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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

by 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.
- shrimpx 5y ago
  > I know roughly what the odds are that the bet will pay out > natural price In low-volume situations (almost all cryptoassets) you don't have these properties. The price is "fake"/random to begin with.

by gfd 5y ago

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.

shrimpx 5y ago
> I know roughly what the odds are that the bet will pay out > natural price In low-volume situations (almost all cryptoassets) you don't have these properties. The price is "fake"/random to begin with.