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Perhaps, but then, if that's how they were managing, then they could go out of business on a strong move up. I think it's more likely that they are using a com

Perhaps, but then, if that's how they were managing, then they could go out of business on a strong move up. I think it's more likely that they are using a combo of reserve bitcoins plus actually buying on the market at the time you place an order. This is why, on some heavy volume days, you will see the message that Coinbase itself (not just you as a user) has reached its buy limit for the day. They buy at the price they quote you, then wait for your funds to clear ACH to deposit the coin in your account. So, another risk Coinbase has is when a customer buys (prompting Coinbase to buy), then the customer's funds don't settle via ACH. Coinbase is then stuck with the coin until they can fulfill someone else's order. This might be at a loss if BTC has moved down. In fact, if a user places an order and BTC moved sharply down, it is likely possible that the user could purposely liquidate the bank account so the ACH would fail. I am betting they have seen this. They have been toying with Instant buys as well, but having to adjust their requirements. In the first iteration, I remembered wondering how they weren't losing their shirts, as it was designed pretty naively, as if everyone were honest. Sure enough, they changed their requirements. In general, they take on more risk than their customers, but one thing I do fault them for is failing to communicate changes in requirements, etc. And, apparently, they do need more robust processes, automated auditing, etc. It is the most reliable place to buy that I have found, but it definitely has some of the Wild West feel of BTC itself.

bushido 13y ago
> They buy at the price they quote you, then wait for your funds to clear ACH to deposit the coin in your account. This is simply stupid, if true. There is no way any institution trading any type of instrument, asset, commodity, security etc should ever do this. And I doubt they do this. > Coinbase has is when a customer buys (prompting Coinbase to buy), then the customer's funds don't settle via ACH. Coinbase is then stuck with the coin until they can fulfill someone else's order. This might be at a loss if BTC has moved down. In fact, if a user places an order and BTC moved sharply down, it is likely possible that the user could purposely liquidate the bank account so the ACH would fail. I am betting they have seen this. Again this is based on the most likely false premise that they do buy the goods before the payment is cleared. This is simply insane. If you're right about your bet that they have seen this, and if the do buy the BTC before payment clears that they get what they deserve. There can never be bonus points for anyone doing nonsensical things. > they have been toying with Instant buys as well What type of instant buys? Instantly buying the BTC on an exchange once the payment is cleared using a market order by default unless the user specifies a max. buy rate (or a min sell rate)? This is the only way they should have been doing it. Or is it instantly buying it when the customer shows intent to purchase before the ACH clear? This is just stupid. > In general, they take on more risk than their customers If this is true, they should get an award for the most ridiculous business practices of the year. Again I doubt this is true. What we need to find out is, in case of a delay on large order where the price of BTC went up did they honor the original quoted rate or the current rate?
- pontifier 13y ago
  I can't speak to what you might call a "large" order, but in the case of a delay selling 0.4 BTC, the price went up dramatically for me, and there was no recourse. I received $156 on the day the price hit it's high of $1242. There is a screenshot of my transaction here: http://imgur.com/iY1btbr http://imgur.com/iY1btbr
  - bushido 13y ago
    I feel bad for you but worse for who ever bought these if it was internally matched(some would may also call it a dark pool)(also explained further below why this was not on an exchange), here's why: Whoever was internally matched got a benefit(alleged profit) of $339.93 on their partial fill; assuming they would have sold it immediately at the high for 216.69% ROI and let not even go into the annual compounded growth rate. Though either ways if I were the other party I would have still asked for a reversal. And here's why: Such error's can easily happen in the reverse order (like in your case) and most often happen on a larger transaction AND if I did not complain about the beneficial trade I would lose a great amount of credibility in court or arbitration for the wrongdoing. Also Coinbase would be well within their rights to reverse the transaction if they followed due process. But, I have serious doubt about all CoinBase practices since yesterday (when I first saw this error), and here's why: 1. Even if I was not adept or did not have experience at reading the tape (time and sales) etc, it would be very easy for me or anyone to very if a transaction occurred on any BTC exchange at around this price level as the data is freely available, also all web based charts available for this would have developed an enormous tail. Which implies just one legitimate reason, that is Internal Matching.[0] 2. Fortunately internal matching works differently than open exchanges that have a bid/ask spread which can get quite wide on BTC due to thin volumes, but remains in a 1% range for good measure lets call this a +/- 10% spread, so on this day if volumes were thin someone could have bought BTC at $1242 * 1.1 => $1366.2 or could have sold it for $1242 * 0.9 => $1117.8. But like I said fortunately internal matching would work differently. Much like a normal exchange it would work on a first in first out basis (FIFO) so if there is one or more buyer at X price and someone decides to sell the first order would be filled. Usually X would be the current market rate +/- an acceptable slippage which is lower than the open market let call this 5%, though it should be no more that 1%). So the worst internal match would be $1242 * 1.15 for buying or $1242 * 0.85 for selling. If this pricing condition is not met coinbase themselves could be the seller(thus become an internal market maker) or the would route the order to an open exchange. There is a near-zero possibility of the fill happening at 68.074% lower than the market rate. The only way this could have happened is if once the order was sent to the market in the form of a market order and there was zero bidders between the ask and < $396.52(since I assume the rate includes a fees). But if it was not internally matched and did not get executed on any exchange the only somewhat legal possibility remaining is an intentional technical/code error the only other options remaining is (hint: completely unethical and/or illegal) them not doing an exchange at all aka. market making at +/- 60%+. 3. Unfortunately if this is a technical error, it most definitely must have happened to other customers too, if it did on a partial fill the sell price would be an average, hence most users would never see it and there (CBs) books would get cleared during the end-of-day reconciliation. I will leave the speculation as to other reasons here. No reason to allege any deliberate wrong doing beyond their lack of understanding about auditing financial transactions. Though did you get your trade reversed? edit: bias correction (explained below) I am big supporter and bigger moralizer with all things relating to the business practices and moral obligations of companies when dealing with the small guys. The critic in me can draw and deduct conclusions that may skip considering situations which while possible have a very very low probability of happening. But as Murphy would say, "Anything that can go wrong, will go wrong". So acknowledging murphy's law its my moralizing responsibility to moralize myself and declare the point below [0]. [1] is further moralizing by me, old habits and all that. [0] There is a remote(but worth mentioning) possibility that as I cannot truly check all exchanges where BTC is traded and cannot identify the exchange through where coinbase executes their trades there is a possibility, however remote that CoinBase could have used an obscure exchange for this transaction that had spreads as wide as +/- 68%. In that case it can/may nullify completely any observations and opinions I shared above, thus rendering my opinions incorrect, in which case I apologize. [1]Though I would request if this is the case that CoinBase/Brian make it clear in their TOS that this is the case, so that users can make an informed decision with the knowledge that they can potentially lose value due to these extreme situations. Of course you would likely not need to legally disclose this so, not disclosing it is also fair.

bushido 13y ago

> They buy at the price they quote you, then wait for your funds to clear ACH to deposit the coin in your account. This is simply stupid, if true. There is no way any institution trading any type of instrument, asset, commodity, security etc should ever do this. And I doubt they do this. > Coinbase has is when a customer buys (prompting Coinbase to buy), then the customer's funds don't settle via ACH. Coinbase is then stuck with the coin until they can fulfill someone else's order. This might be at a loss if BTC has moved down. In fact, if a user places an order and BTC moved sharply down, it is likely possible that the user could purposely liquidate the bank account so the ACH would fail. I am betting they have seen this. Again this is based on the most likely false premise that they do buy the goods before the payment is cleared. This is simply insane. If you're right about your bet that they have seen this, and if the do buy the BTC before payment clears that they get what they deserve. There can never be bonus points for anyone doing nonsensical things. > they have been toying with Instant buys as well What type of instant buys? Instantly buying the BTC on an exchange once the payment is cleared using a market order by default unless the user specifies a max. buy rate (or a min sell rate)? This is the only way they should have been doing it. Or is it instantly buying it when the customer shows intent to purchase before the ACH clear? This is just stupid. > In general, they take on more risk than their customers If this is true, they should get an award for the most ridiculous business practices of the year. Again I doubt this is true. What we need to find out is, in case of a delay on large order where the price of BTC went up did they honor the original quoted rate or the current rate?

pontifier 13y ago
I can't speak to what you might call a "large" order, but in the case of a delay selling 0.4 BTC, the price went up dramatically for me, and there was no recourse. I received $156 on the day the price hit it's high of $1242. There is a screenshot of my transaction here: http://imgur.com/iY1btbr http://imgur.com/iY1btbr
- bushido 13y ago
  I feel bad for you but worse for who ever bought these if it was internally matched(some would may also call it a dark pool)(also explained further below why this was not on an exchange), here's why: Whoever was internally matched got a benefit(alleged profit) of $339.93 on their partial fill; assuming they would have sold it immediately at the high for 216.69% ROI and let not even go into the annual compounded growth rate. Though either ways if I were the other party I would have still asked for a reversal. And here's why: Such error's can easily happen in the reverse order (like in your case) and most often happen on a larger transaction AND if I did not complain about the beneficial trade I would lose a great amount of credibility in court or arbitration for the wrongdoing. Also Coinbase would be well within their rights to reverse the transaction if they followed due process. But, I have serious doubt about all CoinBase practices since yesterday (when I first saw this error), and here's why: 1. Even if I was not adept or did not have experience at reading the tape (time and sales) etc, it would be very easy for me or anyone to very if a transaction occurred on any BTC exchange at around this price level as the data is freely available, also all web based charts available for this would have developed an enormous tail. Which implies just one legitimate reason, that is Internal Matching.[0] 2. Fortunately internal matching works differently than open exchanges that have a bid/ask spread which can get quite wide on BTC due to thin volumes, but remains in a 1% range for good measure lets call this a +/- 10% spread, so on this day if volumes were thin someone could have bought BTC at $1242 * 1.1 => $1366.2 or could have sold it for $1242 * 0.9 => $1117.8. But like I said fortunately internal matching would work differently. Much like a normal exchange it would work on a first in first out basis (FIFO) so if there is one or more buyer at X price and someone decides to sell the first order would be filled. Usually X would be the current market rate +/- an acceptable slippage which is lower than the open market let call this 5%, though it should be no more that 1%). So the worst internal match would be $1242 * 1.15 for buying or $1242 * 0.85 for selling. If this pricing condition is not met coinbase themselves could be the seller(thus become an internal market maker) or the would route the order to an open exchange. There is a near-zero possibility of the fill happening at 68.074% lower than the market rate. The only way this could have happened is if once the order was sent to the market in the form of a market order and there was zero bidders between the ask and < $396.52(since I assume the rate includes a fees). But if it was not internally matched and did not get executed on any exchange the only somewhat legal possibility remaining is an intentional technical/code error the only other options remaining is (hint: completely unethical and/or illegal) them not doing an exchange at all aka. market making at +/- 60%+. 3. Unfortunately if this is a technical error, it most definitely must have happened to other customers too, if it did on a partial fill the sell price would be an average, hence most users would never see it and there (CBs) books would get cleared during the end-of-day reconciliation. I will leave the speculation as to other reasons here. No reason to allege any deliberate wrong doing beyond their lack of understanding about auditing financial transactions. Though did you get your trade reversed? edit: bias correction (explained below) I am big supporter and bigger moralizer with all things relating to the business practices and moral obligations of companies when dealing with the small guys. The critic in me can draw and deduct conclusions that may skip considering situations which while possible have a very very low probability of happening. But as Murphy would say, "Anything that can go wrong, will go wrong". So acknowledging murphy's law its my moralizing responsibility to moralize myself and declare the point below [0]. [1] is further moralizing by me, old habits and all that. [0] There is a remote(but worth mentioning) possibility that as I cannot truly check all exchanges where BTC is traded and cannot identify the exchange through where coinbase executes their trades there is a possibility, however remote that CoinBase could have used an obscure exchange for this transaction that had spreads as wide as +/- 68%. In that case it can/may nullify completely any observations and opinions I shared above, thus rendering my opinions incorrect, in which case I apologize. [1]Though I would request if this is the case that CoinBase/Brian make it clear in their TOS that this is the case, so that users can make an informed decision with the knowledge that they can potentially lose value due to these extreme situations. Of course you would likely not need to legally disclose this so, not disclosing it is also fair.