Bitstamp issues statement and temporarily suspends service

[Inotanewbie]

The 19000 BTC isn't even half of the volume that was traded per day the last couple of days. It is a big hit but i suppose it is recoverable.

I'm more worried about the wording in the statement where it states:

We are working to transfer a secure backup of the Bitstamp site onto a new safe environment and will be bringing this online in the coming days. Customers can stay informed via updates on our website, on Twitter (@Bitstamp) and through Bitstamp customer support at support@bitstamp.net."

I don't think it should take days to copy and check their environment, why would it take this long?

And updates haven't been provided since this morning on either Twitter or their website. No source for the last statement on Coindesk. I'm worried we won't hear anything for a few days now. And that reminds me of Gox...

The big question is will they allow a run on Bitcoin and fiat withdraws?

Anyone who has a large sum trapped there would likely want out ASAP.

If they allow this and bite the bullet I will give them credit where it is due. Otherwise they are insolvent.

I don't think it would be wise to allow trading to start back up until they are ready to start processing withdrawals again. One could speculate that the reason the price of bitcoin has not fallen since bitstamp announce they suspended service is because they have been trying to buy up as much bitcoin as possible in order to have a 100% reserve level

[1714562844]

1714562844

[donk4u]

Another exchange that has betrayed the trust of their customers.

[reyhan12]

The btc price has been hovering  in the 270-276s. It's as if the bitcoin world is at a standstill and is waiting for bitstamp to come alive again. Or maybe it's the calm before the storm...

[Soros Shorts]

Looks like 10k BTC per day is a nice reasonable number to assume is their average daily volume traded.

Based on those numbers I do not believe they have enough to cover said losses in full. Remember now they have expenses over that year.

For most financial companies holding other people's money, losing 5-10% of assets under management pretty much guarantees insolvency. $5 million in operating cash is probably more than what a typical $1 billion hedge fund would have.

Do they have insurance?

[mayax]

Looks like 10k BTC per day is a nice reasonable number to assume is their average daily volume traded.

Based on those numbers I do not believe they have enough to cover said losses in full. Remember now they have expenses over that year.

For most financial companies holding other people's money, losing 5-10% of assets under management pretty much guarantees insolvency. $5 million in operating cash is probably more than what a typical $1 billion hedge fund would have.

Do they have insurance?

of course they don't. who will insure them? they are not regulated

I think their "boss", DAN MOREHEAD will give them money.

[donk4u]

same bs as with gox including the sorry for the inconvinence. No reason for them not to allow withdrawls as deposit addresses comprimised they are broke and looking for a way to parachutte out  like gox.

[RoadStress]

Where are the europeans converting their BTC to fiat these days? BTC-E seems to have very big fees for wire transfer withdraw.

[ciappa]

Where are the europeans converting their BTC to fiat these days? BTC-E seems to have very big fees for wire transfer withdraw.

Try it on bitcoin.de

[johnyj]

They could just do like chinese exchanges: Let clients pay it with a hair cut 

Or they could operate using fractional reserve method, a 90% reserve is still much much better than any banks which only have 10% of client money at hand

[dave111223]

Time will tell.

Assuming they had a 10,000 BTC per day trading volume that turns into 40 BTC in trade fees per day...

For 1 year (365 days) that is 14600 BTC. That would be their entire yearly profit from fees.

They lost 18000+ BTC in one fell swoop.

Not sure if I would think they have enough reserves in profit even if it were 20,000 btc per day trade volume (which is way over estimating).

The past 365 days of bitstamp trading daily volumes/price.

http://bitcoincharts.com/charts/bitstampUSD#rg360ztgSzm1g10zm2g25zv

Looks like 10k BTC per day is a nice reasonable number to assume is their average daily volume traded.

Based on those numbers I do not believe they have enough to cover said losses in full. Remember now they have expenses over that year.

You are overlooking old accounts, which probably make up a good portion of reserves.  For example people who deposits $10 worth of BTC, like 3 years ago and forgot the account even exists.

They could probably do a cash grab on those accounts (ie people who haven't logged in for 3 years) and make up a large amount of their losses, without anyone being the wiser.  Just locked out all those accounts, and if someone happens to try to login just give them the run around and "no record of your account"....sure it's shit; but it beats going bankrupt or giving everyone a haircut (and going bankrupt in the future).

Or claiming that everyone deposits after their January 6th warning to old addresses were "lost' even if they weren't....basically going through the couch cushions they could probably scrape together 10% of reserves.

[Nagle]

Or they could operate using fractional reserve method, a 90% reserve is still much much better than any banks which only have 10% of client money at hand.

That's not what "fractional reserve" means. For a bank, a loan is an asset - someone owes them money. Banks get into trouble  when many loans go bad, as happened when the real estate bubble popped. Or they get into trouble if they have short-term deposits and long term loans, and too many depositors want their money out at once.

That's not Bitstamp's situation. They don't own 30-year mortgages.  They have no big illiquid assets they can sell off. They have nothing except their customer balances, and, according to their financial statement filed with Companies House, a few hundred thousand in paid-in capital.

Bitstamp needs $5 million within days, or they're going into bankruptcy.

[Rampion]

Bitstamp needs $5 million within days, or they're going into bankruptcy.

This is a fact. Considering they have been making tens of k's of BTC in commissions since 2011 and that they have been a running a relatively "low-cost" operation, they should be able to have 19k BTC laying around with no prob. Nevertheless it would be a big hit, and it's not guaranteed they managed their funds wisely in order to have such a "cushion" laying around.

Let's see how this plays out. I'm just glad that, as usual, I did not have any significant amount of coins in hands that are not my own.

[Pustul]

Apparently they say they will resume operations in the next 24 hours:

https://www.cryptocoinsnews.com/bitstamp-resume-operations-next-24-hours/

[GGGGG]

Apparently they say they will resume operations in the next 24 hours:

https://www.cryptocoinsnews.com/bitstamp-resume-operations-next-24-hours/

Let's see. Hope this is not another BS. Though I have a relatively small amount with them compared to other members, it feels pretty crappy.

[Nagle]

Apparently they say they will resume operations in the next 24 hours:

https://www.cryptocoinsnews.com/bitstamp-resume-operations-next-24-hours/

No indication of what they mean by "resume operations", though. If they resume withdrawals with no restrictions, they may be OK. If they resume trading or deposits but restrict withdrawals, this is Mt. Gox again.

[johnyj]

Or they could operate using fractional reserve method, a 90% reserve is still much much better than any banks which only have 10% of client money at hand.

That's not what "fractional reserve" means. For a bank, a loan is an asset - someone owes them money. Banks get into trouble  when many loans go bad, as happened when the real estate bubble popped. Or they get into trouble if they have short-term deposits and long term loans, and too many depositors want their money out at once.

That's not Bitstamp's situation. They don't own 30-year mortgages.  They have no big illiquid assets they can sell off. They have nothing except their customer balances, and, according to their financial statement filed with Companies House, a few hundred thousand in paid-in capital.

Bitstamp needs $5 million within days, or they're going into bankruptcy.

It is the same, although banks claim that they have this and that asset, when they suddenly need money, those loans can not come back in one night or one month. In fact 90% of the deposit money are just sitting in the bank's account without moving, that is the original reason banks loan out those money to earn interest on those dead money

What those coins in bitstamp's cold storage are doing? Collecting dust. They can actually loan out those coins and operate more like a real bank, but without loaning anything out they are much safer than a traditional bank if a large scale of withdraw is happening. For normal bank, if more than 40% of customer are doing withdraw simultaneously, they will run into a liquidity crisis and go broke. But unless more than 80% of bitstamp customer withdraw from bitstamp at the same time, they will be fine (Of course I suppose that they are doing 100% reserve, if they already practice FRB then no one knows how serious the situation is)

BTW, they don't need $5 million, they only need 19000 coins, no big deal for them. But if bitcoin price suddenly rise by 10 times, they might run into problems, just like MTGOX experienced, their initial loss of 200K coins caused by 2011 hack becomes so huge amount of wealth after 2 years that they can never earn it back

[mayax]

Apparently they say they will resume operations in the next 24 hours:

https://www.cryptocoinsnews.com/bitstamp-resume-operations-next-24-hours/

Let's see. Hope this is not another BS. Though I have a relatively small amount with them compared to other members, it feels pretty crappy.

it depends what it means small amount for you, it could be big for other.

[smoothie]

Time will tell.

Assuming they had a 10,000 BTC per day trading volume that turns into 40 BTC in trade fees per day...

For 1 year (365 days) that is 14600 BTC. That would be their entire yearly profit from fees.

They lost 18000+ BTC in one fell swoop.

Not sure if I would think they have enough reserves in profit even if it were 20,000 btc per day trade volume (which is way over estimating).

The past 365 days of bitstamp trading daily volumes/price.

http://bitcoincharts.com/charts/bitstampUSD#rg360ztgSzm1g10zm2g25zv

Looks like 10k BTC per day is a nice reasonable number to assume is their average daily volume traded.

Based on those numbers I do not believe they have enough to cover said losses in full. Remember now they have expenses over that year.

You are overlooking old accounts, which probably make up a good portion of reserves.  For example people who deposits $10 worth of BTC, like 3 years ago and forgot the account even exists.

They could probably do a cash grab on those accounts (ie people who haven't logged in for 3 years) and make up a large amount of their losses, without anyone being the wiser.  Just locked out all those accounts, and if someone happens to try to login just give them the run around and "no record of your account"....sure it's shit; but it beats going bankrupt or giving everyone a haircut (and going bankrupt in the future).

Or claiming that everyone deposits after their January 6th warning to old addresses were "lost' even if they weren't....basically going through the couch cushions they could probably scrape together 10% of reserves.

I highly doubt there is that much extra "forgotten" cash sitting in unused accounts.

Even I who have moved a good amount of fiat through bitstamp don't leave even $1 on there if I do not have to.

I need that $1 to buy me some cheeseburgers! LOL 

[smoothie]

Or they could operate using fractional reserve method, a 90% reserve is still much much better than any banks which only have 10% of client money at hand.

That's not what "fractional reserve" means. For a bank, a loan is an asset - someone owes them money. Banks get into trouble  when many loans go bad, as happened when the real estate bubble popped. Or they get into trouble if they have short-term deposits and long term loans, and too many depositors want their money out at once.

That's not Bitstamp's situation. They don't own 30-year mortgages.  They have no big illiquid assets they can sell off. They have nothing except their customer balances, and, according to their financial statement filed with Companies House, a few hundred thousand in paid-in capital.

Bitstamp needs $5 million within days, or they're going into bankruptcy.

It is the same, although banks claim that they have this and that asset, when they suddenly need money, those loans can not come back in one night or one month. In fact 90% of the deposit money are just sitting in the bank's account without moving, that is the original reason banks loan out those money to earn interest on those dead money

What those coins in bitstamp's cold storage are doing? Collecting dust. They can actually loan out those coins and operate more like a real bank, but without loaning anything out they are much safer than a traditional bank if a large scale of withdraw is happening. For normal bank, if more than 40% of customer are doing withdraw simultaneously, they will run into a liquidity crisis and go broke. But unless more than 80% of bitstamp customer withdraw from bitstamp at the same time, they will be fine (Of course I suppose that they are doing 100% reserve, if they already practice FRB then no one knows how serious the situation is)

BTW, they don't need $5 million, they only need 19000 coins, no big deal for them. But if bitcoin price suddenly rise by 10 times, they might run into problems, just like MTGOX experienced, their initial loss of 200K coins caused by 2011 hack becomes so huge amount of wealth after 2 years that they can never earn it back

more than 10% of their coins in their possession stolen.

So how do they handle the instant run on bitcoin and fiat once they reopen?

Institute bullshit daily limits?

That won't fly well given their situation. I would imagine there would be a pretty big uproar among customers/users should they not allow FULL btc and fiat withdraws.

[jaberwock]

Apparently they say they will resume operations in the next 24 hours:

https://www.cryptocoinsnews.com/bitstamp-resume-operations-next-24-hours/

GOX said more than once they would resume operations.

Let's see if they will honor what they say or if things will go even worse