Wow, this paper's conclusion is delayed by 3 years. Willy and Markus bots are old news for anyone who has been following bitcoin closely. The source of all these allegations was this blog appearing in 2014:
This is how research in economics works. It can take even 5 years to get a paper published, although these guys seem to have written the paper quite recently. Turnaround was quick for them...
If you were paying attention in the week that followed this post, the spread between GDAX and the other major US exchanges narrowed from $1000+ per coin to just about $11 right now, and trade volumes on GDAX plummeted. Maybe theres's some other reason, though there's some crazy correlation there at least. I'm surprised more people aren't talking about that.
Looks like that article was written on the 23rd of December.
That's the same time period around which Coinbase abruptly released Bcash. That time period was a barrage of negative kerfuffles for them.
Historically Coinbase/GDAX has enjoyed "inflated" BTC/USD prices because of their trustworthiness. Contrast with Bitfinex which does not serve US customers, has been hacked in the past, and is (last I heard) in debt from said hack. Or contrast with any of the other exchanges which are either questionable or located outside the U.S. Gemini is the only other state-side trustworthy exchange besides them.
(I say inflated, but it's probably more appropriate to say that the price is a discount on all other exchanges; a discount which accounts for the counterparty risk and difficulty moving USD in/out of them.)
The late December fiascos that Coinbase suffered has likely shaken that sense of trust, at least in the short-term, resulting in both reduced trading volume and reduced prices relative to other exchanges.
So the question is, which theory is more likely? That a single trading bot has complete control over Bitcoin's price and its discovery has resulted in the dismantlement of the program? Or that traders are reacting to the news of "insider trading" by Coinbase employee's? Or maybe it's as simple as being the end of December. The winter holidays slow down markets.
Serious question: Why does hackernews seem to be biased towards BTC over BCH?
In my opinion, any honest examination of the tradeoffs between block size, orphan block rate, cost to run a non-mining node (which do not contribute to network security except indirectly via serving SPV wallets), and mining fees, will show that a 1-1.7MB block size limit is just too low for current tx volumes.
The current BTC network is unusable due to the massive fees. Even worse, those who actually used the currency (sorry, I mean store of value?) get penalized for having so many UTXOs. UTXOs directly increase the size in bytes of the transaction, increasing the fees you pay.
I've paid probably an average of $30 fees over the last 2 months, with the highest fee being $100 on a $4000 transaction (fee is related to size in bytes, not dollar value transmitted, I'm giving those numbers just to show how ridiculous it is)
EDIT: Also worth mentioning that the Coinbase CEO does not like blockstream because they censored Brian Armstrong (the CEO) for supporting BIP 101. Bitcoin Core has used a lot of heavy handed and very sketchy tactics to wrest control of the ecosystem in Satoshi's absence. They view themselves as the sole guardians of "consensus".
Increasing block size is not a sustainable solution for scaling transactions. Transaction fees are too high and BTC should move to 2MB as a short-term fix but the long-term fix is off-chain solutions like Lightning.
Then why is even a harmless increase to 2 or 4 refused? The current confirmation time and fees are beyond any worst case scenario, but yet there are still people completely brainwashed to argue that Bitcoin Core is perfectly fine.
Bitcoin Cash scale what it can scale, that is, blocksize. That's it, it is a pragmatic approach absolutely obvious for anyone with more than 2 year of experience in programming.
The Bitcoin Unlimited team has tested 1 GB blocks and presented their research and findings at conferences already.
That being said, the least sustainable solution is to keep blocks at 1 MB for btc. The core group have ousted and alienated everyone who made bitcoin work originally. The fees have priced out everyone who created the ecosystem originally. It is crystal clear to anyone even slightly paying attention that they have done nothing but lie and censor.
If you are getting all your information from /r/bitcoin you should know that it is censored into oblivion and has been nothing but propaganda for years now. Bigger blocks obviously work and the 'lighting network' not only has raises enormous questions about how it can work, it has been promised as just around the corner for multiple years now.
The Bitcoin Unlimited team tested on a tiny network ; ~6 miners with a highly simplified set of transactions that made some of the statistics collected so meaningless that they explicitly left them out of the talk. Under these conditions, they found that 1GB was the point where the network broke under its own weight [0]. If you were to run the full sized bitcoin network, you would likely see problems much sooner than 1GB. As far as I recall, they did not even address the centralization argument (eg. the network may "work", but give a disproportionate advantage to large miners).
[0] This actually happened a couple of times earlier, but those were fixable with straightforward software optimizations.
Apparently we're already seeing block size increases give disproportionate advantage to large miners on Ethereum, which allows miner voting on block size similar to Bitcoin Unlimited's proposal and is processing the most transactions out of all the major coins, at much smaller transaction rates than that: https://www.reddit.com/r/ethereum/comments/7pfshh/why_is_8m_... (Ethereum probably isn't as highly optimized as Bitcoin though.)
This is a generalization that is meaningless without the context of what the bottleneck actually is. Bandwidth works, processing blocks 1,000 times bigger works, what exactly do you think would be the problem? 1GB every 10 minutes is 1.6MB/s. The DOCSIS 3.0 standard goes higher than 100MB/s and anyone can rent a VPS with a gigabit connection for $15 - $20 USD per month.
The bottleneck is propagation time. Also "The propogation time did not depend strongly on the network bandwidth for the given nodes"
Keep in mind that it is not sufficient for each node to have the bare minimum amount of bandwidth to download 1 block every ten minutes. When a node mines a block, we need that block to propagate across the entire network (~11,000 nodes [0]). Further, we want this propagation time to be relatively trivial; otherwise the number of orphan blocks would increase giving an advantage to large mining clusters and reducing the overall security of the network.
For now the technical aspects of cryptos are simply not all that important. We're still in the incubation phase where crptos are being used as assets instead of currencies. And at this point all that matters is public perception and security, which go hand in hand. And I think the lack of any individuals behind Bitcoin also greatly benefits it. The team behind Ethereum, for contrast, somewhat belies the notion of decentralization - even moreso after they chose to unilaterally roll back "their" ledger.
The next phase begins when 'regular' people are engaging in at least occasional direct exchanges of currency using private wallets to purchase goods/services. That would highlight the technical issues with Bitcoin, but even then I suspect Bitcoin will remain the top dog as a store of value and we'll collectively choose a runner up for rapid exchange/verification. It might not even be an independent coin itself, but a strap-on tech that helps protect against double spend, even if with a sub-100% accuracy in exchange for speed. The idea there being that it would primarily be used to mostly validate small-value transactions, with an inherently reduced double spend incentive, whereas big value transactions could go through the main coin.
Tether claims to be backed by USD but could easily be a money printing press injecting fake value into the crypto markets. According to their own data, they have created $1.6B worth of tethers:
Fractional reserve guarantees that the max multiplier between money in motion and money at rest is never more than 10x.
If I’m supreme ruler of the world and I replace all currency with Hinkley Bucks, 100 of them in total, and I put them in the bank, they loan 90 to a guy who builds a house. The builder and all their suppliers and employees put that 90 in the bank, and the bank loans 81 to a guy starting a grocery store chain. Then those guys and the farmers bank that money and the bank loans out 72 bucks. On and on until the balance in everyone’s savings accounts adds up to 1000 bucks. And yet somehow the bank has all one hundred bucks in its vault. Because the rest is loans.
If you increase the reserve to 11% then 100 bucks “disappear” from this economy. Going from 10 to 11% is a 10% increase in the reserve, and it [tanks] GDP.
If you go the other way you dangerously increase the money supply very quickly. I can’t even conceive of how much more volatile 1/1800 is compared to 1/10.
The 10x thing is a common misconception generated by the fact that 10 is a nice round number that works well for this type of just-so story.
The Wikipedia article on reserve requirements has a handy table by country, from which you can see that the required ratio is actually less than 10 in most of the developed world.
In fact, several countries have no reserve requirements at all! Following your logic, those countries should be even more volatile than whatever is going on in crypto currency land. I think we can safely conclude your logic is flawed.
Mind you, I still think the whole tether business is extremely fishy. I'm just annoyed by the spread of monetary just-so stories that pretend to apply to the real world. Reserve requirements are a red herring in modern monetary systems, because central banks will always guarantee liquidity by acting as a lender of last resort.
10% isn't a fact, it's an example that is close enough to illustrate the thought experiment but allow you to do the math in your head (I originally learned about this years ago in a personal finance podcast).
And of course the fact that I have $65 in my wallet right now instead of in the bank takes $650 out of the cycle. If you're in a country where people don't trust the banks that much, or people have almost no money, a big fraction of all the money in play may be in cash, in someone's pocket, a safe, a cash register, an ATM, a briefcase, or hiding under their mattress.
Banks usually don't lend money out to just anybody, so the worst case scenario never actually happens. Or only happens once every 70 years. If there aren't too many banks in your country then you oversee more of the money supply and the house of cards effect should be more obvious than here.
If you have no reserve, then the only limits are how many people want 100 bucks (so upper bound $700B) and how fast can you file the paperwork to make it happen. What’s the friction in the system.
My fear is that their 1/1800 is that friction, and not a safety feature at all.
sigh maybe this just isn't the venue or even the right group to try to discuss this stuff (myself included). We like to pretend like everybody else has an 'easy' job but economics is hard stuff.
I think you're mostly right, except for a couple of problems that I know of.
One, when the system goes sideways those liabilities tend not to be paid off. Bankruptcies and such. And we assume that banks are managing these risks but that doesn't always turn out to be the case - which is how the reserve rate got instituted in the first place. The government says, we don't care how much you think you've got it sorted out, we insist that you be at least this tiny bit pessimistic. My original post was sort of pointing out that if you hear "Oh we have an 8% reserve so that means only 92% of assets are being used", the money moves around so many times that the effective rate is much lower and the risk is shared. But it still does put an upper bound on how much they can be leveraged. How much money is moving around (modulo fraud and 'monetary easing'). It's not the only one, and it might not even be the most important 'resistance' built into the financial policies, but it is part of it.
The second is that we for some reason measure the health of our economy by how much money is changing hands. We don't discount liabilities changing hands at all in that, which is a bit worrying, because in the early 2000's when they weren't lending money to anybody, everything tightened up, and when they're throwing money at anybody it looks like growth but feels like danger.
It’s worth noting that ‘fractional reserve’ isn’t really how banks work anymore. That model implies that banks require reserves to lend money, but they actually don’t (except in the countries that have a reserve requirement, for compliance reasons). The central bank does need to ensure that enough reserves exist in the system to have enough liquidity for banks to transfer money between them, but the banks tend to hold as little as possible, as in most places they don’t get any return on them, so they lend them to other banks (banks cannot lend reserves to individuals) or exchange them for bonds. If they need more to fulfil transfer requirements, they can just borrow them from other banks or the ‘lender of last resort’ - the central bank itself.
The interesting implication of this is that the central bank doesn’t really have direct control of the size of the money supply (as is implied by the ‘money multiplier’ myth). That is determined endogenously by the amount of lending the banks do (plus other sector’s - Government spending and current account surplus/deficit - contributions).
Yes, I'm a macroeconomist, I dabble in these matters all day every day (actually not really, I run the family company nowadays, but anyway, this stuff is my bread and butter, supposedly)... I know that current western systems are better characterised as being endogenous money systems rather than fractional reserve (though the two are not mutually exclusive, as if the reserve ratio is not mandatory but flexible then banks can be doing fractional reserve while the central bank simultaneously does not have any control over the size of the money supply... which isn't that bizarre either because as one progresses up the hierarchy of money supplies (M0, M1, M2, M3...) one pretty quickly gets far from anything central banks can legiferate about and into the domain of “assets agents are willing to accept as valuable and as suitable for exchange”, such as cigarettes, art, or prime real estate.
I'd argue that the endogenous money model most definitely isn't applicable to any cryptocurrency currently out there because maximum amounts are fixed, and thus (eventually) would be come unresponsive to market needs (and more technically, their derivative, the ‘speed’ with which money is introduced or removed, does not depend on the needs of the underlying economy and instead on technical aspects of the size of the mining network & cetera).
Sorry I didn't answer earlier I didn't see your comment.
Well, in theory you could run fractional reserve bank by letting your deposit customers decide whether they want or not be making deposits to you at any deposit rate you are offering. This would work if you disclosed your balance sheet and your customers were smart enough to make proper capital adequacy calculations on that. In the real world, however, I am not sure if disclosing the balance sheet matters, expected outcome (deposit holders losing their money) is pretty much the same.
Tragedy of the commons? I want all of my money lent out, but I also want the bank to have a reserve in case I need it, which means none of your money lent out.
The only way out of this is for customers to bargain collectively for the proper reserve ratio.
Nowadays the bank regulation is a bit more complicated than simple reserve requirements, and the capital held in "safe" assets (central bank deposits, government issued loans etc) is not there in the case if you need it (most of the time when you "need" your money, bank actually does not pay it out, but just changed whom it ows the money i.e. makes an account transfer), but it is there for the losses bank may make in their credit portfolio.
A simple example:
Bank has 90 deposits and 10 equity. That is used to finance 80 mortgages and 20 deposits in central banks.
Now, if the deposit customers have full understanding what kind of mortgages the bank has issued, they can estimate how likely it is that more than 10 of the mortgages fail, bank goes bankrupt and the deposit holder does not get paid full.
You see quickly that there is many ways how a bank kan reduce the risk in its credit portfolio. If the bank decides to lend only 10 and store 90 in central bank deposits, the risk of the bank losing more than 10 is quite small. but of course, you get more money from mortgages than from central bank, so you want to lend as much as you can to mortgages to maximize revenue. But then you need to pay also more to the (rational) deposit holders because of increased risk. You see also very quickly that even if the deposit holders had full understanding of the balance sheet, the calculations would be so difficult that wihtout regulation, most would inves their savings to banks that are riskier than what they think -> and lose their money.
I was sort of trying to get to a kind of the same point - tragedy of the point must yield regulation. Well, maybe it's not the same point. But I was trying!
Not to mention that in modern monetary systems, the central bank can always inject liquidity (new reserves) into the system if required (QE, etc.), and the Government also often insures people's bank deposits up to some limit. The Government can also choose to bail out the bank if required.
There is literally no comparison. If Tether runs out of US dollars, they have no options, and people holding Tether have no recourse...
Sure, but assuming Tether are lying about their instrument being fully backed it doesn't meet any of the theoretical requirements either. Fractional reserve relies on banks being strongly incentivised not to issue too many bank notes because they earn profits only on repaid loans issued to creditworthy borrowers, not from the act of printing the bank note to sell for currency.
Even in the absence of regulation, centralised clearing and interbank loan markets and a central bank as lender of last resort, fractional reserve depends on bank notes circulating and retaining value because enough people actually need them to meet debt repayment obligations, not on sufficient numbers of people believing that it's fully backed by the financial asset they actually want in their portfolio.
(Also, the history of bank runs suggests the legal requirement might have been a rather good idea)
I’m a macroeconomist, a disbeliever in current cryptocurrencies (because they do not allow fractional reserve banking because they have finite supply) and I absolutely agree with you. I was being facetious further up, I thought that was clear (but apparently it wasn’t).
I think in times like this it is important to separate fractional reserve (only a portion of a bank's assets are cash reserves) and plain fraud (Tether Inc. are insolvent and don't hold all the assets they claim to)
I couldn't point to anything specific besides general human nature and in my opinion that suggests that if it can be done for a profit it will be done.
So to me it seems highly unlikely that there isn't some flavor of manipulation going on. There are random alt coins with multi-billion dollar market caps. There are fortunes being minted, people are surely manipulating something.
I think the interesting question though is will the world long term become the new manipulated view or will it eventually all just fall part.
The Tether 'situation' worries me most. As far as I can tell Kraken is the only exchange that even allows tether to fiat trade, and that's just the first thing about the whole story that worries me.
> Any recent manipulations ? especially in 2017 end ?
Personal guess: none needed. The massive value drop right before Christmas was IMHO a combination of Christmas shopping (people cashed out their new riches to surprise their loved ones) and the end of FY2017 (tax gaming).
[disclosure: owning ~500€ in BTC, did not sell/buy during that period]
Abstract: To its proponents, the cryptocurrency Bitcoin offers the potential to disrupt payment systems and traditional currencies. It has also been subject to security breaches and wild price fluctuations. This paper identifies and analyzes the impact of suspicious trading activity on the Mt. Gox Bitcoin currency exchange, in which approximately 600,000 bitcoins (BTC) valued at $188 million were fraudulently acquired. During both periods, the USD-BTC exchange rate rose by an average of four percent on days when suspicious trades took place, compared to a slight decline on days without suspicious activity. Based on rigorous analysis with extensive robustness checks, the paper demonstrates that the suspicious trading activity likely caused the unprecedented spike in the USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to more than $1,000 in two months.
Highlights:
• Suspicious trades on a Bitcoin currency exchange are linked to rises in the exchange rate.
• A single actor likely drove the USD/BTC exchange rate from $150 to $1000 in 2 months.
• Trading volume on all exchanges increased greatly on days with suspicious activity.
• Unregulated cryptocurrency markets remain vulnerable to manipulation today.
That’s like saying the recent California wildfires are equivalent to the Great Chicago Fire.
Both are tragedies and both have a certain element of scale to them, but the Chicago fire was actually much much worse. It killed far more people, made far more people homeless, and destroyed far more economic value (adjusted for inflation).
Yes the current regulated markets have serious problems and are in need of reform. But the scale and scope of fraud and manipulation on all crypto currency markets is vastly larger and far more pervasive.
Just some interesting trivia. Two days after the Chicago fire which killed ~300 people, there was a much bigger fire in Wisconsin that killed 1200-2500 people. Over 300 people just from the town of Peshtigo died. It was a town with only about 1700 residents. It didn't get much media attention, however, because of the Chicago fire.
I suspect this is going on today. Cryptocurrency traders place a lot of faith in the exchanges. A bad actor at an exchange could manipulate a price upwards:
- Create a ton of volume and potentially and upward trend (two bots trading with one another, increasing the price each time)
- Generate hype around a coin
- Let FOMO take over
If things start to go south, disable withdrawals, deposits, or freeze the market until you can get it under control.
In aviation, the saying goes that "aviation regulations are written in blood", because for many rules, some time in the past people died in an accident, and the rule was established to prevent reoccurrence.
Now, in finance, the situation is not quite so dramatic. Nevertheless, many of the banking rules that cryptocurrencies (and sometimes fintech) aim to circumvent or flout are there for a reason. Surprise!
>> I doubt any of this manipulation is even illegal?
That was my first thought also... in stock/futures trading world, this is 100% normal business as usual. The idea of buying all the available XYZ to run up prices is a valid move for a hedge fund with sufficient capital to do so.
In the MtGox case, the exchange was (allegedly) fraudulently buying BTC with cash that didn't exist, which could theoretically continue for as long as they have enough cash on hand to satisfy withdrawal requests. IANAL but in the US that sounds like blatant wire fraud at the very least; I'm not sure about the relevant Japanese law.
Right, I'm saying the exchange isn't actually solvent. The "cash balance" on the fraudulent buyer account wasn't backed by any actual cash deposit or proceeds from BTC sale, it's just a column in a database table.
Theoretically, the exchange buys up a bunch of BTC with non-existent cash, raising the price tenfold, until their real cash deposits are too low to meet withdrawal requirements, then they do as the grandparent post says and disable withdrawals, deposits, or freeze the market until they can get it under control.
The paper is written rather... colloquially. Not necessairly a problem. But it seems mostly concerned with telling the story, and that a huge buyer in the market causes prices to go up. That's not market manipulation.
However, there is also the claim that the buyer did not actually have to pay for the BTC they bought. Well, that's certainly a (very strong!) form of manipulation, but it's not what people traditionally mean when they use the phrase. There is normally an expectation that you have real money and are following exchange procedures, but simply behaving in a way that is frowned upon or considered unfair/detrimental to the reputation of the market. As far as I can tell, people are still worried about traditional manipulation in Bitcoin markets, for things like marking the close. The behaviour described here is more akin to hacking/traditional fraud - it is not zero-sum.
I agree, the version of the paper published for the Workshop on the Economics of Information Security http://weis2017.econinfosec.org/wp-content/uploads/sites/3/2... has a large number of small mistakes and the statistical analysis performed is pretty poor and badly explained.
And you're right, it is not really market manipulation, it is blatant fraud by Mark Karpeles and he will almost certainly be found guilty of that charge in Japan. It is strange that the paper makes no mention of his conviction for fraud.
Bitcoin topped out as soon as the futures went live. Massive contango on a regulated futures market may have been a factor in "reeling in" price. The spot market is so thin that it didn't seem to take much open interest in the futs to whip the underlying.
It's conceivable that some spot exchanges are or were still from 2017 to now, either malicious and/or incompetent, which would facilitate the continuation of such behavior, likely by more players than one or two.
On contango: I would not call what the futures market is experiencing "massive" contango. There is a very slight premium to further dated futures ($35/btc Feb over Jan, and $5 Mar over Feb contracts on CME), but this is very normal for a commodity and logically in place for exchange/spot holding risk. I would call the average settlements over the past month of futures being listed very normal contango. And I don't think the contango itself had anything to do with "reeling in" price. The futures finally being listed perhaps.
"The spot market is so thin" I also think is incorrect. GDAX is normally 0.01 USD wide (albeit for small amounts) and often-times under $1 wide for many BTC. I would call the spot market very thick, if anything. You can get off what appears to be very large amounts of BTC with minimal slippage most times of the day.
"didn't seem to take much open interest in the futs to whip the underlying" -- are you saying a futures move would lead the market? I respectfully disagree. All the entities I know price futs from spot and are generally putting on the arb in this order, not the other way around.
> You can get off what appears to be very large amounts of BTC with minimal slippage most times of the day.
I wrote a script[1] that pulls down the public order books for Bitstamp, GDAX and Bitfinex, because I was interested in seeing the depth of the BTCUSD market, and right now you can offload:
258, 301 and 325 BTC on GDAX, Bitfinex and Bitstamp, respectively (total: 884 BTC), at 1% slippage for 3,544,921, 4,152,783 and 4,452,134 USD, respectively (total: $12.1m).
Those market depth numbers are probably thinner than they seem, there is no regulation of spoofing/layering and it would be instructive to look at the cancellation rate of passive orders originally placed deep in the book when market price subsequently approaches the resting limit price.
Of course if you want to move larger amounts there are specialized OTC markets that handle large block trades, e.g. Cumberland Mining. Of course the lit exchanges are important for price discovery.
It would be interesting to compare the BTC market depth as a percentage of market value to other exchange traded assets.
I would be skeptical of strong claims about how Bitcoin futures have affected its price significantly so quickly, mainly because their volume is very low when compared to Bitcoin exchanges and even other unregulated futures (such as Bitmex's future contracts, which have been around for much longer than CME and others have).
It makes sense the price has stabilized recently due to how strong the recent bull market was, it will likely need some time to relax and consolidate before it decides what direction to push next.
Perhaps, but bitcoin futures are advertised like crazy on the the futures exchange, but volume is completely minuscule compared to other commodities (and crypto exchanges for that matter).
I'd expect traditional future buyers (if that is the correct term?) to be much less likely to be swayed by advertisement than the new market segments that could be attracted with bitcoin futures. Kind of logical to focus advertisement activity on the latter group.
since the futures are cash settled, is it really possible for there to be such a tight correlation?
also, I surmise that a major factor in the correction we've witnessed in the past month or so has been the congested mempool (high fees and slow tx times).
Yes, the futures price settles daily based on the reference rate. Eventually such correlations become more efficient once you have a real market. (As another poster pointed out it's still thin).
I wouldn't call it a particularly rigorous analysis and it provides no more incite than what has been published about Willy before.
Mark Karpeles fraudulently buying up $112 million worth of bitcoin in two months when there was no fiat on the other side of the trade pushed the Bitcoin price up. It's as simple as that.
At the end of an article is an anecdote about an older (for Silicon Valley) woman who states "And maybe I’m going to lose [my investment of $12k].. Maybe I’m going to keep cleaning houses. But something is telling me I can trust this generation."
My worry is that (1) people like this woman who don't understand markets, let alone cryptocurrencies, will get burned by this, and (2) some small set of people who do understand markets will take advantage of those who don't.
This could result in a situation in which techies are blamed, like Wall Street, for causing lots of people to lose money (and -- let's face it -- lots of people will lose money, if not now then at some point).
When my 70 year old neighbor who can barely operate an iPhone wants to buy crypto, all I can think of is that scene in the Wolf of Wall Street where they're selling people penny stocks. I do think there is a utility for crypto and I do think some cryptocurrencies will be good investments long term. But I also think the hype is outpacing the utility and a lot of people will be left holding the bag
Explains a lot. A casual review of many coin price histories gives you the sense that something might be "off," although that is just my subjective view.
Another one: coins in general would have been far better off without this current pricing bubble.
I invest long-term into a couple of interesting projects and you're absolutely right. Most popular alt coins suffer from near daily pump and dumps and and a casual look at hourly charts will easily reveal this. I can't even imagine what a nightmare it is trying to do technical analysis and make sense of the market for those who day-trade cryptocurrencies.
It’s similar to 1999 dotcom run up, there will be a crash to remove all the bad actors (like the former pets.com), but it won’t kill cryptocoins just like the dotcom crash didn’t kill ecommerce.
The dot com bubble analogy is fashionable right now because it serves to push the desired narrative without having to deny or provide evidence against what is clearly a bubble. I'd imagine many of the people you see perpetuating this are the same that were denying the bubble a few months ago. However that doesn't necessarily make it wrong -- I'm very skeptical but I'd have a tough time arguing that nothing useful at all will come of crypto after a bubble pop. Wether it's worth it or not is another question.
Err, are you asking whether the internet was useful during/prior (and despite) the dot.com bubble? The answer is, yes, it was hugely useful. Initially for information (e-mail, ftp, finger, usenet, gopher, WWW), later for commerce.
It was far more useful, and far more frequently used, even years before the dot.com bubble, than cryptocurrencies are now.
If you took away cryptocurrencies right now, impact on me and almost everyone I know would be basically nil. If you had taken away the internet in 1996, I and many other people would have complained.
The dot com bubble was also much bigger than this current cryptocoin bubble. The market cap was bigger by multiples. I would also guess that this market cap reflected vastly more actual capital flowing into the market than we see now flowing into the “digital token” markets.
The prices are so easily manipulated on unregulated exchanges, coupled with other scams, means the nominal price can be moved with a lot less capital.
As a point of comparison, approx. 1MM people own Bitcoin, and I imagine that when you add in all the other cryptocurrencies it's not a whole lot larger.
In 1995, 40MM people had access to the internet.
The internet was a lot more established at the time of the Dotcom boom.
> Err, are you asking whether the internet was useful during/prior (and despite) the dot.com bubble?
Look, I was there from the mid 90s. I'm curious about the various viewpoints, as well as a more objective, less biased summary which attempts to ignore the nostalgia factor.
> Initially for information (e-mail, ftp, finger, usenet, gopher, WWW), later for commerce.
Thanks, OK, those are examples I can work with.
E-mail -> Still exists. Was it better back in those days? We had spam back then, right? Although not so much in the earlier parts of the 90s. FWIW, I did not have access to IMAP server. I had to use POP3 and webmail instead. Nor was IMAPS or POP3S used. Man, did POP3 and webmail sucked (until Gmail came along).
FTP -> Barely used anymore. Perhaps only in "the scene", though I know in the end of '00s that already happened via autoxfer bots. We got better, more secure means of data transfer though.
Usenet -> Still exists. Spammers largely moved on. Now and then two worlds: text and binary. One grew a lot, but a lot of smaller providers didn't grow with the insane data storage amounts. So a few big players nowadays. Same with ASPs (aka ISPs) in general for that matter. It has its + and - I guess.
Finger -> Replaced by blogs I guess?
Gopher -> Barely used anymore. Replaced by WWW. I didn't experience Gopher. My first browser was Netscape 2 <3
What about the more server/UNIX world? Was that better back then as well, with these large UNIX molochs like NeXT, SGI, HP, SUN, IBM, SCO?
Arguably though, the widespread adoption of TLS/SSL has made us more secure now than in the 90s. Back in those days, we did not have technologies like Tor.
> If you took away cryptocurrencies right now, impact on me and almost everyone I know would be basically nil. If you had taken away the internet in 1996, I and many other people would have complained.
I wasn't looking at it from that angle, I assumed the OP was comparing the internet of then with the internet of now; not comparing cryptocurrency.
Cryptocurrency is just a pleasure to observe for me, like rats running around in a cage. A bunch of NTs getting manipulated by a small number of psychopaths, that's how I'd sum cryptocurrency up.
Ah, my understanding was that OP was comparing utility of the internet then (at the time of the bubble) with crypto currencies now (at the time of the bubble, arguably).
right but the dot com bubble included Google and Ebay and a lot of other legit companies. Maybe one can argue that bitcoin and Ethereum are the analogs but only time can tell
They can't be Google. Google survived the bubble by staying a small private company that bigger companies didn't see as worth acquiring. It saved them from dying with those companies when the bubble popped.
AOL had been slowly dying since it's 2000 merger with Time Warner. It's just so large that it's been flailing about for almost two decades.
I'll give you Yahoo. While their current demise may have been related to wounds from the dot com bubble, I think they could have been fine had they not overexerted themselves trying to return to glory. I can't blame them for trying, though.
I think we are nearer to 'Fixed Odds Betting Terminals' [1] than the dot com boom. Even the most absurd excesses of the dor com boom seem quite rational in comparison the situation today. I think that it really is somewhere between straight gambling and how we imagine the tulip craze to have been.
What is actually needed to understand the situation today is a ringside seat to one of the devoted believers that has shut down their whole life and decided to gamble away their girlfriend's inheritance on fake coins. The way it takes over a person's life is a bit like crystal meth addiction combined with joining a religious cult. For these people there is no way out, their fear and greed locks them in to going all of the way. These people are not going to make any money, just lose every penny they can borrow.
With dot com there was not this low barrier to entry for essentially gambling, people did not cut themselves off from society in their little pyramid scheme cult. I find bitcoin really horrible and I am glad to have studied it close hand. I do google the coin names and it seems that everything considered a hot coin by those dedicated to the cult is blatantly a scam.
I think there is good money to be made in bitcoin for me just by documenting the fall of an individual and those around due to the obsession. Storytelling matters and I have a lot of very good material coming out of this bitcoin thing and the crazy things people say. All I have to do is keep good notes and the story should write itself very nicely.
I liked this comment in the original article, which is far too flippant for HN but sums up how nonsensical everything bitcoin is to me:
if this article wants to be taken seriously it needs to have a header image of some real, metal-stamped bitcoins with the logo embossed on them, all round and shiny and gleaming. Preferably it would also show two cupped hands with the bitcoins spilling out of them. Otherwise I don't even know what we're doing here.
You can tell when a bubble is about to burst because people will start talking about how it is different this time and it will never stop going up.
To be fair though, I thought more people would start cashing out before now. I suspect the vast majority of Bitcoins are held by a very small number of people and pretty much all activity in the market is happening on the far fringes right now.
Is this serious scientific research? Looks like a joke to me, or very bad journalism:
>During both periods, the USD-BTC exchange rate rose by an average of four percent on days when suspicious trades took place, compared to a slight decline on days without suspicious activity.
So price action happens based on trading activity, wow what a shocking conclusion. Here I was thinking prices went up and down randomly for no reason!
>The team found that many instances of price manipulation happened simply because the market was very thin for various cryptocurrencies including early Bitcoin.
Hmmm this seems to imply supply and demand also have some sort of effect on price movement. Another shocking discovery!
>As mainstream finance invests in cryptocurrency assets and as countries take steps toward legalizing bitcoin as a payment system (as Japan did in April 2017), it is important to understand how susceptible cryptocurrency markets are to manipulation.
And they came to this final fantastic conclusion about the present (2017/2018) based on alleged manipulation that happened 4 years ago on an exchange that no longer exists. Fascinating research indeed. /s
You can see on a regular basis that South Korean exchanges are always paying 25-50% more than Western exchanges.
The Bitcoin pump to 20k, the entire history of Bitcoin Cash, and recently the Ripple pump to $3 were all pumped by Bithumb, Upbit, etc. Hence the controversy with Coinmarketcap removing Korean exchanges for a second resulting in the marketcap dropping 50 billion.
That's interesting. Why would they buy it for more than $2? Is it because the exchange is selling for more or just problems with international currency.
There's a high demand in S.Korea (mostly FOMO) and it's a bit hard to transfer a large amount of money out of S.Korea for some legal reasons, which makes arbitraging hard.
It's interesting to imagine this being "good" from the chains point of view. It is "using" predictable human greed to create a situation where it absorbs more and more value. The game Go's complexity cascades from very simple rules and has a "life" to it sustained by human energy. Blockchain's may be the first of games that are tied into reality via economic effects. Games do this already, but not at these levels of global mindshare and value.
As an interesting thought experiment, consider that VC is a tiny asset class. Now consider that if the amount invested in crypto were the same as is invested in VC, the market cap of crypto would be over 100 trillion dollars. At least if you assume a fixed ratio of dollars invested to market cap.
And, it would produce literally no value (unlike VC investment in companies). There are so many ways to look at crypto that makes it seem like it's incredibly undervalued and this kind of thought experiment has been done many times in different ways (with the example for the thought experiment changing over the years as the crypto market cap has grown to surpass the example...e.g. gold, Western Union money transfers, etc.). But, unless and until crypto provides value to justify it, it's all just speculation.
Right now, BTC is a basically useless asset. You can't buy things with it (without paying more than using dollars). You can't cost-effectively transfer money with it (fees are too high and transaction times are too long). What can you do with it? Sit on it, and hope it goes up. (Which is what I'm doing with the small amount I still hold.)
I'm vaguely optimistic about cryptocurrency, in general, but the current state of things makes me think there's too much money chasing too little value...all that money could be going into companies that make or do useful things. But, instead, it's just burning electricity.
Not directly a Bitcoin issue, but 99% of ICOs are blatant and obvious scams, most small altcoins are blatant and obvious scams. Even some major altcoins are blatant and obvious scams. I feel like there's a more than even chance of this whole thing ending in tears in the next couple of years, even if cryptocurrency eventually (like five, ten, twenty, years down the road) wins.
I don't mean to say you're wrong. More money will likely pour into cryptocurrency as people with money either fall for the ponzi schemes that surround it, or as it actually begins to produce some kind of value and becomes a useful tool for normal people to do normal things with it. We can't begin to compare crypto to the internet (as I've also seen people do...suggesting crypto adoption is now where the internet was 5, 10, years in, or whatever, just because the same number of people are hoarding coins as were on the internet at some early point) until you can actually buy pet food using it (or do something else of value). It isn't a revolution if it just sits in a vault like gold.
>Right now, BTC is a basically useless asset. You can't buy things with it (without paying more than using dollars). You can't cost-effectively transfer money with it (fees are too high and transaction times are too long). What can you do with it? Sit on it, and hope it goes up. (Which is what I'm doing with the small amount I still hold.)
For example, 10mil shares decided between market makers sitting on both sides of the bid that goes at a price they agree on which is not in the interest of fairness or the public. Another reason for the crypto movement.
Can you elaborate? Say Alice and Bob are market makers. They are colluding on some target price, say $10k. What's the spread, how does the trading proceed, and what is the effect on fairness and the public?
I'm not the OP to your question, but I observe what you are asking about each day. Here are the steps that can facilitate your example. If you are imagining stocks(instead of futures), replace the word "contract" with the word "share" in the example below.
1) The last trade price is $9950
2) Alice calls Bob, confirming she wants to close 500k long contracts by selling them to Bob
3) Bob bids up the price to $9999
4) Alice says "Ok Bob, let's go", and offers the maximum limit offer quantity at $10,000. This maximum varies by instrument(example 5000)
5) Bob bids 5000 at $10,000, consuming all of Alice's offers
6) This process repeats(very, very quickly) until 500k has been exchanged, or until another participant with size starts knocking out Alice's offers.
Edit:
When you see this behavior on the volume profile, it looks like a long horizontal bar that doesn't belong. When you see it live as it happens, it's pretty scary if you have a position open. That's when you realize that you are a rubber life raft, and there are 2 gargantuan oil tankers colliding in the space you occupy.
The other way these happen(in futures at least) are called "upstairs" deals. It's when you want to exchange a quantity of contracts large enough to disturb the market, and the exchange will facilitate the trade to avoid Bob or Alice(accidentally) knocking the market several ticks. I don't know how crypto currencies could have a similar scenario for those deals, but since CME is involved with BTC futures, it might be possible.
Source: me, active futures trader in NQ/ZB/CL land.
How does Bob raise the price $49 without actual paying a lot of people and creating a real new price?
Or is that the entry price of the scam? And the profits come from everyone else willing to buy at 10k (instead of 9950) because they are placing market orders and don't know what the real price is?
Seems like this "scam" is just taking money from people who have no idea what price they want, which gets us back to what investors think they are entitled to 8% /yr for purely passive investments backed by no loan contract.
No one is really getting scammed in the example. Bob buys whatever liquidity is available between 9950-10000. Keep in mind, Bob's goal is to buy at 10k. If he is able to get 100-200 of those contracts on the way up to 10k, he's buying at a lower price than he intended, which is a great deal for Bob.
It's partly substantive. The 'too the moon' part was snark, but Bitcoin went from $400 to $1,000 in 2016, then from $1,000 to $14,000 in 2017, and I guess the same people driving the market who enjoyed 1,000% returns 2 years in a row will attempt to do it again this year too.
This time next year if Bitcoin hasn't imploded it will be up around $100,000.
Please don't post like this. It just leads to useless off-topic digression, all based on bad information or no information.
There's no apparent relationship between those accounts, they're not arguing the same things at all, and it's so unfair to call out specific users that way. Imagine what a message you're sending to new HNers to put them on a list like that!
It's true that we banned one of those accounts for serial abuse of the site, but that's all the more reason to be careful about how you treat the others. Guilt by association is not legit.
Thanks for the info. To me, just about any HN post about XYZcoin is a minefield these days. The sentiments seem to all be unrealistically positive and the derision of the glaringly insane XYZcoins are just swamped in whataboutism and thread-derailing. I know it's a hot market and there is a lot of stuff going on, so these threads themselves are warranted, yet the comments in them are just clownshoes.
There have been a lot of low-quality comments posted on both sides of this hot topic. That's because hot topics attract low-quality comments. It's certainly not true that "the sentiments" are all positive, and I guarantee you that people who hold the opposite views to yours see "the sentiments" here as all the other way. We really need a name for this cognitive bias.
Also, "whataboutism" has become the worst internet cliché in recent memory and I'm starting to feel like we should add software to just autokill comments that use this word, since it's such a strong signal of unsubstantive bickering.
Upon further reflection, maybe it is just the 'top' comments in a thread that have the unrealistically positive sentiment. Yes, down-threads do tend to be more nuanced, but those also tend to have less comments and sub comments. I don't have the data, and I do have my own biases of course, but I feel that I see large comment blocks of thread derailing and bickering at the top. The more 'reasonable' comments then get shoved to the bottom (in XYZcoin threads).
Reminds me a bit of how the Russian bots operate. Any indication whether or not this is in any way related?
The more I think about it, the more it seems like the entire proliferation of cryptocurrency is an attempt to sponge money out of the hyper-capitalistic West. Too many bots/fraudulent trades, and too much hyper-positivity online. It feels incredibly skeezy, even coming from the usual online trader bros.
You are able to be anonymous on HN by creating a new account which is not tied to your regular account history.
If you had millions of dollars in crypto you would too. It's not nearly the same as having it in a bank or mutual funds which cannot easily be taken from you in a flash.
People can simply hack your laptop or bludgeon you with a hammer until you give them up instantly.
I mean, if bludgeon you with a hammer is part of your threat model, I think there's still some concern that people will bludgeon until you agree to make a bank transfer.
Yes, you can be anonymous on HN - that assumes you've stayed anonymous. Obviously these people didn't and so they need a new account. The motivation is huge.
The threat vector boils down to using a phone number porting attack to gain access to Coinbase, and maybe also email. It has happened to many public owners of crypto.
That feels unlikely to me. Why would there be so many people who 1.) have enough crypto to be worried, and 2.) want to talk about crypto but didn't create a separate account prior to this negative article?
> Why would there be so many people who 1.) have enough crypto to be worried
Because it's easy to have enough crypto to be worried. For example, if I had bought 10 BTC @ 100€/BTC = 1.000€ (which, at the time, was a reasonable investment size for a crypto starter, and a droplet of water for a seasoned person with a bit of money to throw around) and held them until now, I'd have 100k€ worth of BTC.
That's more than enough motivation for a criminal for example to fleece your home while you're away (e.g. if you posted on your HN-relatable Twitter account that you're off to a conference) and look for a paper wallet. I have seen people literally stab each other over 100€ worth of marijuana, to put things into perspective...
You answered a different question by cutting mine in half... my bitcoin holdings are stab-worthy, I understand why someone would hide their identity.
My question reflects my suspicion of astroturfing. What would explain an anomalously high number of new accounts fighting the claims of price manipulation in bitcoin? It's unlikely to be people just hiding themselves - they would already have accounts.
> You answered a different question by cutting mine in half...
I apologize - I messed up the indentation and thought you were replying to another comment. Sometimes I feel HN could use some Reddit features...
> It's unlikely to be people just hiding themselves - they would already have accounts.
Yeah but for example my RL identity can be inferred from my username, my post history and probably my Twitter feed. So if I were someone who had a stake in high BTC rates - no matter if as a plain wallet holder or as operator/stakeholder in a BTC/coin-related enterprise - I would certainly make a new account, and probably even a new one for every comment, to hide the association.
What's interesting is the rhetoric around cryptos as a populist movement. There's so many people on reddit that claim that trading cryptos is how they're going to get out of the 9-5 working man grind. That it's a way to end the dominance of the wealthy banking elites.
And yet, the wealth inequality in cryptos, especially bitcoin, makes our current economic situation seem like child's play. If bitcoin ever does go "to the moon", we will have a small, few mega-wealthy elite who did hardly anything to build that wealth, while the rest of the world missed the boat.
That’s one reason Bitcoin won’t “go to the moon.” Real currency represents a claim on current production in the economy. If Bitcoin were to continue its exponential price rise, we would have a situation where the people who amassed Bitcoins early could claim wildly disproportionate amounts of the current wealth of society.
There is simply no reason wealth holders are going to turn over real wealth to folks who happened to get in early to Bitcoin.
This reflects that Bitcoin is not real currency. It’s a digital token, with artificial scarcity. Since the core protocol has remained relatively secure, it allows it to serve as a pure commodity for the purpose of market speculation.
That’s the only thing driving the increase in price. Exponential gains (in dollar price) cannot continue. Therefore, the speculative motivation will leave the market. Probably the price will fall very soon.
Once the price resets to a lower price point,speculative demand could pick up again.
I suspect that there is massive, almost indefinite amount of demand for this type of speculative gambling. So, unless government steps in, we will see this constant, churning rise and fall distributed between the population of digital tokens suitable for this purpose.
You can see that attempts by early crypto coin holders to “cash out” and lay claim to their nomitive wealth in the real world, in any significant amount, hasten the “break” in the speculative mania cycle.
I’ve called the top here for Bitcoin, I don’t think it will break $20k.
People active in Bitcoin find this hard to believe, but as an example from “meat space,” the price of Beanie Babies never climbed after its big crash. (My to the shock of these “beanie bag” holders, I presume.)
There's a lot of people who think it's a way to get rich... and I'm just wonder where the money would come from? You can't just withdraw $1M from a bank account for doing nothing and have nobody suffer for it. You're either duping ignorant people or you're the ignorant person being duped. Which looks is predictably like a pyramid scheme.
The only problem with calling the "top" is that this latest bubble is the 8th crash. Of course depending on what we qualify as a bubble and as a crash. It could also be the 5th if we look at round powers of 10 being breached then recovered from.
Just look at the full historic price of USD:BTC in a log graph and you'll see what I mean.
> . There's so many people on reddit that claim that trading cryptos is how they're going to get out of the 9-5 working man grind. That it's a way to end the dominance of the wealthy banking elites.
It's a common way of selling get rich quick scams; having a handful of people who have gotten rich quick provides a veneer of plausibility. (Including, but not limited to, Ponzi schemes.)
People do not realize how manipulated the traditional financial markets are otherwise known as Wall Street. Cryptocurrency is less manipulated as it's run by a different culture of people.
It's not technically incorrect to say there is manipulation in the US markets, but comparing bitcoin exchanges to US exchanges is a bit laughable.
The US Federal Reserve has (had) what amount(ed) to a printing press, associated with "working groups" a.k.a. PPT. However, major US exchanges themselves, whether stock, futures, etc., are far more regulated and mature compared to a bitcoin exchange. The manipulation to which you're referring is far more indirect.
The crypto markets are pretty close to OTC markets. Any significant flow will shift markets. The only problem, IMHO, is that traditional investors are looking at it.
Lets talk about QE-1-4, the printing of money and bankers being bailed out. Your argument does not stand by any measure of reason or logic. Lets also talk about investment bankers and VC's who are completely being disrupted.
We know about that. Let's not bother to talk about it; it smells like trying desperately to change the subject. We're talking about how, with all that you said about financial markets, bitcoin is worse. Saying "but the financial markets are manipulated" doesn't refute the claim we're talking about whatsoever.
This statement is laughably naive... crypto markets are quite literally a wild west free for all.
We're going to see crypto markets go through many of the same lessons that traditional markets did and slowly relearn why we have regulation and insurance.
I don't believe that to be true. Cryptocurrency is very easy to attack. Look at the previous ethereum, bitcoin, etc attacks. Not to mention massive wallet thefts. The complete lack of any insurance. It's very much a wild west market.
Sure the traditional stock market is heavily manipulated but there's enough cross competition there that it balances out.
You would have been better off relating crypto to the existing currency markets. Forex is nearly unregulated (insider trading is completely fine), and is generally a free for all.
Do we really know anything siginficant about the extent of the players in the cryptocurrency marketplace to know if the statement "cryptocurrency is less manipulated" is true or not? We don't even know who created it in the first place!
I thought the general assumption is that there's a lot of "unknown unknowns"? Am I wrong?
Yes, I used to run small OTC public company. I've seen the difference in manipulation. Here's weird thing: Goldman and others (with the exception of Bear Stearns and LEH) the big guys get regulatory breaks in law because they can afford to pay off people like Warren Buffet ($5bil to Goldman) - you don't see these guys in jail. This is why the crypto movement is happening.
https://willyreport.wordpress.com/2014/05/25/the-willy-repor...