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Author Topic: This Bitfinex Credit Bubble cannot end well  (Read 61712 times)
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August 18, 2014, 12:40:57 PM
 #521

Dangerously close to prior 451 bottom, thus it might continue.

Edit: Longs now down from 31.8 million to 19.5. Near 40% reduction, which is quite healthy indeed.
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August 18, 2014, 03:01:28 PM
 #522

The price on Bitfinex peaked on 4th December at 1175 USD (BitcoinWisdom). On that day, USD loans on the site were 6.8 million (bfxdata.com)

Why look at the dollar amount of loans and not the interest rate on loans? The dollar amount is like volume - with more people using the platform, I would expect the dollar amount to increase. The interest rate might more accurately reflect the demand for dollars.

On Dec 4, the USD swap rate was 0.99112. Now, it's 0.05926. Compared to back then, nobody wants to borrow USD and go long BTC on margin.
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August 18, 2014, 05:18:47 PM
 #523

Because part of the idea is to gauge how many BTC are out there that have to be sold within a certain amount of time.

The swap rate, while certainly allowing that amount of time to widen, does not provide any indication of the number of BTC.
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August 18, 2014, 05:27:42 PM
 #524

The price on Bitfinex peaked on 4th December at 1175 USD (BitcoinWisdom). On that day, USD loans on the site were 6.8 million (bfxdata.com)

Why look at the dollar amount of loans and not the interest rate on loans? The dollar amount is like volume - with more people using the platform, I would expect the dollar amount to increase. The interest rate might more accurately reflect the demand for dollars.

On Dec 4, the USD swap rate was 0.99112. Now, it's 0.05926. Compared to back then, nobody wants to borrow USD and go long BTC on margin.

The dollar amount tells you how many btc have been bought on margin, or at least you can make some assumptions and estimate it. You could have comapred this to the orderbook of bitfinex or all the exchanges to make some judgements about how dangerously the credit bubble was progressing. Also, in December bitfinex was not popular and fewer people used it, so there was far less supply of use swaps.
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August 18, 2014, 06:57:09 PM
 #525

What is going to be interesting is if we have another bubble. I think the swaps could increase faster than the last two bubbles, as there is currently a lot of money sitting on BFX not doing anything.  And in the past it looks like the amount of borrowed swap was limited more by the availability of funds then the interest rate. Eg. people didn't care that they were borrowing at 0.2%/day - and there was almost unlimited demand for swap at that rate so long as we are in a really strong bubble.

I think I observed a 10% increase per week in the swap before. Now, IF there is a bubble, we could see it increase 20-30%.  Which would put us back where we started!

It is also possible that interest rates fall so low that $5-$10 million is moved out of Bitfinex - thus limiting the future impact of a bubble.  Some of that money might go into buying BTC (personally I've got a series of low bids), but probably most of it won't as the swap investors are more risk-adverse. 

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August 19, 2014, 04:08:32 AM
 #526

The price on Bitfinex peaked on 4th December at 1175 USD (BitcoinWisdom). On that day, USD loans on the site were 6.8 million (bfxdata.com)

Why look at the dollar amount of loans and not the interest rate on loans? The dollar amount is like volume - with more people using the platform, I would expect the dollar amount to increase. The interest rate might more accurately reflect the demand for dollars.

On Dec 4, the USD swap rate was 0.99112. Now, it's 0.05926. Compared to back then, nobody wants to borrow USD and go long BTC on margin.

I actually checked around an hour ago and there are no offers to borrow BTC as of now. I am not sure if they have disabled BTC shorting or not, but there is no demand for BTC swaps at the moment.

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August 19, 2014, 04:32:13 AM
 #527

The price on Bitfinex peaked on 4th December at 1175 USD (BitcoinWisdom). On that day, USD loans on the site were 6.8 million (bfxdata.com)

Why look at the dollar amount of loans and not the interest rate on loans? The dollar amount is like volume - with more people using the platform, I would expect the dollar amount to increase. The interest rate might more accurately reflect the demand for dollars.

On Dec 4, the USD swap rate was 0.99112. Now, it's 0.05926. Compared to back then, nobody wants to borrow USD and go long BTC on margin.

I actually checked around an hour ago and there are no offers to borrow BTC as of now. I am not sure if they have disabled BTC shorting or not, but there is no demand for BTC swaps at the moment.
It's not disabled - I see a single entry now, 30 btc at 0.0001% lol

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August 19, 2014, 03:34:43 PM
 #528

Last two days I spent closing my open positions. Time will show if I was right or wrong.

I was right Smiley

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August 19, 2014, 07:27:34 PM
 #529

Last two days I spent closing my open positions. Time will show if I was right or wrong.

I was right Smiley

Very good, assuming they were longs Wink.

Maybe the same will be true for the shorts at some point.

BTC swaps at 7000!

Still: that's not even 1/5th of the USD swaps at current price.

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August 19, 2014, 09:41:06 PM
 #530

The price on Bitfinex peaked on 4th December at 1175 USD (BitcoinWisdom). On that day, USD loans on the site were 6.8 million (bfxdata.com)

Why look at the dollar amount of loans and not the interest rate on loans? The dollar amount is like volume - with more people using the platform, I would expect the dollar amount to increase. The interest rate might more accurately reflect the demand for dollars.

On Dec 4, the USD swap rate was 0.99112. Now, it's 0.05926. Compared to back then, nobody wants to borrow USD and go long BTC on margin.

I actually checked around an hour ago and there are no offers to borrow BTC as of now. I am not sure if they have disabled BTC shorting or not, but there is no demand for BTC swaps at the moment.
It's not disabled - I see a single entry now, 30 btc at 0.0001% lol

that's how it always is -- one or two lowball bids. most don't bother to do swaps manually when shorting because flash rate is always so cheap.

USD swaps down to 18 million. some people must have got murdered.
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August 20, 2014, 11:15:32 PM
 #531

Despite the recent BTC price bounce and the lower rates (0.05%/day and falling) the outstanding USD swaps continue to fall.  I wonder if people are withdrawing large amounts of money from BFX? 

Despite there being $14 million less in outstanding swaps (we've fallen from $32 million down to $18 million), there is no increase in the amount of offered (but not taken) swaps - which is relatively stable at $4 million.

So $14 million of liquidity is gone.  Some of it might be sitting on the sidelines, for instance people trying to scalp the next BFX flash crash.  How much of the $14 million is in low bids?  You could bid for 40k btc at $350 with $14 million - so I'm guessing the majority of the money has left the exchange.

There might be 10k-20k of low-bid orders on BFX from $250 to $450.  So that could explain 1/3 of the $14 million.

Don't day trade.
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August 20, 2014, 11:42:36 PM
 #532

Despite the recent BTC price bounce and the lower rates (0.05%/day and falling) the outstanding USD swaps continue to fall.  I wonder if people are withdrawing large amounts of money from BFX? 

... there being $14 million less in outstanding swaps (we've fallen from $32 million down to $18 million),

I wonder how many bulls simply transferred their long positions from bfx to OKcoin which only recently began to offer futures.

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August 21, 2014, 02:54:03 PM
 #533

the total sum of loans wont go up fast people took loses so their collateral is lower and cant borrow much more money

Los desesperados publican que lo inventó el rey que rabió, porque todo son en el rabias y mas rabias, disgustos y mas disgustos, pezares y mas pezares; si el que compra algunas partidas vé que baxan, rabia de haver comprado; si suben, rabia de que no compró mas; si compra, suben, vende, gana y buelan aun á mas alto precio del que ha vendido; rabia de que vendió por menor precio: si no compra ni vende y ván subiendo, rabia de que haviendo tenido impulsos de comprar, no llegó á lograr los impulsos; si van baxando, rabia de que, haviendo tenido amagos de vender, no se resolvió á gozar los amagos; si le dan algun consejo y acierta, rabia de que no se lo dieron antes; si yerra, rabia de que se lo dieron; con que todo son inquietudes, todo arrepentimientos, tododelirios, luchando siempre lo insufrible con lo feliz, lo indomito con lo tranquilo y lo rabioso con lo deleytable.
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August 21, 2014, 03:49:54 PM
 #534

The money did not just disappear.  It was simply transfered to other traders.  The buying power is still in the market.
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August 21, 2014, 04:07:19 PM
 #535

The money did not just disappear.  It was simply transfered to other traders.  The buying power is still in the market.

there is no guarantee that the gained money will be used on leverage and that people dont take profits home

Los desesperados publican que lo inventó el rey que rabió, porque todo son en el rabias y mas rabias, disgustos y mas disgustos, pezares y mas pezares; si el que compra algunas partidas vé que baxan, rabia de haver comprado; si suben, rabia de que no compró mas; si compra, suben, vende, gana y buelan aun á mas alto precio del que ha vendido; rabia de que vendió por menor precio: si no compra ni vende y ván subiendo, rabia de que haviendo tenido impulsos de comprar, no llegó á lograr los impulsos; si van baxando, rabia de que, haviendo tenido amagos de vender, no se resolvió á gozar los amagos; si le dan algun consejo y acierta, rabia de que no se lo dieron antes; si yerra, rabia de que se lo dieron; con que todo son inquietudes, todo arrepentimientos, tododelirios, luchando siempre lo insufrible con lo feliz, lo indomito con lo tranquilo y lo rabioso con lo deleytable.
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August 21, 2014, 04:28:38 PM
 #536

Never a guarantee.  But the winners in the dump were the shorters.  They used the funds to open more shorts.  They are now trapped in the current rally.
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August 21, 2014, 04:37:32 PM
 #537

You know, there are certain kinds of bubbles that people like Smiley
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August 21, 2014, 04:47:25 PM
 #538

The money did not just disappear.  It was simply transfered to other traders.  The buying power is still in the market.

It transferred to the Winners.

It left a lot of losers. Those losers will neither have the appetite nor be in the same position to make Bitcoin investments as they once were. Simply put, those losers have left the market, leaving only the winners looking to make further winnings. Next time around, some of those winners will be losers. They will no longer have the appetite nor the means to make the same level of investments as they once did, etc etc.

This is a declining market. The present primary trend is undeniable. Bitcoin will go up and down, but overall it will go down or at best, simply stagnate and go knowhere anytime soon, as this is the natural momentum in a post bubble hyped up market, as an ever increasing volume of liquidity leaves the market, resulting in less and less fiat in play to keep the market propped up. The declining volumes on all the main exchanges would ratify this view. If one were to take a somewhat contrarian view that the big money is moving into Bitcoin but acquiring their BTC in OTC deals, then this is an ever bigger reason why Bitcoin will continue to go down, namely it would be in big money's interest to depress the price in order to get as good a deal for themselves as possible, before allowing/facilitating/forcing the market to rise again.

I suspect this 'bottom' will play out in similar fashion to late 2011 and the first half of 2013, where Bitcoin crashed to it's $2 low, then hovered around $5-$8 for months. Since Bitcoin has proven that it is unsustainable for the time being at $600, perhaps ~$500 will prove to be the consolidation zone in the fullness of time? Or perhaps this region will also prove unsustainable as either selling pressure from increased adoption (i.e. retailers converting immeidately to USD) and the lack of new liquidity forces existing traders to take profits and/or fold their hands? If that were to be the case, then look out below a few weeks down the line from here.

Kraken Account, Robbed/Emptied. Kraken say "Fuck you, its your loss": https://bitcointalk.org/index.php?topic=1559553.msg15656643#msg15656643

Bitfinex victims. DO NOT TOUCH THE BFX TOKEN! Start moving it around, or trading it, and you will be construed as having accepted it as an alternative means of payment to your USD, BTC, etc.
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August 21, 2014, 06:08:59 PM
 #539

Welcome back Mat!  Long, short, or flat?  It sounds like you are short, or would be if you didn't give up on shorting completely.
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August 21, 2014, 06:14:13 PM
 #540

The money did not just disappear.  It was simply transfered to other traders.  The buying power is still in the market.

there is no guarantee that the gained money will be used on leverage and that people dont take profits home

but you were trying to make the argument that USD leverage can't go up again b/c of the losses inflicted on the previously leveraged.  it can and probably will b/c the winners can redirect their USD winnings to new USD leveraged positions.

edit:  this is a great thread, btw, and i congratulate Blitz for picking up on this important metric.
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