This Bitfinex Credit Bubble cannot end well

[MatTheCat]

Can you take a swap out at .1% (say) and then offer that same USD for .2%?  That would double the "total swaps" number without actually doubling the leveraged BTC. 

Its NOT possible.

NOT possible for anyone, or not possible for normal Joes but very possible for the exchange and/or friends of the exchange?

[1714961904]

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[thezerg]

Guys

Since when so called "moderators" are starting FUD threads?

Cui prodest?

Ask yourself this simple question and if your IQ is not lower than your shoe size you'll come up with the right conclusion.

Have a good day and a great weekend

Giancarlo
Bitfinex Team

I have to disagree about this being FUD here.  The amount of longs, shorts, and the going rate are important metrics.  And I don't necessarily even think its bearish to have this extremely high level of lending... but it may cause local flash crash on your exchange as a single person attempts to harvest this leverage.  Its making me think about putting in a lowball bid, except bullish. 

On the lender side, clearly if you want to avoid BTC volatility but trust BitFinex as an exchange then offering USD at these loan rates is an awesome investment.  Its interesting to imagine who fits this lender profile:  For example various "money market" funds could probably loan via BitFinex but not buy BTC (without breaking its published investment profile).


PS: None of this reflects on the BitFinex exchange.  You are not responsible for responsible investing.

[N12]

Perhaps you are looking for something more sinister here, but from that graph it seems to me that the likeliest explanation of the ballooning swaps on Finex is simply that they have gained a lot of users since December. I don't know for how long they have existed but I didn't actually try trading there until last winter, as part of me moving away from MtGox, and I suspect that may be true for a lot of other users as well. I think you would find that everything from Kraken to Huobi gained a lot of users during that time period.

I disagree that USD swaps balloons more than BTC swaps in general in your graph. If you cut out June the trend is not nearly as pronounced. In fact, both swap pairs follow an upwards trajectory with two major exceptions: people were in general very bearish in February (omg! look at those slopes!), and people are very bullish in June. You can also see the formation of a bullish trend in January which later falls apart spectacularly, and I think we all know why that was.

The BTC swaps are only one piece of evidence for what I believe to be the fact that Bitfinex hasn't grown by a factor of 9 since December. Here's something much better: http://data.bitcoinity.org/markets/volume/6m/USD?c=e&t=a&volume_unit=btc I would say it grew by a factor of 2-3, a moving average would visualize this better.

Guys

Since when so called "moderators" are starting FUD threads?

Cui prodest?

Ask yourself this simple question and if your IQ is not lower than your shoe size you'll come up with the right conclusion.

Have a good day and a great weekend

Giancarlo
Bitfinex Team

I was excited when I saw you had come to post, yet you only leave an ad hominem attack without contributing to the topic, which is disappointing. Tell me, had it been the opposite ie BTC shorts piling on for months to alltime highs and me pointing it out, would you have said the same? I'm not intimately familiar with Bitfinex, so it's possible that some nuances are eluding me.

[Torque]

Guys

Since when so called "moderators" are starting FUD threads?

Cui prodest?

Ask yourself this simple question and if your IQ is not lower than your shoe size you'll come up with the right conclusion.

Have a good day and a great weekend

Giancarlo
Bitfinex Team

Dude, I know you absolutely love your exchange and have every right to defend it.  But can you please lay off with the childish insults?  Do you see other prominent exchange operators worldwide talking to the public like this?

You are quickly proving yourself to be the MOST UNPROFESSIONAL Bitcoin exchange operator there is, bar none.  If you don't think that your business will suffer in the long run for acting like that, you're delusional.

[Sukrim]

You are quickly proving yourself to be the MOST UNPROFESSIONAL Bitcoin exchange operator there is, bar none.

Now that MPOE-PR has been banned this could even be true.

[MatTheCat]

I was excited when I saw you had come to post, yet you only leave an ad hominem attack without contributing to the topic, which is disappointing. Tell me, had it been the opposite ie BTC shorts piling on for months to alltime highs and me pointing it out, would you have said the same? I'm not intimately familiar with Bitfinex, so it's possible that some nuances are eluding me.

Yeah. It would nice to have some stat (which we could believe in) which stated unequivocally how much of those swaps are currently employed in leveraged long positions. If it is anything near to ALL OF THEM then that would indeed be a ticking timebomb, so much so that I don't believe that this can be the case. One simply doesn't sit in a leveraged long position, paying those sort of interest rates whilst the market retraces and/or consolidates, which is what it has been doing for around a month now.

If it is indeed the case that we have a whole lot of leveraged longs sitting around waiting on their break-even point to come back and perhaps a little bit of profit, then that is a shit ton of selling pressure just waiting to be released.

If it is the case that none of the information coming out of Bitfinex can be fully trusted and behind those swap rate stats, lie layer upon layer of Bitfinex duplicitiy, then that wouldn't surprise me at all and would perhaps paint less of a foreboding picture for the Bitcoin market......unless of course one trades or has money on Bitfinex.

[uhoh]

Guys

Since when so called "moderators" are starting FUD threads?

Cui prodest?

Ask yourself this simple question and if your IQ is not lower than your shoe size you'll come up with the right conclusion.

Have a good day and a great weekend

Giancarlo
Bitfinex Team

You are quickly proving yourself to be the MOST UNPROFESSIONAL Bitcoin exchange operator there is, bar none.

A Million times, THIS.

Are you being coached in business ethic by Inaba or something?

[urwhatuknow]

Perhaps you are looking for something more sinister here, but from that graph it seems to me that the likeliest explanation of the ballooning swaps on Finex is simply that they have gained a lot of users since December. I don't know for how long they have existed but I didn't actually try trading there until last winter, as part of me moving away from MtGox, and I suspect that may be true for a lot of other users as well. I think you would find that everything from Kraken to Huobi gained a lot of users during that time period.

I disagree that USD swaps balloons more than BTC swaps in general in your graph. If you cut out June the trend is not nearly as pronounced. In fact, both swap pairs follow an upwards trajectory with two major exceptions: people were in general very bearish in February (omg! look at those slopes!), and people are very bullish in June. You can also see the formation of a bullish trend in January which later falls apart spectacularly, and I think we all know why that was.

The BTC swaps are only one piece of evidence for what I believe to be the fact that Bitfinex hasn't grown by a factor of 9 since December. Here's something much better: http://data.bitcoinity.org/markets/volume/6m/USD?c=e&t=a&volume_unit=btc I would say it grew by a factor of 2-3, a moving average would visualize this better.

Guys

Since when so called "moderators" are starting FUD threads?

Cui prodest?

Ask yourself this simple question and if your IQ is not lower than your shoe size you'll come up with the right conclusion.

Have a good day and a great weekend

Giancarlo
Bitfinex Team

I was excited when I saw you had come to post, yet you only leave an ad hominem attack without contributing to the topic, which is disappointing. Tell me, had it been the opposite ie BTC shorts piling on for months to alltime highs and me pointing it out, would you have said the same? I'm not intimately familiar with Bitfinex, so it's possible that some nuances are eluding me.

It's not an ad hominem attack, it's just a simple observation.
I see from your profile that you are the moderator of this section and this means you have to be moderate.
If you were a provocateur ( there are so many on bitcointalk) I wouldn't even have blinked.

Bitfinex is currently the no.1 platform for volume on the BTC/USD pair, taken away Chinese platforms that run on a 0% commission basis and therefore can't be trusted for their volume.

I believe our platform is  financially, technologically and managerially superior and deserve to be there.
We came to this position with almost zero media exposure, we decline every interview request, conference intervention or any other type of advertisement.
It's pure word of mouth and customer service.

To take a simple parameter ( swap amount to BTC price ratio)  and to extrapolate a theory to explain we are at risk was in my opinion not very "moderate" by you.

Bitfinex has been growing tremendously in the last months and the amount of swaps is only one of the various parameters that should be taken into consideration.
As usual, time will tell who is right and who is wrong.

I believe BTC is getting into a more mature phase and if our customers believe that BTC is on the verge of another big leap ahead there is not much we can do about it.

By the way, if you were more familiar with our platform ( by your own admission you are not) you would know that we recently decreased max leverage from 5 to 2.5 and we believe this is reducing risk in a considerable way.

I might not be the best PR guy in town ( this is a fact ), but I will be more than glad to reply to any specific question you might come up with.

Thanks a lot and have a great weekend.

Giancarlo
Bitfinex Team      

[oda.krell]

Impression of first response by Giancarlo in here: absolutely terrible.

Impression of second response by him: quite good.


There's still hope :D

[BitBits]

I can't believe this thread even exists, Giancarlo shouldn't have even bothered commenting the obvious!
The logic in the original post is SO totally wrong and the OP really needs to do the homework on basic trading tools (for ANY commodity trading platform!!!) before trying to "make waves" with absolutely no basis to the accusations.

Fist of all, the total borrowed (regardless of what it was in the past) is a reflection of current traded volume on Bitfinex and this number grew simply because more traders joined the platform recently. This is just what it is - Bitfinex recently became the most popular exchange for BTC/USD pair.

Secondly, ALL of the borrowed by traders funds you see are fully backed primarily by THEIR OWN funds. There is simply no other technical way to borrow, but to have sufficient amount in trader's own account and the leverage at Bitfinex is a measly 2.5:1 (this is "nothing" in comparison to a 400:1 or more offered by some Forex brokerages).

What "credit bubble"? What are you talking about? Why do you care and what is your grudge?

[windjc]

I can't believe this thread even exists, Giancarlo shouldn't have even bothered commenting the obvious!
The logic in the original post is SO totally wrong and the OP really needs to do the homework on basic trading tools (for ANY commodity trading platform!!!) before trying to "make waves" with absolutely no basis to the accusations.

Fist of all, the total borrowed (regardless of what it was in the past) is a reflection of current traded volume on Bitfinex and this number grew simply because more traders joined the platform recently. This is just what it is - Bitfinex recently became the most popular exchange for BTC/USD pair.

Secondly, ALL of the borrowed by traders funds you see are fully backed primarily by THEIR OWN funds. There is simply no other technical way to borrow, but to have sufficient amount in trader's own account and the leverage at Bitfinex is a measly 2.5:1 (this is "nothing" in comparison to a 400:1 or more offered by some Forex brokerages).

What "credit bubble"? What are you talking about? Why do you care and what is your grudge?

Blitz just got totally owned.

[DannyElfman]

They will rollback the trades and everything will be just fine, no need to worry so much about cascade.

This is only true if the price on other markets returns to the point prior to when the cascade went off. If there is a differential, then that portion of liquidated traders will lose.

This has been my worry for a long time. Lenders will be fucked if the price on other exchanges doesn't recover and the book is liquidated. They should have cut back on trader's margin allowed a long time ago. It's out of hand.

[DannyElfman]

Fist of all, the total borrowed (regardless of what it was in the past) is a reflection of current traded volume on Bitfinex and this number grew simply because more traders joined the platform recently. This is just what it is - Bitfinex recently became the most popular exchange for BTC/USD pair.

Secondly, ALL of the borrowed by traders funds you see are fully backed primarily by THEIR OWN funds. There is simply no other technical way to borrow, but to have sufficient amount in trader's own account and the leverage at Bitfinex is a measly 2.5:1 (this is "nothing" in comparison to a 400:1 or more offered by some Forex brokerages).

What "credit bubble"? What are you talking about? Why do you care and what is your grudge?

Do you have numbers to back up the first bolded? Compare to short swaps over the same period.

And on the second, take a look at the order book. And consider order book manipulation on top of that. Consider that Stamp liquidity is gone. In a serious decline -- a flash crash that does not recover -- how much of those longs can be sustained by the book?

I'd like to see some numbers since you seem so sure. At a glance, the situation is actually quite bad.

[Bogleg]

They will rollback the trades and everything will be just fine, no need to worry so much about cascade.

This is only true if the price on other markets returns to the point prior to when the cascade went off. If there is a differential, then that portion of liquidated traders will lose.

This has been my worry for a long time. Lenders will be fucked if the price on other exchanges doesn't recover and the book is liquidated. They should have cut back on trader's margin allowed a long time ago. It's out of hand.

Leveraged traders will get wiped out first before lenders. And since bitfinex has insured all swap, they will get sued if they do not keep their promise.

[myself]

I can't believe this thread even exists, Giancarlo shouldn't have even bothered commenting the obvious!
The logic in the original post is SO totally wrong and the OP really needs to do the homework on basic trading tools (for ANY commodity trading platform!!!) before trying to "make waves" with absolutely no basis to the accusations.

Fist of all, the total borrowed (regardless of what it was in the past) is a reflection of current traded volume on Bitfinex and this number grew simply because more traders joined the platform recently. This is just what it is - Bitfinex recently became the most popular exchange for BTC/USD pair.

Secondly, ALL of the borrowed by traders funds you see are fully backed primarily by THEIR OWN funds. There is simply no other technical way to borrow, but to have sufficient amount in trader's own account and the leverage at Bitfinex is a measly 2.5:1 (this is "nothing" in comparison to a 400:1 or more offered by some Forex brokerages).

What "credit bubble"? What are you talking about? Why do you care and what is your grudge?

you can always ask R to edit the data base and give you some money to play the market, but i guess first u need to be a special friend 

[boraf]

I can't believe this thread even exists, Giancarlo shouldn't have even bothered commenting the obvious!
The logic in the original post is SO totally wrong and the OP really needs to do the homework on basic trading tools (for ANY commodity trading platform!!!) before trying to "make waves" with absolutely no basis to the accusations.

Fist of all, the total borrowed (regardless of what it was in the past) is a reflection of current traded volume on Bitfinex and this number grew simply because more traders joined the platform recently. This is just what it is - Bitfinex recently became the most popular exchange for BTC/USD pair.

Secondly, ALL of the borrowed by traders funds you see are fully backed primarily by THEIR OWN funds. There is simply no other technical way to borrow, but to have sufficient amount in trader's own account and the leverage at Bitfinex is a measly 2.5:1 (this is "nothing" in comparison to a 400:1 or more offered by some Forex brokerages).

What "credit bubble"? What are you talking about? Why do you care and what is your grudge?

you can always ask R to edit the data base and give you some money to play the market, but i guess first u need to be a special friend 

What do you mean?

[elebit]

Secondly, ALL of the borrowed by traders funds you see are fully backed primarily by THEIR OWN funds. There is simply no other technical way to borrow,

Yeah ... about that ... I think you need to expand your imagination a little. Talk to Zhou Tong about it.

[elebit]

And since bitfinex has insured all swap, they will get sued if they do not keep their promise.

Please warn before you do this. I still have coffee coming out of my nose.

[zby]

I can't believe this thread even exists, Giancarlo shouldn't have even bothered commenting the obvious!
The logic in the original post is SO totally wrong and the OP really needs to do the homework on basic trading tools (for ANY commodity trading platform!!!) before trying to "make waves" with absolutely no basis to the accusations.

Fist of all, the total borrowed (regardless of what it was in the past) is a reflection of current traded volume on Bitfinex and this number grew simply because more traders joined the platform recently. This is just what it is - Bitfinex recently became the most popular exchange for BTC/USD pair.

Secondly, ALL of the borrowed by traders funds you see are fully backed primarily by THEIR OWN funds. There is simply no other technical way to borrow, but to have sufficient amount in trader's own account and the leverage at Bitfinex is a measly 2.5:1 (this is "nothing" in comparison to a 400:1 or more offered by some Forex brokerages).

What "credit bubble"? What are you talking about? Why do you care and what is your grudge?

There are no accusations in the OP - it is entirely valid speculation about leverage and swap costs.

[CEG5952]

They will rollback the trades and everything will be just fine, no need to worry so much about cascade.

This is only true if the price on other markets returns to the point prior to when the cascade went off. If there is a differential, then that portion of liquidated traders will lose.

This has been my worry for a long time. Lenders will be fucked if the price on other exchanges doesn't recover and the book is liquidated. They should have cut back on trader's margin allowed a long time ago. It's out of hand.

Leveraged traders will get wiped out first before lenders. And since bitfinex has insured all swap, they will get sued if they do not keep their promise.

Yes, leveraged traders will get wiped out. First. You assume sufficient liquidity to save lenders. That's a joke. Bitfinex has not insured all swap! They have "effectively" insured it. Do that math -- 15% of swap fees? Versus the reality if they have to liquidate the book? Everyone is just so damn sure that a crash can't keep the price down. But if it does, Bitfinex can't lock traders in their positions, and lenders past their contracts, indefinitely. And that will be the end of this house of cards.

(I'm amazed at how this community learns nothing from the past)