Hacker News new | ask | show | jobs
by mattodell 4326 days ago
I am the author of this post. Let me know if you have any questions.

Essentially what happened is that Bitcoin Exchange Bitfinex allows you to trade with leverage. There were approximately $28M USD worth of leveraged orders and they were margin called as the price fell. This created a feedback loop that resulted in the flash crash.
4 comments
diminoten 4326 days ago
So just to make sure I understand, when BitFinex offers leverage trading, are they betting that the price of Bitcoin won't go up as high as the folks asking for leverage think it'll go?

If not, why do people offer leveraged trading? Just for the interest? A fee?

link
Guvante 4326 days ago
> why do people offer leveraged trading

Bitfenix doesn't provide the leverage, they use other trades to provide it.

Those traders get hourly interest for participating.

If you have a balance and you don't want to use it, loaning it out can make some money you wouldn't otherwise get.

It is similar to loans but on a shorter window.

link
tedunangst 4326 days ago
A broker offering leverage is earning interest nearly risk free. They retain control of the collateral and can (as observed) force close the position. Only in really extreme situations is their money at risk.
link
mattodell 4326 days ago
Correct, but it is actually other users offering the leverage. Bitfinex created a P2P market for it. If you offer your USD as leverage then you receive interest.
link
oillio 4326 days ago
You said there was $28M in leverage before the crash. Do you know what the leverage is currently?
link
runeks 4326 days ago
It fell from $29M to $24M: http://www.bfxdata.com/swaphistory/totals.php

But that drop doesn't happen at the same time as the big drop on Bitfinex, as far as I can see. I assume all times are UTC, unless otherwise stated.

The drop in total sum of USD swaps fell from 2014-08-14T07:30 to 2014-08-14T08:30, but the drop on Bitfinex happened around 2014-08-14T10:00

link
mattodell 4326 days ago
The thing is that Bitfinex only reports their leveraged volume every hour so you can't really pinpoint the margin calls.

Especially since bfxdata is a third party site.

link
mattodell 4326 days ago
If you go to BFXdata.com you can see historical graphs for it. Bitfinex reports their leveraged volume every hour.

Here's a screenshot of what you are looking for: https://i.imgur.com/SvSFYMK.png

edit1: I also added that graph to the post.

link
npp5048 4326 days ago
Just a heads up, I was trying to figure out what graphing/charting library you're using and noticed that your <html> tag closes immediately after opening it, rendering the rest of your mark-up invalid.

All that aside, Good article, interesting read.

link
Keyframe 4326 days ago
A stop hunt?
link