Comment by reisse
4 months ago
Bybit trading volume is in tens billions of dollars daily. Their comission rate for the retail traders is up to 10bp (0.1%). Even considering a huge part of that volume is coming from institutional players who enjoy significantly reduced commission rates, I think they're surely making few million dollars daily on comissions alone, maybe tens of millions in a good day. And besides comissions, they also have other sources of profit, like staking, crediting customers, and forced liquidations.
Being a crypto exchange in current market is very profitable. If the crypto itself does not collapse, I think it's totally possible for them to repay that sum in a year or less.
I'm nowhere near expert on any of the things below, but: My gut tells me if an exchange makes as much money as you suggest, people involved in that exchange are making even more profit from the said exchange, otherwise they wouldn't engage. The whole thing being literally money out of thin air, it feels like a huge bubble that should inevitably burst bringing down _ a lot _ of collaterals with it.
</speculation>
Coinbase charges 100bps (1%) between trader & maker fee.
Just last quarter, Coinbase had:
https://help.coinbase.com/en/exchange/trading-and-funding/ex...
https://s27.q4cdn.com/397450999/files/doc_financials/2024/q4...
Note that Coinbase (like most exchanges) charges retail clients outrageously high fees (orders of magnitude more than you would pay at a competitive FX or equity broker), but institutional and whales that trade a lot very small fees.
Yet another way crypto moves money from poor suckers to insiders.
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You might be interested in reading Warren Buffett's reasoning for not investing in crypto. Basically he says crypto produces no goods, products or services, and it's only value comes from finding a "bigger fool" to pay a higher price than you did for it.
It's value is from speculation assuming future speculation will assume more future speculation
It's easy to agree with this position if you deliberately ignore that the "service" crypto provides is a decentralized, censorship-resistent, self-contained, global system of finance that is designed specifically for the modern internet age and which does not need to be under the control of any particular nation-state or company in order to function.
Otherwise, it is clear where the value comes from.
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Dunning–Krugerrands
Yeah, as a layman this MSTR explainer was an "aha" moment for me:
No, what is likely happening with all the convertible bond issues is that MicroStrategy prices the bonds in a manner to attract market neutral hedge fonds, meaning arbitrageurs. Saylor has briefly mentioned these firms, as opposed to firms seeking actual Bitcoin exposure. For issue after issue, they can be spotted as the largest bond holders by anyone with a Bloomberg terminal. By buying the bonds, even when conversion price is at a large premium, and by simultaneously shorting the shares, these arbitrage funds can lock in close to risk-free profits. Due to the convex nature of the value of the convertible bonds, the hedge funds attempt to profit no matter whether MicroStrategy shares rise or decline
Like, a broker profiting off PFOF in the stock market makes sense because there's an underlying asset generating real cashflow that people are buying into. But where is the money in crypto actually coming from? You have to pay miners, brokers, rugpulls/thefts/etc and there's barely any cashflow from the underlying assets (dApps?). But if it really is ~just a casino, with retail gamblers as the only real source of cash, it can still be profitable for smart money to pour billions in and use their PhDs to trade the vol. It goes up, it goes down, overall retail is bleeding huge amounts of cash on a sort of 5 dimensional pyramid scheme but enough gamblers go viral winning the slots/blackjack that the casino doesn't run out of customers.
Can this continue indefinitely? Maybe / probably? Seems similar to sports betting, Polymarket, retail now ~70% of options trading. The west and especially America becoming a gambling culture. The "bubble" may burst and reinflate over and over.
https://medium.com/@bdratings/all-your-models-are-destroyed-...
> Due to the convex nature of the value of the convertible bonds, the hedge funds attempt to profit no matter whether MicroStrategy shares rise or decline.
This sounds exactly like the rationale for the box spreads incident on WSB a couple years ago.
"literally cannot go tits up!"
> But where is the money in crypto actually coming from?
Where does the valuation of a payment processor come from?
Or is the objection that no one is actually using them to process payments, only to gamble? If so I'd ask for citations regarding the exact market breakdown.
https://www.oneweirdkerneltrick.com/polytope.pdf
Most of the trading is not done by retail traders but at much lower fees than that, if not being paid (market makers). I just can't make it add up.
Hyperliquid, a decentralized perp exchange, is a good proxy for ByBit’s revenues. On an average, Hyperliquid does between 800k-1M in revenue per day. ByBit is substantially bigger and easily does 50-100M in monthly revenue
I know! As I stated,
> Even considering a huge part of that volume is coming from institutional players who enjoy significantly reduced commission rates...
But the volume is huge. Even if we take the best publicly shared MM rates from Bybit (which is 1.5bp taker commission, 0.5bp maker rebate), and assume the whole volume is traded with these rates, it is still 1bp from 40B dollars, which is 4M dollars daily.
even if this is true, they'll use their entire cashflow for more than a year to cover a single loss? That's not how business works...
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ByBit's trading volume is almost certainly largely wash trading. Most unregulated crypto exchanges are rife with wash trading.
https://www.nber.org/papers/w30783