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Comment by querulous | Hacker News Reader

the market is extremely illiquid. even if you know it's a scam you have few options if you want to cash out.

you can trade bitcoin for cash balances at various exchanges but actually withdrawing those balances is subject to miniscule daily/monthly withdrawal limits and if there's a run on the market those exchanges will almost certainly collapse. there's no significant over the counter market. you can swap your bitcoin or tether for other crypto currencies but none of those have independent exchanges/markets. the best you can probably do with them is trade them back for bitcoin.

if you're a market participant who thinks things are a scam your best option is to withdraw what you can while you can and do everything you can to prop up the price until you are liquidated

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> the market is extremely illiquid

Trading is dominated by smart money -- whales, arbitrageurs, etc. Coinbase may have a lot of newbies buying 0.002 BTC, but these aren't the ones trading Tether.

Whales and arbitrageurs have many facilities for withdrawing national currencies. They've completed the AML/KYC process. They have access to multiple banks in multiple countries.

If the smart money knows Tethers are fractional reserve, if they know cryptocurrencies are bubbling, wouldn't they withdraw?

Wouldn't the smart money put downward pressure on exchange rates?

And if the market is that illiquid, a little downward pressure would be magnified into even more severe price drops.

Since that's not happening with Tether, BTC or ETH, there must be another explanation.

Maybe the smart money knows something that isn't obvious to the rest of us.

I don't understand how people can confidently characterize the nature of crypto trading volume. How do you know where the bulk of trading volume is coming from? There's nothing whatsoever stopping wash trades. With sufficient capital you can massively manipulate trading volume.

To put downward pressure on the exchange rates the smart money would have to be holding tons of tether to liquidate in the first place -- is there any reason to believe they are?

Who holds Tethers, the Reddit guy who just bought $200 of BTC on Coinbase? No, it's the guys trading large blocks on exchanges.

> you can trade bitcoin for cash balances at various exchanges but actually withdrawing those balances is subject to miniscule daily/monthly withdrawal limits and if there's a run on the market those exchanges will almost certainly collapse.

Afaik Bitstamp doesn't have any withdrawal limits for verified users.

Cool, so Satoshi comes along and says "I'll have $100 Million please" then Bitstamp have the cash to cover it?

For an exchange there needs to be a counterparty. While Bitstamp is known as 'an exchange', they are not the counterparty AFAIK.

If Satoshi rocks up with 1 meeeelion BTC, if faith evaporates, the bid price could well be zero.

Unlimited wire transfers out of Gemini, too.

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