My Bitfinex story and the solutions

Since the day I started trading Bitcoin, I’ve been in constant stress about the exchanges. I was lucky to avoid Mt. Gox and didn’t lose anything from Bitstamp, Cryptsy and Gatecoin. I was constantly scared that I would end up losing money from a collapse and not from my decisions. Well this time has finally come and I can stop trading Bitcoin (at least in centralised exchanges)

When the price was around 650$, I bought 1 Bitcoin and I knew that if the price would drop more than 30$ I would have to sell it. I used my entire balance to buy that Bitcoin and luckily, I decided that near 600$ I should sell 0.5, because I wanted to re-buy at lower prices. This is the best lesson to me in terms of ALWAYS USE A STOP LOSS. This time the loss was 300$ when I could had gotten away with just a 30$ loss. I don’t have big sums of money and I really depend on trading. So to someone 300$ might seem like nothing, but to me even that is important.

I was a fan of the margin trading, because I didn’t want to hold any BTC. When the problems started with the margin trading, I decided to stop using their margin. I also wanted to use as much leverage as I could, just to make sure than in case of a hack, that I wouldn’t lose too much money. In the past, when I used margin trading and they had problems, they made me whole by covering my losses. That was a thing that unfortunately made me trust them more, but lose faith in their ‘margin trading’. Since that CFCT fine came out, I started worrying about their constant losses. They got hacked, then they had to cover customer losses and they had to pay a fine too, so I could put off using leverage.

Not having cold storage seemed inconceivable to me. I fell on this trap because, when BFX was hacked and they lost only 0.5% of their balance, as they used hot and cold storage. When the CFCT announcement came out, I was only worried about the fake name I put on the exchange, as I thought this could affect me if they started asking for ID etc, not that they would start this mental individual account thing... Now, if they require account verification and I am unable to buy ETH, ETC or LTC for a premium I will never be able to withdraw my funds…

Kraken and BTCC are the only exchanges I would currently trust, but to me, Bitcoin trading is over. Outside hackers are not a danger anymore. Insiders are.

Tether is still relatively unsafe. Read their TCs before you purchase and trade Tether. For example, what would happen if they lost control over their main issuing account? Omni is relatively good and the OmniDEX might be good, but I still wouldn’t trust. It is a new technology and it is being upgraded frequently.

Bitsquare sounds promising, but it is still illiquid and you have to trust the other party in order to get your cash. Chargebacks and collusion of buyer and arbiter are very possible and with specific methods might be unavoidable.
Bitshares is a decentralised asset exchange that is relatively fast and secure. You could trade BitUSD and BitBTC which are collateralised assets pegged to real assets. The only problem is that the collateral is in Bitshares tokens, which are highly volatile and the price feeds are based on a community elected committee. At the moment these markets are very illiquid and there are many problems that need to be fixed.

Possible solutions :

Lighting Network + separate customer accounts for FIAT like FXCM does, so in case the company goes bust, the deposits are not affected. I think there is a start-up that is trying to do that and I am looking forward to it, or even Lighting Network + Lighting OmniDEX (Tether)