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Author Topic: This Bitfinex Credit Bubble cannot end well  (Read 61705 times)
IacceptBTC
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July 20, 2014, 01:27:17 AM
 #261

With the new changes, do you think Bitfinex will liquidate BTC to USD in a predictable way? Or do you think they will speculate to some extent? (i.e. not dumping every day at 00:00 UTC, etc)

Doubt it will be predictable. I really don't think they will just dump immediately. They are already floating the interest amount, so it would easily be an amount they were willing to speculate on. They have a strong incentive NOT to crash the market, IMO.
I don't think it would be so unpredictable that it would cause havoc on the market, but rather it would be random, but also in small enough amounts so that market would not be greatly affected.
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Newbie1022
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July 20, 2014, 02:06:32 AM
 #262

We honestly don't know what their incentives are. They could be in the game and look to absorb thousands, maybe tens of thousands, of bitcoins that they could then later unwind on other exchanges. It's an unregulated market. The market is flat due largely to manipulation and the leveraged are losing their shirts. There really is nothing other than good conscience or a true belief in Bitcoins long-term potential that would stop them. Finally, even if they believe in the long-term potential of Bitcoin there are newer and more dazzling exchanges coming out every day. We are thinking on one hand that they don't want to kill the goose that laid the golden eggs, but at the same time what is their exit strategy when their market share gets encroached upon?

So, is that going to happen. Probably not. But do we know a damned thing about what their incentives are? Probably not.
Leina
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July 20, 2014, 02:32:04 AM
 #263

To go long you need collateral in USD.

Think the latest news update said you can use bitcoin as collateral to "self fund".

Correct me if I am wrong.
molecular
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July 20, 2014, 05:54:05 AM
 #264

To go long you need collateral in USD.

Think the latest news update said you can use bitcoin as collateral to "self fund".

Correct me if I am wrong.

If true, doesn't that seem a tiny bit dangerous?

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gizmoh
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July 20, 2014, 06:27:45 AM
 #265

To go long you need collateral in USD.

Think the latest news update said you can use bitcoin as collateral to "self fund".

Correct me if I am wrong.

If true, doesn't that seem a tiny bit dangerous?

The situation is more precarious than it would seem as the exit door for long traders is tiny if fire starts spreading.
That Bfx only now realizes the need to reduce margin from 2.5 to 1.5 for btc/ltc collateral and start collecting swap interests from traders just in case..

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BitBits
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July 20, 2014, 06:31:01 PM
 #266

To go long you need collateral in USD.

Think the latest news update said you can use bitcoin as collateral to "self fund".

Correct me if I am wrong.
Use of BTC as collateral has always been the case, I can confirm that as I've done it myself in the past many times (backing the position swaps are in USD though). So, relative to USD funds on the account one could effectively go with 3.5:1 margin on long position. After the 21st this will change and leverage for those using BTC as collateral will become 1.5:1 (or 2.5:1 relative to USD account's value).
Just to note, use of BTC as collateral, makes one's "tradable balance" floating. If you go long and BTC price is increasing, you can add to your position. The same goes for the opposite market direction. If BTC price is falling, "tradable balance" is decreasing and if price drops a lot, the margin call would come a LOT sooner then if the position was "USD backed"

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Newbie1022
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July 20, 2014, 06:42:16 PM
 #267

FUR11
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July 20, 2014, 07:50:56 PM
 #268

Oh wow, I didn't know that Bitfinex was in danger of such a big bubble collapse! I was thinking about lending some FIAT while it's doing nothing. I really wonder how safe their promise really is that they liquidate positions quick enough. Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

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July 20, 2014, 08:15:05 PM
 #269

Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

what they do is halt trading when the flash crash occurs, then they keep trading frozen while they wait for other markets to recover. then they unfreeze trading after rolling back flash crash trades. and lots of traders get screwed....
Habeler876
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July 21, 2014, 12:03:58 AM
 #270

So, no noticeable dumps at 00:00 UTC -- so I guess it's not going to be that predictable. Grin I do wonder what effect this will have on the market (the new swap rules).

Newbie1022
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July 21, 2014, 12:32:22 AM
 #271

So, no noticeable dumps at 00:00 UTC -- so I guess it's not going to be that predictable. Grin I do wonder what effect this will have on the market (the new swap rules).

Anybody else notice how asymmetrical the market depth on Bitfinex is right now? Up 30 would take 2500 whereas down 30 would take 1800. Ever more noticeable, up 70 takes 6050 and down 70 takes 3680. Who in their right mind would buy at market price right now with such an imbalance even if you didn't anticipate an implosion in the next 24 hours? I think one way or another, we are going to see some real fireworks, today.
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July 21, 2014, 02:41:55 AM
 #272

Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

what they do is halt trading when the flash crash occurs, then they keep trading frozen while they wait for other markets to recover. then they unfreeze trading after rolling back flash crash trades. and lots of traders get screwed....

...and the idea that they might freeze trades to protect lenders discourages people from betting on a flash crash and so the bid order book remains thin.
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July 21, 2014, 02:53:16 AM
 #273

Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

what they do is halt trading when the flash crash occurs, then they keep trading frozen while they wait for other markets to recover. then they unfreeze trading after rolling back flash crash trades. and lots of traders get screwed....

...and the idea that they might freeze trades to protect lenders discourages people from betting on a flash crash and so the bid order book remains thin.

I would think that a lot of people have a price in mind that they would buy bitcoin at if the price were to drop to a certain level.

Just because the order book is thin doesn't mean people will not step in to purchase if the price drops, say 10%
Yololintian
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July 21, 2014, 04:24:14 AM
 #274

Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

what they do is halt trading when the flash crash occurs, then they keep trading frozen while they wait for other markets to recover. then they unfreeze trading after rolling back flash crash trades. and lots of traders get screwed....

...and the idea that they might freeze trades to protect lenders discourages people from betting on a flash crash and so the bid order book remains thin.

I would think that a lot of people have a price in mind that they would buy bitcoin at if the price were to drop to a certain level.

Just because the order book is thin doesn't mean people will not step in to purchase if the price drops, say 10%
Under normal circumstances I would definitely step in to buy some if bitcoin drops 10% or more in a short period of time but consider that some people like me will not at this point in time because of the looming threat of a liquidation event on bitfinex if the price does drop about 10-20%; I have orders set really low and I hope that if they get filled bitfinex does not rollback trades. I'm also not sure about reports that bitfinex rolled back most trades during the last liquidation event in early February because my order at, if I remember correctly, 520~ was filled, and the flash crash happened in the low 600 range; and once trading resumed the price started higher than my order.
FattyMcButterpants
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July 21, 2014, 08:17:10 AM
 #275

if I remember correctly, 520~ was filled, and the flash crash happened in the low 600 range; and once trading resumed the price started higher than my order.

yeah, but the flash crash went down to about $100, just like BTCE.

you can still see it on the charts if you go back and look at the low of the wick. the price started that high because they halted trading and rolled back orders.
Newbie1022
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July 21, 2014, 06:49:46 PM
 #276

Looking at the Bitfinex stats, I haven't really seen any deleveraging activity occurring at all. Is this going to be a spread out event? Something should happen. Not really sure what that something is. But there should have been some sort of visible pulse if they really did change their policy and nada.
superbit
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July 22, 2014, 02:50:58 AM
 #277

Looking at the Bitfinex stats, I haven't really seen any deleveraging activity occurring at all. Is this going to be a spread out event? Something should happen. Not really sure what that something is. But there should have been some sort of visible pulse if they really did change their policy and nada.

If it is only on new offers taken out today then it will be very gradual as current offers expire over the next 30 days.

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Harley997
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July 22, 2014, 03:54:23 AM
 #278

Is a roll-back during such a cascading crash really a safe thing to do or may people be left without their money?

what they do is halt trading when the flash crash occurs, then they keep trading frozen while they wait for other markets to recover. then they unfreeze trading after rolling back flash crash trades. and lots of traders get screwed....

...and the idea that they might freeze trades to protect lenders discourages people from betting on a flash crash and so the bid order book remains thin.

I would think that a lot of people have a price in mind that they would buy bitcoin at if the price were to drop to a certain level.

Just because the order book is thin doesn't mean people will not step in to purchase if the price drops, say 10%
Under normal circumstances I would definitely step in to buy some if bitcoin drops 10% or more in a short period of time but consider that some people like me will not at this point in time because of the looming threat of a liquidation event on bitfinex if the price does drop about 10-20%; I have orders set really low and I hope that if they get filled bitfinex does not rollback trades. I'm also not sure about reports that bitfinex rolled back most trades during the last liquidation event in early February because my order at, if I remember correctly, 520~ was filled, and the flash crash happened in the low 600 range; and once trading resumed the price started higher than my order.
Remember that the prices and trading done at one exchange will affect the trading at other exchanges. If the price in bitfinex goes too far below the prices on other exchanges then people will buy on bitfinex and sell on BTC-e for example, attempting to arbitrage, this would create liquidity on bitfinex and cause prices to fall on other exchanges.

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FattyMcButterpants
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July 22, 2014, 06:04:18 AM
 #279

Remember that the prices and trading done at one exchange will affect the trading at other exchanges. If the price in bitfinex goes too far below the prices on other exchanges then people will buy on bitfinex and sell on BTC-e for example, attempting to arbitrage, this would create liquidity on bitfinex and cause prices to fall on other exchanges.

sure, but arbitrage takes time. in this case, you'd have to sell on BTC-E, wire out fiat, wire it into Bitfinex, then buy. that sort of arbitrage is very risky to attempt in a fast-moving market like bitcoin.
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July 22, 2014, 08:45:54 AM
 #280

There is plenty of fiat on bitfinex, but often its better to lend it (I lend my fiat reserves for 2days at a time) than have it sitting doing nothing in an order book. I believe this is why the bid side on finex is often thin, especially at any significant distance from the current price.

Just for the record "This Bitfinex Credit Bubble could/might end well".

so there...

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