Coinbase buy price is pegged to Bitstamp

[_wayfarer_]

I've been researching this for a while, and have noticed that 95% of the time, Coinbase's price is pegged to Bitstamp.  It is especially tight when the market is in decline, and opens up somewhat (not so tightly pegged), when the market is rising rapidly, such as when it was headed for the 1200 mark recently.

I have some charts that show this effect: https://daybittrader.com/ (scroll to the bottom)

You can see there is only a loose relation when compared to Mtgox, but Bitstamp tracks almost every little change.  Has anyone else researched this or noticed this effect?

I have a few months of data if any serious people would like to do research.  I don't want to dump it to the whole world, but you can PM me if you're curious.


***EDIT*** added image from below post:

[wannasurf]

I thought it was a known thing that Coinbase uses Bitstamp as their backend (but on a quick search I didn't find proof of it). They aren't an actual exchange AFAIK. You act surprised, though?

[mtnminer]

I am glad Coinbase uses Bitstamp, as I believe it is a more honest price standard when I look at what I cant actually transfer out into fiat currency.  Mtgox also seems over priced and no Americans get money out of Mtgox anyway!

Mtnminer

[BitchicksHusband]

Yeah, it's almost always about $3 above Bitstamp.

[Bono]

They claim on the site that they draw from several sources - but I really don't care because the price to me has always seemed consistent and fair. There was a day awhile ago where I think it was lagging at about $650 and Gox was nearing $800...

[jballs]

I've been researching this for a while, and have noticed that 95% of the time, Coinbase's price is pegged to Bitstamp.  It is especially tight when the market is in decline, and opens up somewhat (not so tightly pegged), when the market is rising rapidly, such as when it was headed for the 1200 mark recently.

I have some charts that show this effect: https://daybittrader.com/ (scroll to the bottom)

You can see there is only a loose relation when compared to Mtgox, but Bitstamp tracks almost every little change.  Has anyone else researched this or noticed this effect?

I have a few months of data if any serious people would like to do research.  I don't want to dump it to the whole world, but you can PM me if you're curious.

Enough data on the page to remove all doubt.




They are hedging, and keeping the spread between the bid/ask. Standard procedure at forex desks (Coinbase has former forex desk people of course). You can sell yours at coinbase at 800 and they will lay them off on bitstamp at say 805 and they pocket 5 bucks, every trade or whatever the spread happens to be.

Since coinbase has the instant conversion option for merchants they pretty much have to do it that way to avert the risk, just basic dynamic hedging. Good to know though, thanks.

[_wayfarer_]

I thought it was a known thing that Coinbase uses Bitstamp as their backend (but on a quick search I didn't find proof of it). They aren't an actual exchange AFAIK. You act surprised, though?

No, not surprised, though I didn't know much about Bitstamp other than being a inactive member there when I started researching this a few months ago.  It looks like Coinbase relies on them a lot.  If you watch the line you'll see a gap opens or tightens when the market changes.  The Coinbase price rises when the market is in rapid expansion, though it still seems to be relatively pegged to Bitstamp.

They are hedging, and keeping the spread between the bid/ask. Standard procedure at forex desks (Coinbase has former forex desk people of course). You can sell yours at coinbase at 800 and they will lay them off on bitstamp at say 805 and they pocket 5 bucks, every trade or whatever the spread happens to be.

I haven't researched the sell price yet, so I don't know if they're generally selling on MtGox or Bitstamp.  I'll probably start collecting that data soon if anyone is interested.

[koshgel]

I've been researching this for a while, and have noticed that 95% of the time, Coinbase's price is pegged to Bitstamp.  It is especially tight when the market is in decline, and opens up somewhat (not so tightly pegged), when the market is rising rapidly, such as when it was headed for the 1200 mark recently.

I have some charts that show this effect: https://daybittrader.com/ (scroll to the bottom)

You can see there is only a loose relation when compared to Mtgox, but Bitstamp tracks almost every little change.  Has anyone else researched this or noticed this effect?

I have a few months of data if any serious people would like to do research.  I don't want to dump it to the whole world, but you can PM me if you're curious.

Enough data on the page to remove all doubt.




They are hedging, and keeping the spread between the bid/ask. Standard procedure at forex desks (Coinbase has former forex desk people of course). You can sell yours at coinbase at 800 and they will lay them off on bitstamp at say 805 and they pocket 5 bucks, every trade or whatever the spread happens to be.

Since coinbase has the instant conversion option for merchants they pretty much have to do it that way to avert the risk, just basic dynamic hedging. Good to know though, thanks.

Really good chart!

[jballs]

I've been researching this for a while, and have noticed that 95% of the time, Coinbase's price is pegged to Bitstamp.  It is especially tight when the market is in decline, and opens up somewhat (not so tightly pegged), when the market is rising rapidly, such as when it was headed for the 1200 mark recently.

I have some charts that show this effect: https://daybittrader.com/ (scroll to the bottom)

You can see there is only a loose relation when compared to Mtgox, but Bitstamp tracks almost every little change.  Has anyone else researched this or noticed this effect?

I have a few months of data if any serious people would like to do research.  I don't want to dump it to the whole world, but you can PM me if you're curious.

Enough data on the page to remove all doubt.




They are hedging, and keeping the spread between the bid/ask. Standard procedure at forex desks (Coinbase has former forex desk people of course). You can sell yours at coinbase at 800 and they will lay them off on bitstamp at say 805 and they pocket 5 bucks, every trade or whatever the spread happens to be.

Since coinbase has the instant conversion option for merchants they pretty much have to do it that way to avert the risk, just basic dynamic hedging. Good to know though, thanks.

Really good chart!

I ripped it from _wayfarer_'s OP link, not my work just to be clear.

I've been looking over coinbase the last couple days trying to get my brain around their model, as they are thus far my favorite btc operation for a lot of reasons (among the top of the list, they have faces and names and a physical address, and pictures even). They have to mitigate risk of price movement pretty much continually because they are guaranteeing fixed local currency and instant conversion. They can't do that without either really deep pockets (if they are spec long btc and cashing fx inventory- unlikely), or laying off on an exchange with a modest spread for the time risk (because sometimes you can't lay off to your advantage even with a fixed bid/ask spread in your favor).

I like what they are doing so far though.

[Rygon]

Totally agree. When they first came online, they were tracking Mt Gox, but that changed after they stopped allowing US folks to withdrawal without paying high fees. Anyone have any idea what the volume is at coinbase? They are easily the least risky way for people in the US to buy/sell smaller amounts of bitcoins.

[BitchicksHusband]

Coinbase is very easy.  That's why I recommend it in my signature.

[_wayfarer_]

Check out the charts when the market is going down.  This is pretty typical:

[bitpop]

.

[BitchicksHusband]

I do believe they do have some trading desk behavior and heard orders cancelled when they predicted wrong. That would be fine if they didnt charge a fee. Otherwise it's shady as any scummy forex broker.

I have heard very little about canceled orders.  And when I heard it, they were down that day so it may have been for another reason.

[keithers]

I've been researching this for a while, and have noticed that 95% of the time, Coinbase's price is pegged to Bitstamp.  It is especially tight when the market is in decline, and opens up somewhat (not so tightly pegged), when the market is rising rapidly, such as when it was headed for the 1200 mark recently.

I have some charts that show this effect: https://daybittrader.com/ (scroll to the bottom)

You can see there is only a loose relation when compared to Mtgox, but Bitstamp tracks almost every little change.  Has anyone else researched this or noticed this effect?

I have a few months of data if any serious people would like to do research.  I don't want to dump it to the whole world, but you can PM me if you're curious.

Enough data on the page to remove all doubt.




They are hedging, and keeping the spread between the bid/ask. Standard procedure at forex desks (Coinbase has former forex desk people of course). You can sell yours at coinbase at 800 and they will lay them off on bitstamp at say 805 and they pocket 5 bucks, every trade or whatever the spread happens to be.

Since coinbase has the instant conversion option for merchants they pretty much have to do it that way to avert the risk, just basic dynamic hedging. Good to know though, thanks.

^
This post is spot on

[el_Tico]

I do believe they do have some trading desk behavior and heard orders cancelled when they predicted wrong. That would be fine if they didnt charge a fee. Otherwise it's shady as any scummy forex broker.

I don't doubt that coinbase cancels orders once in a while but a 1% fee isn't bad at all. Especially when your first $1 million in transactions is free.

http://support.coinbase.com/customer/portal/articles/1277919-what-fees-does-coinbase-charge-for-merchant-processing-

[bitpop]

.

[skivrmt]

I've been researching this for a while, and have noticed that 95% of the time, Coinbase's price is pegged to Bitstamp.  It is especially tight when the market is in decline, and opens up somewhat (not so tightly pegged), when the market is rising rapidly, such as when it was headed for the 1200 mark recently.

I have some charts that show this effect: https://daybittrader.com/ (scroll to the bottom)

You can see there is only a loose relation when compared to Mtgox, but Bitstamp tracks almost every little change.  Has anyone else researched this or noticed this effect?

I have a few months of data if any serious people would like to do research.  I don't want to dump it to the whole world, but you can PM me if you're curious.

Enough data on the page to remove all doubt.




They are hedging, and keeping the spread between the bid/ask. Standard procedure at forex desks (Coinbase has former forex desk people of course). You can sell yours at coinbase at 800 and they will lay them off on bitstamp at say 805 and they pocket 5 bucks, every trade or whatever the spread happens to be.

Since coinbase has the instant conversion option for merchants they pretty much have to do it that way to avert the risk, just basic dynamic hedging. Good to know though, thanks.

I thought this was fairly well know also.  You can almost always buy slightly cheaper than Bitstamp than Coinbase.  But for a US customer, the ease of using a bank transfer and instant buying outweigh the few dollars if you're buying for the long run.

[Nagle]

Right. This shows that Coinbase is doing exactly what they should be doing. Coinbase is a dealer; that is, they make a market and buy and sell as a principal. They're not an exchange, which just matches orders (or should; one wonders about some of the Bitcoin exchanges.) Coinbase takes in little Bitcoin payments, shortly thereafter sells in bulk on an exchange, and sends money to the business customers of their payment service. For this they charge a reasonable spread, under 0.5%. They have to pay Bitstamp's commission of 0.2% out of that. They also tack on a 1% fee to merchants after the first $1M in transactions, but they're probably making most of their money on the spread. Merchants get paid daily.

That's a reasonable, although not highly profitable, business. 

[bitpop]

.