Nightmare on cryptocurrency street

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Komrun

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Morning!
Wile I'm invested in the Crypto and have total faith in it, nothing stops us to prepare for the worst case scenario. Specifically for us plebs in South Africa with the current economy. While everybody is talking about "from the earth to the moon" let's talk about Twenty "Thousand Leagues Under the Sea".
 
I see +R50K orders on the order book (ETH) every now and then and with the monthly volume so high in case of a crash I'm not sure if Ice3x or Luno can handle so much withdrawals at the same time.
remeber also that in the price correction 2 weeks ago (which wasn't hectic or catastrophic by any means) ice3x tweeted that withdrawals are slow currently!
Imagine if Bitcoin fell to $5000 from an all time high of $16000 overnight! everyone will be panic selling and by the time your withdrawal is confirmed the price drops another 30%!
 
Withdrawal - Money goes to your bank acc. You mean your sell order ??
 
Komrun said:
I see +R50K orders on the order book (ETH) every now and then and with the monthly volume so high in case of a crash I'm not sure if Ice3x or Luno can handle so much withdrawals at the same time.
remeber also that in the price correction 2 weeks ago (which wasn't hectic or catastrophic by any means) ice3x tweeted that withdrawals are slow currently!
Imagine if Bitcoin fell to $5000 from an all time high of $16000 overnight! everyone will be panic selling and by the time your withdrawal is confirmed the price drops another 30%!
Click to expand...

Ok? And the issue is what? Sell at $5k and you've $5k waiting to be withdrawn. BTC price could drop to $0.01 and you'd still have your $5k in your account
 
the whole process between loging in to the exchange until fiat is in your bank can take up to 3 days in normal conditions.
in a market situation where minutes matter i'm not sure how that will play out.
I'm aware it's all part of crypto, you gain some, lose some...
My main question is what we should do, or what we CAN do "if" such a disaster hits the market.
 
Komrun said:
Can exchanges survive 80% of their holdings withdrawn in a couple of days?! that's my question!
Click to expand...

Not sure I understand your question/concern.

The exchange doesn't have to have funds to buy your Bitcoin - there must be a willing buyer. Exchanges are not like banks that need to keep a bunch of cash on hand for people that want to withdraw.

Regarding slowness - yes, of course, when the market goes hectic, the likes of Polo and Bittrex also slow to a crawl. That's life - for now.
 
Komrun said:
Can exchanges survive 80% of their holdings withdrawn in a couple of days?! that's my question!
Click to expand...

Depends on whether or not they are "reusing" customer coins and/or cash and how. A respectable exchange would not reuse coins or take market risk with customer funds. If there was a run on an exchange there should be no reason why it should not be able to honour ALL withdrawals (cash and coin) in a reasonable time, ie enough time to get coins out of cold storage.

Crypto exchanges are unregulated so who knows what prudential mechanisms they have in place.
 
What's more likely is that, as there is no market maker for crypto, a run on it will result in a lot fewer buyers than sellers and the price will fall like a rock in a black hole's gravity well.
 
The biggest practical concern would be if the exchanges are being dishonest and not actually holding the full value of the BTC on deposit with them. In theory, an exchange might decide to sell or leverage a percentage of their BTC deposits in other ways, as long as they think they have sufficient to cover any withdrawals.

There have been suspicions about some of the overseas exchanges doing this, especially after the last bitcoin hard fork - i.e. the exchanges who could not immediately provide you with your BCH at 1:1 parity are possibly suspect because it might mean that they didn't actually have the underlying BTC to cover the fork and provide everyone with equivalent BCH.

As far as I understand it, most exchanges store the majority of the BTC on deposit with them in cold storage to make it very hard to hack, but what the balance is in that storage is generally not public knowledge. I'm not sure what auditing standards the local exchanges are subject to or if this is even something that is audited.
 
Sinbad said:
What's more likely is that, as there is no market maker for crypto, a run on it will result in a lot fewer buyers than sellers and the price will fall like a rock in a black hole's gravity well.
Click to expand...

Yup! I can't wait for this to happen. Been talking about the arbitrage and how BTC sells at a premium on Luno compared to offshore exchanges. I have seen BTC cheaper on Luno in times of panic, as more people want to get out than are willing to buy. Logically speaking anyone wanting to sell in a panicked market could send their coins to a more liquid exchange and sell for fiat or USDT or something, but I am looking forward to the day when there are too many BTC Rand sellers and not enough buyers on local exchanges. I think there will be blood on the floor, and I will be there to lick it up!
 
Komrun said:
Imagine if Bitcoin fell to $5000 from an all time high of $16000 overnight! everyone will be panic selling and by the time your withdrawal is confirmed the price drops another 30%!
Click to expand...
You're going to have more issues waiting for your transaction to complete (getting it from a private wallet to luno again) in such a scenario where the whole world is sending btc around. If your funds are already on luno - well, you're playing with fire holding assets on an exchange that doesn't allow for stop loss orders. You want your btc to automatically sell in the event that it drops below a threshold. Without that functionality in place I'm not interested in ever holding any reasonable amount on luno.
 
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