[csomar]

That author is plain wrong and shows deep ignorance about bitcoin and the crypto-market.

An unsustainable price of bitcoin will lead to the collapse of other exchanges since people cashing out on these exchanges requires enormous amount of real money.

This will create a situation where the price of bitcoin in Bitfinex is higher than other exchanges by a big gap. This is not the case, actually the opposite is true: Bitstamp, Gdax, and Gemini prices where higher for substantial durations in the last few weeks.

You can only artificially pump the price to an unsustainable high for a very short period of time (2013/mtgox) or have this market restricted (no withdrawals/deposits, etc...). However, this is not the case. You can withdraw/deposit to bitfinex and their coldwallet shows 1.6bn usd worth of bitcoins.

TL;DR: The author fits the "butt-hurt" category, refuses to accept the reality and tries to find non-real argument for his hypothetical flash crash.

Disclosure: I currently hold no Bitcoin but some bitcoin cash positions. I also think the market is in a bubble. But a bubble with real people dollars flowing in.

[mgbmtl]

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 our accounts?)

[csomar]

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...

[pfisch]

>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

[mgbmtl]

Thanks. Makes sense. I guess the "instant buy" on some exchanges gave me the impression that they kept coins in stock. (edit: I just saw the other comments regarding Coinbase, which answer that issue)

However I'm a bit confused by:

> An unsustainable price of bitcoin will lead to the collapse of other exchanges since people cashing out on these exchanges requires enormous amount of real money.

To cash out, other people need to buy, typically with fiat currency, so it's unlikely that their bank accounts would empty overnight? (assuming no fraud, bugs, not running the exchange at a loss, etc)

[pbhjpbhj]

>To cash out //

Isn't the problem that an exchange can [pretend to] credit your account to the tune of $n million, use your bitcoin to sell for that amount, then keep/use the proceeds of the sale.

This is what traditional banks do with fractional reserve banking, except here the fraction of your bitcoin held is zero ;0).

Also, if bitcoin plummets you're probably not going to be happy when the exchange says "oopsies, our bad, that transaction failed, here's your bitcoins back".

[sp821543]

From coinbase TOS:

You acknowledge that the quoted Buy Price Conversion Rate may not be the same as the Sell Price Conversion Rate at any given time, and that Coinbase may add a margin or “spread” to the quoted Conversion Rate.

[heptathorp]

If that's in the GDAX TOS, it's an unnecessary disclaimer. The best Bid and Ask are by definition not the same price, otherwise one or the other order would have been at market and matched against the other, and there is always a non-zero spread between the two.

[csomar]

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

[sp821543]

Same TOS

[csomar]

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.

[bonestamp2]

I like how they say "may add"... haha, they always add it! I assume they're talking about the GDAX order book but if you watch the live coinbase price data on tradingview.com and try to buy bitcoin on casebase at the exact same time, it's always a little higher on coinbase.com (about 0.5% higher from my experience). I wouldn't mind if they weren't also charging an additional ~4% fee on top of that.

[tonfa]

So that's more fee than the worst wire transfer or credit card currency exchange?

[bonestamp2]

Definitely more than a wire transfer, but I'm not sure where else to buy with a credit card at a lower fee. Buying instantly at a known price is much better than a wire transfer that comes through in 2-3 days -- who knows what the price will be when it comes through!

[alexcnwy]

Sound analysis! Quick question: what do you think is going to happen to BCH when coinbase unlocks users' tokens?

[csomar]

Most coinbase users withdrew their coins. I'm guessing they have way less than 100k BCH. Xapo recent dump of 25k in a couple days barely moved the price downed considering its volatility. I'm guessing we triple/quadruple from here by early next year. Don't take this as investment advice. I'm not responsible for your losses or your life.

[nerdponx]

ZeroHedge recently had an article posted here showing that there were just $6bn of actual inflow into Bitcoin go account for its $330bn market cap. Thoughts on that?