Cryptocurreny retailer BitPrime closes trading after running out of money
bitprime.co.nz
bitprime.co.nz
For some context, a few years ago, they only did OTC trades (you ask for a quote and have a few hours to confirm the price and send the funds), with quite a large minimum of a few thousand. You only really delt with them if you wanted to on-road or off-road large amounts of New Zealand dollars. They didn't even run their own crypto wallets or have any infrastructure. They would just run accounts on larger crypto exchanges (binance?) and manually confirm deposits.
Looks like they have updated their process recently to be more automated so they can accept lower minimums, but their process apparently hasn't changed. They still don't hold customer funds and only trade between crypto and NZD.
It's entirely possible they ran into problems because their model isn't compatible with large downward volatility. Or maybe an exchange froze their account?
...?
Bitprime allowed people in NZ to easily transfer value in and out of those exchanges. Or directly into a wallet for other services (i.e. buying NFTs or paying ransomware), or to hoddle.
An OTC desk can be setup to spread the buy over several days / months, buy across markets, and optimize for best price execution. It's not necessarily a huge business, but a lot of businesses and high net worth individuals will use these types of services instead of trying to learn the skills themselves.
This is typically a role of a dedicated broker house or there is a special area in many investment banks that takes care of that as part of customer flow handling.
It's a country of 5M. High Net Worth is usually top 0.1% (100M+) - that's like 2k families.
Or would foreigners use this service for some reason?
Also, the best OTCs tend to be failure tolerant: website down or DDoS'd? Doesn't matter, you talk on Signal or WhatsApp or Telegram.
If you do that by buying $10k x 10k transactions, your demand will increase the price of the asset and mean you pay more than current price for no good reason.
OTC desks either collect the $100m from large holders in big blocks, or they use working capital to constantly buy the asset and sell it for a single quoted price (hoping to gain on arbitrage).
In this particular case, they also offered the unique service of accepting /nzd vs. EUR/USD/JPY/KRW
Which could possibly be the reason why they are in trouble? The NZD has been dropping against USD over the last while, so any uncovered delays could hurt their margins?
> wants to buy, say $100m of an asset
https://www.bitprime.co.nz/about-us/ says:
Victories
Crypto Bought:2M+
Crypto Sold: 90M+
Users: 30K+
I don’t have any kids to feed, just young dumb and tired of market crashes.
You can buy the dip! /s
I don't think it will affect markets much. There are only a few companies involved. Most of the money is from the retail investors, and that money is already gone. The crypto exchange balances going to zero won't change things much as those are mostly imaginary numbers anyway.
That’s roughly the entire GDP of France. If France’s economy poofed out of existence or halved in value, that’d be a huge shake up.
The market cap of a stock (shares outstanding x share price) makes sense because each share represents a piece of the profits of the company and an ownership stake. If you took away half of the shares, the price per share would ~double and the market cap would remain the same since it's based on current cash + projections about the future profitability of the company, and the share price reflects those expectations. None of that is true for crypto.
Financially illiterate crypto people started multiplying the coin price x number of coins outstanding and calling that a "market cap" but there's nothing underlying the crypto world. Owning a bitcoin doesn't represent a percentage profit of some underlying economic activity that's being independently valued, coins are zero coupon bearer instruments, the value is in the coin itself. It's like talking about the "market cap" of pesos, just incoherent and easily gameable.
https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc...
He’s the CEO of one of the largest and most established crypto exchanges. The interview is stunning.
I remember a guy on HN a year or two ago who was very proud of the ICO he ran in 2017. The token was useless, investors lost their money, and he was fined something around a million dollars by the SEC. But to him that was a mark of pride, like he fought The Man and won. His excuse for scamming investors was basically “startups fail too, I’m a founder.”
The toxic startup hustle exemplified by Uber and some other companies ten years ago directly led to the utter moral collapse in crypto.
And like, if you're a crypto true-believer, any crash that may or may not happen this year probably doesn't mean too much: the surge in prices wasn't because of any particularly groundbreaking developments in terms of the main long-term pitches (e.g. "new financial infrastructure for the world"), even NFTs seemed to really follow the price run-up, not lead to it. It really looks more just like a lot of people gambling with cash to burn in a situation where a lot of traditional entertainment was less attractive if not outright restrictive. So keep your head down and keep building...
But building a trading platform then talking shit about stuff that as far as I can tell you are making money off of trading (e.g. Luna, https://help.ftx.com/hc/en-us/articles/4491807784852-FTX-wil... )... that just seems begging for trouble.
Perhaps it's excessive pattern matching, but it's hard not to see a civic relationship between the (correct) perception of startups as underhanded and the rise of an entire industry of scammers who will do and say anything to get ahead.
So the view from the inside, like what a VC sees, is that everybody is piling up and it's so so easy to say "I've got hot shit" and you have to be like "yeah maybe." A lot of the time "don't pitch me bro." And set it up like a nightclub, realistically none of the founders will have real tech without getting it from real researchers, so they have to impress you with how well they work the club. Now that I say that I'm figuring out my own strat too, treat it like a club.
So the second secret, don't tell anybody, don't link to this comment, close the doors, unplug the ethernet, turn on the wifi jammers, put your smartphones in the faraday cage, the secret is: everybody wants you to lose. Everybody wants you to lose. Just like in a club. When you accept that, it's so much easier! The entire club wants you to prove you're a lesser man, like sit next to the bar waste your money on drinks (never on a hotel), parade in circles concentrically around the women dancing with their clique of girlfriends in the middle, asking like once or twice and feeling bad for months about being rejected, that's what the club wants the men to do. And there is violence at the club, it's not like "the worst that can happen is she says no" that's a load of shit, it depends on a lot of things.
So it's the same adversarial environment, everything going against you. Realize that, and it's suddenly much easier.
"Market cap" estimates assume that everyone could sell without the price moving. It's going to be far more sensitive to price changes than an actual country's GDP, it's based on what current trading prices are.
And Bitcoin, unlike a company with a huge market cap, isn't providing goods or services. E.g. if Apple disappeared into thin air, everyone hoping to buy new Apple phones or computers would be dramatically affected and that would have a ton of ripple effects. But if Apple's sales dropped to 0 and then they went out of business, their valuation would be down to 0 but a lot of people would've recouped some of their investment on the way down - the people selling earlier being better off than the ones later. This is a crazy scenario, though, since they're sales wouldn't go to 0 overnight.
So who's actually relying on Bitcoin? Some companies in the space, sure. Probably a bunch of individuals who did stuff like use bitcoin as part of their wealth portfolio when taking out loans. But if those people had those holdings wiped out, will the ramifications be huge? My guess is probably not but I don't actually know how many people would, for instance, be unable to pay their mortgage if their crypto holdings imploded.
(This will be interesting to see if a crash does happen: in a world where you believe prices always go up, the "clever" move is to not sell your bitcoin, but to borrow against it, so it appreciates in the background still. But in a world where there's a crash, this could leave you worse off than before, the debt won't go away just because the price fell.)
~$7500 (Dec 2019) to ~$35000 (May 2022)
You can even see it on your chart.
How is the late-2019 starting point relevant?
I guess it was about 10 % at some point not too long ago?
HN is only a step above CNN when it comes to trustworthiness on this specific topic.
Luna something like the 15th
They were absolutely major players and not a "random shitcoin"
Irrespective of your attitude to an unheard-of coin, the situation rather epitomises the problem many have with crypto. They start off as penny stocks, but people expect them all to rocket to Fortune 500 levels for no good reason other than all the other gullible idiots pumping their savings into them, forgetting in their greed that it's quite as easy to start a run if you have enough.
Before you know it —and I very much mean you there— they're trading at $120 with a cap of $32bn before the floor drops out. I know a cap isn't tangible value but none of this stuff is. That didn't stop this being a top 10 crypto currency at one point.
It's all Monopoly money. You can get rich trading it, but you can also lose everything. A lot of people are getting fractions of a penny on their dollar investment. All because, what? It stinks of pump and dump. It all stinks of pump and dump.
Pile on the environmental disaster that is proof of work, and you should be able to see why people hate crypto. It's weirder that more people don't but on investigation that's usually because they have skin in the game.
https://mobile.twitter.com/patdennis/status/1518637225789042...
Sick of people calling everything in crypto a Ponzi scheme. Some crypto projects are pump and dump schemes, while others are pyramid schemes. Others are just standard issue fraud. Others are just middlemen skimming of the top. Stop glossing over the diversity in the industry.That's not what I'm saying. I consider myself fairly active in the space, and I hadn't heard a peep about this coin until it blew up. I doubt most on HN had either, but that won't stop the doomers.
Isn't it a problem with "the space" that any old Gigachad and his drawful of sockpuppets can jump on a nobody-coin that's been doing nothing for three years, and in 12 months of frothing, pump it up to a top-10 coin, and dump out their holding for a few billion dollars and "active in the space" people like you don't even notice?
Thousands more of these things are being minted every week. Thousands more opportunities to suck in "investors at the ground floor".
I don't think it's fair to label critics as doomers. We just don't see the value you do, or at least, our accounting puts the very visible and very recurrent harms of crypto above their potential benefits.
Safety is dangerous.
Which is as much as an unfounded absolutism as stating the opposite. While there's not fundamental limit to what you're saying, there might be qualitative differences though going forward: I can still go into a store these days and buy tulip bulbs, it just doesn't cost me two salaries...
The service seems to have been making it possible for people to sell their coins directly to one another. (Crypto exchanges hold your crypto and don't do an actual transaction through the block chain until you withdraw what you have. Though they could still guarantee not losing your coins if they go bankrupt...)
This is what they said about it:
> Are my funds safe?
> We don’t hold customer funds – at the time of the trade, we send the cryptocurrency directly to your wallet. If you need to execute a trade at this time, other platforms can facilitate this.
It looks exactly like Robinhood (a liquidity issue), but without the faceless an unaccountable entity sitting behind them telling them to suspend trading.
These guys appear to be acting as middlemen between their New Zealand customers and several exchanges. Bank transfers take days to finalize (and weeks to settle), so their business appears to be built around capitalizing on that time opportunity and allowing their customers to lock-in quotes without having to wait for their funds to appear in their exchange account if they dealt directly with an exchange.
While the crypto markets are stable and the volume is predictable, everything is fine and they can maintain a balance on their exchanges and in their bank account. A sudden surge in volume (due to a massive price swing) means having to close shop and suspend trading while the transfer from exchange to bank account (or the other way) finalizes.
Crypto can go to zero and the world will continue on.
Of course, I didn't move my money into crypto so that might be the reason.
If you are big into an altcoin, prepare for that to go up in smoke the next few months.
If you hold a lot of Bitcoin, make peace with it losing over 75% of value in the next few months. It’s going back to pre-covid levels at best.
When Fed interest rates are low and credit is cheap, money supply increases and more of it flows into higher risk/return assets like crypto and drives their prices up.
When Fed interest rates go up and credit becomes more expensive, money supply decreases and funds flow out of high risk assets like crypto, driving their price down.
The current bear market will last as long as the Fed continues raising interest rates, then turn back into a bull market when that reverses. Unless there's a war going on, in which case all bets are off.
So you won't see much effect in the real economy.
There is absurd amounts of Crypto lending that's probably causing a lot of margin calls forcing a negative feedback loop in Crypto prices.
Everytime this happened before - the Central Bank of Tether came to the rescue and printed 10% of the entire Crypto market cap in ~2 days to pump up the market ~30%.
Time will tell if they have the balls to do this now - when they're already under investigation in many jurisdictions.
yes, this is absolutely in context indicative of the speculative circus ending.
Everyone knows the coyote has been running in air, waiting for various planks of a putative bridge to somewhere to materialize; those who put money into this vision who do not have it out now, will not get it back in a meaningful time frame, modulo dead cat bounce.
IMO "hodling" anything other than the most conservative (sic) of "coins" means taking a total loss. Bitcoin and Ethereum and a few others may crawl back over a few years; whether there is appetitive for another bubble with them is TBD.
It is not rational to believe their putative utility will emerge in that time; any future run up will merely be another round of speculation..
If BitPrime was a CRM SaaS that shut down and laid off all 6 of its employees or whatever nobody would think to write an article about it.
Which would be shocking for a cryptocurrency platform!
Good news for $COIN?
You and I have a different idea of what " pretty well" means, unless I missed something.
"We don’t hold customer funds – at the time of the trade, we send the cryptocurrency directly to your wallet"
I guess shows this isn't another Quadriga event. So that's good!
Basically the founder lived the high life with his partner, multiple houses, a yacht, etc etc, and it looked like a stunningly successful and honest exchange. He died in India when he was there apparently building orphanages.
It turns out that he ran the entire thing from his laptop and nobody else could get in as he didn't share the passwords to anything. It further turns out that when people started investigating properly, the whole enterprise was insolvent, because he had viewed the customer funds and company funds as personal funds, 'normal' money and cryptocurrency alike, and he had gambled most of the cryptocurrency away in bad trades on other exchanges, and most/all of the 'fiat' was gone too. He also turns out to have had a history of involvement in scammy 'hyper-growth investment!' stuff.
His death looks very convenient, and IIRC his widow won't allow the body to be exhumed and checked to make sure it's really him (it probably is, I have no idea). The funds were gone.
As a neutral observer, she sounded somewhat believable, especially since she basically was along for the ride, and has almost nothing to show for the scam (and a lot of downside from being the person targeted by the ire of depositors)
https://www.cbc.ca/news/canada/nova-scotia/jennifer-robertso...
> The company's CEO and founder, Gerald William Cotten (born 11 May 1988),[2] died in 2018 after traveling to India. Up to C$250 million (US$190 million) in cryptocurrency owed to 115,000 customers was missing[3] or could not be accessed because only Cotten held the password to off-line cold wallets.[4][5][6]
> Blockchain analysts have reported that they are unable to find evidence of Quadriga's cold wallets on the blockchain, a public ledger used for cryptocurrencies.[37][38]
> Ernst & Young found five Quadriga cold wallet addresses, but they were empty, containing no cryptocurrency since April 2018.
https://amycastor.com/2019/02/12/how-the-hell-did-we-get-her...
Because crypto is so well known for the honesty of its actors.
Looks like they don't even maintain custody of user funds at all.
All this is very clear from the existing docs on their site.
Oh that's interesting. Then that's a very different proposition.
> Our fee structure is different to that of a brokerage or exchange. As a retailer, our expenses are generally higher than a sole crypto trader’s.
So apparently not an "exchange platform", but rather a "retailer".
Presumably they're trying to cater to less-technical folks who'd pay extra for the convenience/ease.
> What you see is what you get! Our advertised rates include ALL fees, and the price agreed upon at the time of purchase is fixed regardless of what happens in the market. Our fees appear slightly higher than exchanges because we have done all the hard work for you – with education and support to help get you started, and no need for you to deal with multiple exchanges or currency conversions.
OK, well that does explain things more neatly.
That's like someone with a 500k to 700k portfolio doing 1M worth of transactions in 5 years (should be reasonable?) trying to be market maker for Tesla.
[1] https://www.blockchain.com/charts/estimated-transaction-volu...
Or are you only interested in discussing this when you can take a victory lap?
It’s a cool experiment, but it’s almost like Uber - something with great promise that delivered something lesser.
I spent a little time in the industry and the most prominent voices are just snake oil salesmen and charlatans now. Anyone who truly believed from the beginning made so much money that it’s not worth the risk for them to be publicly involved in the community.
It became an MLM for bros and basement-dwellers alike to gamble their stimulus checks on.
Just yesterday tether printed another billion usdt.
They were openly proven to have only 3% of their currency backed by USD by the NY AG but everyone just ignores that judgement.
They never held under audit, have proven to not be backed by USD and refuse to disclose their holdings. Their CFO is an Italian surgeon who sold pirated copies of Windows.
When eventually that falls, the entire space I figure will implode.
https://www.bloomberg.com/news/features/2021-10-07/crypto-my...
It is obvious they are using fake magic money to prop/inject into the eco-system.
When btc, eth props up, everything else tends to as well.
IDK how it's not obvious to you unless you have some financial incentive to ignore the obvious.
This may be where we diverted from each other.
Crypto is new, so it's mostly recognized by early adopters - people that are more likely to change their mind in the changing circumstances. There's also a lot of the "get rich quick" crowd, money laundering, illegal purchases, and other activities there, but these are all the factors that support the price of crypto.
So yes, it's extremely volatile. Yes, its price depends on the mood of lots of moody people. But it's still a valid commodity backed by human greed.
IMO bitcoin can act as a commodity, but it needs more participation and infrastructure (importantly, the internet) to realize that. Mining bitcoin is cheaper than mining gold though, so that should be a good hint that if Bitcoin is any kind of store of value, it should end up cheaper than gold.
https://community.intercoin.org/t/what-backs-a-currency-terr...
https://www.wsj.com/amp/articles/pensions-bad-year-poised-to...
This has nothing to do with crypto and is going to hurt a lot of innocent people. Not a top concern for HN however.
It is a response to this statement. Grubhub and food are not linked.