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.
Bitfinex, a cryptocurrency 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. 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 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 cryptocurrency 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 coming days and weeks, and I expect the liquidity for Euro loans on Bitfinex will rival that of the 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). Considering the problems inherent with the convertibility of USD tether, though, 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.