Coinbase says buying and selling temporarily disabled amid price rout | Hacker News Reader

Coinbase says buying and selling temporarily disabled amid price rout

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135 pointssmoser193 comments

There is something that feels extremely fishy to me about what has happened at coinbase over the last few days.

For years I've told people to just store their coins on coinbase. I've been a big fan of their "vaults", and I've been saying that they are the shining beacon of legitimacy in this whole thing.

I honestly don't know that I still agree with that. This whole rollout of BCH has made me honestly start questioning if I can trust coinbase anymore. I expect stuff like this from sketchy exchanges like what btc-e was, but not coinbase. That makes me really sad, since they were (still are, for now) such an incredible success story.

I think there is going to be a lot of regulation coming and I'm not entirely sure that that is a good thing. It makes me pause for the same reason I wouldn't be sure that regulators telling me what webservers or programming languages I'm allowed to use would be a good thing.

I really hope all of the "never keep anything on an exchange!" people aren't proven right again by coinbase of all people.

What advantages are there to storing BTC on Coinbase vs. your own wallet

User experience, which is important when you're trying to appeal to non-techies, like the ones fueling the Bitcoin spike in the first place.

Just remember that "everything was great until the normies arrived" is equivalent to "our shit didn't scale well."

A few days ago it felt so much easier to answer this question, haha.

Coinbase puts a lot of work and effort into their security models. Storing coins yourself means that you now have to:

1) Physically secure your private key

2) Secure the machine that you use to interact with that private key

3) Ensure that that private key was generated in a secure way

4) Ensure that the ways that you interact with that private key don't cause any problems.

etc.

Storing your own keys is a bet that you are better at security than coinbase's team. That's not a bet I necessarily want to make.

Or, just buy a Ledger Nano S, which handles all of that for you. For serious crypto one uses hardware keys, and cryptocurrency is no different.

s/Ledger Nano S/Trezor

Both work just fine, when compared to DIY. Playing favorites is not how to advocate to people not in the know; I happen to have a Ledger, so it's what I typed.

If you have small amounts of crypto currency and want a secure machine and don’t want to buy a hardware wallet:

You can take your old phone or tablet, apply any available upgrades, factory reset it, use it only for crypto currency stuff.

Our mobile operating sysmtems are pretty secure (in the grand scheme of things)

Until you lose it or drop it in a lake or it doesn't boot one day or the flash memory corrupts.

All these people recommending phones or hardware wallets as being easy, and not mentioning the complexity and opsec of offsite backup....

Hardware wallets come with a passphrase mnemonic that completely restores them. Write it down, put it in a safe deposit box, you're done. You can then take an acetylene torch to your hardware wallet, buy a new one, restore from the passphrase, and have everything back. Hardware wallets are far easier to back up offsite than key management on a computer, though a SmartCard-HSM comes close. (Hardware wallets are the same principle as an HSM.)

Since you're probably wondering, the passphrase mnemonic on my Ledger is a group of 24 words that represent a translation of the primary secret key. All accounts on my Ledger are derived from it. I've tested wiping and restoring, and the passphrase now lives in my bank deposit box.

By the nature of cryptocurrency, if you had all the public keys from your hardware wallet you could use it as a bank by dropping the wallet itself in a safe deposit box. You don't need it in your physical possession to receive, only send. I'm considering buying a second for exactly this purpose, though at that point, a paper wallet would be just as functional.

You can, but you shouldn't. What if you lose your mobile phone...?

> Our mobile operating sysmtems are pretty secure (in the grand scheme of things)

Not yet. Maybe after Android One / Project Treble runs on the majority of smartphones in the world. Which won't happen since Google made Android Go for low-end devices.

That's three problems. Security of the device(s), the lack of redundancy, and the physical security of the device.

A hardware wallet (such as Trezor or Ledger Nano S) together with a smartphone (or PC) yields you 2FA. "(Or PC)" could mean an offline Linux distribution on a USB key which is used as backup. The hardware key suggests a paper backup which should be safely stored at a notary or safety deposit box. Same for the USB key with the backup Linux distribution. Though it can also just contain some config files (stored encrypted).

Such a hardware key costs <= 100 USD/EUR (plus the costs of the notary or safety deposit box) so for any amount of cryptocurrency _above_ the cost of that it is worth it.

These costs are peanuts for the average BTC user, but for people in poorer countries its sadly quite an investment. Worth it though.

Great question. I bought into BTC in 2011, not using an exchange. I'm wondering how much of a pain it'll be when I eventually want to sell them.

Coinbase brings a bank-level cryptocurrency consumer experience to the masses and provides a safe interface to an environment where you otherwise can easily shoot yourself in the foot. All you have to do is verify your identity and you can recover "lost" currency. The alternative is losing access if you misplace your paper wallet.

Except this isn't even remotely true! This is the sloppiest and most scammy financial institution that I've ever interacted with. They claim to abide by KYC guidelines then happily ignore your identity when you come to recover the account they gleefully have locked you out of. Every user, on a long enough timeline, will experience some kind of lockout. Then you will have to work ceaselessly to try to recover access. Actually that crumpled paper wallet that's been through the wash and was forgotten in a random drawer in your old house will be much safer to use than this company's support.

And this screed doesn't even touch on their incredibly shady exchange practices. They have how many VCs backing them and couldn't manage to make an exchange that scaled to meet demand at a crucial juncture? Either their funders haven't done due diligence or the technical faults were all part of their plan.

yeah but it's not like running a trading platform is trivial. even the big conventional established exchanges occasionally have outages

You think it's fishy and you have no way to know if something is going on behind the curtain at coinbase but you don't want regulation? Regulation is what lets you peek behind the curtain and know that Coinbase is or isn't doing something fishy.

Thats not what bank regulations have achieved.

Compare and contrast to hypothetical banks with no regulations at all? Maybe they're not perfect right now, but it could be a lot worse, too.

I'd certainly agree that at least in the US, regulation has greatly increased banking transparency.

There are still edge cases, but capital ratio requirements and accounting standards, compared to none? Huge difference.

They have achieved trust is system. If my bank stops existing right now, I still have any money.

If <exchange> gets hacked, tough luck.

It depends on the holdings, not everything you can have in a bank account is FDIC insured.

Update: By "everything" I mean not all kinds of financial instruments are insured by the FDIC. They do not cover mutual funds, annuities, bonds, etc. They cover pretty much just cash and cash equivalents.

It's fairly trivial to make sure everything's FDIC insured, and being wealthy enough to care about the per-account caps should mean you've got someone to advise you on doing so.

It doesn't even require a human advisor. Many banks participate in CDAR, which spreads large deposits across multiple accounts at other banks in the network. Fidelity isn't a bank, but their cash management feature includes checks, an ATM card, bill pay, and can send and receive ACH and wire transfers; they also implement this hack.

None of this applies to securities. Presumably you could insure them. It's not obvious to me from first principles that the cost of insurance would wipe out any incremental appreciation value, but I've never heard of anyone doing this so probably it does.

Securities held at a broker are usually backed by SPIC protection.

True. But for average people at popular banks, it's very sufficient.

Thats federally insured. You are paying taxes for your 'still have your money'.

Not as clear cut as you think it is. If the government insured bitcoin 'for free' you would also see a major surge in confidence.

The government insures bank deposits because it, and the vast majority of its citizens, has/have a vested interest in the stability of its currency. That's kind of the point of fiat currency. At the end of the day, there are dudes with guns that will back its value. Not so with Bitcoin. And good luck to any expecting that to change.

There have been many notable failures of enforcement, but as someone who has been in and out of a few banks I can assure they take compliance extremely seriously most of the time. It's enough for people to have faith in the system.

Are you sure of that? In many ways bank regulation has achieved exactly that. We have an SEC, we have mandatory filings, we have disclosure requirements, conflict of interest requirements, bank capital requirements, stress tests, and many rules about types of financial products which cannot be sold. Those create much more uniformity and trust in the system. (of course this comes with some cost, but, arguably the thing lost in the system is volatility more than anything else).

... and then we had 2008, where you can violate all of that with reckless abandon and still get bailed out.

2008 was about over leverage and speculation.

It was also about mortgage fraud ... bond rating fraud ... multinational banks selling fraudulent mortgage backed securities based on the previous two frauds. Almost no one went to jail for any of it, the few who did were little fish. The SEC, Fed, Treasury and DOJ were asleep at the wheel before and during the crash and did almost nothing after other than reward the perpetrators: A. threw $700 billion in tax payer funds at them B. forced mergers that made some of them even bigger C. the Fed printed $4 trillion dollars and handed it to them to plow in to the stock market and juiced an 8 year bull market which enriched all of them.

Cryptocurrencies certainly have their problems but the last 10 years have been a case study in how horrible fiat currencies and the current global financial system really is. Japan's central bank has printed so much money they own something like 65% of all the ETF's on the Nikkei.

China, EU, U.S. and Japan have printed something like $16 trillion dollars since the crash. If banks leverage that at a conservative 12X that's $192 trillion. The world is awash in fantasy money.

It is easy to claim that these things were fraud, but courts have not agreed that they were fraud. The dispersion of responsibility in the system made it difficult for any one person to be solely responsible for the actions of the firm. the "fraud" you perceive was an emergent phenomenon resulting from poor oversight. Few people actually committed fraud. The difference in personal responsibility is very important, especially for the people involved.

I agree, however, that our legal system lacks an adequate punishment for companies that allow such poor governance practices. I don't feel it is necessary to throw people in jail for it, though.

In my opinion, we ought to be able to convict a company of "governance failure" which would carry the concomitant punishment of mandatorily ejecting all officers and directors without severance and without the ability to exercise options.

No... large numbers of people committed fraud. Countrywide, and one of its execs, were convicted of fraud in one of the egregious examples of "the hustle". The problem was an appeals court overturned the conviction in an inexplicable decision:

https://www.propublica.org/article/us-attorney-asks-court-to...

I'm not sure 2008 was a problem of information transparency. There were people who accurately read the signs and viewed the documentation.

The crash was the result of speculation and improper risk assessment, followed by the inevitable correction.

to say that 2008 happened as proof that these regulations don't work is kind of erroneous, as many of the regulations were revised or implemented as a result of that crash, to avoid it happening again.

Had bankers broken regulations with “reckless abandon”, a few more of them might be in jail. And there’s the problem: a lot of the shenanigans might not have been on the up-and-up, but they were not illegal. For example, Moodys rating junk derivatives as AAA isn’t illegal, AFAIK, it’s a trust issue that should have put Moody’s out of business but didn’t.

We also have immense global money laundering from banks.

And in return, each bank account cost of regulatory compliance is pretty large.

Im not saying all bank regulations are bad, but its not like bank regulation is an example of policy success.

And you think it would be better without regulations?

Yes, it would be extremely useful if some of the ardent voices for unregulated crypto took a bit of time to acquaint themselves with the history of various banking collapses from 1850 to 1930, and subsequent rise of modern financial structures.

>don't want regulation

No, there are many reasons why I do want regulation. I just try not to get too religious about any of my opinions, and that lets me still see some reasons why regulation can be a bad thing.

I figure regulation should protect against deliberate malice and foreseeable stupidity. Unfortunately that can be very broad, the line isn't always clear, and it can change. I figure good regulation needs to be very agile, and above all skeptical of its own use of power. But again, reasonable people can easily disagree on all of the specifics.

I can't help find it funny as the libertarian cryptocurrency fans slowly realize why we have all these dang laws. There are plenty of financial regulations that could use updates or tweaks, but an overwhelming majority are put in place to protect people and try to ensure transactions are as fair as possible. Cryptocurrencies too often throw the baby out with the bathwater.

Yup. The last few years has basically been a real-time history lesson on how the modern financial and regulatory systems came to be. Must be fairly fascinating for economists and historians.

I can feel it! It's fascinating.

Meanwhile, the libertarians in the crowd are nodding, having expected this... and protected themselves from the fallout ahead of time.

No true Scotsmen.

The only true Scotsmen are the ones who agree with me :)

Could be most did in terms of not having their coins in an exchange, but their coins, wherever they are, just lost value for everyone looking to spend a bit of their money today. Off-exchange storage prevents against exchange-based theft, but not overall loss of value. If that loss of value stems from fraud on a single exchange it still impacts the libertarian crowd.

Exactly. And not just libertarians, but any bitcoiner who understood that a prime motivation behind bitcoin was not having to rely on centralized financial entities!

Matt Levine has some amusing commentary about how crypto currency is going to rapidly reenact the entire history of the evolution of the modern financial system.

I can't find the quote now, but in that same line of thought he suggests that at some point in the near future, crypto currency enthusiasts will un-invent fire.

Well, fire is considered harmful.

Only backwards

The entire Bitcoin saga has been the most shining example of this classic narrative:

1. Technology people are presented with a social/cultural/government situation that seems inelegant, irrational and overly complex.

2. They decide to "solve" that problem using technology.

3. Even with the new technology, it somehow appears everything is not miraculously better.

4. Technology people propose layering a few small social fixes on top of their technology to address the "minor issues" left by their brilliant technology.

5. They fail to realize all of their kludgy human-level patches on top of the technology are merely less-mature forms of the social structure they claimed to have replaced in step 2. Now we have an even less elegant, more irrational, more complex social institution, mixed with non-helpful technology.

6. Now the problem is not fun to work on any more (too much squishy inelegant human stuff), so they wander off to "solve" some other cultural malady.

I like how you laid that out. We are seeing a very similar process happen with Uber and Airbnb at varying rates.

There's a law of economics that, crashes occur when everyone who can remember the reason we have laws to prevent them is dead.

I think that's the Minsky Moment, basically that long periods of stable investment growth lead to increased risk-taking, inflation of a bubble, and eventually a crash.

Maybe i'm dense but where else has this classic narrative unfolded? Social media? What you are describing seems to me more common with bureaucratic solutions than technological ones.

web app tools...

Adding regulation would just increase the complexity. Instead of one curtain, you now have two. For as much as people complain about the US government, they certainly aren't backing down when it comes to having them meddle in private affairs.

Let the market work this out. Coinbase exists to legitimize the industry. If they turn, someone will step in to take their place. Blockchain and crypto aren't going anywhere.

I think the issue is about transparency. Most of the economic models us laymen think about and use to rationalize our political beliefs rely on perfect information. There are valid libertarian arguments against regulations which restrict what actions a company can take but I don't think there are very good arguments against regulations which only require companies to publicize their internal workings.

>If they turn, someone will step in to take their place.

There's a lot of stuff going on in that 'someone will step in' though. How many people lose their money when CoinBase turns? Do quick movers get out with all their BTC intact and slow movers go bitcoin-bankrupt? 'Someone will step in' may be an assurance to the long-term future of crypto but it says nothing to the fates of many of the individual investors who currently hold that crypto.

Yeah, maybe the long term is all good either way, but look at it from the view of an individual, or institution, trying to decide an investment strategy. It's like any product or service. Let's finance is like restaurants, and look at the example of a local McDonald's: Food has been fine, and if the manager screws up, there'll be another to step in and fix things, eventually. But lets say the manager really screws up and a bunch of people get sick. That a new manager will fix things isn't much consolation. And after a few days in the toilet, and fines paid for poor sanitation standards, and news plastered around about the issue, it's going to be a while. Now imagine there wasn't even a local health & safety team certifying and inspecting these things to begin with, and a new place opens up: It's exciting, edgy cuisine, equal parts delicious and daring. But there's no health & safety inspection. Heck, that's part of the excitement, they don't have to play by any set rules! So you might get an awesome meal, but its a dice role on which day of the week all customers will spend their time crapping their pants.

Now, in the world of large-scale personal finance and institutional investment, not many are going to risk redecorating the insides of their pants every few days. They're sticking with McDonalds, which may still cause some level of bowel décollage now and again, but in much safer, more predictable ways. I'm not saying that makes crypto a "fail", only that the next few months will really determine if it's going to be a future behemoth or a niche asset class that risk-tolerant portfolios occasionally take a piece of.

Coinbase had four outages in June that corresponded to unusually high volume. That didn't scare you away?

That was when I was initially setting up accounts, and it was enough to scare me away. I use Gemini. They've had unplanned outages too, but they're much rarer -- only one that I recall over the same timespan (against 10+ for Coinbase).

Every exchange has gone down, Kraken is far worse than Coinbase. Poloniex used to go down constantly, but they are holding up remarkably well lately.

Gemini's spread used to be pretty bad and they didn't do much volume outside their daily auction. They really aren't focused on retail investors so they don't see the same scaling issues as Coinbase.

Even now Gemini's volume is pretty low. I just checked and BTC is 36k, last time I saw GDAX today (won't load for me now) was around 88k I think.

So a 2x volume justifies 10x outages?

What fishy thing happened re: the bitcoin cash rollout? I know there is speculation of insider trading from individuals at the company but was there anything the company itself did that’s sketchy? They said BCH was coming after the fork and then they delivered it as far as I can tell.

They rolled it out without warning, the price spiked massively, they froze everything, and then revised the pricing charts to hide the $8500 price it peaked at. Their charts now falsely show the high price was only around $4000. All this has caused a lot of speculation about insider trading.

Storing your coins on coinbase (or any other exchange) is pretty much always a bad idea. If you don't own the private keys, you don't own the coins.

Coinbase is not immune from failure, government intervention, or fraud. The insurance no doubt has limits, and if you've ever filed an insurance claim you'd know that if something goes wrong you'll probably be up a creek without a paddle.

Insurance companies almost always win, that's how they make money.

> Storing your coins on coinbase (or any other exchange) is pretty much always a bad idea. If you don't own the private keys, you don't own the coins.

The problem here for most of the people currently FOMOing in, is that there are no "good ideas" as far as coin storage goes. Storing on shady exchanges is risky, but due to lack of knowledge / technical skill, many/most would also be at risk of losing their coins one way or another if they held the keys themselves.

What this tells us, is that this technology isn't ready for mainstream use.

The technology is there, it's simply a matter of disseminating knowledge.

It's not as if people are born with innate knowledge of personal finance skills. These are skills which must be learnt like anything else.

> Insurance companies almost always win, that's how they make money

Not exactly. They make money off pricing their insurance higher than the chances of it happening.

Yes exactly. They make money by a) charging enough in fees to cover the risk and b) limiting the amount they have to pay out.

Just look at how health insurance works: without government regulation, most of the day to day healthcare you actually need isn't covered under the terms of the insurance. For example, contraceptives.

Err, a big chunk of their bottom-line comes from reinvesting the float, or just re-insuring and taking the spread.

To do this you can only make money if the insurance is priced at more than the chance of it happening. Or the reinsurer wouldn't be able to offer any insurance either, & the float wouldn't exist because it would be paid back in claims.

Insurance runs on the same premise of making money a casino does. If there was no casino edge, there would be no cash for the casino 'float' back into bets.

Given a market in a steady state, as long as your (return+premium) rate is higher than your expected payout, you're still ok. So your premium-expected_payout could be negative and you could hopefully still keep the lights on, no?

The really scary (or even shady) part to me isn't a complete outage, but a controlled selective one - where some functions become unavailable to some people. That creates massive opportunities for abuse.

But why were you ever telling people to store anything on coinbase? That is downright terrible advice to be giving anyone.

One of Bitcoin's selling points is that it's decentralized. By keeping coins in a cloud operated wallet that you don't fully control, you're willfully giving up control over your own wealth, and needlessly putting your coins at risk.

You're comparing coinbase to an idealised version of a private wallet–which doesn't exist. In reality, a lot of money was probably lost to hard drive failures and other human errors. We just never read about it in the news, because each individual case is too small to warrant news coverage.

There are several reputable apps for both iOS and Android that provide secure, easy to use wallets, which do not centralize the storage of a user's coins whatsoever.

I've told friends for years about Bread[0], a wallet app for both smartphone platforms that I've used before with great success.

[0] https://breadapp.com/

That's just changing the threat from "compromised exchange" to "compromised phone". I'd trust Coinbase to get it right before I'd trust the average Android phone not to be hacked.

Only 0.5% of Android devices are running the latest OS. https://developer.android.com/about/dashboards/index.html#

It’s all about opportunity, risk and reward. Hack a phone and you win some bitcoins. Quickly patched. Hack an exchange and you’re rich beyond belief.

You've left out "use an existing Android botnet to siphon off private keys in a way that's far less likely to attract law enforcement attention".

What are you talking about? This is not about the exchange being compromised at all. In any event, I don't think it's much more difficult to get your phone getting hacked than it is to get your Coinbase account hacked. That's not what this is about.

This is about the cloud wallet service provider having the ability to basically do whatever it wants with your funds (including using them to pad their fractional reserves), charge you whatever fees it wants for whatever dumb reason they can think of, and do all the other things the banking system does today to peoples' wealth.

If this is what you want to do with your Bitcoin, then you're better off putting your money into fiat because that's a system that was actually designed to be used in our current currency/banking scheme.

> What are you talking about? This is not about the exchange being compromised at all.

Yes, it is. The question is "which place to store your coins is riskier?" I'm of the opinion that a decently run exchange with a full security team in place is going to be better at managing security than virtually any individual attempting to do it at home.

You, for example, suggested an Android app as a wallet, which seems to conflict with the best practice of storing wallets on an air-gapped offline system or on a dedicated hardware device.

> The question is "which place to store your coins is riskier?"

Where did you get that idea from? Not from my OP, that's for sure:

> One of Bitcoin's selling points is that it's decentralized. By keeping coins in a cloud operated wallet that you don't fully control, you're willfully giving up control over your own wealth, and needlessly putting your coins at risk.

Please, do not misrepresent my views. I do not have much of an opinion on the security of wallets, because I know that unless you go cold storage, any other wallet approach is about as safe as the one in your back pocket.

You can't seem to stop injecting your own totally unrelated arguments and also seem to refuse to actually comprehend the complaint I aired in my OP.

The concern I raised was one of centralization. The Bitcoin white paper is pretty explicit when it comes to explaining its rationale, and in fact mentions negating centralization in the very first sentence of the abstract[0]:

> A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.

[0]https://bitcoin.org/bitcoin.pdf

So there's really no reason to continue to ignore what I am actually saying, because it's a valid concern that strikes at the core tenants of Bitcoin's intended use case. Your concern, on the other hand, is splitting hairs on a subject that does not at all address the actual, fundamental issue of using a Coinbase wallet. This has nothing to do with Coinbase the exchange, this is about the Coinbase service which offers wallets, to which they and only they control the private key.

> needlessly putting your coins at risk

You keep claiming I'm misreading you, but this is the precise bit I'm focused on. For most people, and non-technical folks in particular, storing their own Bitcoin is "needlessly putting your coins at risk". They'd be better off having it on Coinbase and letting their security folks handle the risk.

I couldn't care less about the decentralization aspect of the argument, as none of that matters as a user if my coins all got stolen off my phone. It's already quite clear that Bitcoin is moving towards more centralization with stuff like the Lightning network, as the fully decentralized approach is already creaking under the current load.

When you put US Dollars in your wallet and then put the wallet in your back pocket, you are putting those dollars at risk. This is the same basic risk you take when you put Bitcoin in a decentralized wallet that you fully own.

However, the point you keep missing is the needless part.

This is not needless risk - this is a calculated risk, which you take based upon the fact that it will make access and use of those bills easier than if you didn't take your cash with you when you went out. If you use common sense, you can still be reasonably sure that your wallet will remain with you and will not have any money stolen out of it.

I've lived in New York City since the crack epidemic, and not once has this strategy failed me, but I do knowingly walk around the street with the knowledge that a crafty pickpocket could probably get away with my wallet if they really wanted to. But with my success rate, it looks like my strategy is paying off, and this is an important thing to judge because money is an important component to one's survival.

Let's look at the benefits of not placing your Bitcoin in a centralized wallet which you do not control. The benefit is that you have access to your coins, can move them however you'd like, and pay whatever fee structure you want. Coinbase only offers you the former. By not storing your wallet on a centralized service, your money is not at the whim of that centralized service. That's a HUGE gain. That's the crux of bitcoin's value.

Leaving your bitcoin in the hands of Coinbase is needless risk because your coins are just as accessible and just as easy to steal from Coinbase as they are to steal from any other wallet accessible via the internet. The added risk Coinbase presents is that they control your funds, they own the private keys, and they dictate all the rules for storing and moving your money. Not to mention, they don't give you freedom from the world financial institutions, they make you an ever-larger cog in the wheel of the current financial system. Why the hell would you want that? If you would actually want that, buy some Swiss Francs or some other fiat currency and stop speculating in Bitcoin.

This flies in the face of the entire purpose of having Bitcoin. If you remove decentralization from Bitcoin, then you remove Bitcoin's power and value. So the people who would prefer to not store their Bitcoin in cold storage should not be getting heavily invested in it. If they have real money on the line that could be ruinous to lose, then they should learn how to be a responsible patron of Bitcoin. Any less would be downright irresponsible.

If this is actually a problem for anyone investing serious money into Bitcoin, then they should stop investing in Bitcoin and figure out something else to do with their time. This is not a plaything, this is cash and people who want to invest in it need to do so responsibly. All this reckless behavior being espoused in threads like these all across the internet are just asking for huge, overbearing regulation of the cryptocurrency industry. Watch it flounder and suffer as a result.

I could personally care less. I sold off the 224 Bitcoins I acquired back in 2008 a few days ago and fed the mania. I refuse to participate in this financial moshpit and I will not contribute to this nonsense any further.

> Leaving your bitcoin in the hands of Coinbase is needless risk because your coins are just as accessible and just as easy to steal from Coinbase as they are to steal from any other wallet accessible via the internet.

This is so transparently false.

Coinbase has a security team that I lack. They have experts in the field that I lack. They have insurance for their holdings that I lack. They have the infrastructure and knowledge to keep cold wallets secure that I lack. None of these lacks can be easily remedied by an individual like me.

They have no ability to use my coins at their "whim". They're a US corporation in a heavily regulated space, money transmission, subject to a whole bunch of laws, both state and Federal. I have far more recourse against them than someone who puts a keylogger on my phone and siphons off my holdings.

It's pretty terrible advice to tell non-technical users to manage their own wallet. Keeping it secure is a non-trivial (understatement!) task.

What kind of non-technical person is trying to buy and manage a bitcoin wallet in the first place?

If the user is only willing to learn enough to keep the coins in Coinbase, then this person has no business dealing with Bitcoin at all.

> What kind of non-technical person is trying to buy and manage a bitcoin wallet in the first place?

I've had half a dozen non-technical friends ask me about getting into Bitcoin in the last month or so. Media attention, get-rich-quick, scams, etc. are all attracting hordes of people, to the point where the Coinbase app was #1 on the App Store for a while.

Even the people running exchanges are getting hacked. What chance does a normal user have?

> If the user is only willing to learn enough to keep the coins in Coinbase, then this person has no business dealing with Bitcoin at all.

"It's the financial system of the future!"

"Only techies can use it!"

Pick one.

By 1950s standards, most Americans are "techies". We learn what we have to in order to survive in a given environment.

We use more technology, but we understand less about what makes it tick. Most of today's Americans can't change a flat tire, let alone the oil. 1950s America would laugh at us for that.

Someone's ability to use a smartphone doesn't mean they're capable of patching the thing to keep it secure.

> Even the people running exchanges are getting hacked. What chance does a normal user have?

I agree that actually securing a wallet, independently, as a non-technical user, is difficult. It is further exacerbated by, as you mentioned, the general hype around crypto related apps that promise to do this in a trivial way, which can often be traps.

I also, however, think your final question presents a false dichotomy, as the two (Exchanges and users) have different threat models.

Exchanges present a larger, highly lucrative target, meaning they are ammenable to expensive, targeted attacks as they can still be possible.

The security model for an individual user can be to secure their coins in a way that is relatively secure (Maybe not as absolutely, as they are not experts), but more importantly to secure their coins in a way which a scalable attack against many users is not tenable.

In this way, just because exchanges get hacked doesn’t necessarily imply that normal users don’t have a chance, as they have different threat models with their own nuances.

Edit: Cleaned up some wording

Ah man I had the same, how did you handle it? I regret helping anyone now, it was stressful and they underestimated the risk despite my constant nagging. Last week in BTC land was insane.

My stock response is "treat it as gambling - put in only what you can afford to completely lose, because I feel like it's a massive bubble, but it's impossible to predict when it might pop".

Indeed. the operational risk is huge. even for tech savvy participants

It certainly was, until the advent of hardware wallets. I wouldn't quite say its easy enough for Grandma to do it, but it makes things much more secure and its no more complicated than setting up a wallet on your machine (give or take a couple of steps).

I just went through the situation where a family member all of sudden panicked (1 week after I reiterated all disclaimers multiple times, I said BTC is stretched and he already missed all forks that may solve it, etc, etc) and wanted his BTC paper wallet transferred to anything else. 33 hours later and 2 times > 40 euros (> 600 Satoshi/Byte) of transfer cost later the BTC are now USD in Bittrex.

Never advice your family anything. If they don't get it, they shouldn't be playing with it. This was certainly my last time, I even think I'm flat out going to refuse to talk about anymore. This week I even received texts that I should act "before Amerika wakes up". It's stopping right now, he either learns the Gdax or I will transfer what's left of his money to his normal bank account (he should be happy it's still almost everything.)

I vehemently advise everyone to stay away from BTC unless you really, really know what you're doing and follow the market closely. Instead, I say to just find a small, cheap crypto that has sound fundamentals and go from there. There aren't many, but they exist.

I posted my comment before I read this. So repeating from here:

https://news.ycombinator.com/item?id=15988939

It seems Coinbase's go to strategy every time markets are volatile. In case people are wondering why is this a recurring problem - this simply perils of Market Making in a volatile market. As a market maker for customer orders Coinbase needs to fulfill both sides. So to make money they buy from customers at low price and sell back at a high price. So they are collecting spread between bid and ask to make money.

But what happens if the market moves rapidly in one direction? They end up selling low and buying high.

So, they need to reset the market making algorithm. Or shutdown the site for a "fix", long enough that the volatility comes back in their range.

And what was wrong with the BCH rollout?

So this essentially implies Coinbase needs to manipulate the market in order to ensure their profitability?

How does it implies any kind of manipulation?

Check out these videos for what a market maker actually is:

https://www.youtube.com/watch?v=QqK6H1JPjv0

https://www.youtube.com/watch?v=Guqs3eOgm6o

But what happens if the market moves rapidly in one direction? They end up selling low and buying high.

So, they need to reset the market making algorithm. Or shutdown the exchange for a "fix", long enough that the volatility comes back in their range.

Disabling a feature during live trading in order to ensure your company doesn't lose out on profitability, which in effect impacts market trend and activity implies manipulation. As a neutral platform whose sole purpose is to provide a place for people to buy and sell, you're essentially influencing the market by disabling/enabling buy/sells, especially at heightened times of flux.

I corrected my mistake of calling the whole thing an "exchange". Corrected it now.

As many have pointed it out on this thread, GDAX - the exchange works just fine. So people who are worried about selling/buying can find a willing participant on the exchange.

But, Coinbase's main site is just another willing participant just like you and me in a given trade. It can refuse to take the other side of the trade if it affects their profits.

If you still insist it is "manipulation" then I digress.

Declining to allow trades during high volatility times is definitionally market manipulation - you're capping the volatility of the market, unpredictably.

Volatility is traditionally where many styles of traders actually make money.

Coinbase is market making the exchange they run, seriously? That's one hell of a conflict of interest.

My bad. I realised, I said exchange. I didn't mean GDAX rather the coinbase site. Corrected now.

Since the beginning, Coinbase has been kind of fishy... Every time Bitcoin would drop sharply in a short period of time, it would shut down all transactions (not sure if it happened today, I haven't been following closely)... In 2012 or 2013, they canceled an order I placed because the price of Bitcoins was too low.

I use GDAX to buy coins but I transfer them out right away.

Now they stopped BCH/BTC trading and it appears that they also freeze the prices to control drops (https://www.reddit.com/r/CryptoCurrency/comments/7lch2d/coin...).

> "Investigating - All buys and sells have been temporarily disabled. We are working on a fix and apologize for any inconvenience," Coinbase said on its status website at 11:11 a.m., ET.

What exactly is broken that needs to be fixed? Is there just a ton of trading volume and their system cant keep up ?

Edit:

I ask because the headline just says that prices are falling quickly and so Coinbase halted trading. This sounds a lot like a circuit breaker but then you read the article to find out something is actually broken.

I'm really curious to know what the symptoms are of whatever is broken. Are trades taking too long to execute? Are people being fulfilled at prices different than they were quoted? What is actually happening?

They go down practically every time there's a lot of volume. Not sure if they have publicly addressed what sort of infrastructure problems they're having though.

Have they gone down when the price is surging upward? I only ever see them going offline when the price goes down but I may have missed something.

Volume is likely to be higher when the price is getting hammered.

Panic, when it occurs, is more acute than ebullience.

Actually with volume its happened both ways. You can easily see from public data that volume doesn't only go mad when price is being hammered.

Yes the site always crashes under load

Just before the first futures it was surging and they went down. But anecdotally it does seem to happen more on the ride down

If it's anything else such as allowing insiders to exit before a crash really takes hold, then people are going to jail.

Why? Are there regulations in place that forbid coinbase to halt their service?

This is not meant to be sarcastic, just wondering if there are laws in place even for unregulated markets like Bitcoin.

Do you really think it matters? Nobody touched the bankers over the financial crisis because they didn't want to touch them, not because nothing "illegal" was going on. Holder and Obama said it themselves that going after them "would hurt the economy". That was their justification for not prosecuting people.

Meanwhile they added 13 bogus charges against Aaron Swartz with a maximum sentence of 35 years for making some documents that were already internally public at the MIT, available to everyone.

If the gov wants to make an example out of Coinbase, especially after they put up a fight in the SEC case, then they will.

I did predict a few weeks ago that if things fall quickly, the systems will do down and people will not be able to sell:

https://news.ycombinator.com/item?id=15869668

I have heard that since coinbase keeps all but 2% of their crypto assets in "cold storage" (offline storage that requires a physical trip to somewhere to spend), there are semi-frequent times where their "hot wallet" runs out of money, and they need to go and retrieve it from cold storage in order to continue.

Naturally this would happen when there are large spikes in usage (which happen during swings in price) and people are trying to move cryptocurrencies out of coinbase.

So the latency are people's feet rapidly shuffling to another physical location?

That doesn't make a good story for the convenience and transfer speeds of some of this technology.

It feels like they're protecting prices or their capital reserves?

It seems Coinbase's go to strategy every time markets are volatile.

In case people are wondering why is this a recurring problem - this simply perils of Market Making in a volatile market. As a market maker for customer orders Coinbase needs to fulfill both sides. So to make money they buy from customers at low price and sell back at a high price. So they are collecting spread between bid and ask to make money.

But what happens if the market moves rapidly in one direction? They end up selling low and buying high.

So, they need to reset the market making algorithm. Or shutdown the site for a "fix", long enough that the volatility comes back in their range.

I've wondered about this. Specifically, how can you make a market in a product that has high violatility and fairly low trading frequency?

Seems like anyone doing so would inevitably get fleeced.

> I've wondered about this. Specifically, how can you make a market in a product that has high violatility and fairly low trading frequency?

A large spread.

Hmm. So are market makers only ever effecting instantaneous matches?

I was under the impression they often held some portion of the asset between buy-sell or sell-buy in order to increase liquidity.

(Which would explain why they like HFT, as anything that boosts trade frequency would decrease their exposure)

They do hold underlying and have to hedge their risk in various ways. A large spread helps a lot.

Coinbase are not market makers...

Not on GDAX sure.

But, when buying and selling from users, yes they are. They don't create a two way market on coinbase.com. If they did, it will be called an "exchange".

Good opportunity for the old-timers who were daytrading in the 1990s to tell their stories of Datek, E*Trade, Ameritrade, Schwab, etc., failing during peak NASDAQ/NYSE markets.

You know who you are -- drinking coffee and staring at multiple monitors while in your boxer shorts at home. 6:29am Pacific, watching Ron Insana and Maria Bartiromo on CNBC...

This has all happened before. It will all happen again.

As I’ve said before, watching cryptocurrency markets evolve is like watching the entire history of financial markets being replayed as painful lessons are relearned.

Is there anywhere I can get a full rundown of the modern evolution of finance? I have a degree in it yet it all still send fragmented.

I don't have an answer for you, but Reminiscences of a Stock Operator is required reading for anyone interested in the history of securities markets. It's fictionalized autobiography of a legendary trader in the 1920s. It could have been written yesterday or a thousand years ago.

https://www.amazon.com/Reminiscences-Stock-Operator-Edwin-Le...

Maybe Bitcoin was created by an A.I. to teach us all a lesson...

Coinbase is the one exchange that's looked like a legitimate business. Between insider trading and execution problems, it's pretty alarming. (Who am I kidding? Clearly this is actually good for Bitcoin somehow.)

Worth noting Coinbase has two kinds of systems risk. There's the technical risk of writing and running code correctly. And there's also the financial risk of them making the market in Bitcoin. Both of those tasks have gotten a whole lot harder recently as Bitcoin transactions have gotten slower and more expensive. Turns out building a global currency with a global 7 transaction / second limit may not be a good idea.

I think their biggest risk is a compromised/rogue employee.

BTC: peaked just shy of $20k, now in freefall to where it was around the beginning of the month, maybe further.

BCH: peaked around "$4k" (if we ignore the $8k that Coinbase was briefly showing in the first few hours of having it publicly available to trade there), dropping back down towards the ~$1-1.5k it was at beforehand.

Pumped. Dumped. Done.

I ignored all the warnings about Coinbase at my own peril.

I tried to move my coins out of the exchange about 48 hours ago (shortly before the crash) but I made the mistake of purchasing a new phone about a week ago and not switching over my 2FA keys in Google Authenticator.

They have an account recovery process in place but it takes "48-72 hours" to complete. I had to re-submit my ID, which was confirmed as verified, but now I just have to sit around and pray that they come through and the process is completed over a holiday weekend.

Obviously partially my fault for not transferring my 2FA keys, but with all the stories of customer service being unresponsive for weeks, I'm not holding my breath.

That actually seems like a good thing. You want caution over a user failing 2FA. If you lost your 2FA keys despite knowing their response times imagine how bad it would have been if you mis-managed your wallet and just lost everything entirely.

Sounds like you got yourself an expensive phone. Hope it was worth it!

Regular markets have circuit breakers [1] that stop trading for a period of time. Coinbase should just define and implement these to let their systems catch up.

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

Coinbase is unintentionally the circuitbreaker. It crashes every time there is a lot of volatility.

That is insane. Traders make money during periods of high volatility and volume. Defined circuit breakers can be planned for, but unpredictable "lol unavailable gtfo" is unacceptable for serious usage.

Anyone remember this story from a few days ago? I think the insider trading has hit it's dump phase.

Pump and Dump? Coinbase Suspends Bitcoin Cash, Investigates Insider Trading

https://www.financemagnates.com/cryptocurrency/news/coinbase...

Why is it they always seem to go down during times of sudden surges and dips? It almost feels like they’re trying to control the market of their platform rather than let it play out. It may indeed just be infrastructure but given the company’s age and decent amount of funding they have now, can scaling really be at play here?

I have wondered this also. Coinbase clearly benefits from BTC and other cryptocurrency being "a thing", and rising prices help that happen. If the price of BTC that market watchers and news orgs quote is impacted heavily by the price on Coinbase, then their actions could have an outsize impact on the overall trend.

I would be curious to hear from folks savvier than me about suspicions like this.

EDIT: wondering why this is downvoted — I make a conjecture and then openly ask for perspectives of those who are more educated on these matters. If you disagree, responding would be helpful. We downvote things not because we disagree but because we think it doesn't add to the discourse.

Yes. Consider that the ramp up in Bitcoin has been happening since June. I recall they were adding 50,000 accounts per day. Suddenly, all the new folks that haven't experienced a bloodbath before are all trying to jump on and sell. I'm not surprised at all, really.

> It almost feels like they’re trying to control the market of their platform rather than let it play out.

No, no, no, you see - that's the free market at work. Can't you see that everyone will simply pick another exchange and scammy practices like this will be evolutionarily eliminated? /s

Coinbase does a number of things that seem strange from a market perspective. There doesn't appear to be an auction to open/close or restart.

Instead they seem to lock their markets and allow post only orders.

The other things this screams is that

1) stop loss orders are useless in volatile markets. I've harped on this alot from the US Cash Equities side but it appears to be equally valid. YOu'll only end up getting filled at te worst possible price and miss the inevitable market rebound.

2) Coming from 1) Don't use leverage, you'll get your face ripped off one of these days due to volatility and you'll be asked to submit more margin just when you can least afford to and possibly be liquidated at the bottom.

In a recent thread, stop-loss limit orders were mentioned, which would appear to address the bad-fill concern, to an extent.

as far as I'm away they don't have them yet.

They're hidden under the "advanced" button when placing a stop-loss order. GDAX (the exchange side of Coinbase) actually have quite a plethora of order types... though they don't seem to let you change the time in force for the resulting limit order when the stop-loss triggers, for whatever reason.

They lock, other than scaling issues, because of liquidity. Bitcoin cash opened with a thin market and ran up to $9,500 in 4 minutes before they halted the market. Was still trading at ~$3k elsewhere at the time.

An open/close or restart isn't needed because all assets are being heavily traded elsewhere. If they switch to post only the arb bots will fill their book over time.

Leverage will rip your face off.

The Bitcoin Cash fiasco is a good demonstration why their approach to opening markets doesn't work - if the correct market price at open is different from the initial price people start placing orders around, no-one can place orders on one side of the book for anywhere near market price, which means there isn't enough liquidity at open, which causes chaos. Apparently they've given up on opening the BCH-EUR and BCH-BTC markets altogether until January after this looked like it was going to happen again with those.

At least in ordinary stock exchanges with HFT, stop loss orders are perfect devices for the HFTers when the price is approaching some psychological limit (say $100), they can push the price down momentarily and buy from all the average Joes whose stop loss orders just triggered, wait for the inevitable bounce and sell at a nice profit.

That isn't at all how HFT's operate.

We wouldn't generally touch an order type like stop loss, heck we wouldn't generally use stop loss limit order either:)

I didn't mean HFTers hold stop loss orders. I mean they look for others who hold stop loss orders to try and arb them.

I’m getting pretty tired of playing whack a mole with these wretched exchanges. I recently left the dumpster fire at Kraken, only to sign up at, yep, Coinbase. Oh well. On to Bitstamp or Gemini I suppose.

You might want to give Binance a try. No affiliation, it just came recommended to me from some successful traders I’ve met when the topic of reliable exchanges came up.

As a crypto trader Binance is where I do business.

Their PC app is phenomenal for the most part, doesn't lag out like a lot of other exchange I've used.

A friend just bought Ripple on Bitstamp and it's taking upwards of two weeks to verify an account? I can physically walk to a bank and get foreign currency in person 1000x faster than this. I think all of this is speculation and hype, and only a small percent of people now have a use case met by these products.

Coin base has scaled too quickly they really should limit their user sign ups until they can get their support queue under control

Move your coins over to GDAX, their sister company. When Coinbase halts trading, GDAX is usually fine.

^^ this has not been my experience

GDAX shut down trading a few minutes ago, unfortunately. Performance issues with the REST API apparently. I think they've been seeing a lot of volume these past few hours.

So if we shouldn't be leaving our coins on coinbase, where do we leave them? A full wallet is not an option for many of us. I don't want to have to download 100's of gigs of data just to store my coins... I even tried to move from bitcoin to etherum since I thought that wallet might be smaller. And it was, but after leaving it running for 2 days it still had a ways to go and all the IO it was doing was really trashing my SSD.

At that point I looked into hot wallets like jaxx. But then on /r/jaxx, there were many people complaining about using jaxx only to have had their private keys stolen. So at that point I just left everything on coinbase :/ Is there any decent hot wallet out there or anything else?

Why don't you use a paper wallet or just keep your private key on a hard drive? Are you exchanging your bitcoins often?

Electrum, Mycelium

order a Trezor and wait for it to arrive in February... until then, breath deeply.

If you pay $20 extra, they will deliver Trezor's now in 3 days.

Ledger Nano S took ~4 days to arrive from France to The Netherlands. During Black Friday mania. It has its pros and cons compared to Trezor so YMMV.

Electrum.

Dear Coinbase,

Why in the world do you keep signing up new customers if you don't have the capacity to hold them?

All aboard, yet the ship sinks due to the passenger load.

That's both absurd and preventable.

AND cue the innumerable HN comments about how we need to feel sympathy for startup 'growing pains.' Coinbase has people's cash, hard cash, and stored value, it's not a software as a service startup that got wildly too popular.

It's not growing pains, it's greed and/or incompetence.

Secret of success: buy low, sell high.

Unless you are a Coinbase customer (because they will selective disable your ability to act when prices move quickly). I've witnessed it at least a dozen time personally, and stopped trading altogether.

Seriously though, the way Coinbase/GDAX has been acting recently can't be attributed to scalability issues. These patterns seem to have a good dose of human decision making in them.

It's so mind-bogglingly fucked... they're freezing the market exactly when the clever investor would like to be buying.

Clever?? Crypto is on its way down right now. You go right ahead and buy, but for everyone else I recommend you SELL.

Ethereum:

- June 13th: $380

- July 17th: $185

- August 31st: $389

- December 16th: $700+

50% or more swings are all too common. I doubt this is the end. While I would love to see the crash happen sooner than later, I think the percentage of traders that would sell at the signs of a 25% drop or more is still too low. You won't see the big crash until more of the general population is in. After this crash, that still could be a ways off sadly as they back out only to enter a few months later.

The issue with this type of circuit breaker is that there is really no information to let people absorb and calm themselves. When you resume the trade people will still be clueless on why prices moved that way and resume their selling

If you have USD in Coinbase that you'd like to buy with right now, you can use your Coinbase account at GDAX and transfer USD instantly to GDAX.

Trades are working fine at GDAX.

Pretty sure GDAX is also owned by Coinbase.

I did it just now.

It's telling to me about the hype bubble that this article is coming from CNBC.

Is coinbase suspending withdrawal to other wallets as well as trading?

How is bitcoin supply finite, if it can hard fork?

Forks aren't Bitcoin

Like saying how is gold supply finite if you can break a piece of gold in half. When Bitcoin forks the value is split between the two forks. If the market cap of Bitcoin before the fork is $10 Billion, the combined market cap of both sides of the fork afterwards will still be $10 Billion. There are double the number of coins because of the fork but now each person who had one coin has two and each coin is worth a fraction of what is was before. It's an increase in supply but an increase that is perfectly distributed among the previous holders.

The split value is in theory but didn't seem to follow in practice. Anyone can create a fork, and the market will not be that efficient, even in the long run. I don't think the metaphor works for that reason.

Simply, forking makes a coin that is not Bitcoin, and people can value it however they like. The only question is why they would value it at all. There are usually technical differences in forks that people believe are better.

A better analogy in my mind is that Bitcoin can be gold coin, and a fork is someone making cardboard coin, coloring them gold, and then calling it a type of bitcoin.

Forks are completely separate from bitcoin and are worth nowhere near as much.

Reply on news.ycombinator.com