This Bitfinex Credit Bubble cannot end well

[myself]

^ ha!



also read this about the execution algo

https://www.tradingview.com/v/w5i8knMU/

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[Newbie1022]

http://www.reddit.com/r/BitcoinMarkets/comments/2di9hp/daily_discussion_thursday_august_14_2014/cjpvdic

User reporting he was not margin called even though the price went lower than his call price. If this is true and if this is not an exceptional case, then there are lots of positions that are still in jeopardy from that 24 million.

This makes sense. The price dropped to 451... then swung back and forth a few times... then stabilized at about $515 for about two minutes... people started buying in thinking it was final capitulation... then another set of margin calls down to about the $490 to $480 territory occurred.

This fiasco ended up costing me another $30 because I thought we were at final capitulation and that it would have to drop below $451 to retrigger the cascade. Then it went nuts again and, at the time, I wasn't going to sit put on it. I imagine this happened to quite a few people. Very scammy.

Did it actually hit 451 just now?

Gah!  And my first buy was placed at 450.02!

Oh nooo!!! That's terrible!!! Wish you better luck on the next drop.

[elebit]

I believe they said in the past that they bought the code and based the platform on it, but that the actual code the platform is built on was written from scratch.

But that doesn't make any sense. Why would they pay for something they didn't use?

[molecular]

God, where have I seen this all before...?

The best thing about it? Bitfinex is actually built on Bitcoinica code, although I hear they changed a whole lot of it.

LOL!

at least they got rid of this guy:



oh, and for the old times sake or anyone who "got zhou-tonged": https://www.youtube.com/watch?v=-z9Jwp2x86o

[teek]

God, where have I seen this all before...?

The best thing about it? Bitfinex is actually built on Bitcoinica code, although I hear they changed a whole lot of it.

LOL!

at least they got rid of this guy:



oh, end for the old times sake or anyone who "got zhou-tonged": https://www.youtube.com/watch?v=-z9Jwp2x86o

Man the term "zhou-tonged" should be in websters..   (just checked wikipedia it's not there).. 

I think that term will stick with me for the rest of my life

[Argwai96]

I believe they said in the past that they bought the code and based the platform on it, but that the actual code the platform is built on was written from scratch.

But that doesn't make any sense. Why would they pay for something they didn't use?

That was worded confusingly. What I've heard is that the code was bought from Bitcoinica, but that it was entirely rewritten. (e.g. buy the code as "inspiration" and build platform from scratch)

But this is all hearsay, anyway.

[elux]

Don't get Zhou Tonged!

Code:

Bam! Bam! (Zhou Tong man)
Now You got No funds (No funds)
Cuz you got Zhou Tonged!!!

This Move puts me in position 
So put 5k get 10k leverage (Thats right)
If I go long then I make Big Profits (Cmon man)
If the price drops then I Lose all my shit (Aw shit)

ZhouTonged!!!
What a Bum Bum
Bam Bam Dilla 

[Yololintian]

I think we won't see much downside from here. The swap rates have returned to sane levels, around .06-.08% per day, about half of the peak rates. This is still a lot per year but its not nearly as much as before. With lower interest, there is less selling pressure from long positions. Also I feel like some people loaning money will take this opportunity to buy cheap capitulation priced coins, as they won't be able to make as much from loaning the money out anymore. Overall I am very satisfied with this development; I think it was very healthy for the price of bitcoin and removed some weak hands and unskilled speculators.

[Newbie1022]

I think we won't see much downside from here. The swap rates have returned to sane levels, around .06-.08% per day, about half of the peak rates. This is still a lot per year but its not nearly as much as before. With lower interest, there is less selling pressure from long positions. Also I feel like some people loaning money will take this opportunity to buy cheap capitulation priced coins, as they won't be able to make as much from loaning the money out anymore. Overall I am very satisfied with this development; I think it was very healthy for the price of bitcoin and removed some weak hands and unskilled speculators.

Maybe... before the crash, yesterday, though, the spreads weren't all that crazy either... just the amount of leverage. The leverage has stayed pretty flat which is good, but I think there is a lot more room to burn.

[tinof]

Looking at the enormous quantity of longs on Bitfinex I would have expected a MUCH bigger crash, maybe it's still gonna happen.

This is nothing we haven't seen before...

I mean, still 24M in longs, who the fuck is still long now? from where? still from months ago?

Based on the outstanding loan from yesterday, I am going to venture a guess that at least one whale has bite the dust.

I do not think the down trend is over, if the price hit 350-400 price level, there will be more whale going bust.

I sincerely hope bitfinex is not using customer money to trade for their own account.

[Kluge]

I believe they said in the past that they bought the code and based the platform on it, but that the actual code the platform is built on was written from scratch.

But that doesn't make any sense. Why would they pay for something they didn't use?

That was worded confusingly. What I've heard is that the code was bought from Bitcoinica, but that it was entirely rewritten. (e.g. buy the code as "inspiration" and build platform from scratch)

But this is all hearsay, anyway.

This is correct, though maybe it wasn't "entirely" rewritten. In the original instance of BFX, the Bitcoinica influence was very visible, even in the GUI. IIRC, BFX did actually purchase the code even though it was leaked soon after Bitcoinica collapsed. This allowed for a partial public audit as weaknesses in Bitcoinica could be tested in BFX, and there was at least one instance of a carried-over vulnerability (this is practically ancient history, though). They rapidly improved the code to the point where it's likely very close to a complete rewrite. I don't think it's fair to compare BFX to Bitcoinica anymore, at least as far as code goes.

[TooDumbForBitcoin]

Begging forgiveness for the newb question which has probably been answered a million times:

How can bitfinex collect on the loans?  What enforcement power do they have?

[FattyMcButterpants]

Begging forgiveness for the newb question which has probably been answered a million times:

How can bitfinex collect on the loans?  What enforcement power do they have?

enforcement power? the fact is that you are but an entry on a ledger to them. (without implying anything about fractional reserve )

now, if you want to talk about usury law, i could foresee some legal issues (without knowing the details), but the question is, who is regulating them, and would anyone do anything about it? still the wild west here!

[Newbie1022]

Feel like you are losing your shirt... contact the CFPB... http://www.consumerfinance.gov/complaint/

P.S. -- this is a joke.

[zedicus]

I think we won't see much downside from here. The swap rates have returned to sane levels, around .06-.08% per day, about half of the peak rates. This is still a lot per year but its not nearly as much as before. With lower interest, there is less selling pressure from long positions. Also I feel like some people loaning money will take this opportunity to buy cheap capitulation priced coins, as they won't be able to make as much from loaning the money out anymore. Overall I am very satisfied with this development; I think it was very healthy for the price of bitcoin and removed some weak hands and unskilled speculators.

Maybe... before the crash, yesterday, though, the spreads weren't all that crazy either... just the amount of leverage. The leverage has stayed pretty flat which is good, but I think there is a lot more room to burn.

I think we will likely fall farther from here. I agree that at least part of the decline is due to margin calls and margin related selling. I would argue that once margin gets to much lower levels we will likely bottom out and potentially see price gains from the levels seen at that point.

[peeveepee]

Begging forgiveness for the newb question which has probably been answered a million times:

How can bitfinex collect on the loans?  What enforcement power do they have?

There is something called margin call and force liquidation to protect the exchange and lender.

[Gimmelfarb]

I think we won't see much downside from here. The swap rates have returned to sane levels, around .06-.08% per day, about half of the peak rates. This is still a lot per year but its not nearly as much as before. With lower interest, there is less selling pressure from long positions. Also I feel like some people loaning money will take this opportunity to buy cheap capitulation priced coins, as they won't be able to make as much from loaning the money out anymore. Overall I am very satisfied with this development; I think it was very healthy for the price of bitcoin and removed some weak hands and unskilled speculators.

i'm not sure how much we can glean from those numbers (and i don't know how honest BFX is about them either). we stopped at the 450 level, but it looks like from bfxda there is still 9-10 million maybe (just eyeballing) taken out above 450. so if we break that, gonna have to consider the possibility of more margin call-fueled drops, depending how far we go and how long swaps have been bleeding people.

but imo, better to look at the TA than swaps anyway. i think you'll see signals before the selloff begins.... still looks bearish from here.

[minerpumpkin]

Okay so what's the general sentiment over here about the recent developments? The credit bubble seems more or less alive and well, still. Do you think that amount of loans will ever stop to exist? Could it really be impeding another rapid growth of the Bitcoin price (bubble)?

[MOB]

Down to 21m now!

[N12]

We had another liquidation despite no new Bitfinex low,



My strong suspicion is now that the report we got about someone's position not having been liquidated at the prior cascade even though his liquidation price was met was a common phenomenon. I'm guessing that Bitfinex decided to split one single liquidation somehow to limit its impact. How else would we have ~5k BTC sold at once even though the price did not go below the former 451 low?

Anyway, a decrease from 30 million to 21 million is quite a deleveraging. Things are much less unhealthy now, in my view.