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When I go onto an exchange to buy a Bitcoin, someone on the other end is selling it. To sell it, they have to deposit it on the exchange. I don't see why an e
by Scirra_Tom 7y ago
When I go onto an exchange to buy a Bitcoin, someone on the other end is selling it. To sell it, they have to deposit it on the exchange. I don't see why an exchange would buy from other exchanges unless they saw arbitrage opportunities.
If they did see arbitrage opportunities they are engaging in risk (there is timing risk for example) and I'm not even sure they could legally do this as deposits should be ringfenced.
- village-idiot 7y agoBecause unlike other exchanges, they actually hold onto the inventory that’s being exchanged. That’s exactly what the hot and cold wallets are, inventory that can be irrevocably lost. This fact exposes them to theft and something akin to a bank run, where withdrawals can exceed deposits, something that can never happen on the NYSE because it doesn’t hold inventory.
- jstanley 7y agoNone of that has anything to do with the notion that exchanges buy bitcoin off each other.
- village-idiot 7y agoYes, because the bit about exchanges buying from each other wasn’t the main point, it’s just the bit you focused on.