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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 lever

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.

oillio 12y ago
You said there was $28M in leverage before the crash. Do you know what the leverage is currently?
- mattodell 12y 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 https://i.imgur.com/SvSFYMK.png edit1: I also added that graph to the post.
- runeks 12y ago
  It fell from $29M to $24M: http://www.bfxdata.com/swaphistory/totals.php 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
  - mattodell 12y 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.
diminoten 12y 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?
- mattodell 12y 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.
- Guvante 12y 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.
- tedunangst 12y 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.
Keyframe 12y ago
A stop hunt?
npp5048 12y 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.

oillio 12y ago

You said there was $28M in leverage before the crash. Do you know what the leverage is currently?

mattodell 12y 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 https://i.imgur.com/SvSFYMK.png edit1: I also added that graph to the post.
runeks 12y ago
It fell from $29M to $24M: http://www.bfxdata.com/swaphistory/totals.php 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
- mattodell 12y 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.

diminoten 12y 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?

mattodell 12y 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.
Guvante 12y 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.
tedunangst 12y 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.

Keyframe 12y ago

A stop hunt?

npp5048 12y 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.