How To Trade Factom

The hottest new altcoin on the block is Factom (FCT). Factoid is the token used to power the Factom protocol. Although technically incorrect, BitMEX calls the token as Factom. Now that Factom is freely tradable, this post will explain the different ways to express bullish and bearish views on this new cryptocurrency.

Spot Trading

Buying and selling Factom on a spot basis is quite simple. The most liquid Factom currency pair is Factom/Bitcoin (FCT/XBT). Poloniex is the leading exchanges by volume.

Buying Factom

To buy Factom, send Bitcoin to the exchange and exchange it for Factom. This must be done on a fully funded basis (i.e. there is no leverage).

Selling Factom

If you hold physical Factom, you can exchange it back for Bitcoin. Selling Factom you don’t possess is not possible.

Leveraged or Derivatives Trading

For most of the readers of this blog, leveraged trading / speculating presents a more interesting way to trade Factom. With the exception of Bitcoin and Litecoin, leveraged or derivatives trading on altcoins was not possible. BitMEX recognised that Bitcoin traders would like to speculate on Factom with leverage and using only Bitcoin as margin.

BitMEX recently launched the FCT7D, a weekly expiring FCTXBT futures contract. Each FCT7D contract represents 1 FCT. The contract expires each Friday at 12:00 GMT on the FCTXBT exchange rate. All margin, profit, and loss are conducted in Bitcoin. The maximum leverage allowed is 10x.

Buying Factom Futures

BitMEX Factom futures contracts allow traders to speculate on the future value of the FCTXBT exchange rate. A trader who wishes to go long 1,000 FCT, must buy 1,000 FCT7D contracts. The beauty of FCT7D is that it requires Bitcoin as margin. The maximum leverage is 10x. If the FCT7D price is 0.005, the trader must post 0.5 Bitcoin as margin (1,000 Contracts * 0.005 FCTXBT * 10%). If the price rises to 0.006, the profit is 1 Bitcoin = (0.006 – 0.005) * 1,000.

Selling Factom Futures

Short selling, or selling something you don’t possess is usually impossible with altcoins. Using FCT7D, traders are able to placed leveraged bearish bets on Factom as long as they own Bitcoin. For example, a trader who wishes to go short 1,000 Factom, must sell 1,000 FCT7D contracts. Again only Bitcoin is required for margin. If the FCT7D price is 0.005, the trader must post 0.5 Bitcoin as margin (1,000 Contracts * 0.005 FCTXBT * 10%). If the price falls to 0.004, the profit is 1 Bitcoin = (0.004 – 0.005) * -1,000.

Placing leveraged trades, and shorting Factom using only Bitcoin is only possible with BitMEX’s FCT7D futures contract. FCT7D Contract Description

Start Trading Factom Now

China Hosing Market On Leverage – Translated From CaiXin

0308a   A couple has a house in Beijing. I put the house under my wife’s name and fake a divorce. Now that the house is worth 7 million, I make her to sell the house to me for 10 million using a down payment of 3 million and a mortgage of 7 million. This way we can both live in the same house, and get an extra 7 million. Perhaps we could invest this 7 million and pay back the mortgage!

If the price of the house falls, we can just default and let the bank take our house, which is equivalent of liquidating our house at the peak. If the housing prices continue to rise, we can earn the difference. Many people in Beijing, Shanghai and Shenzhen are doing this, and this is how the subprime mortgage crisis begins.


The housing market has become the hot thing, even Dama (the middle aged woman) on the way to work are looking at house prices. And what’s special is that the “get-rich-quick in real estate cheat” (the quoted lines above) are all over social media. I guess I am outta my mind.

Currently, what this “cheat” is trending on social media networks. However, a house worth 7 million but getting a 7 million mortgage is actually a zero percent down payment. This is similar to the subprime mortgage crisis of 2008 where banks in America were lending to low income people with 0% down payment.

Perhaps some might be excited to see this piece. But this might not be logically correct.

Time for facts

1、Banks have risk management teams, and it is not a guarantee that a mortgage will be granted!

If you want to buy a house that is guesstimated to e worth 7 million at 10 million, this is far more expensive than similar properties in that area. It doesn’t take a genius to notice the problem here. Moreover banks are for-profit, their employees have a standard policy for granting mortgages. They certainly don’t want bad debts over their books. To control risk, banks will also guesstimate if the price is reasonable. If you are smart, the bank’s gonna be smarter than you.

China is a country where a good relationship gets you anything. Is that the case? Yeah, you can try to bribe the loan officer, but the cost might be too high. With the anti-corruption trend in China, no one knows if this will still work.

Perhaps  we can sell it at 7.5 million instead of 10. But morally, getting divorced for that small amount of money isn’t worth the price. You know how troublesome relatives get once they know this… right?


2、Do you know how financially sound you have to be to get a 7 million loan on a 10 million property?


Let the real estate agent tell you! When you apply for mortgage, the bank need to justify your ability to repay, you are required to submit proof of income. You might say that you could provide a fake one. But once the bank finds out what you are doing, your personal credit is ruined. Coz who will lend to a liar!

Even accounting for all the discounts you get, you are going to pay back 30 thousand per month on that 7 million mortgage. Most banks requires the repayment amount to be less than 50% of your monthly income. This means you must have a 60k post-tax monthly income to get that mortgage.

Are you sure that you have that income level? If you are a successful person, it is not worthwhile for you to do all of this to earn the difference. Coz the last thing you need is money!

3、Do you think getting 7 million in cash is the end of the story? NOPE! Now you have to pay the interest on the  10 million loan.

How can you be certain that your 7 million is going to grow? You need at least 4% APR to cover the interest from the mortgage.

You can invest in financial products (eg: Lufax), but with recent reserve ratio reduction and other monetary policies, do you think interest rates on these products will remain high? Do you really trust your money invested in these high yield products? Can’t you see what happened with E-ZuBao (The p2p lending scheme, which turned out to be a beautifully marketed ponzi scheme)?

By that time, not only have you lost 7 million, but you still need to pay back your loans. Your money is gone, your wife is gone too! Why risk it?

4、Do you know that’s a crime?

Cashing out like this is not a good strategy. If you are doing this, you’re pretty much a gambler. What you need to know is that you are committing a serious crime.

China is a society with Rule of Law, and the government is putting serious effort in banishing financial crime. If you have a look at the Criminal Law of China, this falls in to the category of Financial Fraud.

What is a Loan fraud? By lying to banks or other financial institutes for the purpose of obtaining a loan for a large sum of money, you may be prosecuted for no more than 5 year behind the bars and penalty of 20-200k CNY. For even greater fraud, the sentence could be up to life imprisonment and confiscation of all assets.

Do you think you could get away with this?That’s a crime! Got it?

When the property market is booming, perhaps only the rich should speculate. If you can’t afford it, then don’t invest. If you are rich, don’t use leverage. If you are brave and rich, have fun gambling. But once the bubble bursts, you will definitely lose more than having money in the stock market crash.

Time to analyse the risk

Leverage on housing market

Many have been predicting the market will crash. China’s housing market has finally entered the crack up boom phase. Just like A-shares SZ index climbed to 5000 last year, the big traders are conducting arbitrage; while other investors are being short-squeezed resulting in them using leverage in an attempt to make back what they lost. The PBoC’s recent action is just giving greater leverage to investors!

The craze of the housing market originated from Shenzhen. In 2015, new property prices grew 47.5%, which was greater than the 42.6% growth for second-hand ones. While in Hong Kong, the housing market has softened. What a weird phenomenon. From the beginning of the year, first-tier cities’ property prices have grown like Shenzhen’s. What the heck is happening?

Centaline Property data shows that in 4Q15 second-hand housing prices fell 6.9% in Hong Kong, its biggest quarterly decline in seven years. On January 20 2016, Henderson Land’s new Mid-Levels luxury property 帝汇豪庭 announced its first pricing numbers, which were down 30%. At the same time, land prices fell more violently. On February 12 the Hong Kong Lands Department’s first auction since the Chinese new Year, the residential area in Tai Po Area sold for 19.8k per square ft., which is down by a whopping 70%. This is half the price of Beijing’s 6th-Ring.

The falling land prices in Hong Kong is due to the negative view of China and Hong Kong economy. Li KaShing is leading the charge by divesting his property holdings in Hong Kong and shifting capital to other places around the world. This macro view should have been the similar in Shenzhen. What’s different:

1: Commercial banks in Hong Kong are privately owned, and have gone through multiple recessions. They are sensitive to the risk of default. While China’s commercial banks are controlled by the state. They haven’t gone through the pain of a housing crash.

2: HKD can be freely exchanged, the the market can create an equilibrium quicker than in Shenzhen.


According to a friend that is familiar with Hong Kong and Shenzhen, The reason why only Shenzhen had rising new development property prices is because the whole pump is initiated from foreign capital and Hong Kongers. Those who sell the properties are the bosses of a foreign company, where those who buy the properties are the employees of the company. All they need is to sign a working contract and income proof for them. The boss will pay the down payment, then the bank will  lend 70-80% to the boss. This is equivalent to ~70% LTV (loan to value) if the house price had risen. This ratio is far higher than a normal mortgage LTV of 50%. After the bosses receives the cash, they will use their company to shift the cash out of China and convert to USD, and wait for the CNY to devaluate. Their employees get a free mansion to live in. Who cares what happens next.

Because of this, housing prices in Shenzhen have risen in an unhealthy way. Some are FOMOing into the market, some are squeezed. This is similar to those who bought stocks when the Shanghai Composite was above 5,000 last year. As a result, Shenzhen housing prices have gone mad.


According to the data from PBoC, in 2014 the outstanding mortgages reached 529 Billion Yuan in Shenzhen, above the 452 Billion Yuan outstanding in Beijing. The mortgage to total lending ratio in Shenzhen reached 22.41%, 1.7x and 2.25x that of Shanghai and Beijing respectively. Since the new housing policies in September 2015, leverage has risen even higher in Shenzhen . Leverage increased 7.5, 11, and 16.3 Billion over the next three months.

This abnormal way of pumping the market and cashing in from mortgages has spread across first-tier cities in China. In September last year, the PBoC and CBRC jointly announced “Notice further improve differential housing credit policy related issues”,  which reduced the down payment for first time buyers to 25%, and allowed commercial banks to adjust to a minimum of 5%.

In Feb 26 this year, Zhou XiaoChuan said the logic of adding leverage to housing market is sound. He also said the housing market has great potential, and the personal mortgage loans to total bank loans ratio is still quite low. Therefore, down payments could be further reduced. The PBoC can also provide more power to the banks and let them decide the down payment and interest rate.


Property is the biggest portion of  citizens’ wealth, ~50%, the rise of housing prices means that the purchasing power of  CNY had fallen relatively. With the PBoC still trying to not devalue the CNY and reducing reserve ratios, commercial bank loans reached 2,510 billion. There is now more pressure to devalue the CNY.

Rising housing prices are very attractive. A lot of cash in China is going to push the housing market higher, preventing citizens from converting cash into USD, which reduces the pressure on the FX reserve balance. In addition to the approximate $ 1.1 trillion of short-term debt of which about $ 1 trillion is pledged to foreign investment products, as of 2016 China’s central bank announced foreign reserve balance of $ 3.23 trillion, and even accounting for bad debts it is still insufficient to cover the FDI (foreign direct investment) outflows.

The boom of housing market locks up a great amount of cash, which reduces citizens’ Gold, Silver, etc. buying power. If CNY greatly devaluates in future, citizens will have no means to escape.

All in all, 2016’s housing market boom is similar to the stock market in 2015. The differences are:

1: Market cap of the housing market is 10x of stock market

2: Not many people used leverage in the stock market, but 3-5x leverage is typical for the housing market. A 50% fall would bankrupt many more investors, compared to the stock market crash last year.

Translation Of Chinese Miner Consensus Meeting

Title: Support 2MB fork, reject any fork with <90% consensus

Author: LitecoinFarm – Jiang Zhuoer

On 23 January 2016, one of the coldest days in Beijing, HaoBTC organised a Bitcoin meeting to let participants discuss the Bitcoin network’s capacity, forks, mining, Bitcoin’s outlook, and more.

Regarding the block size increase, participants have made the following decisions and hope other Bitcoin enterprises and users will follow:

1: Increase the Bitcoin block size to 2 MB
2: Refuse to support any fork that has support of less than 90% of mining capacity

The 2MB block size originates from Satoshi Nakomoto’s whitepaper: “A P2P Electronic CASH System” instead of “A P2P Electronic SETTLEMENT system”. According to Satoshi’s design, Bitcoin is to be used as a transactional currency instead of for settlements. A 1MB block size limit does not satisfy the goals of a transactional  currency, and possibly not even a settlement one (note: 1MB ~= 7 tx/s, SWIFT ~=60 tx/s).

As for the 90% consensus requirement, the purpose is to ensure the Bitcoin community can develop in a healthy and sustainable manner.

Representatives from HaoBTC, Bitmain , Antpool, Antminer, BTC123, Yunbim Bither, Bikan, SosoBTC, and more.

More About The Consensus Mechanism

As we all know, the block size discussion is no longer purely a technical discussion, but has turned into a political issue.

During the Miami Bitcoin conference, there was no consensus among the community. To prevent the community from forking, we should try to lower our limit and accept others’ opinions, and at least achieve and some basic improvement. The consensus threshold should be high enough to prevent the community from breaking and to ensure future functionality.

Though the consensus we arrived at is not a big one; there are still plenty of people that hold the view of “1MB block size is sufficient” . We have made a small but great step towards raising the limit to 2MB. The problem with increasing the block size is that there are many conservatives believe risking a hard-fork would be very harmful to Bitcoin . Some rejected Classic not because of proposal to increase the block size, but because of the hard-fork risk, especially when only 70% network consensus is required. With the 90% agreement, we have made a great attempt to resolve the concerns of the conservatives.

Therefore the 2MB limit and 90% fork consensus should bring us to a more acceptable fork, and we wish to see consensus on other issues (e.g. increasing unconfirmed tx).

Under the 90% & 2MB consensus agreement, some have suggested the following:

1: Blocks are full
2: Core proposal is <2MB
3: Classic proposal have not gained consensus

Under the 90% hash power condition, switch from a 1MB limit to a 2MB limit to deal with the block size problem.

Segregated Witness
Core is attempting to use the Segregated Witness (Seg Wit) approach to solve the block size issue. While this has great potential, there are security concerns.

First, assuming Seg Wit is used by all one-signature tx, the effectiveness of it is only equivalent to a 1.6MB block size. Because of the complexity and development needed for Seg Wit, some may refuse to employ the update. Assuming 50% of tx use Seg Wit in 12 months, this is equivalent to a 1.3MB block size, which is pretty useless.

Second, Seg Wit requires a lot of manipulation of core components of Bitcoin, which carries a lot of risk. Bitmain CEO: “Currently Core devs are working overtime to catch up with the development schedule. We all know what will happen if we can’t get enough sleep and code on…”

Historically Bitcoin is far from “reliable” as we have all experienced. For instance, we had a ValueOverflow incident on 2010/08/15 in which billions of Bitcoin were generated in 1 single block. Once such issues occur, Bitcoin’s price will go down by a magnitude of 10 and destroy its reputation. Rejecting the Core immature Seg Wit proposal is very important.

Consensus action
We invite all Bitcoiners to join this basic consensus, please reply to this ( thread to show support of the above 90% hash power / 2MB block limit consensus.

Side Note : What Is 90% Hash Power Consensus?
As some hash power is anonymous, (solo mining/private pool), it is difficult to know their opinions. If we neglect the private pools’ share, we effectively need 95% of the public pools to agree.

BitMEX Affiliate Payouts Now For Life

Affiliate Referral Program

BitMEX appreciates users spreading the word. We’re going to prove it.

Affiliate referral payments are now for life, instead of just for 6 months.

As before, every user that you refer to BitMEX using your unique referral link will receive 10% off trading fees for 6 months.

You will receive a percentage of trading fees the referred user pays to BitMEX, starting from 10%. As your total referral amount grows, so does your percentage.

Get Your Referral Link

Fee Structure Rebalance

In order to increase liquidity, we have rebalanced the trading fee structure. This restructure maintains the same overall fee %, but further incentivises liquidity providers.

We have adjusted the fee structure from 0% / 0.05% maker / taker to -0.025% / 0.075%.

This means that makers will receive a 0.025% rebate, and takers will pay 0.075%.

These changes will affect all contracts except our hedging series (XBU) on Monday November 23 at 12:00 GMT.

Hello Bitcoin: China Begins Actually Enforcing Capital Controls


Faced with a depreciating currency and an acceleration of elites running for the exit, China is actually beginning to enforce capital controls. The official individual FX limit is $50,000 per year. But for those with the right connections, RMB flowed out of China like water. The amount of illegal capital repatriation from China has been estimated in the trillions of USD. Now that is all changed. Xi Jinping is hell bent on transitioning the Chinese economy into one lead by domestic consumption rather than by investment. GDP growth has slowed, and at the same time the strengthening USD has forced the PBOC to allow the RMB to weaken.

Property markets in favoured jurisdictions have seen furious buying by cash rich Chinese. The Chinese hoard levitated property prices in Vancouver, Sydney, New York City, and parts of California. The explosive growth is about to come to an abrupt halt, if the PBOC has it way. They have instructed banks to begin enforcing the $50,000 limit and to look through the ultimate beneficiary account to determine if bundling of funds is occurring. [AFR]

The crackdown from Beijing has seen Chinese banks setting up watch lists for unusual transactions, according to one bank manager, who asked not to be named as he was not authorised to speak about the policy.

He said the operation was aimed at cracking down on a practice whereby family and friends of those wanting to purchase a property overseas all transfer US$50,000 into an overseas account. That’s the limit each Chinese individual is allowed to move out of the country each year.

The purchaser then pays back his friends and family in China and uses the money from the overseas account to put down a deposit on the property.

However, banks are now tracking the source of funds for overseas bank accounts that have received more than US$200,000 within 90 days, according to the bank manager, who works in Shanghai for one of the major state-owned banks.

“We have always had this policy but now it has been restated and is being enforced more strictly,” he said.

“In the past we could find a way around these rules but now all those ways have been blocked.”

“I’m sure this would be having an impact on overseas property purchases,” he said.

Sydney and Melbourne are starting to feel the pinch [AFR].

Chinese purchases of Australian property have dropped significantly in the past month, according to agents, as buyers struggle to shift money out of the country following Beijing’s move to tighten capital controls.

One Chinese agent said the latest efforts by the central government to avoid large capital outflows were having a “significant impact” on his business.

“It has affected 70 to 80 per cent of current transactions and some have already been suspended,” said the agent who asked not to be named.

The tighter foreign exchange rules are also set to impact the federal government’s relaunched Significant Investor Visa (SIV), which provides fast-tracked residency for those investing at least $5 million into Australia.

“I think it will be big, big trouble for the SIV program because the amount of money is just too large,” said one Shanghai-based adviser, who sells Australian property and advises wealthy clients on their migration plans.

Only seven SIV applications have been submitted since the new rules were introduced on July 1, which require investors to put their money into riskier assets such as venture capital and emerging companies.

The fall 2013 Bitcoin bubble was fuelled by speculation that Chinese investors would be able to send their capital abroad by using Bitcoin. The problem was the grey channels were by and large much cheaper and easier than using Bitcoin. Therefore the massive inflows never materialised. The situation is grossly different now. The PBOC is actively enforcing the controls and the avenues open to the Chinese are rapidly disappearing.

The big question for anyone attempting sell RMB / buy Bitcoin then sell Bitcoin / buy USD (or another G10 currency) is liquidity. I took data from about trading volumes for BTCCNY and BTCUSD. For the Chinese exchanges I divided their reported volume by 2 because they double count trades. Over the past 30 days the average daily trading volume was 82,400 BTC. To minimise price impact, assume that you trade 30% in line with volume. At a BTCCNY rate of 1,500 CNY, that comes to a total of 51,180,000 CNY of Bitcoin that can be traded per day with minimal price impact. I did the same calculations for the top BTCUSD exchanges, and the amount is 39,366,600 CNY. Because you need convert RMB -> BTC -> USD, I assume that 39,366,600 CNY worth of BTC can be traded each day with minimal price impact.

Chinese people love property. It is one of the preferred vehicles in which park their cash abroad. The other benefit is they can ship their families off to obtain passports in better jurisdictions. The below table shows how many equivalent houses Chinese buyers could purchase each day using Bitcoin.

City Median House Price Equivalent Houses
Sydney 1,000,000 AUD 8.7
Arcadia California 1,084,500 USD 5.7
New York City 572,800 USD 10.79
Vancouver 900,592 CAD 9.1

According to the National Realtors Organisation, for the 12 months ending March 2014 Chinese people bought $22 billion in property in America. Per day that equates to roughly 368 million CNY, or over 9 days worth of Bitcoin trading. This happens each day, and this is just for America. Chinese will not all rush to use Bitcoin as a method of wealth transfer, but with no other options they will get creative. The largest Bitcoin exchanges globally are in China. In China, you can wire CNY to the exchange, buy Bitcoin, and remit Bitcoin outwards in under 30 minutes for 0 fee. The foundation is there, and now there is a real pain point. As the capital account of China deteriorates due to slowing global growth, a stronger USD, and competitive devaluation by their trading partners, the only way out may be Bitcoin.


2014 Profile of International Buying Activity

Median house price in Sydney tops $1 million for first time

Arcadia Home Prices & Values

New York Home Prices & Values

Canada National Average Price Map