Buy Bitcoins with Flexpin Vouchers in Canada

Canadians have a few choices when it comes to buying bitcoins in Canada. One of the methods involves using Flexpin vouchers to exchange for bitcoins using services such as Bitaccess. Check out this post about my experience using Flexpin vouchers to buy bitcoins in Canada.

I’d say the best way for Canadians to buy bitcoins is to use QuadrigaCX, which is a cryptocurrency exchange based in Vancouver. The challenge with using QuadrigaCX is many Canadians have trouble with (and/or hate to deal with) compliance. If you want full access to QuadrigaCX deposit and withdrawal methods, then you should follow all the Canadian AML rules by verifying your account. Check out this post for my tips on how to verify your QuadrigaCX account.

Trading Bitcoin Price Spreads Bitfinex, Poloniex, QuadrigaCX

As bitcoin gains popularity, more exchanges are emerging globally, each with its own pros and cons. With so many exchanges to trade on, deciding which one is right for you will depend on your trading strategy, and one strategy I’d like to highlight is spread trading. This means profiting from the different prices for bitcoins between various exchanges. In the example below I’ll use examples for Bitfinex, Poloniex, and QuadrigaCX.  I use QuadrigaCX as an example because this is the best place for Canadians to buy and sell bitcoins, and QuadrigaCX also offers a bitcoin/US dollar pair. Also keep in mind that Bitfinex & Poloniex use USD “tether” which is a representative token and not actual US dollars.

The strategies described below are probably best done using the API from each exchange. If you are not familiar with using web APIs, then the strategies below can still be used by entering your orders manually, but you can execute orders (and manage order books) much better using a program to enter orders for you instead of entering orders manually. Here are links to web API documentation for each exchange: Bitfinex API, Poloniex API, QuadrigaCX API.

Let’s take a look at the market on each of these three exchanges to see what the current spreads are. When I refer to the “spread”, I’m referring to the difference between the bid and ask prices posted to the exchange, and then I will compare the “spread” between each exchange to see if there are any profit opportunities.

At the time of writing, here are the current markets:

Poloniex 15,529 / 15,560

Bitfinex 15,526 / 15,538

QuadrigaCX 15,505 / 15,999

The first thing we should notice as we look at these bids and offers is the markets on Bitfinex and Poloniex are much tighter than the market on QuadrigaCX. There is a small difference (a fraction of 1%) between the bids and offers on both Bitfinex and Poloniex, but a few percent difference between bids and offers on QuadrigaCX. This is where the opportunity lies. Even though QuadrigaCX is based in Canada and largely deals with Canadian payment methods, they still post a USD market, but since moving USD in and out of QuadrigaCX is much less common than Canadian dollars, their USD markets are also much more shallow.

When evaluating these markets, we should also keep trading costs in mind. Explicit trading fees are the biggest expense, the only other expense being the implied cost of carrying the float of money required to make trades. Poloniex will cost about 0.25% per transaction (depending on your volume), Bitfinex will cost 0.20%, and QuadrigaCX charges 0.50% per transaction. So in order to make a profit, we need to at least cover these trading costs.

The lowest bid based on the price quoted above is QuadrigaCX @ 15,526 and the highest offer is QuadrigaCX @ 15,999. If you bought 1 bitcoin at 15,526 and sold at 15,999, your profit before commissions would be 473 (the difference between the buy and sell). But what are the fees? 77.63 on the buy side, and 80 on the sell side for a total of 157.63. So if you can make a market with a spread of 473 and incur 157.63 of costs, then your profit will be 315.37.

Is it this simple?  Well, yes and no. In one sense, anyone is free to post markets and wait for traders to take their bid or offer. But on the other hand, the market is wide for reason. Looking at the volume of trades on the BTC/USD market on QuadrigaCX, it can sometimes take more than an hour to go by between transactions. This light liquidity is the risk that you need to take in order to get the reward.

Another way to bridge this liquidity is to post bids and offers on QuadrigaCX, recognizing that the spread is the widest on this market, and when you do get filled on one leg of the trade, you can offset your risk by taking the opposite side of the trade on a more liquid exchange (such as Poloniex and Bitfinex). For example, if we post a bid of 15,510 and an offer of 15,900 on QuadrigaCX, and the 15,510 bid gets filled, we can still work our sell order on QuadrigaCX at 15,900, while we also work duplicate orders on other exchanges. We can work OCO orders (“order cancels other”) so that when one of our sales gets filled on one exchange, we cancel the other working orders. You can see how using a computer program (a “bot”) to do this type of trading is much better than doing it manually (unless you want to stare at a trading screen all day).

The program (or trading strategy) that you use must make the necessary calculations for you, so that your program (or you) can know where to place buys and sells. If you are writing a program to do this type of trading, you need to have the program run checks and make calculations, adjust orders according to formulas. You can either set cron jobs to refresh orders and calculations on specific time intervals, or have the program place buys and sells based on other triggers, or both. Once you understand how to price these types of markets, its really up to your imagination how to let the program run your trading strategy. You can take more or less market price risk, you can tie up more or less capital, you can have the strategy take a bullish or bearish strategy, and you can use other exchanges (such as Deribit) to hedge your risk.

If you are a programmer and you know how to use JavaScript, Nodejs, python, or other such languages to build these programs, but you don’t want to risk your own capital, I am happy to put up the money in exchange for your work, please feel free to contact me on this site, I’m always looking for more competent developers.

Bitfinex Euro Market Update

It’s been a few days since Bitfinex listed Euro trading, so we now have some more data to work with. Even though the Bitfinex USD market is based on tether, and fiat deposits/withdrawals will remain severely restricted, the USD market is still much larger than the Euro market. At the time of writing, the current bid/offer for borrowing/lending Euros on Bitfinex is 0.012% to 0.0243% per day. There is 13,000 bid and 140 offered, so the Euro lending/borrowing market is wide and illiquid. This presents some interesting challenges and opportunities. For those of us capable of making a market (either manually or using bots) the wide spread is not such a big deal, at least as long as our volume doesn’t overwhelm the market. For my purposes, I’d put up to 10,000 Euros into this market before I’d start to worry that I can’t get the money out to lenders frequently enough to earn a liquid rate. But it’s a double edged sword, a choice of risk to reward, about whether to get the money out to borrowers or to try and catch a sucker rate.

I’ve also noticed that the volume offered in the Euro lending book on Bitfinex is kinked. There is only about 360,000 Euros offered up to 0.08% per day (from a market of 0.025% per day) and then there is an additional 10,000,000 Euros offered at 0.083% per day. So someone must think this money gets taken at this rate at some chance that they are willing to let the cash sit on the exchange (with all those associated risks) until this time. Not my style of trading (I hate dead money), but it helps us get a sense of the possible outcomes (and the ceiling on rates).

A quick glance at the loan book total outstanding shows the USD amount at 461,787,500.86 and the Euro 190,431.82, so the Euro market on Bitfinex has a long way to go in order to catch up to the USD volume.

Bitfinex adds Euro margin trading

Bitfinex, a crypto currency exchange that has been wrapped up in speculation about their relationship to tether, has now listed Euro trading pairs. Bitfinex has also offered Euros for margin trading so users can either borrow or lend Euros for margin.

I have few details on what will back up the Euros on Bitfinex, whether these are a type of tether, how users can deposit and withdraw Euros, etc, but I entered the Bitfinex Euro lending market last night. I’ve been lending USD on Bitfinex since they launched the market, and have found USD lending to be profitable, even after the exchange hacks. There are times when liquidity dries up or when demand for USD loans grows quickly as traders borrow to jump on the rising bitcoin price, and rates for USD loans get very high and this is when lenders need to expand their outstanding loans as well as the duration of their lending portfolio.

Although the overall risk of USD lending on Bitfinex is also very high, the risk that an individual borrower defaults is actually quite low since the exchange has enough liquidity to match any margin call blow-out, and since there are so many competing crypto currency exchanges nowadays, the arbitrage opportunities drive cross exchange liquidity, re-enforcing the low risk of margin loan defaults. I imagine the market for Euros on Bitfinex will be similar to the market for USD in this respect.

At the time of writing, a few hours after their launch, the margin loan volume for Euros on Bitfinex is still pretty shallow, but I bet that other traders will be drawn to it over the days and weeks, and I expect the liquidity for Euro loans on Bitfinex will rival their USD market soon enough. Going forward, I expect the USD market will still remain larger than the Euro market since the USD has more liquidity across all platforms/exchanges (including fiat markets), but considering the problems inherent with the convertibility of USD tether, the Euro market on Bitfinex might get a slight edge.

To start my Bitfinex Euro lending book, I didn’t deposit Euros from fiat, and I don’t plan on withdrawing Euros to fiat, instead, I’ll fund my Euro loans by exchanging bitcoins and other cryptos already in my Bitfinex account. To get the Euros out again, I’ll convert them back to cryptos and then send those cryptos off the exchange to another platform/address/account.

Bitfinex Recovery Right Tokens

Ok, this is getting a little confusing now.  So holders of the BFX tokens who converted have now received Recovery Right Tokens (RRTs) that will receive payment if funds from the theft are recovered. The RRTs are trading on the the exchange at a rate of 0.13 RRT/USD right now.

Bitfinex Recovery Right Tokens – Bitfinex blog

It is possible that some or all of the bitcoins stolen from Bitfinex will be recovered, perhaps through the efforts of law enforcement or through our own outreach to the hackers. . To further reward BFX token holders converting to equity, we have created a…

Quick Review of Yubibao

Chinese bitcoin traders should be familiar with the Huobi exchange. It is a mainland based digital currency exchange similar to other exchanges. With Bitfinex offering user generated leveraged trading, Huobi has created a Hong Kong based subsidiary called BitVC and a service within BitVC called Yubibao.  The reason why Huobi is separate from BitVC is because of the way leveraged trading is treated in mainland law. What makes the Bitfinex and Poloniex margin funding systems so innovative is they allow a free market for funding and this results in users funding their own margin trading without the exchange taking the principal credit risk. The Yubibao service within BitVC offers something similar, but in a simplified way (which brings with it greater risks but greater ease of use for less sophisticated users).

What the bitcoin financial world lacks right now is a type of savings and loan marketplace similar to traditional banks. There are bitcoin P2P site, but because of their design (their desire for Auto Invest in particular), these p2p bitcoin markets are the source of high risk/reward credits. Since there is no country currently offers a regulatory framework for a traditional bitcoin bank, there is a large untapped demand for a type of bitcoin savings account. There are a couple of services that come close (BTCPOP’s savings account) but none that reflect the actual risks and rewards of banking.

Yubibao attempts to fill this gap by providing a type of savings account that credits daily interest. The way it works is similar to Bitfinex because users deposit funds that are then used by traders as margin. Where Bitfinex and Yubibao are different is in the way Yubibao stands between savers and borrowers. Yubibao sets the rate of daily interest charged to each side and takes a fee of 20% for the service. This process makes it easier for savers to manage their accounts since they don’t have to get into the market and do it themselves, but it also means that Yubibao is taking on bunch of risks that Bitfinex is not. I noticed that the rate of funding on Bitfinex is higher than the rate of funding offered to savers on Yubibao, makes sense since the fees are higher on Yubibao.