Topic: How profitable are exchanges? - page 9. (Read 15755 times)

China has a lot of excess capacity in many ways, mostly in commercial real estate but in other ways as well.

The fact that they have offices in prime locations with a lot of staff could mean they are well funded.

I would find it plausible that Chinese exchanges were trading using their own funds for profit and were making a lot of money. I would also say that this practice can be extremely risky and would make holding funds at these exchanges risky as well.

Their revenue may be big but they have huge costs which are mostly dealt with in USD so they have to be net sellets of BTC

big exchanges earn so much that they could define bitcoin price only by keeping their profits in bitcoin/fiat.

im not quite sure what they do with their profits, but imagine the price if all of them keep fee profit in btc...

But there isn t much choice for the "elsewhere", especially if all of them are abusing their position.

If "customer regulation" was enough, there would have been no need for government regulation.

One problem is that many of those exploits are nearly impossible to detect by looking at the trade logs.  Their only effect is to make all ordinary clients less lucky.  E.g., the ordinary trader who posts a sell order will have it filled by a buy order at his ask price; whereas, if the exchange were honest, there would have been a buy order at a higher price waiting for it.

Last May, the five largest Chinese exchanges, apparently scared by some government pressure, released a joint note  pledging (among other things) to end leverage trading and put a fee on high-frequency robot trading.  I read between the lines that they were caught doing some dirty tricks (which depend on fast-acting robots), and were scared enough to stop, or cut back on them.

I would even guess that those dirty tricks were responsible for the general downward price trend from February to April, as ordinary Chinese traders were disappointed with their "bad luck" and cashed out, one by one. Indeed, that "five-exchanges" note coincided with the end of the downward trend and a month of steady price.

They can do anything they want. When the exchange is not regulated by the government, it will be regulated by their customers.

Push things too far and all their customers will take their money elsewhere.

For one thing, the fact that there are many of them.  Entrepreneurs do not rush to open businesses that are not profitable.

For another, that they have large fancy offices in prime locations, with many staff (Huobi had 50, IIRC). Either Huobi or OKCoin moved to larger offices some months ago.

Finally, they are indeed well-funded, but why would anyone invest in them (10 million US$ just in one of them, IIRC) if they were not profitable?

There are many laws that strictly forbid operators of ordinary stock exchanges from profiting by exploiting their privileged position -- namely, their knowledge of the order book before it is posted to the public -- to trade against their clients.  Those laws do not apply to bitcoin exchanges.  Why would the owners not do those things, if they are legal for them?

This would be the higher end of the revenue potential for most exchanges. Most major exchanges do not charge fees above cost for "bank" related fees.

What makes you say that chinese exchanges are profitable? Couldn't they simply be well funded?

That is the MINIMUM revenue (profit is revenue minus expenses, harder to guess).
Bitcoin exchanges can profit in many other ways, that are illegal for stock exchanges.
The Chinese exchanges have zero trading fees, but seem to be very profitable.

Bitcoin price just fell 30$ (5%) in the last 24 hours. 

Can we please stop this nonsense of bitcoin being a hedge against inflation?  It is deceptive advertising...

Let's save that claim for the future, if and when there will be no more risk of the price drpping again like that.

The profit of the exchanges is easily calculated by their daily volume, and as every exchange take only a little part of every trade as fee, you can deduct that from the whole volume.
Regards

ANXPRO

sure that big exchanges will very profitable
since many of traders trading there, and they get coin from trading fee
i am interested from where chinese exchange who doesn't add trading fee get income?
maybe because their national currency was inflated
inflation will make they choose bitcoin instead their own currency

Why would citizen of emerging market will choose bitcoin vs their own currency?

It does not matter if a currency is listed on a stockmarket.

Once citizens of emerging markets start to use bitcoin then it can reach it's potential.

Self defeating to be listed on stock exchange.

Hoarding will kill the adaptation and usage. And people can choose another coin for usage.

Right now I don't think that will be a good idea. 99% of the world population don't know about Bitcoin. The exchange rate and adoption will increase logarithmically in the coming few years. Once that happens, they can list the exchanges in NASDAQ or some other stock market.

Meeting market demand while at the same time making some profit is not the same as front running or queue jumping order book. The order on order book uses limit order, so customers are not paying higher price than they want.

Normally, some exchange will have consistently lower price or higher price due to trust, deposit fee, trading fee, and etc. So keeping account balance on two or more exchanges at the same time isn't really possible.


To cheat on customers, there are other simple way. Such as artificially crediting their own account with bitcoin or fiat and do directional bet using customer money.

PS. I must point out that I am not a trader, so figuring out ways in which exchange owners could cheat on their clients is merely a curious puzzle for me.  Exchange owners have much stronger motivations, so they surely will find much "better "solutions to that puzzle.

One way to find such solutions in to read the laws and SEC regulations that apply to the operation of ordinary stock exchanges.  Every practice that is prohibited by them must be a proven way to unfairly take money from customers; so one can bet that the bitcoin exchange owners are doing it. 

I think it was just MtGox that was especially badly managed. Other exchanges have not had anywhere near the levels of problems that gox had

Any money that the arbitrager makes comes out of other clients' pockets.  So if the exchange owners do arbitrage and collude to peek at each other's books before other clients, they are taking unfair advantage of them.

An arbitrager essentially merges the order book of some other exchange A into the exchange B where you are trading.  However, while doing so, he raises some of the asks and lowers some of the bids; in such a way that, when you trade into those "transported" orders, you pay more or earn less than you would if you were trading on exchange A.  These differences are pocketed by the arbitrager.

Arbitrage does not require moving national money across exchanges.  If one has suitable reserves or money and coins on each exchange, one can keep all four accounts balanced (and steadily increasing) by moving bitcoins only between the exchanges and adjusting the amounts bought and sold on each side.  Moreover, such rebalancing is necessary only if the traders are grossly unbalanced, e.g. if the price is steadily rising and one exchange is consistently behind the other.  If the price is going up and down at random, one expects that the accounts will tend to stay nearly balanced just by statistical cancellation.

I wouldn't even call it insider arbitrage myself. It would really just be exchange operators not needing to wait for confirmations when depositing btc into their own exchange.

As long as exchange operators are not doing anything to depress/increase the price of bitcoin on their specific exchange in the way of news/policies this would be fine.