On: Bitcoin August 14 Flash Crash

[diminoten]

So just to make sure I understand, when BitFinex offers leverage trading, are they betting that the price of Bitcoin won't go up as high as the folks asking for leverage think it'll go?

If not, why do people offer leveraged trading? Just for the interest? A fee?

[Guvante → diminoten]

> why do people offer leveraged trading

Bitfenix doesn't provide the leverage, they use other trades to provide it.

Those traders get hourly interest for participating.

If you have a balance and you don't want to use it, loaning it out can make some money you wouldn't otherwise get.

It is similar to loans but on a shorter window.

[tedunangst → diminoten]

A broker offering leverage is earning interest nearly risk free. They retain control of the collateral and can (as observed) force close the position. Only in really extreme situations is their money at risk.

[_2avo → diminoten]

Correct, but it is actually other users offering the leverage. Bitfinex created a P2P market for it. If you offer your USD as leverage then you receive interest.