Potentially stupid market structure question of the day: are 100% of Coinbase crypto trades executed on-chain? Is it possible for trades to happen off-chain?
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Thanks for the helpful responses. Potentially stupid question #2: if all CB is doing is updating database entries, how do CB trades impact the price of the underlying? When does CB interact with the blockchain to settle net buy/sell demand?
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They're all book entry transactions. The only on chain events are deposits/withdraws. As for if that is the case, how does CB impact price? All of traders/market makers are looking for arb opportunities which then bring prices in line +\- transaction fees + other costs.
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the public BTC chain is not a "SIP" to which all trades must be reported like equities; it's more a ledger of wholesale movements. it contains things that aren't trades, and misses many trades. MMers have across venues, and trades are real, so arbitrage is the linkage.
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or that's the theory, at least. as
@jgreco said, there's a counterparty credit dimension, as well as some funding differences, that can affect prices in ways you don't see in traditional exchange markets.
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It's no different from 100x ETrade customers trading AMC stock amongst themselves. A trade between two or 100 ETrade customers would just update entries internal to ETrade.
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That was perhaps not the best analogy, because two ETrade customers trading between themselves would likely still have their orders go through a lit exchange, but in terms of clearing at the DTCC, there's nothing to clear.
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A market clearing price can be reached with no on chain transactions you just need buyers and sellers. The order book doesn’t require any block chain settlement. Automated market makers likely fulfill the role of making on chain transactions when arbitrage opportunities arise.
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I’m not sure this is even a thing. The demand to trade between assets is contained to the exchange and distributed via arbitrageurs. Or so I thought…
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