Can You Trust Coinbase & GDAX? An Honest Review
Note: I will respond to most relevant comments if you are interested in engaging. Thank you for watching / reading.
Coinbase / GDAX launched support for Bitcoin Cash out of the blue yesterday and caused a flash crash in Bitcoin and a massive rally in Bitcoin Cash. Is Coinbase / GDAX stupid, or is there a more malicious intent? There are some rumors going around that there was insider trading and intentional manipulation of the market.
The evidence supporting this is from the multiple coincidences surrounding the launch such as:
- Recent Bitcoin Difficulty Adjustment
- Bitcoin Cash Price Spiking Prior to Announcement
- Roger Ver on CNBC's Fast Money Next Day
These factors all point to insider trading and a coordinated attack on Bitcoin. However, I still suspect this was more negligence than anything else. While individual employees and contractors at Coinbase likely engaged in insider trading (given it is very difficult to prove given the relative anonymity of cryptocurrencies), I doubt Coinbase as a whole engaged in this activity.
My reasoning is based on the same principles that Bitcoin's security is based on: Game theory. If you're one of the largest exchanges with a brand built on trustworthiness, would you really risk all of that for a short-term gain? Note that only 3k Bitcoin Cash changed hands on GDAX, which isn't the type of reward I'd look for if I was going to throw away a $1B+ business. While many more pumped on Bittrex (which would have led to handsome profits for any insider traders), it still isn't worth throwing away an entire business for such a gain.
Instead, I find it far more likely that some idiot(s) thought it'd increase Coinbase's brand reputation by surprising everyone with an earlier than expected release of support for Bitcoin Cash - Basically a nice little holiday gift. It then horribly backfired instantly and they immediately began damage control (which they are doing better than most companies given how awful this was).
I'm not saying it is 100% negligence; I wouldn't be surprised to learn of some insider trading. However, I think the bulk of this was pure stupidity. So my overall conclusion? I still trust them, just with less faith in their overall competency. I might move a larger amount of capital to Gemini despite their fees.
What are your thoughts?
I loved your closing comment in the video: "They're probably just idiots".
Otherwise known as Hanlon's razor: "Never attribute to malice that which is adequately explained by stupidity"
That's a great quote
I had heard of Occam's, but never of Hanlon's razor before. Interesting... and funny!
Perfect. I forgot all about that even though I've heard it used several times before. Hard to remember all those philosophical razors!
I think it boils down to coinbase being overwhelmed with the level at which they are scaling, leading to them having insufficient time and resources available to properly manage the business. There is no excuse for this type of screw up, but I dont think there was anything malicious going on from the Coinbase/Gdax side.
On the Bitcoin Cash side you can be sure that the people behind the scenes there were ready and waiting for a chance to pump. Roger Ver has repeatedly stated that he feels that Bitcoin Cash is the one true bitcoin and he is openly hostile to the Bitcoin Core team. Whether they knew GDAX was about to go live in advance or not, you can be sure they had planned this months ago and were ready to act at the first opportunity.
I feel that bigger issue now is whether Bitcoin Cash will become the main on ramp for fiat currency? As you have noted yourself in your videos, the bulk of the transactions on the Bitcoin network are exchange to exchange or exchanges to wallets. People are buying bitcoin to go and buy altcoins. If Bitcoin Cash can deliver on its promise of lower transaction fees and faster confirmation times, why would anyone continue to use Bitcoin as an on ramp? I fear this could be extremely damaging to Bitcoin as the fixes for transaction fees and confirmation times still seem a long way out.
Before someone says I'm a shill for Bitcoin Cash, I want to say that I am sick of the tribalism in Bitcoin vs Bitcoin cash debate. I hold both but don't think either fully solves the issue of scaling in a satisfactory way. They are both wide open to be disrupted by a third gen crypto.
I love your channel, keep up the great work.
People will continue using Bitcoin just because it's the standard. If it was just about convenience, then most crypto-to-crypto pairs would use Ethereum since it has a fiat on-ramp, is large enough and has relatively fast confirmations (I say relatively fast due to slowdown post Crypto Kitties). As is, Ethereum is used a decent amount but nowhere near as much. Without taking the Bitcoin brand, Bitcoin Cash won't become the predominant crypto-to-crypto pair currency. And to take the Bitcoin brand would require a LOT of changes to occur which are highly improbable.
Happy you mentioned that you are on steemit in the video. I was watching on youtube, unaware you use steemit.
Yeah going to start mentioning it at the end of videos if I remember - going to be my version of Patreon since it is an easy way to contribute without really having to contribute, plus increases my interaction with broader base because even if not everyone comments here, at least everyone can see my comments here and see responses to the questions they have that are asked by someone else.
Great!
Also, i suggest you to check Dtube (part of steemit ecosystem) and LBRY.
I don't think they are "idiots." Not with that much money on the table. I think it was a quick move that profited very few very quickly. There should have been an announcement instead of "implementing by January 1st." Just my opinion though...
I agree that there should have been an announcement and some people may have did insider trading to profit from it, but the size of the pump just isn't worth it for a company valued at $1.6b (and now likely even higher given the explosive growth in the number of accounts since that last valuation).
Good points
Whether malicious or negligent the way this unfolded clearly enabled insider trading, in my view that is the only logical explanation for the pre-pump.
Coinbase may be honest but nevertheless they failed to effectively ensure the "honesty" of their staff, in my view.
That's very possible - it's difficult to enforce admittedly given the nature of cryptocurrencies, but they could have handled this better regardless is the one part everyone can agree on.
I agree, they're probably just idiots, and not just because of this, also because they're only just now adding their 4th coin.
I just found the YouTube channel recently. In today's video I saw you are here. I very much like the way you lay it out. There are a lot of people pushing things that are bad. But you give real information. Best crypto channel to date! Thank you!
Thanks for the kind words!
Agreed. "They´re probably just idiots". Unfortunately they have an excellent onboarding system: bank transfer/credit card for many countries AND affiliate links so we all recommend it to our friends
Hopefully they get themselves together swiftly. At least the launch today went smoothly.
This is hard thing to know for sure in a market with low transparency and no regulations.
Also price manipulation isnt a hard thing to pull, and It may as well kill a lot of cryptos in the long run (inclusive Bitcoin.
Especially as SEC gets involved. Hopefully we'll see a decentralized exchange that works well with good UI and high liquidity (biggest issue for all of them) at some point in next 5 years.
The only one i have seen so far that is working is Bitshares. Havent traded there yet, but have you tried it?
I would like to hear what you have to say about it.