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posted by cmn32480 on Wednesday August 08 2018, @05:29PM   Printer-friendly
from the hit-me-right-in-the-wallet dept.

Arthur T Knackerbracket has found the following story:

A massive wrong-way bet on Bitcoin left an unidentified futures trader unable to cover losses, burning counterparties and threatening to dent confidence in one of the world's largest cryptocurrency venues.

The long position in Bitcoin futures listed on OKEx, a Hong Kong-based exchange, had a notional value of about $416 million, according to an OKEx statement on Friday and data compiled by Bloomberg. OKEx moved to liquidate the position on Tuesday, but the exchange was unable to cover the trader's shortfall as Bitcoin's price slumped. Because OKEx has a "socialized clawback" policy for such instances, it will force futures traders with unrealized gains this week to give up about 18 percent of their profits.

While clawbacks are not unprecedented at OKEx, the size of this week's debacle has attracted lots of attention in crypto circles. The episode underscores the risks of trading on lightly regulated virtual currency venues, which often allow high levels of leverage and lack the protections investors have come to expect from traditional stock and bond markets. Crypto platforms have been dogged by everything from outages to hacks to market manipulation over the past few years, a period when spectacular swings in Bitcoin and its ilk attracted hordes of new traders from all over the world.

[...] Bitcoin, the biggest cryptocurrency by market value, dropped 2.2 percent to $7,383.44 at 4:56 p.m. Hong Kong time on Friday, extending its decline this week to 10 percent. It has slumped 48 percent this year.

-- submitted from IRC


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  • (Score: 2) by Thexalon on Wednesday August 08 2018, @06:26PM (8 children)

    by Thexalon (636) on Wednesday August 08 2018, @06:26PM (#718898)

    Believers in Bitcoin touted it as a much better store of value than dollars, yen, euro, etc, because there was no guvmint interference and such, and by design it didn't have inflation problems.

    But based on the current drop in the value of Bitcoins, the inflation rate of Bitcoin for 2018 is in the ballpark of 150%. Say what you will about the 1-3% inflation that you get from the US dollar and Federal Reserve, but at least you aren't losing over half your wealth in a matter of months.

    --
    The only thing that stops a bad guy with a compiler is a good guy with a compiler.
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  • (Score: 4, Informative) by maxwell demon on Wednesday August 08 2018, @06:33PM

    by maxwell demon (1608) on Wednesday August 08 2018, @06:33PM (#718901) Journal

    Well, it's still worth about 85% more than one year ago.

    --
    The Tao of math: The numbers you can count are not the real numbers.
  • (Score: 3, Insightful) by Snow on Wednesday August 08 2018, @06:36PM (6 children)

    by Snow (1601) on Wednesday August 08 2018, @06:36PM (#718904) Journal

    Zoom out.

    Bitcoin goes up and it goes down. Right now, it's going down, but it will go up again.

    Right now, inflation for bitcoin is about 3% (ie. The bitcoin supply increases by about 3%/year).

    • (Score: 3, Interesting) by Thexalon on Wednesday August 08 2018, @06:54PM

      by Thexalon (636) on Wednesday August 08 2018, @06:54PM (#718920)

      Right now, inflation for bitcoin is about 3% (ie. The bitcoin supply increases by about 3%/year).

      You appear to be conflating inflation and money supply (M0, in economist-speak).

      Money supply, M0 is the amount of money in circulation created by the central system, i.e. the steady increase of Bitcoins caused by mining. The next measure of money supply, which Bitcoin doesn't have in force right now but conceivably could, is M1, which would be loans of Btc backed by smaller amounts of Btc from M0.

      Inflation measures purchasing power, i.e. how much stuff you can buy for, say, 10 Btc. Since almost nobody accepts Btc as their form of payment, to buy most things you need to convert your Btc to some other currency before converting it to stuff. So, by my reckoning, 10 Btc was in January worth somewhere in the ballpark of 6 new Honda Civics ($15K * 10 Btc / $25K per Civic), and now a few months later is worth a bit under 3 new Honda Civics ($7K * 10Btc / $25K per Civic). That's a serious drop in purchasing power, and had this happened to a major government-backed currency the world would be panicking.

      --
      The only thing that stops a bad guy with a compiler is a good guy with a compiler.
    • (Score: 0) by Anonymous Coward on Wednesday August 08 2018, @06:56PM (4 children)

      by Anonymous Coward on Wednesday August 08 2018, @06:56PM (#718921)
      Up and down is a sign of an unstable product, likely used for speculation, price driven by pump-and-dumpers. It is not acceptable as store of value. Need money now? Sorry, the BTC is down today, wait half a year...
      • (Score: 3, Informative) by bob_super on Wednesday August 08 2018, @07:07PM (3 children)

        by bob_super (1357) on Wednesday August 08 2018, @07:07PM (#718926)

        Rule #1: Do not invest in high-volatility products any money that you can't afford to lose.

        • (Score: 2) by sjames on Wednesday August 08 2018, @11:37PM (2 children)

          by sjames (2882) on Wednesday August 08 2018, @11:37PM (#719108) Journal

          Sure. But what about that claim so long ago that bitcoin would BE money. That you'd use it same as cash for the morning Starbucks and a newspaper?