Coinbase Pro Disables Margin Trading

To me this gives even more creedance to the rumor that they have massive liquidity problems behind the scenes. Thus the continuous outages at times when the market is pumping. I’m highly dubious of their post mortems and the service incidents coincidental timings.

Is anyone actually making any money on day-trading Bitcoins? I bought a couple Bitcoins back in 2012 and have just sat on them the last 8 years. In general, the market for this stuff is so astronomically weird that it really doesn't make sense to try to trade in it at all..

It turns out Coinbase was reacting to this CFTC guidance.[1] The CFTC has ruled that &quot;delivery&quot; of a digital currency after a futures contract is closed out means delivery to the user&#x27;s wallet, not a credit in the broker&#x27;s accounting system. The Bitcoins have to leave Coinbase&#x27;s control completely. Coinbase doesn&#x27;t want customers withdrawing big amounts all the time, apparently.<p>[1] <a href="https:&#x2F;&#x2F;www.coindesk.com&#x2F;the-us-cftc-just-defined-what-actual-delivery-of-crypto-should-look-like" rel="nofollow">https:&#x2F;&#x2F;www.coindesk.com&#x2F;the-us-cftc-just-defined-what-actua...</a>

&gt; In response to new guidance from the Commodity Futures Trading Commission, we are disabling our margin trading product.<p>As other articles mentioned, which unspecified guidance?<p>Anyway, don&#x27;t really care about whether margin is available or not on spot assets, good luck with that. Stay solvent and liquid!

This is actually great news!<p>Margin trading and investment Bitcoin storage don&#x27;t belong to the same institution in my view, unless there&#x27;s a clear separation of ownership in a case of bankrupcy.

Kraken is destroying them in margin&#x2F;derivatives and their margin product is quite bad. Not saying there is a relationship, but it is a good trade for Coinbase if Kraken has to shutter theirs as well.

I don’t see how this is much different to how the CFTC steps in and raises margin requirements on silver futures contracts when the price starts to run. I would tend to guess that coinbase really did have the CFTC bring the hammer down and force them to make this change just as the pricing of crypto started to rocket.

Coinbase has been leading the Bitcoin rally lately and dragging (the supposedly) tether inflated bitfinex exchange.<p>I wonder if coinbase users went too far in using margin that the CFTC intervened. Wait and see if the same happens to Kraken. They are both bitcoin exchanges.

Who was the counterparty? Margin trading implies that some party in addition to the customer is at risk. Some of the Bitcoin exchanges tried to escape this by closing out positions when the customer&#x27;s equity was wiped out, but in a falling market, you often can&#x27;t do that fast enough. Then the broker&#x2F;exchange has to collect from the customer beyond what they had in their account.<p>That led to messes like this [1] when the bottom fell out of natural gas prices.<p>[1] <a href="https:&#x2F;&#x2F;advisorhub.com&#x2F;broker-seeks-millions-from-wiped-out-optionsellers-clients&#x2F;" rel="nofollow">https:&#x2F;&#x2F;advisorhub.com&#x2F;broker-seeks-millions-from-wiped-out-...</a>

Blog: We&#x27;ve disabled margin trading because of CFTC. For more info go to our FAQ.<p>FAQ Question 1: Why have you disabled margin trading? We&#x27;ve disabled margin trading because of CFTC. For more info go to our blog.

Maybe forcing a large fraction of their best talent out the door wasn&#x27;t such a hot idea.

Further reason why exchanges that are offshore and outside of US jurisdiction continue to dominate. Old rules for an old world, meanwhile the industry has been innovating 1000x faster than the traditional financial system. I get that the US and it’s regulators never want to let go of their power, but every day that passes they get weaker as the future bypasses them.