Re:A Major Coinbase Milestone: 1 Million Consumer Wallets
by panabee on Thursday February 27, 2014 @05:00PM
(#7315463)
how are they able to guarantee an exchange rate? aren't they exposing themselves to the huge fluctuations in bitcoin price (though the price seems to have stabilized recently)? for instance, there were some days this month where the price fluctuated by more than 40%. somehow the price and volume must work out where this is a calculated risk to cultivate the broader bitcoin ecosystem. would love to see some numbers if anyone has any ...
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Re:A Major Coinbase Milestone: 1 Million Consumer Wallets
by erikpukinskis on Thursday February 27, 2014 @05:26PM
(#7315678)
I suspect they don't need to expose themselves because they are holding large amounts of both Bitcoins and cash, so they can simply sell them to people at whatever price they want to. It's not like they take your USD and then have to run out and buy Bitcoins to cover them. They do have to worry about the value of their Bitcoin and USD holdings becoming worthless, but that's something all Bitcoin and USD investors have to worry about.
If they are taking some risk, by making commitments that they don't have backed with currency, it's trivially easy to calculate their exposure and figure out how high their fees need to be to cover it. That's a problem actuaries solved decades ago. Currency exchange is not a new business.