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Comment by VincentTide | Hacker News Reader

What you said does not make sense for an exchange. For every seller, there needs to be a buyer who first deposits USD.

Ya but with BCH, being a hard fork where the asset was created from everything to a certain block of the BTC chain, it effectively created new coin balances out of nothing. Now imagine when people start trying to cash those out to fiat.

In this situation, there was no fiat laid out to get it but it is indeed worth fiat in the case of a withdrawal.

No.

If people want to cash out their BCH, they need to sell it on the exchange for USD. The USD needs to already exist in the exchange for someone to buy it. The fiat was laid out by the buyer.

So there's no fundamental liquidity issue, if everyone wanted to cash out their BCH to fiat it should not be an issue.

Normally, yes. But if you sell it through coinbase and not gdax, cb let's you sell it instantly and acts as a buyer.

How do you know they're acting as a buyer and not just creating a sell order on GDAX?

Because they just bought it from you at that guaranteed price. They could go and sell it on the market for more/less, but the price you sold it to CB for remains the same.

That price changes dynamically at some interval, and is discounted against the trading market value, correct?

They do update that price frequently (minutes, maybe seconds) and there is a premium added to the price. I assume they add this premium so they can then go liquidate it for profit on the exchange as needed.

That doesn't sound to you like they're just selling it on gdax?

They can do whatever they want with it after they have sold it to me for a fixed price.

Heh, I'm not sure why you think its a fixed price. They're probably showing you the lowest sell order on the order book.

Have you ever bought/sold on CB? It is exactly that, a fixed price. It's the convenience you pay for to use CB. That price updates frequently, but whatever price you execute at is the price you pay/sell for.

They would get into trouble if they tried to play market maker.

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