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Author Topic: Lending BTC to exchanges. Why?  (Read 818 times)
tvbcof
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August 05, 2011, 05:05:21 AM
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I made noise on several posts about lending liquidity to exchanges (because I found myself doing it involuntarily anyway.)  I got the following question:

  "Also, what benefits do you think holding a larger amount of BTC would have for an exchange? At this stage it just seems like a liability but I'd like to hear your thoughts."

My answers, most of which I pulled straight out of my ass just now:

1)  The primary thing I was thinking of was for futures and options, and that is what Jered (Tradehill) mentioned in his gracious response to my whining.  I think that CampBX was projecting something like a 50% margin which leaves need for some BTC to loan out to the (likely suicidal) trader.

2)  If exchanges have need to keep some sort of escrow in the form of BTC, it could be more convenient to satisfy liquidity needs from a different pool.

3)  The exchange could use it as working capital to fund expansions assuming there are not bound by "don't get high on your own supply" type regulations...if there are any regulations at all in this regard.

4)  An exchange, unlike almost any other entity, could give themselves a pretty healthy discount on conversion to 'official' currencies and they themselves fund different enterprises.

3 and 4 are basically a way for someone who has some excess liquidity in BTC to 'invest' in a way.

---

As for myself, I am neither a giant BTC holder, nor a very trusting person.  Before _I_ would do anything like this, I would want to see an established track record and a good bit of visibility.  I cannot see it being worth the time of any exchange, even if they had a need for the funds, to prove that they are trustworthy to my satisfaction.  Not for the kind of money _I_ have to play this angle at the present time.

I also cannot see there being enough value to be had to distribute much back to the 'investor'.  But who knows...I'm not an MBA (and indeed have no business or entrepreneurial experience at all.)

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alan2here
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August 05, 2011, 04:29:30 PM
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Because otherwise small trades would be a nightmare. Personally I like using my excange as a wallet as well.

I guess exchanges could assoceate with an online wallet with one as default, making it just as smooth but more modular.
tvbcof
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August 05, 2011, 06:11:02 PM
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Because otherwise small trades would be a nightmare. Personally I like using my excange as a wallet as well.

I guess exchanges could assoceate with an online wallet with one as default, making it just as smooth but more modular.

The kind of 'lending' I was thinking about was relatively larger blocks of BTC.  Hundreds to thousands of BTC.  And on some sort of set schedule and agreement.  For instance, they could hold the BTC for exactly three months and the lender would lose use of them for trading or whatever.

This would be an alternative for someone like me who has a block of BTC that I do not plan to trade (or utilize) for some time and would otherwise just let them sit in cold storage.

From the exchange's perspective, the risk model would be vastly simplified vs. using the liquidity in people's individual trading accounts.  A panic or loss of confidence in the exchange or whatever could make that pool quite dynamic and risky I would think.


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August 05, 2011, 08:51:07 PM
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There is currently no Bitcoin exchange sound enough to lend to.

Name one Bitcoin exchange or exchanger with a Dun and Bradstreet listing, let alone a decent credit rating.
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August 05, 2011, 08:58:57 PM
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There is currently no Bitcoin exchange sound enough to lend to.

Name one Bitcoin exchange or exchanger with a Dun and Bradstreet listing, let alone a decent credit rating.

we do...  but we're not an exchange..  just an ewallet / bank / whatever.


Bitcoin RSS App / Bitcoin Android App / Bitcoin Webapp http://www.ounce.me  Say thank you here:  1HByHZQ44LUCxxpnqtXDuJVmrSdrGK6Q2f
tvbcof
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August 05, 2011, 09:04:26 PM
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There is currently no Bitcoin exchange sound enough to lend to.

Name one Bitcoin exchange or exchanger with a Dun and Bradstreet listing, let alone a decent credit rating.

Everyone has their own risk tolerances.  But I personally agree with you mightily that in the here and now there is no exchange that is even close to the level of risk that I want to play around with...

...any more than I have had to in order to snap up some BTC before the big boys do the Wikileaks dance on their faces.

Keyur @ Camp BX
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August 06, 2011, 06:48:35 AM
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There is currently no Bitcoin exchange sound enough to lend to.

Name one Bitcoin exchange or exchanger with a Dun and Bradstreet listing, let alone a decent credit rating.

Nagle,
     We are listed on DnB - need to update the listing with new information (including our new office address), but the listing is there!

Thank you,
     Keyur


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ctoon6
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August 06, 2011, 02:57:45 PM
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i don't think anyone has learned anything. Angry

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