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The entire thing is absolutely stupid, and isn't going to last forever. People are way too bullish on it. People who have no business investing in it are taking on debt to do so, with no clear exit strategy other than "the moon." A lot of people who don't have any money are going to get absolutely toasted when the pendulum swings the other way. They're in it to get rich. They have no idea what blockchains are. They just think they're buying magic internet money people get rich from.
To put a little perspective on how ridiculous this all is: Last night after Coinbase came back from maintenance, there was the (expected) sell-off, so I figured I'd make a quick buck and bought 300 LTC for about $241 each, then sold it a few minutes later for $251 after the instant rebound and went to bed with a nice $3k profit. I woke up this morning and was astonished to see that LTC was about $380. This was in the course of about 5 hours. Had I not sold it last night, I would have made almost $40k. I'm a little annoyed about that, but again: this is a stupid, irrational bubble that makes absolutely no sense. It's entirely speculative.
I think crypto and blockchain has a future, but it has to solve a few problems first (transaction fees/time and anonymity). None of the big three currencies do that well enough yet. This bubble is going to pop soon and I'm worried that a lot of people are going to get impacted badly.
There's cheap liquidity (ho ho ho said the FED and the ECB), there are institutions (pension funds) that are starting to buy in, and in comparison, the dot-com bubble (which was mainly a US led bubble, not global) went to $5.7tn to $1.7tn. Gold is worth $8tn globally. Why couldn't Bitcoin get to part of that level, e.g. $2tn?
It sure looks like a bubble, and it probably is, but it could literally be the largest bubble in our lives -- unlike one stock in the market, this is a global phenomenon + you only have a few currencies that matter.
To the extent that there is an analogous concept it's their utility as a means of exchange. Which outside of drugs and hard drive ransoms is minuscule at best.
- if 1 BTC were $100 trillion, then it's clearly passed the fundamentals of "being a unit of exchange between commercial entities", since it would be way more than what any form of exchange would ever require.
The truth behind the pedantic answer:
- if it's a store of value, then the "fundamental" value is the amount of fiat that's gone into the system so far. If all the exchanges have roughly $100 in USD deposits, the base value of their bitcoin deposits will be at least $100, roughly.
- If it's as a means of transactions, then the fundamentals are linked to how much transaction volume is going on. For example the flow of USD into BTC and vice-versa. BTC <-> BTC exchanges in that universe probably help to define things as well, as it would be used as an alternative to USD.
The dollars don't come from nowhere, so there's at least some base numbers you can think about. Thinking of it as "USD going into the ecosystem" and "USD going out" is a good proxy for now I think. Obviously very fluid, though.
https://www.amazon.co.uk/This-Time-Different-Centuries-Finan...
-- said a million articles in 2000
If you buy in, buy in during a consolidation phase, when you see the price is stable. Ethereum had a huge run up, yet then consolidated for around 6+ months around $300. I would say that is healthy. Now it's heading higher. "Fundamentals" aside, of course.
edit: Oh you said "hope it is not" - my mistake.
Also, rich Saudis are scared shitless about losing their wealth when political winds change. They put their money into crypto and it's much, much harder to take it from them, provided they own the private key. This is the best mechanism of wealth storage yet created, provided the value holds, which as more around the globe believe in, it becomes more likely. Bitcoin could be digital gold, but we shall see.
That's not exactly trivial - how do you store a private key in such a way that it's safe, accessible to you and only you, cannot be destroyed by your enemies, and can be passed on to your heirs upon your death?
[1] yes, there's such a thing: https://www.goodreads.com/book/show/2211931.The_Bin_Ladens
In contrast, if you buy bitcoins, when you flee the country you can bring your wealth with a memorized 24-word code or a slip of hidden paper, and people in other places will accept your Bitcoin.
If you have enough trusted friends, that should work.
His dad runs quite a large traditional investment fund and knows of people in his network working at pension funds that are looking at putting money into Bitcoin / Ethereum and others. The family has done private equity deals together with some of these funds (mostly raising debt financing from them).
I'm not an extreme crypto bull, but I honestly think it's still early. But there will be massive volatility along the way.
Note: not investment advice, obviously. Just my opinion.
The problem with crypto-_currency_ is that it's not a productive asset. A share of a business pays dividends over time and thus has intrinsic value (and _some_ speculative value), while a currency does not. A currency transaction is a zero-sum game, which is good because it minimizes friction.
Buying cryptocurrency with the expectation of increases isn't investment, it's _speculation_.
Pension funds generally allocate up to 5% of their portfolio to alternatives, which could be smaller funds investing in art, watches, music royalty rights, farmland, wine, and the likes. This also includes crypto.
If you're an investment manager, it isn't necessarily crazy to allocate 0.2 or 0.5% of your portfolio to crypto and try to capture some of those gains.
Everyone is talking about what if scenarios where huge offshore money or sovereign wealth or whatever comes into Bitcoin YUGE. Well, ok, do you think that money is just parked somewhere or is actually invested somewhere in a productive business?
Most dollars which aren't spent on consumption are converted into equity in productive businesses. In this case, dollars are merely the unit of account. You aren't invested in dollars, you are invested in businesses that produce the things that people need and those investments are measured in dollars.
To draw a parallel to the stock market is not appropriate, but those who bought into MSFT or AMZN even during the peak of the dot com bubble have nothing to regret today.
In the end, if it goes another 30x from where we're at today, and then has an 80% correction, you'll still be up 6x. It only makes sense to exit if you think such a correction is imminent, or you believe the entire space is going to zero.
Drawing comparisons between gold and a fiat currency (BTC) is completely confusing.
Gold is a tangible commodity. I’ve been in the cryptoasset space for a while and I’m still not exactly sure how to cleanly classify it.
I can relate. If I'd done the exact paired trades i did this month (only between btc, bch, eth, and usd), only at different times than i did, i would have doubled my money yet another time, for a life-changing sum.
Instead I've been sleeping well every night for a month on a healthy exit. Even with hindsight, I don't have any regrets.
I didn't get into the space to get rich and sweat at night, I got in to socialize monetary control. Now crypto doesn't even want to be money. Once this bubble cools off I can start dreaming again.
They are doing it willingly to get rich.
But what about all the non-fiat purposes of crypto currency? It seems that is what’s currently getting lost in the conversation.
For example, I simply want a way to accept electronic payments from people without dealing with middle men.
I want merchants and the general public to become aware of the inherent value in some blockchain by itself as a way for us all to spend “money” and get “paid” in a peer-to-peer manner.
I hope the people who are buying into this bubble come to see this. But I’m afraid if they do get burned, they will have missed the whole point.
Personally, I think many are extremely overbought (BTC, LTC, ETH, etc) but can't help but feel that those with real utility and industry value are (relatively) undervalued.
Buy: 300 LTC @ 241 = $72,300 + 1.49% fee ($1077) = $73,377 cost basis
Sell: 300 LTC @ 251 = $75,300 - 1.49% fee ($1122) = $74,178 gross
$74,178 - $73,377 = $801 net
and that's before accounting for taxes. What am I missing here?
Even if you don’t plan to trade, it might be a good idea to buy/sell through GDAX rather than Coinbase to avoid the fees.
I've just been told that hodl means "hold on for dear life".
LOL
Bitcoin Lightning currently works on testnet ... give it a few months and those problems will be solved. The price is exploding in anticipation of events like this.
https://play.google.com/store/apps/details?id=fr.acinq.eclai...
I was just like wow, this is going to be pulling in a lot of people that have no idea what they are doing. Everything seems irrational. Who knows though.
The exchanges have an export history feature, which I'm planning to put into a spreadsheet to calculate profit. That's gonna be a fun weekend project.
From our perspective yes, Crytpo's use case as currency make absolutely no sense (yet), we tap our Visa card to pay instantly with no fees and no fraud liability, hard to beat.
As a store of value however there is a very strong use case in the western world. Of the top my head, it is estimated that 10% of our GDP is in off shore havens, think about that infamous 1% moving just half of that 10% into Bitcoin ..
I digress..
If you venture your mind a little outside the borders of our empire and think about the 'unbanked' parts of our planet, entire populations whom live under poverty for the sole reason that they do not have access to the equity and efficient markets directly. If you look there, people are DYING for something like Bitcoin and other crypto's. There is absolutely no reason an African farmer to have to sell his Oranges to Europe in Euro then buy it back from there (Sell Euro to local currency) for local use.
Currency is an abstraction, an expression of a market, just like language is.
Here we tap to pay and need everyone to protect us from fraudsters, pornographers, money laundry , <insert your favorite horse man of the apolocyple here>, in other parts of the world , that far out number the western world in population, they don't care to be protected by the above because quite frankly the price they pay for that 'protection' is insanely oppressive governments that use the above to legitimize the oppression.
It is exactly in those markets where you start to see a VERY stong use case as both store of value and currency for crypto and it is exactly that market that will drive the world's demand for good UI for crypto that will eventually usher in mass adoption.
Of course, there's a reason third world countries want capital controls - a lot of the people seeking to export capital are corrupt non-owning possessors of resources. Just as an example, whatever rank administrators within state oil companies and such who want to take things that actually belong to the nations - because such nations have rather weak administrative classes (not that the US isn't moving closer to "kleptocracy" itself).
So everywhere, bitcoin certainly looks like a device for protecting value - except once all the money that wants to move in has moved, then bitcoin's lack of actual practical use (see $20 fees) will make it not terribly valuable and all that money in it will be at a bit of risk.
Plus, phone-based money systems already are coming/in Africa. They solve the ordinary transaction problem. The problem of "how do you get money out of X currency or resource" isn't a logistics problem, it's a power-struggle. The reason Y person is fighting to get money out of X currency is Z person wants to stop that happening. But overall, remember neither Y nor Z are likely to be less than fully corrupt.
Use as currency for Bitcoin (and other coin networks) is still in it's infancy and cannot scale the way it needs to should it want to replace fiat.
The important distinction I would draw though that stores of value have historically been cumbersome to transport and liquidate, Bitcoin solves that problem in a very good way.
I feel it's important to also address this 20$ bitcoin fee meme that seems to be going around. While based in truth it is not 100% accurate.
You have the capacity to set your own txn fee on the Bitcoin network. If you don't mind waiting a couple of blocks (1-3 hours) to get your transaction confirmed , then the fees fall down to single dollars and even lower. If you're selling a bulk commodity to a distributor in another market , you don't need ecommerce style confirmation times. Same goes for transferring large sums of wealth.
With that said, things like the lightning network will resolve alot of issues with Bitcoin scaling and in my (humble) opinion this is why LTC is pumping. (Atomic swap + Transfer over LTC )
Someone in a country, who has the equivalent of $800 is life savings, is experiencing hyperinflation (Venezuela let's say). Are you telling me that they're not willing to pay 2.5% (20/800) of their savings to save 97.5% of it? Why do you think someone would be willing to let hyperinflation destroy 100% of their life savings when there's an alternative?
Anyway, this is a straw man. Who is saying cryptos are useless? People are saying that they are a bubble, that the valuations are irrational.
I hope you mean realize that merchants eat the fee and are contractually not allowed to offer discounts for cash payments. And many of them are not happy about this situation.
I doubt cypto currency is going to help that setup at all, and most likely it will just offer more avenues to do the same.
Note that calling cryptocurrencies "crypto" doesn't make much sense either.
e: for making a huge sale of crops or something to another nation, then 1 transaction fee is not bad compared converting at a %, but you'd still need to convert from Bitcoin to a local currency to actually use the money you made.
The IRS would crack down on this as with any other tax avoidance scheme. Offshore havens are probably safer since many rely on loopholes.
If just 0.000000001% of all astroids made of solid platinum land in my back yard I'll be a gazillionaire!
If you're trying to hide assets, the U.S. is the place to be, as none of our treaties actually require us to share information back with the rest of the world.
That's just not true, these fees are baked into the prices, since the seller pays them.
That's one of the reason cryptocurrencies are advantageous in the long run, they can eventually provide the transaction fees close to what they cost in electricity and infrastructure amortization - pretty much sub-penny to transfer any amount.
I guess it's businesses, who pay high enough fees on your transactions.
Please remember "that infamous 1%" is actually the 0.001% or much less. The top 1% income actually includes dentists, successful software engineers, etc. Normal successful people. An amount of wealth that can actually be attained regardless where you came from, given luck, talent, luck and in some cases, hard work[0].
The phrase "the 1%" was originally introduced to draw a line between people with such a ridiculous amount of wealth that it doesn't make sense and is really only attainable by being born in it, or being born with very rich family and learning the shibboleth over your lifetime. Becoming insanely wealthy by an insane stroke of luck is possibly but it only gets you in contact with this elite, not "in", but if you play your cards right your children might.
[0] don't be mistaken that "hard work" is any kind of predictor for wealth. just look around you. hard work may be considered virtuous, but that's it. it's not like "being a good person" gets you rich, either.
Fees that are absorbed by the merchant, so not an entirely fair comparison. Still, I agree that the fees make the use cases for cryptocurrenies very limited personally. Right now, I can pay a fee to a third-party (CC fees in the form of slightly higher priced goods) BUT that third-party takes on a significant part of the liability (e.g. for goods not provided), and I can transfer money to a trusted (or untrusted providing I am OK with the risk) party in the same country for ZERO fees via my bank. For those use cases, using most cryptocurrenies would be strictly worse (I either give up the fraud protection or I am paying an unnecessary fee).
The only case where it makes sense is for international transfers, which typically do have higher bank fees, but personally they are so rare (I've used it once in the past decade) that they are barely worth considering for my personal use cases.
That would make it something of a niche form of payment compared to say credit cards. You aren't going to use it to pay for a cup of coffee, but there still are trillions of dollars worth of wire transfers per day. That is roughly one thousand times the amount currently transacted per day in bitcoin at the current valuation so even taking over a tiny portion of the wire transfer market would justify bitcoin's current valuation.
Maybe a case could be made for Venezuela where bolivars are useless, but USD is a far better candidate for their currency needs that Bitcoin, given how volatile Bitcoin is.
It'll be an interesting test case for the value cryptocurrencies can provide in third world countries.
Even better, I should sell just a paper (well, an electronic one) stating you own some thin air. Hey, geeks, how cool can this get?
I am sure I could find buyers in the same market as cryptocurrencies.
PS: This is not directed at you, but you expressed the level of pointlessness and... void that reigns in this 'market', so I picked your message to place my joke/rant.
Have fun, but don't bet your life on it.
Mabye in the future it can be more than a speculation, but right now it's a game.
You could be right.
But I don't understand everyone's certainty that cryptocurrencies are a fraud-bubble-scam-Ponzi-mania.
The growth curve fits both exponential and logistic (S-curve) functions.
Exponential growth is unsustainable, while logistic growth describes most technology adoption. Halfway through the cycle they're indistinguishable.
When there's 98% agreement this is a bubble about to burst, my instinct is that the conventional wisdom is wrong.
When it blows up, you won't understand why the SEC didn't protect you. By then, you'll realize it was a mirage all along, and you'll want someone to blame for letting it get so out of hand. Every piece of news you interpret will tell you that losing money was not your fault, because that's what you'll want to believe.
On the flip side, the current price action is causing the same sort of confirmation bias--just in the opposite direction.
Even in Africa, the possibility of phone-based money allows people to do this.
Bitcoin's risks don't balance its benefits for most users of currency and basically, it's a currency or a "technology", it's simply a unique commodity akin to art or Tulips. I mean, if the bubble was tulips today, I could sell them as "unique biotechnological value-preservation technologies". But that wouldn't change the well known financial/psychological/social dynamics involved.
I have a high tolerance for risk, so I don't mind going in big (big for me) - if it works out great, if not, it's been a helluva ride.
Of course, that's assuming that don't end 2017 (or 2018) with a massive crypto bubble burst!
I say that without sarcasm. A legitimate request.
So like, you buy not from someone selling, but from Coinbase's stash, who then buys to refill from someone else.
No idea how accurate that is though, maybe someone can back me up or correct me here
What about the stupid fees that bank charge you to have the privilege to have you as a customer?
What about the fact that at the moment it takes 3-5 business days to make a simple bank transfer to another bank?
What about those insane fees when you try to buy another currency through the banks?
What about the fact that I have to call my bank and plead my case when I want to transfer an unusually large amount of money to somebody else because of them blocking the transfer and now I have to spend 1 hour on the phone to solve that issue and prove that I am the one who initiated the transfer?
What about the fact the bankers have brought the world on the edge of a great depression due to their greed and left millions of people underwater on their mortgages?
Bitcoin/LTC/ETH may not solve all the problems that we are facing now, it may not have much practical use at the moment either, but I 'll be damned if I give more money to the banksters.
Might be worth using a credit union. To my knowledge, BECU isn't charging me any fees for my accounts with them.
Also worth noting that all governed digital payment systems (VISA, Paypal) are (1) prone to censorship and (2) leak information. Additionally, ACH and card transactions are based on debits that are initiated by the person requesting funds, as opposed to credits that are initiated by the owner of the funds. Not so terrible, but for the fact that the approval process for transactions is almost always one-sided. Anyone can debit my account and that transaction will go through by default.
Pardon my ignorance but don’t banks provide a service? If they charge too much, can’t I find a bank that charges less?
What makes their fees “stupid”?
The only way I could find a "bank" with lower fees was to abandon banks altogether and switch to a credit union. I swear it's like all the banks collude to determine market rates for how many and how high of fees they can all charge their customers, to the point where—as a regular consumer—they're all indistinguishable.
Not only are the credit union's fees lower (or non-existent in some cases) the interest rates are higher and there are no shareholders to appease, except for other members of the credit union.
For me, I have a modest holding (in terms of its USD value today as compared to my other investments). After much wrestling, I’ve decided to just let it sit and be done with it. If it crashes back to pennies, oh well. If it goes to the moon, I’m glad I had a piece of the action.
As much fun as it seems, I’ve made the deliberate decision to not try to game / day trade it. It’s been possible to try to make money like that in Vegas for many years and that’s never been that interesting to me, either.
[citation needed]
Even long term investors in traditional securities often get panicky during bear markets. They sell their holdings, even if the underlying value hasn't really changed.
Clearly, are shown by the site here, these aren't nearly as liquid as fiat currencies, nor are they really used to purchase anything.
So... What is it?
EDIT: upon thinking about it, MLM wasn't the term I meant.
During that same time I transferred 15k$ from one crypto-wallet to another. It took 10 minutes all told.
Sure there are lots of people who are buying crypto because they think they'll make loads of money but a significant portion of us are in it because we dislike the infantilizing ways the current banks hold us hostage.
My first hand experience (2017) is that US banking oferring (from a european guy perspective) is a eyes opening experience.
* There is no instant bank wires (free ones) between major banks. Or at least the same days ones, working reliably through most of banks.
* You get paper checks from your bank :)))))
* Small business (sold a car, got a return from landlord) give you money on checks, also accept only paper checks if you need to pay them on the spot (in the office).
* your bank charges you a monthly fee, to protect you from overdraft (wtf is this on debit account??), he shall block from happening at the begining - we call it "protection racket" in Italy.
* boa/citi and others have websites with design from 2005, not to mention mobile apps..
* you can't send money from bank account to a different bank to your unsophisticated friend (plumber, maid, or mr sandwich) just knowing his phone.
* when you withdraw money from coinbase to your connected US bank account, you pay 1,5% of face value. WHAT? PERCENTAGE FEE? This is USA banking thing, as the very same coinbase, charges fixed 0.15 EUR fee per no matter how big wire if you're european.
* major us banks got two factor just two years ago in terms of security.
* tap to pay (we call it paypass) is also almost 10 years after europe.
* first chip card in citi was offered to me in 2015 or 2016? Still magnetic (easily copied) card is used in majority of points in the USA
etc..
Some of them are chaning in the last two years, but mostly for sophisticated customers, small banks, and people not being able to use those features between different banks. It will still take a lot of time to catch up with a Kenya from Africa...
...But if you were beaten and robbed on your way to the bank, that check would be worthless to the thief. If your bank went insolvent, the FDIC would cover your $60k. What happened to depositors when Mt. Gox went belly up? What happens when that same thief hacks your wallet instead? There are many positives to our current banking system which you seem to be dismissing. Namely accountability. Perhaps once these things are well regulated and backed by legitimate business it will see mainstream use. But crypto is literally nothing but a speculative game and means for laundering money at the moment.
Here in Europe I can make a payment to any other EUR bank account in Europe, for free and it’ll usually arrive the same or next day. All I need is the recipients bank account number, and to enter that and the amount on my online banking - I don’t need to go and see anyone or fax anything over.
Recently a new initiative was launched where (between participating banks) you can transfer up to €15,000 in a maximum of 10 seconds:
https://www.europeanpaymentscouncil.eu/what-we-do/sepa-insta...
If we're talking about other currencies, you have a good point. I think lumen (XLM) is the best right now, ~$0.0000015 fee, ~3 second average right now
Transfers are free and fast here in the UK.
You conveniently skipped over how much it cost in fees to transfer that much. I'd wager it was significantly more than $7.50.
Sure, but if someone scoops your crypto coins, or you leave them in an exchange that's hacked, you basically have no way to get it back.
This is trading a serious amount of security granted to us by world governments for convenience. It also increases your cognitive load of handling your crypto safely.
That bank sounds terrible, and it can vary from branch-to-branch which is frustrating.
If I had to bet, there is still lots of upwards runway left, but at some point, it will come crashing down, the bad [companies][coins] will be worthless, and out of the ashes will rise a more sensible market with some of these [companies][coins] truly changing the world.
I'm bullish on blockchain technologies over the next decade or two, but we're gonna have to clean up for awhile.
My hope is that blockchain enthusiasts are taking their profits and using them to invest in building something better.
(There's also a lot to be said here about the hucksterism, shilling, get-rich-quick schemes, and an almost-fanatical belief in the power of a pure free market inherent in the BTC community from the beginning, but that's best left to another post)
I understand the technical reasons why due to the 21M bitcoin limit, hashrate difficulty increasing, etc. It just seems like a rigged system with the people “on top” getting huge rewards for very little work whereas the people lower down who do many orders of magnitude more work are getting very little reward. From that perspective, it has the scent of MLM, if you will.
There will be many hundreds of coins flooding the market. There is no such equivalent in the real (offline) world. You have gold, silver, platinum, etc. - but that's about it. No one is inventing/digging up new types of metals.
Does one cryptocurrency increase 20x in a month? Then yes, it's a bubble, and it will likely crash pretty hard in another month or two (but probably not as much as it rose).
Does it increase 20x in a few years? Not necessarily a bubble because its value may simply be related to its adoption and potential.
The thing about cryptocurrencies is they have rather limited supply once they are launched on the market. So if their userbase/number of adopters increases by 10x overnight, and most of them intend to keep those coins, then it doesn't really qualify as a bubble, even if the value explodes.
That said, I can see a future for it if something like lightning network ever gets released (and actually works).
A big advantage of cryptocurrencies (I think) is that there is no regulation (no central bank injecting billions), but it is also its Achilles's heel because it can't be used ha s a commodity currency because it miss the stability of a currency backed by a central bank.
In multilevel marketing, people are being sold downstream profits directly from people they sign up. If you sign up another person you take a cut of their revenue. If you sign up enough people and they sign up enough people you stand to gain a lot of money with very little work.
When it falls apart, assuming you're not deep enough in that you're indited yourself, you keep that profit. It's the people at the tail end who lose because the only way to really profit is to sign people up.
On the other hand when you sell someone on bitcoin you aren't taking a cut of their 'revenue'. If you're invested in bitcoin you're as in the hock for a crash as they are.
It's an asset, though a somewhat different one to traditional assets. As such it's subject to the same kinds of asset bubbles as any other asset (ie. gold is not as liquid as fiat, nor is it really used to buy things). But it's not the same kind of thing as MLM.
It's not being used to buy things because its a deflationary currency which along with an adoption curve means it's more advantageous to sit on it.
The adoption is definitely increasing the value of it, its a more liquid gold to me, but like any other currency or asset the value is derived from the trust and value that people put in it.
They obviously need to keep dollars on hand in order to cash everyone out. But what if Bitcoin goes up in price? If there is a run on the exchange later they may have to sell their bitcoins on the spot market to cash people out.
Banks reinvest money held into loans and other speculative investments. But what do you do when as an excuange / market maker you stand ready to buy and sell at any time?
Here is my concern: while it was just two guys meeting up to exchange $ for bitcoin, the $ kept circulating. But these exchanges may be locking up more and more USD just so they have enough to cash people out on demand. As a result, there is a real transfer of wealth to bitcoin and USD is getting frozen in exchanges.
If this continues for 5-10 years more, wouldn't bitcoin become millions of dollars and bitcoin holders would be able to buy up anything vs dollar holders? One bitcoin holder could buy half of NYC already, and who can stop them?
If Coinbase is making the market prices by leaving large limit orders at certain prices, and Coinbase limit runs out, then the price moves past their limit. It's as simple as that.
Nobody can place limit orders with money they don't have (I understand there is a "margin trading" option, but I don't have that enabled on my account and I'm uncertain how many accounts on GDAX do have that feature.)
If Bitcoin price goes up, that just means that the supply of Bitcoin at a lower price point has evaporated.
Coinbase is not buying and selling coins (let's assume, but also assume that if they are buying and selling, they play by the same rules as everyone else. No imaginary wallets.)
The exchange are just playing matchmaker so that Market Order X that crosses Limit Orders Y, Z, P, Q, R... that intersect, are all matched and executed together. Then, GDAX can collect a fee from the person who placed the Market order, and GDAX Limit orders are fee-free. Coinbase-proper is 100% market orders with a slightly larger fee, so they can clean up even more on each transaction there, because Coinbase still does not need to sell some of their own currency for each buy; they are just the matchmaker.
Coinbase and GDAX are the same company. If Coinbase needs some of GDAX's liquidity so that it can match Coinbase customers with GDAX's limit orders, they can do that opaquely. The customers do not need to know where their cryptocurrency came from exactly.
If all of the liquidity on GDAX dries up, then there will be a problem (but still, the problem/opportunity is not Coinbase's problem, it is the whole market that comes grinding to a halt until someone opens up some more liquidity at a particular price point.)
Things look different with margin trading though. Margin trading implicitly implies a loan from the exchange to the trader. If the market moves too much against the trader, exchanges typically automatically force their positions to be closed. The problem is that if the price moves too quickly, the proceeds from this transaction may not be enough to cover the loan to the trader. So then the trader can end up owing money to the exchange, and it may be difficult for the exchange to get that money. That can lead to solvency issues.
Governments need to quickly enforce suitability guidelines along the lines of accredited investor status asap (I believe some countries already working on this.) Some would argue this is unfair, but people just getting by have no business playing in this wild west.
Disclaimer: I am not Peter Lawrey.
> Bubbles grow against walls of doubt. It is when the bubble must stand on it's own that it bursts.
If these markets level out, and people stop investing because you can no longer get 20% returns every week, that is when things are going south.
There are still several unsolved problems with cryptocurrencies like having to keep a large database on disk and slow transactions (and illegal status in some countries). They are not protected from 50% attack by governments. When they are resolved, it can become really good alternative to card systems.
VISA has many disadvantages compared to Bitcoin:
- it uses outdated technology and is absolutely insecure (card details are easily stolen and sold in large volumes, they still use unencrypted magnetic stripe)
- it can require paperwork and a deposit to accept payments. It is difficult if you do something legally gray (for example, related to porn)
- it is difficult to get a card without identification even if you are not going to do anything illegal
- transaction cost is high for small payments
- US government forbids to use VISA on some territories for political reasons
- merchants often refuse to accept cards from some banks or some regions (for example: Digital Ocean doesn't accept some prepaid virtual cards)
- companies can collect and exchange customer data when they pay with a card. Because it has your name.
- the data on transactions from all countries go through systems controlled by US
It is only natural to replace those outdated magnetic card systems.
Maybe they try to and couldn't keep up? Would be fascinating how this stuff is managed behind the scenes.
For clarification: I bought some $1000s worth of LTC when it was under $100 shortly after the Futures news hit. It was pure gamble on my part and I could have easily lost instead of the other way around.
I also bought a few ETH coins when it was around $400 but haven't cashed those out yet. I'm predicting my LTC gains will be wiped by ETH losses.
* Neophytes buying whatever they can put their hands on, because... mania
I doubt people really understand what they are buying whether it's bitcoin or litecoin. If you think you do, well, then most people do. Don't look at "crytocurrency" as the future "payment method", invest it like an asset. Go in low, come out high.
I invested in litecoin because I believe the market is undervalued. It's like a blue chip but will continue to rise for a while. If litecoin is to continue to rise, my bet is stopping at 600 then stabilized until bitcoin pops again. Litecoin in my view will never pass Bitcoin, but it's nonetheless a fun investment to play with.
In Litecoin's case it's also because it's one of the very few cryptocurrencies that has been adopted by virtually all exchanges, and it has faster transaction times than Bitcoins (for which transaction times and fees are a big problem currently, after the big recent influx of users/investors).
I have been asked my a few friends and family members about investing similar amounts in Crypto, not knowing much about it.
People want piece of the action. The return period is small, LiteCoin up 90% just in the last 24 hrs, up 10000% in the last year. These are bonkers results if you just want to play the market and cash out.
For those that believe in the technology that blockchain, DAG and smart contracts offer there is a lot up and coming projects that might contribute a lot to the space (and beyond into the real industry world, potentially).
I think BTC and ETH are the lowest-risk coins right now. 99% of the coins are going to fade away, so that's where the real bubble is. Some random ICO pops up and within months their token market cap is hundreds of millions based on nothing other than a vague buzzword-laden plan?
Further, I'd argue that BTC and ETH are both extremely overbought at the moment, and reflect more of what a bubble is than many of the lowly alt coins that have real use cases (not that BTC and ETH don't). I feel you're underestimating the potential of some of these smaller projects, the problems they aim to solve and the progress they've made towards solving them.
It all comes down to how effectively you think the distributed consensus on transaction history is protected. A consensus which is not based in human relationships is very easy to pervert, given enough wealth.
The doomsday scenario, from my perspective, is China expropriating the mining farms in its jurisdiction, and constructing double spends until nobody trusts BTC as a means of transferring value. If that happens, there will be a huge rush to the exits. And it would be cheap, quick, and easy for China to do so.
There's a lot of money to be made in the meantime, though.
I think allocating a small percentage of wealth to an asset with 10% chance of going up 20x, and 90% change of going to 0 (net expected value 2x) is a rational diversification. Crypto seems to be fairly uncorrelated to broad market. (This is actually a more bearish perspective than I hold, but wanted to point out that it can be rational to hold an asset which is likely to fail as long as there exists a significant chance of order-of-magnitude returns)
The way I think about investment is that you should only invest if you have a clear and rational reason to do so.
There is a rational reason to use fiat: you need to pay taxes in it. The government also provides all sorts of guarantees about your cash when deposited in a bank. These are solid, irrefutable arguments.
Investment in bitcoin seems to be based on an argument along the lines of “we need to change currency because centralised is bad” or “it’s just another form of gold”, or worse: “because it will keep going up”. None of these arguments make sense. Yes, maybe bitcoin will become a big currency. But why? Can you give a watertight answer as for the value of fiat? Some people answer “it’s decentralised”, but that is clearly untrue. Miners and exchanges are the centralised concentrations of power in bitcoin, but they are unregulated.
The idea of cryptocurrency is interesting and exciting, but investing in something purely because it’s interesting or exciting is only a good idea if you’re happy to lose that money. No doubt bitcoin is important as a technological milestone, but that does not make it a good investment.
When bitcoin crashes, it could undermine various startups, which will have a knock-on effect to the startup bubble we’re in. Presumably that won’t be enough to crash a stock market, unless bitcoin reaches astronomical levels.
Hmm. Maybe I should buy some gold.
They're pretty good at scaling to meet that crazy demand
Is this for real?
You still get your coins at the price you paid.
How long does the credit card process take?
It's funny because you're actually mad at ACH here.
Wow.
If you have access to a computer that has many many gold plated connections.
Gold is still superior for restarting civilization after an apocalyptic event.