> In response to new guidance from the Commodity Futures Trading Commission
Coinbase has always been trying to follow all the laws and show how "legal" crypto can be. If the CFTC says they don't like it then Coinbase is going to shut it down... maybe they'll try to fight it behind the scenes - but they want to stay online and making money.
If they were going to lie, there are a lot better ways to go about it than blaming a government regulatory agency which probably will be fairly open to saying "Yes, we did ask them to close their margin trades because XYZ"
Whatever their reasons, it's clear that it wasn't the CFTC's guidance that made them suddenly pull the plug.
I could kind of see them having conversations with a regulatory authority for a few months, trying to see if there's a way to keep having the product.
Then, when it's clearly "Nope, not going to happen", they shut it down. That could take ~6 months with extended negotiations.
As far as server load goes up, by how much does it need to increase to cause a problem? Are the numbers feasable, eg 100x volumes?
I still have trouble picturing how this conspiracy would work. I assume it involves coinbase pumping bitcoin prices with money that they don't have. They pump it all the way up, realize "oh shit we don't have enough real money to cover the fake money", and then pull the plug to stop the bleed? Can't they decide ahead of time how much money they can safely spend and stop accordingly? Why do they need to halt trading? If they stop pumping, and the price continues to rise, that doesn't cause them to lose any more money, because it's just other people trading with other people.
>As far as server load goes up, by how much does it need to increase to cause a problem? Are the numbers feasable, eg 100x volumes?
It's kind of hard to tell just by looking at the charts. Just because trade volume is low doesn't mean load on the order matching engine is low. If you spam the trading engine with tons of non-marketable orders, nothing will get executed (no volume), but the order matching engine will still have to wade through those orders.
Not saying that Coinbase does this, but incoming wires/ACH/whatever continue to roll in during an outage, but they can stop the initiation of any outgoing xfers, and then be slow with them claiming a backlog.
A big Canadian exchange, quadrigacx that blew up ~2 years ago was doing all sorts of tricks like this. Their bankruptcy is still ongoing, but somehow ~9 dollar in 10 went missing. The other 1 of 10 was frozen by a bank and eventually returned as $5m bank drafts that no bank would accept.
Kinda like "Your money is in Bill's house, and Fred's house", except Bill and Fred didn't have houses.
That would only make sense if coinbase was down for several days at a time. If it was only down for a few hours then that's nearly not enough time for enough money to flow in (aren't wire transfers batched per day rather than processed in real time?). It also doesn't answer my earlier question of "why don't they just stop pumping before they run out of money?".
>A big Canadian exchange, quadrigacx that blew up ~2 years ago was doing all sorts of tricks like this.
Perhaps that's exactly what's happening at coinbase, but pointing to them being down when there's high trading volume isn't a convincing argument.
All depends how stuck they are.
Your confidence in coinbase, given they are unregulated in any meaningful way, is IMO misplaced.
I think you're reading too much into my comment. I wasn't trying to claim that cryptocurrency exchanges didn't engage in shady behavior, I was only claiming that the specific accusation of "they halted trading because of liquidity issues from their pumping" didn't make any sense.
You're saying you don't think that any existing exchanges are conspiring (or have conspired) to defraud?
> there have been multiple high profile stories of very large players engaged in fraud, embezzlement, and duplicitous price fixing, and they are completely unregulated.
Doesn't this make such theories more plausible, not less?
The outages aren't related to insufficient liquidity and only hurt Coinbase.
there isnt really a source necessary
nobody has any insight until they do
So how can they do this without getting caught (and they haven't been caught - firms like Alameda are watching closely)?
This sounds like one of those things that's easy to just exclaim but is lacking a mapping to anything specific
Here's an article about spoofing and market manipulation of real money in regulated excanges: https://ankura.com/insights/spoofing-market-manipulation-and...
This quote from the above article, does not apply to crypto exchanges so far as I know:
"Rules govern how trading is done. Laws prohibit manipulative trading practices on both securities and futures exchanges."
"To date, no cryptocurrency exchange has registered with the SEC" from https://medium.com/semadaresearch/should-cryptocurrency-exch...
...Unless there's magically someone filling it just before they do (i.e. frontrun by an internal bot) every time they try. I have observed exchanges doing this. I don't believe that Coinbase is one of them, though, as others have pointed out with their positioning they are better of not to.
Edit: The source is available if anyone's interested. I intended to do more with it, but lost steam after I lost my coins. https://github.com/nfriedly/Coin-Allocator
I've been holding a sizeable Bitcoin position since 2011, but I'll acknowledge you can make a killing trading in bull markets or crushing bear markets.
However, margin will be steep, considering the volatility; my broker in particular actually has a $200k overnight margin requirement for a short position.
I'm sure you've heard the saying that the market will remain irrational for longer than you can remain solvent. Please keep that in mind when shorting bubbles.
Exchange (that is, Globex) availability hasn't ever really been an issue (and I can't remember the last outage they had; it'll be a big deal, considering there are literal trillions in notional value swapping hands every day). Your broker, which will be your gateway to actually trading the contracts, will be the bottleneck of availability.
I personally use Interactive Brokers, and their uptime is great. Even during times of extreme volatility this year across many markets, which caused the likes of Robinhood or even more established brokers like TD Ameritrade to experience downtime, IBKR has been fine. Obviously your mileage may vary and I suggest you do your due diligence on brokers.
So you might supply USDC on Aave and borrow WBTC. You can then trade that WBTC for USD (if you're bearish on BTC relative to USD), wait for the WBTC price to drop, buy it back and repay your loan.
Though if you're wealthy enough to trade the futures, it's taxed more favorably and easier to manage.
*) I‘m used to commission free stock trading with no volume limits in Germany, for any private individual. Don‘t know how this handled in other countries though.
For example, if you buy 1 BTC and then immediately sell it, will you get the same number of dollars back?
Listen the rule is simple:
1. After a crash, buy BTC and just forget about it until some alert that BTC has exploded 5x or more
2. If BTC had a big run up, buy ETH instead
3. If ETH had a big run up, next buy XRP
4. If XRP had a big run up, then escape into tethers and wait for crash
If you did this sequence the last few times then ONE bull run nets you 5 x 5 x 5 returns!
I'm sure your trading strategy is sound, but it's still a lot of work over the years to get the 500x gain, vs the 380x gain from just doing nothing.
(This comment is in jest. I realize "500x" is a figure of speech and not meant as a literal claim of performance.)
There isn't a compendium of standard tactics that "work" in normal markets. If there were, they would no longer be profitable. Anything that works is secret & novel, and finding a novel approach to an old market is harder than finding a novel approach to a weird one.
As other articles mentioned, which unspecified guidance?
Anyway, don't really care about whether margin is available or not on spot assets, good luck with that. Stay solvent and liquid!
I embrace that. There is nothing sarcastic about it to me.
I will also say that yes transparency in these matters is a strict improvement over the status quo so we can certainly agree on that.
Margin trading and investment Bitcoin storage don't belong to the same institution in my view, unless there's a clear separation of ownership in a case of bankrupcy.
What's the concern here? That someone will buy bitcoin on margin, withdraw all of it, and then declare bankruptcy?
It’s not a matter of withdrawals, it’s a matter of losing more money than you have and being unable to cover the loss.
GP was probably expressing concern that it may be possible for Coinbase to be wiped out in bad leverages which would affect people that don't trade at all.
CFTC doesnt regulate spot assets. So it really depends on how Coinbase classifies what people are actually trading.
I mean can they actually expect you to pay back what they legally shouldn't have let you have? Are you 2m in debt or in trouble for hacking or what?
I wonder if coinbase users went too far in using margin that the CFTC intervened. Wait and see if the same happens to Kraken. They are both bitcoin exchanges.
That led to messes like this  when the bottom fell out of natural gas prices.
FAQ Question 1: Why have you disabled margin trading? We've disabled margin trading because of CFTC. For more info go to our blog.
And stupid companies? They’ll do the same thing but take all their employees and affiliated companies with them.
Much of the "Roaring 20s" that preceded the giant market crash happened because of zero oversight or regulation and saw tons of fraud, and, yep, tons of reckless margin trading. This created huge systemic risk that all came to bear on Black Tuesday, which led to unemployment, homelessness and bankruptcies. This led to the Securities Act of 1933 and 1934.
Further, the Glass-Steagall act, also of 1933 separated investment banks and depository institutions. I'll let you take one guess why this was necessary. I'll also let you take one guess what happened after it was repealed (in 1999).
Also kicked off in 1933 was the FDIC.
All three of these are incredibly relevant to crypto and to this specific conversation.
And here we are now, a plague and a massive stock rally.
If I were to bet, I'd say people should prepare for history to rhyme.
Good policy is good policy no matter what year we came up with it.
Even if I grant the analogy, their original proposition is accurate. Regulations are the main reason why US exchanges are an incredibly small percentage of total crypto volume.
Do you have a way to protect one customer's funds when another customer is ruined?
As far as mechanisms there's auto deleveraging and insurance fund.
Professional traders all wish to be on exchanges with high leverage because it means more volume is uninformed flow and therefore there is more alpha on the table. The pie is bigger.