8 ms·

Shitcoin vs. buttcoin: a dummies guide to cryptocurrency manipulation

140 points by bb88 9y ago

dvt 9y ago
This is a form of "painting the tape"[1] -- influencing the price of a security by artificially manufacturing volume. Obviously, massively illegal on the stock market, it's pretty common (and well-documented) when it comes to crypto-currencies. [1] https://www.investopedia.com/terms/p/paintingthetape.asp https://www.investopedia.com/terms/p/paintingthetape.asp
- eschaton 9y ago
  You mean “massively illegal, period.” Cryptocurrencies are not magically immune to all of the financial regulation of the past few hundred years just because they’re not specifically called out in those regulations. “Cryptocurrencies are unregulated” is not just a myth, it’s propaganda created by shady people trying to sell you something.
  - ShabbosGoy 9y ago
    I don’t see many prop traders or HFT scalpers going to jail. Regulations are by definition reactionary, not preventative.
    - tptacek 9y ago
      What's an "HFT scalper"? Are you sure you understand the concepts you're using to compare cryptocurrency trading to?
      - ShabbosGoy 9y ago
        http://www.smallake.kr/wp-content/uploads/2014/05/Bodek-H-Shaw-M-Introduction-to-HFT-Scalping-Strategies.pdf http://www.smallake.kr/wp-content/uploads/2014/05/Bodek-H-Sh... It’s secondary to my point, though. Certain types of market manipulation are encouraged by exchanges in order to provide liquidity. I wouldn’t be surprised if the major cryptocurrency exchanges engage in market manipulation. In fact, it would be trivial to do so. They have access to the order book before anyone else, and they write the matching engine. My main point is that regulations come after the fact, not before. Until the SEC states otherwise, cryptocurrencies aren’t securities. So why would securities regulations apply?
        tptacek 9y ago
        The other term for "statistical front-running", a term this white paper uses, is "trading". Front-running occurs when a party to a trade has a fiduciary obligation to another party, and uses information gleaned from that party to trade to their disadvantage. A market maker has no such obligations: their responsibility is to make sure that tradable instruments trade like stocks (there's a price, and you can trade for it on the spot) rather than houses (there's a huge range of prices, and it might take months to find a buyer). There is no comparison between electronic market-making --- which "preys" on "institutional" traders by ensuring that their large block trades immediately influence market prices, rather than doing so after the trade is complete and the institution captured its free money for being able to trade without moving markets on the spot --- and "painting the tape" scams, where there is no underlying liquidity, no buy-side or sell-side at all, just fraudsters bidding up prices in a pump-and-dump scam.
        dsacco 9y ago
        > Certain types of market manipulation are encouraged by exchanges in order to provide liquidity. This is unequivocally false, and we can’t look just past this claim because it’s “secondary to your point.” High frequency trading (and market making in general) isn’t market manipulation. The paper you’re citing uses pejorative terms like “exploiting” and “scalping”, but to the extent that HFT “exploits” market microstructure, it’s just rapidly buying and selling securities. This is not market manipulation; on the contrary, the decreased latency and increased trading volume actually improves both net liquidity and price discovery.
  - dvt 9y ago
    This is a bit dubious. What if I paint the tape in Monopoly, artificially raising the price of Mediterranean Avenue? Even if we were playing Monpoly for money, it's kind of hard to see how this would be "illegal" (as in, prosecutable given current law).
keyle 9y ago
And because you can't really buy anything useful with your sh*tcoin or buttcoin, you can buy future IOU coins, ICOs! This is a seriously great video. The 'bubble' will only stop when we can finally use these currencies in the real world, until them, it's purely speculative on their potential future use.
- themagician 9y ago
  I don’t know that the bubble will ever stop. The ponzi is as old as time and there’s always room for more get rich quick schemes. As long as there’s a few charasmatic folks trying to get others to essentially give them their money the bubble will just hop from one coin to another.
  - keyle 9y ago
    It's true, every coin (without innovation) is a ponzi scheme
justboxing 9y ago
TL;DR: What attributes qualify a crypto to be a Sh* t Coin? Serious question, not trolling. I am asking as there's a sea of shilling and mis-information out there and it's getting very difficult to figure out what's real and what's pump-and-dump / shilling, painting the tape, washtrading type scam. My question is, What makes a "Sh* t" coin a "Sh* t" coin? I'm getting varying answers depending on source. Is it the current price (like fraction of cents) or is it a coin that has a landing page site with a "White paper" but no usage, or something else? I thought Ripple ( XRP ) was onto something when they claimed that they have "partnered" with 100+ Banks, Financial institutions to provide liquidity and fees saving in cross border transfers. Further research unearthed the fact that they do not have a SINGLE real customer, and that all the ones they hype on reddit r/Ripple and on CNBC are "Trials" / Pilots of their xCurrent and xRapid blockchain based software. So does this make XRP also a Sh*t coin?
- empath75 9y ago
  It’s whatever coins people are buying that isn’t the one you want them to buy so you can buy a Lambo.
  - nefitty 9y ago
    If your intent is to eventually buy a Lambo, then you're probably the kind of person who is duped by shitcoins. "Investing in depreciating assets, that's an interesting strategy." - Carter Thomas
- ricardobeat 9y ago
  Where do you get that? Ripple seems to really have a few dozen banks as clients. The main issue with it is that the XRP token is not what actually powers their banking products, but an additional (possibly slightly cheaper) system which may not have any value after all. Shitcoins are the ones that put up a fancy website, a babble-filled whitepaper, maybe have an ICO, but their economic model makes no sense (blockchain for dentists anyone?), or they have no product at all and just clicked a few buttons to generate an Ethereum/Waves/etc token. Thus their ‘currency’ is likely to have zero utility. They still go up on wild speculation, because why not.
rkagerer 9y ago
Cute, but times like this I wish HN had a downvote button.
- irl_zebra 9y ago
  They do! Check this out.
  - uhhyeahdude 9y ago
    Ouch.
  - hsljekskfh 9y ago
    how come i and he don't see it?
- InclinedPlane 9y ago
  Ironic that you'd be interested in anything other than an instrument that can only count upwards.
damdog2020 9y ago
This is a silly video, but not very informative. The blockchain and crypto currencies are here to stay. This video is simply satire.
- laurentoget 9y ago
  do you know something we do not?
deleted 9y ago
[deleted]
perseusprime11 9y ago
A sh*tcoin is anything other than a Bitcoin.
afeezaziz 9y ago
This is good but I think there is some parallel between Bitcoin bubble and the unicorn building frenzy a few years back. Maybe they should make a video about that too!
narrator 9y ago
So I am looking at Bitconnect which is IMHO the biggest sh*tcoin out there with many alleging it is a ponzi scheme. There was recently regulator action against it[1] and it looks like it is dead. Except it's still trading[2] and has recovered some value after falling 90%. This is the most curious thing about the cryptocurrency world. Is it that as long as they trade and there's limited supply and the network is still up this stuff will just keep rolling along in zombie mode? A cryptocurrency doesn't need to have any company at all behind it as long as the network and protocols work. Am I missing something here? [1]https://www.bloomberg.com/news/articles/2018-01-16/bitconnect-closes-exchange-as-states-warn-of-unregulated-sales https://www.bloomberg.com/news/articles/2018-01-16/bitconnec... [2]https://coinmarketcap.com/currencies/bitconnect/ https://coinmarketcap.com/currencies/bitconnect/
- nefitty 9y ago
  I'm inclined to categorize Bitconnect completely apart from shitcoins. It's not necessarily that it's not a shitcoin, but the fact that is so wildly, obviously a traditional scam with some modern tech as dressing. I feel some level of sympathy for a beginner who falls for a shitcoin, but that sympathy becomes anger when the general chorus is yelling "Don't mess with that," but greed is still the deciding factor.
neuro_imager 9y ago
I think most cryptocurrencies are shitcoins. The only currency that provably IS NOT a shitcoin is Monero. Monero is the only private, untraceable, trustless, secure and fungible cryptocurrency. There is a growing number of online goods and services that you can now pay for with Monero. Globee is a service that allows online merchants to accept payments through credit cards and a host of cryptocurrencies, while being settled in Bitcoin, Monero or fiat currency. Project Coral Reef is a service which allows you to shop and pay for popular music band products and services using Monero. Linux, Veracrypt, and a whole array of VPNs now accept Monero. There is new Monero only marketplace called Annularis currently being developed which has not been created for those who value financial privacy and economic freedom, and there are rumours Open Bazaar is likely to support Monero once Multisig is implemented. In addition, Monero is also supported by The Living Room of Satoshi so you can pay bills or credit cards directly using Monero. The use-case and features of Monero are well explained in this post: https://np.reddit.com/r/CryptoCurrency/comments/7ra409/your_guide_to_monero_and_why_it_has_great/ https://np.reddit.com/r/CryptoCurrency/comments/7ra409/your_...
- kolar 9y ago
  Monero is definetely not the only one in this club. For example: there is Numeraire which is actively used by data scientist on numer.ai. NMR has true value as long as Numerai hedge fund is using it.
  - neuro_imager 9y ago
    That looks really interesting. Thanks for pointing it out. Are you involved with this project?
bb88 9y ago
I really like how this gets 130 upvotes and still gets flagged.

140 points by bb88 9y ago

dvt 9y ago

This is a form of "painting the tape"[1] -- influencing the price of a security by artificially manufacturing volume. Obviously, massively illegal on the stock market, it's pretty common (and well-documented) when it comes to crypto-currencies. [1] https://www.investopedia.com/terms/p/paintingthetape.asp https://www.investopedia.com/terms/p/paintingthetape.asp

eschaton 9y ago
You mean “massively illegal, period.” Cryptocurrencies are not magically immune to all of the financial regulation of the past few hundred years just because they’re not specifically called out in those regulations. “Cryptocurrencies are unregulated” is not just a myth, it’s propaganda created by shady people trying to sell you something.
- ShabbosGoy 9y ago
  I don’t see many prop traders or HFT scalpers going to jail. Regulations are by definition reactionary, not preventative.
  - tptacek 9y ago
    What's an "HFT scalper"? Are you sure you understand the concepts you're using to compare cryptocurrency trading to?
    - ShabbosGoy 9y ago
      http://www.smallake.kr/wp-content/uploads/2014/05/Bodek-H-Shaw-M-Introduction-to-HFT-Scalping-Strategies.pdf http://www.smallake.kr/wp-content/uploads/2014/05/Bodek-H-Sh... It’s secondary to my point, though. Certain types of market manipulation are encouraged by exchanges in order to provide liquidity. I wouldn’t be surprised if the major cryptocurrency exchanges engage in market manipulation. In fact, it would be trivial to do so. They have access to the order book before anyone else, and they write the matching engine. My main point is that regulations come after the fact, not before. Until the SEC states otherwise, cryptocurrencies aren’t securities. So why would securities regulations apply?
      - tptacek 9y ago
        The other term for "statistical front-running", a term this white paper uses, is "trading". Front-running occurs when a party to a trade has a fiduciary obligation to another party, and uses information gleaned from that party to trade to their disadvantage. A market maker has no such obligations: their responsibility is to make sure that tradable instruments trade like stocks (there's a price, and you can trade for it on the spot) rather than houses (there's a huge range of prices, and it might take months to find a buyer). There is no comparison between electronic market-making --- which "preys" on "institutional" traders by ensuring that their large block trades immediately influence market prices, rather than doing so after the trade is complete and the institution captured its free money for being able to trade without moving markets on the spot --- and "painting the tape" scams, where there is no underlying liquidity, no buy-side or sell-side at all, just fraudsters bidding up prices in a pump-and-dump scam.
      - dsacco 9y ago
        > Certain types of market manipulation are encouraged by exchanges in order to provide liquidity. This is unequivocally false, and we can’t look just past this claim because it’s “secondary to your point.” High frequency trading (and market making in general) isn’t market manipulation. The paper you’re citing uses pejorative terms like “exploiting” and “scalping”, but to the extent that HFT “exploits” market microstructure, it’s just rapidly buying and selling securities. This is not market manipulation; on the contrary, the decreased latency and increased trading volume actually improves both net liquidity and price discovery.
- dvt 9y ago
  This is a bit dubious. What if I paint the tape in Monopoly, artificially raising the price of Mediterranean Avenue? Even if we were playing Monpoly for money, it's kind of hard to see how this would be "illegal" (as in, prosecutable given current law).

keyle 9y ago

And because you can't really buy anything useful with your sh*tcoin or buttcoin, you can buy future IOU coins, ICOs! This is a seriously great video. The 'bubble' will only stop when we can finally use these currencies in the real world, until them, it's purely speculative on their potential future use.

themagician 9y ago
I don’t know that the bubble will ever stop. The ponzi is as old as time and there’s always room for more get rich quick schemes. As long as there’s a few charasmatic folks trying to get others to essentially give them their money the bubble will just hop from one coin to another.
- keyle 9y ago
  It's true, every coin (without innovation) is a ponzi scheme

justboxing 9y ago

TL;DR: What attributes qualify a crypto to be a Sh* t Coin? Serious question, not trolling. I am asking as there's a sea of shilling and mis-information out there and it's getting very difficult to figure out what's real and what's pump-and-dump / shilling, painting the tape, washtrading type scam. My question is, What makes a "Sh* t" coin a "Sh* t" coin? I'm getting varying answers depending on source. Is it the current price (like fraction of cents) or is it a coin that has a landing page site with a "White paper" but no usage, or something else? I thought Ripple ( XRP ) was onto something when they claimed that they have "partnered" with 100+ Banks, Financial institutions to provide liquidity and fees saving in cross border transfers. Further research unearthed the fact that they do not have a SINGLE real customer, and that all the ones they hype on reddit r/Ripple and on CNBC are "Trials" / Pilots of their xCurrent and xRapid blockchain based software. So does this make XRP also a Sh*t coin?

empath75 9y ago
It’s whatever coins people are buying that isn’t the one you want them to buy so you can buy a Lambo.
- nefitty 9y ago
  If your intent is to eventually buy a Lambo, then you're probably the kind of person who is duped by shitcoins. "Investing in depreciating assets, that's an interesting strategy." - Carter Thomas
ricardobeat 9y ago
Where do you get that? Ripple seems to really have a few dozen banks as clients. The main issue with it is that the XRP token is not what actually powers their banking products, but an additional (possibly slightly cheaper) system which may not have any value after all. Shitcoins are the ones that put up a fancy website, a babble-filled whitepaper, maybe have an ICO, but their economic model makes no sense (blockchain for dentists anyone?), or they have no product at all and just clicked a few buttons to generate an Ethereum/Waves/etc token. Thus their ‘currency’ is likely to have zero utility. They still go up on wild speculation, because why not.

rkagerer 9y ago

Cute, but times like this I wish HN had a downvote button.

irl_zebra 9y ago
They do! Check this out.
- uhhyeahdude 9y ago
  Ouch.
- hsljekskfh 9y ago
  how come i and he don't see it?
InclinedPlane 9y ago
Ironic that you'd be interested in anything other than an instrument that can only count upwards.

damdog2020 9y ago

This is a silly video, but not very informative. The blockchain and crypto currencies are here to stay. This video is simply satire.

laurentoget 9y ago
do you know something we do not?

deleted 9y ago

[deleted]

perseusprime11 9y ago

A sh*tcoin is anything other than a Bitcoin.

afeezaziz 9y ago

This is good but I think there is some parallel between Bitcoin bubble and the unicorn building frenzy a few years back. Maybe they should make a video about that too!

narrator 9y ago

So I am looking at Bitconnect which is IMHO the biggest sh*tcoin out there with many alleging it is a ponzi scheme. There was recently regulator action against it[1] and it looks like it is dead. Except it's still trading[2] and has recovered some value after falling 90%. This is the most curious thing about the cryptocurrency world. Is it that as long as they trade and there's limited supply and the network is still up this stuff will just keep rolling along in zombie mode? A cryptocurrency doesn't need to have any company at all behind it as long as the network and protocols work. Am I missing something here? [1]https://www.bloomberg.com/news/articles/2018-01-16/bitconnect-closes-exchange-as-states-warn-of-unregulated-sales https://www.bloomberg.com/news/articles/2018-01-16/bitconnec... [2]https://coinmarketcap.com/currencies/bitconnect/ https://coinmarketcap.com/currencies/bitconnect/

nefitty 9y ago
I'm inclined to categorize Bitconnect completely apart from shitcoins. It's not necessarily that it's not a shitcoin, but the fact that is so wildly, obviously a traditional scam with some modern tech as dressing. I feel some level of sympathy for a beginner who falls for a shitcoin, but that sympathy becomes anger when the general chorus is yelling "Don't mess with that," but greed is still the deciding factor.

neuro_imager 9y ago

I think most cryptocurrencies are shitcoins. The only currency that provably IS NOT a shitcoin is Monero. Monero is the only private, untraceable, trustless, secure and fungible cryptocurrency. There is a growing number of online goods and services that you can now pay for with Monero. Globee is a service that allows online merchants to accept payments through credit cards and a host of cryptocurrencies, while being settled in Bitcoin, Monero or fiat currency. Project Coral Reef is a service which allows you to shop and pay for popular music band products and services using Monero. Linux, Veracrypt, and a whole array of VPNs now accept Monero. There is new Monero only marketplace called Annularis currently being developed which has not been created for those who value financial privacy and economic freedom, and there are rumours Open Bazaar is likely to support Monero once Multisig is implemented. In addition, Monero is also supported by The Living Room of Satoshi so you can pay bills or credit cards directly using Monero. The use-case and features of Monero are well explained in this post: https://np.reddit.com/r/CryptoCurrency/comments/7ra409/your_guide_to_monero_and_why_it_has_great/ https://np.reddit.com/r/CryptoCurrency/comments/7ra409/your_...

kolar 9y ago
Monero is definetely not the only one in this club. For example: there is Numeraire which is actively used by data scientist on numer.ai. NMR has true value as long as Numerai hedge fund is using it.
- neuro_imager 9y ago
  That looks really interesting. Thanks for pointing it out. Are you involved with this project?

bb88 9y ago

I really like how this gets 130 upvotes and still gets flagged.