This Bitfinex Credit Bubble cannot end well

[thezerg]

Is it possible for a single person, or small concerted group, to control both the shorts and longs, profitably? If so, and assuming this is the case, how should an outsider place his or her bets?

With Bitfinex, you're playing against the house.

Whatever you do, the odds are against you. My advice: Use price alarms, and not stops, because they will hunt your stops there every time. Shady as hell....

Huh? No, Bitfinex is not on either side of the leverage... people offer liquidity, other people take it for leverage, Bitfinex takes some % of the interest.  But Bitfinex is "insuring" the lenders (whatever that means), so only in the case of a flash-crash you might be "playing against the house"

I think he's saying that Bitfinex are stop hunting and/or front running their own customers. That's my reading of it, anyway.

I wouldn't put it past them, either....

They are known for it https://bitcointalk.org/index.php?topic=660948.msg7444385#msg7444385
https://bitcointalk.org/index.php?topic=660948.msg7444557#msg7444557

So someone got stopped out and Bitfinex is somewhat illiquid; Also there are a lot of places people might place obvious stops. This is no evidence against Bitfinex.

LOL at referencing MTC as a reliable source.  On the other hand you are right.  Every exchange has the opportunity to front run trades or harvest over leverage.  Day trading is a dangerous game and most ppl lose.

[1713568115]

1713568115

[Mobius]

Is it possible for a single person, or small concerted group, to control both the shorts and longs, profitably? If so, and assuming this is the case, how should an outsider place his or her bets?

With Bitfinex, you're playing against the house.

Whatever you do, the odds are against you. My advice: Use price alarms, and not stops, because they will hunt your stops there every time. Shady as hell....

Huh? No, Bitfinex is not on either side of the leverage... people offer liquidity, other people take it for leverage, Bitfinex takes some % of the interest.  But Bitfinex is "insuring" the lenders (whatever that means), so only in the case of a flash-crash you might be "playing against the house"

Bitfinex takes a cut of the interest payments and do not lend nor borrow money from/to consumers. I would seriously doubt their ability to pay out all of the money lend to customers via swaps in the event of a large crash when the price does not fully recover in the very near term. If the price were to recover then they could simply cancel all of the trades (unethical IMO) but if price losses are sustained then this would not even be an option. It is important to note however that bitcoin has seen fewer and smaller crashes recently and the crashes/declines that we did see have been relatively orderly.

[DannyElfman]

I think it is funny that people use highly leveraged positions and let them go near forced liquidation, then due to market movements and illiquidity, get stopped and try to blame all on bitfinex.

Ever wondered why no serious trader using bitfinex ever complained?

[Marbit]

I think it is funny that people use highly leveraged positions and let them go near forced liquidation, then due to market movements and illiquidity, get stopped and try to blame all on bitfinex.

Ever wondered why no serious trader using bitfinex ever complained?

Do you really think that? Have a good long read in the service discussion thread. Their market freeze + locking shorts in position during a rally left many traders with a very sour taste in their mouth.

[DannyElfman]

I think it is funny that people use highly leveraged positions and let them go near forced liquidation, then due to market movements and illiquidity, get stopped and try to blame all on bitfinex.

Ever wondered why no serious trader using bitfinex ever complained?

Do you really think that? Have a good long read in the service discussion thread. Their market freeze + locking shorts in position during a rally left many traders with a very sour taste in their mouth.

Yes I remember that well, but that was a business decision. In no way did the traders implied that Bitfinex was entering positions and being a bucket shop. (That is what most people here accuse BFX of).

Their business and success is hugely depended on a healthy swap market and freezing the market in chain-liquidation scenarios is a bad but apparently neccessary step.

[nrd525]

The bubble might be alleviated (or at least decentralized) by http://www.coindesk.com/huobis-bitvc-opens-new-bitcoin-interest-accounts-all-international-customers/

[DannyElfman]

The bubble might be alleviated (or at least decentralized) by http://www.coindesk.com/huobis-bitvc-opens-new-bitcoin-interest-accounts-all-international-customers/

Their system is a joke compared to BFX. They have no true market price for swap but just distribute it evenly to lenders and let borrowers pay way too much for it.

Maybe they change it though.

[Marbit]

I think it is funny that people use highly leveraged positions and let them go near forced liquidation, then due to market movements and illiquidity, get stopped and try to blame all on bitfinex.

Ever wondered why no serious trader using bitfinex ever complained?

Do you really think that? Have a good long read in the service discussion thread. Their market freeze + locking shorts in position during a rally left many traders with a very sour taste in their mouth.

Yes I remember that well, but that was a business decision. In no way did the traders implied that Bitfinex was entering positions and being a bucket shop. (That is what most people here accuse BFX of).

Their business and success is hugely depended on a healthy swap market and freezing the market in chain-liquidation scenarios is a bad but apparently neccessary step.

Saying "it's a business decision" doesn't mean that no serious trader every complained.... plenty of traders had legitimate complaints in that fiasco.

I wouldn't make any assumptions about their business model.

[DannyElfman]

I think it is funny that people use highly leveraged positions and let them go near forced liquidation, then due to market movements and illiquidity, get stopped and try to blame all on bitfinex.

Ever wondered why no serious trader using bitfinex ever complained?

Do you really think that? Have a good long read in the service discussion thread. Their market freeze + locking shorts in position during a rally left many traders with a very sour taste in their mouth.

Yes I remember that well, but that was a business decision. In no way did the traders implied that Bitfinex was entering positions and being a bucket shop. (That is what most people here accuse BFX of).

Their business and success is hugely depended on a healthy swap market and freezing the market in chain-liquidation scenarios is a bad but apparently neccessary step.

Saying "it's a business decision" doesn't mean that no serious trader every complained.... plenty of traders had legitimate complaints in that fiasco.

I wouldn't make any assumptions about their business model.

You are right.

Atleast in the bucket shop accusation I am pretty positive that they act honest.

I prolly should leave now to not get branded a shill :p

[Nrcewker]

At least now Bitfinex is very good, enjoy the process, they do not care what the end

[Essex343]

So....long squeeze still incoming? Cuz I been hearing that tale for a loooooong time now. Just sayin.

[fonzie]

Right now there is a huge amount of USD swap offers that far exceed the demand. Question is how many of them will buy into BTC if we should go upwards?
This could fuel up the next rise and might help to close old levereaged long positions without tragedy.

[N12]

So....long squeeze still incoming? Cuz I been hearing that tale for a loooooong time now. Just sayin.

Maybe because the overall condition has persisted for a long time? It's just that few spoke about it before. A few weeks or months isn't much compared when this has been going on since either March 2014 or even winter 2013, depending on how you view it.

I'm not sure it's particularly probable per se that a flash crash has to happen. It's conceivable to deleverage in a more orderly fashion, or that this pattern holds out long enough and the saviour rally actually comes. Also, the longs on Bitfinex is just one particular aspect of that exchange, and Bitfinex is one particular aspect of the overall market (a flash crash on Bitfinex is unlikely to significantly affect Bitstamp), and the exchanges are just one aspect of the overall market too.

But, with the current amount of longs versus shorts, IF a deep spike downwards happens, it's going to be hard to not have a liquidation cascade.

[wachtwoord]

So....long squeeze still incoming? Cuz I been hearing that tale for a loooooong time now. Just sayin.

Maybe because the overall condition has persisted for a long time? It's just that few spoke about it before. A few weeks or months isn't much compared when this has been going on since either March 2014 or even winter 2013, depending on how you view it.

I'm not sure it's particularly probable per se that a flash crash has to happen. It's conceivable to deleverage in a more orderly fashion, or that this pattern holds out long enough and the saviour rally actually comes. Also, the longs on Bitfinex is just one particular aspect of that exchange, and Bitfinex is one particular aspect of the overall market (a flash crash on Bitfinex is unlikely to significantly affect Bitstamp), and the exchanges are just one aspect of the overall market too.

But, with the current amount of longs versus shorts, IF a deep spike downwards happens, it's going to be hard to not have a liquidation cascade.

Does anyone have data on the percentage of shorts and the percentage of leveraged longs? (percentage to the market cap so 21M BTC)

[N12]

Does anyone have data on the percentage of shorts and the percentage of leveraged longs? (percentage to the market cap so 21M BTC)

Sure we do. Just check out https://www.bitfinex.com/pages/stats or http://www.bfxdata.com.

Right now it's near 30 million USD vs. 5.3k BTC.

[wachtwoord]

Does anyone have data on the percentage of shorts and the percentage of leveraged longs? (percentage to the market cap so 21M BTC)

Sure we do. Just check out https://www.bitfinex.com/pages/stats or http://www.bfxdata.com.

Right now it's near 30 million USD vs. 5.3k BTC.

Thanks!

So the short is completely negligible and the leveraged long isn't that large either at roughly 50k BTC (a quarter percent of the market cap). Can we all relax now?

For reference even a huge stable and respected company such as MSFT has 1% of it's float sold short (sorry I don't have data on leveraged longs as that's not even collected centrally I would guess).

[N12]

Not large for the overall market? Yes, I agree. Although arguably you could take it as a sentiment indicator for the broader market, but it is hard to say how representative it is. Large for the exchange market, perhaps a little. Large for the Bitfinex market? Definitely.

There's no question that this has anything to do with any exchange other than Bitfinex and perhaps BTC-E, really. Why would it, when the last margin induced flash crash on Bitfinex didn't?

[wachtwoord]

I agree relative changes reflect sentiment, but I'm a long term investor anyway.

On a related note I have held shares of companies with huge short interest. In stocks this in only a good thing as shorts need to borrow the shares and the rate for this increases based on demand. This way you make a nice little extra on the side and are able to buy more at depressed prices. I like short sellers

[DannyElfman]

I agree relative changes reflect sentiment, but I'm a long term investor anyway.

On a related note I have held shares of companies with huge short interest. In stocks this in only a good thing as shorts need to borrow the shares and the rate for this increases based on demand. This way you make a nice little extra on the side and are able to buy more at depressed prices. I like short sellers

Short selling is very good for the market, naked short selling is not. So What bitfinex offers is actually very good for the market

[Newbie1022]

And the credit bubble lives!!! Nice bleeder during the last rout. And yet, we sit over $30 million on Finex with other purveyors of leverage entering the game... and we are still falling anyways. =S Spooky!