Show HN: I built a live Bitcoin price aggregator with multiple indexes(live.bitcoinindex.es) |
Show HN: I built a live Bitcoin price aggregator with multiple indexes(live.bitcoinindex.es) |
- Say I have 11 BTC on Coinbase.
Wire $10k to OKPAY ($25 bank fee, 0% OKPAY commission)
Send OKPAY money to BTC-E, $200 fee (2%).
- Now I have $9,775 on BTC-E.
Within ~1 second of each other, I enter a market order to buy 10.754 BTC on BTC-e for $9,775, and sell 10.754 BTC on Coinbase for $10,488.21 (after their 1% fee).
These are the real market rates at the time of this post (accounting for book depth). I make $488 with no risk other than holding the Bitcoin for awhile, which anyone holding Bitcoin does anyway.
Before I attempt to do this and find out the hard way why it ends up costing me money in the process, could someone please kindly point out the flaw in my plan?
And at last, your arbitrage profit will get severely eaten by the fees of the banks and BTC exchange platforms.
It's never easy to make a profit in an arbitrage scheme (unless you have a crushing competitive advantage such as transaction speed): if it were easy, enough people would use the scheme, bringing the price differences back to a range were turning a profit would be difficult again... so if there are significant price differences between exchanges, it's a signal of arbitrage difficulty.
You could also simply buy on BTC-e, transfer bitcoins to Coinbase, sell on coinbase.
It's pure arbitrage.
Also while all your transfers are clearing bitcoin could swing one way or the other totally screwing things up (coinbase takes several days to clear bitcoin buys (not sure about sells))
As for risks:
It just takes too much time to buy bitcoins with dollars/sell with dollars on some of these exchanges, which is why this is possible.
Kind of like http://bitcoinaverage.com/ does, but with a nice chart like http://bitcoinindex.es/.
I suspect the visualized data will be much more interesting, since different local economies behave differently. For example, when BTC was "crashing" yesterday to $850 USD, Chinese trades were still holding well about $1000 USD. Eventually the arbitrage opportunity becomes too big and the gap is closed. Watching this is fascinating.
I think it would have some kind of restful API.
Secondly, I know hardly anything about bitcoins - but here all I see is an arbitrage opportunity. Buy bitcoins from BTC-e and sell them on MTGox, which seems to be consistently around 150 (I assume USD) different.
Am I missing something here?
EDIT: This only worked until the end of may - I've just noticed that OKPAY withdrawal is no longer an option: https://www.mtgox.com/pdf/20130528_okpay_statement.pdf
What do you use for a stack?
Do you think the API for borrowing a deflationary currency should have a different API than an inflationary one?
Sounds like you're very knowledgeable about the money-lending space. Where do I send my money?
Worth checking out while doing research.
Instead of lending, what about investing in startups using bitcoins?
Is this something that can be written into the Bitcoin protocol?
But as a borrower, deflation blows. If I borrow 100 BTC and the terms of the loan are that I have to pay back 100 BTC + 10 BTC as interest, but the value of BTC has increased by another 10% I'm really paying 21% interest on the loan.
But as a borrower, inflation rocks. If I borrow 100 USD and the terms of the loan are that I have to pay back 100 USD + 10 USD as interest, but the value of USD has decreased by 10% I'm really paying 0% interest on the loan (actually, I might be able to beat inflation and come out ahead).
This goes back to what I mentioned in another thread [1] about buying and selling in either type of currency.
Let me hand wave some things, we'll assume that the real value of an item or ROI is static, and only the nominal value is changing with inflation or deflation.
Inflation: I borrow money to buy an item. I pay interest on the loan, and gain the benefit of having the item today rather than a year later when I would have saved up the cash. Over that year I pay off the loan, but with inflation I may get a discount of sorts on the item. If inflation is 10%, the nominal value is 10% higher the next year. If the interest payment is less than 10% I've saved money. If it's more than 10%, hopefully there was a profit in having the item now rather than later or I lost money.
Deflation: I borrow money to buy an item. I pay interest on the loan, and gain the benefit of having the item today rather than a year later when I would have saved up the cash. Over that year I pay off the loan, but with deflation I have an added cost. If deflation is 10%, the nominal value is 10% lower the next year. If the interest payment is negative ~10%, I've saved money. If it's higher, then hopefully there was a profit in having the item now rather than later or I lost money.
In fact, that matrix is essentially the same. Borrowers win in inflation (or might), while lenders might lose (but it beats leaving the cash under the mattress where it will lose value). Borrowers lose in deflation in most circumstances, while lenders win as long as borrowers don't default too often. Lenders under deflation have to be confident that the expected ROI of their loans will beat the deflation rate, or they might as well leave the cash alone. Lenders under inflation are virtually guaranteed that reasonable loan practices (subprime mortgages being an example of unreasonable loan practices) will be better than sitting on the cash if the economy is otherwise stable.
That doesn't really answer the question. Grandparent wasn't asking "Why would you want to borrow BTC?". It was asking, "Why would you want to borrow in a deflationary currency such as BTC rather than a traditional, inflationary currency?"
As others have pointed out, the most obvious practical reason why a borrower might specifically desire a BTC-denominated loan is in order to short sell Bitcoin. For something like a business loan, it seems intuitive that choosing BTC over a traditional currency would accomplish little aside from maximizing the interest rate on your loan (in real terms). Admittedly there may be plenty of unwary buyers who'll happily enter into a loan like that without doing any math first - the entire payday/title loan industry is built on this fact - but an operation relying on that unfortunate fact doesn't jibe too well with the stated goal of behaving more ethically than the existing financial establishment. So hopefully there's something else to it?