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Market manipulation is a big risk here. Basically "wolf of wall st" style shenanigans, or the stuff that salomon brothers did in the mortgage bond market in th

Market manipulation is a big risk here. Basically "wolf of wall st" style shenanigans, or the stuff that salomon brothers did in the mortgage bond market in the 1980s. Essentially a few big investors who've cornered the market, acting in concert, can move the market essentially according to their own desire. I read yesterday that the order book for btc was $33 million (don't know what the daily volume is; could anyone enlighten me? Not an active bitcoin follower but have experience in markets). The top 1,000 BTC holders own about $100 Billion at current prices. Even a few of them could concertedly buy small amounts of BTC at rapidly increasing prices, then if that leads to a huge rally and increase in volume (like yesterday) they can sell into that volume and make a nice profit. Lots of other things like that they can do: https://www.girardgibbs.com/securities-fraud/stock/market-manipulation/examples/ https://www.girardgibbs.com/securities-fraud/stock/market-ma... Not saying they do those things, but that is a real risk in unregulated, concentrated markets where there is no real way to quantify value EDIT: montecarl pointed me to the gdax site, also https://data.bitcoinity.org/markets/price/6m/USD?c=e&t=l https://data.bitcoinity.org/markets/price/6m/USD?c=e&t=l shows price and vol data (im a noob) and it looks like volume is much higher, on the order of 100-150k BTC / day so over $1B USD volume at $17K / BTC.

isolli 9y ago
That's why I would be worried about investing in Bitcoin futures. I could not find any information on how the settlement price will be calculated, but I assume it would be easy to manipulate the price for a short time around the settlement date.
montecarl 9y ago
Mouse over the orderbook on this page: https://www.gdax.com/trade/BTC-USD https://www.gdax.com/trade/BTC-USD It will show you how much money you need to move the market on that exchange.
- aaavl2821 9y ago
  thats a lot more volume than i thought based on the comment i read yesterday. also just found this site https://data.bitcoinity.org/markets/price/6m/USD?c=e&t=l https://data.bitcoinity.org/markets/price/6m/USD?c=e&t=l which has historical price and volume data. looks like 24 hour volume has generally been around 100-150k BTC / day could still manipulate markets with 40% concentration and that much liquidity, but would be much harder than if the daily volume was on the order of tens of millions like i mistakenly thought
- deleted 9y ago
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deweller 9y ago
I don't understand the idea that a whale could move the market and make money off it. To move the market, you need to spend money. The only way it works is if you create some kind of momentum and the market continues to go up. But rational markets will sell into the artificial momentum and the price will be be close to where you started. The net result is that you lost money. I believe there is momentum in markets (they are definitely NOT perfectly rational). But is there enough momentum to really make money with this scheme? I highly doubt it. Also consider that a group of whales would have to work together to do this. Do you really trust your whale friend to buy at the same time you do? What if he front-runs you and you end up buy the bitcoin he just bought last week for 10% lower? I don't buy the theory that there are a group of "whales" sitting around planning how to manipulate markets together.
- aaavl2821 9y ago
  You are right, it doesn't always work, but it can work, and work really well. The way you make money is by creating volume and momentum. You buy in a low volume market, where it's cheaper to move the market, then if volume takes off and price momentum builds, you can sell much more volume without moving the market. We aren't talking about people liquidating their entire stakes, but you can make a few million here and there easy. There is strong incentive to collude: collusion unlocks the potentially powerful profit engine of market manipulation. You make more money working together than you could on your own. If people try to screw each other too much the whole thing falls apart, as market movements are no longer predictable to the colluders, and their advantage is gone. So yeah collusion can break down in cases but as a rule people understand they make more money together If you don't buy that theory, id recommend reading about Solomon brothers or even watching the wolf of wall st. Martin shkreli did this stuff too. I think it was Jim cramers tactic for a while (talk your book on tv, get retail volume in small cap stocks and sell into that) JP morgan and other early wall st financiers did this sort of stuff. It happens in the real world even now; I've heard from friends at big banks that they know people who will sometimes do stuff like this market manipulation is how people make real money in unregulated markets. cornering the market is and always has been the holy grail for market manipulation and profiting in unregulated markets. It's why regulation exists. Its a theory in the same way that evolution is a theory

isolli 9y ago

That's why I would be worried about investing in Bitcoin futures. I could not find any information on how the settlement price will be calculated, but I assume it would be easy to manipulate the price for a short time around the settlement date.

montecarl 9y ago

Mouse over the orderbook on this page: https://www.gdax.com/trade/BTC-USD https://www.gdax.com/trade/BTC-USD It will show you how much money you need to move the market on that exchange.

aaavl2821 9y ago
thats a lot more volume than i thought based on the comment i read yesterday. also just found this site https://data.bitcoinity.org/markets/price/6m/USD?c=e&t=l https://data.bitcoinity.org/markets/price/6m/USD?c=e&t=l which has historical price and volume data. looks like 24 hour volume has generally been around 100-150k BTC / day could still manipulate markets with 40% concentration and that much liquidity, but would be much harder than if the daily volume was on the order of tens of millions like i mistakenly thought
deleted 9y ago
[deleted]

deweller 9y ago

I don't understand the idea that a whale could move the market and make money off it. To move the market, you need to spend money. The only way it works is if you create some kind of momentum and the market continues to go up. But rational markets will sell into the artificial momentum and the price will be be close to where you started. The net result is that you lost money. I believe there is momentum in markets (they are definitely NOT perfectly rational). But is there enough momentum to really make money with this scheme? I highly doubt it. Also consider that a group of whales would have to work together to do this. Do you really trust your whale friend to buy at the same time you do? What if he front-runs you and you end up buy the bitcoin he just bought last week for 10% lower? I don't buy the theory that there are a group of "whales" sitting around planning how to manipulate markets together.

aaavl2821 9y ago
You are right, it doesn't always work, but it can work, and work really well. The way you make money is by creating volume and momentum. You buy in a low volume market, where it's cheaper to move the market, then if volume takes off and price momentum builds, you can sell much more volume without moving the market. We aren't talking about people liquidating their entire stakes, but you can make a few million here and there easy. There is strong incentive to collude: collusion unlocks the potentially powerful profit engine of market manipulation. You make more money working together than you could on your own. If people try to screw each other too much the whole thing falls apart, as market movements are no longer predictable to the colluders, and their advantage is gone. So yeah collusion can break down in cases but as a rule people understand they make more money together If you don't buy that theory, id recommend reading about Solomon brothers or even watching the wolf of wall st. Martin shkreli did this stuff too. I think it was Jim cramers tactic for a while (talk your book on tv, get retail volume in small cap stocks and sell into that) JP morgan and other early wall st financiers did this sort of stuff. It happens in the real world even now; I've heard from friends at big banks that they know people who will sometimes do stuff like this market manipulation is how people make real money in unregulated markets. cornering the market is and always has been the holy grail for market manipulation and profiting in unregulated markets. It's why regulation exists. Its a theory in the same way that evolution is a theory