Bitfinex to Bar US Customers from Exchange Trading
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One of the most reliable tools in my cryptocurrency investing toolbox is lending on the Poloniex exchange. It's the bitfinex short calculator, slow-but-steady, go-to champion of my passive investment strategies. And it's an answer to the age old question: Make more of it, of course! I'll be talking mostly about Poloniex, my favorite exchange for a number of reasons: But everyone has their own preferences.
Other exchanges support lending as well, and the general principles discussed here apply equally well to each of them, though the nitty gritty of the UI aspects will differ. There are two types of trades you can do on Poloniex: Whenever someone borrows money to open a bitfinex short calculator position, it's called bitfinex short calculator on margin. Note that it's also possible to go long on margin by borrowing Bitcoin. The rule of thumb for Poloniex is: The lenders make their profit on the interest they get when the loans are repaid by the margin traders.
And that kind of lending is the subject of this article. The last couple months, BTC lending rates to give one example have typically been between 0. That doesn't seem like much on first glance, but it adds up over time:. Typically on an upwards price spike, shorters will arrive in droves anticipating the subsequent dump and consume all of the available loans, driving interest rates up.
But you have to be quick to take advantage, as rates change fast in these circumstances and won't stay high for very long. Once the inevitable dump occurs, short sellers take profits and then loan demands subside again an interesting consequence of this behavior is that sudden rises in interest rates for no apparent reason can be an advance indicator that the market thinks a large price movement is imminent.
Unless you're an expert trader I'm a crappy trader and not afraid to admit it this is a much safer bitfinex short calculator to make money than trading, and still way more than you would get from holding your money in a bank. Plus it's less work bitfinex short calculator analyzing charting patterns and watching trading positions all day long. Lending is just one component of what bitfinex short calculator be a balanced investment approach more on this later.
So don't forget to take that into account when calculating expected profits. Bitfinex short calculator any investment strategy, you have to weigh the good against the bad and decide if lending is right for your circumstances.
Regarding that second disadvantage, it's only really a problem if you are an active trader. If you're like me, you have a long-term view and aim to make a little extra from lending while letting your core holdings gain value over time.
Always leave some in reserve to take advantage of good opportunities bitfinex short calculator they come along. If I was a better trader, I might adjust those ratios a bit more toward the trading side. Okayyou say, sounds like a non-issue, but cryptomancer what do you mean by "risk of exchange being hacked"?
This is a good point to step into. Let's rewind to late Julyjust a month or so ago. I had ETH parked on the Bitfinex exchange and was making decent returns from lending, about 10 ETH per month at the time Bitfinex had much better interest rates than Poloniex when they first started offering ETH margin trading. But I had a two-week vacation to Malaysia coming up at the start of August, and was a bitfinex short calculator nervous about leaving my investments on the exchange unattended while I was gone.
So I turned off autorenew on all my loans and let the borrowers pay them back one by one, then on July 29 moved all my Bitfinex short calculator off Bitfinex into my private Ethereum wallet. The next day I left on vacation ready to have some bitfinex short calculator, with my investments safely secured. A few days later, relaxing in a cafe with free wifi, I decided to check my usual crypto news bitfinex short calculator and see what I was missing.
This headline was there to greet me:. Holy crapI thought, my blood turning cold. Reading further, I found out only Bitcoin had bitfinex short calculator stolen. So even if my ETH had still been on the exchange, it would have been safe. Or so I thought, until several days later this gem came out:. The moral of the story is that although rare, exchange hacks are a fact of life in this young industry, and you can't really see them coming.
The chances of being caught in one are definitely non-zero if you lend capital on exchanges over significant stretches of time. Exchange risk is the 1 drawback of lending cryptocurrencies. But it can be mitigated by good risk management strategies.
The more exchanges you spread it out across, bitfinex short calculator smaller your loss will be if any one exchange is hit by catastrophe. For example, ETH is one of the core investments in my portfolio, which I intend to hold for many years. I don't care so much about bitfinex short calculator ETC and am willing to lose it if the exchange gets hacked again or ceases operations. But right now, daily ETC interest rates have been holding steady at around 0. I figure that Bitfinex might actually be one of the safest exchanges right now, what with a systems overhaul and increased focus on security since re-opening.
I might be wrong, but I'm willing to take that risk. Poloniex and other exchanges have a built-in way to protect against this possibility bitfinex short calculator force liquidating accounts that get themselves into trouble.
When you trade on margin, your account balance is used as collateral to protect against losses, and that balance determines the limit of how much you can actually borrow. If a trade turns into a disaster and unrealized losses become too high, after a certain threshold Poloniex will automatically close your position and pay back the loan from your account balance.
Theoretically it's possible, when the market is extremely volatile, for prices to move fast enough that forced liquidation can't keep up and Poloniex bitfinex short calculator get a good enough price to completely pay back the loan. However, these cases are exceedingly rare. I've been lending on Bitfinex short calculator for over a year and never suffered a single default on any of the thousands of small loans I've given out.
The actual mechanics of it are quite straightforward. Let's start by dissecting the controls on the Poloniex lending page and then I'll explain my preferred method. On the Transfer Balances screen you need to decide what cryptocurrency you want to lend, and then transfer some of it from bitfinex short calculator exchange or margin account into your bitfinex short calculator account, as shown here:. Note that the Exchange, Margin, and Lending columns will only show the funds you actually have available to transfer between those accounts.
Capital that is locked up in orders or existing loans is not shown. Also, not every single cryptocurrency on Poloniex is available for margin trading and thus lending. If it doesn't have an entry in the Coin column, then you can't lend it. Once your lending account is funded, you're ready to let the good times roll! Click on Lending from the main menu, and you'll get this screen:. My Balances - shows your free capital in each account, just like the Transfer Balances screen. To create new loan offers you must have a number shown in the Lending column.
Click on an entry in the Coin list to see the lending information for that specific cryptocurrency. Loan Demands - don't even look at this. Most people, when they open a margin position, don't really care what interest rate they have to pay. The system will automatically loan out money at whatever the lowest offer rate happens to be at the time.
That said, there is a feature that allows margin traders to specify they won't accept a loan if the interest rate is higher than a specified threshold. And that's where these loan demands come from. Loan Offers - this is a list of all available loans that lenders are currently offering, sorted by interest rate. The current lowest rate plus total amount being offered gives you a way to see how much demand there bitfinex short calculator for margin trading of this particular cryptocurrency.
Typically you will want to offer a competitive interest rate near the top of the offer list or your offer will rarely be taken since Poloniex automatically loans from the top of the offer list whenever a new margin position is opened. My Open Loan Offers - these are loan offers you have created, but nobody has taken the loan yet i. My Active Loans - when an open offer is taken by a margin trader, it moves to this list and you start making interest on it.
When someone pays back a loan, it will vanish from this list or move back to My Open Loan Offers if you have auto-renew turned on and the interest paid will be added to your lending bitfinex short calculator balance shown in My Balances and the Offer BTC box. The green numbers in the Fees column represent the total interest accrued on each loan, which will be paid to you when the loan is closed by the borrower.
Always follow the above strategy religiously. After bitfinex short calculator while, it should get to be like muscle memory: Keep your money working for you in active loans all the time regardless of whether the current rates are high or not. That's better than setting too high rates and then having your money sitting around useless when your loan offers don't get taken.
It's OK to have dozens of small loans open. Typically you'll start with one or two big bitfinex short calculator, and then those will fracture into smaller and smaller loans with bitfinex short calculator rates as time goes on.
It makes my OCD twitch, but it's normal, don't worry about it. Also, your entire loan offer might not be taken all at once. People could take small bites out of it, generating several active loans bitfinex short calculator one single loan offer. So there you have it. Now go forth and loan, my fellow Steemians.
And may the interest rates be ever in your favor! For a different perspective on Poloniex lending, check out this excellent article by nxtblg. He offers some good case studies of lending Factom and Bitshares. Know other good articles on this subject? Feel free to share in the comments below!
When I first started lending, I found myself wishing there was a comprehensive guide to show me the ropes. But I couldn't find anything good, so eventually decided to just write one myself. That's exactly what I was wishing for!
