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GDAX will restore the balance of margin called users with company funds

blog.gdax.com

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Re: GDAX will restore the balance of margin called users with company funds

#31

Post by mrleiter »

This is really a curious instance. Those people whose savings have been wiped out have been hit so hard because they had stop orders, not limit orders. The main difference is that once the stop point has been reached, a stop order becomes a market order and then is filled at market rate. So yes, a stop order at, e.g., 300$ turns into a market order for 300$ and it may be that you are filled at 1$ if there is huge market movement downwards.

Moral of the story: even if you do not grasp basic financial instruments, in cryptocurrency you can still be saved because of reputation.

Re: GDAX will restore the balance of margin called users with company funds

#32

Post by justinjlynn »

mrleiter wrote: post #31

This is really a curious instance. Those people whose savings have been wiped out have been hit so hard because they had stop orders, not limit orders. The main difference is that once the stop point has been reached, a stop order becomes a market order and then is filled at market rate. So yes, a stop order at, e.g., 300$ turns into a market order for 300$ and it may be that you are filled at 1$ if there is huge mar…

This is the basic definition of moral hazard. If the exchange had reason to believe a trader didn't even know the basic characteristics of the orders they were placing what business have they engaging with them at all?

Re: GDAX will restore the balance of margin called users with company funds

#33

Post by shizzlest »

kev009 wrote: post #10

I had around $151k at the day's value wiped out as one data point (my fiat cost basis on entry was lower, not my life savings but not a trivial amount for me). Had a very busy week and didn't grok it was gone until Thursday afternoon. It actually felt cathartic to feel the feeling of losing $150k in the sense I was thinking "ok if I can accept dealing with that failure I can deal with any business fiasco when I start…

"not my life savings but not a trivial amount for me"

sounds like you really should consider lowering your stake in this crypto gambling

Re: GDAX will restore the balance of margin called users with company funds

#34

Post by shizzlest »

justinjlynn wrote: post #32
mrleiter wrote: post #31

This is really a curious instance. Those people whose savings have been wiped out have been hit so hard because they had stop orders, not limit orders. The main difference is that once the stop point has been reached, a stop order becomes a market order and then is filled at market rate. So yes, a stop order at, e.g., 300$ turns into a market order for 300$ and it may be that you are filled at 1$ if there is huge mar…

This is the basic definition of moral hazard. If the exchange had reason to believe a trader didn't even know the basic characteristics of the orders they were placing what business have they engaging with them at all?

one has to wonder why the exchange gives away their own money. trying to make the speculators feel that everything is fine and dandy in crypto gambling land ?

Re: GDAX will restore the balance of margin called users with company funds

#35

Post by shizzlest »

civilitty wrote: post #24
kev009 wrote: post #20

Earlier quoted context omitted.

It takes a few hundred ETH to have worthwhile leverage.. so they probably risked losing a substantial amount of trade volume and liquidity with the fiasco aside from loyal customers and early adopters. It wasn't just the natural market forces. They directly manipulated the market by stopping trading, and indirectly during and after the event with a variety of system issues that are not comforting. IMO this move to re…

That's the rub with BTC: technical and security problems have historically plagued BTC companies with huge amounts of money lost. GDAX giving a FDIC-lite guarantee sets them far apart from the rest, even if their customer service and interface is inferior.

i dont think that will work. wait until real sums are involved and see what happens. its not a business model to pay users for their own mistakes unless the system is rigged in some way anyway. just my opinion.

Re: GDAX will restore the balance of margin called users with company funds

#36

Post by danmaz74 »

ryen wrote: post #27

Seems like a good mea culpa, but time will tell how they really feel about making good on these promises.

Mea culpa for what? For greedy traders* not understanding the risks of margin trading?

( *) I'm playing with small money on poloniex as a greedy trader. I made +400% in 3 months, but I don't expect to be refunded if I lose everything for a mistake I made. I would only hope for a refund in case of a bug-related issue.

Re: GDAX will restore the balance of margin called users with company funds

#37

Post by shoo »

shizzlest wrote: post #33
kev009 wrote: post #10

I had around $151k at the day's value wiped out as one data point (my fiat cost basis on entry was lower, not my life savings but not a trivial amount for me). Had a very busy week and didn't grok it was gone until Thursday afternoon. It actually felt cathartic to feel the feeling of losing $150k in the sense I was thinking "ok if I can accept dealing with that failure I can deal with any business fiasco when I start…

"not my life savings but not a trivial amount for me" sounds like you really should consider lowering your stake in this crypto gambling

> An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.

> We must prevent our readers from accepting the common jargon which applies the term "investor" to anybody and everybody in the stock market.

> Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook. More than that, some speculation is necessary and unavoidable, for in many common-stock situations there are substantial possibilities for profit and loss, and the risks therein must be assumed by someone. There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are: (1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and (3) risking more money in speculation than you can afford to lose.

> In our conservative view every nonprofessional who operates on margin should recognise that he is ipso facto speculating, and it is his broker's duty to advise him as such.

> The true investor scarcely ever _is forced to sell_ his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by _other persons'_ mistakes of judgment.

- Benjamin Graham, "The Intelligent Investor"

Note that Graham is largely talking about common stocks - interests in potentially profitable businesses with real world assets than have a value independent of the current market price.

Betting any amount of capital on exchange rate changes of currencies? On cryptocurrencies? ...on margin that forces you to sell if the market price fluctuates? ...when the market price itself is largely/entirely based on speculation? This is not classifiable as investment activity, and arguably not classifiable as intelligent speculation either.

Re: GDAX will restore the balance of margin called users with company funds

#38

Post by lmilcin »

shoo wrote: post #37
shizzlest wrote: post #33

Earlier quoted context omitted.

"not my life savings but not a trivial amount for me" sounds like you really should consider lowering your stake in this crypto gambling

> An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative. > We must prevent our readers from accepting the common jargon which applies the term "investor" to anybody and everybody in the stock market. > Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook.…

Exactly my thoughts. You invest based on your belief in true value. You speculate to exploit volatility.

If you are investing you don't want stop loss order. Your belief is that long term it will bring you returns regardless of temporary volatility.

If you speculate, it's your fault you used that or another strategy. You may call yourself lucky to get your "investments" back from the exchange but understand that this is being paid by other users of the exchange, in the long run.

I hope this is going to be a valuable lesson for a lot of people who do not really get what this game is about.

Re: GDAX will restore the balance of margin called users with company funds

#39

Post by obstinate »

shizzlest wrote: post #35
civilitty wrote: post #24

Earlier quoted context omitted.

That's the rub with BTC: technical and security problems have historically plagued BTC companies with huge amounts of money lost. GDAX giving a FDIC-lite guarantee sets them far apart from the rest, even if their customer service and interface is inferior.

i dont think that will work. wait until real sums are involved and see what happens. its not a business model to pay users for their own mistakes unless the system is rigged in some way anyway. just my opinion.

My immediate thought was whether someone might be able to induce the behavior. That combined with self-dealing (owning both the buying and selling accounts) could extract significant profits from an exchange that is willing to make its customers whole.

I would never do such (I consider it unethical, but more to the point I have neither the capital nor risk tolerance to pull it off), but I wonder if someone might. Or perhaps already has.

Re: GDAX will restore the balance of margin called users with company funds

#40

Post by nihonde »

This business of correcting errors to keep incautious crypto-speculators whole is going to kill ETH. Let the people who trade on margin fall. At the end of the day, the critical stability of the currency depends on people like me, who speculate with disposable income, and not on suckers with margin accounts. I have a lot invested in this currency, but it's still less than a quarter of my YTD gain on actively managed mutual funds. If ETH drops to USD0.01, my account sits still until we hit sell pressure again.
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