Bitcoin depth/Market Microstructure

[KINGOFSHORTS]

I don't trade BTC etc.. (don't like to trade what I don't understand)

From what I can tell its super easy to deposit and get BTC. Want to buy 1.5 billion BTC, no problem wire cash and go to one of 300 exchanges that exist and you get filled.

lets say you make a 40% return according to the current bitcoin "NBBO" and you decide to cash in your chips and go home.

OOOOoops. nope, you are limited in quantities between 10K to 25K per day Why is this? If this market is Liquid, then putting in and taking out should be equally effortless but its not.

Do these exchanges have some sort of cash hoard to settle trades provide security? what is the settlement time?

When the mainstream media reports on bitcoin its always whatever the highest tick on one of the 300 exchanges. So the price reporting, is this derived from a BTC transaction that went to USD? since they are quoting in USD.

Also how deep is this market, if I want to liquidate 5000 bitcoin to money it should be no problem? or will the price instantly collapse like in the 2010 flash crash when stub quotes crossed and got filled?

Is there a place where I can see the full "Level II order book"?

Are there market makers making a two sided market or is it just trades between individuals.

There just seems to be so much opacity in how all of this works.

Also where are the bitcoin Millionaires (people who actually liquidated bitcoins and now have 50M USD actual cash in bank) I have yet to see any of them.

 

[Overnight]

I don't trade BTC etc.. (don't like to trade what I don't understand)

...From what I can tell its super easy to deposit and get BTC. Want to buy 1.5 billion BTC, no problem wire cash and go to one of 300 exchanges that exist and you get filled.

Point of order, there can be only 21 million whole BTC, and there never will be since some have been lost.

As for the exchange thing and order books? I didn't know there might be order books for BTC and other cryptos? I thought it was a direct buy-sell deal at spot?

 

[KINGOFSHORTS]

Point of order, there can be only 21 million whole BTC, and there never will be since some have been lost.

As for the exchange thing and order books? I didn't know there might be order books for BTC and other cryptos? I thought it was a direct buy-sell deal at spot?

I wonder how many of the 18.5 million bitcoins are lost? (ie drives in landfill, lost USB keys etc..) I read that about 14million BTC are in illiquid entities don't move.

The whole thing is just so strange. Its funny that the guy who invented bitcoin is not really known. For all we know this is one of the most epic of epic HYIP ponzis and the anonymous dude is some recluse mastermind cashing in.

The sad part is there is no one doing a real in-depth report on this phenomena, its all MSM regurgitation of FOMO reporting regarding the last big price jump etc.

So far I have not seen one report of an individual who actually cashed in BTC and collected a 10+ Million win in the bank. Where are the Multimillionaires that cashed in the chips? I suspect there is price manipulation and games being played.

I do think this will explode in an epic fashion, when I do not know.

Oh and the blockchain can only support 4-5 transactions per second, so currently it has no real value even as a true medium of exchange. Also fees for transactions are high as well.

I will stick to SPY and its options, I can easily trade in and out of 7 digit amounts no problem, move any amounts between brokerage firms and its there I can use my ATM cards anywhere anytime. Liquid and transparent.

 

[Overnight]

...

I do think this will explode in an epic fashion, when I do not know.

I'm pretty sure that in the next day or two, you'll be getting some feedback on your posit from at least one of our Crypto proponents here, with some strongly-worded text maybe.

john...something.

 

[KINGOFSHORTS]

I'm pretty sure that in the next day or two, you'll be getting some feedback on your posit from at least one of our Crypto proponents here, with some strongly-worded text maybe.

john...something.

I just want to learn and understand but damn it is so opaque. Also do these exchanges have some kind of insurance, ie lets say Coinbase goes poof! did you just lose everything. hopefully this "John" guy could shed some light on this, cause man its a head scratcher.

 

[qlai]

It’s kind of like FX in microstructure.

 

[narafa]

I don't trade BTC etc.. (don't like to trade what I don't understand)

From what I can tell its super easy to deposit and get BTC. Want to buy 1.5 billion BTC, no problem wire cash and go to one of 300 exchanges that exist and you get filled.

lets say you make a 40% return according to the current bitcoin "NBBO" and you decide to cash in your chips and go home.

OOOOoops. nope, you are limited in quantities between 10K to 25K per day Why is this? If this market is Liquid, then putting in and taking out should be equally effortless but its not.

This depends on the exchange you are dealing with & their rules for withdrawals. Some exchanges don't have any limits for withdrawals. Others will restrict withdrawals to certain amounts per day for unverified or partially verified customer accounts, etc...

If you are an institution and you are using Coinbase or Bitstamp, you bet there will be no limits.

Also how deep is this market, if I want to liquidate 5000 bitcoin to money it should be no problem? or will the price instantly collapse like in the 2010 flash crash when stub quotes crossed and got filled?

Again depends on your particular exchange liquidity. If you throw 5000 BTCs on any exchange right now (Even the largest), you will flash crash the price for sure. Even a 1000 BTC market sell order will plunge the price by several thousand dollars.

Is there a place where I can see the full "Level II order book"?

Yes, most exchanges display L2 order book for you to see.

Are there market makers making a two sided market or is it just trades between individuals.

There are no official market makers of course, but a lot of the exchanges actually act as market makers continuously posting bids/offers for their own book I believe. Since several exchanges are connected together in the backend, you will bet that each exchange will want to arbitrage miss pricings in real-time and their best dream is when someone actually decides to sell a large amount at market, they will be very happy to buy all that and sell it on another connected exchange for a decent profit for themselves.

 

[narafa]

I just want to learn and understand but damn it is so opaque. Also do these exchanges have some kind of insurance, ie lets say Coinbase goes poof! did you just lose everything. hopefully this "John" guy could shed some light on this, cause man its a head scratcher.

This is what Custodians are for. Reputable exchanges either run a custody service themselves or have a third party custodian for you to safe keep your digital assets.

The good thing about crypto is that you can be your own custodian if you want, withdrawing BTC from your exchange to your own offline (Paper or Hardware wallets) and you no longer need to worry about the exchange going under.

This is something which you can never do for any other asset type or if you want to do it, will be very expensive.

 

[KINGOFSHORTS]

Which exchange has no withdrawal limits liquidating BTC and wired to a bank USD?

found an interesting link regarding top bitcoin holders etc. quite interesting.

https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html

 

[KINGOFSHORTS]

This is what Custodians are for. Reputable exchanges either run a custody service themselves or have a third party custodian for you to safe keep your digital assets.

The good thing about crypto is that you can be your own custodian if you want, withdrawing BTC from your exchange to your own offline (Paper or Hardware wallets) and you no longer need to worry about the exchange going under.

This is something which you can never do for any other asset type or if you want to do it, will be very expensive.

But with firms like E-trade,TD etc.. there is 500K SIPC and 1.2M for FDIC Sweep. so I can keep liquid across several firms and execute trades in and out.

so its kind of like having to take out sacks of money at the end of the day if these firms had no insurance and I wanted to be my own custodian.

So is there a delay, lets say I do my trading at a crypto exchange and I want to sweep at the end of the day to my USB Stick? so I can do this in an out anytime no friction or fees?

How capitalized are these crypto exchanges, is there like a website that provides this info? Also the infrastructure for these exchanges, Are they secure facilities with RAID, multi homed networks, multi physical locations, appropriate fire suppression. I guess they probably use AWS or Azure for this? with appropriate security (ie Firewalls,IPS,logging etc.) When I worked at Optiver they were 1000% serious when it came to availability/stability.