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

[mjr]

"I looked over the FRR posts.  It seems lots of people don't like the ease with which so many lenders shirk their "responsibility" to choose a rate at which they are willing to lend.  Well, they aren't shirking it.  They are choosing to use "the average of all fixed-rate swaps, of all terms, weighted by their amount, as displayed" on the BitFinex site.  If you want to improve it, break it into several "Variable Rates," VR1, VR2, VR3, etc., each with whatever characteristics might be fun.  See what people like.  Maybe VRD1, VRD2, VRD7, etc, for FRR's that use average rates over the last N days.  Excluding the last hour would discourage whales from gaming it."

This is a very good point, it is what I originally thought would be the best way to spread out the offers, by using a delta. Either way, the rate at which someone chooses to lend is basically their decision, and I believe, as it was shown with increased bot usage, most people will simply choose "something is better than nothing". Those people were not really competing with active managers, but now, if they are not using the FRR, but rather a bot, they are. There is no such thing as an "acceptable rate", just an "acceptable rate for me". So, as I have repeated over and over again, the FRR simply let people who don't want to actively manage their funds dump it into a simple bucket, meaning that others could run circles around them, by simply managing their funds. Now, there is no FRR on the book that I can see...and rates are now 0.0388%, roughly half of what they used to be. I am not saying that this is SOLELY due to this, but even so, I think that you will always see a race to the bottom for the limited number of trades that happen during any given time span. I wish it was still 2013 and I could get multiple % per day, but, markets become more efficient with time.

In other news, the upgrade process is coming along well. I think you guys will be very happy with some of the new features and the improved performance. I am thinking, after this is complete, that we can then start addressing some of the long standing requests from the community. I know that some people I know want to have better control over reports, etc.

As we are going into this holiday season, I hope you all have a great time celebrating however you choose to do so. So, Happy Holidays to all, and I am going back to coding. Feel free to respond, as usual.

[noggin-scratcher]

"The main problem with the FRR seems to be that too many people choose it.  We view this as a sign that it is useful, so we're looking for insight as to what bad things happen when too many people use it."  I don't have enough experience with swaps to answer any of those questions

I think the answers we've seen have more than answered that question.

To my mind the defective quality is that the FRR doesn't respond to swaps being taken at FRR - it can only be affected by fixed rate swaps being taken, so it acts as an upper boundary that absorbs any/all demand that makes it that far into the order-book without increasing its own rate in response to that excess demand.

Once the lower layers of 'undercutting' get cleared out, there's another $2.5M that can be taken without the going rate increasing by a single iota, which is just plain absurd. To fix it, we need a FRR that's set by its own rules (my suggestion being to use indicators of overall supply/demand to increment the automated rate up/down), rather than setting the rate by reference to a market that it is itself affecting. As it is we get a self-referential definition and it doesn't work.

[Barabbas0]

http://bfxdata.com/swapstats/usd.php

You can see the FRR wall and that 100% of lends have been fixed in both the past 1 and 24 hours. Borrowers should have to explicitly request FRR. Automatically borrowed funds should always be fixed rate. When FRR autolenders are allowed to be market makers, of course they will drive the markets down with supply.

Let FRR be Y.

Y = market price

Let Fixed rate (driven by bots) be X.

X = Y - 0.01

Now that Fixed is the new market price we get:

Y = X

So over time, you have no choice but to have X and Y both go down.

[dscotese]

Borrowers should have to explicitly request FRR.

Where is a description of the process a trader can go through to indicate what to do when the term of a swap expires?  Traders are allowed to indicate whether to close the position or establish another swap, right?  And if you do establish another swap, what are your options?

[Barabbas0]

Right now you can toggle between paying interest daily or term. If you choose to autorenew, I see no issue with allowing it to autorenew at FRR or fixed via a similar toggle.

The major issue is that when you open a new margin position you "buy" loans at market value. When FRR is a market maker, it ends up competing with itself.

[noggin-scratcher]

Must admit, I find it hard to get worked up about the FRR right now - there's been barely any FRR swaps taken in days, so it would seem that the fixed-rate market is in fact setting the going rate at the current level, and the FRR as a system is mostly just taking a giant chunk of supply and keeping it safely tucked away out of sight so that it can't wipe away the limited amount of demand.

It sets a ceiling, and a slowly descending ceiling at that, but it's not really controlling the current rate. If it were 'improved' to be a well-defined rate set by its own rules and responsive to the reality of supply/demand rather the self-referential definition we have (which is the improvement I advocate), I can only expect we'd see USD swap rates crushed even closer to zero. Right now there just seems to be too much money chasing too few traders.

And this with the price of bitcoin finally showing some signs of rising... can't tell if that's a collective statement of "Bullshit, it's going to be back to bear-town any day now", or a sign that even with an uptick the supply of funding is outpacing the need for funding, or just a result of people saying "Trading? Not right now, it's christmastime".

[Elvis Trout]

Hi there, the website keeps logging me out after a few seconds am I being hacked or is there some problem with the site?

[conspirosphere.tk]

Hi there, the website keeps logging me out after a few seconds am I being hacked or is there some problem with the site?

it used to happen to me when using a vpn at every ip change. Try to disable it if you use one.

[Barabbas0]

There's been barely any FRR swaps taken in days, so it would seem that the fixed-rate market is in fact setting the going rate at the current level, and the FRR as a system is mostly just taking a giant chunk of supply and keeping it safely tucked away out of sight so that it can't wipe away the limited amount of demand.

And this with the price of bitcoin finally showing some signs of rising... can't tell if that's a collective statement of "Bullshit, it's going to be back to bear-town any day now", or a sign that even with an uptick the supply of funding is outpacing the need for funding, or just a result of people saying "Trading? Not right now, it's christmastime".

Just because FRR aren't being taken doesn't mean they aren't contributing to supply. As I stated earlier, the Fixed rates are pegging themselves to FRR (minus a tiny amount to put them TOB), but FRR is pegged to market rate (determined by fixed rates). Just having all those orders on the books drives down price, just like any other order book. If BTC price was rising, you'd expect lending rates to increase. The simple fact is, FRR are lazy investors and they're driving down rates, just like lazy whales always do. Hell, I wouldn't mind if Bitfinex just scraped FRR. It sucks as a borrower, too, because your rates are always fluctuating. As a lender, it sucks because you'll never get your order taken.

[dzyk]

The Best Service! im reccomended!

[mjr]

There's been barely any FRR swaps taken in days, so it would seem that the fixed-rate market is in fact setting the going rate at the current level, and the FRR as a system is mostly just taking a giant chunk of supply and keeping it safely tucked away out of sight so that it can't wipe away the limited amount of demand.

And this with the price of bitcoin finally showing some signs of rising... can't tell if that's a collective statement of "Bullshit, it's going to be back to bear-town any day now", or a sign that even with an uptick the supply of funding is outpacing the need for funding, or just a result of people saying "Trading? Not right now, it's christmastime".

Just because FRR aren't being taken doesn't mean they aren't contributing to supply. As I stated earlier, the Fixed rates are pegging themselves to FRR (minus a tiny amount to put them TOB), but FRR is pegged to market rate (determined by fixed rates). Just having all those orders on the books drives down price, just like any other order book. If BTC price was rising, you'd expect lending rates to increase. The simple fact is, FRR are lazy investors and they're driving down rates, just like lazy whales always do. Hell, I wouldn't mind if Bitfinex just scraped FRR. It sucks as a borrower, too, because your rates are always fluctuating. As a lender, it sucks because you'll never get your order taken.

It is impossible to "peg" yourself to the FRR...that was the solution I had offered, to allow a delta value so you could peg your order to the FRR but choose to price it more aggressively. You can place it lower than the current rate, but that rate can change, and if you want to manually adjust it...you can do that as frequently as you want. If you say, "but I can get a bot to do it", I agree, and you bot will always compete against the other fixed rates, as well as the FRR. You have active traders using fixed rate, vs people who are not managing it directly. You think that by forcing the people who don't care to actually start caring it would lower competition?

As it stands, noggin-scratcher is right, there is more and more swaps chasing a fixed (or even decreasing) amount of volume. I am not sure if it is christmastime or people gun shy about a bull trap, but at the end of the day, there is a finite amount of demand, call it X. The people who choose to lend for the lowest amount, regardless of FRR, until X is exhausted are the only ones who will get ANY return. If you remove the FRR, you either have no change, because you will still compete against the other fixed rates for the same fixed amount of trading volume (as noggin-scratcher pointed out, very few FRR swaps have been taken), or, more likely, the money that is currently sitting on the sidelines just pushes rates lower.

I really do have to agree with one post, which says that because a rate taken at the FRR cannot itself influence the FRR, we have a poor feedback mechanism. We are working on a change, but with the entire margin system and quite a few users who currently have funds in the swap market, caution is appropriate. We also are really focusing on this upgrade, and I made a pretty big milestone today, so I am hoping to be able to announce more soon. Anyway, I agree with you guys that the FRR is NOT implemented in the best way, but I don't think that some people are looking at it objectively. If rates are higher, we make more, so why does it seem like we are forcing rates lower, especially given that it seems most traders are relatively insensitive to the swap cost? Because our core business is being the best bitcoin exchange we can be! The swap market exists to facilitate and enable margin trading. As opposed to trying and boost rates, we would rather just let the market do as it wills, and let the rates be set naturally, even though it may not be as profitable in the short term, we would rather that it is a somewhat good price discovery method. I mean, at any point, we could have just gotten rid of the "market" portion and made it into a fund as was suggested a while ago. That is not our goal, and not what we see as the purpose of the swap market. It exists to facilitate traders, and whoever is willing to accept the least return will get their swaps filled (or their bitcoins bought), that is just the nature of the market.

So, this is a little longer of a post than I had intended, and I really don't want to fan the flames on the FRR issue, because we are going to change it, I understand what has been said, and if you look at things from an objective point of view (not as a person seeking the highest return possible), I think you will see that markets are useful at setting prices, and we'd rather let the price be discovered organically instead of having some sort of agenda. Even the FRR, it may not be great, and it can definitely be better, but it is very simple, and based on numbers that we don't create. It was originally conceived to hopefully allow liquidity providers the ability to benefit from rising markets, and at the same time, ensure a constant supply of swaps to fuel trading. It has done that, but it is showing some cracks at the seams, and those are what we are addressing.

So, Happy Holidays to everyone, I hope you guys get lots of bitcoin for Christmas, Hanukkah or whatever festivities you celebrate! Rest assured, we are working on some really nice new things for 2015 that will hopefully reward you guys for your loyalty and patience. 

[Barabbas0]

because we are going to change it

Good!

If you look at things from an objective point of view (not as a person seeking the highest return possible), I think you will see that markets are useful at setting prices, and we'd rather let the price be discovered organically instead of having some sort of agenda.The FRR can definitely be better, but it is very simple, and based on numbers that we don't create.

I respectfully disagree. They are being treated as market makers (placing limit orders) but are not "setting" any prices. I might say, one way to deal with the massive backlog of lenders is by filling orders on the bid side. Actually, as I post this, there's overlap in both sides of the lend book. Also, I did tweak your quote a little bit. I did not mean to change any wording.

[HowardF]

And this with the price of bitcoin finally showing some signs of rising... can't tell if that's a collective statement of "Bullshit, it's going to be back to bear-town any day now", or a sign that even with an uptick the supply of funding is outpacing the need for funding, or just a result of people saying "Trading? Not right now, it's christmastime".

All of this, combined, is whats killing the rates right now.  The market is just too flat to pull in many new investors, people just aren't excited about bitcoin anymore.  Even in my Local sales, I'm only getting repeat customers, whom I mostly attribute to black market buyers.  I haven't had any real investors show interest in months.  And most of the people I talk to who are invested are moving to safer investments than buying coins on margin.  A lot of that money is getting pumped into margin lending, which increases the supply even more, and lowers the rate even more.

Just because FRR aren't being taken doesn't mean they aren't contributing to supply. As I stated earlier, the Fixed rates are pegging themselves to FRR (minus a tiny amount to put them TOB), but FRR is pegged to market rate (determined by fixed rates). Just having all those orders on the books drives down price, just like any other order book. If BTC price was rising, you'd expect lending rates to increase. The simple fact is, FRR are lazy investors and they're driving down rates, just like lazy whales always do. Hell, I wouldn't mind if Bitfinex just scraped FRR. It sucks as a borrower, too, because your rates are always fluctuating. As a lender, it sucks because you'll never get your order taken.

Exactly this.  The problem with FRR is that it creates an artificial downward wall, not a fair value market.  In times of low demand people set low prices, and the market goes down like it should.  But in times of mid to high demand, the low priced orders get taken, then we work into the FRR.  The money is still getting taken at FRR rates, so the average doesn't go up and because a few orders still slip in below FRR, the average actually is still going down, despite high demand.   Only in times of HUGE demand do rates ever go up, and then they quickly sink back down once the HUGE demand period is over and FRR loans start returning.  If you look at the historical rate charts this is painfully obvious.



In a normal, unmanipulated market prices should naturally go up and down, not always down or into a wall.  I am actually fully convinced at this point the only way bitfinex margin lending is going to survive is to completely get rid of the FRR.  If you look at the chart, we're actually hitting new lows after every wall break, and the wall breaks are happening less and less frequently.  Soon rates will be lower than a good bank savings account, and when that happens, well, nothing good will come as a result.

[mjr]

because we are going to change it

Good!

If you look at things from an objective point of view (not as a person seeking the highest return possible), I think you will see that markets are useful at setting prices, and we'd rather let the price be discovered organically instead of having some sort of agenda.The FRR can definitely be better, but it is very simple, and based on numbers that we don't create.

I respectfully disagree. They are being treated as market makers (placing limit orders) but are not "setting" any prices. I might say, one way to deal with the massive backlog of lenders is by filling orders on the bid side. Actually, as I post this, there's overlap in both sides of the lend book. Also, I did tweak your quote a little bit. I did not mean to change any wording.

I disagree, but mainly with your terminology. A market maker is literally "making a market" meaning that they are willing to take either side of a trade. So market making in this instance would mean that I am willing to take a swap at rate X, or offer a swap at rate Y. Placing limit orders is not solely the act of a market maker. That being said, they are not placing limit orders, in that technically a limit order is an order to be filled at a given price. If they aren't setting a price, it isn't a limit order. It probably has more in common with an opening or closing cross, in that it is kind of like a large auction at a price TBD, but it isn't exactly like that. It is also similar to a market order, in that they don't care what the price is.

Either way, overlap happens, usually, due to differences in time preferences. All that is offered is 2 days, all that is requested is 30 days, for example, so no match occurs.

Thanks for your comment though. And we will be changing it, but it will probably just be to make it more responsive and less liable to dampen the price movements.

I'll respond to some other comments below, which might have some relevance.

[mjr]

And this with the price of bitcoin finally showing some signs of rising... can't tell if that's a collective statement of "Bullshit, it's going to be back to bear-town any day now", or a sign that even with an uptick the supply of funding is outpacing the need for funding, or just a result of people saying "Trading? Not right now, it's christmastime".

All of this, combined, is whats killing the rates right now.  The market is just too flat to pull in many new investors, people just aren't excited about bitcoin anymore.  Even in my Local sales, I'm only getting repeat customers, whom I mostly attribute to black market buyers.  I haven't had any real investors show interest in months.  And most of the people I talk to who are invested are moving to safer investments than buying coins on margin.  A lot of that money is getting pumped into margin lending, which increases the supply even more, and lowers the rate even more.

Just because FRR aren't being taken doesn't mean they aren't contributing to supply. As I stated earlier, the Fixed rates are pegging themselves to FRR (minus a tiny amount to put them TOB), but FRR is pegged to market rate (determined by fixed rates). Just having all those orders on the books drives down price, just like any other order book. If BTC price was rising, you'd expect lending rates to increase. The simple fact is, FRR are lazy investors and they're driving down rates, just like lazy whales always do. Hell, I wouldn't mind if Bitfinex just scraped FRR. It sucks as a borrower, too, because your rates are always fluctuating. As a lender, it sucks because you'll never get your order taken.

Exactly this.  The problem with FRR is that it creates an artificial downward wall, not a fair value market.  In times of low demand people set low prices, and the market goes down like it should.  But in times of mid to high demand, the low priced orders get taken, then we work into the FRR.  The money is still getting taken at FRR rates, so the average doesn't go up and because a few orders still slip in below FRR, the average actually is still going down, despite high demand.   Only in times of HUGE demand do rates ever go up, and then they quickly sink back down once the HUGE demand period is over and FRR loans start returning.  If you look at the historical rate charts this is painfully obvious.



In a normal, unmanipulated market prices should naturally go up and down, not always down or into a wall.  I am actually fully convinced at this point the only way bitfinex margin lending is going to survive is to completely get rid of the FRR.  If you look at the chart, we're actually hitting new lows after every wall break, and the wall breaks are happening less and less frequently.  Soon rates will be lower than a good bank savings account, and when that happens, well, nothing good will come as a result.

I disagree, when rates get too low...it seems you think people will choose to stop offering, which lowers the supply, which leads to...higher rates. So, the rates will be always just higher than the bare minimum necessary to incentivize people offering a swap (I think that if you can find a bank account that offers 0.03 or around there compounded daily please let me know where), similar to mining. If 20 million of the 25 million currently actively being used were to say "I can do better elsewhere", and given that the demand still exists for 25 million in swaps, the rates would have to rise dramatically...

I do agree that the FRR acts as a damper...but who is to say it wouldn't work the same way in reverse? It is not inherently downward pressure, it is simply a damper on movements in general. If we were in a huge bull market, a real one, like the rise to 1200, wouldn't the FRR stop the rates from falling as more and more fixed rates were taken above the FRR? Or alternatively, if people acted rationally and if they didn't know which way it was going to move, they would simply choose the cheaper option, shorting. Wouldn't the FRR act in the opposite manner on the BTC market? I haven't really looked at how it might play out, but I think in general that any large sluggish pool of money isn't inherently downward or upward motivated, and a lot of the factors would really influence decisions of everyone.

I think that because we have been in a bear market for a LONG time, the speculative interest (as you astutely pointed out) has somewhat dwindled. More people perhaps are realizing that while bitcoin may go to the moon, I am not so sure that that trip will happen within the next 30 days. I, personally, find that on the streets, locally, demand is incredibly high, and usually if you want to buy, you are paying a pretty big premium. I for one have a standing buy order for 2% above bitfinex from someone I know. He sells the coins to others for 8-10% above, but his main issue is getting enough coins to satisfy the demand. So, I think that a lot of what you pointed out is correct.

Either way, if you removed the FRR, you would still have the exact same rate, because the people choosing the FRR aren't getting filled. Everyone is competing with the people around them, and I think many people are simply looking for a more stable return after maybe getting burned in the bear market. After losing 20%, you tend to be a little more cautious, and 10% starts looking pretty good.

I do think there is a shift occuring, maybe the last gasps of the crazy speculation that was the hallmark of 2013...but I am very hopeful, because I see more real services that are using bitcoin, many of which rely on a deep, liquid market where they can actually obtain bitcoin, or dollars, rather than simply gambling on some 20X contract with no actual delivery, pegged to an index.

Some of the services that I really love, and feel free to suggest others that you like are:

1. Coinapult (not available in the US, unfortunately), but I used to work for them, and helped build their locks product
2. Piiko - One of the most realistic and potentially amazing uses for bitcoin, 66% of cell phones are prepaid...allowing you to recharge their balance, easily and without worrying about local currencies is a HUGE feature.
3. Leetcoin - I wish this were bigger, but I think that eSports is going to be HUGE in the years to come and competitive cash games seem like a really cool idea. I absolutely LOVE League of Legends, and I think that community has so much synergy with bitcoin, only a matter of time before Riot starts accepting them.
4. Purse.io - Helping people buy things with a discount, while allowing them to basically place limit orders...
5. Changetip - Content monetization and tipping are going to be a killer app
6. Localbitcoins - I paid for my rent in Colombia using a localbitcoins buyer, was far faster and cheaper than a wire...

Not sure if I am missing any obvious ones, but if we are seeing a shift from speculation to usage, that is a good thing in my eyes. Not that there is anything wrong with speculating, it is a valuable activity and provides liquidity, but the usage of bitcoin (and note that almost none of those services really care what the price is) is the reason that the speculation exists.

I think that eventually, if bitcoin does what it is capable of, it will be more like the forex markets than the pink sheets, and you will be looking at pips, not tens of dollars in movements. At the end of the day, I really believe that bitcoin is a better system, and I hope to see adoption increase. To be honest, I rarely look at the price, because I think that once usage increases, the price will follow, but then again, I am a very typical buy and hold type of guy.

[Barabbas0]

I disagree, but mainly with your terminology. A market maker is literally "making a market" meaning that they are willing to take either side of a trade. So market making in this instance would mean that I am willing to take a swap at rate X, or offer a swap at rate Y. Placing limit orders is not solely the act of a market maker. That being said, they are not placing limit orders, in that technically a limit order is an order to be filled at a given price. If they aren't setting a price, it isn't a limit order. It probably has more in common with an opening or closing cross, in that it is kind of like a large auction at a price TBD, but it isn't exactly like that. It is also similar to a market order, in that they don't care what the price is.

Either way, overlap happens, usually, due to differences in time preferences. All that is offered is 2 days, all that is requested is 30 days, for example, so no match occurs.

Thanks for your comment though. And we will be changing it, but it will probably just be to make it more responsive and less liable to dampen the price movements.

I'll respond to some other comments below, which might have some relevance.

Uh, I think you confused my use of "market maker" with an authorized market participant at an exchange. Market maker = limit order, market taker = market order. They are market makers in that they are adding orders to the book, not taking them.

[artenais]

And than you have pure genious who clear 1,5m of lend wall without any kind of cycle effectivly stopping the market for X hours/days.

[itod]

Some of the services that I really love, and feel free to suggest others that you like are:

1. Coinapult (not available in the US, unfortunately), but I used to work for them, and helped build their locks product

Used them to send coins more than a year ago, total disaster, bitcoins went missing, had real trouble to sort things out with the party that should receive coins. Highly NOT recommended, use with caution.

[cloverme]

anyone else having an issue logging in to BFX using the 2FA? keeps telling me my code is invalid. 

I've had that issue a few times, make sure your mobile is set to automatically update the time. There have been issues where the code won't work exactly when it refreshes. Also, Authy works a lot better than the google authenticator as well.

[noggin-scratcher]

I do agree that the FRR acts as a damper...but who is to say it wouldn't work the same way in reverse? It is not inherently downward pressure, it is simply a damper on movements in general. If we were in a huge bull market, a real one, like the rise to 1200, wouldn't the FRR stop the rates from falling as more and more fixed rates were taken above the FRR?

I'm not sure I follow you there - fixed rate swaps above FRR don't get taken unless there's enough demand to get the amount offered at FRR down to near-zero. After a big rise in demand that pushes the going rate up high, the FRR might continue to stay high for a while as the average slowly descends, but it wouldn't be able to resist downward motion.

Hm, unless there were a huge body of swap demands placed at FRR, enough to keep all the 'passive' swap providers' funds occupied and make it difficult for a trader to get funding unless they go over the top and place their demand higher than FRR. But I feel like that's an unlikely scenario in all but the most extreme cases. Would only be a possibility in the absolute hyper-manic phase of a bubble (or the equally hyper-manic period during the 'first bounce' out of a crash, where people line up to place bets on the bubble resuming), whereas FRR as-is seems to have it's typical rate-depressing effect even in times of small-to-moderate price rises.