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Bitcoin Exchange Had Too Many Bitcoins

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Re: Bitcoin Exchange Had Too Many Bitcoins

#41

Post by andy_wrote »

panarky wrote: post #33
jstanley wrote: post #4

Great writeup. Almost anything written by Matt Levine is worth reading. This is a concise and accurate description of the fun that occurred with Bitfinex's handling of the BCH fork. At least, it's fun if you weren't involved. If you naively held BTC on Bitfinex and were hoping to receive an equal amount of BCH you probably didn't think it was fun. If you carefully read Bitfinex's statements and decided to take advant…

Matt sums it up well in a footnote: Imagine if I announced tomorrow that I had created a new blockchain, called Bitcoin Matt, and that everyone who owned a BTC today will tomorrow own both a BTC and a BCM. Fine, great, you all own BCMs, congratulations. But also anyone short a BTC today will be short a BCM tomorrow, and will be forced to go buy in those BCM shorts. Even with no economic support for BCM -- with nobody…

I'm not knowledgeable about BTC; this is the part that confused me. If you short a stock, and it distributes dividends or stock or ponies, as Levine says, you have to return that to the borrower. I'm not sure if this is law or just the overwhelming common practice of the markets, but either way we agree on this. You _could_ devise a short agreement where you say "no distributions are owed," but that's not the standard that the big securities-lending market has settled on and I'm not sure why people would demand that instead.

If on the other hand you short a stock, and a third party says "Hey, I'm going to give everyone who owns this stock on this date a bag of cash!" I don't think that shorts would be obligated to cover that. This is, I guess, like what happened with Dole, except that there the third party was a judge, who has the force of law at his back. And this strikes me as similar to what happened to BTC/BCH, except without said force of law. Wherein lies the ability of someone to compel a BTC short to now owe BCH too? What exactly is it that shorts have agreed upon to return to the longs that they borrowed from, and if it's just BTC, isn't returning a BTC enough? If not, what stops someone else from making their own fork and compelling shorts to come up with that too?

Re: Bitcoin Exchange Had Too Many Bitcoins

#42

Post by [deleted] »

jstanley wrote: post #4

Great writeup. Almost anything written by Matt Levine is worth reading. This is a concise and accurate description of the fun that occurred with Bitfinex's handling of the BCH fork. At least, it's fun if you weren't involved. If you naively held BTC on Bitfinex and were hoping to receive an equal amount of BCH you probably didn't think it was fun. If you carefully read Bitfinex's statements and decided to take advant…

[deleted]

Re: Bitcoin Exchange Had Too Many Bitcoins

#43

Post by tpallarino »

smaili wrote: post #26

Here's what people tried to pull off: 1. Set up an account, borrow one bitcoin, sell it short, collect $2,700. 2. Set up another account, buy a bitcoin, spend $2,700. 3. When the fork happens, your long account ends up with +1 BTC and +0.8 BCH. 4. Your short account ends up with -1 BTC and -0 BCH (because Bitfinex doesn't require you to come up with the BCH). 5. Net, you have $0, 0 BTC and 0.8 BCH. 6. The 0.8 BCH wer…

Disclosure: Bitfinex robbed me of BCH according to the terms of the agreement, which was not amended until after the fact.

The money wasn't totally free. There was a huge opportunity cost to holding BTC at that time, and even having any in the margin wallet was a huge liability as opposed to funding your margin account with altcoins. Any serious trader knew that alts would rise immediately following the fork and Bitcoin would drop.

And regardless of whether it was free, their terms explicitly stated that those with a BTC balance in their wallets would receive BCH [1]. They did not issue a follow up post clarifying that hedging was strictly not allowed and thus robbed people. After how they handled both this and their hack, I urge/beg people not to use this exchange.

[1] https://www.bitfinex.com/posts/212

Re: Bitcoin Exchange Had Too Many Bitcoins

#47

Post by thefalcon »

vkou wrote: post #38
thefalcon wrote: post #15

Earlier quoted context omitted.

My point is that there is no driver for the price to crash. There will not suddenly be a surprise supply of BCH found that will flood the market. Everyone knows that there is 1 BCH for every BTC out there, and that almost none of that is currently able to be exchanged on a market. That includes every single person who is driving up the price of BCH by purchasing it in the limited markets where it is available.

People trading BTC for USD seem to think otherwise. The BCH fork had no serious impact on the value of BTC. Holders of BTC are not confident that BCH will be successful. Yet, if we were to take BCH's $400/coin at face value, then splitting BTC into BCH just created $340 of value, per coin in existence. If I gave everyone who currently had a US dollar a 'Vkou-dollar', would I have created even a penny of value? What i…

Having Big Blockers off on their own chain instead of causing headaches for the Bitcoin legacy chain is probably increases the value of BTC by about 15%, so the math works out. (I'm being a little flippant here, but on a serious note we have no idea how the value of BTC was affected because 15% daily swings aren't something anyone even bats an eye at anymore.)

Re: Bitcoin Exchange Had Too Many Bitcoins

#48

Post by tpallarino »

panarky wrote: post #33
jstanley wrote: post #4

Great writeup. Almost anything written by Matt Levine is worth reading. This is a concise and accurate description of the fun that occurred with Bitfinex's handling of the BCH fork. At least, it's fun if you weren't involved. If you naively held BTC on Bitfinex and were hoping to receive an equal amount of BCH you probably didn't think it was fun. If you carefully read Bitfinex's statements and decided to take advant…

Matt sums it up well in a footnote: Imagine if I announced tomorrow that I had created a new blockchain, called Bitcoin Matt, and that everyone who owned a BTC today will tomorrow own both a BTC and a BCM. Fine, great, you all own BCMs, congratulations. But also anyone short a BTC today will be short a BCM tomorrow, and will be forced to go buy in those BCM shorts. Even with no economic support for BCM -- with nobody…

Except your clone doesn't have miner support, community support, and get listed by major exchanges. I hate that people are acting like anyone can just go and make a fork for free money.

Re: Bitcoin Exchange Had Too Many Bitcoins

#49

Post by tpallarino »

cwkoss wrote: post #16

Bit tangential, but I read an interesting theory this morning: Because there is greatly reduced liquidity of BCH (most exchanges don't support, hard/slow to deposit into exchanges that do), supply of BCH is artificially limited at the moment. Proponents of BCH can trade their BTC for BCH at a rate greater than they believe it is worth to easily pump the value and 'market cap' (most market cap stats have no measure of…

Yes. Price and market cap mean nothing when there is not sufficient liquidity. There was literally a 60% price spread between exchanges yesterday because arbitraging is incredibly difficult/impossible.

Re: Bitcoin Exchange Had Too Many Bitcoins

#50

Post by tpallarino »

notlikethis1994 wrote: post #31

Yeah if you were paying attention to the short vs long interest for BTC on Bitfinex right before the hard fork, BTC shorts went up like crazy and everyone thought ppl were hyper bearish on BCH. It was actually because ppl were pulling this funny business to get free BCH from Bitfinex.

Hedging against a clearly inflated asset is "funny business"?
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