30 ms·

An anatomy of Bitcoin price manipulation

622 points by VHRanger 5y ago

echopurity 5y ago
kordlessagain 5y ago
I remember when something similar was going on with AMD stock, which was heavily shorted at times.
bitxbitxbitcoin 5y ago
May I suggest a similar look at September’s fake press release about WalMart accepting Litecoin.[0] Unlike with the Amazon hype which had arguably an unknown non zero price signal at the time, price manipulation here was the alpha and omega for the initial so obviously fake press release. [0] https://www.nytimes.com/2021/09/13/business/litecoin-walmart-crypto-hoax.amp.html https://www.nytimes.com/2021/09/13/business/litecoin-walmart...
mwattsun 5y ago
I'm suspicious of Bitcoin as a store of value. Some seem to think that because there is a fixed amount of Bitcoin it will automatically rise in price as demand confronts scarcity, but that assumes there will continued demand. Elon Musk says Dogecoin is better because it has some inflation built in, encouraging people to spend instead of hoard, but adds "I'm not saying that it's the ideal system for a currency" "Elon Musk - SpaceX, Mars, Tesla Autopilot, Self-Driving, Robotics, and AI", Lex Fridman Podcast #252". Clip from a discussion about money starting minute 48:41 https://youtu.be/DxREm3s1scA?t=2923 https://youtu.be/DxREm3s1scA?t=2923 Lex: You mentioned that Doge is the people's coin. Elon: Yeah. Lex: And you said that you were literally going, SpaceX may consider literally putting a Dogecoin on the moon. Is this something you're still considering, Mars perhaps, do you think there's some chance, we've talked about political systems on Mars, that a Dogecoin is the official currency of Mars, it's the coin of the future? Elon: Well, I think Mars itself will need to have a different currency because you can't synchronize due to speed of light, or not easily. Lex: So it must be complete standalone from earth? Elon: Mars is, at closest approach, it's four light minutes away roughly, and then add for this approach, it's roughly 20 light minutes away, maybe a little more. So you can't really have something synchronizing if you've got a 20 minute speed of light issue, if it's got a one minute blockchain. It's not gonna synchronize properly. I don't know if Mars would have a cryptocurrency as a thing, but probably, seems likely. But it would be so kind of localized thing on Mars. Lex: And you let the people decide. Elon: Yeah, absolutely. The future of Mars should be up to the Martians. I mean, I think the cryptocurrency thing is an interesting approach to reducing the error in the database that is called money. I think I have a pretty deep understanding of what money actually is on a practical day-to-day basis, because of PayPal. We really got in deep there. And right now the money system, actually for practical purposes is really a bunch of heterogeneous mainframes running a old COBOL. Lex: Okay, you mean literally Elon: Literally. That is literally what's happening in batch mode. Okay. Lex: In batch mode. Elon: Yeah. Pity the poor bastards who have to maintain that code. Okay. That's pain. Lex: Not even Fortran? Elon: COBOL, yep. That's COBOL. And they still, the banks are still buying mainframes, in 2021, and running engine COBOL code. The federal reserve is like probably even older than what the banks have, and they have an old COBOL mainframe. And so the government effectively has editing privileges on the money database. And they use those editing privileges to make more money whenever they want. And this increases the error in the database that is money. So I think money should really be viewed through the lens of information theory. You're kind of like an internet connection. Like what's the bandwidth, total bit rate, what is the latency jitter, packet drop, errors in the network communication. Just think of money like that basically. I think that's probably what I really think of it. And then say what system, from an information theory standpoint, allows an economy to function the best. Crypto is an attempt to reduce the error in money that is contributed by governments diluting the money supply as basically a pernicious form of taxation. So both policy in terms of with inflation, and actual like technological, COBOL, cryptocurrency takes us into the 21st century in terms of the actual systems that allow you to do the transaction, to store wealth, all those kinds of things. Like I said, just think - In theory - of money as information, people often will think of money as having power in and of itself. It does not. Money is information, and it does not have power in and of itself. Applying the physics tools of thinking about things in the limit is helpful. If you are stranded on a tropical island and you have a trillion dollars, it's useless. Because there's no resource allocation. Money is a database of resource allocation, but there's no resources to allocate except yourself. So money's useless. If you're stranded on a desert island with no food, all the Bitcoin in the world will not stop you from starving. Lex: Yeah. Elon: Just think of money as a database for resource allocation across time and space. And then what system, in what form should that database, or data system, what would be most effective? There is a fundamental issue with, say Bitcoin, in its current form in that it's, the transaction volume is very limited. And the latency, the latency, for a properly confirmed transaction is too long, much longer than you'd like. It's actually not great from transaction volume standpoint or latency standpoint. So it is perhaps useful as, to solve an aspect of the money database problem, which is the sort of store of wealth or an accounting of relative obligations, I suppose. But it is not useful as a currency, as a day-to-day currency. Lex: But people have proposed different technological solutions. Elon: Like Lightning and the Layer 2 technologies on top of that. I mean, it's all, it seems to be all kind of a trade-off, but the point is, it's kind of brilliant to say, to just think about information, think about what kind of database, what kind of infrastructure enables the exchange of - Yeah, let's say like you're operating an economy, and you need to have some thing that allows for the efficient, to have efficient value ratios between products and services. So you've got this massive number of products and services, and need to, you can't just barter. Because that would be extremely unwieldy. So you need something that gives you a ratio of exchange between goods and services. And then, something that allows you to shift obligations across time, like debt, debt and equity shift obligations across time. Then what does the best job of that? Part of the reason why I think there's some merit to Dogecoin, even though, it was obviously created as a joke, is that it actually does have a much higher transaction volume capability than Bitcoin. The costs of doing a transaction, the Dogecoin fee is very low. Like right now, if you wanna do a Bitcoin transaction, the price of doing that transaction is very high, so you could not use it effectively for most things. And nor could it even scale to a high volume. And when Bitcoin was started, I guess around 2008 or something like that, the internet connections were much worse than they are today, like order of magnitude. I mean, they were way, way worse in 2008. So like having a small block size or whatever it is, and a long synchronization time made sense in 2008, but, 2021, or fast forward 10 years, it's like, comically low. And I think there's some value to having a linear increase in the amount of currency that is generated. So, because some amount of the currency, if a currency is too deflationary or like, or should say if, if a currency is expected to increase in value over time, there's reluctance to spend it. Because you're like, "Oh, if I, I'll just hold it and not spend it because its scarcity is increasing with time, so if I spend it now, then I will regret spending it. So I will just, you know, hoard all it." But if there's some dilution of the currency occurring over time, that's more of an incentive to use that as a currency. So Dogecoin just somewhat randomly has just a fixed a number of sort of coins or hash strings that are generated every year. So there's some inflation, but it's not a percentage at base. It's a fixed number, so the percentage of inflation will necessarily decline over time. I'm not saying that it's like the ideal system for a currency, but I think it actually is just fundamentally better than anything else I've seen, just by accident.
- Hokusai 5y ago
  How is Elon Musk a relevant opinion on this matter? Even worse, he is well known for astroturfing his own assets.
  - mcbishop 5y ago
    Elon Musk in the exchange above: > I think I have a pretty deep understanding of what money actually is on a practical day-to-day basis, because of PayPal. His comments in the exchange seem insightful to me. I assume you didn't bother reading them.
    - danaris 5y ago
      ...because Musk bought PayPal, he can speak authoritatively on Bitcoin?
      - gunshai 5y ago
        This is a bit of misunderstanding of history. He started X.com which would later become PayPal.
        Cederfjard 5y ago
        To be even more precise, X.com merged with Thiel's Confinity, which already had a product called PayPal, and later the whole company was renamed after the latter. PayPal existed as a thing before Musk's involvement.
        mml 5y ago
        oh, and musk was fired for incompetence, and all his code thrown away after the x.com acquisition. he also isn't the founder of Tesla. basically everything "everyone knows" about Elon "monorail" Musk, is a lie.
    - jcranmer 5y ago
rasengan 5y ago
Didn't FTX make Solana?
- VHRanger 5y ago
  No, but they heavily invested in it
JohnJamesRambo 5y ago
They do it down too. It’s not a secret or illegal. Here’s a post mortem from the guy that did it. https://twitter.com/AlamedaTrabucco/status/1467219711830151178 https://twitter.com/AlamedaTrabucco/status/14672197118301511... Ready for a move up again soon.
- noja 5y ago
  > It’s not [...] illegal Errr - what? I think you'll find that market manipulation is prohibited in the US under Section 9(a)(2) of the Securities Exchange Act of 1934, and in the EU under article 12 of the Market Abuse Regulation (etc.) The US Securities Exchange Act defines market manipulation as "transactions which create an artificial price or maintain an artificial price for a tradable security". See https://en.wikipedia.org/wiki/Market_manipulation https://en.wikipedia.org/wiki/Market_manipulation
  - adrianN 5y ago
    Is Bitcoin already classified as a tradable security or is it still Monopoly money?
    - vmception 5y ago
      False dilemma Products are regulated by the FTC Commodities and currency derivatives that are traded are regulated by the CFTC Securities issuance and securities trading are regulated by the SEC so have fun with the federal trade commission rawr big teeth over there /s
    - teekert 5y ago
      People assign value to monopoly money now? Edit: I get that many people here are ant-cryptocurrencies, but I think it is rather childish to call it monopoly money.
      - adrianN 5y ago
        Yeah, a replacement set costs about three Euros on Amazon.
mbesto 5y ago
Curious - does anyone not think Bitcoin or any other cypto coin is being manipulated?
- recursive 5y ago
  Me. I don't have an opinion.
  - likecarter 5y ago
    Great analysis.
- temp8964 5y ago
  What coin is not being manipulated? Even USD is being manipulated by the fed. All the countries manipulate their coins. So the real question is whether a coin is being manipulated, but what kind of manipulation you can accept.
  - mbesto 5y ago
    First, let's start by using a valid comparable. Fiat currency has the feature of "medium of exchange", at present BTC does not (technically it does but its adoption for exchange is abysmal). > So the real question is whether a coin is being manipulated, but what kind of manipulation you can accept. The NYSE is a better comparable. In the US we have the SEC which does regulate against market manipulation: https://en.wikipedia.org/wiki/Market_manipulation https://en.wikipedia.org/wiki/Market_manipulation I do believe there is some level of market manipulation not captured by the SEC, however there is at least some baseline level of control against it.
    - SilasX 5y ago
      >First, let's start by using a valid comparable. Fiat currency has the feature of "medium of exchange", at present BTC does not (technically it does but its adoption for exchange is abysmal). You're changing the topic. You asked whether BTC was being manipulated, and were asked to compare to the US dollar. Whether the dollar is as "medium of exchange" has no bearing on that, you're just unhelpfully switching to an unrelated issue that will make the dollar look better in orthogonal ways.
iso1631 5y ago
Meh, it's more fun than gambling on the superbowl. Put $50 in, and with the superbowl you get an hour of watching a game and maybe come out with $100 or maybe come out with $0 With bitcoin you get to ride the highs and lows for years and maybe come out with nothing, or maybe with $5000
StrangeClone 5y ago
This is done in regular stock market too. Fake news, speculation, etc are frequent. Ex: “X giant is acquiring Y” claims with no data to back up. What’s different in case of crypto?
- VHRanger 5y ago
  Two things: 1. Because crypto exchanges are also clearinghouses, liquidations tend to cascade. 2. It's much more blatant in the crypto markets. See the DRW lawsuit linked in the article - the CFTC is aware that DRW is doing similar things in the CME futures market, but the extent to which it's done is smaller.
- hnmullany 5y ago
  If it's significant enough, the SEC will knock on your door when this happens in the regular market
  - jimmydorry 5y ago
    I’m not aware of any pundits, that get on the TV to push agendas about stocks, getting in any trouble with the SEC. I’m not sure if it’s just because I have been looking closer recently, or had more time WFH, but the blatant manipulation on morning shows and financial segments is appalling. Things like saying a given pharmaceutical is headed for zero because their drug failed to get FDA approval, when actually the company had just started their trial and not yet sought approval. Or pushing a stock then pretending to lose connection when asked what the company does. Or saying that a company pivoting to online retail will not have the necessary skills and will be facilitating terrorists (name dropping Al Kaida).
    - rowathay 5y ago
      Pardon my ignorance and/or naïveté, but are these real examples?
      - jimmydorry 5y ago
paulpauper 5y ago
The price is nothing but down, down, down. it is not manipulation but just ppl dumping at every opportunity, like bank stocks in 2007-2008 or dotcom stocks in 2000-2002. Would not want to own this.
- epinephrinios 5y ago
  It's "down, down, down" only if you entered at a very high price: https://athcoinindex.com/coin/bitcoin https://athcoinindex.com/coin/bitcoin As the great Andreas Antonopoulos said, everyone gets the Bitcoin price they deserve.
  - dadoge 5y ago
    Slight correction: It’s down down down if you entered at a high price AND sold within 3yrs No one who held BTC for 3-4 yrs straight has lost money on their investment throughout the entire history of BTC There will be a point in time where this won’t be true anymore, but I think we are far from it
    - cuteboy19 5y ago
      70% of people who bought Bitcoin bought it in the past year. With these statistics, it is very likely that more people lost money through Bitcoin than gained it. Someone has to pay for all the Bitcoin mining around the world, so it's probable that Bitcoin as a whole is net negative. That is, the average investor loses money on Bitcoin.
      - dadoge 5y ago
        What about anyone who fully understood its value proposition and held for a 3-4 yr timeframe? EDIT: let’s check back in in 1-3 yrs here and see if people who bought last year and held are doing :-)
        cuteboy19 5y ago
        I'm sure such people exist, its just that there are probably more losers than winners in this net negative game. Analogously, there are some people who have won a lot of money from casinos but the average gambler loses money because the house always wins. Miners are 'the house' for this analogy
naveen99 5y ago
It’s not so much price manipulation as timed restrictions / throttled deposits / withdrawals / order execution. basically market malfunctions / barriers. you can always arrange over the counter transactions though.
- madduci 5y ago
  The bad thing is, it directly influences also the price of other coins, especially the top 5. Only Tether is "stable" in all the senses
albert_e 5y ago
https://archive.md/CxQpX https://archive.md/CxQpX
skilled 5y ago
Interesting tidbit: "An aside on NFTs Because they’re “unique” objects, NFTs are a perfect vehicle for wash trading. You can easily ensure you only wash trade to yourself. The common scheme is to wash trade with yourself until some credible dunce buys the NFT from you at your manufactured “fair” value, leaving you to walk away with real money." It's such a stupidly simple idea it's actually brilliant.
- paulpauper 5y ago
  not really if the fees are high and tons of ppl are doing this with few sales. the nft market is so unbelievably saturated.
- MikeDelta 5y ago
  Reminds me of this sketch from Enfield and Whitehouse https://youtu.be/ZiJa9diJOMk https://youtu.be/ZiJa9diJOMk
  - crtasm 5y ago
    From loadsamoney to lots of money! https://genius.com/Harry-enfield-loadsamoney-doin-up-the-house-lyrics https://genius.com/Harry-enfield-loadsamoney-doin-up-the-hou...
- belter 5y ago
  In a complex system, whose algorithmic essence is price forgery, value randomness and pump and dump as a strategy...Would argue that achieving maximum manipulation is simply the algorithm optimizing for its "best".
- masona 5y ago
  The fine art market has been doing this for decades by using auction records to set prices.
  - spoiler 5y ago
    You can't buy and sell the same item to yourself at an auction multiple times... Or am I missing the point you're trying to make? Also, the value is in the art, not the receipt. With NFT, that's not the case... Unless it's an exchangeable NFT, like one you can exchange for a service (e.g. as a tick) or some goods, but that's not really how NFTs are being used.
TheDesolate0 5y ago
superkuh 5y ago
No, this is the anatomy of an off-chain price manipulation of a private futures market that exchanges something that is tradeable for Bitcoin. It used to be funny but now it's just sad seeing everyone confused about the difference between bitcoin and third party markets. Only a vanishingly tiny fraction of this actually has any representation on the bitcoin blockchain. It's like buying stolen Tide detergent out of the back of a shady car in the parking lot of the actual grocery store then complaining about the grocer when you get home and it's watered down. This is the normal finance people with their normal scams manipulating private enties like Binance which are vagely associated with Bitcoin. The finance people and the public at large cannot see bitcoin as anything other than an investment and that perception blinds them.
tdherzl 5y ago
It should be noted that OP is a staunch BTC skeptic and a proponent of MMT. This seems to be one of his many attacks on BTC.
- VHRanger 5y ago
  Uh, author here, I have no idea how you could ever think I'm a proponent of MMT. I'm a vocal critic: https://www.singlelunch.com/2018/10/01/bad-economics-shame-on-you-planet-money-mmt-episode/ https://www.singlelunch.com/2018/10/01/bad-economics-shame-o... As for BTC, yes, I hate it and am vocal that PoW cryptocurrencies should stop existing. But this piece isn't focused on that.
wesapien 5y ago
Just anything you want to manipulate, you fake the news these days.
- jondwillis 5y ago
  It’s not a new phenomenon.
  - tarsinge 5y ago
    It's a bit fuzzy but I remember a chapter in the Count of Monte Cristo where the Count bankrupt an enemy by bribing a telegraph agent to pass a false geopolitical (Spain?) report to cause market crash of bonds of that country and push his enemy to sell low.
fleddr 5y ago
It's a good and fair article. Even without media manipulation, there's a huge amount of futures trading on high leverage which tends to pile up. Then, all that is needed is a fuse and something spectacular will happen, either up or down. The author could have picked from a series of other dates, where seemingly relevant/important news to Bitcoin is revealed, and somehow...price action does nothing on those dates. Why not? Not enough leverage built up. So it's the nature of the trading making price so volatile. A small event can trigger a cascade of liquidations. To a skeptic, this would be a reason to reject the asset. To a long term holder, it doesn't matter as they don't trade. To short term traders, it's the way to make a lot of money quickly, or to blow up your account and lose it all.
mslupski1 5y ago
What else is new? Kudos for all the research, but I don't think any reasonable person needs any proof that all crypto is ripe with manipulators and scammers.
wcchandler 5y ago
That was a good read. Thanks! I would've enjoyed the TL;DR (How market manipulation is done) at the top to draw me into the actual mechanics behind how it happens. Now I want to make a bot to detect some of these patterns and alert me on them.
hestefisk 5y ago
Very nice, detailed analysis. Thanks for sharing.
jokoon 5y ago
I hope it's not going to be a long time before congress swiftly enact regulating anything related to crypto currencies when interacting with the dollar. Although bitcoin might also be used to honeypot hackers through bitcoin exchangers, so I don't know... I'm even starting to believe insurance companies might work with crypto folk and lobby government so that insurance companies keep paying for ransomware.
syntaxing 5y ago
I don’t have enough mathematical knowledge in this subject to back this statement up but I swear I noticed this for SPACs too. There’s these really odd spikes up and down that does not make any sense according to public information
- acjohnson55 5y ago
  Most SPACs are very lightly traded and are prone to weird patterns.
benreesman 5y ago
Eh 20-ish years ago the shit happening on Island and Archipelago would blow most people’s minds. Undocumented, conditional, non-displayed order types. Routine wash trading. Shear-but-don’t skin multi-venue arbitrage. The ECNs were the Wild West. Smoke-filled dark pools. Island and Arca are NASDAQ and NYSE now. But Ben, US equities have intrinsic value unlike this BTC garbage! Well unless they pay no dividend, have dual-class share structure, and IPO without a profitable quarter. What’s a share of SNAP entitle you to exactly? Ah right, you think someone will buy it for more. Crypto will have it’s 2001-style GC cycle, the useful stuff will stick around until Goldman owns it and the SEC makes a show of regulating it, the tulip garbage will wash out leaving behind a bunch of rich guys who are really annoying because they never built anything, and we’ll go back to arguing about programming languages.
- dheera 5y ago
  > US equities have intrinsic value Really? My impression is that many US equities in 2022 are more like Reddit up/downvote scores than a reflection of intrinsic value. Which isn't a bad thing in my opinion, by the way.
  - benreesman 5y ago
    I mean if they pay a dividend (and you believe it will continue) you can do math that treats it like a bond coupon and do a present-day valuation. If they have attached voting rights you can get together with other investors and vote yourself a bigger dividend (though same goes for Uniswap v2), or a share buyback. But yeah, mostly it’s a Keynsian Beauty Contest.
  - cillian64 5y ago
    I think of it like this. If you suddenly owned 100% of Bitcoin, then you wouldn’t actually have anything valuable - nobody would buy it off you. If you suddenly owned 100% of Tesla then you’d be able to extract a lot of value.
    - benreesman 5y ago
evrydayhustling 5y ago
This is some interesting analysis, but all of the causal language is unsupported -- and I think mostly inverted from the reality. Here is an equally supported description: - Retail and futures traders create instability by placing leveraged trades and stop orders that amplify swings. - Market makers are aware of instability and design their bots to turn off so that they don't end up on the wrong side of a liquidity cascade. - People with large orders often cancel them in order to improve their orders when chasing the price. (This happens in non crypto markets too, but some of those markets have incentives and regulation to force market makers to provide stabilizing liquidity.) The most explicit manipulation is the news outlets designed to amplify positive news. But even that can be explained by desire for clicks as much as short term market shifts.
- VHRanger 5y ago
  Author here. I considered this, but rejected most of those hypotheses. > Retail and futures traders create instability by placing leveraged trades and stop orders that amplify swings. True > Market makers are aware of instability and design their bots to turn off so that they don't end up on the wrong side of a liquidity cascade. Algorithmic traders, yes. Market makers absolutely not. MMs want to be there as much as possible in liquidation cascades, because bid/ask spreads are huge. MMs effectly print riskless money in these situations (which is why you see Alameda and DRW issue so much USDT in these events). > People with large orders often cancel them in order to improve their orders when chasing the price. It's absurd to think this is the case when the order cancellation pattern is precise to ~3ms and repeated >5 times in a 30 second span. What you see on 26/7/2021 0:59:20-1:00:45 is intentionally done by bots designed to do this. > But even that can be explained by desire for clicks as much as short term market shifts. Agreed, there's a footnote that posits other actors than the momentum ignition traders could have planted the fake news because they saw the same opportunity
  - stepanhruda 5y ago
    Market makers don’t print riskless money, they are affected by a very real risk of divergence loss.
deleted 5y ago
[deleted]
gfd 5y ago
Dumb question, but is price manipulation wrong when it's for something that doesn't have a "true" price? Like I get why it should be illegal for stocks. If you pump it and the price reverts back to some true price (calculated from expected future earnings or whatever), then people who bought it expecting it to be at an efficient price will lose money. In the case of crypto where everything is driven by supply and demand only, who loses?
- prox 5y ago
  Because (layman here) you could still pump & dump and influence prices. Perhaps it’s tougher with bigger established coins BTC or ETH, but it’s still a thing afaik.
- woodruffw 5y ago
  This is only a partial answer: broadly, we lose as a society. Openly fake markets and obvious manipulation erode trust in systems that, even when corrupt and manipulated, are ultimately tied to real value (people’s labor, their retirement accounts, &c.) None of what we have is great, and I’m not going to bother justifying traditional financial markets. But cryptocurrencies represent a massive moral hazard to our handling of hundreds of millions of peoples’ economic security.
- c7DJTLrn 5y ago
  I'd argue there's no right or wrong at all when it comes to this. There's only bigger and smaller, stronger and weaker, early and late. We draw an arbitrary line somewhere and say that people on one side cannot trade on information they have and the people on the other side can. And we trust that the people on the former side will never try to find a cheat or workaround. The market is completely made up. It's driven by inequality in access to information. You're only going to make money if you're: A. Lucky B. Ahead of the game in some shape or form
- lcvw 5y ago
  Stocks also don’t have a “true” value. Their price is driven entirely by supply and demand, which in turn is weakly anchored by investors doing fundamental valuations on the stock (there is more demand for an underpriced stock). The issue is that market manipulation is outright theft, usually from retail investors. Think of it like playing blackjack. When I hit, I make a bet and I know roughly what the odds are that the bet will pay out. If the house was to manipulate the cards in the deck so that the odds are different, I would lose much more often then I should, and it would be theft. Similarly, if someone uses artificial demand to drive up the price of btc above the natural demand and I overpay, then they are selling to me at an unfair price. Eventually the price with fall to the natural price and I will lose money. Btc is weird because people keep buying more, but the principle is still the same. If the price is going to go from 40k and 50k over the next few months, and the price is artificially raised to 45k (which is when I buy in this example) then even if I get out at 50k I’ve lost 5k of profits I would get if the market was fair. So the short answer is that in any case of any market manipulation, it is theft from other investors. Usually (but not always) small retail investors. Now the argument some crypto folks make is that market manipulation is part of this market, so take that how you will.
kkjjkgjjgg 5y ago
Am I reading right that among all the words, there are just three examples of "manipulation"? - fake news stories about Amazon accepting Bitcoin, and something Tether - "momentum ignition", trying to start a trend by placing a big trade offer and withdrawing it when takers arrive Are those really a big deal? I guess technically every trade in crypto or stock markets is also a "market manipulation", as it has the potential to move the price.
Animats 5y ago
There's a hype cycle right now with the claim that Walmart is going to issue NFTs, or get into cryptocurrencies, or something.[1] Walmart is not saying that. They filed for a trademark for "WALMART" for the trademark class that includes cryptocurrencies. Which means only that WalMart, Inc. spent $400 to protect their brand name from someone creating "WalMartCoin". WalMart, asked for a statement, said they had no immediate plans in that area. [1] https://www.theverge.com/2022/1/16/22887011/walmart-metaverse-nft-cryptocurrency https://www.theverge.com/2022/1/16/22887011/walmart-metavers...
- Ekaros 5y ago
  That seems like very cheap insurance... Even the legal filings to fight someone launching WalMartCoin are more...
- paulgb 5y ago
  Reminds me of the whole market-moving news cycle about Amazon accepting cryptocurrency “by the end of the year” last year. Tons of coverage, like this[1]. It never passed the smell test, all traced back to one anonymous City A.M. source, and of course it didn't happen. [1] https://gizmodo.com/amazon-to-accept-bitcoin-by-end-of-2021-and-develop-own-1847360405 https://gizmodo.com/amazon-to-accept-bitcoin-by-end-of-2021-...
  - hoffs 5y ago
    The article that this post is about talks literally about Amazon event...
    - paulgb 5y ago
      Ah, you're right. I'd saved it to read later, should have kept my mouth shut until I did.
mulcyber 5y ago
I take advantage of the post to ask. Anyone has a good introduction to trading for engineers/mathematicians/programmers? Something that goes into the theorics and the math of the thing. Like an MIT open course or something. I'm always a bit lost with these things.
- VHRanger 5y ago
  Patrick Boyle's books are a good start. Generally I would discourage people from trading - 99% of people who try fail.
lend000 5y ago
While I appreciate the amount of work that went into this article, there are at least 50-100 potential current "news" stories in the crypto space at any given time. It's easy to find one that correlates with price movements after the fact, but more or less impossible to do so with forward testing. Virtually no successful crypto trading firms are using real time news data as a centerpiece of their trading, because news has almost no impact (contrary to popular belief and the assertions of this article), especially compared to equities. Elon Musk's tweets, which ostensibly should matter least for fundamental value, are probably the biggest drivers of capital, albeit only in the short term. See [0]. And then the part about "suspicious" orders on the book before the liquidation cascade. Come on. Amateur crypto traders are reinventing religion, where mysterious unknown "whales" are the gods, pulling all the strings. [0] https://en.wikipedia.org/wiki/Data_dredging https://en.wikipedia.org/wiki/Data_dredging
- setr 5y ago
  > And then the part about "suspicious" orders on the book before the liquidation cascade. Come on. Amateur crypto traders and outsiders are reinventing religion, where mysterious unknown "whales" are the gods, pulling all the strings. Sounds like something a whale would say…
pcurve 5y ago
The "Bart" pattern had me in stitches because there has been similar stock meme among Korean individual traders mocking strange price actions and doing technical analysis using cartoon characters to figure out the best entry/exit points. https://m.blog.naver.com/kwonhs225/222201971395 https://m.blog.naver.com/kwonhs225/222201971395 Pretty hilarious.
somewhereoutth 5y ago
Bitcoin (and friends) is essentially a pyramid (edit: ponzai) scheme, where late entrants pay the 'returns' on early entrants - but with a technology layer that precisely and and publicly records each payin/payout. In a way it is beautiful - the fraud is so transparent, and so technologically guaranteed to be transparent, that it becomes legitimised. Almost as if robbing a bank would be ok if you made an appointment beforehand.
- errantmind 5y ago
  By that logic, any marketplace is a pyramid scheme because later entrants always pay earlier entrants. A pyramid scheme has a very particular definition, please look it up.
  - somewhereoutth 5y ago
    Sorry, I meant ponzai scheme. Marketplaces are where things with inherent value are exchanged. Crypto has zero inherent value - it serves only as a record of previous players in the scheme.
    - errantmind 5y ago
      Gatekeeping 'value' yields no insights. Value is whatever people think it is and doesn't require any physical connection to reality, nor any rational mechanism.
      - somewhereoutth 5y ago
        I think we can ascribe an inherent value - as opposed to market price. When the inherent value is clearly and indisputably zero, but punters are handing over real cash, then you have a fraudulent scheme.
        errantmind 5y ago
        You have provided no definition of this 'inherent value' you claim to exist. You keep stating conclusions in absolute terms with nothing to back it up.
blunte 5y ago
I’ve spent a lot of time, made a lot of manual trades, and lost a lot of money on crypto futures in the last three months. I’ve learned some things… One is that the order books are virtually meaningless, at least for humans. They change so rapidly, bulking or vanishing, that you cannot gain any sense of what the market wants or is doing. I’ve also seen strings of tiny trades, apparently strategically timed with order book cancellations, causing big price changes on almost no volume.
lvl100 5y ago
What this study misses is how much BTC is fueled by altcoins. It’s an ecosystem that’s rarely discussed.
ypeterholmes 5y ago
So the entire Crypto space is a "lawless wasteland" just because some folks are trying to manipulate the markets? Gonna need a bit better argument to buy that.
SZJX 5y ago
IMO the other explanatory post by Coral Alexander linked at the beginning this post did a better job to describe the hypothesis in a more accessible and clearer language. https://www.coalexander.com/post/binance-spoofy-bots-and-liquidations https://www.coalexander.com/post/binance-spoofy-bots-and-liq... In this post, the central thesis that spoofing was the key igniter of the event was not clear IMO and it didn’t explain well how spoofing works, while the other post lays it out very well, along with dedicated explainers for the key terms.

622 points by VHRanger 5y ago

echopurity 5y ago

kordlessagain 5y ago

I remember when something similar was going on with AMD stock, which was heavily shorted at times.

bitxbitxbitcoin 5y ago

May I suggest a similar look at September’s fake press release about WalMart accepting Litecoin.[0] Unlike with the Amazon hype which had arguably an unknown non zero price signal at the time, price manipulation here was the alpha and omega for the initial so obviously fake press release. [0] https://www.nytimes.com/2021/09/13/business/litecoin-walmart-crypto-hoax.amp.html https://www.nytimes.com/2021/09/13/business/litecoin-walmart...

mwattsun 5y ago

I'm suspicious of Bitcoin as a store of value. Some seem to think that because there is a fixed amount of Bitcoin it will automatically rise in price as demand confronts scarcity, but that assumes there will continued demand. Elon Musk says Dogecoin is better because it has some inflation built in, encouraging people to spend instead of hoard, but adds "I'm not saying that it's the ideal system for a currency" "Elon Musk - SpaceX, Mars, Tesla Autopilot, Self-Driving, Robotics, and AI", Lex Fridman Podcast #252". Clip from a discussion about money starting minute 48:41 https://youtu.be/DxREm3s1scA?t=2923 https://youtu.be/DxREm3s1scA?t=2923 Lex: You mentioned that Doge is the people's coin. Elon: Yeah. Lex: And you said that you were literally going, SpaceX may consider literally putting a Dogecoin on the moon. Is this something you're still considering, Mars perhaps, do you think there's some chance, we've talked about political systems on Mars, that a Dogecoin is the official currency of Mars, it's the coin of the future? Elon: Well, I think Mars itself will need to have a different currency because you can't synchronize due to speed of light, or not easily. Lex: So it must be complete standalone from earth? Elon: Mars is, at closest approach, it's four light minutes away roughly, and then add for this approach, it's roughly 20 light minutes away, maybe a little more. So you can't really have something synchronizing if you've got a 20 minute speed of light issue, if it's got a one minute blockchain. It's not gonna synchronize properly. I don't know if Mars would have a cryptocurrency as a thing, but probably, seems likely. But it would be so kind of localized thing on Mars. Lex: And you let the people decide. Elon: Yeah, absolutely. The future of Mars should be up to the Martians. I mean, I think the cryptocurrency thing is an interesting approach to reducing the error in the database that is called money. I think I have a pretty deep understanding of what money actually is on a practical day-to-day basis, because of PayPal. We really got in deep there. And right now the money system, actually for practical purposes is really a bunch of heterogeneous mainframes running a old COBOL. Lex: Okay, you mean literally Elon: Literally. That is literally what's happening in batch mode. Okay. Lex: In batch mode. Elon: Yeah. Pity the poor bastards who have to maintain that code. Okay. That's pain. Lex: Not even Fortran? Elon: COBOL, yep. That's COBOL. And they still, the banks are still buying mainframes, in 2021, and running engine COBOL code. The federal reserve is like probably even older than what the banks have, and they have an old COBOL mainframe. And so the government effectively has editing privileges on the money database. And they use those editing privileges to make more money whenever they want. And this increases the error in the database that is money. So I think money should really be viewed through the lens of information theory. You're kind of like an internet connection. Like what's the bandwidth, total bit rate, what is the latency jitter, packet drop, errors in the network communication. Just think of money like that basically. I think that's probably what I really think of it. And then say what system, from an information theory standpoint, allows an economy to function the best. Crypto is an attempt to reduce the error in money that is contributed by governments diluting the money supply as basically a pernicious form of taxation. So both policy in terms of with inflation, and actual like technological, COBOL, cryptocurrency takes us into the 21st century in terms of the actual systems that allow you to do the transaction, to store wealth, all those kinds of things. Like I said, just think - In theory - of money as information, people often will think of money as having power in and of itself. It does not. Money is information, and it does not have power in and of itself. Applying the physics tools of thinking about things in the limit is helpful. If you are stranded on a tropical island and you have a trillion dollars, it's useless. Because there's no resource allocation. Money is a database of resource allocation, but there's no resources to allocate except yourself. So money's useless. If you're stranded on a desert island with no food, all the Bitcoin in the world will not stop you from starving. Lex: Yeah. Elon: Just think of money as a database for resource allocation across time and space. And then what system, in what form should that database, or data system, what would be most effective? There is a fundamental issue with, say Bitcoin, in its current form in that it's, the transaction volume is very limited. And the latency, the latency, for a properly confirmed transaction is too long, much longer than you'd like. It's actually not great from transaction volume standpoint or latency standpoint. So it is perhaps useful as, to solve an aspect of the money database problem, which is the sort of store of wealth or an accounting of relative obligations, I suppose. But it is not useful as a currency, as a day-to-day currency. Lex: But people have proposed different technological solutions. Elon: Like Lightning and the Layer 2 technologies on top of that. I mean, it's all, it seems to be all kind of a trade-off, but the point is, it's kind of brilliant to say, to just think about information, think about what kind of database, what kind of infrastructure enables the exchange of - Yeah, let's say like you're operating an economy, and you need to have some thing that allows for the efficient, to have efficient value ratios between products and services. So you've got this massive number of products and services, and need to, you can't just barter. Because that would be extremely unwieldy. So you need something that gives you a ratio of exchange between goods and services. And then, something that allows you to shift obligations across time, like debt, debt and equity shift obligations across time. Then what does the best job of that? Part of the reason why I think there's some merit to Dogecoin, even though, it was obviously created as a joke, is that it actually does have a much higher transaction volume capability than Bitcoin. The costs of doing a transaction, the Dogecoin fee is very low. Like right now, if you wanna do a Bitcoin transaction, the price of doing that transaction is very high, so you could not use it effectively for most things. And nor could it even scale to a high volume. And when Bitcoin was started, I guess around 2008 or something like that, the internet connections were much worse than they are today, like order of magnitude. I mean, they were way, way worse in 2008. So like having a small block size or whatever it is, and a long synchronization time made sense in 2008, but, 2021, or fast forward 10 years, it's like, comically low. And I think there's some value to having a linear increase in the amount of currency that is generated. So, because some amount of the currency, if a currency is too deflationary or like, or should say if, if a currency is expected to increase in value over time, there's reluctance to spend it. Because you're like, "Oh, if I, I'll just hold it and not spend it because its scarcity is increasing with time, so if I spend it now, then I will regret spending it. So I will just, you know, hoard all it." But if there's some dilution of the currency occurring over time, that's more of an incentive to use that as a currency. So Dogecoin just somewhat randomly has just a fixed a number of sort of coins or hash strings that are generated every year. So there's some inflation, but it's not a percentage at base. It's a fixed number, so the percentage of inflation will necessarily decline over time. I'm not saying that it's like the ideal system for a currency, but I think it actually is just fundamentally better than anything else I've seen, just by accident.

Hokusai 5y ago
How is Elon Musk a relevant opinion on this matter? Even worse, he is well known for astroturfing his own assets.
- mcbishop 5y ago
  Elon Musk in the exchange above: > I think I have a pretty deep understanding of what money actually is on a practical day-to-day basis, because of PayPal. His comments in the exchange seem insightful to me. I assume you didn't bother reading them.
  - danaris 5y ago
    ...because Musk bought PayPal, he can speak authoritatively on Bitcoin?
    - gunshai 5y ago
      This is a bit of misunderstanding of history. He started X.com which would later become PayPal.
      - Cederfjard 5y ago
        To be even more precise, X.com merged with Thiel's Confinity, which already had a product called PayPal, and later the whole company was renamed after the latter. PayPal existed as a thing before Musk's involvement.
        mml 5y ago
        oh, and musk was fired for incompetence, and all his code thrown away after the x.com acquisition. he also isn't the founder of Tesla. basically everything "everyone knows" about Elon "monorail" Musk, is a lie.
  - jcranmer 5y ago

rasengan 5y ago

Didn't FTX make Solana?

VHRanger 5y ago
No, but they heavily invested in it

JohnJamesRambo 5y ago

They do it down too. It’s not a secret or illegal. Here’s a post mortem from the guy that did it. https://twitter.com/AlamedaTrabucco/status/1467219711830151178 https://twitter.com/AlamedaTrabucco/status/14672197118301511... Ready for a move up again soon.

noja 5y ago
> It’s not [...] illegal Errr - what? I think you'll find that market manipulation is prohibited in the US under Section 9(a)(2) of the Securities Exchange Act of 1934, and in the EU under article 12 of the Market Abuse Regulation (etc.) The US Securities Exchange Act defines market manipulation as "transactions which create an artificial price or maintain an artificial price for a tradable security". See https://en.wikipedia.org/wiki/Market_manipulation https://en.wikipedia.org/wiki/Market_manipulation
- adrianN 5y ago
  Is Bitcoin already classified as a tradable security or is it still Monopoly money?
  - vmception 5y ago
    False dilemma Products are regulated by the FTC Commodities and currency derivatives that are traded are regulated by the CFTC Securities issuance and securities trading are regulated by the SEC so have fun with the federal trade commission rawr big teeth over there /s
  - teekert 5y ago
    People assign value to monopoly money now? Edit: I get that many people here are ant-cryptocurrencies, but I think it is rather childish to call it monopoly money.
    - adrianN 5y ago
      Yeah, a replacement set costs about three Euros on Amazon.

mbesto 5y ago

Curious - does anyone not think Bitcoin or any other cypto coin is being manipulated?

recursive 5y ago
Me. I don't have an opinion.
- likecarter 5y ago
  Great analysis.
temp8964 5y ago
What coin is not being manipulated? Even USD is being manipulated by the fed. All the countries manipulate their coins. So the real question is whether a coin is being manipulated, but what kind of manipulation you can accept.
- mbesto 5y ago
  First, let's start by using a valid comparable. Fiat currency has the feature of "medium of exchange", at present BTC does not (technically it does but its adoption for exchange is abysmal). > So the real question is whether a coin is being manipulated, but what kind of manipulation you can accept. The NYSE is a better comparable. In the US we have the SEC which does regulate against market manipulation: https://en.wikipedia.org/wiki/Market_manipulation https://en.wikipedia.org/wiki/Market_manipulation I do believe there is some level of market manipulation not captured by the SEC, however there is at least some baseline level of control against it.
  - SilasX 5y ago
    >First, let's start by using a valid comparable. Fiat currency has the feature of "medium of exchange", at present BTC does not (technically it does but its adoption for exchange is abysmal). You're changing the topic. You asked whether BTC was being manipulated, and were asked to compare to the US dollar. Whether the dollar is as "medium of exchange" has no bearing on that, you're just unhelpfully switching to an unrelated issue that will make the dollar look better in orthogonal ways.

iso1631 5y ago

Meh, it's more fun than gambling on the superbowl. Put $50 in, and with the superbowl you get an hour of watching a game and maybe come out with $100 or maybe come out with $0 With bitcoin you get to ride the highs and lows for years and maybe come out with nothing, or maybe with $5000

StrangeClone 5y ago

This is done in regular stock market too. Fake news, speculation, etc are frequent. Ex: “X giant is acquiring Y” claims with no data to back up. What’s different in case of crypto?

VHRanger 5y ago
Two things: 1. Because crypto exchanges are also clearinghouses, liquidations tend to cascade. 2. It's much more blatant in the crypto markets. See the DRW lawsuit linked in the article - the CFTC is aware that DRW is doing similar things in the CME futures market, but the extent to which it's done is smaller.
hnmullany 5y ago
If it's significant enough, the SEC will knock on your door when this happens in the regular market
- jimmydorry 5y ago
  I’m not aware of any pundits, that get on the TV to push agendas about stocks, getting in any trouble with the SEC. I’m not sure if it’s just because I have been looking closer recently, or had more time WFH, but the blatant manipulation on morning shows and financial segments is appalling. Things like saying a given pharmaceutical is headed for zero because their drug failed to get FDA approval, when actually the company had just started their trial and not yet sought approval. Or pushing a stock then pretending to lose connection when asked what the company does. Or saying that a company pivoting to online retail will not have the necessary skills and will be facilitating terrorists (name dropping Al Kaida).
  - rowathay 5y ago
    Pardon my ignorance and/or naïveté, but are these real examples?
    - jimmydorry 5y ago

paulpauper 5y ago

The price is nothing but down, down, down. it is not manipulation but just ppl dumping at every opportunity, like bank stocks in 2007-2008 or dotcom stocks in 2000-2002. Would not want to own this.

epinephrinios 5y ago
It's "down, down, down" only if you entered at a very high price: https://athcoinindex.com/coin/bitcoin https://athcoinindex.com/coin/bitcoin As the great Andreas Antonopoulos said, everyone gets the Bitcoin price they deserve.
- dadoge 5y ago
  Slight correction: It’s down down down if you entered at a high price AND sold within 3yrs No one who held BTC for 3-4 yrs straight has lost money on their investment throughout the entire history of BTC There will be a point in time where this won’t be true anymore, but I think we are far from it
  - cuteboy19 5y ago
    70% of people who bought Bitcoin bought it in the past year. With these statistics, it is very likely that more people lost money through Bitcoin than gained it. Someone has to pay for all the Bitcoin mining around the world, so it's probable that Bitcoin as a whole is net negative. That is, the average investor loses money on Bitcoin.
    - dadoge 5y ago
      What about anyone who fully understood its value proposition and held for a 3-4 yr timeframe? EDIT: let’s check back in in 1-3 yrs here and see if people who bought last year and held are doing :-)
      - cuteboy19 5y ago
        I'm sure such people exist, its just that there are probably more losers than winners in this net negative game. Analogously, there are some people who have won a lot of money from casinos but the average gambler loses money because the house always wins. Miners are 'the house' for this analogy

naveen99 5y ago

It’s not so much price manipulation as timed restrictions / throttled deposits / withdrawals / order execution. basically market malfunctions / barriers. you can always arrange over the counter transactions though.

madduci 5y ago
The bad thing is, it directly influences also the price of other coins, especially the top 5. Only Tether is "stable" in all the senses

albert_e 5y ago

https://archive.md/CxQpX https://archive.md/CxQpX

skilled 5y ago

Interesting tidbit: "An aside on NFTs Because they’re “unique” objects, NFTs are a perfect vehicle for wash trading. You can easily ensure you only wash trade to yourself. The common scheme is to wash trade with yourself until some credible dunce buys the NFT from you at your manufactured “fair” value, leaving you to walk away with real money." It's such a stupidly simple idea it's actually brilliant.

paulpauper 5y ago
not really if the fees are high and tons of ppl are doing this with few sales. the nft market is so unbelievably saturated.
MikeDelta 5y ago
Reminds me of this sketch from Enfield and Whitehouse https://youtu.be/ZiJa9diJOMk https://youtu.be/ZiJa9diJOMk
- crtasm 5y ago
  From loadsamoney to lots of money! https://genius.com/Harry-enfield-loadsamoney-doin-up-the-house-lyrics https://genius.com/Harry-enfield-loadsamoney-doin-up-the-hou...
belter 5y ago
In a complex system, whose algorithmic essence is price forgery, value randomness and pump and dump as a strategy...Would argue that achieving maximum manipulation is simply the algorithm optimizing for its "best".
masona 5y ago
The fine art market has been doing this for decades by using auction records to set prices.
- spoiler 5y ago
  You can't buy and sell the same item to yourself at an auction multiple times... Or am I missing the point you're trying to make? Also, the value is in the art, not the receipt. With NFT, that's not the case... Unless it's an exchangeable NFT, like one you can exchange for a service (e.g. as a tick) or some goods, but that's not really how NFTs are being used.

TheDesolate0 5y ago

superkuh 5y ago

No, this is the anatomy of an off-chain price manipulation of a private futures market that exchanges something that is tradeable for Bitcoin. It used to be funny but now it's just sad seeing everyone confused about the difference between bitcoin and third party markets. Only a vanishingly tiny fraction of this actually has any representation on the bitcoin blockchain. It's like buying stolen Tide detergent out of the back of a shady car in the parking lot of the actual grocery store then complaining about the grocer when you get home and it's watered down. This is the normal finance people with their normal scams manipulating private enties like Binance which are vagely associated with Bitcoin. The finance people and the public at large cannot see bitcoin as anything other than an investment and that perception blinds them.

tdherzl 5y ago

It should be noted that OP is a staunch BTC skeptic and a proponent of MMT. This seems to be one of his many attacks on BTC.

VHRanger 5y ago
Uh, author here, I have no idea how you could ever think I'm a proponent of MMT. I'm a vocal critic: https://www.singlelunch.com/2018/10/01/bad-economics-shame-on-you-planet-money-mmt-episode/ https://www.singlelunch.com/2018/10/01/bad-economics-shame-o... As for BTC, yes, I hate it and am vocal that PoW cryptocurrencies should stop existing. But this piece isn't focused on that.

wesapien 5y ago

Just anything you want to manipulate, you fake the news these days.

jondwillis 5y ago
It’s not a new phenomenon.
- tarsinge 5y ago
  It's a bit fuzzy but I remember a chapter in the Count of Monte Cristo where the Count bankrupt an enemy by bribing a telegraph agent to pass a false geopolitical (Spain?) report to cause market crash of bonds of that country and push his enemy to sell low.

fleddr 5y ago

It's a good and fair article. Even without media manipulation, there's a huge amount of futures trading on high leverage which tends to pile up. Then, all that is needed is a fuse and something spectacular will happen, either up or down. The author could have picked from a series of other dates, where seemingly relevant/important news to Bitcoin is revealed, and somehow...price action does nothing on those dates. Why not? Not enough leverage built up. So it's the nature of the trading making price so volatile. A small event can trigger a cascade of liquidations. To a skeptic, this would be a reason to reject the asset. To a long term holder, it doesn't matter as they don't trade. To short term traders, it's the way to make a lot of money quickly, or to blow up your account and lose it all.

mslupski1 5y ago

What else is new? Kudos for all the research, but I don't think any reasonable person needs any proof that all crypto is ripe with manipulators and scammers.

wcchandler 5y ago

That was a good read. Thanks! I would've enjoyed the TL;DR (How market manipulation is done) at the top to draw me into the actual mechanics behind how it happens. Now I want to make a bot to detect some of these patterns and alert me on them.

hestefisk 5y ago

Very nice, detailed analysis. Thanks for sharing.

jokoon 5y ago

I hope it's not going to be a long time before congress swiftly enact regulating anything related to crypto currencies when interacting with the dollar. Although bitcoin might also be used to honeypot hackers through bitcoin exchangers, so I don't know... I'm even starting to believe insurance companies might work with crypto folk and lobby government so that insurance companies keep paying for ransomware.

syntaxing 5y ago

I don’t have enough mathematical knowledge in this subject to back this statement up but I swear I noticed this for SPACs too. There’s these really odd spikes up and down that does not make any sense according to public information

acjohnson55 5y ago
Most SPACs are very lightly traded and are prone to weird patterns.

benreesman 5y ago

Eh 20-ish years ago the shit happening on Island and Archipelago would blow most people’s minds. Undocumented, conditional, non-displayed order types. Routine wash trading. Shear-but-don’t skin multi-venue arbitrage. The ECNs were the Wild West. Smoke-filled dark pools. Island and Arca are NASDAQ and NYSE now. But Ben, US equities have intrinsic value unlike this BTC garbage! Well unless they pay no dividend, have dual-class share structure, and IPO without a profitable quarter. What’s a share of SNAP entitle you to exactly? Ah right, you think someone will buy it for more. Crypto will have it’s 2001-style GC cycle, the useful stuff will stick around until Goldman owns it and the SEC makes a show of regulating it, the tulip garbage will wash out leaving behind a bunch of rich guys who are really annoying because they never built anything, and we’ll go back to arguing about programming languages.

dheera 5y ago
> US equities have intrinsic value Really? My impression is that many US equities in 2022 are more like Reddit up/downvote scores than a reflection of intrinsic value. Which isn't a bad thing in my opinion, by the way.
- benreesman 5y ago
  I mean if they pay a dividend (and you believe it will continue) you can do math that treats it like a bond coupon and do a present-day valuation. If they have attached voting rights you can get together with other investors and vote yourself a bigger dividend (though same goes for Uniswap v2), or a share buyback. But yeah, mostly it’s a Keynsian Beauty Contest.
- cillian64 5y ago
  I think of it like this. If you suddenly owned 100% of Bitcoin, then you wouldn’t actually have anything valuable - nobody would buy it off you. If you suddenly owned 100% of Tesla then you’d be able to extract a lot of value.
  - benreesman 5y ago

evrydayhustling 5y ago

This is some interesting analysis, but all of the causal language is unsupported -- and I think mostly inverted from the reality. Here is an equally supported description: - Retail and futures traders create instability by placing leveraged trades and stop orders that amplify swings. - Market makers are aware of instability and design their bots to turn off so that they don't end up on the wrong side of a liquidity cascade. - People with large orders often cancel them in order to improve their orders when chasing the price. (This happens in non crypto markets too, but some of those markets have incentives and regulation to force market makers to provide stabilizing liquidity.) The most explicit manipulation is the news outlets designed to amplify positive news. But even that can be explained by desire for clicks as much as short term market shifts.

VHRanger 5y ago
Author here. I considered this, but rejected most of those hypotheses. > Retail and futures traders create instability by placing leveraged trades and stop orders that amplify swings. True > Market makers are aware of instability and design their bots to turn off so that they don't end up on the wrong side of a liquidity cascade. Algorithmic traders, yes. Market makers absolutely not. MMs want to be there as much as possible in liquidation cascades, because bid/ask spreads are huge. MMs effectly print riskless money in these situations (which is why you see Alameda and DRW issue so much USDT in these events). > People with large orders often cancel them in order to improve their orders when chasing the price. It's absurd to think this is the case when the order cancellation pattern is precise to ~3ms and repeated >5 times in a 30 second span. What you see on 26/7/2021 0:59:20-1:00:45 is intentionally done by bots designed to do this. > But even that can be explained by desire for clicks as much as short term market shifts. Agreed, there's a footnote that posits other actors than the momentum ignition traders could have planted the fake news because they saw the same opportunity
- stepanhruda 5y ago
  Market makers don’t print riskless money, they are affected by a very real risk of divergence loss.

deleted 5y ago

[deleted]

gfd 5y ago

Dumb question, but is price manipulation wrong when it's for something that doesn't have a "true" price? Like I get why it should be illegal for stocks. If you pump it and the price reverts back to some true price (calculated from expected future earnings or whatever), then people who bought it expecting it to be at an efficient price will lose money. In the case of crypto where everything is driven by supply and demand only, who loses?

prox 5y ago
Because (layman here) you could still pump & dump and influence prices. Perhaps it’s tougher with bigger established coins BTC or ETH, but it’s still a thing afaik.
woodruffw 5y ago
This is only a partial answer: broadly, we lose as a society. Openly fake markets and obvious manipulation erode trust in systems that, even when corrupt and manipulated, are ultimately tied to real value (people’s labor, their retirement accounts, &c.) None of what we have is great, and I’m not going to bother justifying traditional financial markets. But cryptocurrencies represent a massive moral hazard to our handling of hundreds of millions of peoples’ economic security.
c7DJTLrn 5y ago
I'd argue there's no right or wrong at all when it comes to this. There's only bigger and smaller, stronger and weaker, early and late. We draw an arbitrary line somewhere and say that people on one side cannot trade on information they have and the people on the other side can. And we trust that the people on the former side will never try to find a cheat or workaround. The market is completely made up. It's driven by inequality in access to information. You're only going to make money if you're: A. Lucky B. Ahead of the game in some shape or form
lcvw 5y ago
Stocks also don’t have a “true” value. Their price is driven entirely by supply and demand, which in turn is weakly anchored by investors doing fundamental valuations on the stock (there is more demand for an underpriced stock). The issue is that market manipulation is outright theft, usually from retail investors. Think of it like playing blackjack. When I hit, I make a bet and I know roughly what the odds are that the bet will pay out. If the house was to manipulate the cards in the deck so that the odds are different, I would lose much more often then I should, and it would be theft. Similarly, if someone uses artificial demand to drive up the price of btc above the natural demand and I overpay, then they are selling to me at an unfair price. Eventually the price with fall to the natural price and I will lose money. Btc is weird because people keep buying more, but the principle is still the same. If the price is going to go from 40k and 50k over the next few months, and the price is artificially raised to 45k (which is when I buy in this example) then even if I get out at 50k I’ve lost 5k of profits I would get if the market was fair. So the short answer is that in any case of any market manipulation, it is theft from other investors. Usually (but not always) small retail investors. Now the argument some crypto folks make is that market manipulation is part of this market, so take that how you will.

kkjjkgjjgg 5y ago

Am I reading right that among all the words, there are just three examples of "manipulation"? - fake news stories about Amazon accepting Bitcoin, and something Tether - "momentum ignition", trying to start a trend by placing a big trade offer and withdrawing it when takers arrive Are those really a big deal? I guess technically every trade in crypto or stock markets is also a "market manipulation", as it has the potential to move the price.

Animats 5y ago

There's a hype cycle right now with the claim that Walmart is going to issue NFTs, or get into cryptocurrencies, or something.[1] Walmart is not saying that. They filed for a trademark for "WALMART" for the trademark class that includes cryptocurrencies. Which means only that WalMart, Inc. spent $400 to protect their brand name from someone creating "WalMartCoin". WalMart, asked for a statement, said they had no immediate plans in that area. [1] https://www.theverge.com/2022/1/16/22887011/walmart-metaverse-nft-cryptocurrency https://www.theverge.com/2022/1/16/22887011/walmart-metavers...

Ekaros 5y ago
That seems like very cheap insurance... Even the legal filings to fight someone launching WalMartCoin are more...
paulgb 5y ago
Reminds me of the whole market-moving news cycle about Amazon accepting cryptocurrency “by the end of the year” last year. Tons of coverage, like this[1]. It never passed the smell test, all traced back to one anonymous City A.M. source, and of course it didn't happen. [1] https://gizmodo.com/amazon-to-accept-bitcoin-by-end-of-2021-and-develop-own-1847360405 https://gizmodo.com/amazon-to-accept-bitcoin-by-end-of-2021-...
- hoffs 5y ago
  The article that this post is about talks literally about Amazon event...
  - paulgb 5y ago
    Ah, you're right. I'd saved it to read later, should have kept my mouth shut until I did.

mulcyber 5y ago

I take advantage of the post to ask. Anyone has a good introduction to trading for engineers/mathematicians/programmers? Something that goes into the theorics and the math of the thing. Like an MIT open course or something. I'm always a bit lost with these things.

VHRanger 5y ago
Patrick Boyle's books are a good start. Generally I would discourage people from trading - 99% of people who try fail.

lend000 5y ago

While I appreciate the amount of work that went into this article, there are at least 50-100 potential current "news" stories in the crypto space at any given time. It's easy to find one that correlates with price movements after the fact, but more or less impossible to do so with forward testing. Virtually no successful crypto trading firms are using real time news data as a centerpiece of their trading, because news has almost no impact (contrary to popular belief and the assertions of this article), especially compared to equities. Elon Musk's tweets, which ostensibly should matter least for fundamental value, are probably the biggest drivers of capital, albeit only in the short term. See [0]. And then the part about "suspicious" orders on the book before the liquidation cascade. Come on. Amateur crypto traders are reinventing religion, where mysterious unknown "whales" are the gods, pulling all the strings. [0] https://en.wikipedia.org/wiki/Data_dredging https://en.wikipedia.org/wiki/Data_dredging

setr 5y ago
> And then the part about "suspicious" orders on the book before the liquidation cascade. Come on. Amateur crypto traders and outsiders are reinventing religion, where mysterious unknown "whales" are the gods, pulling all the strings. Sounds like something a whale would say…

pcurve 5y ago

The "Bart" pattern had me in stitches because there has been similar stock meme among Korean individual traders mocking strange price actions and doing technical analysis using cartoon characters to figure out the best entry/exit points. https://m.blog.naver.com/kwonhs225/222201971395 https://m.blog.naver.com/kwonhs225/222201971395 Pretty hilarious.

somewhereoutth 5y ago

Bitcoin (and friends) is essentially a pyramid (edit: ponzai) scheme, where late entrants pay the 'returns' on early entrants - but with a technology layer that precisely and and publicly records each payin/payout. In a way it is beautiful - the fraud is so transparent, and so technologically guaranteed to be transparent, that it becomes legitimised. Almost as if robbing a bank would be ok if you made an appointment beforehand.

errantmind 5y ago
By that logic, any marketplace is a pyramid scheme because later entrants always pay earlier entrants. A pyramid scheme has a very particular definition, please look it up.
- somewhereoutth 5y ago
  Sorry, I meant ponzai scheme. Marketplaces are where things with inherent value are exchanged. Crypto has zero inherent value - it serves only as a record of previous players in the scheme.
  - errantmind 5y ago
    Gatekeeping 'value' yields no insights. Value is whatever people think it is and doesn't require any physical connection to reality, nor any rational mechanism.
    - somewhereoutth 5y ago
      I think we can ascribe an inherent value - as opposed to market price. When the inherent value is clearly and indisputably zero, but punters are handing over real cash, then you have a fraudulent scheme.
      - errantmind 5y ago
        You have provided no definition of this 'inherent value' you claim to exist. You keep stating conclusions in absolute terms with nothing to back it up.

blunte 5y ago

I’ve spent a lot of time, made a lot of manual trades, and lost a lot of money on crypto futures in the last three months. I’ve learned some things… One is that the order books are virtually meaningless, at least for humans. They change so rapidly, bulking or vanishing, that you cannot gain any sense of what the market wants or is doing. I’ve also seen strings of tiny trades, apparently strategically timed with order book cancellations, causing big price changes on almost no volume.

lvl100 5y ago

What this study misses is how much BTC is fueled by altcoins. It’s an ecosystem that’s rarely discussed.

ypeterholmes 5y ago

So the entire Crypto space is a "lawless wasteland" just because some folks are trying to manipulate the markets? Gonna need a bit better argument to buy that.

SZJX 5y ago

IMO the other explanatory post by Coral Alexander linked at the beginning this post did a better job to describe the hypothesis in a more accessible and clearer language. https://www.coalexander.com/post/binance-spoofy-bots-and-liquidations https://www.coalexander.com/post/binance-spoofy-bots-and-liq... In this post, the central thesis that spoofing was the key igniter of the event was not clear IMO and it didn’t explain well how spoofing works, while the other post lays it out very well, along with dedicated explainers for the key terms.