the Lender's money in the detriment of "proper trading etiquette". They have made this clear several times, and we need to accept that they are simply too young, too small and working in too volatile a market to be able to satisfy all sides of the trade.

So perhaps those of us who are trading for the big moves should take appropriate steps, including moving part of /all of the funds to other exchanges that allow you to trade your strategy properly. None the less, i think there are also some of us who take comfort in knowing that trading will be halted whenever the market goes crazy. Of course, this will work ONLY in case the market recovers...if not then i guess the whole BTC world will crash and burn and our discussions here (and our money) will become irrelevant

[F-bernanke]

If there is any sort of stop loss/shutdown after a 20-25% daily swing, that mostly regulates trader profit.  I would just like to add that in that case there should also be more regulation for lenders.  Loaning out at 1% a day is an insanely good return for any risk profile.  So, if lender's losses are limited, the interest rates should also be capped at something smaller.

Haha, 1% per day is highly unlikely, and only during insane rally's.

Right now it's 0,11%, and i'm not lending/risking my money for that low a return...

[alpha492]

I appreciate BFX's commitment to finding a middle ground but to a trader this is kind of like blasphemy.  Speaking as someone who has been trading a few years now you have to understand trading is a game of strategy, moves and counter-moves.  A trader may take on a strategy that can incur 10 minor/moderate losses in a row in an expectation that if they stick to the same strategy they will score one big win on the 11th trade.  This is kind of a simplified explanation but you have to understand.  For many of us the crash down to 530 (following stamp and other exchanges) wasn't a gamble, it was an expectation--part of a longterm strategy.  Those who aren't spreadbetting or scalping, which would be a majority b/c btc is a rough environment for short interval strategies, trade in expectation of a major swing.  The last two weeks have been full of false signals and sideways markets that most of us have been sucking up losses from and sticking to a swing strategy in expectation we would see a major and profitable swing.

To save the lenders BFX chose to halt trades and wait for a reversal to prices above where the halt began, this utterly crippled a number of traders I'm sure.  

It shouldn't be a matter of 'traders vs lenders' but unfortunately in protecting the interests of one group you harmed another.  Again I understand why, but this is something worth taking the time to consider when you make these decisions.

As a trader for years in FX i also agree fully with you, and i feel for all those who had as a core strategy to bet on big swings in the price. They got unfairly screwed this time, and will most likely do so in future occasions. But we all need to understand and adjust our expectations that, going forward, it's in the best interest of BFX to preserve the integrity of the Lender's money in the detriment of "proper trading etiquette". They have made this clear several times, and we need to accept that they are simply too young, too small and working in too volatile a market to be able to satisfy all sides of the trade.

So perhaps those of us who are trading for the big moves should take appropriate steps, including moving part of /all of the funds to other exchanges that allow you to trade your strategy properly. None the less, i think there are also some of us who take comfort in knowing that trading will be halted whenever the market goes crazy. Of course, this will work ONLY in case the market recovers...if not then i guess the whole BTC world will crash and burn and our discussions here (and our money) will become irrelevant

I agree with most of this except for two things

1.) Trades were resumed when the market recovered and exceeded the price in which trades should have/were intended to be halted
I.E Stamp crashed to 530, BFX should have resumed at this level

2.) Those who took the proper steps were the ones who lost (stops and trailing stops), those who put in the predatory limit orders were the ones rewarded.

I wish it were as simple as this but trading is a game that needs strict and understandable rules, without them its just gambling.  That's all today was--a gamble.

[Sawadekub]

guys dont be stupid u just lost few k... if bitfinex dont halt it.. 15mil are taken at stake.. which u think is more important to them? your few thousands vs 15mil lenders money ? and of course margin traders risk is higher then lenders risk..so u deserve what u earn or loss.. use your freaking pea brain to trade next time.. do not invest all your life savings on a stupid crash.. be CONSISTENCE EARN LESS AND IN THE LONG RUN U STILL EARN INSTEAD OF WHINING LIKE A PIG ! think about it PERIOD! 

[pheL]

I just had a stop loss order that apparently executed 10$ above the stop loss for now reason... Please help me reset this. What do you need from me to look into my case?

[PirateHatForTea]

I think more transparency would also help both lenders and traders. I like that BFX is managing leverage ratios - eg they disabled leverage altogether for a few days during the China bubble insanity.

But there are actually some half-decent market solutions to achieve a similar effect, if you provide extra information to traders to let them make decisions.

One of those would be to make the current leverage ratio of the whole BFX book public, as well as what proportion of margin collateral is BTC vs USD. The other would be to make BFX's current balance on Bitstamp in USD and BTC public.

I realise these may be seen as sensitive information, and there may be good reasons for not disclosing them (can anyone think of any - I'm interested primarily in security reasons?). However if these were public, a) traders would have a much more realistic view of the available liquidity - rather than there being a step function drop in liquidity when Stamp balance hits zero unexpectedly and b) lenders would have a better idea of the risk of lending, as they can see what sort of leverage is being used, and the mix of assets used as collateral.

Actually, I support coming up with a better formula for allowed leverage that accounts for the high volatility of BTC when borrowing USD - you should not be able to borrow 2x current USD of trading account BTC. A simple, but extreme, version is not to allow borrowing USD against BTC, another option is to only allow 1:1 leverage for the BTC component.

[CambioBTC]

Wow this is absolute bullshit. Lost money yesterday, and now BFX is down and I can't close my short position as we go up and i lose again because of Binfinex's bullshit.

The people in this forum that are not frustrated just simply have not lost significant amounts of money because of Bitfinex incompetence.

Brutal.

Is anyone else having this problem
of not being able to close shorts ?


Don't want to get stuck in a position I can't get out of.

It's working fine for me.

Edit: Chrome doesn't work, but works in Firefox and on my  phone

Thanks,

A Chrome / FireFox solution.
That answer helped immensely, moving forward with trading,
some of us can't afford to be getting caught-up in shorts that can't be closed.

These type of questions really should be answered by BitFinex,
instead they just leave us hanging out there in no-man's land like try it, take a
chance and see if it works or not, which equates to gambling on if the platform is
working correctly or not.

In the end I really hope BitFinex gets a grip on how to handle the system,
maybe some type of "Circuit Breaker" is the answer,

One thing for sure is that as it stands if nothing else it really screws up the BitCoinWisdom
charts zooming  scale every time one of those big red candles and the big green bouncing candle
from the drop to 100, screws up placing Fib Lines, zooming in and out after those
ridiculous candles are on the chart (sigh).

[obitoo]

Just had a quick skim through the nights posts, so apologies if this has been already said

On the 'circuit breaker' idea - to implement it based on hard limits, eg '10% drop in an hour' / '20% from high'  sounds fraught to me.   Whatabout 'when we run out of liquidity on Stamp' - that after all, is the crux of the matter surely? 

Also, big red banners on the top of the screen are good.   Keeping the announcements page up to date would be a small but easy thing, no? C'mon, I know you were busy yesterday but a little announcement update wouldnt have taken 5 minutes (and if it did, then invest a days dev time in a little bit of CMS) 

just my 2p

[001sonkit]

From this crap, you taught all the lenders a thing. Never pay the protection fee since they are protected from default anyway with your arbitrary halt, this is why those lenders get 200% per year, risk/return factor.
And you told the SHORTers here that there will never be cheap shit to be bought since you will protect the LONG guys and the lenders anyway.

[glavmey]

1.) A solution in which market activity reflected a cross all exchanges is not inhibited
- Lenders seem to have a hard time with this one, the market will swing 10-15% if part of your funds are lost on a very natural market movement that is your responsibility as a lender, and you must own it.  BFX kindly offers insurance which is an offer I think you would have to be crazy not to take.

The problem is that the total insurance funds are only ~55.000 USD. I think many lenders would gladly insure their loans, but simply can't because those 55.000 USD are always taken. If every lender would only offer swaps if they are insured, all traders would have to fight over only 55.000 USD liquidity offers with probably astronomically high rates! So i think it's a bit short-sighted that a few traders (not you!) think that every uninsured lender should lose all his money because of a technical/organisational issue (e.g. price crashes to 1$ because BFX doesn't have enough coins/USD on bitstamp or whatever) so that some traders can make profit, because "it's the lender's fault if they don't take insurance".

But as someone who lends some of his money, I don't think that it should never be possible for lenders to lose money! As you said, if the market swings 10-15% (or more) on a natural market movement and i lose money, then i can hardly complain.

[Spaceman_Spiff]

From this crap, you taught all the lenders a thing. Never pay the protection fee since they are protected from default anyway with your arbitrary halt, this is why those lenders get 200% per year, risk/return factor.
And you told the SHORTers here that there will never be cheap shit to be bought since you will protect the LONG guys and the lenders anyway.

I am sure a spike from $700 to $4900 and back to $700 would have been dealt with in the same way.

And if lenders are protected better with a clear system, lending capital will increase and borrowing rates will go down.

[aragalie]

But as someone who lends some of his money, I don't think that it should never be possible for lenders to lose money! As you said, if the market swings 10-15% (or more) on a natural market movement and i lose money, then i can hardly complain.

I would disagree with that: it should not, under any preventable circumstance (from shutting down the trading engine to shutting down the platform completely) be allowable to have the lenders lose money. I'm not sure how many of the people here commenting about losing money have actually been faced with the prospect of losing tens or hundreds of thousands of your hard-earned dollars. I'm not talking about BTCs that you bought 3 years ago at a fraction of the cost and you sold recently for huge profit, i'm talking about money that you earned through months and years of hard and value-creating work.

Then again, i'm sure very few people posting these comments have actually tried to convince other people to put up their money in their platform for unknown and unverified traders to play around with on margin....


Anyways, it seems we keep beating this horse after it's long dead. BFX has made it clear what their strategy is, and i'm sure most if not all the lenders (of USD as well as BTC and LTC), as well as the majority of the traders, support it.

[Sukrim]

From this crap, you taught all the lenders a thing. Never pay the protection fee since they are protected from default anyway with your arbitrary halt, this is why those lenders get 200% per year, risk/return factor.
And you told the SHORTers here that there will never be cheap shit to be bought since you will protect the LONG guys and the lenders anyway.

Well, go ultra-long then, buy up the order book up to a few 1000 USD and see what happens when shorts get eliminated and called!