Can You Trust Coinbase & GDAX? An Honest Review

in #bitcoin3 years ago

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:

  1. Recent Bitcoin Difficulty Adjustment
  2. Bitcoin Cash Price Spiking Prior to Announcement
  3. 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?

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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"

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.

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.

That would be a fine explanation in 2013 perhaps, not 2017.

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.

Yeah, I agree. But if they couldn't get their act together in this eternity of time in crypto, I wonder how bad they'll screw up after some hypothetical IPO.

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.

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.

I also think that they simply executed the BCH listing in a stupid way. The question remains, if they truly were naive about this or not. Because all Coinbase users know that they are in fact able to announce changes in advance.
Since I don't like unsupported conspiracy theories I'll stick to "in dubio pro reo" - when in doubt side with the accused.

Off topic: What are your thoughts on IOTA? I didn't found any video on your channel about that.

"They're probably just idiots." I agree. I prefer to attribute incompetence than attribute malevolence. What do you think about BitStamp?

A ton of law suites? They blocked it 3 min in, how would anyone think they have a case?

I'm not a legal expert - just know that people go crazy over this sort of thing even if there isn't a strong chance of winning.

thanks. What coins can you trade on gemini?

Seems like BTC and ETH only for now

Hi - I have really liked all of your videos, would you be willing to make one about long term investments in crypto?

I want to make bank from crypto (I invest 50%+ of my paycheck, my wife does the same) and we have an early retirement plan. Would you be willing to make a video about long-term (5-10 year) investment strategies for crypto? Or is this stuff so new that I do have to watch my ownership of coins daily/weekly?

I've discussed previously my opinion on buy & hold vs. trading. For crypto, I suspect trading is superior given the bubbly nature of the field. If you don't have much or any investments in traditional asset classes, you are risking your financial future on a very volatile Mr. Market which you should be cautious of.

may be employees of coinbase involved in insider trading
investigation stared

Yeah we'll see what happens.

hey... great content. Have you thought of posting your videos to d.tube? It is steemit's version of youtube. You might make more than you do on youtube.

While it's possible that I could, I am more concerned with eyeballs right now as I have other plans for the future where the size of my audience will be relevant.

If you ever do it, I would be interested to hear how d.tube compares to YouTube in terms of earnings. It would make an interesting video. Keep up the good work, i enjoy your point of view.

Hey, are u the cryptovestor on the discord channel premium signals?? He has the exact same name.

Also bitcoin tx fee is now more than 20 USD... if this continues, no one is gonna use bitcoin anymore. U think bitcoin still has a future after lighning network is launched?

No that isn't me - I am not on discord at all. Not going to make any predictions on the effects of Lightning Network yet, but I am hoping for a substantial improvement on the current Bitcoin 'experience.'

The more I hang out on discord channels and telegram the more your opinion of bubble solidifies for me. There are tons of pumps and dumps planned on those groups. Even the bitcoin cash fiasco people were planning that a day before all day.
And there is so much pumping on those groupsb
People who have hundreds and thousands of dollars FOMO in even at all time highs because suddenly 10 people would come in and tell everyone to buy X coin sayinng thats its going to the moon

Then they would say they went all in because its the next big thing. And right before my eyes the coin gets a 20 30 percent bump.
Its unreal. They dont talk about technology or adoption. They just want money.

IF it works as intended...

People on bitcoin lightning testnet have been tweeting about how they were able to send bitcoin with zero fee to other addresses all week . It seems primed and ready.

I expected a pretty biased and negative video by the title but I was pleasantly surprised by your remained objective outlook. Thank you

I believe Coinbase wouldn't risk any forms of insider trading but it's probably very hard to completely prevent with bitcoin transactions being partially anonymous.

As far as I'm concerned there were very low btc fees on Coinbase just now making it a perfect opportunity to get some more BTC with lower transfer fees plus a 'discounted' price.

The dinner table questions about Bitcoin vs. Bitcoin Cash will go pretty smoothly for me. When they ask what the difference is, I'll tell them, "Nothing, because I don't hold either."


By the way, I'm really happy that you're promoting the comments section of STEEM. It's an area that doesn't get a lot of focus. People tend to promote blogging, not discussions, so this is really nice.

You might consider using chainbb because it is focused on presenting STEEM discussions as threads (aka forum style). It also sorts by activity. One of the best STEEM front-ends out there.

Hah. Well I think a lot of the value of my YouTube is the active comment section (even if the comments themselves aren't always of the highest quality), so figure replicating that here would be worth it. Also know that a lot of people try contacting me on YouTube and there just isn't enough hours in a day for me to get to them all, so the limited comments I have here make it easier to get involved. Plus in the long-term, I may invest some into Steem Power (or delegation) so I can reward higher quality comments. Thanks for the recommendation too!

I really hate this gdax and coinbase run by the bank, trying to ruin the crypto market!!!

Great in sight to crypto currencies.

Heh, yeah. "Never attribute to malice what can easily be explained by incompetence." Or something to that effect.

Thank you for your videos too, by the way.

A bit off-topic, but as a new investor with a variety of cryptocurrencies now across multiple wallets and exchanges, do you have recommendations on how to best monitor the progress of your crypto holdings from the time of purchase relative to BTC's changes over time? Should I be manually inputting every single trade / transaction / time / current price of BTC in a program or website? Are there any videos you would recommend on the subject? I'd really like to nail down a reliable system.

Your videos are awesome! Your channel is the first I've ever added to my YouTube notifications. Thanks for sharing :)

Do you know if Gemini is available for Canadians? I ask because, on Sep 26, 2017, it was announced that CAD balances is no longer supported for Coinbase’s Canadian customers. There is QuadrigaCX as an alternative, but in terms of volume ($33,763,870) it​ doesn't​ really compare​ with Gemini ($292,972,400) or GDAX ($1,662,270,100).

How exactly coinbase/GDAX caused people to lose money with the sudden start of trade? I don't get it?

Hi Crypto Investor... strangely I found Steemit via one of your YouTube videos.. someone had left a comment when you were talking about articles you were going to right for Medium. Now watching your video on YouTube I see that you're here... so that's super exciting. I won't have to flick over to YouTube now.

I've been using the Bittrex exchange and I really like it... but I hadn't bothered with getting verified until now (I bought some Steem and want to transfer it) and their "10 minute verification" has taken 3 days now... so yes, while GDAX and Coinbase might be idiots... they aren't the only incompetence in town.

I have always really enjoyed your videos, especially when you advise restraint when other YouTubers are just bragging about all the money they've made.

Thank you for your insight and I really look forward to your posts here on the Steem blockchain!