How does Coinbase functionize?

[martoooo]

Hello, friends!

I am searching on the Internet how exactly Coinbase works but every article about this actually exposes the advantages or the disadvantages og the exchange but neither the way it works.

The reason I am asking this question is simple. As a member of the crypto community, I have just asked myself what will happen if many people buy bitcoins for $4000 from an exchange and then try to sell them on $5000. How does the exchange protect itself from loses?

Can you help me to complete my research? I suggest that few people know that. Otherwise, anybody will have a clear idea how to create a cryptocurrency exchange.

[Ither1994]

Currency exchange section is not for discussing currencies it's for buying and selling move this to the correct section, the discussion section where it belongs.

[Joel_Jantsen]

The reason I am asking this question is simple. As a member of the crypto community, I have just asked myself what will happen if many people buy bitcoins for $4000 from an exchange and then try to sell them on $5000. How does the exchange protect itself from loses?

Coin-base doesn't make money from your bitcoins stored on their website.As the bitcoin price rises,the coins stored on exchange do rise in the value.All the numbers you see on your wallet on coinbase doesn't mean the coins are actually reserved for you.They keep recycling.

Can you help me to complete my research? I suggest that few people know that. Otherwise, anybody will have a clear idea how to create a cryptocurrency exchange.

It's no rocket science,you should google properly.

[HabBear]

The reason I am asking this question is simple. As a member of the crypto community, I have just asked myself what will happen if many people buy bitcoins for $4000 from an exchange and then try to sell them on $5000. How does the exchange protect itself from loses?

Coinbase makes money via the fees they charge for transactions and a small spread that they (likely) create between buy and sell levels. Maybe there's an investment loss for them but it's not recorded as a profit or loss because they must have liquidity to handle all the transactions. There might be a tax gain or tax loss benefit but that's it. They're not speculating on the price of Bitcoin as their core business model. It's not like they're a bookie. They bring you liquidity between fiat and cryptocurrency and for that you pay a fee - it's either 1.99% or 3.99% (i think).

All the numbers you see on your wallet on coinbase doesn't mean the coins are actually reserved for you.They keep recycling.

This is a good example. Do you know why you Coinbase accounts don't have private keys? Because technically they're not wallets. They're just records of accounts and balances on Coinbase's books. It's an agreement to pay you back whatever you've deposited.