Monero - The Bitcoin Forum

Trading Cryptocurrency Markets

Hello! My name is Slava Mikhalkin, I am a Project Owner of Crowdsale platform at Platinum, the company that knows how to start any ICO or STO in 2019.
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Major Exchanges
In finance, an exchange is a forum or platform for trading commodities, derivatives, securities or other financial instruments. The principle concern of an exchange is to allow trading between parties to take place in a fair and legally compliant manner, as well as to ensure that pricing information for any instrument traded on the exchange is reliable and coherently delivered to exchange participants. In the cryptocurrency space exchanges are online platforms that allow users to trade cryptocurrencies or digital currencies for fiat money or other cryptocurrencies. They can be centralized exchanges such a Binance, or decentralized exchanges such as IDEX. Most cryptocurrency exchanges allow users to trade different crypto assets with BTC or ETH after having already exchanged fiat currency for one of those cryptocurrencies. Coinbase and Kraken are the main avenue for fiat money to enter into the cryptocurrency ecosystem.
Function and History
Crypto exchanges can be market-makers that take bid/ask spreads as a commission on the transaction for facilitating the trade, or more often charge a small percentage fee for operating the forum in which the trade was made. Most crypto exchanges operate outside of Western countries, enabling them to avoid stringent financial regulations and the potential for costly and lengthy legal proceedings. These entities will often maintain bank accounts in multiple jurisdictions, allowing the exchange to accept fiat currency and process transactions from customers all over the globe.
The concept of a digital asset exchange has been around since the late 2000s and the following initial attempts at running digital asset exchanges foreshadows the trouble involved in attempting to disrupt the operation of the fiat currency baking system. The trading of digital or electronic assets predate Bitcoin’s creation by several years, with the first electronic trading entities running afoul of the Australian Securities and Investments Commission (ASIC) in late 2004. Companies such as Goldex, SydneyGoldSales, and Ozzigold, shut down voluntarily after ASIC found that they were operating without an Australian Financial Services License. E-Gold, which exchanged fiat USD for grams of precious metals in digital form, was possibly the first digital currency exchange as we know it, allowing users to make instant transfers to the accounts of other E-Gold members. At its peak in 2006 E-Gold processed $2 billion worth of transactions and boasted a user base of over 5 million people.
Popular Exchanges
Here we will give a brief overview of the features and operational history of the more popular and higher volume exchanges because these are the platforms to which newer traders will be exposed. These exchanges are recommended to use because they are the industry standard and they inspire the most confidence.
Bitfinex
Owned and operated by iFinex Inc, the cryptocurrency trading platform Bitfinex was the largest Bitcoin exchange on the planet until late 2017. Headquartered in Hong Kong and based in the US Virgin Island, Bitfinex was one of the first exchanges to offer leveraged trading (“Margin trading allows a trader to open a position with leverage. For example — we opened a margin position with 2X leverage. Our base assets had increased by 10%. Our position yielded 20% because of the 2X leverage. Standard trades are traded with leverage of 1:1”) and also pioneered the use of the somewhat controversial, so-called “stable coin” Tether (USDT).
Binance
Binance is an international multi-language cryptocurrency exchange that rose from the mid-rank of cryptocurrency exchanges to become the market dominating behemoth we see today. At the height of the late 2017/early 2018 bull run, Binance was adding around 2 million new users per week! The exchange had to temporarily disallow new registrations because its servers simply could not keep up with that volume of business. After the temporary ban on new users was lifted the exchange added 240,000 new accounts within two hours.
Have you ever thought whats the role of the cypto exchanges? The answer is simple! There are several different types of exchanges that cater to different needs within the ecosystem, but their functions can be described by one or more of the following: To allow users to convert fiat currency into cryptocurrency. To trade BTC or ETH for alt coins. To facilitate the setting of prices for all crypto assets through an auction market mechanism. Simply put, you can either mine cryptocurrencies or purchase them, and seeing as the mining process requires the purchase of expensive mining equipment, Cryptocurrency exchanges can be loosely grouped into one of the 3 following exchange types, each with a slightly different role or combination of roles.
Have you ever thought about what are the types of Crypto exchanges?
  1. Traditional Cryptocurrency Exchange: These are the type that most closely mimic traditional stock exchanges where buyers and sellers trade at the current market price of whichever asset they want, with the exchange acting as the intermediary and charging a small fee for facilitating the trade. Kraken and GDAX are examples of this kind of cryptocurrency exchange. Fully peer-to-peer exchanges that operate without a middleman include EtherDelta, and IDEX, which are also examples of decentralized exchanges.
  2. Cryptocurrency Brokers: These are website or app based exchanges that act like a Travelex or other bureau-de-change. They allow customers to buy or sell crypto assets at a price set by the broker (usually market price plus a small premium). Coinbase is an example of this kind of exchange.
  3. Direct Trading Platform: These platforms offer direct peer-to-peer trading between buyers and sellers, but don’t use an exchange platform in doing so. These types of exchanges do not use a set market rate; rather, sellers set their own rates. This is a highly risky form of trading, from which new users should shy away.
To understand how an exchange functions we need only look as far as a traditional stock exchange. Most all the features of a cryptocurrency exchange are analogous to features of trading on a traditional stock exchange. In the simplest terms, the exchanges fulfil their role as the main marketplace for crypto assets of all kinds by catering to buyers or sellers. These are some definitions for the basic functions and features to know: Market Orders: Orders that are executed instantly at the current market price. Limit Order: This is an order that will only be executed if and when the price has risen to or dropped to that price specified by the trader and is also within the specified period of time. Transaction fees: Exchanges will charge transactions fees, usually levied on both the buyer and the seller, but sometimes only the seller is charged a fee. Fees vary on different exchanges though the norm is usually below 0.75%. Transfer charges: The exchange is in effect acting as a sort of escrow agent, to ensure there is no foul play, so it might also charge a small fee when you want to withdraw cryptocurrency to your own wallet.
Regulatory Environment and Evolution
Cryptocurrency has come a long way since the closing down of the Silk Road darknet market. The idea of crypto currency being primarily for criminals, has largely been seen as totally inaccurate and outdated. In this section we focus on the developing regulations surrounding the cryptocurrency asset class by region, and we also look at what the future may hold.
The United States of America
A coherent uniform approach at Federal or State level has yet to be implemented in the United States. The Financial Crimes Enforcement Network published guidelines as early as 2013 suggesting that BTC and other cryptos may fall under the label of “money transmitters” and thus would be required to take part in the same Anti-money Laundering (AML) and Know your Client (KYC) procedures as other money service businesses. At the state level, Texas applies its existing finance laws. And New York has instituted an entirely new licensing system.
The European Union
The EU’s approach to cryptocurrency has generally been far more accommodating overall than the United States, partly due to the adaptable nature of pre-existing laws governing electronic money that predated the creation of Bitcoin. As with the USA, the EU’s main fear is money laundering and criminality. The European Central Bank (ECB) categorized BTC as a “convertible decentralized currency” and advised all central banks in the EU to refrain from trading any cryptocurrencies until the proper regulatory framework was put in place. A task force was then set up by the European Parliament in order to prevent and investigate any potential money laundering that was making use of the new technology.
Likely future regulations for cryptocurrency traders within the European Union and North America will probably consist of the following proposals: The initiation of full KYC procedures so that users cannot remain fully anonymous, in order to prevent tax evasion and curtail money laundering. Caps on payments that can be made in cryptocurrency, similar to caps on traditional cash transactions. A set of rules governing tax obligations regarding cryptocurrencies Regulation by the ECB of any companies that offer exchanges between cryptocurrencies and fiat currencies It is less likely for other countries to follow the Chinese approach and completely ban certain aspects of cryptocurrency trading. It is widely considered more progressive and wiser to allow the technology to grow within a balanced accommodative regulatory framework that takes all interests and factors into consideration. It is probable that the most severe form of regulation will be the formation of new governmental bodies specifically to form laws and exercise regulatory control over the cryptocurrency space. But perhaps that is easier said than done. It may, in certain cases, be incredibly difficult to implement particular regulations due to the anonymous and decentralized nature of crypto.
Behavior of Cryptocurrency Investors by Demographic
Due to the fact that cryptocurrency has its roots firmly planted in the cryptography community, the vast majority of early adopters are representative of that group. In this section we cover the basic structure of the cryptocurrency market cycle and the makeup of the community at large, as well as the reasons behind different trading decisions.
The Cryptocurrency Market Cycle
Bitcoin leads the bull rally. FOMO (Fear of missing out) occurs, the price surge is a constant topic of mainstream news, business programs cover the story, and social media is abuzz with cryptocurrency chatter. Bitcoin reaches new All Timehigh (ATH) Market euphoria is fueled with even more hype and the cycle is in full force. There is a constant stream of news articles and commentary on the meteoric, seemingly unstoppable rise of Bitcoin. Bitcoin’s price “stabilizes”, In the 2017 bull run this was at or around $14,000. A number of solid, large market cap altcoins rise along with Bitcoin; ETH & LTC leading the altcoins at this time. FOMO comes into play, as the new ATH in market cap is reached by pumping of a huge number of alt coins.
Top altcoins “somewhat” stabilize, after reaching new all-time highs. The frenzy continues with crypto success stories, notable figures and famous people in the news. A majority of lesser known cryptocurrencies follow along on the upward momentum. Newcomers are drawn deeper into crypto and sign up for exchanges other than the main entry points like Coinbase and Kraken. In 2017 this saw Binance inundated with new registrations. Some of the cheapest coins are subject to massive pumping, such as Tron TRX which saw a rise in market cap from $150 million at the start of December 2017 to a peak of $16 billion! At this stage, even dead coins or known scams will get pumped. The price of the majority of cryptocurrencies stabilize, and some begin to retract. When the hype is subsiding after a huge crypto bull run, it is a massive sell signal. Traditional investors will begin to give interviews about how people need to be careful putting money into such a highly volatile asset class. Massive violent correction begins and the market starts to collapse. BTC begins to fall consistently on a daily basis, wiping out the insane gains of many medium to small cap cryptos with it. Panic selling sweeps through the market. Depression sets in, both in the markets, and in the minds of individual investors who failed to take profits, or heed the signs of imminent collapse. The price stagnation can last for months, or even years.
The Influence of Age upon Trading
Did you know? Cryptocurrencies have been called “stocks for millennials” According to a survey conducted by the Global Blockchain Business Council, only 5% of the American public own any bitcoin, but of those that do, an overwhelming majority of 71% are men, 58% of them are between the ages of 18 and 35, and over half of them are minorities. The same survey gauged public attitude toward the high risk/high return nature of cryptocurrency, in comparison to more secure guaranteed small percentage gains offered by government bonds or stocks, and found that 30% would rather invest $1,000 in crypto. Over 42% of millennials were aware of cryptocurrencies as opposed to only 15% of those ages 65 and over. In George M. Korniotis and Alok Kumar’s study into the effects of aging on portfolio management and the quality of decisions made by older investors, they found “that older and experienced investors are more likely to follow “rules of thumb” that reflect greater investment knowledge. However, older investors are less effective in applying their investment knowledge and exhibit worse investment skill, especially if they are less educated and earn lower income.”
Geographic Influence upon Trading
One of the main drivers of the apparent seasonal ebb and flow of cryptocurrency prices is the tax situation in the various territories that have the highest concentrations of cryptocurrency holders. Every year we see an overall market pull back beginning in mid to late January, with a recovery beginning usually after April. This is because “Tax Season” is roughly the same across Europe and the United States, with the deadline for Income tax returns being April 15th in the United States, and the tax year officially ending the UK on the 6th of April. All capital gains must be declared before the window closes or an American trader will face the powerful and long arm of the IRS with the consequent legal proceedings and possible jail time. Capital gains taxes around the world vary from jurisdiction to jurisdiction but there are often incentives for cryptocurrency holders to refrain from trading for over a year to qualify their profits as long term gain when they finally sell. In the US and Australia, for example, capital gains are reduced if you bought cryptocurrency for investment purposes and held it for over a year. In Germany if crypto assets are held for over a year then the gains derived from their sale are not taxed. Advantages like this apply to individual tax returns, on a case by case basis, and it is up to the investor to keep up to date with the tax codes of the territory in which they reside.
2013 Bull run vs 2017 Bull run price Analysis
In late 2016 cryptocurrency traders were faced with the task of distinguishing between the beginnings of a genuine bull run and what might colorfully be called a “dead cat bounce” (in traditional market terminology). Stagnation had gripped the market since the pull-back of early 2014. The meteoric rise of Bitcoin’s price in 2013 peaked with a price of $1,100 in November 2013, after a year of fantastic news on the adoption front with both Microsoft and PayPal offering BTC payment options. It is easy to look at a line going up on a chart and speak after the fact, but at the time, it is exceeding difficult to say whether the cat is actually climbing up the wall, or just bouncing off the ground. Here, we will discuss the factors that gave savvy investors clues as to why the 2017 bull run was going to outstrip the 2013 rally. Hopefully this will help give insight into how to differentiate between the signs of a small price increase and the start of a full scale bull run. Most importantly, Volume was far higher in 2017. As we can see in the graphic below, the 2017 volume far exceeds the volume of BTC trading during the 2013 price increase. The stranglehold MtGox held on trading made a huge bull run very difficult and unlikely.
Fraud & Immoral Activity in the Private Market
Ponzi Schemes Cryptocurrency Ponzi schemes will be covered in greater detail in Lesson 7, but we need to get a quick overview of the main features of Ponzi schemes and how to spot them at this point in our discussion. Here are some key indicators of a Ponzi scheme, both in cryptocurrencies and traditional investments: A guaranteed promise of high returns with little risk. Consistentflow of returns regardless of market conditions. Investments that have not been registered with the Securities and Exchange Commission (SEC). Investment strategies that are a secret, or described as too complex. Clients not allowed to view official paperwork for their investment. Clients have difficulties trying to get their money back. The initial members of the scheme, most likely unbeknownst to the later investors, are paid their “dividends” or “profits” with new investor cash. The most famous modern-day example of a Ponzi scheme in the traditional world, is Bernie Madoff’s $100 billion fraudulent enterprise, officially titled Bernard L. Madoff Investment Securities LLC. And in the crypto world, BitConnect is the most infamous case of an entirely fraudulent project which boasted a market cap of $2 billion at its peak.
What are the Exchange Hacks?
The history of cryptocurrency is littered with examples of hacked exchanges, some of them so severe that the operation had to be wound up forever. As we have already discussed, incredibly tech savvy and intelligent computer hackers led by Alexander Vinnik stole 850000 BTC from the MtGox exchange over a period from 2012–2014 resulting in the collapse of the exchange and a near-crippling hammer blow to the emerging asset class that is still being felt to this day. The BitGrail exchange suffered a similar style of attack in late 2017 and early 2018, in which Nano (XRB) was stolen that was at one point was worth almost $195 million. Even Bitfinex, one of the most famous and prestigious exchanges, has suffered a hack in 2016 where $72 million worth of BTC was stolen directly from customer accounts.
Hardware Wallet Scam Case Study
In late 2017, an unfortunate character on Reddit, going by the name of “moody rocket” relayed his story of an intricate scam in which his newly acquired hardware wallet was compromised, and his $34,000 life savings were stolen. He bought a second hand Nano ledger into which the scammers own recover seed had already been inserted. He began using the ledger without knowing that the default seed being used was not a randomly assigned seed. After a few weeks the scammer struck, and withdrew all the poor HODLer’s XRP, Dash and Litecoin into their own wallet (likely through a few intermediary wallets to lessen the very slim chances of being identified).
Hardware Wallet Scam Case Study Social Media Fraud
Many gullible and hapless twitter users have fallen victim to the recent phenomenon of scammers using a combination of convincing fake celebrity twitter profiles and numerous amounts of bots to swindle them of ETH or BTC. The scammers would set up a profile with a near identical handle to a famous figure in the tech sphere, such as Vitalik Buterin or Elon Musk. And then in the tweet, immediately following a genuine message, follow up with a variation of “Bonus give away for the next 100 lucky people, send me 0.1 ETH and I will send you 1 ETH back”, followed by the scammers ether wallet address. The next 20 or so responses will be so-called sockpuppet bots, thanking the fake account for their generosity. Thus, the pot is baited and the scammers can expect to receive potentially hundreds of donations of 0.1 Ether into their wallet. Many twitter users with a large follower base such as Vitalik Buterin have taken to adding “Not giving away ETH” to their username to save careless users from being scammed.
Market Manipulation
It also must be recognized that market manipulation is taking place in cryptocurrency. For those with the financial means i.e. whales, there are many ways in which to control the market in a totally immoral and underhanded way for your own profit. It is especially easy to manipulate cryptos that have a very low trading volume. The manipulator places large buy orders or sell walls to discourage price action in one way or the other. Insider trading is also a significant problem in cryptocurrency, as we saw with the example of blatant insider trading when Bitcoin Cash was listed on Coinbase.
Examples of ICO Fraudulent Company Behavior
In the past 2 years an astronomical amount of money has been lost in fraudulent Initial Coin Offerings. The utmost care and attention must be employed before you invest. We will cover this area in greater detail with a whole lesson devoted to the topic. However, at this point, it is useful to look at the main instances of ICO fraud. Among recent instances of fraudulent ICOs resulting in exit scams, 2 of the most infamous are the Benebit and PlexCoin ICOs which raised $4 million for the former and $15 million for the latter. Perhaps the most brazen and damaging ICO scam of all time was the Vietnamese Pincoin ICO operation, where $660million was raised from 32,000 investors before the scammer disappeared with the funds. In case of smaller ICO “exit scamming” there is usually zero chance of the scammers being found. Investors must just take the hit. We will cover these as well as others in Lesson 7 “Scam Projects”.
Signposts of Fraudulent Actors
The following factors are considered red flags when investigating a certain project or ICO, and all of them should be considered when deciding whether or not you want to invest. Whitepaper is a buzzword Salad: If the whitepaper is nothing more than a collection of buzzwords with little clarity of purpose and not much discussion of the tech involved, it is overwhelmingly likely you are reading a scam whitepaper.
Signposts of Fraudulent Actors §2
No Code Repository: With the vast majority of cryptocurrency projects employing open source code, your due diligence investigation should start at GitHub or Sourceforge. If the project has no entries, or nothing but cloned code, you should avoid it at all costs. Anonymous Team: If the team members are hard to find, or if you see they are exaggerating or lying about their experience, you should steer clear. And do not forget, in addition to taking proper precautions when investing in ICOs, you must always make sure that you are visiting authentic web pages, especially for web wallets. If, for example, you are on a spoof MyEtherWallet web page you could divulge your private key without realizing it and have your entire portfolio of Ether and ERC-20 tokens cleaned out.
Methods to Avoid falling Victim
Avoiding scammers and the traps they set for you is all about asking yourself the right questions, starting with: Is there a need for a Blockchain solution for the particular problem that a particular ICO is attempting to solve? The existing solution may be less costly, less time consuming, and more effective than the proposals of a team attempting to fill up their soft cap in an ICO. The following quote from Mihai Ivascu, the CEO of Modex, should be kept in mind every time you are grading an ICO’s chances of success: “I’m pretty sure that 95% of ICOswill not last, and many will go bankrupt. ….. not everything needs to be decentralized and put on an open source ledger.”
Methods to Avoid falling Victim §2 Do I Trust These People with My Money, or Not?
If you continue to feel uneasy about investing in the project, more due diligence is needed. The developers must be qualified and competent enough to complete the objectives that they have set out in the whitepaper.
Is this too good to be true?
All victims of the well-known social media scams using fake profiles of Vitalik Buterin, or Bitconnect investors for that matter, should have asked themselves this simple question, and their investment would have been saved. In the case of Bitconnect, huge guaranteed gains proportional to the amount of people you can get to sign up was a blatant pyramid scheme, obviously too good to be true. The same goes for Fake Vitalik’s offer of 1 ether in exchange for 0.1 ETH.
Selling Cryptocurrencies, Several reasons for selling with the appropriate actions to take:
If you are selling to buy into an ICO, or maybe believe Ether is a safer currency to hold for a certain period of time, it is likely you will want to make use of the Ether pair and receive Ether in return. Obviously if the ICO is on the NEO or WANchain blockchain for example, you will use the appropriate pair. -Trading to buy into another promising project that is listing on the exchange on which you are selling (or you think the exchange will experience a large amount of volume and become a larger exchange), you may want to trade your cryptocurrency for that exchange token. -If you believe that BTC stands a good chance of experiencing a bull run then using the BTC trading pair is the suitable choice. -If you believe that the market is about to experience a correction but you do not want to take your gains out of the market yet, selling for Tether or “tethering up” is the best play. This allows you to keep your locked-in profits on the exchange, unaffected by the price movements in the cryptocurrency markets,so that you can buy back in at the most profitable moment. -If you wish to “cash out” i.e. sell your cryptocurrency for fiat currency and have those funds in your bank account, the best pair to use is ETH or BTC because you will likely have to transfer to an exchange like Kraken or Coinbase to convert them into fiat. If the exchange offers Litecoin or Bitcoin Cash pairs it could be a good idea to use these for their fast transaction time and low fees.
Selling Cryptocurrencies
Knowing when and how to sell, as well as strategies to inflate the value of your trade before sale, are important skills as a trader of any product or financial instrument. If you are satisfied that the sale itself of the particular amount of a token or coin you are trading away is the right one, then you must decide at what price you are going to sell. Exchanges exercise their own discretion as to which trading “pairs” they will offer, but the most common ones are BTC, ETH, BNB for Binance, BIX for Bibox etc., and sometimes Tether (USDT) or NEO. As a trader, you decide which particular cryptocurrency to exchange depending on your reason for making that specific trade at that time.
Methods of Sale
Market sell/Limit sell on exchange: A limit sell is an order placed on an exchange to sell as soon as (also specifically only if and when) the price you specified has been hit within the time limit you select. A market order executes the sale immediately at the best possible price offered by the market at that exact time. OTC (or Over the Counter) selling refers to sale of securities or cryptocurrencies in any method without using an exchange to intermediate the trade and set the price. The most common way of conducting sales in this manner is through LocalBitcoins.com. This method of cryptocurrency selling is far riskier than using an exchange, for obvious reasons.
The influence and value of your Trade
There are a number of strategies you can use to appreciate the value of your trade and thus increase the Bitcoin or Ether value of your portfolio. It is important to disassociate yourself from the dollar value of your portfolio early on in your cryptocurrency trading career simply because the crypto market is so volatile you will end up pulling your hair out in frustration following the real dollar money value of your holdings. Once your funds have been converted into BTC and ETH they are completely in the crypto sphere. (Some crypto investors find it more appropriate to monitor the value of their portfolio in satoshi or gwei.) Certainly not limited to, but especially good for beginners, the most reliable way to increase your trading profits, and thus the overall value and health of your portfolio, is to buy into promising projects, hold them for 6 months to a year, and then reevaluate. This is called Long term holding and is the tactic that served Bitcoin HODLers quite well, from 2013 to the present day. Obviously, if something comes to light about the project that indicates a lengthy set back is likely, it is often better to cut your losses and sell. You are better off starting over and researching other projects. Also, you should set initial Price Points at which you first take out your original investment, and then later, at which you take out all your profits and exit the project. That should be after you believe the potential for growth has been exhausted for that particular project.
Another method of increasing the value of your trades is ICO flipping. This is the exact opposite of long term holding. This is a technique in which you aim for fast profits taking advantage of initial enthusiasm in the market that may double or triple the value of ICO projects when they first come to market. This method requires some experience using smaller exchanges like IDEX, on which project tokens can be bought and sold before listing on mainstream exchanges. “Tethering up” means to exchange tokens or coins for the USDT stable coin, the value of which is tethered to the US Dollar. If you learn, or know how to use, technical analysis, it is possible to predict when a market retreatment is likely by looking at the price movements of BTC. If you decide a market pull back is likely, you can tether up and maintain the dollar value of your portfolio in tether while other tokens and coins decrease in value. The you wait for an opportune moment to reenter the market.
Market Behavior in Different Time Periods
The main descriptors used for overall market sentiment are “Bull Market” and “Bear Market”. The former describes a market where people are buying on optimism. The latter describes a market where people are selling on pessimism. Fun (or maybe not) fact: The California grizzly bear was brought to extinction by the love of bear baiting as a sport in the mid 1800s. Bears were highly sought after for their intrinsic fighting qualities, and were forced into fighting bulls as Sunday morning entertainment for Californians. What has this got to do with trading and financial markets? The downward swipe of the bear’s paws gives a “Bear market” its name and the upward thrust of a Bull’s horns give the “Bull Market” its name. Most unfortunately for traders, the bear won over 80% of the bouts. During a Bull market, optimism can sometimes grow to be seemingly boundless, volume is rising, and prices are ascending. It can be a good idea to sell or rebalance your portfolio at such a time, especially if you have a particularly large position in one holding or another. This is especially applicable if you need to sell a large amount of a relatively low-volume holding, because you can then do so without dragging the price down by the large size of your own sell order.
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[Table] IAmA founder of Tindie.com, 'etsy for tech', that started as question on /r/Arduino in April, led me to quit my job in Sept, and just closed $500k in funding. AMA

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Date: 2012-12-20
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Link to my post
Questions Answers
I've never understood why funded start-ups get so much money -- what do you need it for, and how (roughly) do you plan to use it? Thanks. First and foremost salaries, health insurance, basic business expenses (servers, designers, travel etc). Having worked at 4 funded startups before this, most have to raise other rounds to hire more people as the business scales and you have to hire more.
EDIT: Some think this was a "sneer" sorry if it came across that way! Realistically this lasts a year at most - 18 months. Seed round should let you fully test the concept and if the business actually can grow to a much larger scale. I'm sorry if that answer sounds like it was anything but a sincere answer.
Don't answer questions. Get on the phone and get your damned site up. You're missing a huge marketing opportunity here. Oh I'm working the phones like i'm in Glengarry Glen Ross...working on bringing it back up.
Looks like you need to invest a little more in servers. You got that right!
Good man and good luck. I suppose I'm just annoyed because I really want to check out what you've done and I really want this to succeed. It's coming back up now sorry about the down time!
I think the downtime on your site is the best response to why start-ups need money. +1.
Am I to understand this that the website is down due to reddit traffic? Because I see no tindie.com. Yep.
Looks like you need to move to the cloud. On AWS..just needed moar..
Still down for me, but here's Google's cached version of the home page. We are now back up..promise..
Please hurry. my attention span is very short! Ahhh back up! Did we make it in time?
How did you find funding? I've always been curious about how that process works. Do you just call up random venture capitalist firms, or what? Good question. My experience may have been a bit atypical, but it was all through meeting people who introduced me to more people until I met my investors. I wouldn't say 'networking' because I wasn't trying to find investors. I was just meeting people, and then it would become - "You should talk to..." I didn't have a formal pitch or slide presentation. It was all through casual conversation.
To hear what my investors thought, they both wrote blog posts on the investment.
Link to versiononeventures.com
Link to www.crashdev.com
I was just meeting people, and then it would become - "You should talk to..." I didn't have a formal pitch or slide presentation. It was all through casual conversation. That is exactly what networking is. I wasn't actively trying to connect with person X & Y. Yes it was casual networking but there wasn't a motive. I think of 'networking' as people hunting for another person with an agenda..but I could be wrong..
, Congrats! CONTEXT: I currently work in corporate sales from 9am-6pm every day, and then come home and work on my web/media start-up pipe dream from 7pm-3am or so every night. It's tiring, but I'm also excited, because I feel like I am at least moving in the right direction. QUESTION: Was there a time during the process that you led two lives? When did you know that your original job wasn't just supporting some "habit"? Thanks! I used to do sales at another startup/web company, so I know how you feel very well. The short answer is yes, definitely from June to Sept when sales were doubling month over month. I was also burning the candle at both ends.
The longer answer is that I've been working on startups for 6+ years- sales, support, developer outreach, and most recently engineering. Throughout that time frame I was picking up bits and pieces along the way. Throughout that period, I felt like I was living two lives. Working the day job, tinkering on the side, but really learning. I had ideas throughout that stretch I was working on which ultimately failed or never even got far enough to get off the ground.
The one piece of advice I'd give you or anyone interested in starting a web company, learn to code. I took a year off and taught myself. I'm no where near a great engineer but now we are two years later, I was at the point to be an engineer during the day, and build Tindie in the mornings and nights.
The benefits are vast from having a better understanding of the technology that goes into a website, the thought process around building a feature, and the fact you can build your idea, throw it out there and if people like it, great! If not, you didn't lose $x,000 hiring someone else. Twice before I've paid other people to build my ideas- both failed miserably. Learn from my mistake.
Circling back to your second question, you never know if you'll take off or not. I think if you have the bug, you keep trying. In that way it is a habit. Try, fail, learn and try again. Once you've made a mistake once, hopefully you won't repeat it and therefore you are further along for your next idea.
What's your favorite product on the site? Oh thats a tough one. Here are a couple..
GAMBY - an Arduino shield for gaming on an Arduino
Robot that plays Angry Birds- a robot you can program to play Angry Birds
808 Kick Drum Clone PCB- a PCB for building your own 808 kick drum
AS3935 Lightning Sensor Board- for detecting lightning
How many people run your website on a daily basis? It was just me up until October. Thats when I brought on 2 contractor friends, and last month the first hire - so max 4, most days 2 or 3 of us are hacking away.
Free advertising for what? If the site doesn't work now, chances are I won't remember to come back. Tindie is coming back up. hopefully you'll give us a second chance! Sorry about the down time!
Reddit: World's friendliest DDoS. +1.
How are you paying yourself and others who work for you? Quitting a job for something like this seems a bit scary. Yes, with the funding, we have salaries and are hiring for a Python/django dev! PM me if you are interested!
Reddit effect? Site seems to be down. ping tindie.com. Request timed out. Request timed out. Yep bringing it back up now.
Great concept idea, congratulations on the funding! Have you done any type of market research/ niche market expansionary issues that you might run into or was this an idea that you just dived right into? Thanks! and nope, I didn't do any market research. I was interested in learning about hardware hacking, Arduino, Raspberry Pi, etc and I felt like other people were also interested. At a high level, I just figured there are more and more people getting jazzed about making electronics, and that's why I just posted the question. I had no idea, so I asked the community and went from there. I didn't expect it to become a business at all. I just saw it as a learning experience and something to have fun with.
Are you going to offer "how-to" guides? It's a good idea. Have any more ideas on what you'd like to see?
What is your price structure going to be like? Are you going to skim off the top from sales or charge the people that post their goods? 5% of each transaction (with a minimum of $1). We only make money when a seller makes money.
Congratulations! Is $500k going to be enough? Where did you come up with the name? Thanks! Not forever.. should last 12 -18 months. Tindie came from 'indie tech' - tech indie..tindie.
I have a legitimate idea for a start-up. Do you have a good resource for helping me figure out where to start? The process? How to go about getting funding? Thanks...and congrats! Cool! Without knowing the idea/audience/your background, ultimately it will depend upon getting it built, out in the wild and iterate as people give you feedback. If you are growing and in a growing market, the investors will find you.
[Confirmed OP is who he says he is.] Marketing my own products seems to be my biggest challenge right now. Do you have any plans for marketing beyond just trying to be awesome and get in the press? Thanks Dustin! Short answer yes. Longer answer, check back in a few weeks.. :)
Did you have previous start-up knowledge before going into Tindie and in this case how did you work out ownership/equity with your investors? Also as a long punt question - do you have any experience or advice about how you divide up a company and give shares/control if there are a number of people working for free until it has a value? Equity depends on how you structure the funding. You'll want to look up startup funding on quora or some info site that can tell you more about the overall landscape. I don't. Since I started Tindie by myself, that was easy. Once you have other employees you can find breakdowns on equity by position & what stage the company is at also on Quora. Do some digging on there. You'll be blown away with the info you find (its a gold mind).
Saw someone asked this above but it wasn't answered. What resources did you use to learn to code? Thanks! Started with "learn python the hard way" progressed to Google App Engine and Django. Basically learn the basics and start building. You'll learn the gaps as you go.
How was your fundraising experience in your city? What were your investors looking for most in your company (for example traction, user acquisition, team)? And finally, do you feel that the city itself is inviting and conducive to innovation? Thanks! Fundraising was fine- but neither of my investors are in Portand (Seattle and Vancouver BC).
Investor comments directly from them: Link to versiononeventures.com
Link to www.crashdev.com
On Portland, I'd say so. Portland is great because its cheaper than the Bay, you can fly down very easily, and less startup noise than Silicon Valley. Before moving to Portland I spent 4 years in San Francisco.
Sorry if you've answered this already or don't want to for privacy reasons, but what's your background? What college (if any), degree, or job did you have before working in startups? I ask as a college student interested in working with startups after graduation. Political Science degree from University of North Carolina at Chapel Hill.
Account Executive at Yelp.
All around sales at Redbeacon.
(took year off to learn to code)
Developer Advocate at SimpleGeo.
How long do you think it will be before your site is back up? Apparently reddit has once again broke a site. Back up!
Bro, do your servers even lift? They were hurting for sure.
Did the popularity of this AMA break your servers? Yes, yes it did.
How did you teach yourself to code and build a website? What resources did you use? 'Learn Python the hard way' was a start. From there worked on building a site on Google App Engine, progressing to Django. Really it was a lot of trial and error. The key things were a few friends to ask questions & stackoverflow.
Have you looked into using bitcoins as a payment method? Yes. Because of we process payments and distribute funds to sellers it would be a bit tricky right now. Trying to not add more complexity than we need to right now..
Congrats! From the Crash Dev blog post, you received 11,000 visitors to your website in the first day? How did that manage to happen? I find that very impressive!! Please share your secret juice. I seeded the userbase & products on the site before it was even launched.
Set up a landing page to let people reserve their username.
Once they've registered, let people submit products for when you launch.
Once you have enough products and the site is built, launch.
Post on Hacker News/ Reddit/ forums and get initial buzz.
Thats about it!
What on EC2? can't you just spin up more boxes? I'm new to it, so that's why I'm interested. Yep its what we did after digging into it to make sure it wasn't something else. 4 XL servers.
Awesome idea! where does the name come from? also, what was your job before this? Thanks David! 'Tech indie' tindie ... I was a web engineer at another growing startup.
Congratulations! How did you make the jump on quitting your daytime job? I'm in the same situation now, trying to get my product into an MVP state, and have already done some analysis on that jump off of the W-2 bandwagon. What would you suggest doing? What were the guidelines you were searching for? When did you KNOW it was right to quit? Congratulations again! Thanks! I knew it was the right time when for the 2nd month in a row sales were growing at 100%. A bit of a risk but at that point I figured if it were going to grow bigger, I had to give it more TLC.
As a fairy, I know how he feels. The Speech. ABC.
I wouldnt mind taking a gamble on your company, do you have an IPO? or any public shares for sale? Thanks, unfortunately we are a private company. Maybe one day..
So instead of just asking about how we killed the site.. Since it's dealing with tech stuff do think you'll have any issues with people and patents? for example, someone buys someone elses thing repackages it and sells it as their own. We haven't had that issue yet. Most of the stuff has been open hardware which ignores the patent war..(thankfully)
Would you rather fight one Onnen-sized Lucky or 100 Lucky-sized Onnens? One Onnen-sized Lucky. Link to i1028.photobucket.com
Off topic, I think your site is getting hosed. Can't connect. I fear for the slag that used to be your network switch. lol. What type of categories are you offering on there? Back up! As far as categories, anything from Audio (synths) to plant monitors. Really a wide range.
You guys sell a robot that plays angry birds? Why do I want it so badly? Hmm good question, but it is super popular (as it's currently sold out)..but we can let you know when they are back in stock!
Link to webcache.googleusercontent.com Google Cache version if anyone wants to see the site before he gets his hosting sorted out. Thanks tbends for the help. We are back up!
Did you start this AMA knowing that we would have friendly-DDOSed your site? Nope, had I known we'd have planned a bit more :)
I cant currently view the site, so I'm not sure what tindie.com looks like... but regardless, what's the monetization strategy you've outlined for investors? I'm especially interested as the topic of the site seems to be "indie" and "open source", yet making $ in these areas can be tricky. Thx. Try now..
As far the revenue, tindie gets 5% of each transaction through the site - from there it becomes a question of scale and # of transactions. The makers are actually the ones who decide if their product is open or not. If they end up making and trying to sell their products, we are a great option.
Emile.
My friend is wanting to start an etsy for free trade items made all over the world. Any suggestions? Set up a landing page to let people register.
Once they've registered, let people submit products for when you launch.
Once you have enough products and the site is built, launch.
That's a start!
I still don't understand what your startup is - what's your product? also, i can't get to your site to find any additional info either. This shit should be clear as crystal if you're trying to get exposure. We are a marketplace for people to buy & sell electronics/tech that they make. The site is back up if you'd like to see. We don't have a 'product' but are the marketplace where makers can buy & sell their goods.
I see your site features a robot that plays Angry Birds. How have you used this machine for personal internet stardom and set record shattering high scores? I haven't actually used it - I do know the dev that made it and have seen it live in person. It does work.
Awesome site, just found and joined it due to this AMA. I was wondering if you could possibly add a feature similar to Etsy's where you can heart items and save them? Either way keep it up! Edit: Also a view all items option in subcategories would be amazing as well. Yep we can. Interesting story - we had wishlists on the site before a redesign, removed them in the redesign, and no one has noticed... We are working on a new solution in the future so stay tuned!
Emilepetrone: We launched a simulated diamond jewelry site called Link to diamonius.co and it's doing well, but since we are self funded via family we don't have the cash flow to do big ad campaigns. Any advice on how to get funding that is bigger than something like Kickstarter could provide? The trick for your business is growing so fast the investors come to you. As far as ad campaigns, maybe try cheaper more creative options that drive traffic your way?
When do you expect to breakeven? Good question, won't say the time but we definitely plan on being profitable. We do generate revenue unlike most tech startups so we are well on our way.
While I understand its nice for privacy and security why does the entire site redirect to https? Wouldn't it be less load on the servers to only use it when needed. Yes, you are right.
Why doesn't your website work? Because too many people were hitting the site, melting out servers- but we are back up now :)
How much equity did you have to give up for the 500K? Unfortunately the question I'm refraining from answering..sorry about that!
Is this similar to www.makeprojects.com ? I haven't been able to visit your site to check it out :/ Check now... not really, more of a marketplace than tutorials site.
A section for amateur radio on the front page would be welcome. I've posted links to you on some of the sites I frequent. Thanks! Adding that category now. Once there are 3 products in the category, it will show up in the side bar.
Link to tindie.com
Why would anyone need a robot that plays angry birds? The other thing is you can use it for mobile app testing. Program it to run through a suite of tests..
Sounds like a neat website, can I have something from your desk? Hmm maybe what are you looking for?
Why can't I get on your website from my phone? Good question, the site was down for a bit, but should be running fine now.
of all, congrats! How old are you (serious question - I am just curious)? And you should get your site back up (as I'm sure you know). I'd love to take a look! How about now?
Now? You're still 27. Maybe 28, but I somehow doubt it. May 7, 1985.
You are at step 3 of 100 steps... You're now indebted to others and are obligated to make this a profitable venture - are you stressed yet? You should be... Yes.
Your servers are crashing because of Reddit. Is this a good or bad thing? Good thing...definitely good problem.
Hi there, me and my friend are trying to find an idea for a website service but quite frankly they are all taken and we have no inspiration at the moment. What would be advice for getting inspiration for this type of thing? Hmm just mess around. Building things. I didn't plan on making Tindie a company, it just happened that people liked it. The more you tinker and launch new ideas, the higher your chance for success.
How do you process payments and how do you pay sellers ? We handle payments through paypal, and disburse the sellers' funds via Paypal at the end of the month. So the $ stays within Paypal and we just transfer it, taking out the Tindie fee.
Why don't you use stripe ? We started with Stripe. Ultimately we could get lower fees with Paypal and international customers were asking for Paypal because they didn't have a credit card. But Stripe has done a great job -best documentation award definitely goes to them.
I've got an idea for a company, I've already worked out a business plan and parts of a marketing plan. I'm not really sure where where to start looking for VC. What would you recommend my next steps should be? Sure thing - start building the business, getting traction and growing. If you can show signs of serious growth, the investors will find you.
Could one use this site to sell a used CO2 laser? I'm thinking of selling mine, but I'm not sure yet...Not sure if this site is for products MADE by such things, or if one could sell the laser there too. Sure thing. Just mark it as Resale, and it will show up in our Resale section. We are focused on maker made, but do except other products...
I sent you a PM about offering to help bring your site up, I have the expertise, and the offer still stands. I just looked at the Google cached version, and it looks really cool and interesting. Ah thanks! I haven't had a chance to look through my PMs but fortunately we got it up. Will reply after going through a few more comments..
Looking for any work from home low wage workers? ;-) Not yet!
I love this place! I would love to order more but the budget of a student is limited. Have you considered reaching out to specific people (i.e. Joseph Prusa) to sell specific things they've made in an American market? Thanks! I have, just a matter of time. I met Prusa at the Open Hardware Summit..thanks for the reminder!
how much did you keep for $500k? Assuming you are asking about equity, i'll leave that question unanswered..sorry about that!
Hey Emile, I hope you're still answering questions. You and I have actually spoken over email a few times. I want you to know I appreciate the advice you gave me and the fact you didn't tell me to goto hell :). I've been planning on working on a community marketplace similar to tindie but in a vastly different space. How did you solve the chicken and the egg problem with tindie? Yep still here, just working my way through. Good question..still figuring that out.
Any room for parallax propeller chip? Sure thing, reselling it? We have a new resale section just for that.
Hey, I am currently a student studying Computer Science and a friend and I have been trying to work on creating a E-Commerce Website as well. Although we aren't new to coding, we are somewhat new to coding larger scale software on the web. We have been using Python within the context of the Django framework, but I am curious if in your experience you have heard of any better frameworks or alternative methods to produce an e-commerce site like yours? Check out Cartridge. Depending upon your idea, it may be perfect.
Why wouldn't ya call it etsy for techie? Hmm I dont know..never thought of it.. hmm.
What did you name your boat? Unfortunately no boat or car..
Link to webcache.googleusercontent.com. Should be running fine now..
Did reddit just Friendly DDos'd your site? Yep!
Where are you hosting? Amazon, Heroku, Rackspace? heroku ps:scale web=10 worker=5 AWS.
The site is down. Maybe the start up funds should go to servers? :p. +1.
Can I have like 2k?? It'd help out a lot. Sorry mate, maybe next time?
A bear hug that kills you with a smile. Link to files-cdn.formspring.me
that is why we cant have nice things around here =[ Its ok.. fail and learn.. we now know what to do for next time :)
The good ole' Reddit DDOS. I'll check back later. Sorry about that! It's coming back up now.
And we are back!
... Its gone. And we are back!
Invest in amazon's cloud :) 4 XL's on EC2.
Lol he is the web host. They're probably using Amazon Web Services or some other cloud setup. The OP himself would be responsible for putting in load balancers & ensuring that the site scales with traffic. At the same time, it's a great lesson learned, occasional failure is a good thing :) Yep AWS, and lesson was definitely learned.
That exact thought goes through my head each time a site gets nuked. I'll be a good and bookmark it, maybe Santa will swap me out of the naughty list. Fuck coal. Thanks Willmus! We are live now, also do not want you to get coal.
I wonder how many of us won't. It's kind of poor planning making a big marketing move like this and not notifying your web host that you're expecting a big surge of traffic. In hindsight, you are right. I wasn't expecting it to actually get much traffic. But lesson learned - and we won't make this mistake next time.
Looks like 502 of their gateways are bad. Might take a while to replace them all. Yeah it did, but we are back up!
Oh sorry guys, i was sitting on ctrl F5. I thought so! +1.
Aand it's back. +1.
It's called free advertising. *OHHH You meant the site is ACTUALLY down... nevermind then. I'll still go back, not really that big of a deal, sites go down all the time Thanks! Yeah wasn't expecting it, but we are back up!
Great, now he's gone. Nope I'm here. Edited my answer to add more context.
WE ALL WANT TO HUG YOUR WEBSITE. Link to 25.media.tumblr.com
I've now seen that comment about 8 times in this thread already. It is very, very appreciated.
The friendliest ddos. +1.
The good ol' reddit DDoS. I can't connect to it either. Just try back in a little while. :) Back up!
I just had the same problem :( Sorry about that! Back up, promise!
That reddit hug! Link to 25.media.tumblr.com
$500k won't last you very long at all. Staff costs alone will burn through that in a matter of a few months, and there's all manner of setup costs and overheads on top of that. $500k isn't supposed to last years - realistically one year to 18 months.
Ah yeah, love me some strongbad. Link to homestarrunner.com. My high school chemistry teacher introduced me to strongbad. best class in high school.
Last updated: 2012-12-25 02:33 UTC
This post was generated by a robot! Send all complaints to epsy.
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