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U.S. Launches Criminal Probe into Bitcoin Price Manipulation
- fwdpropaganda 8y agoSome context from a non-expert. From what I understand, things like spoofing in financial markets (where you submit orders which you don't plan to have filled for the purpose that the market sees "interest" in a certain direction and in hope that moves the market), are regulated but still a grey area. The reason for this is that it's an activity that involves intent. Placing certain orders is perfectly ok if you're hoping that they get filled and you take a position, but placing the same orders could be spoofing if your goal is to cancel them once the market starts moving as a consequence.
- sine 8y agoThis is an execelent flowchart detailing the regulatory policy on spoofing on US stock markets: https://pbs.twimg.com/media/DXD3RlQVoAALYLa.jpg https://pbs.twimg.com/media/DXD3RlQVoAALYLa.jpg
- bhouston 8y agoIs this serious?
- asfasgasg 8y agoThe person who wrote it was probably serious, but it is not correct.
- perl4ever 8y ago"Everybody" hates HFTs, but everybody also wants the illusion of a continuous market that can be bought and sold into at any moment in any quantity. So a lot of the arguments/discussions are really about how we can pretend that the trading which is required isn't really happening.
- jasonmorton 8y agoYes, it seems like intent is important, but in some cases (e.g. the BATS rule), no intent is needed. There are statistical properties that indicate intent, but it seems like most of the criminal cases involve finding an email or text message like "I found a bot" or someone telling an engineer to build a system with a manipulative intent.
- fwdpropaganda 8y agoLink to BATS rule?
- jasonmorton 8y ago12.15 on p 167 of http://cdn.batstrading.com/resources/regulation/rule_book/BATS_Exchange_Rulebook.pdf http://cdn.batstrading.com/resources/regulation/rule_book/BA...
- TangoTrotFox 8y agoMarkets are constantly manipulated and what we consider acceptable or not seems at times quite arbitrary. For instance quantitative easing is a practice we engage in whose entire purpose is to artificially inflate the value of markets to help spur 'growth.' Is the problem that people may be trying to manipulate the price of decentralized commodity or that people are investing in a decentralized commodity without realizing that there may be people trying to manipulate it? I think there is a place for 'hard regulations' but I think there is also a time when the focus should be more on information than trying to enforce national rules on a global scale. Even more so when those rules are likely to fall subject to all the failings of political systems including graft, corruption, and the like.
- sine 8y agodecentralized commodity This is a misconception about cryptocurrencies such as Bitcoin or Ethereum. Both are highly centeralized, in the hands of a tiny oligarchical ownership along with a small group of mining warehouses. https://news.earn.com/quantifying-decentralization-e39db233c28e https://news.earn.com/quantifying-decentralization-e39db233c...
- bhouston 8y agoAnd they are likely going to get more centralized over time. The smaller currencies, outside of the top 10, are now all likely vulnerable to 51% attacks. I wouldn't be surprised if that grows to include any outside of the top 5 soon. It looks like this is how smaller currencies die, they are vulnerable at any time to 51% attacks thus no one wants to use them. At least in the traditional banking system if you had a lot of money you could manipulate exchange rates, but you couldn't just outright steal when you had extreme market power.
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- zdkl 8y agoThe case of coins that optimise for consumer/general purpose hardware (by employing PoW algorithms suited for CPUs, or explicitely switching algorithms periodically) is interesting in this context. Traditional cloud platform providers are also in a position to impact mining on those. I doubt that any coin could cope with those warehouses of potential mining power. I'm looking closely at monero on this subject. Despite or because of their hardcore emphasis on privacy, that project has made interesting decisions regarding how to deal with potentially hostile miners. Disclaimer: Yep, you guessed it, I hold coins, and monero is among them. I'm not saying buy XMR, but definitely take a look at their "politics".
- sine 8y agoFor anyone who hasn't been following, the prevailing theory is that the largest Cryptocoin exchange "Bitfinex" also runs an altcoin called "Teather" which was marketed as being backed 1:1 by USD. So far they've created 2.8 BILLION USDT and coincidently the times they create millions of these happens to be in the middle of extreme market crashes. See this chart: https://i.imgur.com/Uo07d1d.jpg https://i.imgur.com/Uo07d1d.jpg More details here: https://medium.com/cryptomedication/uncovering-the-real-cartel-in-bitcoin-65b56a7a00a2 https://medium.com/cryptomedication/uncovering-the-real-cart... https://medium.com/@bitfinexed/latest https://medium.com/@bitfinexed/latest https://medium.com/@mattcollburner/bitmex-insiders-caught-in-a-web-of-lies-6d9b90baa693 https://medium.com/@mattcollburner/bitmex-insiders-caught-in...
- HyperTalk2 8y agoThey created another $250 million worth just one week ago. https://omniexplorer.info/address/3MbYQMMmSkC3AgWkj9FMo5LsPTW1zBTwXL https://omniexplorer.info/address/3MbYQMMmSkC3AgWkj9FMo5LsPT...
- ttul 8y agoSo, who are “they” and where is all this fiat going? That’s a great and yet unanswered question. If Tether was real, then KPMG would be glad to audit them..
- Entangled 8y agoSo, BTC created 16 million coins from air and nobody complained. Ripple created 100 billion coins from air and nobody complained. Tron, Stellar, Cardano, Iota, all in the billions. The top 1000 coins were created from air and nobody complained (most are scams). Why creating Tethers from thin air is now a cause of concern? That's a coin just like every coin out there, like Tron, Verge, EOS, they're created from nothing by a program, they have the value the market decides it has and the creator has all the right to print all the coins they want just like everybody else. And the market has decided USDT has more value than all other coins combined as it is number two in volume just behind BTC. People use USDT as a safe harbor when markets collapse, it has its use, a very valuable use. Of course they will print trillions if they could, everybody would print trillions of their shitty coins and cash out tanking the market if they could, that's the nature of cryptocurrencies. I fail to see why people complain about Tether (highly valuable) and not about the rest of the scam coins that are draining the market from stupid money.
- jasonmorton 8y agoHere https://drive.google.com/file/d/0Bzu6iGPza2s9amFURTFzenRWVGgxbzNWMUVsQ2pTLTUzc1Nv/view?usp=sharing https://drive.google.com/file/d/0Bzu6iGPza2s9amFURTFzenRWVGg... are some slides from a talk I gave last year at Strata about what spoofing and layering is, and how a trading firm or exchange might detect or prevent them.
- jcfrei 8y agoThanks for sharing!
- thisisit 8y agoThis going to be interesting. They will ask all the US based exchanges - Coinbase, Circle etc for their trade and order data for analysis. Coinbase has already fought and lost a case when it came to sharing the data for tax purposes. And one of the touted features of cryptocurrency has always been anonymity.
- krageon 8y agoBitcoin is traceable by nature. Anyone who makes claims of anonymity either doesn't understand how it works or has a system in place that provides uncertainty (ie tumbling).
- Cthulhu_ 8y agoTraceable yes, but also anonymous since a BTC address is just a number without any personally identifiable information attached to it. It's at the edges - e.g. exchanges - where it becomes traceable.
- celticninja 8y agoPseudonymus
- adrianN 8y agoGood luck using bitcoin in a way where you can't connect the BTC address to a real person after a small number of transactions. Anonymizing data is very hard, pseudonyms are almost never anonymous.
- dkersten 8y agoI know people who have exchanged bitcoins and cash anonymously on the street. Sounds pretty risky to me and I certainly don’t think it’s feasible for large volumes of either currency, but it’s possible and has happened, at least.
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- sureaboutthis 8y agoThis is so strange to me because I was unaware bitcoin was a real financial instrument any country would care about. I've had three financial advisors, from Edward Jones, Stifel Nicolas and a little guy around the corner, all tell me to stay away from bitcoins. One even told me that, in two years, bitcoin would be dead. So this is all strange to me.
- celticninja 8y agoTo be fair almost every financial advisor ever would have told you to stay away from bitcoin because it was an unknown quantity and very high risk. In hindsight everyone of them was wrong if you bought in at any point between 2009 and mid - 2017 and sold in the last 6 - 8 months. Also they have been calling bitcoins death since about 2009 when it was created so I would not put too much faith in those predictions. If anything this sort of thing could help bitcoin, either price manipulation is identified, the culprits prosecuted and bitcoin goes on as it is. Or no manipulation (or not significant manipulation) is identified and bitcoin carries on as it is but with a govt. seal of approval (up to that point).
- Cthulhu_ 8y agoThey would've been right if it was the Zimbabwaean dollar if you bought it in the 80's, or one of Bernie Madoff's financial products. They could still be right, given time. They've been right for Bitcoin Gold, for example. They were right when MtGox crashed.
- celticninja 8y agoMy point was more that as a regulated individual a financial advisor should never have advised an investment in bitcoin. Even if the market proved them wrong (as it has up to now) it doesn't make them wrong for not advising you to invest in it.
- bfuller 8y agoNot necessarily "should never have advised an investment in bitcoin", that would depend on the investors risk profile.
- exabrial 8y agoWhy? I like the wild west landscape that is Bitcoin! If anything it's going to turn it to be an interesting experiment in macroeconomics!
- brownbat 8y agoFunny how the cryptocurrency values were crashing in advance of this news...
- rb808 8y agoI was surprised to read that the US regulators feel they have jurisdiction to regulate bitcoin transactions. How can this be - is it just because there are BTC futures now?
- brazzy 8y agoHow could they possibly not have jurisdiction when a large percentage of bitcoin traders and several large exchanges are in the US?
- Taniwha 8y agomore than that - the blockchain is global, reconciliation happens everywhere - and that doesn't mean that no country's laws apply to it, it means that ALL of them potentially do
- lagadu 8y agoBecause fraud laws have no provision about them only being applicable to USD or any specific currency, plus there's the whole debacle of whether BTC is a security or a commodity, both of which fall under their own set of regulations.
- nonbel 8y ago>"The Justice Department has opened a criminal probe into whether traders are manipulating the price of Bitcoin and other digital currencies, dramatically ratcheting up U.S. scrutiny of red-hot markets that critics say are rife with misconduct, according to four people familiar with the matter. [...] Federal prosecutors are working with the Commodity Futures Trading Commission, a financial regulator that oversees derivatives tied to Bitcoin, the people said." Why isn't there a better source for this than "four people"? I didn't see anything on the DOJ site. Perhaps they are talking about this: https://www.cftc.gov/PressRoom/PressReleases/7731-18 https://www.cftc.gov/PressRoom/PressReleases/7731-18 However, that doesn't mention the DOJ so maybe not. Is it normal for the DOJ to anonymously report its activities to journalists like this?
- cjbos 8y agoIts highly unlikely that any of those 4 people are DOJ employees. More likely 4 traders that have been interviewed and confirmed as much to the journalist.
- nonbel 8y agoThis is even worse than if it was DOJ leak. We would be dealing with a rumor started by people under investigation for manipulating bitcoin prices...
- dragonwriter 8y agoBeing interviewed in the course of an investigation means you are a potential witness, not necessarily a target or even subject of the investigation.
- ceejayoz 8y ago> Why isn't there a better source for this than "four people"? Because they're leaking. "Four people" is how a media organization says "it's not just one whackjob making shit up". > I didn't see anything on the DOJ site. Why would you? They don't appear to have publicly announced anything yet. > Is it normal for the DOJ to anonymously report its activities to journalists like this? It's normal for people at the DOJ to do so, yes. Some leaks are done on a semi-official basis (https://boingboing.net/2017/02/22/the-leaky-leviathan.html https://boingboing.net/2017/02/22/the-leaky-leviathan.html), others are just individuals doing it on their own.
- lumberjack 8y agoDespite all predictions to the contrary, the US government is doing quite a lot to legitimize Bitcoin.
- tptacek 8y agoOr, Bitcoin finally got to a place where enough normal retail financial customers are exposed to it that the DOJ can't ignore scams, and by the time the ecosystem is locked down and the get-lambos-quick schemes are foreclosed on, Bitcoin will look about as attractive as it did in 2010.
- awt 8y agoBtc value increased not due to scams - neither the scammers nor the scammed ever hold the stuff (that is, off an exchange in a secure wallet), but due to long term holders, to whom it will continue to be attractive until some state goes back on the gold standard, which is not happening. EDIT: Also, the number of people to whom btc is attractive is less important than the type of people. It may be that there is never mass adoption of Bitcoin - it is also the case that throughout history most people never had any money at all. And even though most people never had any money, sound money has been extremely valuable nonetheless because most people don't know what to do with money anyway.
- spookthesunset 8y agoNobody knows why the value of BTC decided to spike like it did last year. Just like nobody knows why it is sliding back down to earth. It is one of the many reasons it makes a piss-poor store of value. (Of course the answer to the spike could very well be “somebody fired up the tether printer” plus “super shady exchanges did tons of wash trading/oughright made up fake transactions”.
- awt 8y agoIt is indeed a piss-poor store of value for people who have high time preference, but unmatched for those with low time preference.
- shiado 8y agoThe mechanics of manipulating price are just too easy not to do it. The wash trading is clearly so bad on many exchanges that I bet there are agreements with the miners to recuperate losses to trading fees. It is in all parties interest to prop the price up this way so why wouldn't they do it. So many sketchy things get ignored because they prop the price up. The USDT situation will get interesting eventually. Somebody made a spreadsheet of non-fiat volume of cryptocurrencies. https://docs.google.com/spreadsheets/d/1pIrTYpJZrGbeI9QTIWGwYdRmz9FFY_KRpXOcZbjwYu8/edit#gid=0 https://docs.google.com/spreadsheets/d/1pIrTYpJZrGbeI9QTIWGw... Basically the fate of many shitcoins are tied together. My thought is that when USDT finally gets revealed as totally fraudulent the whole crypto house of cards crashes.
- chrisco255 8y agoTether will just be replaced by other stable coins if it turns out that Bitfinex can't back them if there were a run on Tethers (the only scenario we would find if this were actually true). There are alternative stable coins which will rise to compete with Tether and balance out the market, including Circle's USDC (https://blog.circle.com/2018/05/15/circle-announces-usd-coin-bitmain-partnership-and-new-strategic-financing/ https://blog.circle.com/2018/05/15/circle-announces-usd-coin...) and the ETH/Gold-backed MakerDAI: (https://makerdao.com/ https://makerdao.com/).
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- owenversteeg 8y agoHuh, that's interesting. So when it says "USD Volume 700mm" does that mean 700MM was actually exchanged from BTC to USD or vice versa? Does a pair of trades USD-BTC-USD count double?
- mancerayder 8y agoWhat grates my nerves isn't primarily Bitfinex/Tether, it's the other exchanges. Why did they accept Tether? Of all the 'altcoins', one backed by an asset like cash is the easiest to verify (or be skeptical of if verification requests are dismissed or ignored). When I signed onto Bittrex, USDT was one of the prominent trading pairs. It was a useful trading pair, because instead of seeing numbers like ".000000314121 : 1 BTC", you'd get a dollar figure you could mentally parse. Of course, the damned software could have done that automatically with a currency of the user's choice. That's kind of a tangent, though. Why weren't the other exchanges more critical of Tether and kept it after months of controversy and skepticism?
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- DenisM 8y agoCoin price is determined by (amount of $ chasing coins) / (number of those coins). Tether is effectively inflating the $$ side by pumping USDT into the system and making people believe USD and USDT are virtually the same. As long as the game continues the prices go up, which benefits everyone in the coin scene, hence everyone is playing along. Also I imagine that major exchanges could get discounts on volume USDT purchases - this would allow them to paper over their own cash shortfalls in exchange for lending legitimacy to the scheme.
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- fredgrott 8y agoWhat is the track on Winklevoss' proposal to a self regulation org for crypto currency exchanges?
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- pandasun 8y agoMan I wish I could understand only 5% of the economics behind this. It seems so interesting.
- asdsa5325 8y agoEconomics? Bitcoin has no intrinsic value and it's propped up by speculation. It's ridiculous.
- penkomeroy 8y agoNothing has intrinsic value.
- AnimalMuppet 8y agoFood? It certainly has some kind of value that dollar bills, gold, and bitcoin don't. You may not like the word "intrinsic", but it's still in the right direction.
- asdsa5325 8y agoThere are plenty of things.