This Bitfinex Credit Bubble cannot end well

[21pilot]

today nevertheless had surprisingly good news for BTC in general:
http://www.coindesk.com/wikipedia-now-accepts-bitcoin-donations/

We need some other major brands to accept BTC and maybe we can
increase the life span of the long positions 

[Newbie1022]

Let's take a minute and think of all those longs on leverage that have been wiped out since last week! ;(

Probably none or very close to none on Bitfinex.  The leverage ratio is low. The swaps are declining because 1) the rules changes and made the leverage smaller and 2) BTC price was flat for a very long time and has now started declining.

I think there's been some roll overs. Also, the new rules hitting at the same time as a drop just puts more pressure on those who were overleveraged, as a practical matter, in the first place. Does it not?

[DjPxH]

Let's take a minute and think of all those longs on leverage that have been wiped out since last week! ;(

Probably none or very close to none on Bitfinex.  The leverage ratio is low. The swaps are declining because 1) the rules changes and made the leverage smaller and 2) BTC price was flat for a very long time and has now started declining.

Which rules have changed? I haven't exactly followed the swaps market there too closely. The credit bubble is still large and going strong!

[Newbie1022]

Let's take a minute and think of all those longs on leverage that have been wiped out since last week! ;(

Probably none or very close to none on Bitfinex.  The leverage ratio is low. The swaps are declining because 1) the rules changes and made the leverage smaller and 2) BTC price was flat for a very long time and has now started declining.

Which rules have changed? I haven't exactly followed the swaps market there too closely. The credit bubble is still large and going strong!

Leverage ratio reduced. Can't take out as much. However, as of this week, Power500 (BTC-e) was offering 16:1 so lord only knows what the gamblers are doing or how high up to their eyeballs in leverage they really are. That said, I think the main game is Bitfinex and those guys have to be sweating bullets right now.

[Yololintian]

Is this the massacre of the leveraged longs?

We aren't low enough for margin calls yet. They will start around 510 ish. The trend is just forced selling and people slowly catching on that the credit bubble was the reason we went from 450 to 680. The Massacre starts when we hit those margin calls.

[Bitcoin_is_here_to_stay]

Is this the massacre of the leveraged longs?

We aren't low enough for margin calls yet. They will start around 510 ish. The trend is just forced selling and people slowly catching on that the credit bubble was the reason we went from 450 to 680. The Massacre starts when we hit those margin calls.

Anybody has a clue why the sell off seems worst on Bitstamp? I mean, all these leveraged longs are on Finex or BTC-e, they should be panic selling rather than ppl on Stamp 

[Yololintian]

Is this the massacre of the leveraged longs?

We aren't low enough for margin calls yet. They will start around 510 ish. The trend is just forced selling and people slowly catching on that the credit bubble was the reason we went from 450 to 680. The Massacre starts when we hit those margin calls.

Anybody has a clue why the sell off seems worst on Bitstamp? I mean, all these leveraged longs are on Finex or BTC-e, they should be panic selling rather than ppl on Stamp 

This is confusing me too but I think its due to some moronic bulls overextending themselves with even more leveraged longs.

[BuildTheFuture]

Stamp is where the merchant processors like Coinbase and Bitpay dump BTC. It isn't a coincidence that dumping got worse post-Dell and now after Bitpay goosed things further today by cutting their fees to zero.

I think eventually we'll find a new equilibrium and start moving back up, especially once Circle and other methods to encourage mainstream users to buy BTC start to get traction. But for now a lot of the people spending BTC are people who already owned it.

[Bitcoin_is_here_to_stay]

Stamp is where the merchant processors like Coinbase and Bitpay dump BTC. It isn't a coincidence that dumping got worse post-Dell and now after Bitpay goosed things further today by cutting their fees to zero.

I think eventually we'll find a new equilibrium and start moving back up, especially once Circle and other methods to encourage mainstream users to buy BTC start to get traction. But for now a lot of the people spending BTC are people who already owned it.

Ah, I have not thought of it. OTOH, a lot of US-based ppl buying through Coinbase now, it should also show on Stamp.

[BuildTheFuture]

Coinbase internally matches orders as much as possible, so most of the time whenever you buy there, your money goes straight into some merchant's bank account.

[Bitcoin_is_here_to_stay]

Coinbase internally matches orders as much as possible, so most of the time whenever you buy there, your money goes straight into some merchant's bank account.

Ah, thanks I was wondering about it, but not sure if they were allowed to do it.

So basically what we are seeing now is

early adopters btc spending > (new adopters) btc buying ?

[davidgdg]

My guess is that by some time in September outstanding swaps will be down from 30 to 15 mil and rates will be below 0.1%. That's the point at which another strong price rise may occur 😊 But until then it will be a slow slide down to ~ USD 500 as the post-May leveraged longs give up.

Any conjecture at which point a cascading long-burn on Finex may occur? I mean we went down quite a bit already but the longs are still holding and the bubble barely deflated.

Most of the new leveraged longs were taken out in June and July at positions between 550 and 650. So we are getting close to a point at which they are mostly under water. If prices go much below 550 I'd expect a rapid cascade down to 500 or perhaps an overshoot to the high 400's. The process could be very quick or rather more painful but I think it will be done either way by late August / early Sept. Then things could get very interesting again in a more positive way. So my re commendation would be to buy at 500 or below once BFX swaps fall below 15m.

[davidgdg]

My guess is that by some time in September outstanding swaps will be down from 30 to 15 mil and rates will be below 0.1%. That's the point at which another strong price rise may occur 😊 But until then it will be a slow slide down to ~ USD 500 as the post-May leveraged longs give up.

Any conjecture at which point a cascading long-burn on Finex may occur? I mean we went down quite a bit already but the longs are still holding and the bubble barely deflated.

Most of the new leveraged longs were taken out in June and July at positions between 550 and 650. So we are getting close to a point at which they are mostly under water. If prices go much below 550 I'd expect a rapid cascade down to 500 or perhaps an overshoot to the high 400's. The process could be very quick or rather more painful but I think it will be done either way by late August / early Sept. Then things could get very interesting again in a more positive way. So my re commendation would be to buy at 500 or below once BFX swaps fall below 15m.

[DjPxH]

So from what I can gather here is that the question remains whether we go under $550 now and start burning the first really long longs. I don't know.... It really could go either way I guess. It's continuing to go down gradually, yet support seems to be still holding strong for some reason...

[N12]

What is it with those maniacs? We were briefly above the 30 million mark again.

[Newbie1022]

What is it with those maniacs? We were briefly above the 30 million mark again.

I saw that as well. I wonder if it is the same uber bulls doubling down to recoup OR if it is a new crowd that thinks we hit a bottom. Either way, if there isn't a solid recovery they are just making things worse.

[Siegfried]

When the price hits your liquidation price, does Bitfinex liquidate your entire position or only a part to keep you above the margin requirement?

[leezay]

When the price hits your liquidation price, does Bitfinex liquidate your entire position or only a part to keep you above the margin requirement?

If you are a whale, your liquidation will move the market and creating more margin call for the rest of your position. It will be a cascading event.

That happened around Christmas last year when one of the trader lose over 900k USD on cascading margin call on litecoin (and hence bitcoin).

[Siegfried]

When the price hits your liquidation price, does Bitfinex liquidate your entire position or only a part to keep you above the margin requirement?

If you are a whale, your liquidation will move the market and creating more margin call for the rest of your position. It will be a cascading event.

That happened around Christmas last year when one of the trader lose over 900k USD on cascading margin call on litecoin (and hence bitcoin).

But if you are not a whale?

[Yololintian]

When the price hits your liquidation price, does Bitfinex liquidate your entire position or only a part to keep you above the margin requirement?

If you are a whale, your liquidation will move the market and creating more margin call for the rest of your position. It will be a cascading event.

That happened around Christmas last year when one of the trader lose over 900k USD on cascading margin call on litecoin (and hence bitcoin).

But if you are not a whale?

I believe it liquidates the entire position because the high margin requirement of 13% is there to protect against the lack of liquidity of the market.