If 10 people have 10 bitcoins that they bought from coinbase for $10, and now the ‘market’ says 1 BTC = $10,000, and all 10 people want to cash out, how does coinbase make disbursal? Obviously there are new people coming in and buying BTC at a higher price, but due to the surge, can Coinbase really honor all deposits?
Ask HN: How can Coinbase make good on deposits/withdrawals?
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Re: Ask HN: How can Coinbase make good on deposits/withdrawals?
#2[deleted]
Re: Ask HN: How can Coinbase make good on deposits/withdrawals?
#3Coinbase 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.
Re: Ask HN: How can Coinbase make good on deposits/withdrawals?
#4[deleted]
Re: Ask HN: How can Coinbase make good on deposits/withdrawals?
#5That's why Coinbase runs GDAX that caters to large & frequent traders, giving huge discounts on fees to the people who provide that liquidity for them. They also run an OTC desk to shuffle funds around in larger quantities both for themselves and their largest customers.
Re: Ask HN: How can Coinbase make good on deposits/withdrawals?
#6What is "the market"??? It's only people agreeing to trade... so vendor AND buyers!! What makes a "market price"? It's the amount that buyers are willing to give to sellers for something.
If there is no buyer (or no sellers ), then there is no "price", because there is no market. Same if buyers and sellers cant agree on the price (vendor ask to much)
Coinbase is only a marketplace. So it doesn't have to honor any deposit. It only allows sellers and buyers to trade
Re: Ask HN: How can Coinbase make good on deposits/withdrawals?
#7Ultimately you don't sell your bitcoins to Coinbase. You sell them to the people who are buying bitcoins on Coinbase. The point where buyers and sellers meet is the current price on Coinbase.
Re: Ask HN: How can Coinbase make good on deposits/withdrawals?
#8From my understanding (which may be entirely wrong but it's not like that stops people on the internet from writing things as if they're correct in all knowledge), Coinbase itself does not give you the $10,000 when they sell. Rather, they are merely a pretty front end for a standard exchange; probably GDAX, the one they also own and operate. So when you go to their site and tell them to give you $10,000 for your 1 BTC, what they actually do is go to their exchange and create a sell order on your behalf. When that order is fulfilled by someone else buying 1 BTC for $10,000, Coinbase takes a cut and then puts the rest into your account.
Re: Ask HN: How can Coinbase make good on deposits/withdrawals?
#9Coinbase 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.
Re: Ask HN: How can Coinbase make good on deposits/withdrawals?
#10To 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 lowering your asking price, and "the market" goes down until you make a sale.
Coinbase may provide some liquidity, buying your BTC at "market price" with their cash reserves, but only if they think they can resell it at a higher price.
The risk they take on in doing that, and the liquidity they provide, is the nominal economic reason you are paying their fees.