Again: That would identify Coinbase as insolvent, right? Why or why not?
I remember how amateurish Coinbase was in the early days, and you can look up a lot of the controversy on HN. People have been coming out saying they haven't processed $5k deposits, that they haven't responded to support claims in months, and on and on. If you're looking for "This exchange is run by amateurs," look no further than Coinbase.
Yet it's not that simple. Coinbase has somehow managed to become the #1 exchange to go to if you're a US citizen that needs an easy way to convert BTC into USD. So I just don't get this line that if an exchange is run by amateurs, it's a sign of insolvency. We have evidence that demonstrates that's not true.
You're not thinking probabilistically nor in terms of risk. There's no way to know for sure that an exchange is insolvent or at risk of becoming insolvent, but there are signs that increase the probability. Being run by amateurs is one such sign. Other signs are lack of insurance, persistent withdrawal issues, persistent arbitrage opportunities, lack of security reviews, poor technological practices (there are posts about the original Mt Gox codebase's poor handling of passwords for example, before Mark took it on), and misleading public statements.
If you bought the line that traditional banks were simply unable to process more than 10 wires a day, rather than it being that Mt Gox was so risky that they refused to process 10 wires a day, then you need to work on critical thinking. Likewise, exhortations that banks were placing restrictions on exchanges because "they were scared of Bitcoin" rather than being because these partners were shady and didn't have sufficient controls should have been met with suspicion.
And yes, Coinbase was also risky. The fact that things worked out doesn't mean it wasn't risky to begin with. I didn't give them any money for the first several years they were in business specifically because I saw them as high risk.
In hindsight, Coinbase had the benefit of having backing by VCs with real business experience and subsequently hiring people with experience in the space, which reduced risk.
It's entirely possible that keeping your money out of Coinbase was the correct ex ante advice, despite their subsequent success. They may well have gotten lucky and succeeded (at least so far) despite their experience.
I don't have any particular knowledge or experience with CB or BTC in general. Just pointing out that it's possible success was despite great risk, and the advice to avoid may have been entirely correct given the evidence at the time.
Do you have evidence of Coinbase's solvency? Because it seems to me this is all based on blind trust. If there is real evidence, of course that trumps the blind trust issue, but without it, it's generally a good bet that amateurs lack the skills, experience and resources to ensure proper handling of financial transactions.
Real banks are also not trusted blindly; they get audited a lot by central banks and other regulators. And they still mess up and get flamed to hell for it. The chance that amateurs in a completely unregulated field do it better is very unlikely.
I don't think its black and white. If all exchanges are run by people who don't know what they are doing not all will fail but a high percentage than if run by more experienced players.
Having said that bankers would be part of the inexperienced group.
