17 ms·

Coinbase Pro Disables Margin Trading

152 points by mercurialshark 6y ago

vmception 6y ago
> In response to new guidance from the Commodity Futures Trading Commission, we are disabling our margin trading product. As other articles mentioned, which unspecified guidance? Anyway, don't really care about whether margin is available or not on spot assets, good luck with that. Stay solvent and liquid!
- arcticbull 6y ago
  But then how will the casino function? No leverage means a bad time for the problem gamblers keeping the price propped up. I suppose they can always buy some Tether from Bitfinex - assuming their bank still accepts deposits (lol).
  - vmception 6y ago
    There is plenty of permissionless leverage onchain in defi platforms and insurance coverages
    - arcticbull 6y ago
      whew got worried for a second there haha
      - vmception 6y ago
        The reserves are more transparent than exchanges with insurance coverage. I embrace that. There is nothing sarcastic about it to me.
        arcticbull 6y ago
        I recognize that and as per usual I disagree with you but I respect and appreciate both your opinion and your willingness to share it with me. I always appreciate my opinions being challenged, and acknowledge that they are simply my opinions. Any perceived sarcasm is meant as banter and not disrespect :) a tough line on the internet I'll acknowledge, hence this reply. I will also say that yes transparency in these matters is a strict improvement over the status quo so we can certainly agree on that.
Traster 6y ago
Blog: We've disabled margin trading because of CFTC. For more info go to our FAQ. FAQ Question 1: Why have you disabled margin trading? We've disabled margin trading because of CFTC. For more info go to our blog.
- NullPrefix 6y ago
  Check the blog again.
  - um_ya 6y ago
    Welp... We'll never see him again.
  - optimalsolver 6y ago
    GOTO blog
slickrick216 6y ago
To me this gives even more creedance to the rumor that they have massive liquidity problems behind the scenes. Thus the continuous outages at times when the market is pumping. I’m highly dubious of their post mortems and the service incidents coincidental timings.
- xiphias2 6y ago
  Where did you read this rumor? I'm interested in the details (I know about the downtimes)
  - deleted 6y ago
    [deleted]
  - vmception 6y ago
    fractional reserve rumors are pervasive and nonstop for custodial exchanges there isnt really a source necessary nobody has any insight until they do
    - Scoundreller 6y ago
      In my opinion, the next custodial exchange to explode isn't a matter of if, but when, when, [...] and when.
    - slickrick216 6y ago
      Exactly this yes. I heard this on Twitter and occasionally on several different crypto forums when there’s been an outage during a price surge. I’m not saying this is definitive but the pattern is nonetheless concerning. I get service incidents happen but the timing always seems weird. That could be sample bias though.
- gruez 6y ago
  But why would "liquidity problems" cause outages? It's not like their servers require liquidity to operate or something. It makes much more sense that their servers are going down because trade volumes are up, thereby causing server load to go up.
xiphias2 6y ago
This is actually great news! Margin trading and investment Bitcoin storage don't belong to the same institution in my view, unless there's a clear separation of ownership in a case of bankrupcy.
- deleted 6y ago
  [deleted]
- gruez 6y ago
  >Margin trading and investment Bitcoin storage don't belong to the same institution in my view, unless there's a clear separation of ownership in a case of bankrupcy. What's the concern here? That someone will buy bitcoin on margin, withdraw all of it, and then declare bankruptcy?
  - zaroth 6y ago
    If you want other examples of how this goes wrong outside of Cryptocurrency, there are some amazing stories on WallStreetBets of traders exploiting bugs in Robinhood’s margin limits to over-leverage and ending up millions of dollars in the red. It’s not a matter of withdrawals, it’s a matter of losing more money than you have and being unable to cover the loss.
    - vmception 6y ago
      That’s not a matter for the CFTC in the spot market or care that an idiot has to pay debt collectors all because they wanted to earn a few pips intraday. CFTC doesnt regulate spot assets. So it really depends on how Coinbase classifies what people are actually trading.
    - gruez 6y ago
      Okay, but why cryptocurrencies specifically? If you find some infinite leverage exploit on coinbase, how are the effects different compared to one on robinhood? The gp commenter mentioned something involving "separation of ownership in a case of bankruptcy", but even then, I don't see how that's any different than finding a infinite leverage exploit on robinhood, finding a withdraw exploit, withdrawing to your bank account, then buying cryptocurrencies with it. At the end of the day as long you can find a infinite margin exploit + withdraw exploit on any margin platform, you can make wealth dissapear into the aether of cryptocurrencies.
seibelj 6y ago
Further reason why exchanges that are offshore and outside of US jurisdiction continue to dominate. Old rules for an old world, meanwhile the industry has been innovating 1000x faster than the traditional financial system. I get that the US and it’s regulators never want to let go of their power, but every day that passes they get weaker as the future bypasses them.
- arcticbull 6y ago
  Just so you know, margin trading is very accessible in the "old world" haha. It just applies to, you know, assets.
  - seibelj 6y ago
    Apparently you can only create a product to do this in the US with the blessing of the CFTC. In foreign countries, you do not need their arbitrary blessing. That is my criticism.
    - arcticbull 6y ago
      Yep regulation is a wonderful thing. It ensures toxic garbage doesn't gain widespread acceptance. Tries to, anyways. That's why we have these agencies - remember the Great Depression? They didn't call it the because it just a pretty good depression.
      - seibelj 6y ago
        I don’t want rules from the 1930s regulating crypto. Luckily foreign countries exist that don’t have to abide by the US laws and regulators. It would be a very sad world if everyone was controlled by a single regulator in the US. There would be no innovation.
        arcticbull 6y ago
        The year in which the regulation was brought in is totally irrelevant, the only thing that matters is whether the regulation is useful and meaningful. I guarantee you if Tether had to abide by the Securities Act it would not exist. I for one am thrilled to have the SEC looking out for us, keeping the scammers and frauds at bay - or at least trying. Good policy is good policy no matter what year we came up with it.
csomar 6y ago
Coinbase has been leading the Bitcoin rally lately and dragging (the supposedly) tether inflated bitfinex exchange. I wonder if coinbase users went too far in using margin that the CFTC intervened. Wait and see if the same happens to Kraken. They are both bitcoin exchanges.
VWWHFSfQ 6y ago
Is anyone actually making any money on day-trading Bitcoins? I bought a couple Bitcoins back in 2012 and have just sat on them the last 8 years. In general, the market for this stuff is so astronomically weird that it really doesn't make sense to try to trade in it at all..
- nfriedly 6y ago
  I made a trading bot that was moderately profitable, until the exchange it was using got hacked and lost all my coins :/ Edit: The source is available if anyone's interested. I intended to do more with it, but lost steam after I lost my coins. https://github.com/nfriedly/Coin-Allocator https://github.com/nfriedly/Coin-Allocator
  - VWWHFSfQ 6y ago
    BTC-E?
    - nfriedly 6y ago
      No, cryptsy.
      - optimalsolver 6y ago
        Did you join in the class action lawsuit?
        nfriedly 6y ago
        No, I don't think I even realized there was one. It's okay, thought, I only lost about $100. (I kept the balance low mainly because I didn't trust my own code yet.)
- AnonsLadder 6y ago
  Yes. Just look at the 3Daily chart of BTC/USD. It's absolutely bonkers
optimalsolver 6y ago
Maybe forcing a large fraction of their best talent out the door wasn't such a hot idea.
Animats 6y ago
Who was the counterparty? Margin trading implies that some party in addition to the customer is at risk. Some of the Bitcoin exchanges tried to escape this by closing out positions when the customer's equity was wiped out, but in a falling market, you often can't do that fast enough. Then the broker/exchange has to collect from the customer beyond what they had in their account. That led to messes like this [1] when the bottom fell out of natural gas prices. [1] https://advisorhub.com/broker-seeks-millions-from-wiped-out-optionsellers-clients/ https://advisorhub.com/broker-seeks-millions-from-wiped-out-...
- gruez 6y ago
  Isn't this only a concern when dealing with futures/options? If you're just buying bitcoin with borrowed money, the counterparty is just the guy lending you the money (coinbase).
predictmktegirl 6y ago
Kraken is destroying them in margin/derivatives and their margin product is quite bad. Not saying there is a relationship, but it is a good trade for Coinbase if Kraken has to shutter theirs as well.
- beaner 6y ago
  Are they though? If not, what lets kraken continue?
Animats 6y ago
It turns out Coinbase was reacting to this CFTC guidance.[1] The CFTC has ruled that "delivery" of a digital currency after a futures contract is closed out means delivery to the user's wallet, not a credit in the broker's accounting system. The Bitcoins have to leave Coinbase's control completely. Coinbase doesn't want customers withdrawing big amounts all the time, apparently. [1] https://www.coindesk.com/the-us-cftc-just-defined-what-actual-delivery-of-crypto-should-look-like https://www.coindesk.com/the-us-cftc-just-defined-what-actua...
- piracy1 6y ago
  I could see it being the case that this could be in part problematic because it could interfere with their anti-theift/fraud mechanisms. If you are mandated by law to pay out the full amount immediately with no strings attached. An attacker could (idk much about to futures markets so maybe I'm wrong) make a super short term trade that forces them to take possession of the coins as a way to bypass withdrawal security.
  - Animats 6y ago
    They actually got the CFTC to allow 28 days for settlement. Some of the other players, such as Gemini, wanted 2 days. If Coinbase can't live with 28 days for settlement, it's because they don't want the money leaving their control.
    - piracy1 6y ago
      Ohhhh, that's a telling tidbit, thank you.
- deleted 6y ago
  [deleted]
zalkota 6y ago
The government is trying to slow the inevitable. So corrupt
dolphin1986 6y ago
I don’t see how this is much different to how the CFTC steps in and raises margin requirements on silver futures contracts when the price starts to run. I would tend to guess that coinbase really did have the CFTC bring the hammer down and force them to make this change just as the pricing of crypto started to rocket.

> In response to new guidance from the Commodity Futures Trading Commission, we are disabling our margin trading product. As other articles mentioned, which unspecified guidance? Anyway, don't really care about whether margin is available or not on spot assets, good luck with that. Stay solvent and liquid!

arcticbull 6y ago
But then how will the casino function? No leverage means a bad time for the problem gamblers keeping the price propped up. I suppose they can always buy some Tether from Bitfinex - assuming their bank still accepts deposits (lol).
- vmception 6y ago
  There is plenty of permissionless leverage onchain in defi platforms and insurance coverages
  - arcticbull 6y ago
    whew got worried for a second there haha
    - vmception 6y ago
      The reserves are more transparent than exchanges with insurance coverage. I embrace that. There is nothing sarcastic about it to me.
      - arcticbull 6y ago
        I recognize that and as per usual I disagree with you but I respect and appreciate both your opinion and your willingness to share it with me. I always appreciate my opinions being challenged, and acknowledge that they are simply my opinions. Any perceived sarcasm is meant as banter and not disrespect :) a tough line on the internet I'll acknowledge, hence this reply. I will also say that yes transparency in these matters is a strict improvement over the status quo so we can certainly agree on that.

Traster 6y ago

Blog: We've disabled margin trading because of CFTC. For more info go to our FAQ. FAQ Question 1: Why have you disabled margin trading? We've disabled margin trading because of CFTC. For more info go to our blog.

NullPrefix 6y ago
Check the blog again.
- um_ya 6y ago
  Welp... We'll never see him again.
- optimalsolver 6y ago
  GOTO blog

slickrick216 6y ago

To me this gives even more creedance to the rumor that they have massive liquidity problems behind the scenes. Thus the continuous outages at times when the market is pumping. I’m highly dubious of their post mortems and the service incidents coincidental timings.

xiphias2 6y ago
Where did you read this rumor? I'm interested in the details (I know about the downtimes)
- deleted 6y ago
  [deleted]
- vmception 6y ago
  fractional reserve rumors are pervasive and nonstop for custodial exchanges there isnt really a source necessary nobody has any insight until they do
  - Scoundreller 6y ago
    In my opinion, the next custodial exchange to explode isn't a matter of if, but when, when, [...] and when.
  - slickrick216 6y ago
    Exactly this yes. I heard this on Twitter and occasionally on several different crypto forums when there’s been an outage during a price surge. I’m not saying this is definitive but the pattern is nonetheless concerning. I get service incidents happen but the timing always seems weird. That could be sample bias though.
gruez 6y ago
But why would "liquidity problems" cause outages? It's not like their servers require liquidity to operate or something. It makes much more sense that their servers are going down because trade volumes are up, thereby causing server load to go up.

xiphias2 6y ago

This is actually great news! Margin trading and investment Bitcoin storage don't belong to the same institution in my view, unless there's a clear separation of ownership in a case of bankrupcy.

deleted 6y ago
[deleted]
gruez 6y ago
>Margin trading and investment Bitcoin storage don't belong to the same institution in my view, unless there's a clear separation of ownership in a case of bankrupcy. What's the concern here? That someone will buy bitcoin on margin, withdraw all of it, and then declare bankruptcy?
- zaroth 6y ago
  If you want other examples of how this goes wrong outside of Cryptocurrency, there are some amazing stories on WallStreetBets of traders exploiting bugs in Robinhood’s margin limits to over-leverage and ending up millions of dollars in the red. It’s not a matter of withdrawals, it’s a matter of losing more money than you have and being unable to cover the loss.
  - vmception 6y ago
    That’s not a matter for the CFTC in the spot market or care that an idiot has to pay debt collectors all because they wanted to earn a few pips intraday. CFTC doesnt regulate spot assets. So it really depends on how Coinbase classifies what people are actually trading.
  - gruez 6y ago
    Okay, but why cryptocurrencies specifically? If you find some infinite leverage exploit on coinbase, how are the effects different compared to one on robinhood? The gp commenter mentioned something involving "separation of ownership in a case of bankruptcy", but even then, I don't see how that's any different than finding a infinite leverage exploit on robinhood, finding a withdraw exploit, withdrawing to your bank account, then buying cryptocurrencies with it. At the end of the day as long you can find a infinite margin exploit + withdraw exploit on any margin platform, you can make wealth dissapear into the aether of cryptocurrencies.

seibelj 6y ago

Further reason why exchanges that are offshore and outside of US jurisdiction continue to dominate. Old rules for an old world, meanwhile the industry has been innovating 1000x faster than the traditional financial system. I get that the US and it’s regulators never want to let go of their power, but every day that passes they get weaker as the future bypasses them.

arcticbull 6y ago
Just so you know, margin trading is very accessible in the "old world" haha. It just applies to, you know, assets.
- seibelj 6y ago
  Apparently you can only create a product to do this in the US with the blessing of the CFTC. In foreign countries, you do not need their arbitrary blessing. That is my criticism.
  - arcticbull 6y ago
    Yep regulation is a wonderful thing. It ensures toxic garbage doesn't gain widespread acceptance. Tries to, anyways. That's why we have these agencies - remember the Great Depression? They didn't call it the because it just a pretty good depression.
    - seibelj 6y ago
      I don’t want rules from the 1930s regulating crypto. Luckily foreign countries exist that don’t have to abide by the US laws and regulators. It would be a very sad world if everyone was controlled by a single regulator in the US. There would be no innovation.
      - arcticbull 6y ago
        The year in which the regulation was brought in is totally irrelevant, the only thing that matters is whether the regulation is useful and meaningful. I guarantee you if Tether had to abide by the Securities Act it would not exist. I for one am thrilled to have the SEC looking out for us, keeping the scammers and frauds at bay - or at least trying. Good policy is good policy no matter what year we came up with it.

csomar 6y ago

Coinbase has been leading the Bitcoin rally lately and dragging (the supposedly) tether inflated bitfinex exchange. I wonder if coinbase users went too far in using margin that the CFTC intervened. Wait and see if the same happens to Kraken. They are both bitcoin exchanges.

VWWHFSfQ 6y ago

Is anyone actually making any money on day-trading Bitcoins? I bought a couple Bitcoins back in 2012 and have just sat on them the last 8 years. In general, the market for this stuff is so astronomically weird that it really doesn't make sense to try to trade in it at all..

nfriedly 6y ago
I made a trading bot that was moderately profitable, until the exchange it was using got hacked and lost all my coins :/ Edit: The source is available if anyone's interested. I intended to do more with it, but lost steam after I lost my coins. https://github.com/nfriedly/Coin-Allocator https://github.com/nfriedly/Coin-Allocator
- VWWHFSfQ 6y ago
  BTC-E?
  - nfriedly 6y ago
    No, cryptsy.
    - optimalsolver 6y ago
      Did you join in the class action lawsuit?
      - nfriedly 6y ago
        No, I don't think I even realized there was one. It's okay, thought, I only lost about $100. (I kept the balance low mainly because I didn't trust my own code yet.)
AnonsLadder 6y ago
Yes. Just look at the 3Daily chart of BTC/USD. It's absolutely bonkers

optimalsolver 6y ago

Maybe forcing a large fraction of their best talent out the door wasn't such a hot idea.

Animats 6y ago

Who was the counterparty? Margin trading implies that some party in addition to the customer is at risk. Some of the Bitcoin exchanges tried to escape this by closing out positions when the customer's equity was wiped out, but in a falling market, you often can't do that fast enough. Then the broker/exchange has to collect from the customer beyond what they had in their account. That led to messes like this [1] when the bottom fell out of natural gas prices. [1] https://advisorhub.com/broker-seeks-millions-from-wiped-out-optionsellers-clients/ https://advisorhub.com/broker-seeks-millions-from-wiped-out-...

gruez 6y ago
Isn't this only a concern when dealing with futures/options? If you're just buying bitcoin with borrowed money, the counterparty is just the guy lending you the money (coinbase).

predictmktegirl 6y ago

Kraken is destroying them in margin/derivatives and their margin product is quite bad. Not saying there is a relationship, but it is a good trade for Coinbase if Kraken has to shutter theirs as well.

beaner 6y ago
Are they though? If not, what lets kraken continue?

Animats 6y ago

It turns out Coinbase was reacting to this CFTC guidance.[1] The CFTC has ruled that "delivery" of a digital currency after a futures contract is closed out means delivery to the user's wallet, not a credit in the broker's accounting system. The Bitcoins have to leave Coinbase's control completely. Coinbase doesn't want customers withdrawing big amounts all the time, apparently. [1] https://www.coindesk.com/the-us-cftc-just-defined-what-actual-delivery-of-crypto-should-look-like https://www.coindesk.com/the-us-cftc-just-defined-what-actua...

piracy1 6y ago
I could see it being the case that this could be in part problematic because it could interfere with their anti-theift/fraud mechanisms. If you are mandated by law to pay out the full amount immediately with no strings attached. An attacker could (idk much about to futures markets so maybe I'm wrong) make a super short term trade that forces them to take possession of the coins as a way to bypass withdrawal security.
- Animats 6y ago
  They actually got the CFTC to allow 28 days for settlement. Some of the other players, such as Gemini, wanted 2 days. If Coinbase can't live with 28 days for settlement, it's because they don't want the money leaving their control.
  - piracy1 6y ago
    Ohhhh, that's a telling tidbit, thank you.
deleted 6y ago
[deleted]

zalkota 6y ago

The government is trying to slow the inevitable. So corrupt

dolphin1986 6y ago

I don’t see how this is much different to how the CFTC steps in and raises margin requirements on silver futures contracts when the price starts to run. I would tend to guess that coinbase really did have the CFTC bring the hammer down and force them to make this change just as the pricing of crypto started to rocket.