Ask HN: How can Coinbase make good on deposits/withdrawals? • Hacker News Board

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#21

Post by aaavl2821 » Thu, Dec 07, 2017, 5:47 PM UTC

wereHamster wrote: post #11

Replace BTC for EUR, CHF, GBP or any other currency (or even a physical good, like an ounce of gold) and see what changes. The fact that BTC is a cryptocurrency doesn't change anything in how trades happen. And the fact that 1BTC used to be 10USD but now is 10k USD is no different than 1USD being 0.95EUR one year ago and 0.85EUR today. The difference is larger, yes, but that doesn't matter.

the structure of the exchanges and the market make a huge difference in how trades happen. one very real example of this is happening now: many people cant make BTC trades happen, while "uptime" for the other markets you mention is virtually 100%

so the fact that BTC is crypto doesnt change anything about how trades happen, but the massive differences in market structure between crypto and established markets makes a huge difference

edit: and the fact that the difference is larger does matter. volatility is one of the core inputs of derivatives pricing, and for a derivatives market to exist, volatility must be estimable. having a derivatives market has major influence on prices and liquidity of the market for the original security. for BTC to really go mainstream, markets need to evolve

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#22

Post by egypturnash » Thu, Dec 07, 2017, 5:51 PM UTC

Remember: you don't have to do your transactions in whole bitcoins.

I, for instance, had .32btc sitting around on Coinbase and decided to sell it when the price broke 10k. That got me about $3k.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#23

Post by PeterisP » Thu, Dec 07, 2017, 5:57 PM UTC

sk2code wrote: post #9

rainforest wrote: post #3

Coinbase can use (and runs) an exchange to get liquidity. When a user sells their coins, Coinbase goes to an exchange and sells them on, taking a cut.

The way things are moving it seems no one is selling and that's what baffles me. Crypto market is something we have never seen before where people are buying and not selling that is what is driving the price of Bitcoin.

Some people definitely are selling, it's not like we're seeing new BTC come from thin air for all these buyers (assuming they're getting BTC on their private wallets instead of an IOU that might not be covered with real BTC)

However, at the moment there's a lot of willingness to buy and little willingness to sell, and that's why the price is rising.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#24

Post by wyldfire » Thu, Dec 07, 2017, 6:25 PM UTC

The confusion results from the conception that the market (any market) has a single price. It doesn't. When exchanges (stock exchanges, currency exchanges, commodity exchanges) execute trades, they do so with something called an "order book". You can think of it more like an available histogram of potential trade prices. The transactions tend to settle at the nexus of where buyers meet sellers, but if there's only $1 worth of BTC available at the "1 BTC=$10000" rate, then if you want all of your $10 transaction to execute now you will have to pay more. Alternatively you can leave your order at the "1:10000" rate and hope that someone comes and picks it up.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#25

Post by js4 » Thu, Dec 07, 2017, 6:31 PM UTC

aaavl2821 wrote: post #20

Thespian2 wrote: post #10

To get your fiat cash out, you'd have to sell that 1 BTC for $10,000. Someone needs to be on the other side of that trade buying it. You get their $10K, and they get your 1 BTC (and coinbase takes a small percentage for facilitating the transaction). If nobody wants to buy your BTC at $10K, you don't get "your" money out, until coinbase can find a buyer to match with your sale. In your example, all 10 of you start lo…

naive question: does coinbase really make markets in BTC??

Maybe Coinbase themselves does.

Coinbase has market makers though who pay 0% transaction fees. So the makers may take the other side of transactions.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#26

Post by bdamm » Thu, Dec 07, 2017, 6:32 PM UTC

aaavl2821 wrote: post #20

Thespian2 wrote: post #10

To get your fiat cash out, you'd have to sell that 1 BTC for $10,000. Someone needs to be on the other side of that trade buying it. You get their $10K, and they get your 1 BTC (and coinbase takes a small percentage for facilitating the transaction). If nobody wants to buy your BTC at $10K, you don't get "your" money out, until coinbase can find a buyer to match with your sale. In your example, all 10 of you start lo…

naive question: does coinbase really make markets in BTC??

What's the question? I assume you're asking if Coinbase actually buys BTC when you ask them to? Coinbase isn't publicly audited as far as I know so we don't really know. A related question would be... what fraction of Coinbase customers actually send or receive bitcoin, and what fraction of Coinbase customers simply buy and hold bitcoin that never goes anywhere. With this question answered, we would know how much Coinbase needs to actually execute on trades, and how much Coinbase could simply take the customers money, claim BTC ownership, and then not actually transact BTC.

I assume exchanges have some way of signalling options to each other but I don't know what that is.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#27

Post by user5994461 » Thu, Dec 07, 2017, 6:34 PM UTC

wereHamster wrote: post #15

sk2code wrote: post #9

Earlier quoted context omitted.

The way things are moving it seems no one is selling and that's what baffles me. Crypto market is something we have never seen before where people are buying and not selling that is what is driving the price of Bitcoin.

People are selling, otherwise there would be no market.

There can be a market with only buyers or sellers. There is just no execution.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#28

Post by [deleted] » Thu, Dec 07, 2017, 6:38 PM UTC

aaavl2821 wrote: post #20

Thespian2 wrote: post #10

To get your fiat cash out, you'd have to sell that 1 BTC for $10,000. Someone needs to be on the other side of that trade buying it. You get their $10K, and they get your 1 BTC (and coinbase takes a small percentage for facilitating the transaction). If nobody wants to buy your BTC at $10K, you don't get "your" money out, until coinbase can find a buyer to match with your sale. In your example, all 10 of you start lo…

naive question: does coinbase really make markets in BTC??

[deleted]

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#29

Post by alistproducer2 » Thu, Dec 07, 2017, 6:48 PM UTC

Thespian2 wrote: post #10

To get your fiat cash out, you'd have to sell that 1 BTC for $10,000. Someone needs to be on the other side of that trade buying it. You get their $10K, and they get your 1 BTC (and coinbase takes a small percentage for facilitating the transaction). If nobody wants to buy your BTC at $10K, you don't get "your" money out, until coinbase can find a buyer to match with your sale. In your example, all 10 of you start lo…

This is wrong. Someone could buy that btc using litecoin they bought on another exchange. Coinbase maintains a promise to cash out user's holdings.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#30

Post by bsvalley » Thu, Dec 07, 2017, 7:18 PM UTC

Coinbase is just a broker with a bunch of customers. It connects to all the BTC exchanges in order to execute all their orders. They don't own bitcoins.