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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: 1, Funny) by Anonymous Coward on Wednesday August 08 2018, @05:38PM (2 children)

    by Anonymous Coward on Wednesday August 08 2018, @05:38PM (#718874)

    From the headline, I thought there was a fork called "Bitcoin Whale" -- crypto currency for whale lovers?

    • (Score: 2) by bob_super on Wednesday August 08 2018, @07:04PM

      by bob_super (1357) on Wednesday August 08 2018, @07:04PM (#718925)

      "It's crypto for rural America, Mexico, and Egypt! Next, stay tuned for the launch of Bitcoin Black Cloud, the crypto for those who like to run their engines rich!"

    • (Score: 2) by EvilSS on Wednesday August 08 2018, @08:02PM

      by EvilSS (1456) Subscriber Badge on Wednesday August 08 2018, @08:02PM (#718963)
      Not quite. It's actually a token for a blockchain tracking commodity whale oil, which has seen a surge in popularity for lighting and heating among retro-hipsters in the north-east and pacific coast regions. So in a way they are whale lovers I guess....
  • (Score: 0) by Anonymous Coward on Wednesday August 08 2018, @05:51PM (1 child)

    by Anonymous Coward on Wednesday August 08 2018, @05:51PM (#718880)

    1849. Relive the dream. Again. Make 'merka Greedy Again.

    • (Score: 0) by Anonymous Coward on Wednesday August 08 2018, @07:29PM

      by Anonymous Coward on Wednesday August 08 2018, @07:29PM (#718945)

      Make 'merka Greedy Again.

      Sorry Mr. Smelly Hippie. Hong Kong is not stateside.

  • (Score: 0) by Anonymous Coward on Wednesday August 08 2018, @05:55PM

    by Anonymous Coward on Wednesday August 08 2018, @05:55PM (#718882)

    Love the idea, but damn if the implementation isn't shaky and not designed to safeguard against human maliciousness and stupidity. It is a tough problem.

  • (Score: 0) by Anonymous Coward on Wednesday August 08 2018, @06:11PM (3 children)

    by Anonymous Coward on Wednesday August 08 2018, @06:11PM (#718891)

    A bitcoin marketplace that allows margin trades. Yeah, that sounds like a smart idea.
    (How about next time the exchange doesn't allow for any long position that can soak past their insurance fund / not allow the cumulative of all margin trades exceed their insurance fund, if they insist on playing margin games at all?)
    Anyone who invested with them pretty much opened themselves up for this. Hope those great returns Bitcoin generates will cover the other players for this.

    • (Score: 2) by driverless on Thursday August 09 2018, @08:28AM (2 children)

      by driverless (4770) on Thursday August 09 2018, @08:28AM (#719291)

      In the case of the original story:

      The episode underscores the risks of trading on lightly regulated virtual currency venues

      wouldn't just the fact that you're trading in an unregulated virtual currency underscore the risks of trading in an unregulated virtual currency?

      • (Score: 0) by Anonymous Coward on Thursday August 09 2018, @01:49PM (1 child)

        by Anonymous Coward on Thursday August 09 2018, @01:49PM (#719363)

        Yes, but a marketplace that allows margin on something unregulated is extra-stupid on the part of every party involved - market, sellers, buyers all.

        Their use of an "insurance" fund might be OK but that fund should then be prepared for all current trades to go south on them.... akin to how other regulated financial institutions behave. (The regulated ones don't need 100% reserve but generally must pass standards).

        • (Score: 2) by driverless on Thursday August 09 2018, @01:54PM

          by driverless (4770) on Thursday August 09 2018, @01:54PM (#719364)

          Yes, but a marketplace that allows margin on something unregulated is extra-stupid on the part of every party involved

          "Not that we needed all that for the trip, but once you get locked into a serious drug... uhh, virtual currency frenzy, the tendency is to push it as far as you can".

  • (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.
    • (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?

  • (Score: 0) by Anonymous Coward on Wednesday August 08 2018, @06:38PM (4 children)

    by Anonymous Coward on Wednesday August 08 2018, @06:38PM (#718907)

    All investments include risks, especially when you buy or sell options. Well, all investments unless you happen to be a congressman trading on inside information [reuters.com]. Will you look at that ... he got arrested.

    • (Score: 2) by Snow on Wednesday August 08 2018, @06:48PM (1 child)

      by Snow (1601) on Wednesday August 08 2018, @06:48PM (#718916) Journal

      This.

      Bitcoin is risky enough. Those people that go 20-100 times margin are fucking nuts.

      • (Score: 2) by FatPhil on Thursday August 09 2018, @12:03AM

        by FatPhil (863) <pc-soylentNO@SPAMasdf.fi> on Thursday August 09 2018, @12:03AM (#719126) Homepage
        In the context of other instruments, we call them "merchant bankers".
        --
        Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
    • (Score: 1, Interesting) by Anonymous Coward on Wednesday August 08 2018, @07:08PM (1 child)

      by Anonymous Coward on Wednesday August 08 2018, @07:08PM (#718928)

      Is Collins worth an SN article all of his own? He's from my district and the local newspaper has been covering his unusual trading activity in this Aussie pharma startup for at least the last year. We cheered when we heard the news this morning that he was arrested. This is a congressman who won't hold local town meetings because he doesn't like hecklers.

      • (Score: 1, Informative) by Anonymous Coward on Wednesday August 08 2018, @07:25PM

        by Anonymous Coward on Wednesday August 08 2018, @07:25PM (#718939)

        He was very involved in Trump's transition team. He's making America great again ... buy using insider information to sell his Aussie stock.

        BTW, Collins is a board member of the company he was trading in.

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