Exchange Economics

By: Jaffer Ali

What are the basics of Exchange Economics? How do they make money? This is a short guide. If you read this thread, you REALLY should consider getting your Bitcoin off exchanges. FYI 99% of other shitcoins will be going to zero on or off exchange, so do whatever you want w/ ’em 1/

Exchanges charge a % of the transaction buying or selling. B) Exchanges trade against clients. You put a buy limit order, they buy & sell to you and make the difference. You put a sell order at X, they make money the other way c) Exchanges lend out BTC, charge interest. 2/

They own their own BTC, but like FTX, many of them lend out YOUR BTC. They thus have no cost of goods and as long as there is no bank run, they can satisfy withdrawals…until they can’t. 3/

D) They let you keep your cash and BTC on the exchange for *free*…sure, why not because they can OUTRIGHT SELL YOUR ASSETS and keep the money (see FTX). I am not making this up. 4/

E) Even when exchanges sell your BTC for cash, you log into your account and it will show that you still own what you bought. And if you want to withdraw, they will just take it from a different account. as long as no bank run, you do not know if your BTC is REALLY there 5/

F) If they get too many withdrawal requests, the first go to practice is to SLOW WITHDRAWALS. They rest on customer service incompetence rather than fraud to slow withdrawals. But this is only stage 1 of withdrawal woes. 6/

G) When the withdrawal requests become too many, exchanges will HALT WITHDRAWALS (see Celsius, Voyager, FTX, Genesis, etc.) Why halt? They FRICKIN’ have sold it out the back door or pledged it as collateral and liquidated. They PLEDGED YOUR ASSETS for THEIR GAIN. 7/

H) Exchange Economics is very flawed as a business. But is ideal for fraud and accumulating assets. Beware of all FREE services. Exchanges are not banks, but run by traders who think they can outsmart the market. 8/

I)The “Not your keys, not your coins” mantra is catchy and while true, it takes a while to deconstruct how exchanges screw their clients. 9/

J) The only reason to have your BTC or assets on an exchange is if you are planning to trade short term. Buying BTC and leaving it on any exchange puts you at the mercy of Exchange Economics. End of thread.