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1/ Some people gave most of the story here. b) BTC/USD becomes rich on Bitfinex c) people send BTC to Bitfinex d) people sell BTC for USD on Bitfinex e) people withdraw USD from Bitfinex f) people send USD to other exchanges g) people buy BTC, completing the arb

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2/ This means that crypto is moving in and fiat is moving out, thus the net BTC inflows. Note that selling BTC/USDT does *not* explain this. (a) you would likely just see USDT crypto outflows; (b) the BTC/USDT arb is generally kept in line between BFX and other exchanges.

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3/ So that's most of the story. But we're missing the character development. I started at (b). What's (a)?

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okay sam -- got a theory. would love to hear your thoughts. paolo may be right that premium is a potential indicator of whale net positions. Finex was bearish @ 20k top range, bullish @ 'crypto winter' phase, bearish after (by comparison), gradually bullish as we've broken down.

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this would mean premium is caused by whales accumulating longs & seems to counter-trade price action which you'd expect of whales. i don't buy the arb argument. finex has had ~$50m avg. 1d vol. past 30d. $300m surplus of inflow:outflow over same period (+$10m surplus / day)

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with that kind of volume, i believe the arb would have been eaten up by now. also -- if the argument is arb is maintained and exploited by the same parties... that further casts doubt as there isn't enough meat on the bone with current volume to run an op like that imo.

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arb is possible but it needs backchannels for instant deposit to instantly sell and utilize the arb in real time, or a huge stash already on both exchanges -- but if it's a huge stash already there, that destroys disproportionate inflow narrative.

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so i think the premium is mostly the simplest explanation -- finex is more bullish than the market. and historically they seem pretty good at countertrading the market.

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maybe there's something simple i'm seeing that destroys all this. happy to be wrong and learn. this is what i've come to at this point. would love to hear your thoughts!

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would love to hear your thoughts on the above too if you have a moment! tear it to shreds if i'm totally off here! thank you

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What's the rate-limiting step on the arb? An arb is as slow as its slowest component. And accumulating a +$300m long position on BFX over the past month--that sound familiar? FWIW I think your eval of why the whales are long is reasonable!

8:28 PM · Jan 6, 2020Twitter Web App

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okay so maybe this is crazy but -- > borrow on bfx > if you're whale, negotiate to split arb w/ bfx > lender gets their interest (cut of arb). > whale generates free USD > whale goes long with free USD > bfx premium simultaneously arbed and lifted by cycle

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also, thanks, and i appreciate that you are pandering like crazy too lol.

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