5 ms·

The bitcoin exchanges have plenty of liquidity, and executions happen in less than one second. The real risk for arbitrage is with the crypto exchange itself:

The bitcoin exchanges have plenty of liquidity, and executions happen in less than one second. The real risk for arbitrage is with the crypto exchange itself: these can go bust, or disappear overnight. You wanna keep $1M sitting on one of these exchanges?

d--b 9y ago
Mmmh, why do you need your coins sitting on one exchange? Can't you just take them out once your transaction is done?
- jacobush 9y ago
  And that is precisely when the trickle begins... nothing ”at once” about taking them out.
- mathgenius 9y ago
  Sure, but you still need to put funds into the exchange to buy the coin in the first place. And likely you would leave the coins there in case the trade goes the otherway. Managing that many coins in your own wallet is a whole other headache. But I guess your point is to not leave much on the exchange at any one time.
  - d--b 9y ago
    True, you're exposed to the exchange at least to enter and exit the trade. But you'd expect sophisticated arbitrageurs to know how to manage their own bitcoin wallets. Perhaps the discrepancy is there because such people don't exist yet.
- moduspol 9y ago
  From my experience, the way you find out there's an issue with the exchange is when you see people posting on /r/bitcoin about having waited weeks for their withdrawal to be processed. Meanwhile the exchange continues to accept deposits.
  - pbhjpbhj 9y ago
    Presumably you can watch the exchange's wallets and see anomalous behaviour relatively easily?
    - moduspol 9y ago
      Maybe, I guess? I feel like you'd almost need insider knowledge of the exchange to be able to tell what is anomalous.
    - mattm 9y ago
      Do exchanges publicize their main wallets? Is there a listing somewhere?
      - tzahola 9y ago
        Yes. It's called "the blockchain".
      - pbhjpbhj 9y ago
        If you buy bitcoin, I assume it works that you receive btc from a wallet, and that wallet belongs to the exchange. If you sell at an exchange then you send your btc to a wallet, and ... They could hide transfers by making new wallets, but that's strikes me as massive red-flag behaviour that an exchange wishing to continue in business is unlikely to take part in? Someone step in and correct me?
- empath75 9y ago
  good luck: https://www.reddit.com/r/bitfinex/ https://www.reddit.com/r/bitfinex/ Nothing but complaints about withdrawals. You can't even withdraw anything from bitfinex less than 250BTC.
  - mrb 9y ago
    Bitfinex is one of the shadiest exchanges. Use reputable ones like Gemini or GDAX.
bunderbunder 9y ago
Wrong kind of liquidity. Trading firms, hedge funds, etc. care care about liquidity of the "Can I convert this into the kind of money I use to pay taxes and employees and investors?" kind. BTC has basically zero of that, as evidenced for the fact that there isn't a deliverable version of this contract. I'm not sure a sensible institution would even consider BTC held at exchanges to be real BTC, just a kind of IOU. There may even be regulations preventing them from doing so. So they will probably want to hold the BTC themselves. Or with a clearer, which is likely to think about these things even more conservatively. And 20 minutes (the last figure I heard for how long it takes to execute a bitcoin transaction) is an eternity to an industry that is starting to think in nanoseconds.
- runeks 9y ago
  > I'm not sure a sensible institution would even consider BTC held at exchanges to be real BTC, just a kind of IOU. Nor should they. BTC held at an exchange is, by any sensible definition, an instantly redeemable promissory note denominated in bitcoins. Several exchanges have defaulted on these types of obligations.
- marshray 9y ago
  > BTC has basically zero of that, as evidenced for the fact that there isn't a deliverable version of this contract. How can anyone claim Bitcoin is a useful currency if it's less practical to deliver than, say, KC Winter Wheat? > And 20 minutes...is an eternity This is for a futures contract one month out. You would close your position at the same time that you agreed upon the rate for the blockchain transaction. When you sold the BTC you could verify receipt of the USD quickly (fiat FTW), whereas the blockchain propagation time is more of a risk to the BTC buyer.

d--b 9y ago

Mmmh, why do you need your coins sitting on one exchange? Can't you just take them out once your transaction is done?

jacobush 9y ago
And that is precisely when the trickle begins... nothing ”at once” about taking them out.
mathgenius 9y ago
Sure, but you still need to put funds into the exchange to buy the coin in the first place. And likely you would leave the coins there in case the trade goes the otherway. Managing that many coins in your own wallet is a whole other headache. But I guess your point is to not leave much on the exchange at any one time.
- d--b 9y ago
  True, you're exposed to the exchange at least to enter and exit the trade. But you'd expect sophisticated arbitrageurs to know how to manage their own bitcoin wallets. Perhaps the discrepancy is there because such people don't exist yet.
moduspol 9y ago
From my experience, the way you find out there's an issue with the exchange is when you see people posting on /r/bitcoin about having waited weeks for their withdrawal to be processed. Meanwhile the exchange continues to accept deposits.
- pbhjpbhj 9y ago
  Presumably you can watch the exchange's wallets and see anomalous behaviour relatively easily?
  - moduspol 9y ago
    Maybe, I guess? I feel like you'd almost need insider knowledge of the exchange to be able to tell what is anomalous.
  - mattm 9y ago
    Do exchanges publicize their main wallets? Is there a listing somewhere?
    - tzahola 9y ago
      Yes. It's called "the blockchain".
    - pbhjpbhj 9y ago
      If you buy bitcoin, I assume it works that you receive btc from a wallet, and that wallet belongs to the exchange. If you sell at an exchange then you send your btc to a wallet, and ... They could hide transfers by making new wallets, but that's strikes me as massive red-flag behaviour that an exchange wishing to continue in business is unlikely to take part in? Someone step in and correct me?
empath75 9y ago
good luck: https://www.reddit.com/r/bitfinex/ https://www.reddit.com/r/bitfinex/ Nothing but complaints about withdrawals. You can't even withdraw anything from bitfinex less than 250BTC.
- mrb 9y ago
  Bitfinex is one of the shadiest exchanges. Use reputable ones like Gemini or GDAX.

bunderbunder 9y ago

Wrong kind of liquidity. Trading firms, hedge funds, etc. care care about liquidity of the "Can I convert this into the kind of money I use to pay taxes and employees and investors?" kind. BTC has basically zero of that, as evidenced for the fact that there isn't a deliverable version of this contract. I'm not sure a sensible institution would even consider BTC held at exchanges to be real BTC, just a kind of IOU. There may even be regulations preventing them from doing so. So they will probably want to hold the BTC themselves. Or with a clearer, which is likely to think about these things even more conservatively. And 20 minutes (the last figure I heard for how long it takes to execute a bitcoin transaction) is an eternity to an industry that is starting to think in nanoseconds.

runeks 9y ago
> I'm not sure a sensible institution would even consider BTC held at exchanges to be real BTC, just a kind of IOU. Nor should they. BTC held at an exchange is, by any sensible definition, an instantly redeemable promissory note denominated in bitcoins. Several exchanges have defaulted on these types of obligations.
marshray 9y ago
> BTC has basically zero of that, as evidenced for the fact that there isn't a deliverable version of this contract. How can anyone claim Bitcoin is a useful currency if it's less practical to deliver than, say, KC Winter Wheat? > And 20 minutes...is an eternity This is for a futures contract one month out. You would close your position at the same time that you agreed upon the rate for the blockchain transaction. When you sold the BTC you could verify receipt of the USD quickly (fiat FTW), whereas the blockchain propagation time is more of a risk to the BTC buyer.