How Does Bitfinex Funding Work?

If you have spare bitcoins kicking around, one way to use them is by lending them out to margin traders on an exchange such as Bitfinex. This post will explain how the Bitfinex funding market works, and how you can use it to earn more bitcoins (and even US dollar tether).

Bitfinex is a cryptocurrency exchange. Users can signup to Bitfinex to trade cryptocurrencies such as bitcoins, ethereum, bitcoin cash, and many others. One of the unique features of Bitfinex is their margin funding markets. For users who want to add leverage to their positions and users who want to earn interest on their bitcoins, Bitfinex offers a margin funding order book where those users can exchange margin funding with each other. So if you’re a trader with a bullish view on ETH over BTC, you can actually borrow BTC on Bitfinex and use those borrowed funds to jack up your ETHBTC position. This funding isn’t free, so users can also choose to lend those BTC and earn a daily interest rate.  The user funding market is an ingenious feature offered by Bitfinex which is one of the main reasons the exchange has attracted so much volume. Whereas a typical margin loan is made by a broker or dealer, as the exchange Bitfinex cuts out these middleman (as they remain as the middleman themselves).

What kinds of rates can lenders expect to receive? Since Bitfinex runs an open order book for funding, the rate you will receive is simply result of of supply and demand, and so the rate you will receive will fluctuate as the market dictates. Rates are quoted as percent per day. To find the simply daily annualized rate, multiply by 365 or use your own formula to find an APR. Follow this link to BFXdata where you can view historical Bitfinex funding rates. You will see that bitcoin funding mostly range from 0.01% per day and sometimes spike up to 0.60% per day.

What are the risks? Other than interest rate risk, and the risk that their bitcoins fall against your own unit of account (your home fiat currency?), the main risks that Bitfinex lenders face is the default risk of borrowers and the credit risk of Bitfinex itself. The risk that borrowers default is actually very low, in fact its so low that you will probably never have a borrow default on a loan. Why?  Because of the Bitfinex margin limits. Follow this link for a description of the margin rules. Bitfinex borrowers receive a margin call when the net value of their account equity reaches 22.5%. When the net value of their account falls below 15% of your borrowed funding value, the position will be force-liquidated.  Since Bitfinex is a very liquid exchange, and since there are so many ways to arbitrage the bitcoin price, the exchange can virtually always liquidate positions to make the lender whole.

The credit risk of Bitfinex is the main risk for lenders. Even though the risk of any individual defaulting is very low (virtually non-existent), the main risk is Bitfinex itself goes bust or gets hacked, and this is not pie in the sky, its happened before and it could happen again. I personally think the risk of Bitfinex being hacked again in a major way is low, the rate of return users can earn by funding margin loans reflects this risk.  Bitfinex funding does not earn you free money. I hope eventually clearing houses (maybe blockchain based clearinghouses?) will emerge to reduce the exchange default risk.

So, you want to earn some bitcoin interest by lending your funds out on Bitfinex? After you open an account, you deposit your bitcoins, and move them to your funding wallet. Now you can place an order to lend out your coins using similar mechanics to trading stocks and cryptos. There is an order book with bids and offers, choose your strategy and work your lending book. You can use the Bitfinex Flash Return Rate (FRR) which is kinda like the average daily rate on funding to automatically renew your loans, or you can auto renew at a fixed price, or you can manually update your loans using your fingers or the Bitfinex API.

Bitfinex also charges fees on margin funding. At the time of writing fees are 15% of the interest you earn.

If you have questions about Bitfinex lending, please post your comments below and I’ll do my best to answer specific questions.

Choice Properties offers to buy CREIT

This is a great move by Choice Properties as it provides diversification and more scale. It shows how Weston is moving towards greater diversification of their investment portfolio in general and making Choice Properties a key part of their strategy. As a holder of both Choice Properties and CREIT, I support this proposal and will choose the cash option.

Choice Properties REIT buying Canadian REIT for $3.9-billion

Choice Properties Real Estate Investment Trust has signed a deal to acquire Canadian Real Estate Investment Trust (CREIT) for $3.9-billion in cash and stock. The combination of Choice Properties, which counts Loblaw as its principal tenant and largest unitholder, and CREIT will create a company with a diversified portfolio of 752 properties.

Loblaw Companies Limited supports Choice Properties REIT’s acquisition of Canadian Real Estate Investment Trust

To facilitate Choice Properties’ financing for the transaction, Loblaw has agreed to convert all of its outstanding Class C LP units of Choice Properties Limited Partnership with a face value of $925 million (“Class C LP units”) into Class B LP units of Choice Properties Limited Partnership (“Class B LP units”) on closing.

Bank of Canada raises key rate to 1.25%

Bank of Canada raises key interest rate to 1.25% | CBC News

The Bank of Canada raised its key lending rate by a quarter percentage point to 1.25 per cent Wednesday, the third time it has moved its benchmark rate from once-record lows last summer. The bank’s rate has an impact on rates that Canadians get from retail banks for things like mortgages, savings accounts and GICs.

Bank of Canada raises interest rate to 1.25%, highest in almost a decade

The Bank of Canada had a window to raise interest rates and it opted to use it. Canada’s central bank raised its lending benchmark a quarter point to 1.25 per cent, an historically low setting that nonetheless will seem high to anyone who got used to post-crisis borrowing costs that were closer to zero.

Trading Bitcoin in Canada: how much does it cost?

Have you decided to trade bitcoins, or are you looking for the best venue to trade?  The post below will review some popular exchanges and describe some of the costs and benefits of each.

Before diving into the specifics, it’s important to recognize the difference between a primary exchange and a service provider. A primary exchange includes exchanges such as Bitfinex, Poloniex, and QuadrigaCX, which are the venues where traders interact. Other services such as QuickBT provide foreign exchange services but do not run exchanges per se. This distinction is important depending on the functionality you require to execute your trading strategy.

CoinSquare, trading fees range from 0.1% to 0.2%, no API access, no affiliate, could be a reason why liquidity is a bit lower on this exchange.

QuadrigaCX, trading fees range from 0.2% to 0.5%, decent API documentation, highest CAD to crypto liquidity.

Kraken, trading fees range from 0.16% to 0.26%, robust API, high liquidity, global exchange offering a few different fiat to crypto pairs.

Review of Hive Blockchain Technologies

A friend of mine who is an investor based in Ontario Canada asked me recently to provide him with my thoughts on Hive Blockchain Technologies, which is a TSX listed company based in Vancouver. Below are my thoughts.

My process to analyse a public company (in Canada and/or the US) is pretty straight forward. The first thing I do is a Google search for their name. This helps link me to their company website, but also helps me see the main pages that might be relevant. I arrive at Hive’s website and download their investor presentation which is a 38 page PDF.  According to their investor presentation, Hive owns 2 GPU based mining facilities and owns the option to buy 2 more facilities from Genesis Mining (which is a cloud mining company, that I’ve used and reviewed on this blog). Genesis in turn owns 30% of Hive.

The first thing that strikes me as I’m reading Hive’s investor presentation is they are rightly currently focused on GPU based mining, which includes such currencies as Monero, Dash, ZCash, Ethereum. Bitcoin mining is not profitable anywhere in the world unless the miner can secure a subsidized price for power, and this usually involves some shady deal with some government or utility. From what I can see, its profitable to mine bitcoins if your facility is in a cold climate, with no taxes, right next door to a hydro electric facility so that no transmission costs are involved. This should be a hint to Ontario based towns with old hydro facilities, and a missed opportunity for Ontario Power Generation.

The problem with focusing on GPU based mining is that in the long run, the profitability of this type of mining should erode. As the market for the most popular based GPU based mining becomes more liquid, it should drive down mining profitability (especially when any kid living in his parents basement running a GPU rig is getting free electricity because his parents pay the utility bill) to the point where profit focused miners will need search further afield to less popular coins to mine. Could this be one of the reasons why Genesis is selling to Hive?

At the time of writing, Hive has a market cap of 800 million Canadian dollars. I visit Sedar.com to find their financial statements. According to their September 30th, 2017 filing, Hive has 5.8 mil in cash and receivables, almost 9 mil worth of equipment, and accounts payable of 3.2 mil. Looks like they spent more than 500k on marketing expenses and 129K on professional fees. These expenses are likely related to their fundraising. They also recorded a 2.7 mil expenses related to share based compensation.

Starting in on the notes from the financial statements, looks like Hive will recognize revenue from mined coins as they are mined and apply an exchange rate at the time the coins are mined, they will also recognize the change in value of their coins on hand based on current rates and apply the difference to current year’s profit/loss. This accounting method could cause their income/loss to swing wildly as the value of the currencies they mine rise and fall. This accounting method could also cause Hive to pay a lot more tax than they otherwise would because they are realizing the tax liability on an ongoing basis, as compared to a passive investor in cryptocurrencies who would only recognize the capital gains and losses as they are realized.

Hive will also depreciate their computer equipment on a four year straight line basis. This policy will also have a dramatic impact on earnings and taxes since these assets make up a large part of Hive’s balance sheet.

Digging further into the notes on the financial statements. The initial deals with Genesis leave Hive public shareholders in a secondary position. Genesis will hold the balance of power. The deal to sell Genesis their shares comes at a great expense to Hive’s shareholders. A finder’s fee of 3.9 million shares was paid to secure Genesis’s 30% stake, and at current market prices, these shares are worth 12 million dollars. Genesis is also the service provider to Hive’s mining operations, so now we have a situation where the “manager” of the assets is also the largest shareholder, I’ve seen situations like this before, and it never turns out good for public minority shareholders.

There have been a number of related party transactions over the past few quarters, and as a public minority shareholder, this would be a red flag.

So Hive doesn’t make profits, the only way they will make money is if the value of crypto currencies gain in value relative to the Canadian and US dollars. Who would want to invest in this company?  I’d say lot’s of people actually. The main investor would be the retail investor in Canada and US who knows enough about crypto currencies to be suckered in my a slick investment sales process. These investors know the potential power of crypto currencies, but not enough to evaluate the profitability of Hive specifically. I think these investors would be better off holding the crypto currencies and riding the wave themselves, rather than entrusting their money to a company with a lot less accountability directly to them. Another strategy for the retail investor who is a potential investor in Hive is to treat their cryptocurrencies as a fun hobby and learn about how to mine themselves. Find a friend who lives in an apartment building where the building pays the electricity, and setup a small GPU mining rig in their apartment, share the profits. You’ll never get rich this way, but actually, the best way to get rich is to do something like the managers of Hive has done, know more than your investors and sell them the investment, pay yourself a handsome fee in the meantime.

 

Bitcoin Futures on CME December 18th

Today the CME announced bitcoin futures trading will begin on December 18th, 2017. This is very exciting news for crypto market participants. Trading in bitcoin futures on a CFTC regulated exchange will move bitcoin closer to the mainstream, add practically unlimited liquidity, and provide bitcoin holders with a way to hedge their bitcoin price exposure to the USD fiat economy.

The CME bitcoin futures contracts will be cash settled based on the CME CF Bitcoin Reference Rate (BRR), which aggregates bitcoin trading activity across several spot exchanges between 3:00 p.m. and 4:00 p.m. London time each day. The contract size will be 5 bitcoins; given the current price of $10,000 BTC/USD, the notional value of each contract might be around $50,000. This contract size is probably too big for the average retail trader, but good enough for the rest of us.

FAQ: CME Bitcoin Futures – CME Group – CME Group

Get answers to frequently asked questions about CME Bitcoin futures, including when contracts will launch, how to trade and contract specs.

Bitcoin Heads to Wall Street Whether Regulators Are Ready or Not

Two U.S. exchanges, including the parent of the venerable Chicago Mercantile Exchange, are racing to embrace bitcoin, dragging federal regulators into a realm skeptics call a fad and fraud. The development shows how some big financial players are moving to co-opt the volatile cryptocurrency and lure more mainstream investors into the market, even before regulators have agreed on just what bitcoin is.

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 are only about 360,000 Euros offered at up to 0.08% per day (from a market of 0.025% per day) and then there ar an additional 10,000,000 Euros offered at 0.083% per day. So someone must think that there is some chance that this money will get taken at this rate and they are willing to let the cash sit on the exchange (with all those associated risks) until that time. It’s 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.

Trade Bitcoins, Ethereum, Litecoin Online

I frequently get asked about how to trade crypto currencies. Aspiring traders see the daily swings in the bitcoin price and wonder whether they should take up trying to pick the highs and lows by trading. This post will describe some trading methods and provide you with a list of venues where you can trade.

The first thing to understand about crypto currencies such at bitcoin, ether, and litecoins, is their value is represented by their market price which is simply set by the powers of supply and demand. There is no central authority that determines their market price, so if you want to profit from the daily price swings, you’ll need to have a trading strategy that takes advantage of this volatility.

You’ll also need to choose your trading venue(s). Where you trade will be based on your trading strategy, but also on your legal/tax jurisdiction. Since you’ll need to comply with the laws of your local government, you should choose exchanges that are compliant for you. The place where you trade will be different if you’re American, Canadian, European, Japanese, etc. And sub-state governments such as provinces and states will also have their own laws. It’s common today for each US and European state to regulate bitcoin differently so do careful research to ensure you are trading in a tax compliant way.

The place(s) where you trade will also depend on your strategy. If you are arbitraging the bitcoin price between different exchanges you’ll need to hold accounts at more than one place, and also have wallets that serve as conduits/transfer nodes for cash, if you’re making your trades manually you’ll be more concerned about the trading dashboard and other human readable analytics, but if you’re using a bot to conduct your trades you’ll need the best API access with easy to use functionality.

Here is a step-by-step tutorial of how to trade on QuadrigaCX, a Canadian based bitcoin exchange. Once you open your account, you can fund it with Canadian dollars using Interac if you verify your account. You can also fund your QuadrigaCX account with bitcoin, ethereum, and litecoin without verification.

Once logged into QuadrigaCX, choose the “trade” tab from the header menu near the top of the page. As the image below shows, you’ll arrive at a page that shows the current market for CAD/BTC with a simple interface you can use to buy and sell. You’ll notice the best bids are listed on the left side in green, and the best offers are listed on the right side in red. These prices are bids and offers from other users on QuadrigaCX just like yourself who are buying and selling. You might be familiar with a market like this since it operates just like a stock market such as the TSX and NASDAQ.

 

 

You’ll notice on the image above, the current market has a best bid of $9,995.01 and a best offer of $10,000.06. This means another user is willing to buy at $9,995.01 and another user is willing to sell at $10,000.06. If you’d like to make a trade right away (a market order) you can sell to the user bidding $9,995.01 and buy from the user offering $10,000.06.  Depending on your trading strategy, you might only be willing to buy at $9,500, so in this case, you can place a order at that price and join the other bids in the order book. Your order will be placed with the quantity you determine at $9,500 until the market drifts down to that level and another user chooses to sell you their bitcoins at that price. Conversely, if you’d like to sell your bitcoins, but only at $10,500, you can place this order as well.

On QuadrigaCX, limit orders placed manually on the dashboard do not have expiration dates, so all orders are essentially good till cancelled (GTC).

As you review the order book from the image above, you will also notice an “amount” beside each price listed in the order book. This is the quantity being bid or offered by all users at that price. This quantity will help you determine whether your order can be filled entirely at the posted price or whether you should choose to pay up or offer down from the best posted price.

 

 

When trading, always keep the fees in mind QuadrigaCX charges an explicit fee of 0.50% per transaction. So if you buy 1 bitcoin at $10,000 CAD, your actual cost will be $10,050. You should also pay attention to the “spread”, which is the difference between the best bids and offers. Using the example above, with a current bid of $9,995.01 and an offer of $10,000.06 the spread is $5.05 or 0.06%. The spread represents an implicit cost of trading too.

Here’s an example of an easy to implement manual trading strategy with a bullish bias. Say you have $1,000 CAD to trade with, you’ve noticed the price of bitcoin is quite volatile, so you plan to make a market on QuadrigaCX to take advantage of this volatility. You will risk 10% of your account with each trade so your unit size will be 0.01 bitcoins since the current price is $10,000.

You place an order to buy 0.01 btc @ $9,993, which is slightly below the current market price using the example image above. You place the order and wait for the market to come to you, when your order is filled, place an order that is 3% above your purchase price (9993 * 1.03 = $10,292), enter your order to sell 0.01 btc @ 10,292 and leave the order in the market.

In the meantime, if you’re still feeling bullish, place another order below the current market, and if this order is also filled, place an order 3% above your fill price. Keep doing this until you reach the maximum value of your account. As you do this, the price of bitcoin will bounce around going up and down, and your orders will fill at prices where you make a spread between your buys and sells. You profit when the price of bitcoin trades within the range of volatility your limit orders imply, and you lose when the price of bitcoins drops straight down.

This is a simple market making strategy with a bullish bias that takes advantage of the volatile price of bitcoin. You can obviously tweak your own strategy to suit your own goals. You could use technical analysis to choose your entry and exit points, etc. Its completely up to you!

Follow this link for a long list of exchanges from around the world.

QuadrigaCX Common Account Verification Questions

Opening an account at QuadrigaCX is the best way for Canadians to buy and sell cryptocurrencies such as bitcoins, ethereum, and litecoin. If you are a Canadian who wants to begin trading or investing in cryptocurrencies on a safe Canadian based bitcoin exchange then you’ll need to open and verify your QuadrigaCX account. It might seem daunting at first, to give QuadrigaCX your personal information, but this is for your own safety since QuadrigaCX is complying with all Canadian money laundering law (AML) so you can be sure you’re following all relevant Canadian laws by using QuadrigaCX.

To verify your QuadrigaCX account, you can either connect your Equifax account, or you can upload your identification manually. The information required includes:

  • A Photo or scan of a Passport or Drivers license – must be in colour
  • A Photo or scan of a bank statement or utility bill showing your name and full address
  • A Photo of yourself holding the government issued ID that you have provided

When I registered, I took a picture of my drivers license from my phone, I downloaded a copy of my phone bill from Rogers.com, and I took a picture of myself holding my drivers license. A few minutes later, a representative from QuadrigaCX called me to confirm my identity, and even asked me to confirm some credentials listed on my LinkedIn profile.

 

 

Here are some common verification questions:

How long does ID & Address verification take?

ID & Address verification is processed manually by the QuadrigaCX Fraud & Compliance team and they aspire to process all new applicants within 72 hours. However, during times of incredible demand for crypto-currencies, there may be delays.

What do you require for ID & Address Verification?

QuadrigaCX uses a manual process performed by members of their Fraud & Compliance team.

Requirements:
– Photo or scan of a Passport or Driver’s license – must be in colour
– Photo or scan of a bank statement or utility bill showing your name and full address
– Photo of yourself holding the government issued ID that you’ve provided. In the same picture have a note that reads “ID VERIFICATION FOR QUADRIGACX.COM” along with today’s date. Make sure your face will be clearly visible and that all ID details are clearly readable.
– Business accounts are required to provide an extra document that supports you are in control of the company, such as articles of incorporation and corporate resolutions.

All of these requirements must be uploaded via the secure file upload within the verification section.

Does QuadrigaCX accept international IDs?

Yes, QuadrigaCX accepts IDs from almost all countries with the exception of the Unites States of America. Canadian Money Service Business (MSB) laws prohibit QuadrigaCX from servicing clients within the Unites States of America. QuadrigaCX will not service US citizens or clients utilizing bank accounts domiciled within the Unites States of America.

Do I need to be verified to trade on QuadrigaCX?

Verification is not required if you plan to fund your QuadrigaCX account with bitcoin, ether, or litecoin and then trade on the exchange for any other fiat or crypto currency.

How does the verification process work?

For Canadian users, QuadrigaCX offers two methods of verification. To become verified, users must complete at least one of the two verification methods:

  1. ID & Address verification where you securely upload copies of your ID and proof of address.
  2. Instant verification in partnership with Equifax where you are served multiple choice questions based on information within your credit file.

By completing either form of verification you enable numerous funding options. Users who complete ID verification gain maximum Interac Online limits and those who complete both methods of verification unlock additional access to EFT (Electronic Funds Transfer) funding.

Do I need to be verified to withdraw?

Verification is not required withdraw any fiat or crypto currency from the exchange. Verification is only required to fund your account with CAD or USD.

How to Trade on an Exchange

This post will examine the way a price is formed on an exchange, and also show you how to trade on an exchange, whether you are trading stocks, options, or bitcoins.

What is an exchange?  An exchange is an organized market where things are traded. An exchange is a bit different from an informal market because an exchange provides a venue, standard rules, and becomes the host that participants can trust. In an informal market, traders must rely on the credit worthiness of each other in order enforce agreements. An exchange provides a middleman function that facilitates trade. The venue (whether its physical or digital) provides a place where traders can go to view prices and volume, and get information on the underlying market. Standard rules means that traders don’t have to negotiate specifics each time they make a transaction on an exchange, they can simply rely on the exchange’s standard rules, this promotes fungibility of the underlying things being traded.

Exchanges make money by charging fees to users. This usually comes in the form of a fee per transaction, but can also come in the form of a fee for the right to participate or to provide brokerage services (historically referred to seats). Exchanges do not get involved as principals or agents. The principals to each transaction are the proprietary traders and the agents are the brokers working for their clients. This way, the exchange does not take positions, and so does not take any market risk. Sometimes, a clearinghouse is used by an exchange in order to store the credit risk of market participants. A clearinghouse provides another layer of security to market participants, and especially in markets with leverage such as futures/options, a clearinghouse reduces credit risk and allows participants to trade anonymously, which further facilitates trade.

So you have some basic understanding of free market economics, and you want to get involved, where do you begin? One of the greatest strengths of our modern world is that anyone with access to a computer and an internet connection can get involved in trading on exchanges. With the advent of crypto currencies, there are very low barriers to entry. If you want to trade stocks on recognized exchanges such as NYSE and Euronext, you will need to hold an account with a registered broker in your jurisdiction. This can be difficult if you live outside of a rich country, but anyone can open an account on a crypto currency exchange such as Bitfinex, Poloniex, and Deribit.

Once you have decided which exchange you want to trade on and what your trading strategy might be (write it down or e-mail it to yourself), you will need to open an account and make a deposit to the exchange. In the case of a crypto currency exchange, all that you’ll need to disclose about yourself is a username/e-mail/password. Your account may be restricted in some ways (maybe deposit/withdrawal limits) unless you disclose more information, but an anonymous account is a possible way to start. Once your account is opened, you will need to make a deposit. You’ll need to navigate the process the exchanges provides to you.

After you’ve made a deposit, you can enter the market and make some trades. Whatever your goals might be, you’ll need to begin by be offering what you have deposited for sale, or putting up your deposited funds as collateral to make a trade. Let’s walk through an example using a deposit of bitcoins on Bitfinex.  The first thing you need to do is obtain some bitcoins, then you’ll need to open an account with Bitfinex and send those bitcoins to your Bitfinex account. Once your bitcoins are being held in your Bitfinex account, you can trade those bitcoins for another currency on the exchange. You can begin to offer to sell your bitcoins for ether on Bitfinex by finding the market for that pair, and viewing the current order book.

The order book for eth/btc on Bitfinex will show all the bids and offers for that pair. The bids are the amounts/prices that other traders are willing to buy, and offers are the amounts/prices that other traders are willing to sell. If you want to sell btc for eth, then you will place an order to sell, and join the offers. If the highest bid is 13 and the lowest offer is 14, then this means the market price will fall someone between those two prices. If you want to sell at the market, you can enter an order to sell your bitcoins at a price of 13 and this will result in a “fill” because you have taken your order “to the market” and “hit the bid”. If you decide that a price of 13 is too low, maybe you think a price of 13.50 is the price you want, then you can enter an order to sell your bitcoins for 13.50 and this will result in your order being the best offer, and make the current market 13 bid and 13.50 ask.  Your offer to sell at 13.50 will join the order book until which time another trader decides to make an exchange with you at this price.

As you can see, exchange prices do not arrive out of thin air. Prices are determined by the interaction of buyers and sellers, bids and offers. There is no central authority that determines prices in a free market on a fair exchange. There may be factors that can influence the decisions of traders, but they are still free to determine the prices they are willing to buy and sell for.

Continuing with the example above. If the current market is 13 bid and 14 ask, and you decide that your bitcoins are worth more than 14, you can enter an order for a higher price, at whatever level you decide. You can even offer to sell your bitcoins for 16, 50, 1,000, or any number, and your order will join the order book. If you choose to offer your bitcoins for sale at 20, your order will join the offer side of the order book until which time you cancel/change it or another trader buys your bitcoins from you at that price. Remember, if the market is currently 13 bid and 14 ask, traders will only buy your bitcoins at 20 when 20 is the best offer. This means that all the other offers in the order book between 14 and 20 must either be cancelled or filled, basically, the price must rise to 20 for your order to be filled.

At first, you might be confused by the functioning of a free market, but I think once you make some trades and see how an exchange operates, you will become more comfortable with the strategies that other trades and market participants discuss.