sounds like you really should consider lowering your stake in this crypto gambling
> We must prevent our readers from accepting the common jargon which applies the term "investor" to anybody and everybody in the stock market.
> Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook. More than that, some speculation is necessary and unavoidable, for in many common-stock situations there are substantial possibilities for profit and loss, and the risks therein must be assumed by someone. There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are: (1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and (3) risking more money in speculation than you can afford to lose.
> In our conservative view every nonprofessional who operates on margin should recognise that he is ipso facto speculating, and it is his broker's duty to advise him as such.
> The true investor scarcely ever _is forced to sell_ his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by _other persons'_ mistakes of judgment.
- Benjamin Graham, "The Intelligent Investor"
Note that Graham is largely talking about common stocks - interests in potentially profitable businesses with real world assets than have a value independent of the current market price.
Betting any amount of capital on exchange rate changes of currencies? On cryptocurrencies? ...on margin that forces you to sell if the market price fluctuates? ...when the market price itself is largely/entirely based on speculation? This is not classifiable as investment activity, and arguably not classifiable as intelligent speculation either.
I've been in crypto for 18 months and at the start put a sizable piece of my networth in WAVES ICO. I missed the ETH ICO even after CTO friend said to get in that ICO but WAVES is up like 2500%+
Now cryptocurrency overall is less than 10% of my networth and I've avoided most ICOs since.
Sorry, as a non-finance-savvy person: 3% of what? (I guess also: what is a 'circuit breaker' in this context?)
1. Rejecting the orders that will wipe out the order book.
2. Doing something hedge-fundy. Becoming counterparty or running the darkpool that let's other people jump on that.
3. Do nothing - there is now an incredible amount of limit orders from people kicking themselves for not doing something like that earlier (I've got a few:P).
So, allow speculators to place as many bets as they want and prevent people who want out from getting out? Let everyone in, and when they become over-leveraged, prevent them from escaping? Rejecting sell orders (which can cause these things, if they're large enough) is not an exchange, but some form of casino.
This will not end well.
Coinbase regularly goes down when there is heavy trading. Very decent of them to publicly refund people for this incident, but given they have regular Ethereum trading issues, they should be quicker to suspend their market and more humble about the technical issues they're facing
The issue is that there are a lot of inexperienced traders on GDAX right now and they were recklessly trading on margin and/or setting stop-loss orders without understanding the possible consequences.
A few seconds is normally long enough for liquidity to transfer between markets and this time it wasn't. That's the issue
Moral of the story: even if you do not grasp basic financial instruments, in cryptocurrency you can still be saved because of reputation.
The number could be fairly manageable.
( *) I'm playing with small money on poloniex as a greedy trader. I made +400% in 3 months, but I don't expect to be refunded if I lose everything for a mistake I made. I would only hope for a refund in case of a bug-related issue.
IMO this move to replenish traders was a mature business decision that many tech companies would have failed at let alone crypto companies. There is massive money in the long game for Coinbase/GDAX, and providing real and imaginary assurance could cement them to become the Visa of the next decades.
From GDAX's point of view the tradeoff boiled down to whether to invest in PR / brand today or risk a moral hazard problem in the future (users expecting bailouts so they take more risk).
1) Flash crash 2) Horrible customer support 3) Delayed Ethereum widthdrawals when the network isn't under stress
They have a lot of problems. They may be happy to spend the money to clean up one of them.
See 2010 flash crash. "Procter & Gamble in particular dropped nearly 37% before rebounding, within minutes, back to near its original levels. The drop in P&G was broadcast live on CNBC at the time, with commentator Jim Cramer commenting."
This gives people the chance to cool off and not sell blindly in a panic, hopefully returning behavior to normal.
It also gives people the chance to intercept automated systems (stop-loss orders, things like that) if it's clear that e.g. it's a "flash crash" and not a more legitimate (for lack of a better term) drop.
It's a circuit breaker in the same way that a regular one works: It stops all activity (all trading) in order to protect the system (the economy) in the event that too much current is flowing through (too many sell orders, or too much volatility in the market).
If you are investing you don't want stop loss order. Your belief is that long term it will bring you returns regardless of temporary volatility.
If you speculate, it's your fault you used that or another strategy. You may call yourself lucky to get your "investments" back from the exchange but understand that this is being paid by other users of the exchange, in the long run.
I hope this is going to be a valuable lesson for a lot of people who do not really get what this game is about.
I've worked on an insurance deal in aerospace with an unproven launch vehicle and from where I was siting, it was just a guessing game based loosely on existing data and some invasive due diligence. These deals work because the insurance company is itself insured by other companies that spread the risk around enough that even a claim for the maximum amount wouldn't do much worse than wipe out a few months profit. No one insures for such large amounts with small unproven companies so the biggest risk for both parties is a systemic failure like AIG.
I would never do such (I consider it unethical, but more to the point I have neither the capital nor risk tolerance to pull it off), but I wonder if someone might. Or perhaps already has.