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As I watch the total crypto market cap shoot through the roof over the past year, one thing I've been wondering is what will stop a global "bank run" on the exc
by kirse 6y ago
As I watch the total crypto market cap shoot through the roof over the past year, one thing I've been wondering is what will stop a global "bank run" on the exchanges when/if something like this does happen?
I was reading thru Coinbase's own insurance wording, and it's clear they dance around it by saying:
To the extent these funds are held as USD in U.S. banks, they are maintained as pooled custodial accounts at one or more banks insured by the FDIC. These pooled custodial accounts have pass-through FDIC insurance up to the per-depositor coverage limit then in place [1]
Which basically means, only Coinbase's holding accounts are covered for $250k, not our personal accounts. I can't imagine the US Gov stepping in to rescue US crypto account holders when/if it does tank, but it might be necessary if it balloons enough.
[1] https://help.coinbase.com/en/coinbase/other-topics/legal-policies/how-is-coinbase-insured https://help.coinbase.com/en/coinbase/other-topics/legal-pol...
- dahdum 6y agoCoinbase doesn't use Tether to store customer funds, they are straight USD or the BTC/ETH itself. I'm not sure how a "bank run", or heavy withdrawal of USD, would cause any more problems than processing delays.
- arcticbull 6y agoThat's a bit of a lack of imagination. What happens is any USDT-BTC exchanges utterly collapse. The price there shoots up to hundreds of thousands of USDT per BTC, those BTC all flood to legitimate exchanges like Coinbase, and deplete their USD. If you believe as I do there's way more USDT printed than backed USD anywhere in the system, Coinbase will dry up too. The price will drop to pennies per BTC on Coinbase. Then there's a ton of bag holders with BTC, and literally no USD to exchange them for. Plenty of USDT though. This is what the 2% per month risk premium is about.
- sammyo 6y agoVery likely in a serious run all the crypto exchanges will crash hard quickly and for an extended time (forever? ;-) essentially stopping trading except for personal direct transactions.
- Shorel 6y agoIf it is not in your own personal wallet, you don't have it. A friend recently got his BTC stolen in one of these online wallets, which are not wallets at all. I advise no one to keep their money in exchanges.
- viklove 6y agoLet me guess -- he didn't have 2fa enabled?