RE: Why You Should Not Trade on Exchanges - Buy/Sell Tips by Charlie Shrem
Hmm this article goes counter to what I thought I knew. Maybe someone can help me out with a few questions I have.
Doesn't shapeshift and the likes dump it on the market automatically too?
If not, why are these trading desks assuming the extra risk on behalf of steem? Doesn't seem like something a good trader would do. If they aren't converting your steem to btc, usd or some other reserve currency right away then they are speculating on steem and so far that speculation isn't doing so well. Is it just that their "dumping" on the market is done with bots that chop the orders up and make it more palatable to market?
I don't think this advice is good for the small dolphin or minnow cashing out a few hundred SBD they made with some stellar posts. They aren't going to be pushing any market scaring volume and will get a much better price on poloniex or bittrex than shapeshift will net them after the massive fees (10% now?) are applied.
I think this advice is more for the elite few at the top.
Hey!
When you say "dump", no they don't have an open sell order that just dumps it all. Most of these companies go in both directions, so they likely hold and hedge in a bull market, they also sell back to customers who want to buy. Every day or week, they probably settle on an exchange or sell large blocks to other companies.
Also, they buy/sell dozens of pairs of even more immature currencies than Steem.
For a small seller/buyer it does not make a difference, however I never recommend keeping money at an exchange.
"however I never recommend keeping money at an exchange."
Agreed, they are just a stepping to stone to my cold storage.
Thanks for the info.
FWIW on another coin, when using Shapeshift as an experiment, I saw a sell order of the exact amount I sent them immediately after it had one confirm. I haven't looked at the behavior for Steem yet.
in my dealings with shapeshift, i can confirm that they do not make their settlements unless they have to. shapeshift has often not been able to buy as much steem as I want to sell to them, and these are generally small amounts.
I don't think it is as profitable, at least not yet, to run these multi-crypto OTC dealer businesses, but I think they probably are doing ok. They basically act as buffers between the in-and-out of the various cryptos out there. I hope more of them spring up, because I hate dealing with exchanges.
I tend to agree that from a Steem price perspective, this is more important for someone who wants to sell a lot of Steem versus someone who is selling 100 or so Steem. It's very important for someone who wants to sell a lot of Steem to do so very carefully to avoid depressing the price during their selling or they will experience a significant loss during their trading (and also cut the value of their remaining holdings), and the instant exchanges tend to be better equipped to do this efficiently.
The advantages for the smaller seller are more in the safety and convenience associated with the use of an instant exchange. Unfortunately a lot of traditional exchange users find themselves ultimately leaving a lot of funds on that exchange, only to eventually experience a painful loss when the exchanged is hacked and they lose funds. I've personally lost funds through exchange hacks on four different occasions, so this happens a lot more than newcomers to crypto realize.
Thanks for the added insight. I find the complexity of what you do fascinating and mind boggling.
I think my problem is not viewing it from a well capitalized position with a steady stream of clients.
Yeah, I got absolutely killed from the bitfinex hack. It's soured me against exchanges pretty much completely. OTC dealers is all i want to deal with now. At least until the exchanges have enough trading volumes that they don't spike 5-20% once or twice a month and wipe out margin positions. Liquidity is essential for margin trading. Cryptos, none of them, have it yet.
I think shapeshift and blocktrades accumulate capital and only go on the exchanges when the balance gets out of kilter. So they are not taking risks, they just are more liquid.
How is accumulating a highly volatile and incredibly immature currency in constant decline not taking on more risk? What kind of timeframes are we talking here for accumulation? I'm having a real mental block getting over that hurdle.
I must be missing something.
they accumulate lots of these from many different cryptos. it balances out, i'm pretty sure. they probably have to trade things in and out as they move against each other but because they hold a big bag of everything, they are not influencing the exchanges as much.
I would love to see the algorithms monitoring that and what happens when there is major market move that skews their books. I'm picturing one of those red siren lights going off in an office. Maybe it's as mundane as some trader uttering, meh, and then presses a button though.
yeah, from what i've seen with shapeshift, the red light sounds like about how they operate. 'balance approching zero, warning, warning!'. about 1/4 of the time i go to do an exchange through them, they say they can't accept even my small trades. and nobody works night shift there.
Let me explain. All the simple instant exchanges mostly provide operations via Poloniex or Bittrex. Our service http://Changelly.com also do the same. We have deposits on exchanges and on our proxy wallets to make exchanges fast for users. For each exchange operation we make the hedge deal on Poloniex and take a small fee for this. You can have a look, how it works, and how do we calculate rates here:
https://steemit.com/money/@changelly/how-changelly-suggests-the-best-exchange-rates
OTC dealers don't have to make orders as often or as big, because they hedge.
Actually, that makes me think of something... so, when is the crypto-hedge-fund going to be a thing? They would be very helpful partners for the OTC dealers.
Alt coins crypto market is very volatile. In this case to prevent risks dealers must have hight commissions and rates should be differ up to a few percents from Poloniex exchange provider. I can't say for all the OTC dealers, but on http://Changelly.com we have only 0.5% fee. That's why almost all the deals are hedging, especially for high amounts to exchange.