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The entire crypto world is like this. MtGox pumping and wash trading with Willy bot. Bitmex trading against and liquidating customers. Coinbase hiring Litecoin

The entire crypto world is like this. MtGox pumping and wash trading with Willy bot. Bitmex trading against and liquidating customers. Coinbase hiring Litecoin creator Charlie Lee and having him frequently wash trading 99% of LTC volume. Each of these has been _the_ preeminent exchange at some point in time, just as OpenSea is for NFT. FTX was born from one of if not the largest crypto trader/market maker, and one of two known Tether customers (who apparently account for a large majority of Tethers). Alameda was the only/largest liquidity provider on FTX for some time. Binance has been similarly accused (without solid proof) of trading against customers. Of course they claim to have walls between these relationships. But then again, so did Mt Gox, Bitmex, Coinbase, OpenSea and loads of others that would take too long to mention. Crypto is a casino where there are a handful of dealers that are running thousands of tables. They are all colluding. The grift is to exchange real fiat currency for chips at their casino. It has been proven at a shocking number of blue chip institutions (dare I say a majority). Given our expected likelihood of uncovering these things, it seems highly probable that it’s happening everywhere.

thebean11 5y ago
I wonder if this is actually unique to crypto, or if it's common in any industry where participants have a massive financial incentive to "cheat"? There's plenty of instances of hedge funds and stock traders acting like this. I bet there would be more if they were under as little regulation as the crypto exchanges..
- qeternity 5y ago
  Well, I spent most of my career as a hedge fund trader so I can also comment on this: of course everyone is looking for the upper hand and people will bend or break rules to achieve this. But this is universal to all games, and fundamentally the game is fair. In crypto, the game is not fair. The refs are players and there are no rules.
  - thebean11 5y ago
    Could you be more specific about what makes crypto less fair than the other markets hedge funds trade in?
    - qeternity 5y ago
      Read my original comment. For all of the Occupy Wall Street rhetoric, overwhelming majority of people in finance are law abiding participants. That’s not to say that they’re particularly moral or honest people. But in regulated markets, regulators seek to make rule breaking a negative EV outcome, so rule following becomes the logical behavior for a self interested actor. Regulators might not always succeed, but it still shifts the outcome distribution massively. In crypto, the opposite is true. Because there are no penalties, otherwise malicious behavior is encouraged. First and foremost: exchanges trading against customers. This would never be allowed in a regulated market, just like we would never allow judges to wager on the cases over which they preside. It creates a horrible conflict of interest. But in crypto, conflicts of interest are the most successful business models (across a load of projects). Crypto is mostly regulatory arbitrage. I’ll be the first to change my mind when the facts change, and maybe I’m just not as visionary as every other lambo hopeful. But as it stands today, this is the reality.
      - thebean11 5y ago
        Let’s say hypothetically all financial regulation is lifted tomorrow, I have a hard time believing the current “honest” participants won’t have a similar free for all. We may be saying the same thing: the difference is the regulation, not the moral character of participants.
        geofft 5y ago
        But the entire value proposition of cryptocurrency is how difficult it is to regulate via traditional law enforcement mechanisms. Which can be used for good, of course - the standard example being things like "transferring money across immoral embargoes". But in this case, if the difference is regulation, then the question for ordinary folks who are not themselves trying to pull a scam is - would you rather work with dishonest con men who believe they will get in trouble with law enforcement if they actually con you, or with dishonest con men who believe they can get away with it?
felixbraun 5y ago
IMO people overestimate how much alpha is in knowing your customers’ positions (as exchange owner). Open interest, volume and price data down to seconds is available via APIs in real-time, from which it is absolutely possible to build a model of positioning. If you launch a new exchange, your biggest problem is lack of liquidity, meaning limit orders won’t fill ‘timely’ and market orders slip, which is very bad UX obviously. That is why it is fairly obvious that one of the best market makers in the industry launched their own exchange; Alameda could provide excellent liquidity for FTX from day one.
- qeternity 5y ago
  > IMO people overestimate how much alpha is in knowing your customers’ positions (as exchange owner). I’ll say this as respectfully as I can: you’re wrong. Aside from algos, positions are the most closely guarded information in trading. If you know someone’s positions, you might be able to assess what their risk tolerance and stops would be, and you can exploit that. If you’re a crypto exchange with huge highly leveraged perpetuals trading, you don’t have to guess where the stops are: you know exactly where those positions will be liquidated. Hell, you built the system to execute the liquidations. So you just run an algo (you don’t even need funds/margin because hell you’re the exchange) to whipsaw people around and trigger this liquidations while you profit massively.
  - felixbraun 5y ago
    I’m very sure that there is more money (for big high volume exchanges) in providing an environment with low liquidations (which amplify price moves against the index, again bad UX) instead of driving customers into them and profiting from trading these wicks. The biggest risk to established exchanges is ‘regulatory alienation’ — and having millions of USD in daily liquidations probably is not helpful here. Won’t say these trades aren’t done (data needed to build positioning models is public), my only point here; v unlikely by exchange owners.
    - audiometry 5y ago
      You don’t need the exchange to do this. You simply need corrupt employee of the exchange with access to the information.
Alex3917 5y ago
> The entire crypto world is like this. I've heard that there are a bunch of companies in the space paying their blockchain engineers minimum wage (when their salaries should have been at least 250k), and instead compensating them by letting them insider trade on their press releases. The reason the people in these cases rarely get fired when found out is that it's literally their compensation package.
skinnyasianboi 5y ago
The entire crypto world is not like this. Crypto is not all about making money.
- aforwardslash 5y ago
  citation needed :)

thebean11 5y ago

I wonder if this is actually unique to crypto, or if it's common in any industry where participants have a massive financial incentive to "cheat"? There's plenty of instances of hedge funds and stock traders acting like this. I bet there would be more if they were under as little regulation as the crypto exchanges..

qeternity 5y ago
Well, I spent most of my career as a hedge fund trader so I can also comment on this: of course everyone is looking for the upper hand and people will bend or break rules to achieve this. But this is universal to all games, and fundamentally the game is fair. In crypto, the game is not fair. The refs are players and there are no rules.
- thebean11 5y ago
  Could you be more specific about what makes crypto less fair than the other markets hedge funds trade in?
  - qeternity 5y ago
    Read my original comment. For all of the Occupy Wall Street rhetoric, overwhelming majority of people in finance are law abiding participants. That’s not to say that they’re particularly moral or honest people. But in regulated markets, regulators seek to make rule breaking a negative EV outcome, so rule following becomes the logical behavior for a self interested actor. Regulators might not always succeed, but it still shifts the outcome distribution massively. In crypto, the opposite is true. Because there are no penalties, otherwise malicious behavior is encouraged. First and foremost: exchanges trading against customers. This would never be allowed in a regulated market, just like we would never allow judges to wager on the cases over which they preside. It creates a horrible conflict of interest. But in crypto, conflicts of interest are the most successful business models (across a load of projects). Crypto is mostly regulatory arbitrage. I’ll be the first to change my mind when the facts change, and maybe I’m just not as visionary as every other lambo hopeful. But as it stands today, this is the reality.
    - thebean11 5y ago
      Let’s say hypothetically all financial regulation is lifted tomorrow, I have a hard time believing the current “honest” participants won’t have a similar free for all. We may be saying the same thing: the difference is the regulation, not the moral character of participants.
      - geofft 5y ago
        But the entire value proposition of cryptocurrency is how difficult it is to regulate via traditional law enforcement mechanisms. Which can be used for good, of course - the standard example being things like "transferring money across immoral embargoes". But in this case, if the difference is regulation, then the question for ordinary folks who are not themselves trying to pull a scam is - would you rather work with dishonest con men who believe they will get in trouble with law enforcement if they actually con you, or with dishonest con men who believe they can get away with it?

felixbraun 5y ago

IMO people overestimate how much alpha is in knowing your customers’ positions (as exchange owner). Open interest, volume and price data down to seconds is available via APIs in real-time, from which it is absolutely possible to build a model of positioning. If you launch a new exchange, your biggest problem is lack of liquidity, meaning limit orders won’t fill ‘timely’ and market orders slip, which is very bad UX obviously. That is why it is fairly obvious that one of the best market makers in the industry launched their own exchange; Alameda could provide excellent liquidity for FTX from day one.

qeternity 5y ago
> IMO people overestimate how much alpha is in knowing your customers’ positions (as exchange owner). I’ll say this as respectfully as I can: you’re wrong. Aside from algos, positions are the most closely guarded information in trading. If you know someone’s positions, you might be able to assess what their risk tolerance and stops would be, and you can exploit that. If you’re a crypto exchange with huge highly leveraged perpetuals trading, you don’t have to guess where the stops are: you know exactly where those positions will be liquidated. Hell, you built the system to execute the liquidations. So you just run an algo (you don’t even need funds/margin because hell you’re the exchange) to whipsaw people around and trigger this liquidations while you profit massively.
- felixbraun 5y ago
  I’m very sure that there is more money (for big high volume exchanges) in providing an environment with low liquidations (which amplify price moves against the index, again bad UX) instead of driving customers into them and profiting from trading these wicks. The biggest risk to established exchanges is ‘regulatory alienation’ — and having millions of USD in daily liquidations probably is not helpful here. Won’t say these trades aren’t done (data needed to build positioning models is public), my only point here; v unlikely by exchange owners.
  - audiometry 5y ago
    You don’t need the exchange to do this. You simply need corrupt employee of the exchange with access to the information.

Alex3917 5y ago

> The entire crypto world is like this. I've heard that there are a bunch of companies in the space paying their blockchain engineers minimum wage (when their salaries should have been at least 250k), and instead compensating them by letting them insider trade on their press releases. The reason the people in these cases rarely get fired when found out is that it's literally their compensation package.

skinnyasianboi 5y ago

The entire crypto world is not like this. Crypto is not all about making money.

aforwardslash 5y ago
citation needed :)