This Bitfinex Credit Bubble cannot end well

[leezay]

It seems that this retracement was good for shorters
What I noticed is that short positions are a lot more dynamic than the long ones.

You would be insane to short long term in this market.

That's right, but holding leveraged long positions no matter what does seem strange to me.
If I want to have long-term position, I'm simply buying coins (no leverage) so that I'm not stopped out

If you have a leveraged position then you will potentially have a higher reward when the price spikes, and considering that most people with leveraged positions are short term traders, a bet on the price moving significantly in the direction of the direction that the trader is assuming bitcoin will move in is assumed to be somewhat leveraged

Only newbie traders would ever short bitcoin. So the price is biased toward long.

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[Gargulan]

It seems that this retracement was good for shorters
What I noticed is that short positions are a lot more dynamic than the long ones.

You would be insane to short long term in this market.

Would be stupid not too short looking back. 20/20 hindsight.

[RoadTrain]

It seems that this retracement was good for shorters
What I noticed is that short positions are a lot more dynamic than the long ones.

You would be insane to short long term in this market.

That's right, but holding leveraged long positions no matter what does seem strange to me.
If I want to have long-term position, I'm simply buying coins (no leverage) so that I'm not stopped out

If you have a leveraged position then you will potentially have a higher reward when the price spikes, and considering that most people with leveraged positions are short term traders, a bet on the price moving significantly in the direction of the direction that the trader is assuming bitcoin will move in is assumed to be somewhat leveraged

And potentially higher losses. The amount of USD swaps is persistently high at over $20 million. It's not as volatile as shorts, so I assume that a large part of it is long-term longs That's what makes me wonder.

[Argwai96]

It seems that this retracement was good for shorters
What I noticed is that short positions are a lot more dynamic than the long ones.

You would be insane to short long term in this market.

That's right, but holding leveraged long positions no matter what does seem strange to me.
If I want to have long-term position, I'm simply buying coins (no leverage) so that I'm not stopped out

If you have a leveraged position then you will potentially have a higher reward when the price spikes, and considering that most people with leveraged positions are short term traders, a bet on the price moving significantly in the direction of the direction that the trader is assuming bitcoin will move in is assumed to be somewhat leveraged

Only newbie traders would ever short bitcoin. So the price is biased toward long.

I would disagree. Some people have made a lot of money shorting bitcoin if they have timed the market correctly. You need to remember that most traders do not generally enter into long term trades.

[N12]

Because Bitfinex apparently uses Bitstamp for mirroring bids (which now have vanished), they are now at extreme risk for a flash crash.

[nrd525]

Are you sure?  I think the Bitfinex order book is relatively deep.  Over the past 30 days Bitfinex did almost twice the trading as Bitstamp (630,000 vs 330,000).  So the risk of a flash crash may have increased, but I'm not sure it'd be a big increase.

And I think we need confirmation from Bitfinex as to whether they were still using Bitstamp.

Last night the bid depth at Bitfinex was around 14,000 at 245 and now it has fallen to 4000.  That might make me agree with you, but on the other hand the ask volume is the approximately the same (around 4000 at 295).  So it looks like people just pulled 10,000 from the bid book which is enough to make me worry on its own.

[Hunyadi]

BTC    21,498.27 BTC 

[Hunyadi]

BTC    21,498.27 BTC 

22,011.32 BTC 

[Xiaoxiao]

BTC    21,498.27 BTC 

22,011.32 BTC 

What is the significance of this?  Is it that lots of people have short positions?  Hence may cause a huge spike in price when their positions get liquidated?

[Hunyadi]

BTC    21,498.27 BTC 

22,011.32 BTC 

23,364.13 BTC

[Hunyadi]

BTC    21,498.27 BTC 

22,011.32 BTC 

What is the significance of this?  Is it that lots of people have short positions?  Hence may cause a huge spike in price when their positions get liquidated?

Exactly

[N12]

BTC    21,498.27 BTC 

22,011.32 BTC 

23,364.13 BTC

Wow. It's like Bitcoinica come again.

[nrd525]

This is getting to be a concern.

I've got some low-placed bids, but the problem with that is that if there is a flash crash, Bitfinex has an algorithm to delay it. And they also might intervene to reverse orders as they have done once.  So it is hard to predict how to take advantage of this.  I'm guessing that a small crash will be acceptable, but a larger one could be slowed down (and thus partially stopped) or lead to reversed orders.  So very low bids are less likelier to succeed that you would otherwise expect.

[inca]

This is getting to be a concern.

I've got some low-placed bids, but the problem with that is that if there is a flash crash, Bitfinex has an algorithm to delay it. And they also might intervene to reverse orders as they have done once.  So it is hard to predict how to take advantage of this.  I'm guessing that a small crash will be acceptable, but a larger one could be slowed down (and thus partially stopped) or lead to reversed orders.  So very low bids are less likelier to succeed that you would otherwise expect.

The world's tiniest violin springs to mind for some reason..

[JerryCurlzzz]

This is getting to be a concern.

I've got some low-placed bids, but the problem with that is that if there is a flash crash, Bitfinex has an algorithm to delay it. And they also might intervene to reverse orders as they have done once.  So it is hard to predict how to take advantage of this.  I'm guessing that a small crash will be acceptable, but a larger one could be slowed down (and thus partially stopped) or lead to reversed orders.  So very low bids are less likelier to succeed that you would otherwise expect.

Agreed. I am not concentrating on catching margin calls on Bitfinex, but rather on BTCE, who has a history of allowing cascades through the book without reversing orders. Bitfinex's algo can be taken advantage of though, to be sure. In the past, when I saw the zig-zagging price action that the algorithm caused (since orders were being held by Bitfinex), I was able to safely fill bids $30 below market and sell $30-40 higher just minutes later.

[celebreze32]

This is getting to be a concern.

I've got some low-placed bids, but the problem with that is that if there is a flash crash, Bitfinex has an algorithm to delay it. And they also might intervene to reverse orders as they have done once.  So it is hard to predict how to take advantage of this.  I'm guessing that a small crash will be acceptable, but a larger one could be slowed down (and thus partially stopped) or lead to reversed orders.  So very low bids are less likelier to succeed that you would otherwise expect.

How does the algorithm work?

[JerryCurlzzz]

This is getting to be a concern.

I've got some low-placed bids, but the problem with that is that if there is a flash crash, Bitfinex has an algorithm to delay it. And they also might intervene to reverse orders as they have done once.  So it is hard to predict how to take advantage of this.  I'm guessing that a small crash will be acceptable, but a larger one could be slowed down (and thus partially stopped) or lead to reversed orders.  So very low bids are less likelier to succeed that you would otherwise expect.

How does the algorithm work?

They restrict order execution when large orders will cause Bitfinex to fall considerably below other markets. They don't allow it to be dumped at once; rather, they let it dump below other exchanges, then let traders buy up the gap, before allowing more of the dumps to execute. In other words, Bitfinex is speculating on its own exchange -- assuming that traders will keep buying as long as Bitfinex price is below other markets.

One problem, of course, is that they may be wrong. In the case that the order book can't cover margin calls, this algorithm will exacerbate the losses its lenders will suffer, since it will allow bid liquidity to be removed when forced executions should have already occurred.

[Hunyadi]

BTC    21,498.27 BTC 

22,011.32 BTC 

23,364.13 BTC

23,879.67 BTC

[Newbie1022]

BTC    21,498.27 BTC 

22,011.32 BTC 

23,364.13 BTC

23,879.67 BTC

Could BFX be taking up swaps themselves to reduce the availability and increase the cost of the shorting option?
OR, is somebody taking up a bunch of swaps to do an epic dump, soon?

[Hunyadi]

Still no proper squeeze