TH1BTC Speculation Thread - Bitfinex Cloud Mining Contract

[greyphilosophy]

All that swap is earning interest.  What happens if the amount owed exceeds the 500 contracts?  So long as no one offers swap past 14.12.2014 then no matter what the price goes to infinity...

[nrd525]

My argument is that the market is badly designed and wide open to manipulation.

Shorter:
Assumes that the swap rate will be relatively constant for the lifetime of the contract.
Assumes that the value of the contract will decrease over the lifetime of the contract due to mining.
Has no power to ensure that either assumption comes true.

Manipulator:
Assumes the swap rate will increase each time the swaps are renewed.  Ensures this happens by maintaining a floor price (thus increasing the contract's premium compared to its mining value and encouraging shorters who will compete and be willing to pay for the increased swap rate).

Assumes the contract will maintain its value until Nov 15 (the renewal of the last round of 30 day swaps).  Ensures that this happens by maintaining a floor price using their own funds.


Result:
Shorter -  makes a trade that looks slightly profitable given difficulty expectations.

Manipulator - makes a trade that appears to lose money given difficulty expectations, but will make a large profit once they manipulate both the contract price and the swap rate.  Has almost all of the power to affect the swap value and determine the loss or profitability of going short or long.

[odolvlobo]

My argument is that the market is badly designed and wide open to manipulation.

Shorter:
Assumes that the swap rate will be relatively constant for the lifetime of the contract.
Assumes that the value of the contract will decrease over the lifetime of the contract due to mining.
Has no power to ensure that either assumption comes true.

Manipulator:
Assumes the swap rate will increase each time the swaps are renewed.  Ensures this happens by maintaining a floor price (thus increasing the contract's premium compared to its mining value and encouraging shorters who will compete and be willing to pay for the increased swap rate).

Assumes the contract will maintain its value until Nov 15 (the renewal of the last round of 30 day swaps).  Ensures that this happens by maintaining a floor price using their own funds.


Result:
Shorter -  makes a trade that looks slightly profitable given difficulty expectations.

Manipulator - makes a trade that appears to lose money given difficulty expectations, but will make a large profit once they manipulate both the contract price and the swap rate.  Has almost all of the power to affect the swap value and determine the loss or profitability of going short or long.

That only works if the manipulator is the only person offering swaps. If there is competition, then the manipulator that tries to set a floor risks losing money on TH1 with no swap to compensate.

I believe there is no manipulation going on. Instead, there is a shortage of swaps because some TH1 longs are simply holding TH1 (and losing money), and some TH1 shorts are paying higher interest rates than they have to.

[nrd525]

The way the manipulator increases the swap rate is by maintaining a price floor for the TH1 contract.  How do you stop this?

The swap rate is set by the market (eg. open competition).  The swap rate increases over time due to the TH1 contract price increasing relative to its mining value.

[greyphilosophy]

And as long as the price floor is intact it doesn't matter who is offering the swap, eventually the manipulator is going to add that contract to their position as well.  They might even intentionally be adding swap just to widen the net.

The idea of adding more swap is interesting, but if bitfinex offers swap on the last day, then everyone would pounce on it because if they can sell it then it becomes pure profit.  For this same reason anyone who offers swap past the last day of the contracts is an idiot.  They'll get the mining dividend, but they'll never see any real return from the contract.

I think the only way to make money off this would be to buy contracts, hold them for the mining dividend, and then sell them before it all hits the fan and the price floor drops.

[lg1500]

i closed all my th1 positions, total lost 20.6 % of my balance
thank you bitfinex for manipulate me

[lg1500]

damn 1.19 now i closed my positions with huge lost, and 1 day later this drop !!! fuuuck

[nrd525]

They issued another 100 shares.

Looks like selling 36 shares caused the price to fall to 1.14.  This does go against my manipulation theory.  However 1.14 still far exceeds the mining value.
Also it isn't clear whether the price is 1.14 or 1.24. There is a wide gap in the offers book.

If this is their solution, I'm tempted to go long.

[nrd525]

https://www.bitfinex.com/pages/announcements

Beta Mining Contract Changes & Adjustments
Posted: 1 minute ago

In an effort to address some of the community’s concerns surrounding the price premium of TH1 over intrinsic value and lack of liquidity on the book, Bitfinex will be making some adjustments to TH1. Firstly, we would like to plainly state that Bitfinex will not tolerate any behavior that we deem to be manipulative. We are looking closely at the behavior of some of the participants and are mulling over some overall rule changes to discourage certain behaviors system-wide – more to come on that later. Just because the platform permits an unintended use pattern does not mean that we won’t take a punitive approach in dealing with those traders trying to exploit loopholes in a manipulative fashion. This contract is a beta product, and we have reserved the right to make adjustments as necessary to improve the integrity of the product. To that end, the following changes will soon go into effect:

    TH1 no longer good collateral. As of midnight UTC on Monday, October 20th, 2014, TH1 can no longer be used as collateral for opening long swap positions in TH1BTC. Only collateral in the form of BTC, LTC or USD will be permitted. We have made this decision based on the fact that TH1 itself will be worthless at contract expiration.
    Margin requirements will start to increase. As TH1 approached expiration, we will be increasing the Initial Margin Requirement (IMR) and the Maintenance Margin Requirement (MMR) according to the following schedule at midnight UTC on the respective dates:
    Date   IMR   MMR
    Monday, October 20th, 2014    40%    20%
    Monday, October 27th, 2014    50%    25%
    Monday, November 3rd, 2014    60%    30%
    Monday, November 10th, 2014    70%    35%
    Monday, November 17th, 2014    80%    40%
    Monday, November 24th, 2014    90%    45%
    Monday, December 1st, 2014    100%    50%
    Wednesday, December 3rd, 2014    100%    60%
    Friday, December 5th, 2014    100%    70%
    Sunday, December 7th, 2014    100%    80%
    Tuesday, December 9th, 2014    100%    90%
    Thursday, December 11th, 2014    100%    100%

It will be the responsibility of the traders to insure that their positions are backed by enough collateral to avoid any forced liquidation that may result when MMR is increased. We apologize for any inconvenience caused by these changes as we continue to fine-tune this beta product for future offerings.

[nrd525]

Does this mean that people were taking long positions on TH1 on the margin?

If so, that is pretty crazy.

[twentyseventy]

Thanks for posting the update; glad to see that they're attempting to address this.

[nrd525]

[nrd525]

[nrd525]

Order book is filling in.

[lg1500]

i had buy position for 0.9101 to close short 1.3, and i panic sold for 1.3 with 20 % lost, i should wait !
but i made this decision becouse bitfinex not responded me for any mails from long time, and from 14 days we had no new assets.
and i partly blame bitfinex for my lost.

[nrd525]

I filed a support ticket with Bitfinex for reimbursement of my loss and I encourage other shorters who closed their positions early to do so as well. I don't think we should be punished for figuring out that the market was poorly designed and taking our own actions in response to Bitfinex's inaction.

If I was shorting now and could close my position at 0.95 BTC, I'd be about even - having made a 0.3 BTC * 38 TH1 profit which is about equal to what I've paid out in dividends.

I think the TH1 price could still fall a bit further. And of course it is likely to over-correct.  The expected difficulty forecast increase (4% - Bitcoinwisdom) is low, but I think at some point the new mining hardware will come online.

[nrd525]

TH1 swaps down to 232.3. That is a lot of closed shorts.

[lg1500]

I filed a support ticket with Bitfinex for reimbursement of my loss and I encourage other shorters who closed their positions early to do so as well. I don't think we should be punished for figuring out that the market was poorly designed and taking our own actions in response to Bitfinex's inaction.

If I was shorting now and could close my position at 0.95 BTC, I'd be about even - having made a 0.3 BTC * 38 TH1 profit which is about equal to what I've paid out in dividends.

I think the TH1 price could still fall a bit further. And of course it is likely to over-correct.  The expected difficulty forecast increase (4% - Bitcoinwisdom) is low, but I think at some point the new mining hardware will come online.

i should not listen you and hold my positions, i had 495 ltc, now i have 410 ltc, 1 day waiting more and 575 ltc, i had buy for 0.9103, and you made me little panic

[lg1500]

this is the worst scenario what i had with th1, closing my positions for 1.32 14-10-2015, one day before drop to 0.9, one f***ing day and bitfinex making announcements, i lost money becouse manipulators+bitfinex and this topic.

[nrd525]

I'm sorry that you lost money following my advice.   We're in the same boat on this one.  I closed my positions at an even higher price than you (but with less dividends).

I think it is possible that my emails to Bitfinex encouraged them to act sooner and saved other shorters money.

I think it is also possible that Bitfinex will reimburse our losses.  If not, I'm going on a medium sized PR war against them. First up - an article in Coindesk exposing how they caused their users to lose money. Also: a signature campaign.