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I asked this question in another thread but really haven't seen a satisfactory response yet: David Karpeles admitted at trial to running bots on Mt. Gox, and s

I asked this question in another thread but really haven't seen a satisfactory response yet: David Karpeles admitted at trial to running bots on Mt. Gox, and such bots were implicated in the rise of Bitcoin's price up to $1000 in 2013. Bitcoin has experienced a similar jump in value over the past year. If Mt. Gox successfully manipulated the price of Bitcoin using bots in the past, how do we know other exchanges aren't doing the exact same thing right now? Don't get me wrong, I think there is potential value in Bitcoin as a distributed/frictionless method of money transfer, however as an asset/investment I think it's extremely risky and I'm not necessarily sure the run up to $4000 reflects its underlying value: the ecosystem is largely unregulated and as such there is a greater risk of fraudulent activity and manipulation that would not be permitted under a regulated market. Especially if the pseudonymous nature of Bitcoin transactions makes such manipulation harder to detect. I am curious if anyone who has recently put money into Bitcoin has thought about this, and if so, what made them to decide to invest anyway? Am I just being paranoid?

mrb 9y ago
«how do we know other exchanges aren't doing the exact same thing right now» It's very simple. Before 2013 MtGox was the largest Bitcoin exchange in the world with the most volume (something like 80-90% of the market—I don't remember the exact numbers). They effectively defined the price and the bot could control it. Nowadays there are dozens/hundreds of exchanges around the world. One bot trying to increase the price on one exchange would get severely arbitraged through other exchanges, and the cheating exchange would be quickly driven into insolvency. Also Mark Karpeles was a sole proprietor of a private company. He had free reigns and no one to answer to. It was easy for him to decide to run this fraudulent bot. The chance of the same illegal manipulation happening at very high profiles exchanges like Coinbase/GDAX or Gemini who are VC-funded and run by respectable executives is very low.
- nodamage 9y ago
  So you think there's zero chance of collusion between exchanges as well? Isn't there some evidence that bots are currently active on major exchanges? I keep hearing about suspicious activity on Bitfenix... aren't they one of the largest exchanges? > The chance of the same illegal manipulation happening at very high profiles exchanges like Coinbase/GDAX or Gemini who are VC-funded and run by respectable executives is very low. Yeah, I don't expect this to be occurring at US companies who presumably could be prosecuted for fraud. But what about other companies that are based in countries with less regulation (or with regulators that could be paid to look the other way)?
  - mrb 9y ago
    The Bitcoin market cap grew from $1 billion in 2013 to $65 billion today. The larger it gets and the more exchanges exist, the more difficult it becomes to control/cheat the price with a fraudulent bot like MtGox did. You seem to be confusing legitimate bots (written by traders to use an exchange's API) with the MtGox fraudulent bot (which was using fake dollars injected in the trading engine by Karpeles). These are 2 very different things. Of course legitimate bots exist, but I don't believe that any big exchange today (including Bitfinex) runs fraudulent bots capitalized with fake money.
canoebuilder 9y ago
It's possible that similar things could be occurring, knowing bitcoin, probably expected. One thing to note is that the vast majority of "mainstream" interest and institutional investment came about because of the surge in pricing caused by the willy bot[0]. People saw this and interpreted it as broad-based interest and demand for btc, while the actual situation was more about a French Jewish Japanophile, deploying some shenanigans in an unregulated market trying to get the head of his embattled exchange business back above water. So in a way the willy-bot situation has triggered all the subsequent irrational exuberance. [0]https://willyreport.wordpress.com/2014/05/25/the-willy-report-proof-of-massive-fraudulent-trading-activity-at-mt-gox-and-how-it-has-affected-the-price-of-bitcoin/ https://willyreport.wordpress.com/2014/05/25/the-willy-repor...

mrb 9y ago

«how do we know other exchanges aren't doing the exact same thing right now» It's very simple. Before 2013 MtGox was the largest Bitcoin exchange in the world with the most volume (something like 80-90% of the market—I don't remember the exact numbers). They effectively defined the price and the bot could control it. Nowadays there are dozens/hundreds of exchanges around the world. One bot trying to increase the price on one exchange would get severely arbitraged through other exchanges, and the cheating exchange would be quickly driven into insolvency. Also Mark Karpeles was a sole proprietor of a private company. He had free reigns and no one to answer to. It was easy for him to decide to run this fraudulent bot. The chance of the same illegal manipulation happening at very high profiles exchanges like Coinbase/GDAX or Gemini who are VC-funded and run by respectable executives is very low.

nodamage 9y ago
So you think there's zero chance of collusion between exchanges as well? Isn't there some evidence that bots are currently active on major exchanges? I keep hearing about suspicious activity on Bitfenix... aren't they one of the largest exchanges? > The chance of the same illegal manipulation happening at very high profiles exchanges like Coinbase/GDAX or Gemini who are VC-funded and run by respectable executives is very low. Yeah, I don't expect this to be occurring at US companies who presumably could be prosecuted for fraud. But what about other companies that are based in countries with less regulation (or with regulators that could be paid to look the other way)?
- mrb 9y ago
  The Bitcoin market cap grew from $1 billion in 2013 to $65 billion today. The larger it gets and the more exchanges exist, the more difficult it becomes to control/cheat the price with a fraudulent bot like MtGox did. You seem to be confusing legitimate bots (written by traders to use an exchange's API) with the MtGox fraudulent bot (which was using fake dollars injected in the trading engine by Karpeles). These are 2 very different things. Of course legitimate bots exist, but I don't believe that any big exchange today (including Bitfinex) runs fraudulent bots capitalized with fake money.

canoebuilder 9y ago

It's possible that similar things could be occurring, knowing bitcoin, probably expected. One thing to note is that the vast majority of "mainstream" interest and institutional investment came about because of the surge in pricing caused by the willy bot[0]. People saw this and interpreted it as broad-based interest and demand for btc, while the actual situation was more about a French Jewish Japanophile, deploying some shenanigans in an unregulated market trying to get the head of his embattled exchange business back above water. So in a way the willy-bot situation has triggered all the subsequent irrational exuberance. [0]https://willyreport.wordpress.com/2014/05/25/the-willy-report-proof-of-massive-fraudulent-trading-activity-at-mt-gox-and-how-it-has-affected-the-price-of-bitcoin/ https://willyreport.wordpress.com/2014/05/25/the-willy-repor...