Quote from: PirateHatForTea on June 26, 2014, 06:05:11 AM

Quote from: urwhatuknow on June 25, 2014, 08:01:21 AM

Thanks for the wise analysis.
What you write makes a lot of sense.
For the sake of clarity: on February 10th transactions were not cancelled because Bitfinex run out of funds on Bitstamp, but because a smart ass found out a way to artificially push the ticker price to very high levels ( over 10,000 usd per btc) and this caused some people to take leveraged positions that should never have occurred.
As this erratic behavior was due to a technical problem and not to a normal market condition we decided to revert the transactions.

This is common practice also in major markets, such as the NYSE or the NASDAQ.

You can find more details about it if you go back to that date on this thread.

Giancarlo, I went back and checked, and the crash I had in mind did occur on Feb 10th, and there was no mention at the time of it being caused by a bug with the ticker price. Your description of the ticker price bug corresponds much more closely with the episode on Feb 6th, where the ticker price was stuck super high and so everyone has huge 'profits' and tradeable balances. See this screenshot for example:

Feb 10th was when Gox made their bullshit transaction malleability announcement. There was a huge long squeeze at one point which drove the price down to 100. Afterwards, Raphael said:

Quote from: unclescrooge on February 10, 2014, 07:00:34 PM

Hey everyone,

I guess it'll be my last message here for today, sorry I can't answer to every individuals requests. Requests made to our email support will be treated in the next few days, including those who lost money because of our trading halt.

So my point will be these: the liquidations that happened and took the price to 100 were less than 25% of the total leveraged long positions. A lot of traders also have collaterals in BTC. Which means that nor Bitfinex nor Bitstamp had enough depth to absorb the cascading liquidations that would have occured and drag the price to near 0 as ALL long would have eventually be liquidated.

So yes, halting the trading engine saved 15+ millions of dollars. Yes, we will be fair to traders that got caught in a short during these time (again, on support email, not in the thread). If you think we should have let liquidity providers lose everything and close the margin trading for good, I understand. Maybe we halted the trading engine a bit too long. But we do not regret this decision and think this was the fairest decision to take.

One last thing: we are not impacted by the problem of Bitcoin withdrawals MtGox have. When a withdrawal seems to have failed, we use the bitcoin address to do a manual double check. So far this is not an issue.

Thank you all for your comprehension and have a good day
Raphael

And earlier that day, you yourself had said that the reason for the flash crash was running out of funds on Bitstamp.

Quote from: urwhatuknow on February 10, 2014, 04:05:50 PM

Guys

before you start any post please think about the following:

1) Bitfinex is not an exchange. It is a complex trading platform and this is why it made it to place itself among the top 4 BTC/USD platforms in the world for volume in 15 months.

2) Bitfinex also allows trading on Bitstamp via metatrading.
This lowers volatility during market crashes, but it is subject to keeping ALWAYS an amount of BTC and of cash on their platform.
There must be a balance between efficiency and third party related risk ( Gox is teaching us that trading platforms can actually have problems).
Therefore we cannot keep too much money or too many coins on Bitstamp.
When I say too many I mean more than a certain number of million dollars equivalent (either cash or BTC x price).

3) Forced liquidations can trigger cascading prices and also a rapid consumptions of coins on Bitstamp.
It takes time to replenish coins, this is not our fault, it is related to how Bitcoins are transferred.
Today for example more than 10k BTC were sold in a matter of minutes.

4) When we don't have coins on BSTP anymore (that is what happened today, we run out of coins on Bitstamp, we had a lot of them but they were all sold within seconds) we just rely on our orderbook and people tend to panic when the price crashes, therefore thinning even more the bid side of the book.

5) Whenever we see any market abnormalities we halt trading.
We don't make money when we halt trading, we just try to cover the funds given by liquidity providers.
(Today we resumed trading as soon as other coins landed on our Bitstamp account)

6) Any trader with more than 3 neurons should understand why we try to protect liquidity providers.
They are the reason why traders can take leverage.
No liquidity providers, no swap, no margin trading.
Every trader should think about this before he starts considering the liquidity provider as a blood sucker.
The liquidity provider is the one that makes it possible, and therefore he should be protected for the sake of the leverage, not because we think they are more beautiful than the traders.

We are not perfect.
We will keep having problems, this is part of the game called "being in business".
But please try to understand each of our moves is made for the sake of our community.
Letting a bunch of traders walk with their opportunistic strategy ( placing a buying order at 100 can possibly be defined differently?) and by doing this hurt the real funders of our platform will never be an option for us.

I hope that this helps

Have a good day and sorry if I lost it for a couple of posts, I apologize about it.

Giancarlo
Bitfinex Team

So actually it looks like my characterization of the flash crash on Feb 10 was correct. Feb 6th was the ticker bug.

you are right and I was wrong, I mistook the 2 episodes.
I apologize for my misrepresentation.
February hasn't been a good month indeed.

Thanks a lot and have a good day

Giancarlo
Bitfinex Team