To me this gives even more creedance to the rumor that they have massive liquidity problems behind the scenes. Thus the continuous outages at times when the market is pumping. Iām highly dubious of their post mortems and the service incidents coincidental timings.
That makes no sense. TFA says
> In response to new guidance from the Commodity Futures Trading Commission
Coinbase has always been trying to follow all the laws and show how "legal" crypto can be. If the CFTC says they don't like it then Coinbase is going to shut it down... maybe they'll try to fight it behind the scenes - but they want to stay online and making money.
If they were going to lie, there are a lot better ways to go about it than blaming a government regulatory agency which probably will be fairly open to saying "Yes, we did ask them to close their margin trades because XYZ"
But why would "liquidity problems" cause outages? It's not like their servers require liquidity to operate or something. It makes much more sense that their servers are going down because trade volumes are up, thereby causing server load to go up.
I believe OP is saying when they can't cover orders, they pull the plug on the market rather than be overexposed.
As far as server load goes up, by how much does it need to increase to cause a problem? Are the numbers feasable, eg 100x volumes?
> I believe OP is saying when they can't cover orders, they pull the plug on the market rather than be overexposed.
I still have trouble picturing how this conspiracy would work. I assume it involves coinbase pumping bitcoin prices with money that they don't have. They pump it all the way up, realize "oh shit we don't have enough real money to cover the fake money", and then pull the plug to stop the bleed? Can't they decide ahead of time how much money they can safely spend and stop accordingly? Why do they need to halt trading? If they stop pumping, and the price continues to rise, that doesn't cause them to lose any more money, because it's just other people trading with other people.
>As far as server load goes up, by how much does it need to increase to cause a problem? Are the numbers feasable, eg 100x volumes?
It's kind of hard to tell just by looking at the charts. Just because trade volume is low doesn't mean load on the order matching engine is low. If you spam the trading engine with tons of non-marketable orders, nothing will get executed (no volume), but the order matching engine will still have to wade through those orders.
It just depends how much capacity they provision. You could overprovision by 10000% like you suggest, or 50%. You can scale based on demand but itās normal to have a lag.
Exactly this yes and as for where I heard it Twitter and several crypto forums. Itās a rumour not a fact and I do concede that Hanlons razor probably applies.
It's not plausible. They don't play a role in "covering orders" aside from providing settlement. That's the job of market makers, who will be less willing to participate after outages.
The outages aren't related to liquidity and only hurt Coinbase.
Where did you read this rumor? I'm interested in the details (I know about the downtimes)
fractional reserve rumors are pervasive and nonstop for custodial exchanges
there isnt really a source necessary
nobody has any insight until they do
Exactly this yes. I heard this on Twitter and occasionally on several different crypto forums when thereās been an outage during a price surge. Iām not saying this is definitive but the pattern is nonetheless concerning. I get service incidents happen but the timing always seems weird. That could be sample bias though.
In my opinion, the next custodial exchange to explode isn't a matter of if, but when, when, [...] and when.
This doesn't make sense. Their exchanges are open to view live, you can literally see the books and the available liquidity.
I didnāt think this was possible with standard coinbase. Maybe with coinbase pro you can see the order book but that could in theory be manipulated. If thereās something that easily disproved it I would be interested to see if yo donāt mind sharing.
How could their order book be manipulated?
Is anyone actually making any money on day-trading Bitcoins? I bought a couple Bitcoins back in 2012 and have just sat on them the last 8 years. In general, the market for this stuff is so astronomically weird that it really doesn't make sense to try to trade in it at all..
I made a trading bot that was moderately profitable, until the exchange it was using got hacked and lost all my coins :/
Edit: The source is available if anyone's interested. I intended to do more with it, but lost steam after I lost my coins. https://github.com/nfriedly/Coin-Allocator
BTC-E?
No, cryptsy.
To answer your question: Yes. The volatility is a trader's dream.
I've been holding a sizeable Bitcoin position[1] since 2011, but I'll acknowledge you can make a killing trading in bull markets or crushing bear markets.
To my anecdotal experience, more like a market makers dream. If you do speculative HFT then for the unexperienced you may get crushed by huge slippages when exchanges crumble under a load. Notice that exchanges in the Bitcoin world either do not, or simply don't care, to guarantee availability during spiked trading. I don't say alpha is impossible, but probably requires certain degree of comprehension.
May I ask for recommendations on where to trade Bitcoin? The fees on Coinbase (Pro), Kraken, etc seem prohibitive to me, especially for larger sums.*
*) Iām used to commission free stock trading with no volume limits in Germany, for any private individual. Donāt know how this handled in other countries though.
For low volume, manual purchases, Robinhood is comission-free. If you want to make a bot and need an API, there will be fees.
Yes, but don't waste your time with American exchanges, the regulations are too burdensome. Bitmex actually maintains a high score section, a lot of people are doing extremely crazy things trading in the crypto space https://www.bitmex.com/app/leaderboard
As a legal citizen and with regular bank, coinbase was super easy. It was barely an inconvenience unlike the old days when trading really dodgy coins
I have a friend who had a bot that was front running users when the Kraken trading engine was much slower....his bot stopped working when Kraken updated the engine though.
You donāt mean front running. Thatās a term of art in trading that means a specific thing. That is, trading against someoneās position you know in advance and you have a fiduciary duty on their behalf (e.g. your brokerage trading against you).
Sure, maybe just simple arbitrage. To tell you the truth I don't know the exact details. Of course he wasn't doing anything illegal (I wouldn't write about it), he didn't have any special access to the exchange
Kraken is destroying them in margin/derivatives and their margin product is quite bad. Not saying there is a relationship, but it is a good trade for Coinbase if Kraken has to shutter theirs as well.
Are they though? If not, what lets kraken continue?
> In response to new guidance from the Commodity Futures Trading Commission, we are disabling our margin trading product.
As other articles mentioned, which unspecified guidance?
Anyway, don't really care about whether margin is available or not on spot assets, good luck with that. Stay solvent and liquid!
But then how will the casino function? No leverage means a bad time for the problem gamblers keeping the price propped up. I suppose they can always buy some Tether from Bitfinex - assuming their bank still accepts deposits (lol).
There is plenty of permissionless leverage onchain in defi platforms and insurance coverages
whew got worried for a second there haha
Who was the counterparty? Margin trading implies that some party in addition to the customer is at risk. Some of the Bitcoin exchanges tried to escape this by closing out positions when the customer's equity was wiped out, but in a falling market, you often can't do that fast enough. Then the broker/exchange has to collect from the customer beyond what they had in their account.
That led to messes like this [1] when the bottom fell out of natural gas prices.
[1] https://advisorhub.com/broker-seeks-millions-from-wiped-out-...
Isn't this only a concern when dealing with futures/options? If you're just buying bitcoin with borrowed money, the counterparty is just the guy lending you the money (coinbase).
This is actually great news!
Margin trading and investment Bitcoin storage don't belong to the same institution in my view, unless there's a clear separation of ownership in a case of bankrupcy.
>Margin trading and investment Bitcoin storage don't belong to the same institution in my view, unless there's a clear separation of ownership in a case of bankrupcy.
What's the concern here? That someone will buy bitcoin on margin, withdraw all of it, and then declare bankruptcy?
If you want other examples of how this goes wrong outside of Cryptocurrency, there are some amazing stories on WallStreetBets of traders exploiting bugs in Robinhoodās margin limits to over-leverage and ending up millions of dollars in the red.
Itās not a matter of withdrawals, itās a matter of losing more money than you have and being unable to cover the loss.
Okay, but why cryptocurrencies specifically? If you find some infinite leverage exploit on coinbase, how are the effects different compared to one on robinhood? The gp commenter mentioned something involving "separation of ownership in a case of bankruptcy", but even then, I don't see how that's any different than finding a infinite leverage exploit on robinhood, finding a withdraw exploit, withdrawing to your bank account, then buying cryptocurrencies with it. At the end of the day as long you can find a infinite margin exploit + withdraw exploit on any margin platform, you can make wealth dissapear into the aether of cryptocurrencies.
Thatās not a matter for the CFTC in the spot market or care that an idiot has to pay debt collectors all because they wanted to earn a few pips intraday.
CFTC doesnt regulate spot assets. So it really depends on how Coinbase classifies what people are actually trading.
Coinbase has been leading the Bitcoin rally lately and dragging (the supposedly) tether inflated bitfinex exchange.
I wonder if coinbase users went too far in using margin that the CFTC intervened. Wait and see if the same happens to Kraken. They are both bitcoin exchanges.
Maybe forcing a large fraction of their best talent out the door wasn't such a hot idea.
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