BitMEX’s “Hookers and Blow” Insurance Fund

BACKGROUND

To those unaware or new to crypto it might come to a shock that BitMEX up until last summer vehemently denounced the use of high leverage in BTC trading products as well as the socialized loss system they came to finally implement and embrace — they weren’t just skeptical of the system but had VERY strong feelings and arrogance that they had a full understanding of what would be ultimately successful in this market — take a look at some of the outrageous posts for yourself from BitMEX CTO Samuel Reed (/u/STRML) on Reddit :

 

BitmexPivot1To be fair to BitMEX after months of next to no volume and waving their hands around like some desperate fat chick hoping to get a pity fuck from someone rubbed the wrong way by OKCoin they finally capitulated and embraced the power of the degenerate gambler as their PRIMARY customer… the sacrosanct BitMEX was no more as 100x birthed on October 12 2015

Notice the rise in turnover at 100x inception as they became a more attractive fat chick:

photo444920610451204802

THE ISSUE

BitMEX has posted some Settlement and DPE data (Dynamic Profit Equalization) ie their way of rebranding the stigma associated with “socialized losses” since June 1st 2015 and can be found HERE. What has been missing up until recently is the Insurance Fund data similar to how OKCoin displays it HERE. The Insurance fund is a result of the salvaged BTC of a position that goes into forced liquidation — so for example:

1 BTC at 100x fixed margin leverage gets liquidated when only 50% or 0.5 BTC remains as collateral, once in forced liquidation the prevalent market conditions will determine how much if any of the remaining 0.5 btc is recovered and placed in the Insurance fund.

On WCHangout a little over a year ago CEO Arthur Hayes put forward the vision of BitMEX in the following:

“We hope to demonstrate through a track record of honesty and transparency in doing what we are saying we are going to do….” -Arthur Hayes, CEO of BitMEX

Unfortunately, the actions and follow through to bring about more transparency after very clearly being made aware of it has not been manifested:

bitmextransparency

in fact they aren’t even near the level of transparency of industry leading OKCoin, an exchange they criticize and despise so much that their troll box will convert “OKCoin” to “The Woodchipper” when you message them in chat. Let’s take a quick look comparison of OKCoin VS BitMEX as far as transparency goes:

OKCoinVSBitMEXAlso I should add that I am betting most are unaware that the BitMEX Insurance fund is pooled from all of BitMEX’s contracts which means ETH, FACT, and the A50 contract both contribute and draw from the same Insurance fund that all the BTC contracts (I just refuse to say XBT) are apart of. The documentation on the site is almost completely useless in articulating this point — I was however able to get a cagey answer from Sam on the trollbox. I don’t have a particular issue with this if it is properly disclosed and in the documentation but some users that ONLY trade BTC may find that they are unknowningly subsidizing these other futures products — we don’t have the data but I am fairly confident that these other alt products draw more BTC from the fund then they contribute. This pooled fund gives BitMEX the ability to crank up the leverage on these alt products as optically they can report 0% losses even though there are actually system losses but they don’t disclose them because the Fund is covering them (mostly from BTC traders).

tldr: what if OKCoin used the BTC insurance fund to cover losses on LTC without telling you ? 

This is not exactly what I would expect to see from a chest thumping “professional” exchange claiming to be the “Goldman Sachs of Bitcoin”

 

BitMEX aims to be the Goldman Sachs of Bitcoinrerere
megalomanic much ? 

 

 

Approximately 4 weeks ago we had Arthur and Wally of BitMEX on WCHangout and I spoke of the dangers and assumptions that come from not being transparent with the data of this fund. /u/btcdrak also requested that ALL data both current and historical be made available and both Arthur and Wally agreed and this was currently on their road map.

Essentially the danger that comes with selective transparency (or lack of transparency) is that it inevitably leads to doubt, doubt breeds skepticism as to why this information is not being provided or withheld, and then when pressed on the issue if the data isn’t then made available bitcoiners will begin to fill in the blanks with their own ideas. From a PR perspective as an exchange in the space the last thing you want is bitcoiners playing fill in the blank as it quickly goes to “omfg GOX!!” — and although that might be extreme when money is at risk the users have the right to bring those accusations even though they might be ridiculous in nature…

 

streetparty“Colombian Street Party”

WE THE COMMUNITY

As a community we really have very little legal recourse against exchanges misbehaving and operating in the wild west culture that is bitcoin trading, that doesn’t mean we are powerless though and although they may taunt us with their lawless domiciles

ArthurSeychelles

It is up to us as the community to demand transparency from those we engage in business with and more so to hold them accountable to their OWN standards that THEY first set out establishing like Sam on trust and transparency transcribed from the WCHangout:

“We believe that we are being…  well we ARE being fully transparent to what the rules are, how the market operates and how it is cleared… in a socialized losses environment not only are you accepting some variable amount of loss depending on the volatility, how liquidations were handled and how well they were handled  … you are trusting them to be honest with what those numbers are in the first place there in no guarantee of that at all basically — they say they lost x amount and they need to claw back from those accounts — I am not saying anyone is lying I have no idea but blind trust — you have no insights into what actually happened you have no insights what their books looks like so you have to trust them much more than you have to trust us because you are trusting them to be honest with those end of the month numbers” -Samuel Reed, CTO of BitMEX

The point I am trying to make is that these aren’t transparency standards that I have concocted but words that have quite literally come out of Sam’s own mouth that I am attempting to hold BitMEX to — and I find that more than fair

Although according to Arthur we are all children

-Bitcoiners are a bunch of children and they get treated that way    Bitmex CEO Arthur Hayes   Album on Imgurevveev

but that doesn’t mean they should ignore our requests or in some paternalistic way know what is “best for us” when we demand transparency, after all we are still their customers and this is the business THEY choose to be in.

I also want to clarify that unlike the conspiracy theorists I DON’T believe BitMEX is insolvent/scamming/etc, quite the contrary as I believe they are making decent money now (or WERE), also they aren’t overt crooks but they are surely being slippery & slimy on some profound questions when it comes to transparency and their claims of being “fully transparent”…

“You, sir, are neither a businessman nor a priest”hvC9KUx

 

 

~~Faith can move mountains, Faith can move markets~~

 

 

 

 

 

 

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BitMEX’s “Hookers and Blow” Insurance Fund

Degenerate Gambler Special: Featuring NEWEST CFD Bucket Shop

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You can enter a position and add in your STOP LOSS and TAKE PROFIT upon entry.

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MetaTrader4 Platform Basics

I could easily write an entire blog post about MT4 but seeing that is widely used program I suggest you google around for some of the more advanced functionality aspects. Once logged on it can seem a bit overwhelming you will see all the pair listed on the side and at the bottom will be the 3 main tabs you will be using regularly — that is of your balance, P&L, current position and pending orders.

**If this looks slightly different than the one from SimpleFX it is because it is a different broker using MT4 but the mechanics are the same**

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**You may also notice that the current currency is BIT versus BTC — they are in the process of changing this as we speak**

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IMO the app actually has better charts then the desktop client and will grow on you quickly

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Conclusion

I am very impressed with SimpleFX and their platform — their web-based interface is sleek, intuitive and powerful — I have yet to see it lag at all — just beware it does log you out every couple of hours if suddenly you notice it not refreshing.

You will have to go case by case to determine spreads versus some other platforms but EURUSD seemed to be with in reason — usually 10 pips and it the spread is listed right on your order ticket which is nice to see that kind of transparency before you execute and feel like you just got ass raped

Clearly the standout of this platform over the current standard in 1Broker is the 1:500 leverage and many more instrument pairs to trade. Combine that with a high power web-based platform as well as MT4 support both desktop and mobile and this is a heavy hitter coming into the FX space for us “mostly crypto” traders.

Also did I mention there is a Trollbox ? lol. Happy Trading.

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Bitcoin’s Virginity, Benjamin’s Big Short & the DRW Connection

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Bitcoin — The Virgin Sacrifice 

Up until now the Bitcoin markets & trading-sphere have largely been an outworld where legacy HFT firms could not dare enter — they were instead left sidelined to peer through the murky ether at an untapped virgin goddess with her large bid/ask spreads and fragmentation. These aligning characteristics has caused a growing restlessness and salivating for the potential profits of “tapping that”.

Enter the recent AlphaPoint integration into BitFinex’s backend and one of the final pieces for institutional order flow to enter the Bitcoin trading ecosystem is near complete — although this may not be in the form of hopium bitcoin believers perceive as “Wall Street getting in” — more on that later

Here is the latest release:

http://globenewswire.com/news-release/2015/04/28/729278/0/en/Bitfinex-Completes-AlphaPoint-Integration.html

TLDR: The most significant point I took away from this is the ability to interact with BFX through the FIX protocol — “FIX has become the de facto messaging standard for pre-trade and trade communication in the global equity markets, and is expanding into the post-trade space to support straight through as well as continuing to expand into FX, fixed income and derivatives markets.” FIX is essentially the backbone of modern financial interactions between broker-dealer and hedge fund communications to the exchanges. OKCoin has had FIX enabled for some time now and it was announced on our very own Google Hangout that a EURO based hedge fund was utilizing their platform — enter the well known 20x OKC “woodchipper” and I will allow you to draw your own conclusions on that matter.
(http://www.reddit.com/r/Bitcoin/comments/2m04s4/okcoin_rep_says_a_new_hedge_fund_controlling_3/)

It has also become public that the specific HFT firms DRW Trading Group and Citadel have taken steps to enter the crypto space(http://www.wsj.com/articles/big-investor-involvement-could-boost-bitcoin-1428259814). This is not only apparent in DRW’s presence at the latest Inside Bitcoins NYC conference speaking privately to both OKCoin and BFX but also their large winning block of the DPR coins at the last auction via their subsidiary Cumberland Mining — all signs pointing toward a large and active presence for DRW in the BTC markets.

Benjamin’s Big Short & the DRW Connection

Another page out of the BTC trading folklore is the larger than life character known by the handle Benjamin(http://tradingview.com/u/Benjamin%20/) on TradingView and sporting his Uncle Ben’s Rice avatar —  many await his appearance like a Lock Ness Monster sighting in TradingView Chat or TeamSpeak. In early January his 3 person team borrowed 50,000 BTC to short bitcoin sub $200 — his actual target was $135 — he announced on TeamSpeak that his team was originally planning on borrowing these coins from a chinese connection but ended up going through a London hedge fund all pointing toward DRW Trading Group’s London office.

Many of the myoptic minded bitcoiners quibbled that why would a hedge fund allow someone to borrow coins for the purpose of shorting — only to return them with significantly less value at a future date. Regardless if DRW was hedging off the risk before hand they would be charging a fair amount of interest fees on that amount of borrowed coins but the MOST interesting “coincidence” was the backdrop of the looming DPR auction. An auction in which Cumberland Mining scooped up an additional 27,000 BTC adding to their inventory and reducing their cost basis. The question remains if they are still looking to acquire in the next auction and I will stop short of speculating whether they are.

The Changing Retail Trader Landscape

do not want to go into the minutia of the Auction details itself and the Cumberland Mining mystery as I think the Coindesk article(http://www.coindesk.com/secretive-mining-firm-revealed-as-possible-us-marshals-auction-winner/) does a great job of divining into topic for those interested.  What I do want to focus on is the consequences to bitcoin retail trading going forward with these new players stepping in.

What these funds are doing is engaging in is mainly market making and advanced algorithmic trading where they simply see BTC as part of their asset inventory to feed off of the supple virgin order flow that has been inaccessible until now. BTC is a new speculative asset class and they see the price of BTC only as a cost basis and are not necessarily interested in its direct appreciation as an investment vehicle. With that said active retail traders may find that their strategies stop working and can & will be used against them. As Sang Lucci says about the listed space any retail strategy that can be algorithm-itised has been and will be soon enough into Bitcoin as well.

Largely, I believe that this is a necessarily step towards seeing the institutional (portfolio style) money come in that the bitcoin believers have been ranting about for so long. But to be perfectly clear these HFT/algo hedge funds make their money on the order flow not the fundamental appreciation of the underlying security — however —  they may not be entirely exclusive but it is important to make this distinction as I believe it is often conflated and misrepresented as overtly bullish.

“Faith can move mountains — faith can move markets”        ts.whaleclub.io        @BTCVIX

Bitcoin’s Virginity, Benjamin’s Big Short & the DRW Connection