This Bitfinex Credit Bubble cannot end well

[gog1]

The bubble deflated and the platform survived.  Short interest also fall back to 6.4k BTC - reduction of about 1k BTC.  I guess the number of margin-long and hodl people got wiped out.  Will probably take some time before things recover.

[1713594195]

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[1713594195]

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[cypherdoc]

^bfxdata show very little shorts vs the longs volume so if there were big winners they were on other exchanges

wouldn't the winners have to be the counterparties to the losers and both be on Bitfinex?

[myself]

^bfxdata show very little shorts vs the longs volume so if there were big winners they were on other exchanges

wouldn't the winners have to be the counterparties to the losers and both be on Bitfinex?

is a exchange not a future contract, longs that sold at a loss were more likely (by volume) to start another long positions for another trader (if is a loser or a winner need to be determined) the short volume was small so the buy-to-take-profits-and-close-short orders were small in volume and this were the winners of the down move

[Newbie1022]

The money did not just disappear.  It was simply transfered to other traders.  The buying power is still in the market.

It transferred to the Winners.

It left a lot of losers. Those losers will neither have the appetite nor be in the same position to make Bitcoin investments as they once were. Simply put, those losers have left the market, leaving only the winners looking to make further winnings. Next time around, some of those winners will be losers. They will no longer have the appetite nor the means to make the same level of investments as they once did, etc etc.

This is a declining market. The present primary trend is undeniable. Bitcoin will go up and down, but overall it will go down or at best, simply stagnate and go knowhere anytime soon, as this is the natural momentum in a post bubble hyped up market, as an ever increasing volume of liquidity leaves the market, resulting in less and less fiat in play to keep the market propped up. The declining volumes on all the main exchanges would ratify this view. If one were to take a somewhat contrarian view that the big money is moving into Bitcoin but acquiring their BTC in OTC deals, then this is an ever bigger reason why Bitcoin will continue to go down, namely it would be in big money's interest to depress the price in order to get as good a deal for themselves as possible, before allowing/facilitating/forcing the market to rise again.

I suspect this 'bottom' will play out in similar fashion to late 2011 and the first half of 2013, where Bitcoin crashed to it's $2 low, then hovered around $5-$8 for months. Since Bitcoin has proven that it is unsustainable for the time being at $600, perhaps ~$500 will prove to be the consolidation zone in the fullness of time? Or perhaps this region will also prove unsustainable as either selling pressure from increased adoption (i.e. retailers converting immeidately to USD) and the lack of new liquidity forces existing traders to take profits and/or fold their hands? If that were to be the case, then look out below a few weeks down the line from here.

It's a mixed bag. You make a great point that this was a very arbitrary and manipulated event such that those who lost won't just feel the burn of the loss (and the diminished purchasing power that comes with it), but will also feel scammed -- that is whether or not that is an accurate characterization (it at least has an element of truth). Thus, you have to replace those guys, many of whom have at least been in the game for upwards of a year, with new blood... it probably won't happen. In some ways, that is why I was hoping for an even more dramatic fall and why I think BitFinex erred in trying to stabilize the market upwards (and anybody holding a bag very rightly would be thinking "f--- this guy" right now) -- the idea being that if the price was low enough that people thought they were getting in at the ground floor (let's say $250 - $350 range) then new people would likely flood in and expand the base. But, even that would be absurd because this was a market event without a proper impetus.

[FUR11]

The bubble deflated and the platform survived.  Short interest also fall back to 6.4k BTC - reduction of about 1k BTC.  I guess the number of margin-long and hodl people got wiped out.  Will probably take some time before things recover.

Yeah, but if/when things recover, there's going to be another credit bubble, I guess. Why shouldn't a new bubble form as soon as the old one is "forgotten" also, new people coming in will be willing to lend some money!

[NapoleonBonaparte]

The bubble deflated and the platform survived.  Short interest also fall back to 6.4k BTC - reduction of about 1k BTC.  I guess the number of margin-long and hodl people got wiped out.  Will probably take some time before things recover.

Yeah, but if/when things recover, there's going to be another credit bubble, I guess. Why shouldn't a new bubble form as soon as the old one is "forgotten" also, new people coming in will be willing to lend some money!

Need a new bubble soon or there will be huge outflow of money. Lenders are not going to put their money on the exchange for long for pitiful yield.

[MOB]

Nothing wrong with a few million leaving Bitfinex.  That should raise the rates a bit for those lenders who stay, or result in more people going long or at least placing low bids.

[Coinfan]

The first low at 451 and then at 443 didn't trigger a real crash. BTC-e went down to about 310.

This seems to confirm that Bitfinex changed the way liquidations happen. Some reports suggest that they have a gradual system on line, that just dumps a part of the coins at once and the rest later. Waiting in order to allow new bid orders.

This post suggests this system it's automatic: http://www.reddit.com/r/BitcoinMarkets/comments/2dohjg/im_josh_rossi_from_bitfinex_here_to_talk_about/, even if talks about another issue, the limits on traders orders. But it has its risks. It means Bitfinex won't create a crash on its own. But on a general crash, any waiting might mean selling even lower, because new bid orders won't show up, rather all of them will be use by bulls in panic dumping their bitcoins in order to avoid liquidation.

But, for now, Bitfinex handled this well. The crazy bulls were burned, but they received plenty of warnings.

[itsAj]

The bubble deflated and the platform survived.  Short interest also fall back to 6.4k BTC - reduction of about 1k BTC.  I guess the number of margin-long and hodl people got wiped out.  Will probably take some time before things recover.

Yeah, but if/when things recover, there's going to be another credit bubble, I guess. Why shouldn't a new bubble form as soon as the old one is "forgotten" also, new people coming in will be willing to lend some money!

This is not necessarily true. It took a long time for this credit bubble (if you were to call it that) to inflate and eventually pop. After prices have received, the price of BTC really only fell ~$100 or less then 20% which is actually a small drop when comparing other BTC crashes.

[AceWallen]

The bubble deflated and the platform survived.  Short interest also fall back to 6.4k BTC - reduction of about 1k BTC.  I guess the number of margin-long and hodl people got wiped out.  Will probably take some time before things recover.

Yeah, but if/when things recover, there's going to be another credit bubble, I guess. Why shouldn't a new bubble form as soon as the old one is "forgotten" also, new people coming in will be willing to lend some money!

This is not necessarily true. It took a long time for this credit bubble (if you were to call it that) to inflate and eventually pop. After prices have received, the price of BTC really only fell ~$100 or less then 20% which is actually a small drop when comparing other BTC crashes.

IMO, once the leveraged positions have been cut down sufficiently and BTC finds a nice bottom to base from, we can finally rally -- perhaps even bubble -- and after that crash is when the leveraged longs will pile up, trying to buy up the correction. next credit bubble, please.

[wachtwoord]

The bubble deflated and the platform survived.  Short interest also fall back to 6.4k BTC - reduction of about 1k BTC.  I guess the number of margin-long and hodl people got wiped out.  Will probably take some time before things recover.

Yeah, but if/when things recover, there's going to be another credit bubble, I guess. Why shouldn't a new bubble form as soon as the old one is "forgotten" also, new people coming in will be willing to lend some money!

This is not necessarily true. It took a long time for this credit bubble (if you were to call it that) to inflate and eventually pop. After prices have received, the price of BTC really only fell ~$100 or less then 20% which is actually a small drop when comparing other BTC crashes.

IMO, once the leveraged positions have been cut down sufficiently and BTC finds a nice bottom to base from, we can finally rally -- perhaps even bubble -- and after that crash is when the leveraged longs will pile up, trying to buy up the correction. next credit bubble, please.

Hasn't this exact thing already happened?

[tarmi]

18 m of longs say no.

[maker88]

The bubble deflated and the platform survived.  Short interest also fall back to 6.4k BTC - reduction of about 1k BTC.  I guess the number of margin-long and hodl people got wiped out.  Will probably take some time before things recover.

Yeah, but if/when things recover, there's going to be another credit bubble, I guess. Why shouldn't a new bubble form as soon as the old one is "forgotten" also, new people coming in will be willing to lend some money!

This is not necessarily true. It took a long time for this credit bubble (if you were to call it that) to inflate and eventually pop. After prices have received, the price of BTC really only fell ~$100 or less then 20% which is actually a small drop when comparing other BTC crashes.

IMO, once the leveraged positions have been cut down sufficiently and BTC finds a nice bottom to base from, we can finally rally -- perhaps even bubble -- and after that crash is when the leveraged longs will pile up, trying to buy up the correction. next credit bubble, please.

Hasn't this exact thing already happened?

all of this has happened before and will happen again  maybe... lol

[tooil]

18 m of longs say no.

Should also check the interest rate also.

The low rate indicate it is worth the risk to long btc using leverage.

[WillyBTC]

18 m of longs say no.

Should also check the interest rate also.

The low rate indicate it is worth the risk to long btc using leverage.

It just mitigates the risk. Usually, profitable swaps have ever-higher interest rates as price continues to move in that direction. My thinking is more so that interest rates fell so much that it made more sense to try to catch cheap coins and trade the bounces than to make peanuts lending.

[wasserman99]

The bubble deflated and the platform survived.  Short interest also fall back to 6.4k BTC - reduction of about 1k BTC.  I guess the number of margin-long and hodl people got wiped out.  Will probably take some time before things recover.

Yeah, but if/when things recover, there's going to be another credit bubble, I guess. Why shouldn't a new bubble form as soon as the old one is "forgotten" also, new people coming in will be willing to lend some money!

This is not necessarily true. It took a long time for this credit bubble (if you were to call it that) to inflate and eventually pop. After prices have received, the price of BTC really only fell ~$100 or less then 20% which is actually a small drop when comparing other BTC crashes.

IMO, once the leveraged positions have been cut down sufficiently and BTC finds a nice bottom to base from, we can finally rally -- perhaps even bubble -- and after that crash is when the leveraged longs will pile up, trying to buy up the correction. next credit bubble, please.

I would say that as of now the price has at least stabilized somewhat. So far we have not seen a massive rebound (except on btc-e from 309). I would also hope that we see the price start to rise substantially but unfortunately this has not happened as of yet.

[itsAj]

The bubble deflated and the platform survived.  Short interest also fall back to 6.4k BTC - reduction of about 1k BTC.  I guess the number of margin-long and hodl people got wiped out.  Will probably take some time before things recover.

Yeah, but if/when things recover, there's going to be another credit bubble, I guess. Why shouldn't a new bubble form as soon as the old one is "forgotten" also, new people coming in will be willing to lend some money!

This is not necessarily true. It took a long time for this credit bubble (if you were to call it that) to inflate and eventually pop. After prices have received, the price of BTC really only fell ~$100 or less then 20% which is actually a small drop when comparing other BTC crashes.

IMO, once the leveraged positions have been cut down sufficiently and BTC finds a nice bottom to base from, we can finally rally -- perhaps even bubble -- and after that crash is when the leveraged longs will pile up, trying to buy up the correction. next credit bubble, please.

The overall amount of leverage has decreased by a lot. IIRC the total swaps outstanding on bitfinex has decreased by ~$10 million. As a result the overall price seems to have stabilized. I would guess/hope that the price will eventually start to rise from the current levels.

[tooil]

The bubble deflated and the platform survived.  Short interest also fall back to 6.4k BTC - reduction of about 1k BTC.  I guess the number of margin-long and hodl people got wiped out.  Will probably take some time before things recover.

Yeah, but if/when things recover, there's going to be another credit bubble, I guess. Why shouldn't a new bubble form as soon as the old one is "forgotten" also, new people coming in will be willing to lend some money!

This is not necessarily true. It took a long time for this credit bubble (if you were to call it that) to inflate and eventually pop. After prices have received, the price of BTC really only fell ~$100 or less then 20% which is actually a small drop when comparing other BTC crashes.

IMO, once the leveraged positions have been cut down sufficiently and BTC finds a nice bottom to base from, we can finally rally -- perhaps even bubble -- and after that crash is when the leveraged longs will pile up, trying to buy up the correction. next credit bubble, please.

The overall amount of leverage has decreased by a lot. IIRC the total swaps outstanding on bitfinex has decreased by ~$10 million. As a result the overall price seems to have stabilized. I would guess/hope that the price will eventually start to rise from the current levels.

18 m of longs say no.

Should also check the interest rate also.

The low rate indicate it is worth the risk to long btc using leverage.

It just mitigates the risk. Usually, profitable swaps have ever-higher interest rates as price continues to move in that direction. My thinking is more so that interest rates fell so much that it made more sense to try to catch cheap coins and trade the bounces than to make peanuts lending.

WillyBTC stated it correctly the missing 10M are probably used to trade rather than lend out on peanut interest.

[myself]

WillyBTC stated it correctly the missing 10M are probably used to trade rather than lend out on peanut interest.

in order to borrow people need collateral and if the los money they have less collateral so there is less demand for USD

[itsAj]

The bubble deflated and the platform survived.  Short interest also fall back to 6.4k BTC - reduction of about 1k BTC.  I guess the number of margin-long and hodl people got wiped out.  Will probably take some time before things recover.

Yeah, but if/when things recover, there's going to be another credit bubble, I guess. Why shouldn't a new bubble form as soon as the old one is "forgotten" also, new people coming in will be willing to lend some money!

This is not necessarily true. It took a long time for this credit bubble (if you were to call it that) to inflate and eventually pop. After prices have received, the price of BTC really only fell ~$100 or less then 20% which is actually a small drop when comparing other BTC crashes.

IMO, once the leveraged positions have been cut down sufficiently and BTC finds a nice bottom to base from, we can finally rally -- perhaps even bubble -- and after that crash is when the leveraged longs will pile up, trying to buy up the correction. next credit bubble, please.

The overall amount of leverage has decreased by a lot. IIRC the total swaps outstanding on bitfinex has decreased by ~$10 million. As a result the overall price seems to have stabilized. I would guess/hope that the price will eventually start to rise from the current levels.

18 m of longs say no.

Should also check the interest rate also.

The low rate indicate it is worth the risk to long btc using leverage.

It just mitigates the risk. Usually, profitable swaps have ever-higher interest rates as price continues to move in that direction. My thinking is more so that interest rates fell so much that it made more sense to try to catch cheap coins and trade the bounces than to make peanuts lending.

WillyBTC stated it correctly the missing 10M are probably used to trade rather than lend out on peanut interest.

That is a very interesting theory. I am trying to think of ways to somehow poke holes in it but I am unable to do so. I don't think this strategy would be without risk, but would probably work if you had enough money.