TH1BTC Speculation Thread - Bitfinex Cloud Mining Contract

[lg1500]

i margin selling TH1 1.299 btc from 2014.10.01

i think i will make total profit something like 50 % - 17% swap cost = 33% with 10 % diff increese
3 % with 0 % diff increese

and lost if diff start going down

[1715133383]

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[1715133383]

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[1715133383]

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[1715133383]

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[nrd525]

When I first started shorting the investment, I figured it would go down slowly - at least at the 1.5-1.7% of its value that was being mined each day.

Now that the price has slightly increased over the past ten days - I think it's going down in a crash.  Probably 20%. Possibly 30%.  Each day that it doesn't go down only increases the severity of the upcoming crash.

When it crashes there will be people left holding the contract who will lose out a lot of money from 1) the 20+% loss in contract value and 2) swap rates will decline to 0.1% or less.

[nrd525]

I asked support about how they were issuing the contracts.  I got this response from Raphael, Bitfinex CTO:

Hello,

We issue the additional contracts by first, getting the hashing provider to
agree to lease us the additional hashing power, then we sell them in bulk
to a market maker at a mutually agreed price.  The market maker then
releases the contracts into the market by either selling them or lending
them, or alternatively, holding them and earning the block rewards.
Bitfinex has no interest in or control over the the order book.  The
announcement of commencement after the next mined block for the additional
contracts is merely to be establish a future (but unknown) delivery
date/time from our hashing provider to our market maker.  It also creates
transparency in the accounting of the block rewards.

Please remember that this is a beta test for us and that our issuance
practices will likely evolve over time.



--

[nrd525]

I'm wondering how to balance my position so that by shorting TH1 I am not altering my asset allocation in favor of USD or BTC.

My TH1 short is currently at a small loss.  But it should be in a profit soon as the contract's value is going to zero.  At the end of the TH1 life, any existing shorts will have a large BTC profit.  However to keep your short, you will have paid out a large amount of dividends and swap payments from your trading wallet.

The complication is that the dividends and swap payments can be paid out of USD or Bitcoin.  If you pay them out of Bitcoin, you aren't changing your asset allocation. But if you pay them out of USD then you are (as you will reap the profit in Bitcoin). 

The easy solution would be to only pay dividends and swap in Bitcoin.  However if you are shorting on the margin, you may want to back up the asset with USD as well to avoid a margin call.

It looks like I'm currently paying dividends in Bitcoin and swap in USD.   This is a decent system as 90% of my expected shorting cost is from dividends.  However it does mean that I am altering my asset allocation away from USD to BTC (by this 10% of swap payments - and also from my expected profits which are all in BTC).

...

If a long TH1 position receives their swap payments in USD, they are shifting their asset allocation from BTC to USD.

[superbit]

I'm wondering how to balance my position so that by shorting TH1 I am not altering my asset allocation in favor of USD or BTC.

My TH1 short is currently at a small loss.  But it should be in a profit soon as the contract's value is going to zero.  At the end of the TH1 life, any existing shorts will have a large BTC profit.  However to keep your short, you will have paid out a large amount of dividends and swap payments from your trading wallet.

The complication is that the dividends and swap payments can be paid out of USD or Bitcoin.  If you pay them out of Bitcoin, you aren't changing your asset allocation. But if you pay them out of USD then you are (as you will reap the profit in Bitcoin). 

The easy solution would be to only pay dividends and swap in Bitcoin.  However if you are shorting on the margin, you may want to back up the asset with USD as well to avoid a margin call.

It looks like I'm currently paying dividends in Bitcoin and swap in USD.   This is a decent system as 90% of my expected shorting cost is from dividends.  However it does mean that I am altering my asset allocation away from USD to BTC (by this 10% of swap payments - and also from my expected profits which are all in BTC).

...

If a long TH1 position receives their swap payments in USD, they are shifting their asset allocation from BTC to USD.

What wallet do the dividend payments come out of if shorting and how do I set it to USD or BTC?

[nrd525]

The payments come from the trading wallet.

The account settings has an option for whether to pay exchange fees in USD or BTC/LTC. But this is only for the 0.1% or 0.2% fee.  I haven't seen any setting for dividends or swap. 

I'm guessing you only have one currency in the wallet - then they take that. Otherwise it looks like dividends get paid in BTC, and swap in USD.

[lg1500]

i predicting flash dump for th1 for something like 30-50 %,, 1.30 --->0.65-1 btc,
just like from 2--->1 and just like everytime one cex.io

[nrd525]

Bid and Ask wall is interesting.  There is an unusual number of amounts of "10" on both sides.

Asks
1.32: 10
1.4: 10.1
1.48: 10
1.55: 10

Bids
1.266: 10.33
1.24: 10
1.23: 10
1.2: 10.1
1.19: 10.35

[deebosch]

When I first started shorting the investment, I figured it would go down slowly - at least at the 1.5-1.7% of its value that was being mined each day.

Now that the price has slightly increased over the past ten days - I think it's going down in a crash.  Probably 20%. Possibly 30%.  Each day that it doesn't go down only increases the severity of the upcoming crash.

When it crashes there will be people left holding the contract who will lose out a lot of money from 1) the 20+% loss in contract value and 2) swap rates will decline to 0.1% or less.

Where to get so many swaps to dump into all these paywalls? My bet is the dump will be near expiration and up to that point we will trade at a large premium...

[nrd525]

As we near the contract expiration, the risk of the flash crash increases.

The holders are chasing a 1.1-1.2% daily profit -- if the contract mines 0.014 BTC and doesn't lose value.  They cannot lend out the contract for fear that the crash would occur as most swaps are 30 days.  I'm guessing they aren't doing 2 day swaps because they have stop losses (which aren't showing up on the order book - I'd love confirmation that stop losses are hidden, does anyone know?).

So a 1.1%-1.2% profit vs a loss of 20% in a flash crash might seem like good odds. The odds will be especially bad if we get within 30 days of expiration.  Or if the flash crash is 50%.

Unless they are getting the shares at a heavy discount (1.1 BTC or less), the market maker it taking a huge risk as they are taking at least 2 days to sell the newly issued shares.   So at some point they'll want to market sell them. 

[deebosch]

I'd love confirmation that stop losses are hidden, does anyone know?

Stoplosses can not be seen because they are not actual orders, they are conditions when the system will create orders.

[nrd525]

GHS price down 10% in the past 24 hours.  Will it affect TH1?

https://bitcoinwisdom.com/markets/cexio/ghsbtc

[lg1500]

this th1 marked is f****d, they making walls from 1.2-1.3 btc/th1, and people cant sell into it, no margin for that,

1.2-1.3 btc/th1 is too much high and only for speculation, not for mining.
i hope on 15.12.2014 my all sell position will be closed with 0.00btc/th1 buy orders, i dont want paying high swap after 15.12.2014 just becouse manipulation when i cant close my positions for 0.00 btc/th1 becouse they manipulating prize high

[Timetwister]

this th1 marked is f****d, they making walls from 1.2-1.3 btc/th1, and people cant sell into it, no margin for that,

1.2-1.3 btc/th1 is too much high and only for speculation, not for mining.
i hope on 15.12.2014 my all sell position will be closed with 0.00btc/th1 buy orders, i dont want paying high swap after 15.12.2014 just becouse manipulation when i cant close my positions for 0.00 btc/th1 becouse they manipulating prize high

The only reason I'm not heavily shorting it is because I'm also worried about short squeezes. I wish there were put options or some other way to short it with limited losses.

[twentyseventy]

this th1 marked is f****d, they making walls from 1.2-1.3 btc/th1, and people cant sell into it, no margin for that,

1.2-1.3 btc/th1 is too much high and only for speculation, not for mining.
i hope on 15.12.2014 my all sell position will be closed with 0.00btc/th1 buy orders, i dont want paying high swap after 15.12.2014 just becouse manipulation when i cant close my positions for 0.00 btc/th1 becouse they manipulating prize high

The only reason I'm not heavily shorting it is because I'm also worried about short squeezes. I wish there were put options or some other way to short it with limited losses.

Yeah, between the lack of liquidity, the relatively high daily cost of borrowing, and this possibility, it's a risky place to be right now. It's keeping me out of it.

[nrd525]

Hash rate is spiking.  Bitbet on > 41 million difficulty by November has two bets that say "yes" (reversing the no trend).

Next difficulty adjustment might be 3.5% (bitcoinwisdom currently predicts 3.7%). For a while it looked like 0%.

Th1 market price is in a very slow decline.  Oct 1 was around 1.285 and now it is around 1.27.  It should be falling by around 1.7%/day.  So the artificial premium continues to grow.


Who is shipping miners these days?

[nrd525]

Sept 27 - Oct 7th
Expected mining (after the 3% fee): 0.155
Actual mining: 0.187  

This might be off by several percent, but I still think we've been having some good luck in our mining performance.  However, it could just be randomness as we've mined as many as 5 blocks in a day.  With this level of variance I'd expect the occasional day where we mine 0 blocks.

That said - according to probability theory you don't expect your luck to even out.

[deebosch]

Me thinks its not luck, its pure fraud. Me thinks there is no 3,500 THs pool that mines these blocks, if you check blocks on blockchain they are mined by different pools. How are they selected to be included in TH1 contract god only knows. Marketmaker is holding most contracts, not selling them but providing swaps, so he is interested in more "luck", later when he sells them "luck" will be gone )))

[nrd525]

Zero mined blocks so far today. Price spikes to 1.32 BTC.


I'm worried. There is a chance that someone is manipulating the price of the TH1 contract.

1. Buy most of the contracts. Establish a floor price of 1.27.  Do not let the floor price fall below 1.27.

2. Make mining dividends - same as usual.

3. Make swap interest. But instead of getting declining swap payments (as the value of the contract shrinks), you actually get increasing swap payments as the contract's premium over its mining worth increases. For instance, on the last day you will be able to make as much as 1.26 BTC by lending out the contract to a shorter.  Now ultimately you will not be able to lend out all of your contracts, but so long as you lend out most of them - and so long as there is strong competition between shorters - you should be able to manipulate the market and make a lot of profit.

There is unlimited (or near unlimited) demand to short a contract that is over-valued. By contrast the supply of these contracts is limited.

There is already evidence that this plan works. For instance, until I thought of this - I was interested in investing increasing amounts of money into shorting TH1 - because it looks (on paper) that I stand to make increasing profits.

Do you see any flaws in this reasoning?

Is there any other logical reason for the price holding at 1.27? If the contract price declines at 1/77th per day and you have conservative estimates: difficulty increases by 0% and the swap rate is 0.7%/day - a TH1 contract holder should only break even according to my spreadsheet.

If this is true, a possible remedy is to constantly increase the supply of the contract.  Even if the manipulator has very deep pockets, the people shorting the contract won't necessarily have them - AND they'll be reluctant to short the contract if manipulation is possible. So the other solution is to educate shorters about this possibility.


If this is true, it is also possible that other people will buy the TH1 with the intention of making a lot of mining dividends and then reselling the contract at 1.27.  This will drive the price of TH1 up. This is fine for the manipulator as they are able to increase their income from swap interest or choose to liquidate part or all of their position.

Is there anyway this could be solved by allowing naked shorting or contracts for difference?

[nrd525]

What would be even worse is if the market maker was also the market manipulator and using their market maker position to restrict supply so that they can maintain control of the market.