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I'm probably oversimplifying this or missing some crucial step but... All your users by BTC at i.e. $10 and store them on your (Gox) exchange. Price jumps to +

by infinii 13y ago

I'm probably oversimplifying this or missing some crucial step but... All your users by BTC at i.e. $10 and store them on your (Gox) exchange. Price jumps to +600 and you subsequently get 50k fiat withdrawal requests. Am I a total cluebie to wonder how they can fund such withdrawals? Maybe there isn't sufficient capital reserve or liquidity between BTC and fiat to withstand such demand?

chill1 13y ago
User that wants to buy BTC via an exchange: * User deposits USD/EUR/etc into an exchange (such as MtGox) * User places a "bid" to buy BTC at a certain price (USD/EUR/etc per BTC) * User waits for their "bid" to be matched by the exchange to another user who has placed an "ask" to sell their BTC for USD/EUR/etc So, the USD/EUR/etc being exchanged between users in an exchange is put there first by the users. The exchange itself does not front USD/EUR/etc; or at least it shouldn't.