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I don't think I've thought about this in a long time as I don't interact with them any more.
Users trading for fiat is one way but what other ways. Obviously they don't have to have the bitcoin until you actually attempt to take custody. We've seen that exchanged use paper bitcoin. It has me wondering how they acquire it in the first place.
Depends on which exchange. Exchanges with order books like coinbase, kraken, etc just get their bitcoin from customers, people buying and selling fill out the order book. Exchanges like River, Swan, Strike, etc are brokerages and get their bitcoin from market makers and other services. Lots of these services just have accounts on the other exchanges and buy at whichever has the best price.
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Interesting. Are you saying this becuase that is what they say they do or is it proven?
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When I was at The Bitcoin Company we looked into making a brokerage and that's just how it is done.
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Thanks, this is what I was looking for. Someone that knows. Now that you outline it, it really seems obvious.
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Someone probably knows, but isn't this what market makers do and get paid handsomely for? And exchanges are kind of an interface for an aggregate of market makers?
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Yeah that makes sense. But you'd think with all the talk about how easy it is to track bitcoin onchain that this would be easy to document.
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10 sats \ 1 reply \ @ek 15 Oct 2023
I don't think exchanges do onchain transactions for trades, only for deposits and withdrawals
Or I might have gotten you wrong
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Yeah not what I'm talking about. I'm almost 100% sure all trading is offchain. What talking about if the onchain record of bitcoin before a user withdraws their bitcoin. Showing where to exchange received the bitcoin they are sending to users.
If it was sold to them by miners then that should be easy to track. I'm just speculating.
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they don't. it's in the name: "exchange". essentially they offer a service/platform so that sellers and buyers of Bitcoins can interact.
for every buyer, there is a seller.
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  • Hashers off-ramping their sats
  • Some exchanges also participates in hash war, because, why not ?
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People send bitcoin to the exchanges. They buy from miners They mine in pools They buy from secret participants
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They set up separate companies or do deals with market makers to provide initial liquidity and then customers come in and start adding to the order book,
As the trade volume increases you attract more people and businesses who want to take advantage of any spreads so there are different trading desks that will operate between arbing local exchanges or arbing between an international exchange from one country and the local exchange.
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In theory, there's a buyer for every seller.
In practice, it's a bit more complicated. Long term investors often forget about the day traders, swing traders, trading bots, arbitrage traders, market makers, liquidity providers and so on.
It's these people trading at the margin that ultimately determine the short term price. For people DCAing a little bit of money each paycheck there's likely some day trader on the other side happy to fill your order.
On the other hand, when a big guy like Saylor comes in and makes an offer for millions of dollars worth in an OTC trade, that's when things get more complicated. That Bitcoin has to come from somewhere and if the OTC desk doesn't have the Bitcoin on hand they have to go out to the market and acquire it. That's when the price rips up because they have to find sellers willing to part with their Bitcoin.
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Trade BItcoin on KYC free exchange
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Sure but that has nothing to do with this discussion.
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