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Comment by cperciva | Hacker News Reader

Post-script: Is this good news for Bitcoin? Oh this is great news for Bitcoin. If you don't believe Bitfinex's $600 million in liabilities are worth a copper shilling, the only option for getting your value out of Bitfinex is to swap your liability for Bitcoin, which drives up the price of Bitcoin at the margin.

Correct me if I'm wrong here, but this seems to be an argument for BTC/USD going up on Bitfinex -- but not necessarily elsewhere. Is the market failing to price in the fact that "USD on account at Bitfinex" has a value which is not identical to that of "USD in a regulated US bank account"?

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Oh this is great news for Bitcoin

If the price of Bitcoin has been inflated by 600 million USD that doesn't really exist, then when this unwinds it will be bad news for Bitcoin.

that's about 0.6% of the market cap of bitcoin

And a whole lot of trust.

You can't compare money and market cap directly. Millions of dollars can move the market cap by billions. It's because the books on exchanges are relatively thin.

Price is set by marginal transactions, not the amount of money converted over time.

"market cap" is a very bad representation of the overall value which is impossible to actually estimate. try selling 600 million worth of btc and see how that cap changes.

Dump large amounts of ANY asset and it will crash. It's only crypto that gets accused of having a "fake" market cap though.

It's only crypto that uses the term "market cap" to mean "outstanding crypto-tokens * price". That isn't what the term means in conventional finance. It's normally applied to shares.

5 BILLION dollars worth of bitcoins are sold every day. The trading volume is higher and the orderbooks are deeper than you think...

Google "Wash Trading"

Doesn't work in crypto markets. Taker fees are typically > 0.20%, with the notable exception of BitMex.

Those who are downvoting the parent, please explain why? He is correct. Is the assumption here that the exchanges themselves are wash trading and not charging themselves fees? Seems possible. But otherwise wash trading is very expensive due to the maker/taker fees.

There is plenty of evidence of wash trading occurring on Bitfinex and other exchanges - there are also many accusations that the exchanges themselves wash trade, to pump up their own volumes. They don't need to pay their own fees!

Taker fees are 0.1-0.2% on Bitfinex. Wash trading would be too expensive.

Where is the evidence the exchange itself is doing it?

Korean exchanges are 0 fee.

Koreans account only for ~7% of the 5 billion USD/day.

Taker fees are significantly discounted for higher volume traders, because they bring smaller traders to an exchange. I know two mid-sized whales who have almost 0% rate as long as they trade certain number of BTC a month.

Where are you getting this number from?

24h trading volume: https://coinmarketcap.com/currencies/bitcoin/#markets

This includes a lot of crypto-crypto volume. Just in the top ten, there's $168m Bitcoin Gold, $145m of Bitcoin Cash, $95m of something called "PowerLedger" that I'm hearing of now for the first time, and $84m of Neo.

Is this real trading activity, or is it people discovering that there's no feasible way to trade USD directly for the meme coin du jour?

Depends on the way it unwinds. If it's through selling BTC to cover Tether redemptions, sure, that'd be bad for cryptocurrency prices. I have a feeling that it'll unwind like Mt. Gox, though - people who accepted Tethers or put deposits into Bitfinex wind up holding the bag when the fake money goes "poof".

You’re talking about two different markets. A Tether-USD is not the same as a USD. If anything, the fact that the irredeemable USDT even has value is a sign of the insanity playing out in the cryptocurrency market. A token worth 1 dollar but not really worth 1 dollar makes no sense at all.

Yep, you'd expect to eventually see a sustained divergence to price in an elevated level of counterparty risk (like we saw back at Mt. Gox). In the short run, though, arbitrage bots gonna arbitrage.

In the short run, though, arbitrage bots gonna arbitrage.

Don't people who run arbitrage bots usually understand concepts like counterparty risk? Do they not realize that by moving money into Bitfinex they're potentially acquiring a large amount of assets which will end up being devalued?

It depends on the experience level of people running them. Cryptocurrencies have a good deal of enthusiasts YOLO-ing on them, as far as I can tell.

Can confirm: I created an open source TA tool[1] for crypto markets that can function as a trading bot. If only I got a penny every time someone emailed me saying they are total beginners, looking for help installing it and hooking it up to their $xx,xxx account.

[0] https://gekko.wizb.it/

interesting branding :)

It might be easier to commit money to an arbitrage bot than to understand the risks involved.

Poloniex trades USDT for quite a few ccs

https://poloniex.com/exchange#usdt_str

Trust in exchanges is what keeps Bitcoin prices up. This is bad for Bitcoin and all digital assets.

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