Coinbase business model

[cbeast]

They call themselves a wallet and payment platform that also acts like an exchange. I think it is an ingenius model. I've been buying and occasionally selling bitcoins there since November '12. It is slow to actually get the coins and at times I've wondered how they can float the money for a future money transfer. Because it takes so long, it only makes sense to make trades that are longer in expectations. It makes no sense to tie up money for a week for a short term profit. The exchange cannot be manipulated by false orders. Coinbase users are most likely cautious investors and probably a good indicator where the market is trending.

[Stephen Gornick]

The exchange cannot be manipulated by false orders.

I'm not sure I entirely follow.   There are people who have discussed emptying their bank account so as to cause the Coinbase ACH to get a return code for NSF, after buying at a higher level and then later seeing the BTC/USD exchange rate at a fraction of that level. 

That essentially is a fake order, and Coinbase then is left holding the bag on the expensive bitcoins the buyer bailed on.  Additionally, Coinbase incurs a fee I believe for that NSF.

So they definitely take a risk with their current model.