An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange • Hacker News Board

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#231

Post by pfisch » Tue, Dec 05, 2017, 6:59 PM UTC

csomar wrote: post #172

mgbmtl wrote: post #167

Earlier quoted context omitted.

Naive question: when an exchange sells, I assume they can decline to buy if they don't have a buyer or too much inventory? For example, if suddenly everyone wants to sell BTC, the price would drop, at which point the exchange could buy the BTC at a much lower price, or not buy at all? (unless they commit fraud, massively purchase BTC without having the actual money to back it, then not be able to wire money out of ou…

The exchange doesn't sell/buy. It just connects the buyers/sellers. There are brokers that do that but you can't call them an exchange. I also think regulation prevent exchanges from trading on their own exchange to avoid front-running and since they have lots of information about the users/deposits/etc...

>I also think regulation prevent exchanges from trading on their own exchange to avoid front-running and since they have lots of information about the users/deposits/etc...

hahaha, regulation. That is hilarious

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#232

Post by panarky » Tue, Dec 05, 2017, 7:01 PM UTC

gst wrote: post #188

querulous wrote: post #136

Earlier quoted context omitted.

the market is extremely illiquid. even if you know it's a scam you have few options if you want to cash out. you can trade bitcoin for cash balances at various exchanges but actually withdrawing those balances is subject to miniscule daily/monthly withdrawal limits and if there's a run on the market those exchanges will almost certainly collapse. there's no significant over the counter market. you can swap your bitco…

> you can trade bitcoin for cash balances at various exchanges but actually withdrawing those balances is subject to miniscule daily/monthly withdrawal limits and if there's a run on the market those exchanges will almost certainly collapse. Afaik Bitstamp doesn't have any withdrawal limits for verified users.

Unlimited wire transfers out of Gemini, too.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#233

Post by ataturk » Tue, Dec 05, 2017, 7:02 PM UTC

ncallaway wrote: post #215

panarky wrote: post #176

Earlier quoted context omitted.

> Bear in mind that this is bitcoin It's still a market, so market logic should apply. > get rich quick with bitcoin I see the same shit with real estate. > sufficient people buying tethers at face value It's a market. Smart money can sell tethers. When there's information that all market participants know, the market price should reflect that information.

> I see the same shit with real estate. And that, famously, _never_ crashed.

The problem with RE is not the values fell, it was that leverage was used to purchase properties as investments and when the underyling investments lost value, there was no reason to pay on the underwater mortgages. The bond explosion was an even bigger problem, magnified by huge leverage and shoddy ratings work.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#234

Post by rsynnott » Tue, Dec 05, 2017, 7:06 PM UTC

panarky wrote: post #176

rsynnott wrote: post #116

Earlier quoted context omitted.

Bear in mind that this is bitcoin. People continued pumping money into mtgox for _months_ after it was clear to anyone who’d been paying attention that it was dead. And currently bitcoin’s in an unusually large bubble, so there are lots of people buying into it who’ve never previously had experience of it. I see ads for, basically, “get rich quick with bitcoin” every day now. The people clicking those are not the wor…

> Bear in mind that this is bitcoin It's still a market, so market logic should apply. > get rich quick with bitcoin I see the same shit with real estate. > sufficient people buying tethers at face value It's a market. Smart money can sell tethers. When there's information that all market participants know, the market price should reflect that information.

> Smart money can sell tethers

I don’t think that many people are really holding onto tethers all that much; who has tethers to sell? Bitfinex itself?

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#235

Post by panarky » Tue, Dec 05, 2017, 7:07 PM UTC

jayd16 wrote: post #203

darawk wrote: post #123

Earlier quoted context omitted.

There's no reason arbitrage should push up the price of Bitcoin. Tether exists to normalize arb opportunities between exchanges. That's what it was created for. There is indeed a real question as to whether or not Bitfinex has issued more Tether than it has in reserve, or whether or not they will actually pay people out for their Tether tokens. But there is no 'arbitrage feedback loop' driving the price rise.

I'm no expert but mulling it over.... If Tether is big enough that the price of BTC is effected by it, such that investors feel they can cash out and that is part of their risk calculation, then a tank in Tether would also cause a drop in BTC. If Tether is backed by loans and not hard cold cash that's a risk and effects the value. If someone is able to buy Tether on credit, and the credit is actually backed by BTC th…

If traders lose faith in Tether, they would sell Tether and buy Bitcoin in a flight to safety. Bitcoin prices would rise as traders try to get out of Tether.

Conceivably, a crisis with Tether could affect confidence in the entire cryptocurrency ecosystem, which would put downward pressure on the Bitcoin exchange rate.

It's not clear which of these factors would dominate, so it's not clear what would happen to exchange rates.

But currently Tethers trade 1:1 for USD on multiple exchanges, so markets aren't showing evidence of lost confidence.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#236

Post by RexetBlell » Tue, Dec 05, 2017, 7:10 PM UTC

ThomPete wrote: post #228

RexetBlell wrote: post #225

Earlier quoted context omitted.

It's definitely not the lack of trading that's causing this. It's funny that you would even think that haha.

Why is it funny? Is there some obvious explanation for this I am missing? Seen it a couple of times now.

It's funny because the trading volume of Bitcoin is huge - about 250 million dollars worth of Bitcoin is bought and sold per hour around the world, 24/7.

My guess is that the reason we see the horizontal lines is because let's say someone places a large sell order (say 1000 Bitcoins) at $11600. It takes a few minutes for the market to absorb it. The price stays flat until the entire order is bought.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#237

Post by lowdest » Tue, Dec 05, 2017, 7:13 PM UTC

ThomPete wrote: post #222

This is off topic but since a lot of people seem to be experts I just wanted to ask. Can someone explain this to me http://000fff.org/uploads/bitcoinprice.png The flat-lines. I have seen it several times. Is is because of lack of data of trading or lack of trading or what's making the price flatline like that?

It's due to large order volume at those prices. If an unusually large limit order or group of limit orders is placed at $11,800, then incoming market orders can chip away at the remaining volume available at that price but not move the externally visible price.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#238

Post by heptathorp » Tue, Dec 05, 2017, 7:14 PM UTC

busterc wrote: post #117

I found this comment, by Richard Berger on SeekingAlpha, compelling: > STOP! and think about what this author has revealed. Even IF Tether is NOT running a fraud, the arbitrage positions that automatically exist between Bitcoin and any tether are real and do create incentive to create an arbitraged feedback loop whereby a pegged tether between Bitcoin - any_generic_tether - USD does exist and self feeds, driving up B…

Can anyone explain how this "arbitraged feedback loop" allegedly works? Arbitrage causes prices to converge, not spiral up or down.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#239

Post by csomar » Tue, Dec 05, 2017, 7:15 PM UTC

sp821543 wrote: post #206

csomar wrote: post #193

Earlier quoted context omitted.

Coinbase is not an exchange, it is a direct seller. Gdax is the exchange.

Same TOS

I'm having trouble locating it but it is the same for Gdax except that it is individual market makers who make the spread and not coinbase itself.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#240

Post by panarky » Tue, Dec 05, 2017, 7:15 PM UTC

dnautics wrote: post #155

pentae wrote: post #142

Earlier quoted context omitted.

I can't wrap my head around this. Who is silly enough to sell bitcoins for 'worthless' Tether?

Why not. Sell your coin to tether to weather short term price dips and transfer between exchanges.... If tether is unsustainable long term, who cares?

> who cares?

Cryptocurrency markets are dominated by highly rational traders with deep pockets.

Just because a bunch of newbies are buying 0.002 BTC on Coinbase doesn't change that fact.

Highly rational traders with deep pockets do care. Getting hand-wavy talking about "irrational markets" doesn't adequately explain why Tethers trade at parity to USD.