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Offline xeroc

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« Last Edit: August 16, 2014, 04:58:53 PM by xeroc »
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Offline Riverhead

Re: Bitcoin price flash crashes to $451 on BitFinex due to margin calls
« Reply #1 on: August 16, 2014, 05:10:37 PM »
Isn't this why we're doing all this testing to make sure we don't suffer the same fate? Also, this is good news for me because I can get some cheap BTC and buy more BTSX :D

Offline tonyk

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Re: Bitcoin price flash crashes to $451 on BitFinex due to margin calls
« Reply #2 on: August 16, 2014, 05:25:53 PM »
Not real precise explanation on their site, and I have never tried them in practice:

'Funds in this wallet are to cover for eventual losses that may occur. When the losses cover almost all your wallet balances, you may get a margin call and have your position force-closed to avoid further 'losses

What % is 'almost all your wallet balances'?
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline xeroc

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Re: Bitcoin price flash crashes to $451 on BitFinex due to margin calls
« Reply #3 on: August 16, 2014, 06:44:28 PM »
Also .. thats my understanding ... in bitsharesX you can go long by buying from someone how is short .. but then you own that asset (let it be bitUSD)
so the guy longing bitUSD will never be margin called ... only the guy that went short ..
so if the price is now going down a lot and the guy shorting gets margin called he has to buy bitUSD (or give up his colleteral)

So there will not be a flashcrash because of a margin call.. beause shorters are called .. not longers .. am I correct?
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Offline Empirical1

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Re: Bitcoin price flash crashes to $451 on BitFinex due to margin calls
« Reply #4 on: August 16, 2014, 07:43:28 PM »
Also .. thats my understanding ... in bitsharesX you can go long by buying from someone how is short .. but then you own that asset (let it be bitUSD)
so the guy longing bitUSD will never be margin called ... only the guy that went short ..
so if the price is now going down a lot and the guy shorting gets margin called he has to buy bitUSD (or give up his colleteral)

So there will not be a flashcrash because of a margin call.. beause shorters are called .. not longers .. am I correct?

As I understand it at the moment, BTSX will be backing up the positions when the shorts do not have enough collateral. So there could be a negative feedback loop if a BTSX flash-crash starts developing but BM thinks it's extremely unlikely.

So the "worst case" is that all bids cancel at once and the new "high bid" is 25% of the old high bid (75% fall instantly).   All margin positions get called at once and 66% of the USD is purchased back by the collateral.  The remaining 33% of the USD is purchased back by issuing new shares.   So if you started with 30% of the cap represented by USD then you are looking at a 10% dilution in a "worst case" 75% crash.    In practice crashes will be slower, many of the positions will be covered without any dilution and less than 30% of the cap will be represented by USD.   So I think what we are looking at here is a whole lot of fear about a "bad event" that you can "hedge against" and is "unlikely" to happen where the potential losses from "dilution" are less than the average daily volatility of Bitcoin.

It's probably the best solution and it's hard to be critical when I don't really understand it enough or have a better solution but at the moment it seems like...

BTSX is the Federal Reserve and BitUSD is 'Too Big to Fail'

Offline xeroc

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Re: Bitcoin price flash crashes to $451 on BitFinex due to margin calls
« Reply #5 on: August 16, 2014, 08:18:31 PM »
BTSX is the Federal Reserve and BitUSD is 'Too Big to Fail'
we are not there yet ... :D
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