Understanding Bitcoin with Luno
#1



Hey guys! Another Quintessential Finance for you guys. Would love to get your feedback on this.  Some food for thought whilst the Bitcoin price skyrockets.

#2
Now get luno to join this forum.

#3
(05-22-2017, 10:55 PM)JamesYellen Wrote: Now get luno to join this forum.

Hey James & Quintus, thanks for starting the thread :-) 

I'll be sure to get some more Luno Community Team members to subscribe here (and to other Bitcoin threads). In the meanwhile, if there are any Luno-specific questions, I'd be happy to help out!

#4
(06-06-2017, 12:15 PM)werner Wrote: Hey James & Quintus, thanks for starting the thread :-) 

I'll be sure to get some more Luno Community Team members to subscribe here (and to other Bitcoin threads). In the meanwhile, if there are any Luno-specific questions, I'd be happy to help out!

Why does Luno take 15-20% of my money when I covert ZAR to BTC?

#5
Tongue 
(06-06-2017, 12:15 PM)werner Wrote: Hey James & Quintus, thanks for starting the thread :-) 

I'll be sure to get some more Luno Community Team members to subscribe here (and to other Bitcoin threads). In the meanwhile, if there are any Luno-specific questions, I'd be happy to help out!

Join the Ether thread... Tongue

#6
(06-06-2017, 12:25 PM)Purply Wrote: Why does Luno take 15-20% of my money when I covert ZAR to BTC?

Hey Purply, that's a common misconception, allow me to explain: 

Luno doesn't set the price of Bitcoin. The market (of buyers and sellers; demand and supply) sets it. Luno is just the platform that allows buyers and sellers to transact. We do make money when you convert ZAR to BTC (and vice versa), but it ranges between 0% and 1%, depending on the type of transaction you make. 

Here's an article I wrote to clarify in more detail: https://www.luno.com/blog/en/post/bitcoi...-countries

So, when the price is above the "Google price" (of what Bitcoin appears to be in USD), it might seem that there's a positive premium. If you want to buy Bitcoin on a different/offshore exchange, you can do so and sell it on Luno and pocket the difference, but as explained in that blog post, you'll soon see that the actual rate (and time exposure) of buying on a foreign exchange is quite higher than that Google price. 

Hope this clarifies it!

#7
Thanks Werner, I understand everything you have mentioned.

I'm hoping you can clarify it even further though.

Lets say I buy 100k worth of BTC/ZAR from Luno, it costs 1% to do the transaction on Luno side, awesome, I now have 99k worth of BTC/ZAR

I now want to sell my 99k worth of BTC/ZAR 10 seconds later as an emergency or whatever came up. I sell everything ( not sure how much Luno asks, maybe R18.50 or a percentage again ) and I assume it costs another 1k max.

So in theory, I should get back roughly 98k in ZAR value since only 10 seconds passed since a bought it, right?

Unfortunately we know the answer is no, I'll probably get back maybe 80k if I'm lucky.

#8
Hey Purply,

No problem, happy to explain that one too :-)

If if the market is very liquid (lots of supply and demand), then yes, just 1% will be charged on the buy and 1% on the sell (or you can place your order as a limit order and 0% will be charged, but you'll have to wait for someone else to close your order --buy your Bitcoin or your rand you placed in that order).

But what you're getting at is still about the supply and demand (which isn't unlimited):

If you head over to the Luno Exchange (https://www.luno.com/trade/XBTZAR) you can toggle the "depth" view to see what the supply and demand look like in real time (or scroll through the order book on the left). This shows you all of the buyers (with ZAR) and sellers (with BTC) and how much they are interested in buying/selling.

If you look at the price of any financial instrument, say MTN shares, you also won't have an unlimited supply thereof. If you wanted to buy R10,000 of MTN stock, fine, there would be enough available at the market price. If you then immediately sold the R10,000 worth of MTN stocks for ZAR again, you would pretty much get the R10k back (minus some trading fees).

But, if someone came with a crazy amount like R500b ZAR, there simply won't be R500b worth of stock available at that price. So, the (crazy) buyer will eventually pay a higher and higher price on their stash of MTN shares until their money is used up. After their R500b is depleted, they could try to sell all those MTN shares in one dump, but again, there won't be enough of a market of buyers interested in buying it ALL at a single price and they'll lose a lot of money in the process.

Since Bitcoin is new (and really small, compared to, say, stock or forex markets) it means that with as little as R100,000 you could momentarily move the exchange rate. In my MTN-example above, what hedge funds do is to buy large amounts of shares over the counter (from a single seller at an agreed-upon price) or they stagger their purchases. I suggest that you always look at the depth chart (or the order book) on the Luno exchange before buying large amounts of Bitcoin in one go and to also stagger your purchases over a few minutes, hours or even days, depending on the volume.

More info on using our Exchange, here: https://www.luno.com/help/en/folders/11000004959

For the vast majority of customers, who just want to buy smaller amounts of Bitcoin, this obviously won't be a problem. Also, trading volumes and market depths just keep getting better as more and more people use the platform.

#9
This has been one of the best replies on this subject matter thus far, thanks so much for you time and insight on this one Werner

I will gladly try this approach as it does sound like it has merit, will revert back once I've completed my next batch of bitcoin purchases, which might take awhile as I'd prefer the price to drop ALOT before then haha.

#10
Nice one, I'm really happy to hear that :-)

As for some (unsolicited) buying advice: I think it's generally best to ignore the short term noise (and to never spend more than you can afford to lose) and break your purchases up and "dollar-cost average": spend a set amount of rand each week, month or quarter to smooth out the crazy volatility. Set a recurring Google alert to remind you or, alternatively, set a recurring weekly payment from your bank to Luno. You'll receive an email from Luno each time your new deposit arrives (and you can manually buy or set a limit order for your preferred price on the exchange).

My colleague wrote a good piece about DCA here: https://www.luno.com/blog/en/post/dollar...ng-bitcoin

#11
DCA has always been my preferred method when investing on the JSE, which I've passed onto crypto.

The given example and explanation on the link still remains helpful, thanks.

#12
(06-06-2017, 12:15 PM)werner Wrote: Hey James & Quintus, thanks for starting the thread :-) 

I'll be sure to get some more Luno Community Team members to subscribe here (and to other Bitcoin threads). In the meanwhile, if there are any Luno-specific questions, I'd be happy to help out!

Welcome to the forum Werner! Thanks for taking the time to sign up, much appreciated.
Forum Admin | Platinum Wealth
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#13
@werner welcome! Now things are happening.

#14
Please correct me if I'm wrong, when placing buy orders on the Luno exchange that aren't filled immediately, the transaction cost will be 0%?

If this is correct, what is meant by "immediately" ?

#15
So if you offer to sell above market price, no one will want to buy from you because they can get a better price at market price. You will have to wait for price to increase above your offer for it to sell.

If you offer to buy at below market rates, no one will want to sell to you because they can just sell it at market rate for a better price.

The above mentioned is called market making. You're essentially "betting" on what the price of Bitcoin will rise or fall to. No fees are charged on these "bets".

If you offer to buy at above market rate, everyone will want to sell to you because that's the best rate they will get at the moment. It will be filled out immediately.

If you offer to sell at below market market rate, everyone will buy from you as this is a bargain and cheaper than current market rates. It will also be filled immediately. These are called market takings because you're using the current prices of the market. Luno will charge you a fee for this.

That's how I understand it and I hope it helps!






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