Fair enough, but many investors have been burned by Madoff style, LTCM, MF Global, Enron style players that turned out to be frauds. The notion that fraud only exists in crypto is patently false. MF Global was a prime bond dealer, for heaven's sake. So, true, exchanges are likely to be more solid, but some very trusted entities turned out to be fraudulent and conned extremely sophisticated investors. The thing is - nobody in crypto denies that there are shady exchanges. But crypto haters all have this fantasy that 1) ALL crypto exchanges are equal and 2) conventional markets are totally fraud-free. It's hilarious the blindness. The smart traders have learned which exchanges are legit and which are not. Binance was hacked once, they owned it in real time, it was minor and they made every user whole. The next time, they crushed the hackers who actually lost money on the attempt. It was beautiful and nothing since then.
Not if Kraken makes you whole. You do not suffer a financial impact if the exchange can cover it and does so. The good ones will, the bad will not. Different exchanges have better and worse security. That's what I've been saying again and again and again. Amazon is not the same as Dollar Tree in language you might understand.
No, it is not. You have to demonstrate that for EACH platform. If one is robust and resilient, then it remains unhacked. Bitmex has never been hacked (though it may be shady for other reasons). That's because they have a VERY strong security that hand checks each withdrawal and only operates in Bitcoin. QuadrigaCX is NOT Binance. There is a WORLD of difference in the two, both in terms of sophistication, security systems and response, and capital reserves to manage any hack. Your analysis needs more depth, imo.
Again, "in language you might understand" isn't helpful to the conversation or up to your standards of civility. There's not doubt that some crypto exchanges are less risky than others. It's also silly to maintain that any of them have the same low risk level as CME, let alone that you or I are able to discern which ones approach that level. As you may remember, there was a time when Mt. Gox was unimpeachable in the world of crpto exchanges and handled 70% of Bitcoin transactions. In November of 2013 you would have been saying the same thing about Mt. Gox as you're saying about Bitmex today. Six months later it was gone. In hindsight, certainly Mr. Gox had nothing on Bitmex of today, but you have no idea what hindsight will show in six months time and I can guarantee that if you were trading BTC in 2013 you wouldn't have flagged Mt. Gox as a risk then (although happy to see your contemporary posts proving me wrong). I get it, you're an evangelist but that's leading you to decide that anyone who points out shortcomings is either ignorant or a "hater". That's cult thinking, not rational investor thinking, and you're better than that. Everything has shortcomings, I'm happy to share a list of the CMEs as part of a separate discussion. Doesn't make me a CME "hater" or someone who doesn't understand CME. However, no regulated commodity exchange has failed to clear a trade. Dozens of deregulated crypto exchanges have. That's just undeniable. Yes, there are lots of risks of bad actors and failures in any type of investing, but I'm not talking about that, I'm talking very specifically about the risk that the exchange fails. And that demonstrable risk of failure is perceived as a risk by the majority of trades, which is responsible for the "risk free" arbitrage opportunity that is in fact not "risk free". The funny part about all of this is that this opportunity only exists because not everyone in the financial world is as enthusiastic about this as you are. If you convince all the people like me in the world that this is risk free, the opportunity goes away. So why, again, are you trying to convince us that it's risk free instead of just taking advantage of our ignorance and "haterness" to make money? Heck, I might only be posting this line of thought to preserve the opportunity for myself!
While it's absolutely possible that a large spot exchange could get hacked and lose funds, in practice over multiple hacks over the last few years, the reputable exchanges have made their clients whole. In fact even some of the smaller ones have compensated users for hacks. Your assumption that just because they are all unregulated they are all in the same risk universe is incorrect. The regulated exchanges you refer to here are CME/ICE BAKKT. Of course they wouldn't be hacked they don't have spot/physical. Why would anyone hack a futures exchange? Your argument is a strawman. LedgerX? They stopped accepting retail a long time ago. Also, pretty sure they are unregulated too. And in the same line of thought, what does the 51% on BTC Gold have anything to do with this discussion other than something you can point to? We are not talking about BTC Gold, drop the strawmans. My point with CME futures prices is that you insinuate that only regulated exchanges are worth trading/reliable counterparties, which is incorrect. CME/BAKKT crypto products could disappear overnight and it wouldn't affect the crypto space/prices at all. A large spot exchange disappearing overnight would. There are 2 points you are mistaken here on given your assertion: 1)Since CME is a regulated exchange and has no counterparty risk, CME BTC futures shouldn't diverge from spot because the cost of carry is 0 for digital assets. So why do they? 2)Again, you are mistaking futures basis for some notion of "risk premium" of counterparty risk. If you actually knew what you were talking about on this point, you would notice that most of the futures prices on non regulated exchanges are roughly the same. The prices of futures on these exchanges have nothing to do with the counterparty risk. Also you completely did not address the fact I stated that if an exchange has serious counterparty risk, it will show up in that exchanges spot price for assets. Again, you need to research more. To sum up, although you may have some knowledge of the space there is much more you need to know. Don't apply traditional asset thinking to digital assets.
That's the million dollar question. I have my theory and it's plausible but first I want to hear the answer from @Sig before I give away the cake.
I very clearly articulated a clear explanation several times. Unlike you, I'm humble enough to realize I might be wrong, but brave enough to at least put a defensible theory out there. You are so busy fighting about how many angels fit on the head of a pin (it was only 21 hacked exchanges, not 22....) that you have either missed that explanation or decided that since you disagree with it than it doesn't exist. And it's clear that unlike some of us, you weren't trading BTC in 2013 when Mt. Gox, the dominant exchange handling 70% of the volume that everyone trusted failed abruptly with the resultant loss of 650,000 BTC, were you? Let me summarize for you again. Mr. Market doesn't care what you and the other crypto evangelists believe. It believes that there is risk involved in arbitraging the futures curve on an unregulated crypto exchange and that risk is exactly reflected in the futures vs spot. If Mr. Market didn't believe that, then it would be arb'd out of existence, therefore, ipso facto, the price difference is caused by the market belief. You may not be aware of this, but your assumptions requires that anyone who isn't participating in this opportunity is too stupid to understand the opportunity, or in your words is a "hater". Any time you're at the poker table of the market and your strategy depends on an assumption that everyone else is stupid or a "hater".....well let's just say this isn't a great position to be in. And once again, one has to wonder why are you trying so hard to convince everyone who isn't already arbing this thing out of existence to arb it out of existence? Is it possible you're maybe just a little too passionate about this?
See you wrote all that above and yet did not give any points to refute any of my points. I'm starting to think it's because you can't. So then I ask again, what's your explanation that CME BTC futures trade at a premium if there is no counterparty risk with CME as you state the futures on non regulated exchanges trade higher because there is counterparty risk. You contradict yourself by saying the bolded underlined above, and saying CME is a regulated exchange with no counterparty risk. Since you brought up Mt.Gox, you clearly knew when I brought up the point that when spot trades higher on an exchange out of line across exchanges, it means the exchange is having counterparty issues. Yet you did not address it and doubled down on a ridiculous claim that it was the futures not spot that indicated that counterparty risk. Stop getting emotional, unless you are melting down with a lack of an explanation.
Settle down, only one person is melting down here and it's not me. There's currently no risk free way way to arb the CME contract. If there was a broker who allowed you to hold BTC in your account (none that I know of that also allow CME trading?) or if there was a bitcoin ETF that traded on a regulated U.S. exchange and allowed full redemption and creation rights, that arb would collapse to a small amount that reflected the asynchronous exposure you end up with from trading hours. See, what I've done here? I've not only shared an explanation and admitted I could be wrong, but also provided a way I can be proven wrong. Are you capable of the same? So again, settle down, share your explanation, and we can discuss it and hopefully we'll both learn something. Otherwise what's the point of this conversation?