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Author Topic: How is it even possible to make money as a currency exchanger?  (Read 1099 times)
pjwaffle
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August 09, 2011, 12:35:38 AM
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Let's say I had 100 USD to start a currency exchange. So let's say I make a forum thread exchanging gold, silver, USD, and BTC. But then it hits me! If everyone wants BTC, however how can I get the BTC to give them without buying it from another currency exchange!?

Basically my point is, being a currency exchanger requires using a currency exchanger unless I misunderstand something (I think I do, so I'm curious how this works).

Discuss.
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August 09, 2011, 01:21:39 AM
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Let's say I had 100 USD to start a currency exchange. So let's say I make a forum thread exchanging gold, silver, USD, and BTC. But then it hits me! If everyone wants BTC, however how can I get the BTC to give them without buying it from another currency exchange!?

Basically my point is, being a currency exchanger requires using a currency exchanger unless I misunderstand something (I think I do, so I'm curious how this works).

Discuss.

YOU don't exchange the BTC, you're just the virtual place where others exchange their BTC for gold, USD or whatever. You just make .65% of each transaction.
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August 09, 2011, 02:59:38 AM
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You're also going to need alot more than 100 USD - you'd need a reserve of every particular asset class you're trying to be an exchanger in, and you'd need a large reserve depending on the volume you are anticipate.

Since BTC is a pretty thinly traded asset (as compared with volume seen on NYSE stocks - with $100,000+ buy/sell orders placed every second) reserves of $1000 USD per asset would probably be more realistic. Even then, if your service catches on you're going to need to come up with more reserves fast, especially if your customers are moving more toward one thing (ie, everyone dumping USD for gold...).

edit: another key to being a currency exchanger (or a business of any sort) is to get stuff cheaper than the average consumer and sell it at a fair markup. If you want BTC to sell on your exchange, start mining, and use the BTC you accumulate in your exchange. For other assets like gold and silver... good luck. Large players sell precious metals at a markup; it depends. APMEX is a pretty well-known and reputable dealer in precious metals, they mark up credit card orders ~2%, and they charge a fixed amount over spot (usually $50 per ounce, for gold). If your're serious, you might want to try getting your hands on a metal in quantity at a discount.
nmat
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August 09, 2011, 11:25:06 AM
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Your first post on this forum was 4 moths ago. You were offering a free service to analyze stock charts and you said that you have been studying charts for 6 months.

I can't even begin to understand how can you ask that question. It's scary, to say the least...
pjwaffle
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August 11, 2011, 09:34:51 PM
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Your first post on this forum was 4 moths ago. You were offering a free service to analyze stock charts and you said that you have been studying charts for 6 months.

I can't even begin to understand how can you ask that question. It's scary, to say the least...

I still can analyze your charts! Tongue

I was just curious how exchanges worked - not how prices move or any charting basics.
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August 11, 2011, 09:45:22 PM
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Let's say I had 100 USD to start a currency exchange. So let's say I make a forum thread exchanging gold, silver, USD, and BTC. But then it hits me! If everyone wants BTC, however how can I get the BTC to give them without buying it from another currency exchange!?
If everyone wants BTC, then your price for BTC is too low. Raise the price until half the people want BTC and half the people want USD.

I am an employee of Ripple.
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nmat
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August 12, 2011, 12:30:30 AM
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I still can analyze your charts! Tongue

I was just curious how exchanges worked - not how prices move or any charting basics.

How can you analyze a chart if you don't know where the data comes from? I mean, do you even know what market depth is?

A point in the chart is made when a seller meets a buyer. Exchanges just make the match.
Serge
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August 13, 2011, 04:44:17 PM
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This is how I see it

all current exchanges such as mtgox, tradehill, etc are like forex exchanges where agents and traders do their thing. if for instance you want to be an 'off-line' local exchanger, you will have to be an agent on one of these forex like exchanges or work with one. then you offer your exchanging services to general public, they come to you to buy btc, dollars, euro, gold, whatever, you base your exchange rates on current forex like exchanges and add a little % fee for your service.

same thing like you may see in some countries local street corner currency exchanges, all their exchange rates based on real forex and local trade rates with small profit margin for themselves.
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August 15, 2011, 04:12:56 PM
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You need stockpiles regardless and most people fund their initial ventures with gigantic, early mining operations.  Like the one dude who got about $500,000 US worth of BTC stolen, he was saving up to fund a giant auction site he wanted to set up.  So most people originally get the funds that way, which is not a very good way to do it now.  You'd pay off your gear in maybe 9 months no matter how much you order and THEN finally start stockpiling BTC.

Last night around midnight, one or more people suddenly bought about $30,000 worth of BTC though so that's another way to fund a BTC operation  Cheesy lol.
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August 19, 2011, 04:36:23 PM
 #10

There's a difference between an "exchange" and a "market-maker" although the terms are used loosely. A typical exchange simply provides the platform for buyers and sellers to meet and trade. The exchange takes a commission on every trade for this service. A market-maker buys and sells with his own funds - he buys at a discount and sells at a premium. He also hedges his positions by simultaneously buying and selling on the exchanges.
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