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Crypto exchange AAX suspends withdrawals

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Re: Crypto exchange AAX suspends withdrawals

#101

Post by asah »

benjaminwootton wrote: post #26
lbriner wrote: post #7

Forgive my ignorance but it seems that one major problem with crypto-exchanges is that they don't necessarily have any assets other than the crypto that has been deposited there, which means all overheads (which I am assuming for some of these guys is $Ms/year) can only come from trading crypto unless they are charging reasonable money for the privilege of using their exchanges. In the FIAT world, banks make tonnes o…

They should make money in the same way that the New York Stock Exchange does - by taking a small fee from every trade.

um, that's exactly what they do.

Re: Crypto exchange AAX suspends withdrawals

#102

Post by knorker »

jacknews wrote: post #77

This all seems like less a problem of crypto as such, and more that exchanges are making a virtual fractional reserve currency by leveraging customer deposits for loans/investments. ie it's a 'banking' problem, specifically a 'fractional reserve banking' problem, not a crypto problem. This is exactly why fractional reserve banking is heavily regulated.

Sure, without the safeguards. No FDIC. No lessons learned from the history of banking.

I agree it's a banking problem in that they're trying to streamline a new economy by not doing what "legacy banking" does. Which is like streamlining airlines by starting the rule book from scratch. But the rules and regulation of the airlines have been paid for in blood. Discard them at your own peril.

Or, in the case of cryptocurrencies, at the peril of the finances of anyone investing in your experiment.

Re: Crypto exchange AAX suspends withdrawals

#103

Post by dralley »

brnt wrote: post #33

So, having been around since the early bitcoin days, core to the salespitch back then was the fact you would have control. You'd have your coins in your wallet, and no need for banks etc. Apparently nobody does this anymore, and gives their wallets to these exchanges (i.e. banks) and balks when the obvious happens in pyramid schemes. People just don't get distributed currency if they promptly undistribute it. Or is i…

Distributed currency turns out to be too difficult for most people, and a currency that only 5% of the population can use isn't very useful.

Re: Crypto exchange AAX suspends withdrawals

#104

Post by qudat »

rchaud wrote: post #69
brnt wrote: post #33

So, having been around since the early bitcoin days, core to the salespitch back then was the fact you would have control. You'd have your coins in your wallet, and no need for banks etc. Apparently nobody does this anymore, and gives their wallets to these exchanges (i.e. banks) and balks when the obvious happens in pyramid schemes. People just don't get distributed currency if they promptly undistribute it. Or is i…

> Apparently nobody does this anymore, and gives their wallets to these exchanges (i.e. banks) and balks when the obvious happens in pyramid schemes. The name of the game is pump and dump, you can't play the game (speculation) if you're not on the field (the exchange). Crypto's marketing is 'financial freedom' as in get-rich-quick, not free as in libre.

That's right. Not to mention the transaction fees are so high that moving from a wallet you own to an exchange can cost non-insignificant amount of money.

Add on top of that the general volatility of crypto, people not wanting to deal with maintaining their own wallet, and you have a recipe for people keeping their funds on exchanges.

Re: Crypto exchange AAX suspends withdrawals

#105

Post by fallingknife »

benjaminwootton wrote: post #26
lbriner wrote: post #7

Forgive my ignorance but it seems that one major problem with crypto-exchanges is that they don't necessarily have any assets other than the crypto that has been deposited there, which means all overheads (which I am assuming for some of these guys is $Ms/year) can only come from trading crypto unless they are charging reasonable money for the privilege of using their exchanges. In the FIAT world, banks make tonnes o…

They should make money in the same way that the New York Stock Exchange does - by taking a small fee from every trade.

That's how they made their money for most of their existence, and how crypto exchanges still do, but not anymore. The NYSE actually makes most of its money now by charging for colocated server space which HFT's use to get super low latency connections to the market.

Re: Crypto exchange AAX suspends withdrawals

#106

Post by kkielhofner »

brnt wrote: post #33

So, having been around since the early bitcoin days, core to the salespitch back then was the fact you would have control. You'd have your coins in your wallet, and no need for banks etc. Apparently nobody does this anymore, and gives their wallets to these exchanges (i.e. banks) and balks when the obvious happens in pyramid schemes. People just don't get distributed currency if they promptly undistribute it. Or is i…

As I've noted before on HN the entire concept of people being able to manage their own wallets flies against everything we know about people. People forget stuff, make mistakes, and lose things. The margin of error for a wallet is tiny. It's not rare for crypto forums, twitter, etc to prescribe completely ridiculous processes and systems for securing wallets, backing up seed phrases, etc. There's an entire cottage industry built around people etching their seed phrases on steel plates for people to (I'm not kidding) bury them like they're gold in the 1800s.

Plus funds in a wallet require extra steps when you want to trade on an exchange (extra costs via gas, time, possible errors, etc). The use cases for crypto are so minimal for the general population one could argue it's only survived this long through making trades on exchanges - to what essentially amounts to gambling. You can't gamble with funds in a wallet which defeats the entire purpose of crypto for the vast majority of the "users" in the space.

Re: Crypto exchange AAX suspends withdrawals

#107

Post by jerf »

endorphine wrote: post #48
rapsey wrote: post #36

Earlier quoted context omitted.

Crypto has really only lived in a zero interest rate policy world and it is shitting the bed majorly now when rates are going up. It is likely far from the bottom.

Why do you believe that is the case? How is this hypothesis explained?

It is important to separate goals from results.

It is a goal of crypto to be an independent medium of exchange, free from governments and to some extent the rest of the economy, and perhaps even someday become the basis of the economy itself.

That does not mean it has done these things. It does not mean it has failed these things either, because goals frankly don't mean much. This is in one of my favorite classes of wisdom, "things that sound obvious when I say them but observably by their actions most people aren't thinking this way." Do not be too quick to say to yourself "oh, yes, jerf I know that goals aren't results", because, again, by their actions many people observably do not have this as clear in their head when they are planning and acting as they may think.

As for the results of crypto, it is certainly clear that crypto is a haven for scams, pyramid schemes, and pump-and-dumps. That also on its own does not disqualify it; I think there's more in crypto proportionally than the US dollar but all fiat currencies have also had scams, pyramid schemes, and pump-and-dumps denominated in them. It is much less clear that crypto has attained its listed goals; there is non-zero evidence that they are in play, but it is also very mixed evidence and you can find plenty of evidence to the contrary of all the things I list.

Crypto has largely existed in a regime with 0% interest, as was mentioned. It is a very viable theory that despite the goals of crypto of being an independent currency, that it is in fact a derivative of existing fiat currency. As for the evidence, there is the fact that it is acting exactly like a very leveraged fiat derivative would be acting when money stops being free, which doesn't necessarily perfectly logically prove the case but is strong evidence. Perhaps someday crypto will be independent but it isn't putting on a very convincing show of it right now. Instead it's looking an awfully lot like the most leveraged fiat currency derivative there is out there at the moment, or at least the most leveraged one us normals can see.

Re: Crypto exchange AAX suspends withdrawals

#108

Post by tinco »

constantcrying wrote: post #85
lbriner wrote: post #7

Forgive my ignorance but it seems that one major problem with crypto-exchanges is that they don't necessarily have any assets other than the crypto that has been deposited there, which means all overheads (which I am assuming for some of these guys is $Ms/year) can only come from trading crypto unless they are charging reasonable money for the privilege of using their exchanges. In the FIAT world, banks make tonnes o…

An exchange shouldn't count deposited crypto as their asset. It is an asset of their customer. I do not think the actual problem here is crypto exchanges being unprofitable. Even if a crypto exchange goes under, it could (and frankly should ) still be able to go under gracefully, e.g. letting all customers withdraw their assets for a month (and E-Mailing private keys as a last resort). The issue here is crypto exchan…

You can say that, but when MtGox went bankrupt, and also lost 4 fifths of its stored crypto, the court just heaped together all assets into one big pile and all creditors into one big pile and let them fight it out.

So now there's a bunch of assholes including but not limited to Peter Vessenes, that are suing the bankrupt entity for billions (completely frivolous of course) and all the depositors have waited for 8 years now to get a fraction back that the vultures have been picking on.

It's completely unfair, but the courts simply don't distinguish between someone who partners with an exchange, and someone who deposits money at an exchange.

Re: Crypto exchange AAX suspends withdrawals

#109

Post by anticristi »

Pardon for living under a rock, but why are crypto exchanges affected by the mood in the crypto market?

I thought that a crypto exchange functions like a currency market: I put an offer to sell 10,000 EUR for 1 BTC and someone else puts an offer to buy 10,000 EUR for 1 BTC. When orders cross, a transaction happens and the exchange gets a fee, whether in currency or crypto units.

What are crypto exchanges fundamentally doing differently that they are suddenly losing money?

Surely a drop in transactions would make them lose fees and require them to fire some staff, but I expected a "Facebook-like" downsizing, not a full-blown bankruptcy.

What am I missing?

Re: Crypto exchange AAX suspends withdrawals

#110

Post by baxtr »

lbriner wrote: post #7

Forgive my ignorance but it seems that one major problem with crypto-exchanges is that they don't necessarily have any assets other than the crypto that has been deposited there, which means all overheads (which I am assuming for some of these guys is $Ms/year) can only come from trading crypto unless they are charging reasonable money for the privilege of using their exchanges. In the FIAT world, banks make tonnes o…

It's in the name, isn't it? An exchange is where assets are exchanged.

For that service they get a fee, usually tied to the transaction volume. Pay any expenses out of that fee and keep transactions rates high is a good mode for survival.

Unfortunately, if asset prices depreciate, fees tank too. But that's manageable.

What's not manageable though if you start using assets of your customers to create a new revenue stream by locking those assets up somewhere or by using them for high-risk trades.

When people start asking their assets back you suddenly have a problem.

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