3 ms·

The question is here - how can they run out of liquidity in the first place? Surely as an honest exchange platform you match buyers and sellers, and take a tran

by Nursie 5y ago

The question is here - how can they run out of liquidity in the first place? Surely as an honest exchange platform you match buyers and sellers, and take a transaction fee? This implies they have been playing games with customer deposits. Which would be shocking for a cryptocurrency platform!

djbusby 5y ago
If they didn't have an exact match for the deal maybe they just were the other party - waiting for the other side of the txn. So, in the middle they kept losing a bit on each deal as crypto dropped and poof...the market-maker funding pool is zero. Good news for $COIN?
- throwanem 5y ago
  They could certainly use some right now.
toxicFork 5y ago
They explain it pretty well in the article.
- readthenotes1 5y ago
  "Our overheads have exceeded our earnings for some time" You and I have a different idea of what " pretty well" means, unless I missed something.
- Nursie 5y ago
  For some reason I missed that! This FAQ- "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!
  - Ygg2 5y ago
    What's a Quadriga event?
    - imron 5y ago
      From Wikipedia > 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.
    - Nursie 5y ago
      Quadriga CX was a Canadian cryptocurrency exchange that went under a few years ago (early 2018? unsure exactly when) . 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.
      - IG_Semmelweiss 5y ago
        the ex made a very convincing blog post some time ago that she was an innocent bystander to that train wreck. 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-robertson-quadrigacx-settlement-agreement-1.5313813 https://www.cbc.ca/news/canada/nova-scotia/jennifer-robertso...
  - xur17 5y ago
    Yeah, I was pleasantly surprised to see that they directly swap without holding customer funds (for any longer than the actual trade takes).
bawolff 5y ago
> Surely as an honest exchange platform Because crypto is so well known for the honesty of its actors.
3np 5y ago
They're an OTC platform and retailer. Meaning when customers buy or sell through their platform, the counterparty is Bitprime, not other customers. As for their "swap" service, that's just proxied to Changelly, another company. 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.
- Nursie 5y ago
  > the counterparty is Bitprime Oh that's interesting. Then that's a very different proposition.
_Nat_ 5y ago
From [this page](https://www.bitprime.co.nz/how-it-works/#fees https://www.bitprime.co.nz/how-it-works/#fees ): > 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.
- Nursie 5y ago
  Yeah, as a retailer their business is far more at risk from market fluctuations I guess. They can ride high in the bull market but a drop in asset price puts everything at risk. OK, well that does explain things more neatly.
  - koolba 5y ago
    Sounds like a market maker. In traditional finance the market maker hedges their large liquidity position through options to limit any risk from wild fluctuations in either direction. In defi, I guess they just hodl and then go bankrupt.
    - archi42 5y ago
      I like the analogy/idea, or more precisely find it amusing. But this company doesn't have the necessary liquidity. Plus I am not sure if there can be a real market maker given the transaction volume and volatility of BTC: In the past the daily transaction volume was in the 3 to 8 * 10^9 [billion] US$ range[1], which is massive. And the volatility isn't exactly famously tame either. For comparison, that company self-reports to have moved a mere 92 million in 5 years. 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-volume-usd https://www.blockchain.com/charts/estimated-transaction-volu...

by Nursie 5y ago

djbusby 5y ago

If they didn't have an exact match for the deal maybe they just were the other party - waiting for the other side of the txn. So, in the middle they kept losing a bit on each deal as crypto dropped and poof...the market-maker funding pool is zero. Good news for $COIN?

throwanem 5y ago
They could certainly use some right now.

toxicFork 5y ago

They explain it pretty well in the article.

readthenotes1 5y ago
"Our overheads have exceeded our earnings for some time" You and I have a different idea of what " pretty well" means, unless I missed something.
Nursie 5y ago
For some reason I missed that! This FAQ- "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!
- Ygg2 5y ago
  What's a Quadriga event?
  - imron 5y ago
    From Wikipedia > 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.
  - Nursie 5y ago
    Quadriga CX was a Canadian cryptocurrency exchange that went under a few years ago (early 2018? unsure exactly when) . 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.
    - IG_Semmelweiss 5y ago
      the ex made a very convincing blog post some time ago that she was an innocent bystander to that train wreck. 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-robertson-quadrigacx-settlement-agreement-1.5313813 https://www.cbc.ca/news/canada/nova-scotia/jennifer-robertso...
- xur17 5y ago
  Yeah, I was pleasantly surprised to see that they directly swap without holding customer funds (for any longer than the actual trade takes).

bawolff 5y ago

> Surely as an honest exchange platform Because crypto is so well known for the honesty of its actors.

3np 5y ago

They're an OTC platform and retailer. Meaning when customers buy or sell through their platform, the counterparty is Bitprime, not other customers. As for their "swap" service, that's just proxied to Changelly, another company. 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.

Nursie 5y ago
> the counterparty is Bitprime Oh that's interesting. Then that's a very different proposition.

_Nat_ 5y ago

From [this page](https://www.bitprime.co.nz/how-it-works/#fees https://www.bitprime.co.nz/how-it-works/#fees ): > 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.

Nursie 5y ago
Yeah, as a retailer their business is far more at risk from market fluctuations I guess. They can ride high in the bull market but a drop in asset price puts everything at risk. OK, well that does explain things more neatly.
- koolba 5y ago
  Sounds like a market maker. In traditional finance the market maker hedges their large liquidity position through options to limit any risk from wild fluctuations in either direction. In defi, I guess they just hodl and then go bankrupt.
  - archi42 5y ago
    I like the analogy/idea, or more precisely find it amusing. But this company doesn't have the necessary liquidity. Plus I am not sure if there can be a real market maker given the transaction volume and volatility of BTC: In the past the daily transaction volume was in the 3 to 8 * 10^9 [billion] US$ range[1], which is massive. And the volatility isn't exactly famously tame either. For comparison, that company self-reports to have moved a mere 92 million in 5 years. 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-volume-usd https://www.blockchain.com/charts/estimated-transaction-volu...