Why there is no liquidity and why prices keep rising

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Steve Sokolowski
Posts: 4421
Joined: Wed Aug 27, 2014 3:27 pm
Location: State College, PA

Why there is no liquidity and why prices keep rising

Post by Steve Sokolowski » Fri Jan 08, 2021 10:08 am

Cryptocurrency prices recently have been rising at a far more astonishing pace than any time in their history. One of the reasons for the extreme price rise is that there is little liquidity on exchanges, particularly on the sell side. People want to buy, but there are no coins available for them to purchase, so their only choice is to offer more and more for what is available.

One might be tempted to argue that the lack of coins on the sell side of the order books is a sign of extreme demand from people who want to get in on the action at any cost, but I fear that might be a critical mistake. In this post, I'm going to show how, eight years after Mt. Gox crashed the first bubble of 2013, exchanges have become - yet again - the weak point in the industry.

On December 25 and 26, anticipating that coins might hit my targets, which I discussed at viewtopic.php?f=11&t=6423 and viewtopic.php?f=11&t=7461, more quickly than expected, I began applying for exchange accounts at several exchanges. To avoid excruciating detail, I'll limit my discussion in this article to six of them: Kraken, Binance US, Paxos, Gemini, Bitflyer, and Bittrex. While we have corporate accounts at three of these exchanges, I do not have a personal account at any exchange and have desperately been trying to obtain one, on the grounds that it is probably simpler for tax paperwork to not have to use a corporate exchange account to sell personal assets.


Kraken

At Kraken, I was able to get approved for their base level of service within a few days, but when I applied to increase my limits and gain access to their OTC services, I heard nothing. On January 5, I waited for 30 minutes in a chat queue to speak to a customer service representative, who eventually said that her only option was to submit a support ticket. The next day, I received the following message:
Hello Stephen,

This is Anita with Kraken's Pro Verification team.

We are currently working on reviewing your account. I will reach out to you with an update as soon as I have one, or with any additional follow up questions or requests that we might have.

We appreciate your patience and understanding.

Kind Regards,
Anita
Kraken Client Engagement
https://www.kraken.com
I haven't heard from them since, and it's now been more than 12 days since I applied for the service.


Binance US

The original Binance suddenly closed our account without warning, stranding Prohashing with now-worthless tokens like Vechain Thor, which are not traded at any other exchange that accepts US customers. (If you want to buy these tokens, please contact us.) We applied for both corporate and personal accounts at Binance US in late December.

About 30 minutes before this article was posted, Binance US finally approved withdrawals on the personal account. However, the OTC desk has yet to reply to an inquiry about higher limits, and the corporate account is mired in paperwork and reviews.


Paxos

I was told that Paxos also has an OTC trading desk, so I tried to sign up for an account with Paxos. Their system failed to recognize my passport multiple times, and now the account is under review.


Gemini

At Gemini, they apologized for "high application volume" while the account is being reviewed:
Image


Bitflyer

I applied for a Bitflyer personal account more recently than the other accounts, and it also has not yet been processed.


Bittrex

At Bittrex, I tried to create an account for personal trading, but their support immediately closed the account, stating that I had duplicate accounts and had to select one of them to continue. I first informed them that the pool needed a development account that could not have any money in it, because how was it to use the corporate account if it didn't have a test account? I finally gave up on that, but then, rather than just closing the most recent account, they requested a ridiculous amount of paperwork. Look at this comical exchange of tickets:
Steve
Dec 26, 2020, 10:32 PST

I tried to sign up for a new account at Bittrex, in preparation for selling my coin savings in the coming weeks.

Unfortunately, the account was disabled immediately. What is the problem?
Madeleine Salvator (Bittrex Support)
Dec 26, 2020, 14:05 PST

Hello,

Bittrex Terms of Service permits individuals to have only one account. You will need to complete the account consolidation process if you have an existing account (with a balance) that has been disabled due to having an additional account.

If you have opened a new account to apply for a corporate account for your registered business entity, your corporate account will be re-enabled, once approved.

You can apply for a corporate account here:
https://support.bittrex.com/hc/en-us/re ... 0000026631

The best way to consolidate accounts is to withdraw your funds to the account of your choice and provide us with the email addresses of the accounts you want us to close.
......
SteveSokolowski
Dec 26, 2020, 15:26 PST

Hi,

Thanks for your reply.

I assume that the other account is likely (censored)@prohashing.com, if the reason for denying an account is having a duplicate account.

I ask that you consider waiving this requirement in this case. The dev account is being used to test software for the Prohashing mining pool, which has a corporate account with Bittrex. As you can see by dev's account history, it has small balances that are used to test the company's trading software. The account has little money in it so that errors in the new software don't cause enormous losses in the main corporate account.

I want to open a personal account to sell (censored) bitcoins and (censored) litecoins of my personal property. For tax reasons, I don't want this money to go through the corporate account or through the development account. If I am audited, I want to be able to show that the money is separate from the business.

Richie Lai, who contacted me on December 7 for help with fixing Dogecoin transactions that Bittrex was unable to send to its customers, can vouch that Prohashing does have a corporate account at Bittrex and that we are reputable people. If necessary, it would be fine for you to reassign ownership of (censored) to another Prohashing employee.

Thanks for your help!

-Steve Sokolowski
Madeleine Salvator (Bittrex Support)

Dec 26, 2020, 15:33 PST
Hello,

Thank you for your interest in a Bittrex Corporate Account!

Additional information regarding corporate and exchange accounts (including a pre application checklist) can be found here: https://support.bittrex.com/hc/en-us/ar ... nt-Request

To be approved for a Corporate Account, please apply here: https://support.bittrex.com/hc/en-us/re ... 0000026631

Best Regards,

Madeleine Salvator @ Bittrex
Follow us on Twitter @ https://twitter.com/BittrexExchange
Follow us on LinkedIn @ https://www.linkedin.com/company/bittrex/
Hi,

You still haven't answered the actual question that I asked you in my previous messages. You answered my response with a form response that was nonsensical - I already have a corporate account.

Please read the text more carefully and escalate this situation as I asked.

Thanks,

-Steve Sokolowski
Hello again,

Thanks for your response. At this time our system does not show that either of your accounts has been approved as a Corporate account so we will need to proceed with the account consolidation process. Please reply with the following items when you are ready and we will be more than happy to assist you.

1) Account email to keep

2) Account email to close

3) Proof of Identity photos. Example here: https://tinyurl.com/btxverify

-The 3 photos must be an image of you looking directly at the camera, another image of you looking off to the right, and a final image of you looking off to the left.
-The paper and the ID must both be visibly held in your hands; they cannot be attached to each other or any other surface.
-The paper must say “Bittrex” and must have today’s date (both handwritten).
-The photo must be blur free, glare free and NON-mirrored. Shoulders and arms must be visible.

Disclaimer: Any images that do not satisfy these requirements will not be accepted under any circumstance.

Best Regards,

Madeleine Salvator @ Bittrex
Follow us on Twitter @ https://twitter.com/BittrexExchange
Follow us on LinkedIn @ https://www.linkedin.com/company/bittrex/
This exchange certainly doesn't exceed Coinbase's record for worst customer service in the world, but it's starting to approach that. As to Coinbase itself, I will never do business with them again in any way, no matter what they change, because of the incidents at viewtopic.php?f=11&t=5967.


Conclusion

Why are the responses of six exchanges important? It's because after 14 days since my initial application on December 25, I still do not have an account where I can sell bitcoins, ETH, or litecoins.

There are many graphs circulating about the supposed "lack of supply" and the "thin order books." There may indeed be a lack of coins on exchanges, and it's clear from simply looking at the order books that a few blocks of any of these coins can make a significant impact on the price. Analysis has shown recently that money is flowing out of exchanges much more quickly than it is coming in.

Giving that it now looks like the cycle might reverse this month, these exchanges may be making a rational decision not to hire additional staff to avoid layoffs. In the meantime, however, that decision just causes the cycle to go higher. Whatever the cause for their slow responses, there are obviously not going to be coins coming into exchanges if nobody can create accounts to bring the money in.

This slow processing of seller accounts is, in addition to GBTC's "free money" effect, are inflating an enormous bubble right now. People who are saying this bubble is completely caused by "organic demand" are partially wrong. There certainly is a huge demand for cryptocurrency, but we won't know what that demand really is until these exchanges provide timely service in opening accounts. In addition to the GBTC premium, I've now added a "delay to opening new account" metric to what I'm watching. Once exchanges start processing new accounts in a reasonable amount of time, then coins will actually be able to be sent to them, and the next bear cycle will start.
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