Coinbase making extra money?

[nahtnam]

Hi.

This is what I noticed about coinbase:


They have a $20 difference so they are making $20 + the fee. Is that right, or is it just better buying it somewhere else? Do other exchanges do it as well?

[zalzane]

Hi.

This is what I noticed about coinbase:
http://puu.sh/5GD6J.png

They have a $20 difference so they are making $20 + the fee. Is that right, or is it just better buying it somewhere else? Do other exchanges do it as well?

Coinbase acts as an exchange. People who have bitcoins and want USD, along with people who have USD and want bitcoins use coinbase to facilitate their transactions.

Lets say I want to buy bitcoins for 600/coin, so I post an "bid order", that tells people I'm willing to give them 600usd for a bitcoin.

A merchant has a bitcoin that he wants to turn into USD. He goes on coinbase, sees that I'm looking to buy a bitcoin for 600usd. He decides that he can do better, so he creates an "ask order", that tells people that he is willing to sell a bitcoin for $650usd.

On coinbase, thousands of these bid and ask orders are on the same exchange. When you see a buy price of $809.58, that means the absolute lowest ask order is selling some amount of bitcoins for $809.58 each. When you see a sell price of $786.10, that means that the absolute highest bid order is buying some amount of bitcoins for $786.10 each.

If you were to go on coinbase right then and buy a bitcoin for $809.58, the absolute best price you could sell it at is $786.10 because that's what the highest bid order is offering. If you're wondering where the extra $30 went, it goes to the guy who you originally bought the bitcoin from.

[wearepoor]

They have a $20 difference so they are making $20 + the fee. Is that right, or is it just better buying it somewhere else? Do other exchanges do it as well?

Yes, exchanges have such difference as well, during hectic times about $100

[mayers44]

In theory, as more and more people trade bitcoin (both on Coinbase and others) the spread will lessen. I have seen huge improvements in the spread percentages just over the past 3 months on Coinbase.

[odolvlobo]

Coinbase acts as an exchange. ...
Lets say I want to buy bitcoins for 600/coin, so I post an "bid order", that tells people I'm willing to give them 600usd for a bitcoin. ...

Unless Coinbase has changed recently, that is incorrect. On Coinbase, you buy or sell directly from them, there are no bids or asks.

[caminilegroup]

Not that big of a spread.

https://lh4.googleusercontent.com/-YGFRl5ADskA/UqUX4HRW11I/AAAAAAAAQWk/vom5tXtLqqg/s0/Screen%2520Shot%25202013-12-08%2520at%25207.04.55%2520PM.png

https://lh6.googleusercontent.com/-5PXcU64d2KI/UqUX4HeAH1I/AAAAAAAAQWo/sXn-GkJNchc/s0/Screen%2520Shot%25202013-12-08%2520at%25207.04.58%2520PM.png

[monbux]

Duh.  Find me an exchange that offers an exact buy/sell price after fees.
Of COURSE coinbase want's the money.

[cenicsoft]

Coinbase isn't an exchange.  They actually take on a lot more risk than an exchange.  When they buy from you or sell to someone else, they may or may not have a matching buyer.  It means they take on some risk.  However, I'm sure they have a certain set of reserves so internally, they can minimize their risk between the buy and sell spread.

One thing that's interesting, which I did report to them, is that the sell price changes to a flat amount (nearest whole $100 amount) when you put in an amount of .0001.  They haven't responded to my bug report yet.

[zalzane]

Coinbase acts as an exchange. ...
Lets say I want to buy bitcoins for 600/coin, so I post an "bid order", that tells people I'm willing to give them 600usd for a bitcoin. ...

Unless Coinbase has changed recently, that is incorrect. On Coinbase, you buy or sell directly from them, there are no bids or asks.

Coinbase gets their bitcoins from bitcoin merchants who want an instant cash-out to USD. In this way, it's an exchange where exchanging from USD to BTC is public and BTC to USD is reserved for bitcoin merchants only. Merchants may have a locked in BTC->USD exchange rate, which is why coinbase's btc selling price is higher than its buying price.

[caminilegroup]

Coinbase isn't an exchange.  They actually take on a lot more risk than an exchange.  When they buy from you or sell to someone else, they may or may not have a matching buyer.  It means they take on some risk.  However, I'm sure they have a certain set of reserves so internally, they can minimize their risk between the buy and sell spread.

One thing that's interesting, which I did report to them, is that the sell price changes to a flat amount (nearest whole $100 amount) when you put in an amount of .0001.  They haven't responded to my bug report yet.

I haven't had that happen.

https://lh5.googleusercontent.com/-jU5WJZmPEME/UqUgZnsN6SI/AAAAAAAAQXg/dBVEddLLbxI/s0/Screen%2520Shot%25202013-12-08%2520at%25207.43.45%2520PM.png

[galbros]

The short answer is yes, Coinbase makes money on their fees and, potentially, on the bid/ask spread.  When you couple this with the apparent de facto two day option they also may expropriate (based on all the threads where coinbase cancels order at the last minute for being "high risk") from traders, I'm guessing they do okay.

The point about them not being an exchange is an important one, they are at risk of price fluctuations not just simply facilitating an exchange, so I don't begrudge them the fees & spread, but am increasingly curious about the number of "high risk" cancellations that seem to pop up.

[nahtnam]

Not that big of a spread.

- clip -

I have implemented a feature on my (future) site where it gets the buy and sell prices. This is what its at right now:

[nahtnam]

Coinbase isn't an exchange.  They actually take on a lot more risk than an exchange.  When they buy from you or sell to someone else, they may or may not have a matching buyer.  It means they take on some risk.  However, I'm sure they have a certain set of reserves so internally, they can minimize their risk between the buy and sell spread.

One thing that's interesting, which I did report to them, is that the sell price changes to a flat amount (nearest whole $100 amount) when you put in an amount of .0001.  They haven't responded to my bug report yet.

I dont think you are allowed to sell that low amount. Its probably not that high of a bug for them since you cant even sell at that low amount.

[caminilegroup]

Not that big of a spread.

- clip -

I have implemented a feature on my (future) site where it gets the buy and sell prices. This is what its at right now:

http://puu.sh/5GKHU.png

Taken seconds ago:

https://lh6.googleusercontent.com/-jG4hpjMD2rI/UqUsa_axyDI/AAAAAAAAQX8/C_KTG3vsx8U/s0/Screen%2520Shot%25202013-12-08%2520at%25208.34.30%2520PM.png

https://lh3.googleusercontent.com/-71X7WNh0Eqc/UqUsbLFxZ2I/AAAAAAAAQYA/FWaRl5QZBNw/s0/Screen%2520Shot%25202013-12-08%2520at%25208.34.35%2520PM.png

Don't know why you are getting a $20 variance.

[nahtnam]

Coinbase isn't an exchange.  They actually take on a lot more risk than an exchange.  When they buy from you or sell to someone else, they may or may not have a matching buyer.  It means they take on some risk.  However, I'm sure they have a certain set of reserves so internally, they can minimize their risk between the buy and sell spread.

One thing that's interesting, which I did report to them, is that the sell price changes to a flat amount (nearest whole $100 amount) when you put in an amount of .0001.  They haven't responded to my bug report yet.

I haven't had that happen.

- clip -

No, your supposed to just put 0.0001. Here is what it looks like at 1 btc:


This is at 0.0001:

[nahtnam]

Not that big of a spread.

- clip -

I have implemented a feature on my (future) site where it gets the buy and sell prices. This is what its at right now:

Taken seconds ago:

- clip -

Don't know why you are getting a $20 variance.

My site uses coinbases buy and sell calls from their API. I have no clue what going on...

[caminilegroup]

Not that big of a spread.

- clip -

I have implemented a feature on my (future) site where it gets the buy and sell prices. This is what its at right now:

http://puu.sh/5GKHU.png

Taken seconds ago:

- clip -

Don't know why you are getting a $20 variance.

My site uses coinbases buy and sell calls from their API. I have no clue what going on...

Sounds like a bug in the code to generate the api contents then.

[nahtnam]

Not that big of a spread.

- clip -

I have implemented a feature on my (future) site where it gets the buy and sell prices. This is what its at right now:

Taken seconds ago:

- clip -

Don't know why you are getting a $20 variance.

My site uses coinbases buy and sell calls from their API. I have no clue what going on...

Sounds like a bug in the code to generate the api contents then.

I have sent an email to them letting them know about this bug.

[flyjames]

they're hedging risk, the spread is pretty small if the price not fluctuating

[caminilegroup]

Coinbase isn't an exchange.  They actually take on a lot more risk than an exchange.  When they buy from you or sell to someone else, they may or may not have a matching buyer.  It means they take on some risk.  However, I'm sure they have a certain set of reserves so internally, they can minimize their risk between the buy and sell spread.

One thing that's interesting, which I did report to them, is that the sell price changes to a flat amount (nearest whole $100 amount) when you put in an amount of .0001.  They haven't responded to my bug report yet.

I haven't had that happen.

- clip -

No, your supposed to just put 0.0001. Here is what it looks like at 1 btc:
http://puu.sh/5GKZ7.png

This is at 0.0001:
http://puu.sh/5GL3Y.png

Now this is interesting

https://lh5.googleusercontent.com/-mFy4dV53wW8/UqUvOOOfnAI/AAAAAAAAQYg/XrkuqFhIB0s/s0/coinbase%2520variance.png