if they pay out 10M USD to a customer, but drop the entire Bitcoin amount valued at 10M in one big dump, they'll never receive the full USD amount, through slippage and market panic. They'd incur a huge loss for themselves.
Hmm, does anyone know if they calculate the conversion rate a customer (buyer) gets based on current market rate or on average sales price they would get?
In other words, if a customer buys an item worth $100 its at current market rates (say $550), but if its something really expensive (e.g. >$1M) you only get the average conversion rate they could get by dumping immediatly (e.g. $540 or whatever)?
Hmm, actually i somehow dont expect anyone here to know for sure ...
Customer pays according to current market price, but at a rate fixed for the day, minus 1% fee. From their webpage:
Let's look at an example. Suppose you create a payment button with a USD price of $10, and sell ten orders during the day. If you have Instant Exchange enabled, your payout at the end of the day will be for $100 USD, regardless of how the price of bitcoin changed during the day. After deducting our 1% fee (plus $0.15 for the bank transfer) you will receive $98.85 to your bank account.
To my understanding that means it is up to Coinbase to make a profit (or, if they fail, a loss) with the actual conversion on the market(s).
Burt this would mean they lose a ton on a $1.6M order. It's a bit difficult to believe this would be their business model. Why take risk when that's not needed?
Correct. That's why I said, I'm sure they dedicate a lot of resources internally to model the market, their risk exposure, and let it guide their actions.
Two remarks:
1) as Fray pointed out, customers also take coins from them. I disagree however that this means they have little use for external markets. I do believe that, at least currently, they'll have more coins than they can "get rid off" internally.
2) Funny that, after a half year bear market, having to handle a 1.6M USD order in coins is suddenly considered a liability unconditionally. Wanna bet people feel differently if we're in an uptrend? "Wooohooo, 1.6M USD *slippage free*. Jackpot baby!".
Note: I'm well aware it's a huge risk. But assuming they have capital (USD) reserves to remain liquid, they might chose not to liquidate a huge order like that, but instead sell it off slower, possibly even on higher prices than when they received it (and what they paid for). I really depends on their willingness to be exposed to an exchange rate risk, imo.
