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Crypto exchange AAX suspends withdrawals

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Re: Crypto exchange AAX suspends withdrawals

#241

Post by memish »

gzer0 wrote: post #119

"At this point I'm convinced Satoshi Nakamoto was actually a public administration professor trying to teach kids why financial institutions have the rules in place that they do. Given enough time, the entire crypto space will have reinvented every regulation they tried to get rid of and understood why they existed in the first place."

Totally, if only they had been regulated and too big to fail as a result of regulatory capture, which is how our system works, the taxpayers would get to bail them out and award SBF a multimillion dollar bonus. Bailing out the banks and execs in 2008 to perpetuate this was just great.

Would you be surprised to learn that SBF was the champion for regulation, was advising congress and a top political donor?

Re: Crypto exchange AAX suspends withdrawals

#242

Post by jgeralnik »

culanuchachamim wrote: post #95

I'm sorry for the ignorance, but why a crypto exchange is expected to keep the money of the customers in case they want to change back their crypto, and it's not like a regular exchange house where you exchange one currency for another currency, and once the transaction was made, they not obligated to exchange back.

It seems you are thinking of the crypto exchange as selling crypto to customers and then "holding on" to their money. That's not the right model.

Party A deposits 1 BTC into the exchange. Party B deposits $1000 into the exchange. Party A wants to sell a BTC for $1000 and party B wants to buy a BTC. They trade through the exchange, pay some fee to the exchange, and an entry in a database is changed such that the $1000 in the exchange now belongs to A and the 1BTC in the exchange's wallet now belongs to B.

Since actually holding cryptocurrency is inconvenient for users, many will just choose to keep the BTC on the exchange until they want to use it/sell it for cash or a different cryptocoin. Many crypto users are speculators who view it the same as holding stocks in brokerage accounts and not as just an exchange.

This money is held in the exchange platform but belongs to the users. They should in theory be able to withdraw it whenever they want.

Instead the crypto exchange decides to make use of these idle customer funds and invest in speculative funds/embezzle all the money and all of a sudden there is not enough funds in the exchange for all users to withdraw.

Re: Crypto exchange AAX suspends withdrawals

#243

Post by Ocha »

speakfreely wrote: post #32

> Due to the failure of our third-party partner, some users' balance data were found abnormally recorded in our system. Hence, limiting our services to prevent further risks, the technical team has had to manually proofread and restore the system to ensure maximum accuracy of all users’ holdings. "Abnormally recorded" ... "prevent further risks" ... "manually proofread" ... "maximum accuracy". Wow.

Sounds like it was written by GPT3.

Re: Crypto exchange AAX suspends withdrawals

#244

Post by raspberry1337 »

anon291 wrote: post #200
disruptalot wrote: post #187

Earlier quoted context omitted.

This was a failure of traditional financial institutions and people who are ok with them, not of crypto. Satoshi wouldn't be encouraging people to put their coins on a trusted third party like that. All fundamental crypto values say this.

Unfortunately, absent the crypto exchanges, which let you easily convert crypto to fiat, there is no reason why crypto has any value. Given that bitcoin transaction times are nowhere near VISA or cash times, bitcoin is fairly useless to purchase things in person and few online vendors take bitcoin alone (most use an exchange to convert bitcoin to cash instantly). So without exchanges, there is literally no purpose or…

> there is no reason why crypto has any value. Given that bitcoin transaction times are nowhere near VISA or cash times,

You interchanged crypto with bitcoin, but bitcoin is not all crypto. The value of crypto comes from them being decentralized and independent of a financial bank. This has the negative side effect of it being very valuable to illegal and fradulent activity, too.

Re: Crypto exchange AAX suspends withdrawals

#245

Post by Gwypaas »

justoreply wrote: post #234
bmmayer1 wrote: post #219

Earlier quoted context omitted.

This. If an exchange cannot 1:1 fund withdrawals it is not an exchange, it's a ponzi scheme. Full stop. All real exchanges should be releasing evidence of 1:1 backed customer deposits ASAP like Coinbase has. And if they don't, it should be considered a canary of systemic risk.

Do you know what are you talking about? Banks don't have all the funds. Are they Ponzi scheme? No.

Banks are also incredibly tightly regulated and your deposit is in almost all developed countries insured [1] by something like FDIC [2].

What the failing crypto exchanges are doing is similar to you buying stock in Apple, but they figure that Wal-Mart will give a better return, so they buy that instead, and when you go to sell your Apple, they hope to pocket the difference. With the fintech variety of financial engineering on top of this.

[1]: https://en.wikipedia.org/wiki/Deposit_insurance

[2]: https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp...

Re: Crypto exchange AAX suspends withdrawals

#246

Post by lxgr »

867-5309 wrote: post #140
nannal wrote: post #41

Earlier quoted context omitted.

There are some 0 fees exchanges, often requires significant volume or occasionally it's for limited periods and/or on a small list of pairs, but I wouldn't be suprised that someone's running fractional reserve with an exchange and offers 0 fees because they make money elsewhere.

it costs them money to exchange, and they add profit on top of this. the "0 fees" are therefore the sum of these masked in an inflated exchange rate

That's not how an exchange works, though.

Exchanges provide the infrastructure for trades to happen (i.e. they maintain order books, match market orders against these, ensure that settlement will eventually happen etc.), but do not take on financial positions themselves.

The "exchange rate" is only determined by the order book, i.e. ultimately by supply and demand.

So if an exchange makes money, it needs to charge at least some of its participants for these services. That can happen through transparent fees, or through less obvious mechanisms (like making retail trades free, and charging an exclusive market maker for the privilege of that exclusivity).

Re: Crypto exchange AAX suspends withdrawals

#247

Post by zeroclip »

gjulianm wrote: post #206
disruptalot wrote: post #187

Earlier quoted context omitted.

This was a failure of traditional financial institutions and people who are ok with them, not of crypto. Satoshi wouldn't be encouraging people to put their coins on a trusted third party like that. All fundamental crypto values say this.

Precisely the failure of crypto is thinking that people will follow "fundamental crypto values" and underestimating the power of convenience and ignorance. "Traditional financial institutions" are inevitable in crypto.

A lot of day traders on FTX are learning first hand the value of DeFi and self custody.

Re: Crypto exchange AAX suspends withdrawals

#248

Post by mikepurvis »

yuvadam wrote: post #237
ethanbond wrote: post #220

Earlier quoted context omitted.

But you realize that banks (and individuals) could have all the advantages of decentralization if they just chose to be decentralized too, right? This prompts the question: why are they so centralized? It turns out the advantages of centralization are more significant than the advantages of decentralization, and this is true even in a market with religious orientation toward decentralization . All you've gotta do to…

Banks can't choose to be decentralized when the whole point of their existence is to custody centralized fiat money.

Individuals can, though. Just stuff your cash into your mattress— boom, decentralization achieved.

Re: Crypto exchange AAX suspends withdrawals

#249

Post by NovemberWhiskey »

JumpCrisscross wrote: post #177
NovemberWhiskey wrote: post #174

Earlier quoted context omitted.

Crypto exchanges act like brokers and exchanges. They match orders and they also hold client money.

> match orders and they also hold client money Matching orders is what brokers canonically do. Exchanges came about to consolidate their activity. There is nothing resembling a true exchange in the crypto space.

That's fair - in any case, the segregation of customer cash and securities from proprietary activities is a (the?) fundamental obligation of broker-dealers.

Re: Crypto exchange AAX suspends withdrawals

#250

Post by toyg »

yuvadam wrote: post #237
ethanbond wrote: post #220

Earlier quoted context omitted.

But you realize that banks (and individuals) could have all the advantages of decentralization if they just chose to be decentralized too, right? This prompts the question: why are they so centralized? It turns out the advantages of centralization are more significant than the advantages of decentralization, and this is true even in a market with religious orientation toward decentralization . All you've gotta do to…

Banks can't choose to be decentralized when the whole point of their existence is to custody centralized fiat money.

The point is to custody money, of any sort. And for that, they are excellent - the economy of scale in having a single organization arrange for security of such money for thousands or millions of customers, is unbeatable. Unless you enjoy employing security guards, building vaults (digital or otherwise), and arranging transports, you want to use a bank - or risk losing all your valuables to skillful thugs every single day.
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