Crypto Wash Trading(arxiv.org)
arxiv.org
Crypto Wash Trading
https://arxiv.org/abs/2108.10984
304 comments
It's hard to tell wash trading from legitimate trading.
Because I'm involved with a committee on financial semantics I wound up learning a bit about swap trading. For stocks if you don't like your long or short position you can buy or sell and it is done.
In the case of swaps if you don't like your position you write another swap contract that is the opposite of the one you don't like. Both are on the books. In the 2008 crisis the size of outstanding swap liabilities dwarfed the real economy, but when you added them all up they mostly canceled out, both in the aggregate and for almost all of the market participants.
Looking at a situation like that which is hard to unravel people are going to make assumptions about the motives and ethics of the participants which are not substantiated.
Because I'm involved with a committee on financial semantics I wound up learning a bit about swap trading. For stocks if you don't like your long or short position you can buy or sell and it is done.
In the case of swaps if you don't like your position you write another swap contract that is the opposite of the one you don't like. Both are on the books. In the 2008 crisis the size of outstanding swap liabilities dwarfed the real economy, but when you added them all up they mostly canceled out, both in the aggregate and for almost all of the market participants.
Looking at a situation like that which is hard to unravel people are going to make assumptions about the motives and ethics of the participants which are not substantiated.
It will be nigh impossible to prove wash trading without the exchange being very obvious or primary trader identification.
Famously, a Mt. Gox data leak actually proved wash trading on that exchange conclusively as same trader IDs took their own orders. [1] So there definitely is proven precedent in the crypto market.
I am not saying it doesn't happen and isn't likely on unaudited/unregulated exchanges. I just want to highlight that the authors make very strong claims and alternative explanations should be explored.
1. https://dx.doi.org/10.2139/ssrn.3362153
Famously, a Mt. Gox data leak actually proved wash trading on that exchange conclusively as same trader IDs took their own orders. [1] So there definitely is proven precedent in the crypto market.
I am not saying it doesn't happen and isn't likely on unaudited/unregulated exchanges. I just want to highlight that the authors make very strong claims and alternative explanations should be explored.
1. https://dx.doi.org/10.2139/ssrn.3362153
The bigger factor in the size of the swap market dwarfing the size of the economy is due to the former being reported in terms of notional.
I will happily enter into an interest rate swap with you on SOFR^-14 and a notional of USD 1 trillion.
I will happily enter into an interest rate swap with you on SOFR^-14 and a notional of USD 1 trillion.
> but when you added them all up they mostly canceled out,
Except they don't cancel when one party goes bankrupt and a bankruptcy court decides how the assets should be divided.
Except they don't cancel when one party goes bankrupt and a bankruptcy court decides how the assets should be divided.
I came looking for your comment. Someone applying some common sense to the “research”. Yet, the post has >400 points.
Feels like these days anybody can post a paper and get uncountable widespread with 0 backings for their research.
In nutrition this happens A LOT. Things like: “meat causes cancer in 70% of the population”. And then you read the paper and they did the study on 80 people between 60-90 years old. There’s just no scientific/statistic rigurosity.
Feels like these days anybody can post a paper and get uncountable widespread with 0 backings for their research.
In nutrition this happens A LOT. Things like: “meat causes cancer in 70% of the population”. And then you read the paper and they did the study on 80 people between 60-90 years old. There’s just no scientific/statistic rigurosity.
you can make something up at the speed of thought. refuting it takes time and effort. peer-reviewing even longer.
Grid trading bots are all over the place. If you look at the crypto-trading subreddits you'll see plenty of posts about how some guy downloaded a bot and makes $300-500/day off of it. These are the new scr1pt k1dd13s; there are turn-key solutions to automate trading and anyone can use them.
It's also very disingenuous for the title to say that 70% of the volume in the top crypto exchanges is wash trading when the 70% category they define are the least popular exchanges (they rank worse than 960 on the finance section of similarweb).
Even more so because the regulated exchange and popular unregulated exchanges have 0 and mostly <20% wash trading respectively.
Even more so because the regulated exchange and popular unregulated exchanges have 0 and mostly <20% wash trading respectively.
Their idea does show a pretty stark difference b/w "regulated" and "unregulated" exchanges, however, as would be expected if that activity is fraudulent in some way.
I'm no fan of crypto currencies (as my comment history will show), but does "different" imply "fraudulent" necessarily? or are there other factors at play? eg. easier APIs, more variance in crypto prices so that an automated trading strategy becomes potentially more lucrative?
Benford's Law is a pretty established method of detecting fraud in forensic accounting.
Benford's Law requires that the numbers being analyzed typically occur over a wide distribution spanning orders of magnitude, which typically doesn't happen in trading (except over very long time periods).
Why would regulated and non-regulated exchanges differ in whether they follow Benford's law or not then? (As in the article)
Only if you assume "automated" == "fraud", which is the distinction that grandparent is getting at.
Imagine you have a completely manual market which follows normal statistical distributions, including Benford's Law. Now you introduce one grid-trading bot with a large amount of capital. (A grid trading bot is basically a piece of software that automatically buys when the price falls below a certain level and then automatically sells when it goes above a certain range.) That one bot is going to make up the vast majority of transactions, because it's effectively "clamping" the price within its trading range. When random fluctuations take it below, it buys and sets a floor on the price. When random fluctuations take it above, it sells and sets a ceiling on the price. If you make the range small enough that most ordinary trades would end up occurring with the bot, it's going to take up the vast majority of volume.
There's nothing illegal about grid trading. They work to dampen random price fluctuations in a market. In exchange, they take on the risk that fundamental supply & demand might shift enough that they're left holding the bag, eg. they run out of inventory to sell and then the price jumps sharply higher, or they collect all the inventory and then the price drops.
But because they're non-human and take one side or another of most trades, they are going to account for a disproportionate amount of volume. This isn't fraud, it's that you don't understand the structure of the market.
Imagine you have a completely manual market which follows normal statistical distributions, including Benford's Law. Now you introduce one grid-trading bot with a large amount of capital. (A grid trading bot is basically a piece of software that automatically buys when the price falls below a certain level and then automatically sells when it goes above a certain range.) That one bot is going to make up the vast majority of transactions, because it's effectively "clamping" the price within its trading range. When random fluctuations take it below, it buys and sets a floor on the price. When random fluctuations take it above, it sells and sets a ceiling on the price. If you make the range small enough that most ordinary trades would end up occurring with the bot, it's going to take up the vast majority of volume.
There's nothing illegal about grid trading. They work to dampen random price fluctuations in a market. In exchange, they take on the risk that fundamental supply & demand might shift enough that they're left holding the bag, eg. they run out of inventory to sell and then the price jumps sharply higher, or they collect all the inventory and then the price drops.
But because they're non-human and take one side or another of most trades, they are going to account for a disproportionate amount of volume. This isn't fraud, it's that you don't understand the structure of the market.
Benford's law is extremely dubious in the field. [1]
"Abstract. Is Benford's law a good instrument to detect fraud in reports of statistical and scientific data? For a valid test, the probability of ‘false positives’ and ‘false negatives’ has to be low. However, it is very doubtful whether the Benford distribution is an appropriate tool to discriminate between manipulated and non-manipulated estimates. Further research should focus more on the validity of the test and test results should be interpreted more carefully."
1. https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1468-0475....
"Abstract. Is Benford's law a good instrument to detect fraud in reports of statistical and scientific data? For a valid test, the probability of ‘false positives’ and ‘false negatives’ has to be low. However, it is very doubtful whether the Benford distribution is an appropriate tool to discriminate between manipulated and non-manipulated estimates. Further research should focus more on the validity of the test and test results should be interpreted more carefully."
1. https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1468-0475....
That is not representative of "the field". Your paper, from 2010, has 21 papers citing it on the link you provided. None support the paper conclusions. The highest cited one of those, from 2019, ([1] with 172 citations) uses Benford's Law exactly as it's commonly stated and used.
Here [2] is Google Scholar on Benford's Law. Of the 36,000 papers it pulled very, very few claim the law is not useful and valid. The vast majority (actually, every one of the first many pages) show how it's useful and demonstrate uses of it. If you want only recent papers, select from the left panel. Same result.
In fact, the first several pages of results contain many papers showing empirical validation of the usefulness of the law.
[1] https://www.degruyter.com/document/doi/10.1111/j.1468-0475.2...
[2] https://scholar.google.com/scholar?hl=en&as_sdt=0%2C14&q=ben...
Here [2] is Google Scholar on Benford's Law. Of the 36,000 papers it pulled very, very few claim the law is not useful and valid. The vast majority (actually, every one of the first many pages) show how it's useful and demonstrate uses of it. If you want only recent papers, select from the left panel. Same result.
In fact, the first several pages of results contain many papers showing empirical validation of the usefulness of the law.
[1] https://www.degruyter.com/document/doi/10.1111/j.1468-0475.2...
[2] https://scholar.google.com/scholar?hl=en&as_sdt=0%2C14&q=ben...
Benford's law does not apply here. Benford's law is designed to separate human generated numbers from truly random ones. The numbers generated by exchange trades are generated by humans choosing trade sizes. This entire methodology is a complete joke.
> Benford's Law is a pretty established method of detecting fraud in forensic accounting
Benford law never had to deal with exchanges where any customer can write a python bot and start trading at sub-second latencies via the exchange API's.
I'd be very surprised if whatever statistical model they're relying on is in any way a match for what real (as in: legitimate orders from actual customers) trading goes on on crypto exchanges.
Benford law never had to deal with exchanges where any customer can write a python bot and start trading at sub-second latencies via the exchange API's.
I'd be very surprised if whatever statistical model they're relying on is in any way a match for what real (as in: legitimate orders from actual customers) trading goes on on crypto exchanges.
Python ...
Subsecond latencies
Ok
Ok
"Subsecond" isn't much of a bar. A second is an eternity.
>Python ... Subsecond latencies
Lol, fair enough.
But I believe my point stands even if you go to python-level latencies.
Lol, fair enough.
But I believe my point stands even if you go to python-level latencies.
Bitcoin transactions with sub second latency
Double ok
Double ok
You dont trade on the blockchain. We build software that does multi hundred millions orders per day. Millions of trades. But of course, not in python.
In Go, lol
You don't even need to detect it. Name a single instance in human history where an unregulated and unaccountable industry didn't instantly degenerate into fraud. "2.5T" "dollars" (majority held by early insiders) is an incredible moral hazard
> Automated trading strategies (e.g., "grid trading") are really popular
Why? After buying and selling side fees, is it easy to make a profit in an automated way with crypto?
Why? After buying and selling side fees, is it easy to make a profit in an automated way with crypto?
I don't know, but it seems to be. In general though, if there are easy profits to make it is because someone on the other side is willing to lose "a small amount of money" for a long time knowing that when things change they will make a ton of money fast, on the backs of all the people they lost to.
For starters, if you can make money in automated trading, why would you not make all the possible money yourself instead of telling other people (or writing the software) and splitting the profit? This question is one I ask anytime someone mentions easy trading, and because I've never heard a good answer I stay away.
To do better than average is possible, but it requires a lot of deep study.
For starters, if you can make money in automated trading, why would you not make all the possible money yourself instead of telling other people (or writing the software) and splitting the profit? This question is one I ask anytime someone mentions easy trading, and because I've never heard a good answer I stay away.
To do better than average is possible, but it requires a lot of deep study.
I wrote a trading bot, it worked well for a while and made money until Mt Gox shut down. I open sourced it because I thought it might be interesting for others to see.
I updated it for Bittrex, but didn't have enough capital to actually make it work.
Now everything has gone up so much, and I'm bearish on crypto in general, so I don't want to have any money invested in it.
That's why mine is available, and I'm not currently trying to keep it running.
I updated it for Bittrex, but didn't have enough capital to actually make it work.
Now everything has gone up so much, and I'm bearish on crypto in general, so I don't want to have any money invested in it.
That's why mine is available, and I'm not currently trying to keep it running.
Because the retail market is big. If you personally buy or sell, you don't care for the "perfect" price.
First, most good trading, crypto or not, is systematic, which is automated.
Then, from what people have told me, crypto is a highly inefficient market so huge of potential for market-making strategies. Tons of arbitrage opportunities between the various venues, centralized and decentralized, mostly uninformed non-professionals so non-toxic flow, huge spreads, etc. It's like the traditional tradi'g world but 30 years in the past.
"Grid trading" is apparently just a weird term for placing orders proactively on multiple levels to obtain a better queue position, useful for increasing edge capture on exchanges with price-time matching. There are a lot more sophisticated techniques you could transfer from the world of traditional electronic trading. Of they're successful on much more competitive markets, no reason they wouldn't work on crypto.
Then, from what people have told me, crypto is a highly inefficient market so huge of potential for market-making strategies. Tons of arbitrage opportunities between the various venues, centralized and decentralized, mostly uninformed non-professionals so non-toxic flow, huge spreads, etc. It's like the traditional tradi'g world but 30 years in the past.
"Grid trading" is apparently just a weird term for placing orders proactively on multiple levels to obtain a better queue position, useful for increasing edge capture on exchanges with price-time matching. There are a lot more sophisticated techniques you could transfer from the world of traditional electronic trading. Of they're successful on much more competitive markets, no reason they wouldn't work on crypto.
If I had vested interest in crypto, of course I will dismiss this paper as bogus
This is why Uniswap's data is much more valuable than centralized exchanges. On-chain trading permits a degree of transparency and trustworthiness not readily feasible with centralized exchanges.
Centralized exchanges are incentivized to doctor their data and lie about their volumes. The larger the volumes an exchange publishes, even if fake or gamed, the more relevant an exchange appears. Users must blindly trust whatever data exchanges can manufacture.
Uniswap charges a flat fee to every trade for all user. It's objective. There's no special back room trading rates, there's no ability to lie about volumes, there's no bonus for having high frequency bots trading. If you want objective data, Uniswap (and other on-chain exchanges) are truthful.
Centralized exchanges are incentivized to doctor their data and lie about their volumes. The larger the volumes an exchange publishes, even if fake or gamed, the more relevant an exchange appears. Users must blindly trust whatever data exchanges can manufacture.
Uniswap charges a flat fee to every trade for all user. It's objective. There's no special back room trading rates, there's no ability to lie about volumes, there's no bonus for having high frequency bots trading. If you want objective data, Uniswap (and other on-chain exchanges) are truthful.
I'm generally pro-cryptocurrencies, but Uniswap definitly makes it harder to see wash trading, not easier. One wallet !== one person, while the regulated, centralized exchanges normally require you to answer bunch of questions and prove your identity because of KYC/AML laws, to guarantee that each participant is just that, one participant.
Actually with gas costs being what they are, wash trading is extremely costly on Ethereum DEXs, which makes their volume much more reliable.
Wash trading relies on low/nonexistent fees to be cost effective as a market signal.
Wash trading relies on low/nonexistent fees to be cost effective as a market signal.
Interesting! That reminds me of the argument that market manipulation makes markets more efficient by increasing the reward available to honest participants. Wash trading being discouraged by high trading fees doesn't have the same incentive structure, but I wonder if you could arrange it the same way?
Yeah, the ability to generate identities on the fly and interact with the financial system immediately is one thing that would give financial regulators a heart attack.
I wonder if it's actually (free identities) XOR (no wash trading), or if the crypto people will come up with some clever way to account for it or disincentivize it.
One thing I've learned is not to count out very resourceful people with skin in the game. Crypto has come up with some really interesting incentive games that I certainly wouldn't have thought of off the top of my head. That being said, this seems like a really hard thing to fix.
I wonder if it's actually (free identities) XOR (no wash trading), or if the crypto people will come up with some clever way to account for it or disincentivize it.
One thing I've learned is not to count out very resourceful people with skin in the game. Crypto has come up with some really interesting incentive games that I certainly wouldn't have thought of off the top of my head. That being said, this seems like a really hard thing to fix.
Yeah, decentralized exchanges really only protects against one type of wash trading (ie. from the exchange, to make it look more liquid than it really is).
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~80% of pools and tokens on Uniswap are scams and rug pulls and it's even harder to figure out what's real.
Useless/scam tokens are a problem, but it's not specific to Uniswap. That's a problem inherent to permitting anyone to create a new token, like with ERC-20 tokens.
If you want to trade useful tokens, Uniswap's data is the most truthful.
It's not that the system can't be gamed, it's that he costs of gaming are transparent and predictable.
If you want to trade useful tokens, Uniswap's data is the most truthful.
It's not that the system can't be gamed, it's that he costs of gaming are transparent and predictable.
I use https://cmcsnipe.com/honeypot to check for scams, easily detects if a token is a honeypot.
> Uniswap charges a flat fee to every trade for all user.
Not flat. It’s a percentage of the trade value.
> If you want objective data, Uniswap (and other on-chain exchanges) are truthful.
Transaction costs limit on-chain exchange wash trading to some degree, but it doesn’t stop price manipulation.
The on-chain aspect has an interesting issue in that during periods of high volatility the network itself gets both slower and more expensive, so an end user may not even get to execute a trade.
Not flat. It’s a percentage of the trade value.
> If you want objective data, Uniswap (and other on-chain exchanges) are truthful.
Transaction costs limit on-chain exchange wash trading to some degree, but it doesn’t stop price manipulation.
The on-chain aspect has an interesting issue in that during periods of high volatility the network itself gets both slower and more expensive, so an end user may not even get to execute a trade.
.... People pay for volume on uniswap daily ...
They just spin up new wallets and keep making them exchange very high amounts of a token (10ETH buy , 10 ETH sell , multiple times) (net expense is just the gas fees, but they get paid wayyy more to do this).
This is usually done to get uniswap traded tokens onto various trending lists like cmc , dextools , etc.
I’d say there is 10-40x the fraud on uniswap than on centralised exchanges, its just that on uniswap if you know where to look, you can transparently see the fake volume being created in front of you.
But for human traders, it can be tricky sometimes.
This is usually done to get uniswap traded tokens onto various trending lists like cmc , dextools , etc.
I’d say there is 10-40x the fraud on uniswap than on centralised exchanges, its just that on uniswap if you know where to look, you can transparently see the fake volume being created in front of you.
But for human traders, it can be tricky sometimes.
That doesn't pass the smell test.
Sure, you can wash trade on Uniswap, but it's expensive and everyone can see you doing it. The fee on most pools on Uniswap is 0.30%.
In contrast, wash trading on most centralized exchanges is cheap or free and very hard to prove unless you have access to their internal data.
Sure, you can wash trade on Uniswap, but it's expensive and everyone can see you doing it. The fee on most pools on Uniswap is 0.30%.
In contrast, wash trading on most centralized exchanges is cheap or free and very hard to prove unless you have access to their internal data.
Im specifically talking about up and coming , memecoins.
The liquidity pool on these are usually provided by token owner themselves, fee doesnt matter there (gas fees does, but they make much much more by doing this).
Tokens like these need these fake volumes to get the necessary amount of holders , publicity and volume to qualify to be listed on centralised exchanges.
Even when everyone can see you do it, owners of popular trending lists which list these tokens, intentionally look the other way on this wash trading and just need it for fulfilling listing requirements.
The liquidity pool on these are usually provided by token owner themselves, fee doesnt matter there (gas fees does, but they make much much more by doing this).
Tokens like these need these fake volumes to get the necessary amount of holders , publicity and volume to qualify to be listed on centralised exchanges.
Even when everyone can see you do it, owners of popular trending lists which list these tokens, intentionally look the other way on this wash trading and just need it for fulfilling listing requirements.
You can't do it without putting significant capital at risk since you also have to supply the other side of the pair. If there is no organic demand for your memecoin, people will be happy to dump it and take your ETH.
Except there is, they spend money on marketing and fill up telegram groups with tons of people who fall for this scam everyday, 90% of telegram groups involving crypto tokens are scams like these.
People get scammed daily by this.
People get scammed daily by this.
This sounds like a much more interesting read than the TFA
If you want to see some examples of crypto scams go to /r/cryptomoonshots on Reddit. Almost everything posted there is some sort of rug pull scam with fake upvotes.
Thanks. So you're saying " FlokiVengers | New Heroes NFT Token Marketplace & NFT Launch Incoming Doxxed Dev | BUSD Rewards | join the Resistance! BSC Token" is a scam?
I mostly agree with you, but it's worth noting that the fee is distributed to the uniswap pool participants. Which means for a smaller coin that you are trying to pump, it would be feasible to deposit the majority of the money into the pool, and then trade back and forth to show volume. You'd be out gas fees + whatever portion of the trading fees the other participants receive.
> I’d say there is 10-40x the fraud on uniswap than on centralised exchanges
This makes no sense, especially if you factor in gas prices, pool fees, and volume.
This makes no sense, especially if you factor in gas prices, pool fees, and volume.
1- Gas price, to them its not a significant amount, its a business expense, they profit much more, when the token gets listed on popular lists due to this, which brings up new holders , who pump up the mcap by a lot, as the lp pool on these tokens is very small (only a couple of million dollars, compared to mcap which is way higher)
2- pool on tokens like these are usually only made by the owner themselves, so pool fees goes back to them.
3- They do this to invite new people, and then inflate the token price, and rug them by either pulling the entire lp, or just exit it , in a few mins.
Some also do this, to qualify for potential centralised exchange listing, down the line (instead of rugging).
2- pool on tokens like these are usually only made by the owner themselves, so pool fees goes back to them.
3- They do this to invite new people, and then inflate the token price, and rug them by either pulling the entire lp, or just exit it , in a few mins.
Some also do this, to qualify for potential centralised exchange listing, down the line (instead of rugging).
If you own most of the lp, most of the fees go to you.
That's not true, the gas fees which are the largest part still go to the miners.
Well, now only about 15% of the tx fees go to miners. The rest of the gas fees are burned, so you can't even get a kickback from a friendly miner on your fees.
Take a deep dive into MEV (miner extractable value). Poorly named for what it is, but I think it is something that you're missing in this picture.
> Miner extractable value (MEV) is a measure of the profit a miner can make through their ability to arbitrarily include, exclude, or re-order transactions within the blocks they produce.
Um. Wow.
So... how much of crypto is just "things that are illegal to do with anything that's not crypto"?
Um. Wow.
So... how much of crypto is just "things that are illegal to do with anything that's not crypto"?
There is a meaningful difference between this kind of miner intervention and the kind of intervention that might be problematic in a centralized context.
Provided there is sufficient decentralization within a blockchain network (i.e. enough independent miners participating) no individual miner will be able to pursue a MEV strategy beyond a single block. The next block will be created by a different miner.
In addition, the right to include any transaction or to control the ordering of transactions depends on the miner winning the right to build the block via the consensus process (for instance, by being first to calculate the PoW). In a sufficiently decentralized network, it is unlikely that any one miner will have any certainty at all with regards to when they will actually be able to build a new block. Depending on the level of centralization, it is also the case that a particular miner will get to mine a new block infrequently at best.
So the worst that a particular miner can do will be to delay the inclusion of a transaction, because any other miner can choose to include the same transaction in a subsequent block. Excluding transactions is outright impossible without buying out the entire capacity of the network by paying massive gas fees to other miners.
And because there is no predicting when the power to choose the ordering or inclusion of transactions will be granted to a particular miner, any miner intervention strategy will need to be both opportunistic and somehow viable within the scope of only one block.
Keep in mind as well that Ethereum blocks occur less than once every 15 seconds.
Provided there is sufficient decentralization within a blockchain network (i.e. enough independent miners participating) no individual miner will be able to pursue a MEV strategy beyond a single block. The next block will be created by a different miner.
In addition, the right to include any transaction or to control the ordering of transactions depends on the miner winning the right to build the block via the consensus process (for instance, by being first to calculate the PoW). In a sufficiently decentralized network, it is unlikely that any one miner will have any certainty at all with regards to when they will actually be able to build a new block. Depending on the level of centralization, it is also the case that a particular miner will get to mine a new block infrequently at best.
So the worst that a particular miner can do will be to delay the inclusion of a transaction, because any other miner can choose to include the same transaction in a subsequent block. Excluding transactions is outright impossible without buying out the entire capacity of the network by paying massive gas fees to other miners.
And because there is no predicting when the power to choose the ordering or inclusion of transactions will be granted to a particular miner, any miner intervention strategy will need to be both opportunistic and somehow viable within the scope of only one block.
Keep in mind as well that Ethereum blocks occur less than once every 15 seconds.
> Depending on the level of centralization, it is also the case that a particular miner will get to mine a new block infrequently at best.
How do all these "mining" companies survive, if they only mine a block infrequently?
How do all these "mining" companies survive, if they only mine a block infrequently?
Capex (hardware/space) + Opex (internet/electricity) = ROI
In order to get more consistent payouts, we mine to a mining pool, which pays us for our shares of work. Since a mining pool condenses a lot of hashrate, the frequency is higher. There are various schemes on top of that (pay per share, etc..), but that is the simple explanation.
This is the 'centralization' argument to mining, except that miners can change to another pool near instantly. If a pool starts to misbehave, then miners will dump them immediately. There is precedent for this, ghash.io.
There are a lot of upfront costs (hardware/space), but once you've paid for those and you have cheap enough electricity, then the rest is profit.
Disclosure: I am a large scale ETH (gpu) miner.
In order to get more consistent payouts, we mine to a mining pool, which pays us for our shares of work. Since a mining pool condenses a lot of hashrate, the frequency is higher. There are various schemes on top of that (pay per share, etc..), but that is the simple explanation.
This is the 'centralization' argument to mining, except that miners can change to another pool near instantly. If a pool starts to misbehave, then miners will dump them immediately. There is precedent for this, ghash.io.
There are a lot of upfront costs (hardware/space), but once you've paid for those and you have cheap enough electricity, then the rest is profit.
Disclosure: I am a large scale ETH (gpu) miner.
This makes sense, thank you.
Each Bitcoin block pays out more than a quarter of a million dollars to the miner that discovers it. Every day, more than 140 blocks are typically mined. "Infrequent" is relative, but if a miner manages to mine one block once per month (roughly once every 4000 blocks), its revenue will be in excess of $3 million per year.
Many mining companies make much more than that, because Bitcoin is more centralized than it should be.
Many mining companies make much more than that, because Bitcoin is more centralized than it should be.
I'd like to hear how you think it is centralized. I address the common point above, but maybe you have other ideas.
Centralization is a continuum, not a binary condition. I don't think that Bitcoin is centralized in absolute terms—it's just more centralized than it should be—which is a normative opinion I have, not a statement of fact.
Bitcoin would be less centralized if ordinary people could mine it successfully with their home computers, rather than needing to buy specialized hardware. As it stands, mining activity is performed almost entirely by people and entities able and willing to spend the money to buy mining rigs. Not a bad thing per se, but it results in fewer people mining than I might prefer.
I think your explanation is a good one.
Bitcoin would be less centralized if ordinary people could mine it successfully with their home computers, rather than needing to buy specialized hardware. As it stands, mining activity is performed almost entirely by people and entities able and willing to spend the money to buy mining rigs. Not a bad thing per se, but it results in fewer people mining than I might prefer.
I think your explanation is a good one.
Thanks for the clarification because it sounded like a more definitive statement than a normative opinion.
Join some of the FB mining groups... you'd be surprised at how many 'normal' people have bitcoin miners. They aren't at the scale of the commercial places, but it is happening. Especially once China shut down, the markets were flooded with boxes.
This is also why I prefer GPU based mining. More accessible (gpus are everywhere) and it is actually the older hardware that is more ROI profitable. It isn't a hardware race like it is with bitcoin. The risk is lower too... if you burn out a $100 card, it is a lot less of an impact than a several thousand $ card.
The interesting thing to watch is what what coin (or technology) will pop up next as the top GPU PoW. There can only be one.
Join some of the FB mining groups... you'd be surprised at how many 'normal' people have bitcoin miners. They aren't at the scale of the commercial places, but it is happening. Especially once China shut down, the markets were flooded with boxes.
This is also why I prefer GPU based mining. More accessible (gpus are everywhere) and it is actually the older hardware that is more ROI profitable. It isn't a hardware race like it is with bitcoin. The risk is lower too... if you burn out a $100 card, it is a lot less of an impact than a several thousand $ card.
The interesting thing to watch is what what coin (or technology) will pop up next as the top GPU PoW. There can only be one.
Crypto is a ponzi scheme that everyone is in on. Introduce a new coin, sell it for a trillionth of a penny, and hope enough people buy it that you can cash out for a billionth of a penny.
Uniswap data is more reliable because of gas fees, which are upwards of $50 per trade recently.
> The larger the volumes an exchange publishes, even if fake or gamed, the more relevant an exchange appears.
Only to unsophisticated traders, since past volume (liquidity) isn’t worth anything right now. What you really want to look at is market depth, ie. the quantity of outstanding open orders in the order book.
> Users must blindly trust whatever data exchanges can manufacture.
Contrary to past volume, open order book orders need not be trusted. Users can test this figure by executing a market order against it and observing the execution price. If there’s always a discrepancy between the two then either the exchange is lying about its order book depth or is susceptible to front running.
Only to unsophisticated traders, since past volume (liquidity) isn’t worth anything right now. What you really want to look at is market depth, ie. the quantity of outstanding open orders in the order book.
> Users must blindly trust whatever data exchanges can manufacture.
Contrary to past volume, open order book orders need not be trusted. Users can test this figure by executing a market order against it and observing the execution price. If there’s always a discrepancy between the two then either the exchange is lying about its order book depth or is susceptible to front running.
Can somebody explain to a crypto-naif what "wash trading" means here?
The abstract:
> We introduce systematic tests exploiting robust statistical and behavioral patterns in trading to detect fake transactions on 29 cryptocurrency exchanges. Regulated exchanges feature patterns consistently observed in financial markets and nature; abnormal first-significant-digit distributions, size rounding, and transaction tail distributions on unregulated exchanges reveal rampant manipulations unlikely driven by strategy or exchange heterogeneity. We quantify the wash trading on each unregulated exchange, which averaged over 70% of the reported volume. We further document how these fabricated volumes (trillions of dollars annually) improve exchange ranking, temporarily distort prices, and relate to exchange characteristics (e.g., age and userbase), market conditions, and regulation.
"wash trading" appears to be fraudulent trades injected into the exchange in order to boost the volume of trades appearing on the exchange.
> We introduce systematic tests exploiting robust statistical and behavioral patterns in trading to detect fake transactions on 29 cryptocurrency exchanges. Regulated exchanges feature patterns consistently observed in financial markets and nature; abnormal first-significant-digit distributions, size rounding, and transaction tail distributions on unregulated exchanges reveal rampant manipulations unlikely driven by strategy or exchange heterogeneity. We quantify the wash trading on each unregulated exchange, which averaged over 70% of the reported volume. We further document how these fabricated volumes (trillions of dollars annually) improve exchange ranking, temporarily distort prices, and relate to exchange characteristics (e.g., age and userbase), market conditions, and regulation.
"wash trading" appears to be fraudulent trades injected into the exchange in order to boost the volume of trades appearing on the exchange.
Boost the volume of trades appearing on the exchange, and the apparent market value of the asset.
You’re right. I think wash refers to selling then buying at the same price resulting in a wash.
From page 2:
One form of such market manipulation is Wash trading--- investors simultaneously selling and buying the same financial assets to create artificial activity in the marketplace, which is known to distort price, volume, and volatility, and reduce investors’ confidence and participation in financial markets (Aggarwal and Wu, 2006; Cumming, Johan, and Li, 2011; Imisiker and Tas, 2018).
One form of such market manipulation is Wash trading--- investors simultaneously selling and buying the same financial assets to create artificial activity in the marketplace, which is known to distort price, volume, and volatility, and reduce investors’ confidence and participation in financial markets (Aggarwal and Wu, 2006; Cumming, Johan, and Li, 2011; Imisiker and Tas, 2018).
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"Selling" crypto from one wallet to another wallet that you own to create the appearance of high trade volume and increase the apparent value of the asset.
You're the buyer and seller in some transaction. You use it to froth the volume of the asset, making it look like it's a vibrant marketplace with lots of buyers and sellers, but really it's just the Dump It guy and you.
It's a way to fraudulently pump the price (or lower the price) of a security. One person with two accounts can keep trading back and forth with themselves, and since crypto exchange know-your-customer measures are trivial or nonexistent, it's very easy to get away with.
There is still an order book so to get the price to rise or fall, the trader would have to buy or sell enough to clear the book.
How does trading back and forth with themselves do anything other than generate fees for the exchange?
How does trading back and forth with themselves do anything other than generate fees for the exchange?
Does this apply to NFTs though, where you're usually talking about a unique NFT within a collection of a few thousand? If you hold a unique NFT and trade it to yourself for a crazy amount of money just once, then that's what everyone is going to see as the last sale price of that NFT. They're not trading often anyway usually, people would probably be more suspicious if you had hundreds of trades.
Edit: I was mixing this up with another conversation, the parent comment obviously isn't about NFTs. I'll leave this here though because I think wash trading is even more relevant to them.
Edit: I was mixing this up with another conversation, the parent comment obviously isn't about NFTs. I'll leave this here though because I think wash trading is even more relevant to them.
The more money you have, the lower the fees. No fees for being a Maker.
You can actually pay nothing on FTX. Only a .025 taker fee + 60% discount for holding FTX coin plus a .01 rebate for being a market maker.
Most of wash trading is probably done by connected individuals though. Whole point of being unregulated. Just be friends with CZ or SBF.
You can actually pay nothing on FTX. Only a .025 taker fee + 60% discount for holding FTX coin plus a .01 rebate for being a market maker.
Most of wash trading is probably done by connected individuals though. Whole point of being unregulated. Just be friends with CZ or SBF.
Well, the book can be tiny sometimes.
It makes bo sense when it comes to any popular cryptocurrency. The only way book can be small for these is on small exchange. But if you attempt to manipylate it to bring in away from current price on large exchanges you'll be immediately interfered with by people doing interexchange arbitrage. Also manipulating small exchange has small impact.
also fees can be nonexistent for big customers, which are likely to engage in such things
A "wash trade" is a trade which generates no value because it represents a swap in kind. For example, if I sell a broad market ETF like VTI and buy a nearly identical asset at the same price from a different firm, that could be a "wash trade" for tax purposes (simplifying this, but this is basically the gist). In the context of crypto transactions, it's typically referring to trades which are just shifting the same assets through a cycle of accounts without representing meaningful transactions. For a crypto real world example, see: https://mobile.twitter.com/MarcusFongNFT/status/145391172161...
> For example, if I sell a broad market ETF like VTI and buy a nearly identical asset at the same price from a different firm, that could be a "wash trade" for tax purposes (simplifying this, but this is basically the gist).
No, you’re describing the wash sale rule, which has to do with which capital losses are tax deductible. It covers pairs of trades up to 30 days apart.
A wash trade is a trade with yourself. Both participants in the same trade — not two distinct trades.
https://www.investopedia.com/terms/w/washtrading.asp
No, you’re describing the wash sale rule, which has to do with which capital losses are tax deductible. It covers pairs of trades up to 30 days apart.
A wash trade is a trade with yourself. Both participants in the same trade — not two distinct trades.
https://www.investopedia.com/terms/w/washtrading.asp
I was confused what "dss-flash" was so I looked it up.
It's a DAO that enables you to mint infinite DAI (some crappy "stablecoin") for a transaction as long as you pay it back in the same transaction.
One of the stated goals of this "feature" is
> Exploits requiring a large amount of capital will be found quicker which makes the DeFi space safer overall.
Ah yes, intentionally making your own product less secure and more open to abuse, so you can make it more secure. Good work. This is taking testing in production to a whole new level.
It's a DAO that enables you to mint infinite DAI (some crappy "stablecoin") for a transaction as long as you pay it back in the same transaction.
One of the stated goals of this "feature" is
> Exploits requiring a large amount of capital will be found quicker which makes the DeFi space safer overall.
Ah yes, intentionally making your own product less secure and more open to abuse, so you can make it more secure. Good work. This is taking testing in production to a whole new level.
This is not what the paper means. They mean a trade between two colluding parties to give the appearance of a trade.
When you trade a any security to yourself (or someone closely related to you) to give the illusion of the price going up. (EDIT: Well... it could be for any reason. But illusion of price going up is one such application of the strategy).
Lets say you invent a new NFT. You sell the NFT to __yourself__ for $100. Then, you sell the NFT to yourself (again) for $200. Finally, you sell the NFT to yourself for $1000. Then you go to the public and say "Look, my NFT has grown 1000% in the past week, you should get in on it!!"
Then they buy the NFT from you for $500. Then suddenly they can't sell the NFT to anyone, because you were the only one buying ever.
Congrats, you just scammed someone for $500.
Lets say you invent a new NFT. You sell the NFT to __yourself__ for $100. Then, you sell the NFT to yourself (again) for $200. Finally, you sell the NFT to yourself for $1000. Then you go to the public and say "Look, my NFT has grown 1000% in the past week, you should get in on it!!"
Then they buy the NFT from you for $500. Then suddenly they can't sell the NFT to anyone, because you were the only one buying ever.
Congrats, you just scammed someone for $500.
You do NOT need to change the prices for it to be a wash trade.
What you gave me a profitable and likely illegal example of a wash trade, but not a definition of wash trade.
A wash trade could be selling thing X for $100 and buying thing Y for $100 where X and Y are the same exact underlying thing. Just moving pointless trades back and forth inflates volumes, which makes people thing the market is moving.
See https://www.investopedia.com/terms/w/washtrading.asp for more
What you gave me a profitable and likely illegal example of a wash trade, but not a definition of wash trade.
A wash trade could be selling thing X for $100 and buying thing Y for $100 where X and Y are the same exact underlying thing. Just moving pointless trades back and forth inflates volumes, which makes people thing the market is moving.
See https://www.investopedia.com/terms/w/washtrading.asp for more
> You do NOT need to change the prices for it to be a wash trade.
No you don't. But you do need to be buying and selling the underlying repeatedly for "some reason".
That "some reason" could be fraud, or it could just be tax-optimization. The important thing is, "wash trading" is the technique of buying-and-selling the same thing at nearly the same time... which has many many applications.
Many of those applications are illegal and fraudulent in a traditional market. So seeing something like 70% of the volume of the real world cryptomarket being wash trading suggests that there's more fraud in the cryptomarket than people generally realize.
No you don't. But you do need to be buying and selling the underlying repeatedly for "some reason".
That "some reason" could be fraud, or it could just be tax-optimization. The important thing is, "wash trading" is the technique of buying-and-selling the same thing at nearly the same time... which has many many applications.
Many of those applications are illegal and fraudulent in a traditional market. So seeing something like 70% of the volume of the real world cryptomarket being wash trading suggests that there's more fraud in the cryptomarket than people generally realize.
Wash trading doesn't change the price, it just increase volume, hence the term wash, there is no price change to the owner.
Selling your own NFT to your self for a profit, that's something else, but its not a wash trade as in that case there is a price change.
Selling your own NFT to your self for a profit, that's something else, but its not a wash trade as in that case there is a price change.
My guess is honestly just exchanges trying to get closer to the top of sites like coinmarketcap..
I mean, its win/win for the exchanges though?
Lets say rich person X wants to conduct large-scale wash-trades to artificially increase (or decrease) the price of [insert cryptocoin here].
By conducting it on Exchange-Foobar, Foobar's traffic goes up, while rich person X gets the price change they want. Win-win for both parties.
EDIT: Remember: exchanges win on volume. They want more trades, they don't care if the value goes up or down.
Lets say rich person X wants to conduct large-scale wash-trades to artificially increase (or decrease) the price of [insert cryptocoin here].
By conducting it on Exchange-Foobar, Foobar's traffic goes up, while rich person X gets the price change they want. Win-win for both parties.
EDIT: Remember: exchanges win on volume. They want more trades, they don't care if the value goes up or down.
Yes if it's a third party doing it, it's especially a win-win for the exchange as they are getting paid fees on all that transaction volume.
I kind if assumed it was the exchanges themselves faking it. Wash trading without colluding with the exchange is pretty expensive.
I kind if assumed it was the exchanges themselves faking it. Wash trading without colluding with the exchange is pretty expensive.
All exchanges, even legitimate ones, offer discount packages on anyone who has high volume.
Ex: Interactive Brokers (a legitimate online exchange for stocks) hit it big with its monthly-subscription model: $$subscription / month $20 / for severely discounted trades (fractions of a penny per trade). https://www.interactivebrokers.com/en/index.php?f=1590&p=sto...
Ex: Interactive Brokers (a legitimate online exchange for stocks) hit it big with its monthly-subscription model: $$subscription / month $20 / for severely discounted trades (fractions of a penny per trade). https://www.interactivebrokers.com/en/index.php?f=1590&p=sto...
Yeah, I get it, but unlike stock transactions crypto exchanges generally take a % of volume traded unlike stock exchanges which take a per-transaction fee instead (I think options might be an exception where there's a per-contract fee..not sure).
If you're about to dump $10,000 to $100,000 worth of fees upon an exchange per month so that you can perform price manipulation (or whatever), you give the exchange a call.
They'll answer. You explain to them that you want to give them $50,000 / month (or something) for 10-million trades/month or whatever.
If they let you, you do it. If they don't, call up another exchange and give them the same offer.
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Its called business. When the $$$ amounts go up beyond a certain amount, you make it worth their while to treat you specially. They want the volume, you want the trades. Old-school business, just talk with them and things happen.
They'll answer. You explain to them that you want to give them $50,000 / month (or something) for 10-million trades/month or whatever.
If they let you, you do it. If they don't, call up another exchange and give them the same offer.
-------
Its called business. When the $$$ amounts go up beyond a certain amount, you make it worth their while to treat you specially. They want the volume, you want the trades. Old-school business, just talk with them and things happen.
This is exactly right, in fact if you think about tax breaks on losses it can actually make a lot of sense to sell yourself the same asset at a loss. In the case of crypto you probably wouldn't sell an NFT at a loss, but a coin would definitely make sense to sell to yourself at a loss.
IANAL I don’t think thing that’s how taxes works.
If you sell yourself the security, it never left your hand so you didn’t realize a loss.
If you sell yourself the security, it never left your hand so you didn’t realize a loss.
I think he is trying to describe tax loss harvesting
https://www.investopedia.com/terms/t/taxgainlossharvesting.a...
What robo advisors can do.. is sell say.. asset A that perfectly tracks an asset (say S&P 500)... and then buy asset B that perfectly tracks an asset (say S&P 500).
So you end up with the "same thing" at the end of the day, but got to harvest some losses.
That said, I think there are some iffy legal situations here, and you run the risk of breaking the law here.
https://www.investopedia.com/terms/r/robo-tax-loss-harvestin...
https://www.sofi.com/learn/content/automated-tax-loss-harves...
https://www.investopedia.com/terms/t/taxgainlossharvesting.a...
What robo advisors can do.. is sell say.. asset A that perfectly tracks an asset (say S&P 500)... and then buy asset B that perfectly tracks an asset (say S&P 500).
So you end up with the "same thing" at the end of the day, but got to harvest some losses.
That said, I think there are some iffy legal situations here, and you run the risk of breaking the law here.
https://www.investopedia.com/terms/r/robo-tax-loss-harvestin...
https://www.sofi.com/learn/content/automated-tax-loss-harves...
TLH is real, but "sell yourself the same asset at a loss" sounds fishy to me.
Because with TLH its not "the same asset" in that its not (a) the literal same item moved from one hand to the other. (b) its not the same item ticker (basically a day trade across accounts) (c) Its not buying/selling with yourself
Because with TLH its not "the same asset" in that its not (a) the literal same item moved from one hand to the other. (b) its not the same item ticker (basically a day trade across accounts) (c) Its not buying/selling with yourself
Transferring money/assets between your accounts is a pretty normal thing to do…
You cant manipulate price via wash trading on fungible commodities with deep order books, only volume.
Your example only works for NFTs because they are non-fungible.
Your example only works for NFTs because they are non-fungible.
Just to clarify, wash-trading has nothing to do with wash-sales, right?
"Painting the tape is an illegal activity that is prohibited by the Securities and Exchange Commission (SEC) because it creates an artificial price. " https://www.investopedia.com/terms/p/paintingthetape.asp
A real life example is a store where the owners hire fake shoppers to crowd the store and "buy" items that are later returned to the store and refunded. All to make the shop look busy compared to other shops, in order to attract customers and claim that they have more foot traffic than competing stores.
A wash trade is anything that results in the equivalent outcome as earlier. It was used to get fraudulent tax refunds so it's not allowed to be used that way. An example is buying AAPL at $150 in January, and it falls to $100 in December. One could sell the stock to claim the deduction on the tax return for the year, but would miss out on potential gains on the stock. So what people would do is sell the stock on Dec 31st and buy it back on January 2nd in the new year. So IRS made a rule that doing such a thing is a wash trade and not eligible for tax deductions on the booked loss for the year.
A wash trade is anything that results in the equivalent outcome as earlier. It was used to get fraudulent tax refunds so it's not allowed to be used that way. An example is buying AAPL at $150 in January, and it falls to $100 in December. One could sell the stock to claim the deduction on the tax return for the year, but would miss out on potential gains on the stock. So what people would do is sell the stock on Dec 31st and buy it back on January 2nd in the new year. So IRS made a rule that doing such a thing is a wash trade and not eligible for tax deductions on the booked loss for the year.
I think you might be conflating Wash Sale and Wash Trade:
https://www.investopedia.com/terms/w/washtrading.asp
https://www.investopedia.com/terms/w/washsalerule.asp
https://www.investopedia.com/terms/w/washtrading.asp
https://www.investopedia.com/terms/w/washsalerule.asp
But wouldn't this be risky in that obviously you have to pay transaction fees etc?
The exchanges are probably the ones doing it.
People think that because something is professionally and popularly marketed, and frequently painted as a "hot new trend!" that is profitable that it is a train they need to hop on to.
Crypto and NFT are (relatively) new online havens for many criminals, money launderers, and scammers to hide within in the same ways that AMWAY, Time Share Vacation Sales People, and as the guys selling speakers out of their vans in a parking lot did throughout the past, with a little Bernie Madoff and updated/modified MLM tactics added. Not saying all trading is bad, but millions of people have already been victimized in such a short time, and social media is in on the hustle because they make great profits within the promotional and "pump and dump" food chain.
I decided to invest just $100 in bitcoin (on a reputable exchange) to watch it over time a year ago, and so far it's maybe gone just slightly over double that (with spikes and dips in between)... I could not imagine having risked any more money than that because it's pretty stupid to send cash trough the US mail system even though it's protected by law, and Crypto is largely unregulated, and one tweet from the guy who owns Tesla can bring the system to it's knees within the blink of an eye. You can't cry over imaginary profit you haven't lost, so I'm fine with not developing a new gambling addiction.
It's very telling how hard it is to see a simple detail about profit performance for other coins online (over time), graphs are way too simple, each coin's graph has a different set of rules and context, there are far too many different apps and exchanges, regulation and taxing is uncertain, the methods of creation and management for crypto are really elusive, confusing, and abstract for the purpose of making the process very mysterious. The very creator of bitcoin is still not willing to take proper credit for it FFS... That's all I needed to really know in terms of the system's reliability...
NFTs are basically digital files, often stored in a Google Drive (which cannot be exclusively owned by nature), but they are sold as if it's possible for a file to not be copied, scam cue #2... What I'm really trying to get to as a point is that it's all basically a giant pile of malarkey for normal people who can't afford to lose money right now. I trust the skeptics more than the people who are raving about being millionaires from it on YouTube every day, because you can't tell if diamonds are real by watching a video on the Internet.
Crypto and NFT are (relatively) new online havens for many criminals, money launderers, and scammers to hide within in the same ways that AMWAY, Time Share Vacation Sales People, and as the guys selling speakers out of their vans in a parking lot did throughout the past, with a little Bernie Madoff and updated/modified MLM tactics added. Not saying all trading is bad, but millions of people have already been victimized in such a short time, and social media is in on the hustle because they make great profits within the promotional and "pump and dump" food chain.
I decided to invest just $100 in bitcoin (on a reputable exchange) to watch it over time a year ago, and so far it's maybe gone just slightly over double that (with spikes and dips in between)... I could not imagine having risked any more money than that because it's pretty stupid to send cash trough the US mail system even though it's protected by law, and Crypto is largely unregulated, and one tweet from the guy who owns Tesla can bring the system to it's knees within the blink of an eye. You can't cry over imaginary profit you haven't lost, so I'm fine with not developing a new gambling addiction.
It's very telling how hard it is to see a simple detail about profit performance for other coins online (over time), graphs are way too simple, each coin's graph has a different set of rules and context, there are far too many different apps and exchanges, regulation and taxing is uncertain, the methods of creation and management for crypto are really elusive, confusing, and abstract for the purpose of making the process very mysterious. The very creator of bitcoin is still not willing to take proper credit for it FFS... That's all I needed to really know in terms of the system's reliability...
NFTs are basically digital files, often stored in a Google Drive (which cannot be exclusively owned by nature), but they are sold as if it's possible for a file to not be copied, scam cue #2... What I'm really trying to get to as a point is that it's all basically a giant pile of malarkey for normal people who can't afford to lose money right now. I trust the skeptics more than the people who are raving about being millionaires from it on YouTube every day, because you can't tell if diamonds are real by watching a video on the Internet.
The creator of Bitcoin is most likely Hal Finney, who died in 2014. https://en.wikipedia.org/wiki/Hal_Finney_(computer_scientist...
Title should be "70% of unregulated crypto exchanges..."
No, regulated at as well it seems, see https://news.ycombinator.com/item?id=29279380
Edit: sorry, misunderstood parent comment.
Edit: sorry, misunderstood parent comment.
It’s in the summary:
> We quantify the wash trading on each unregulated exchange, which averaged over 70% of the reported volume.
> We quantify the wash trading on each unregulated exchange, which averaged over 70% of the reported volume.
That's just the list of exchanges, wherein Coinbase is listed as a regulated exchange. Compare that with the text of the abstract:
> We quantify the wash trading on each unregulated exchange, which averaged over 70% of the reported volume.
See how the 70% figure applies strictly to the unregulated exchanges?
> We quantify the wash trading on each unregulated exchange, which averaged over 70% of the reported volume.
See how the 70% figure applies strictly to the unregulated exchanges?
So this implies that the crypto markets are actually far less liquid than the trade volume implies. Suddenly those massive 10% +/- fluctuations in a day make a lot more sense.
[deleted]
Yeah, but everyone already knew that unregulated exchanges are faking their volumes. This isn’t news to anyone who has the slightest clue about cryptocurrency markets.
This is one of the few things about cryptocurrency markets that isn’t being disputed by anyone.
This is one of the few things about cryptocurrency markets that isn’t being disputed by anyone.
It’s something of a sign of how dramatically it would be possible for the price to crater. With less liquidity in the market a smaller amount of people trying to legitimately sell off their BitCoin could result in a massive downward spike in price. Which generally causes more people to sell, which further exacerbates how badly the lack of real buyers will lower the price. In a general sense, faking volume makes it impossible to tell what the real level of demand for something is.
Has everyone internalized that faking volume means Bitcoin’s real value to people is hard to pin down? Maybe, but it’s useful to try and pinpoint exactly how much trading is fake regardless. (30% real trading would still indicate a non-trivial portion of people who actually will buy at current price, much better than if it was 99% fake trading or something).
Has everyone internalized that faking volume means Bitcoin’s real value to people is hard to pin down? Maybe, but it’s useful to try and pinpoint exactly how much trading is fake regardless. (30% real trading would still indicate a non-trivial portion of people who actually will buy at current price, much better than if it was 99% fake trading or something).
Literally anyone who had any idea what crypto markets are like knew that these markets were extremely illiquid.
It's not just that, though. The markets aren't particularly liquid, and there isn't much rational basis for any particular price, and a lot of the real trades are being performed by irrational day-traders or poorly designed algorithmic traders.
It's all of these elements together that add up to the ridiculous volatility you see in these markets.
It's all of these elements together that add up to the ridiculous volatility you see in these markets.
This is great knowledge. People should not be investing based on what's popular or what is being traded. Better hold than gamble. Monetary speculation should be dumb in a sound money system
True and true, but the current system is just a madhouse... The funny part is when people are confusing stock price with approval of the company/concept and its business soundness (also looking forward), e.g. with Tesla or cryptocurrencies.
> Monetary speculation should be dumb in a sound money system
Yeah, but no one is listening. From the richest to the poorest, it's all about "to the moon." 50% of my family and friends have RobinHood accounts and are day trading crypto (usually doge or shiba) ... and don't even know what it is. (A dear friend even spent $15k on a rig and thought i was lying when i said his crypto wasn't actually "IN" his digital wallet.)
Yeah, but no one is listening. From the richest to the poorest, it's all about "to the moon." 50% of my family and friends have RobinHood accounts and are day trading crypto (usually doge or shiba) ... and don't even know what it is. (A dear friend even spent $15k on a rig and thought i was lying when i said his crypto wasn't actually "IN" his digital wallet.)
What do you mean by "IN"? Are dollars "IN" your bank account?
I'm not trying to make a tired argument about dollars being fake or something, I just don't see the distinction as far as wallets specifically are concerned.
I'm not trying to make a tired argument about dollars being fake or something, I just don't see the distinction as far as wallets specifically are concerned.
The difference is: (a) if I don't trust "computers" it absolutely can because I can use deposit box, and (b) the government guarantees that it is via FDIC insurance plus a long list of legal alternatives if it suddenly isn't there.
Crypto has neither (a) nor (b); it is specifically designed to not have (a), and I don't see it having a (b) any time soon since regulation is anathema.
I see your point. Both are ledgers. So in that way crypto and bank accounts are similar. But bank accounts can become cash. Crypto cannot. Now the argument shifts to "what is cash" but a different kind of ledger. We can argue why one is trusted more than the other, and perhaps 100 years from now crypto might be as safe as US dollars or Euros. But today there is a big, bit difference between a crypto wallet and a bank account. I find it especially confusing that many crypto advocates typically lament going off the gold standard, which makes my head hurt...
Now that I argue this... i'm confused. Dammit, Beavis.
Crypto has neither (a) nor (b); it is specifically designed to not have (a), and I don't see it having a (b) any time soon since regulation is anathema.
I see your point. Both are ledgers. So in that way crypto and bank accounts are similar. But bank accounts can become cash. Crypto cannot. Now the argument shifts to "what is cash" but a different kind of ledger. We can argue why one is trusted more than the other, and perhaps 100 years from now crypto might be as safe as US dollars or Euros. But today there is a big, bit difference between a crypto wallet and a bank account. I find it especially confusing that many crypto advocates typically lament going off the gold standard, which makes my head hurt...
Now that I argue this... i'm confused. Dammit, Beavis.
Bitcoin was indeed founded by libertarians who believed the loss of the gold standard was the beginning of the end of western civilisation.
It’s a weird belief but - what if they’re right ? What if it did cause a lot of the problems ? Maybe not directly, but by freeing the state from a boundary-setting limiter it somehow corrupted it?
I don’t know the answer but Bitcoin is a bet that it did cause problems. And so far it’s a winning bet.
It’s a weird belief but - what if they’re right ? What if it did cause a lot of the problems ? Maybe not directly, but by freeing the state from a boundary-setting limiter it somehow corrupted it?
I don’t know the answer but Bitcoin is a bet that it did cause problems. And so far it’s a winning bet.
you can store your private keys printed inside a deposit box if you don't trust computers (which you shouldn't). Nobody guarantees bitcoin, but insurance companies will always exist.
Ultimately you need to trust the blockchain, which runs on computers. Which is the commenter's point.
Even with cash, you trust that the banks won't blacklist your serial numbers. With gold you trust that the world will not invent a new gold making method that will make it worthless (as happened with aluminum). A basic level of faith is required by any system, so that point is not valid.
The blockchain is a virtualized state - yes it executes on computers but the whole point is distributed consensus - you don't have to trust the computers, you trust the open source code being executed by the network.
> you don't have to trust the computers, you trust the open source code being executed by the network
You're contradicting yourself.
You're contradicting yourself.
It's not a contradiction.
You can trust the law / trust the code, but not trust the judges / trust the machines that run the code.
You trust the law beacuse you can read it / You trust the code because you can read and mathematically prove that it works
You cant trust the judges -- you have to have faith in them
You cant trust the machines either -- but blockchain gives you specific mathematical guarantees that it is very hard for them to break the system.
You can trust the law / trust the code, but not trust the judges / trust the machines that run the code.
You trust the law beacuse you can read it / You trust the code because you can read and mathematically prove that it works
You cant trust the judges -- you have to have faith in them
You cant trust the machines either -- but blockchain gives you specific mathematical guarantees that it is very hard for them to break the system.
I don't think you're using the word 'trust' correctly. Trust is a belief that a particular outcome will occur despite having no guarantees that it will occur. What does it mean to trust the law? I have no idea.
I think you are quibbling over the word "trust". How about you believe, based on your understanding of the system and the monetary cost of attacking it, that the virtualized computer will execute the way you expect it to execute?
The same way you'd "trust" that a safe deposit box will not be breached. It's certainly not impossible, but it's unlikely based on your understanding of how it works.
The same way you'd "trust" that a safe deposit box will not be breached. It's certainly not impossible, but it's unlikely based on your understanding of how it works.
Yes, I have no objection to this usage of 'trust'. My objection is in 'trust the law'.
With cash, if you put a fortune in your shoebox it is "IN" your shoebox. The whole point of bitcoin is the distributed nature. Your wallet can be copied without altering any actual holdings or values, whereas a shoebox cannot.
A bitcoin wallet is more like a safety deposit box key, than an actual box itself.
A bitcoin wallet is more like a safety deposit box key, than an actual box itself.
That's not the comparison I made. I'm talking about a bank account not holding physical bills.
> I'm talking about a bank account not holding physical bills
Trusting the regulated bank isn't that far from trusting the monetary authority that gives paper bills value. Or, for that matter, for the 99% of people who have not verified Bitcoin's math and have not inspected the code running on the servers they buy Bitcoin through, trusting the techies who pitch the product.
Trusting the regulated bank isn't that far from trusting the monetary authority that gives paper bills value. Or, for that matter, for the 99% of people who have not verified Bitcoin's math and have not inspected the code running on the servers they buy Bitcoin through, trusting the techies who pitch the product.
That's..a different discussion. My point is that IN bank and IN wallet are both technically incorrect, but for basically all purposes correct.
But yes, you are right that the vast majority of users of [piece of software] have not verified [piece of software] and are relying on other humans to basically tell them if they should or shouldn't run it.
But yes, you are right that the vast majority of users of [piece of software] have not verified [piece of software] and are relying on other humans to basically tell them if they should or shouldn't run it.
You have a point in that neither bank accounts nor bitcoin wallets are wallets in any shape or form, the difference is bank accounts are not advertised as wallets, but bitcoin wallets are. Also interesting that the bitcoin imagery is all about gold coins, when in fact there are no coins at all, virtual or otherwise. Bitcoin is merely an abstract unit of count. The very name 'bitcoin' is misleading. Everything about cryptocurrencies seems fraudulent in one way or another.
You really think people equate crypto wallets with physical wallets, more than they do bank accounts? Not sure I agree. I think it would be much better if they did equate it with a wallet. An account can be recovered if lost, a wallet cannot. Wallet encourages better behavior security wise IMO.
I think you're grasping at straws with the coins thing..you really think there's an attempt to confuse people into thinking that it's..physical coins?
I think you're grasping at straws with the coins thing..you really think there's an attempt to confuse people into thinking that it's..physical coins?
From my experience, most people are left in disbelief when you tell them that the bitcoins they own are not in their wallet. It reflects a deep lack of understanding of how bitcoin works. I don't think misunderstanding how a financial product works is a good thing. Whereas, again, from my experience, bank accounts are well understood. People are fully aware that their funds are not being kept in a box in the bank's vault, and no one tries to convince them of the contrary either.
Okay, then that vacuous point is correct as well. A bank account is just a 9-ish digit number. So in that regard it's similar to a bitcoin wallet. What the person who started this convo was saying is that his friend thought the bitcoin wallet contained the bitcoins, in the exact same way that a regular wallet contains regular paper currency. That the bitcoin wallet would grow in file size based on the amount of bitcoin inside it. All pedantic misinterpretations aside, I'm pretty confident that's what he was trying to convey.
In the 90s a few of my friends decided to be day traders. It worked great until March 2000.
Well technically your private key is "IN" the wallet which is how you access the funds. So it's pretty close to the same thing.
[deleted]
I recently had to go through extensive KYC/AML email conversations and phone calls with bunch of exchanges like Coinbase and others. Got me interested how wash trading could happen, when they were so strict with me, and which exchanges were investigated.
These seems to be the exchanges they investigated. Would be interesting to see a breakdown of percentage per exchange, as I still don't understand how wash trading can happen at Coinbase since they seem to be very strict.
These seems to be the exchanges they investigated. Would be interesting to see a breakdown of percentage per exchange, as I still don't understand how wash trading can happen at Coinbase since they seem to be very strict.
Exchange Code Exchange Name
Panel A Regulated exchanges
R1 Bitstamp
R2 Coinbase
R3 Gemini
Panel B Unregulated Tier-1 exchanges
UT1 Binance
UT2 Bittrex
UT3 Bitfinex
UT4 HitBTC
UT5 Huobi
UT6 KuCoin
UT7 Liquid
UT8 Okex
UT9 Poloniex
UT10 Zb
Panel C Unregulated Tier-2 exchanges
U1 Bgogo
U2 Biki
U3 Bitz
U4 Coinbene
U5 DragonEX
U6 Lbank
U7 Mxc
U8 Fcoin
U9 Exmo
U10 Coinmex
U11 Bibox
U12 Bitmart
U13 Bitmax
U14 Coinegg
U15 Digifinex
U16 GateioGreat data! I am no longer confused as to why the Binance Bridge between ETH and BSC is getting shut down…in six days.
> I recently had to go through extensive KYC/AML
I'm not entirely sure how KYC/AML are related to wash trading ...
In other words: how is the amount of checks they impose on their customers related to what goes on in their trading engine?
Or do you assume that because they're very strict on one thing necessarily implies they're strict everywhere?
That's quite a stretch.
I'm not entirely sure how KYC/AML are related to wash trading ...
In other words: how is the amount of checks they impose on their customers related to what goes on in their trading engine?
Or do you assume that because they're very strict on one thing necessarily implies they're strict everywhere?
That's quite a stretch.
Wash trading is not just one thing, I give you that. But a frequent way of achieving wash trading is to buy and sell from yourself via multiple accounts. KYC/AML + Terms of Conditions specifying you can only own one account prevents that, as much as it can at least. Even if you are two different people just trading between you, AML laws will prevent that and surely Coinbase has the most basic checks in place to detect something that simple.
Ya I seriously doubt there is much wash trading at the Tier A exchanges you listed above.
The market is interdependent. Wash trading on one platform benefits all other platforms. When you ask someone the price of BTC they don't say $x on Coinbase, $y on Kraken, etc.
Literally all of crypto is a scam. After 10 years there is not one feasible use case that isn't done better through another tool. I don't consider "making black markets and extortion easier" a feasible use case.
Literally all of crypto is a scam. After 10 years there is not one feasible use case that isn't done better through another tool. I don't consider "making black markets and extortion easier" a feasible use case.
But it is a use case, along with gambling via crypto day trading.
You may not like it morally and may wish for crypto to be legally banned as a result, but casinos are real and extortion is real.
You may not like it morally and may wish for crypto to be legally banned as a result, but casinos are real and extortion is real.
You are both right, but unlike crypto, casinos and crime facilitating black markets don't pretend to be something other than what they are.
However, I tend to think crypto is a bit more than that: an anti institutional weapon.
Therefore it's not a coincidence that crypto also serves the above use cases that specifically seek to avoid institutional oversight, or in circumstances where institutions have already failed (i.e. Venezuela).
Once the illusions of anarcho-capitalist utopia dissolve, that's what's left, and crypto's fundamental market value - minus the greater fool stuff - reflects the sum of 1) the fear of and 2) enthusiasm for the destruction of institutions, with both of those pushing the value up.
Stronger, trusted, adaptive, and accountable institutions that provide their societies with security and broadly shared well being will push it down.
However, I tend to think crypto is a bit more than that: an anti institutional weapon.
Therefore it's not a coincidence that crypto also serves the above use cases that specifically seek to avoid institutional oversight, or in circumstances where institutions have already failed (i.e. Venezuela).
Once the illusions of anarcho-capitalist utopia dissolve, that's what's left, and crypto's fundamental market value - minus the greater fool stuff - reflects the sum of 1) the fear of and 2) enthusiasm for the destruction of institutions, with both of those pushing the value up.
Stronger, trusted, adaptive, and accountable institutions that provide their societies with security and broadly shared well being will push it down.
If you don't consider black markets a feasible use case you're cherrypicking.
https://goo.gl/search/Define+feasibility&hl=en
feasibility (noun):
state or degree of being easily or conveniently done
The originator, Ross Ulbricht, is in prison for life. Anything that involves any remote possibility of that is not "feasible" to me, specifically in terms of the strength of my own self-preservation instincts.
The originator, Ross Ulbricht, is in prison for life. Anything that involves any remote possibility of that is not "feasible" to me, specifically in terms of the strength of my own self-preservation instincts.
So because it isn't a magic bullet that makes participants bulletproof it's infeasible? Would you say dollars are infeasible as a black market tool as well? What about cocaine?
What if the reason of slow adoption is traditional institutions act against it?
I don't think that's the case. There was a period of time about 5 or so years ago where you could pay with Bitcoin almost anywhere. That's all but disappeared after a wave of $100 transaction fees hit.
Use case was killed by itself.
Use case was killed by itself.
> There was a period of time about 5 or so years ago where you could pay with Bitcoin almost anywhere.
I do not recall this time at all.
I do not recall this time at all.
Surely, that means it never happened. You must be some sort of oracle.
https://www.techrepublic.com/article/pay-with-bitcoin-10-of-...
https://money.cnn.com/2014/09/26/technology/paypal-bitcoin/
https://www.businessinsider.com/dell-becomes-biggest-company...
https://money.cnn.com/2014/12/11/technology/microsoft-bitcoi...
https://www.techrepublic.com/article/pay-with-bitcoin-10-of-...
https://money.cnn.com/2014/09/26/technology/paypal-bitcoin/
https://www.businessinsider.com/dell-becomes-biggest-company...
https://money.cnn.com/2014/12/11/technology/microsoft-bitcoi...
What’s the threshold for “pay with Bitcoin almost anywhere”? 95%? 90%?
Surely the fact that articles are written about individual retailers who are now (then) taking Bitcoin is evidence against the acceptance of BTC being pervasive as a payment instrument rather than evidence in support of it.
Surely the fact that articles are written about individual retailers who are now (then) taking Bitcoin is evidence against the acceptance of BTC being pervasive as a payment instrument rather than evidence in support of it.
I searched for less than 5 minutes and found four examples pretty handily. Anyway, the point was that you could pay with BTC and high transaction fees killed that use case. Feel free to substitute "anywhere" as you please.
Oh yeah?
Ever tried to send funds to a family member on the other side of the world over a weekend?
Ever tried to send funds to a family member on the other side of the world over a weekend?
Western Union, cash money in minutes in nearly all over the world ?
They're not open at night. They take egregious fees, often up to 20% on the exchange rate. You can't send more than $2,500 online. And who wants to stand in line, fill out paperwork, or walk around with large sums of cash? If that exploitative company is the best example you've got, I rest my case.
You wrote: <<They take egregious fees, often up to 20% on the exchange rate.>>
I find this hard to believe. Can you please demonstrate a single transaction with this fee?
I find this hard to believe. Can you please demonstrate a single transaction with this fee?
They usually have both a flat-rate transition fee, and some spread they take on top of whatever open market exchange rate would otherwise be.
For small transactions, you can have things like a $29 fee, for a $500 transaction, where the spread is also taking a 1% cut. You also can find $2.99 transactions. It depends on the source of funds and destination. Also if you are doing something like using a credit card as the source of funds, you might get cash-advance fees (and much worse interest rates).
For small transactions, you can have things like a $29 fee, for a $500 transaction, where the spread is also taking a 1% cut. You also can find $2.99 transactions. It depends on the source of funds and destination. Also if you are doing something like using a credit card as the source of funds, you might get cash-advance fees (and much worse interest rates).
Source: https://www.finder.com/western-union-international-money-tra...
I've never used Western Union personally, so don't listen to me. Listen to their customer reviews:
https://www.sitejabber.com/reviews/westernunion.com
I've never used Western Union personally, so don't listen to me. Listen to their customer reviews:
https://www.sitejabber.com/reviews/westernunion.com
Fees, lack of security, in person?!, etc
The reason financial transactions take time is not that there's something wrong with the technology, but that we, as society, have chosen to establish capital controls. Choosing to evade such controls, without really understanding why we put them there in the first place, basically makes you an anti-social brat.
> ...we, as society, have chosen to establish capital controls.
Obviously that's not the case if entire societies use bitcoin now, as soon as it is an option. We didn't choose the mess, it was foisted upon us.
You can make excuses for the current system if you want to, but you're wrong. You can shame people tired of paying a quarter of their pay to western union to help Tia afford a water tank so she can have running water during the weekdays. You can demand people just follow rules that make no sense to them because "we as a society" have Good Reasons™ for them. But if you expect them to, if you act like their behavior makes no sense, you're deluding yourself and nobody else.
Obviously that's not the case if entire societies use bitcoin now, as soon as it is an option. We didn't choose the mess, it was foisted upon us.
You can make excuses for the current system if you want to, but you're wrong. You can shame people tired of paying a quarter of their pay to western union to help Tia afford a water tank so she can have running water during the weekdays. You can demand people just follow rules that make no sense to them because "we as a society" have Good Reasons™ for them. But if you expect them to, if you act like their behavior makes no sense, you're deluding yourself and nobody else.
> We didn't choose the mess, it was foisted upon us.
What mess? Borders and customs? Yes, we chose that.
What mess? Borders and customs? Yes, we chose that.
Are you being obtuse deliberately?
First, no, most people didn't choose borders and customs. The very people we are talking about, the people that send money home, and their advocates, often ignore borders deliberately. I don't recall choosing any of that stuff. I don't think there's a person alive today that did.
But that aside, we aren't talking about someone checking your luggage for fruit seeds on the way in. You know damn well what mess I'm referring to, because you've spent however long in this thread defending it like none of the problems people point out exist.
First, no, most people didn't choose borders and customs. The very people we are talking about, the people that send money home, and their advocates, often ignore borders deliberately. I don't recall choosing any of that stuff. I don't think there's a person alive today that did.
But that aside, we aren't talking about someone checking your luggage for fruit seeds on the way in. You know damn well what mess I'm referring to, because you've spent however long in this thread defending it like none of the problems people point out exist.
If none of the people alive today wants borders, how do you explain the existence of borders? What is your theory? And no, I don't know what 'mess' you are referring to. You seem to talk quite cryptically, to be honest.
Alright, I'll draw it in crayons: having to pay 25% of your income to send part of your income home to family. That mess. The one I mentioned already that you handwaived over.
I never said nobody wants borders, I said nobody chose borders. We were all born into this. You understand the distinction between choosing something and learning to live with it?
Of course that's a tangent on your original statement, your assertion that we choose capital controls, that you have not addressed. If our society left capital control to a democratic process they wouldn't exist, and the proof of that is that people avoid them at every opportunity, hence bitcoin.
Shit, "capital controls" is a distraction from the issue we were trying to address, which is the ridiculous state of the remittances industry as an example of the state of the consumer financial services industry that bitcoin serves as an alternative to that you keep defending but fail to actually construct an argument in defense of. "We chose them for a reason" "what reason?" "oh you don't like borders?" It's senseless.
People choose bitcoin. Actual individuals choose it. Nobody holds a gun to their head and makes them use it. The same cannot always be said of the alternative. Is people choosing it a good enough reason for you to accept that it is good and should exist? Seems to be a good enough reason for the alternatives to exist, even if it isn't true.
I don't talk cryptically, I stay on point. I don't derail, I don't create tangents. You do, with every single reply. Not everyone gets lost in the noise.
I never said nobody wants borders, I said nobody chose borders. We were all born into this. You understand the distinction between choosing something and learning to live with it?
Of course that's a tangent on your original statement, your assertion that we choose capital controls, that you have not addressed. If our society left capital control to a democratic process they wouldn't exist, and the proof of that is that people avoid them at every opportunity, hence bitcoin.
Shit, "capital controls" is a distraction from the issue we were trying to address, which is the ridiculous state of the remittances industry as an example of the state of the consumer financial services industry that bitcoin serves as an alternative to that you keep defending but fail to actually construct an argument in defense of. "We chose them for a reason" "what reason?" "oh you don't like borders?" It's senseless.
People choose bitcoin. Actual individuals choose it. Nobody holds a gun to their head and makes them use it. The same cannot always be said of the alternative. Is people choosing it a good enough reason for you to accept that it is good and should exist? Seems to be a good enough reason for the alternatives to exist, even if it isn't true.
I don't talk cryptically, I stay on point. I don't derail, I don't create tangents. You do, with every single reply. Not everyone gets lost in the noise.
Alright, now that you have laid out your argument we can see how silly it is. The fact that some people don't like a regulation, or that some people choose to contravene it, doesn't mean that such regulation is illegitimate. A regulation is legitimate as long as it is put in place by a legitimate (i.e. democratic) government. And since a democratic government represents the will of the people, it's clear that we the people have indeed put the regulation in place. Nobody says you have to agree with it, but not agreeing with a regulation is not a reason to infringe it. That's just childish.
So "the government is legitimate, problem solved." All good then, I simply do not understand why there are social problems and resistance movements worldwide, it is childish! The governments are legitimate!
If these governments actually represented the will of the people, the people would not be using bitcoin to send money home. Or smoking weed for that matter. There is a giant blind spot in your worldview IMO.
There's a whole host of other problems with your point, such as who decides whether a government is legitimate (you? Some "democratic committee?"), whether people in China or KSA can rightly disobey laws because they're not democratic, whether you have the right to force me to be one of your people, and probably more I didn't catch, I'll let you bring them up if you want to talk about them.
If these governments actually represented the will of the people, the people would not be using bitcoin to send money home. Or smoking weed for that matter. There is a giant blind spot in your worldview IMO.
There's a whole host of other problems with your point, such as who decides whether a government is legitimate (you? Some "democratic committee?"), whether people in China or KSA can rightly disobey laws because they're not democratic, whether you have the right to force me to be one of your people, and probably more I didn't catch, I'll let you bring them up if you want to talk about them.
Not on the other side of the world but my parents send me through Zelle and works pretty easily - hits the account same day.
I tried Zelle the other day to send a payment.
New user? Payment frozen, no recourse until Monday morning on a Friday, late afternoon.
I'll stick with Coinbase, if I want centralized risk.
New user? Payment frozen, no recourse until Monday morning on a Friday, late afternoon.
I'll stick with Coinbase, if I want centralized risk.
FWIW, cryptocurrency settles in seconds.
https://coinmarketcap.com/alexandria/article/how-long-does-a...
> On the Bitcoin network, the average confirmation time for a BTC payment is about 10 minutes. However, transaction times can vary wildly.
This is because it is affected by factors such as the total network activity, hashrate and transaction fees. If the Bitcoin network is congested, there will be a backlog of transactions in the mempool. This would result users paying more in transaction fees to get transactions to go through faster. This occured in April 2021, where average Bitcoin transaction fees reached $59.
> On the Bitcoin network, the average confirmation time for a BTC payment is about 10 minutes. However, transaction times can vary wildly.
This is because it is affected by factors such as the total network activity, hashrate and transaction fees. If the Bitcoin network is congested, there will be a backlog of transactions in the mempool. This would result users paying more in transaction fees to get transactions to go through faster. This occured in April 2021, where average Bitcoin transaction fees reached $59.
I'm familiar with cryptocurrencies. I did not say Bitcoin. One counterexample isn't representative of current options. There are plenty of coins which clear in seconds.
I would say there are four important use cases of Crypto so far.
1) NFTs - digital ownership
2) DAO - organizations without having to setup an LLC that allow voting etc
3) Accounting for low trust societies (supply chain management, etc)
4) Value store for very high inflation currencies, or states with severe problems
1) NFTs - digital ownership
2) DAO - organizations without having to setup an LLC that allow voting etc
3) Accounting for low trust societies (supply chain management, etc)
4) Value store for very high inflation currencies, or states with severe problems
1. Digital ownership of a token. Digital assets can still be copied and distributed. Notions of ownership and title in digital are still inherently problematic.
2. This is probably not a feature society needs.
3. Possibly good? I'd say instead of "low trust" being the feature, "no natural owner of the database" describes the supply chain situation better.
4. maybe. USD, Gold, Etc have historically been good at this.
> Digital assets can still be copied and distributed. Notions of ownership and title in digital are still inherently problematic
Some NFTs come with additional publishing rights for the underlying asset. For example Eminems sold an NFT that contained to the rights and a different rapper bought it to make a song with it: https://bitcoinist.com/the-rapper-who-bought-eminems-nft-for... I think we're going to see more stuff like this in the future.
> 2. This is probably not a feature society needs
You might be right, but we do allow LLCs so we do allow a more difficult way to do the same thing. There is less regulation around DAOs but that's starting to change in some states, I'm for letting the experiment run
> 3. Possibly good?
I think this is a net benefit
> 4. maybe. USD, Gold, Etc have historically been good at this.
Yeah, for this one in particular I was thinking of stable coins that are backed by USD
Some NFTs come with additional publishing rights for the underlying asset. For example Eminems sold an NFT that contained to the rights and a different rapper bought it to make a song with it: https://bitcoinist.com/the-rapper-who-bought-eminems-nft-for... I think we're going to see more stuff like this in the future.
> 2. This is probably not a feature society needs
You might be right, but we do allow LLCs so we do allow a more difficult way to do the same thing. There is less regulation around DAOs but that's starting to change in some states, I'm for letting the experiment run
> 3. Possibly good?
I think this is a net benefit
> 4. maybe. USD, Gold, Etc have historically been good at this.
Yeah, for this one in particular I was thinking of stable coins that are backed by USD
If someone sells the NFT and publishing rights to a work at the same time… couldn’t they just sell the publishing rights? It’s like you’re buying the publishing rights and getting a receipt for your purchase and people are acting like the receipt is the big deal.
>3. Agree. There are a lot of databases that should exist, but the economic incentives of individual participants in a system means nobody wants to pay for it. Blockchains might present a way to make an end to end distributed database with no single owner, but where commercial interest still exists. (E.g. not open source)
Completely agree, I’d much rather lose at least 6.2% (if not 20%) in totally legitimate fiat currency inflation than see 200% returns on crypto as a result of that money printing.
QE definitely isn’t wash trading.
QE definitely isn’t wash trading.
That's how all Ponzi schemes are marketed. "I got rich, so can you!"
This is why I didn't get a desk job where I had to show up by 8am...seemed like a cyclical ponzi scheme.
Like social security where old investors are paid out from the income of new investors? And your "investments" are just IOUs from the general revenue fund of the same company?
If you are using the P word in a conversation about crypto, chances are you are not adding much value to the conversation.
That particular dead horse has been beaten to a point where all is left are strictly people adhering to dogma on one side or the other of the conversation.
Try tulips next, to make the picture complete.
That particular dead horse has been beaten to a point where all is left are strictly people adhering to dogma on one side or the other of the conversation.
Try tulips next, to make the picture complete.
It's a cliché for a reason.
How is QE even remotely wash trading?
Closely related parties, no change in beneficial owner, entity trading is paid a commission of other market participants profits that result from the artificial inflation of the asset, buying and selling the same or substantially similar assets within 30 days.
If anyone else took 15% of everyone else's returns on that asset and was using their own money with the stated purpose of inflating the asset price, they'd go to jail.
"For example, wash trades were used in the LIBOR scandal to pay off brokers who manipulated the LIBOR submission panels for the Japanese Yen. According to charges filed by the UK financial authorities, UBS traders conducted nine wash trades with a brokerage firm to generate 170,000 pounds in fees as reward for the firm for its role in manipulating LIBOR rates.7"
If anyone else took 15% of everyone else's returns on that asset and was using their own money with the stated purpose of inflating the asset price, they'd go to jail.
"For example, wash trades were used in the LIBOR scandal to pay off brokers who manipulated the LIBOR submission panels for the Japanese Yen. According to charges filed by the UK financial authorities, UBS traders conducted nine wash trades with a brokerage firm to generate 170,000 pounds in fees as reward for the firm for its role in manipulating LIBOR rates.7"
[deleted]
How about the exchanges do it themselves because there's no regulation and if they don't do it, the volumes would be way to low
I have a feeling you are correct. Exchanges have the lowest barrier to entry, non-public client position information, and cheaper access to capital than most market participants.
> We quantify the wash trading on each unregulated exchange, which averaged over 70% of the reported volume.
Coinbase isn’t one of the unregulated exchanges.
Coinbase isn’t one of the unregulated exchanges.
The trick to wash trading on CoinBase is (or was) to be on the inside:
> The order also finds that over a six-week period—August through September 2016—a former Coinbase employee used a manipulative or deceptive device by intentionally placing buy and sell orders in the Litecoin/Bitcoin trading pair on GDAX that matched each other as wash trades. This created the misleading appearance of liquidity and trading interest in Litecoin.
https://www.cftc.gov/PressRoom/PressReleases/8369-21
I wouldn’t be surprised if the wash trading on these unregulated exchanges followed a similar pattern where insiders were largely using the system to their advantage and using their insider knowledge or connections to (try to) hide it.
> The order also finds that over a six-week period—August through September 2016—a former Coinbase employee used a manipulative or deceptive device by intentionally placing buy and sell orders in the Litecoin/Bitcoin trading pair on GDAX that matched each other as wash trades. This created the misleading appearance of liquidity and trading interest in Litecoin.
https://www.cftc.gov/PressRoom/PressReleases/8369-21
I wouldn’t be surprised if the wash trading on these unregulated exchanges followed a similar pattern where insiders were largely using the system to their advantage and using their insider knowledge or connections to (try to) hide it.
Sure, although not part of the period covered by this paper:
> Our data cover the period from 00:00 July 09th, 2019 (when TokenInsight started to collect transaction information from these exchanges) to 23:59 November 03rd, 2019 (the time we wrote the first draft).
> Our data cover the period from 00:00 July 09th, 2019 (when TokenInsight started to collect transaction information from these exchanges) to 23:59 November 03rd, 2019 (the time we wrote the first draft).
Yeah that's a pretty well known case, specific to Litecoin. Also crypto has come a long way since 2016
I imagine the fraudulent schemes have also come a long way since 2016.
Given the volume of trading that happens on unregulated exchanges, I don’t see why anyone would think the amount of fraud has been decreasing as unregulated activity is increasing.
Given the volume of trading that happens on unregulated exchanges, I don’t see why anyone would think the amount of fraud has been decreasing as unregulated activity is increasing.
Sure but I was responding to a comment regarding Coinbase.
Too bad neither the title of this HN submission nor the title of the paper says "Crypto Wash Trading on unregulated exchanges", but I guess that wouldn't write as many headlines.
I'd argue that the original article's title was fine; they were indeed looking for wash trading across all the crypto exchanges. The second sentence of the abstract was basically, "Trading activity on regulated exchanges looks fine, but the unregulated ones are a hot mess."
It's just the altered title for the HN submission that is actively misleading.
It's just the altered title for the HN submission that is actively misleading.
Email the site mods using the footer contact link. Sometimes they reply in minutes. Put “FP #1” and “misleading title” somewhere in the subject.
It’s right there in the abstract.
Yes, but I think the person you are responding to has a good point: it should be in the headline, as adding one more word ("unregulated") is a pretty significant distinction.
When the title just says "70% of the volume in the top crypto exchanges", perhaps you can forgive the skim-readers of the world for believing they meant "top crypto exchanges", as stated, rather than "top unregulated changes".
Sometimes it's nice for the title to honestly represent what the paper/blog/whatever is about without having to dive into the abstract.
I think there might even be some word for having titles which somewhat misrepresent the piece in question, often used when the title elicits more clicks by leaving out a key piece of information.
Sometimes it's nice for the title to honestly represent what the paper/blog/whatever is about without having to dive into the abstract.
I think there might even be some word for having titles which somewhat misrepresent the piece in question, often used when the title elicits more clicks by leaving out a key piece of information.
Is there somewhere to read a quick summary of the regulation of crypto exchanges, I don't know they'd become specifically regulated?
Answered in another comment: https://news.ycombinator.com/item?id=29279685
Coinbase CFTC $6.5 million settlement: https://www.cftc.gov/PressRoom/PressReleases/8369-21
How does Coinbase self-regulate wash trading?
> How does Coinbase self-regulate wash trading?
Coinbase follows KYC laws. That prevents one person from opening two accounts and trading between them.
Coinbase follows KYC laws. That prevents one person from opening two accounts and trading between them.
Huh. What if 2 people decide to do it?
> What if 2 people decide to do it?
Two accounts trading back and forth will light up anti-spoofing tech from the 1980s. Keep in mind that the AML regulations Coinbase follows are specifically designed to catch fake money movement.
Two accounts trading back and forth will light up anti-spoofing tech from the 1980s. Keep in mind that the AML regulations Coinbase follows are specifically designed to catch fake money movement.
Anti-spoofing tech for regulated securities. There's no rules for crypto to suggest that Coinbase needs to (or would) flag a group of individuals doing this.
> Anti-spoofing tech for regulated securities. There's no rules for crypto to suggest that Coinbase needs to (or would) flag a group of individuals doing this.
It's the same stuff that catches money laundering. Coinbase isn't exempt from anti-money laundering laws. (With respect to Coinbase not being subject to the Exchange Act, that's very much an open, if irrelevant to this discussion, question.)
It's the same stuff that catches money laundering. Coinbase isn't exempt from anti-money laundering laws. (With respect to Coinbase not being subject to the Exchange Act, that's very much an open, if irrelevant to this discussion, question.)
I don't see how that is relevant here. Wash trading is market, price, and reputation manipulation, not money laundering or tax evasion.
I'm not sure Coinbase's need to report money laundering applies.
I'm not sure Coinbase's need to report money laundering applies.
> Wash trading is market, price, and reputation manipulation, not money laundering or tax evasion
A lot of money laundering involves wash trading. That's why institutions like Coinbase have systems in place to detect it. Non-laundering wash trades would get flagged by such a system. If it were systemic, it would almost certainly merit a SAR.
A lot of money laundering involves wash trading. That's why institutions like Coinbase have systems in place to detect it. Non-laundering wash trades would get flagged by such a system. If it were systemic, it would almost certainly merit a SAR.
>A lot of money laundering involves wash trading.
Citation needed, because wash trading and money laundering are not mutually inclusive. There are not controls in place for money laundering that detect wash trading, because crypto is not a regulated security.
Citation needed, because wash trading and money laundering are not mutually inclusive. There are not controls in place for money laundering that detect wash trading, because crypto is not a regulated security.
Pretty sure that none of the honest and upstanding people in the crypto-world would attempt to circumvent regulations like that!
/s
/s
Does that mean they don't try to prevent a group of individuals coordinating wash trading between their accounts?
> Does that mean they don't try to prevent a group of individuals coordinating wash trading between their accounts?
To wash trade effectively for more than a single instance one needs hundreds to thousands of accounts. Somebody could coördinate that many people. But it's hard. And it creates exhaust lights up law enforcement radars, as it's practically indistinguishable from money laundering.
To wash trade effectively for more than a single instance one needs hundreds to thousands of accounts. Somebody could coördinate that many people. But it's hard. And it creates exhaust lights up law enforcement radars, as it's practically indistinguishable from money laundering.
What's a "regulated" exchange in this context? US Exchanges are "self-regulated" and ultimately answer to FINRA and the SEC. Any rules they publish must be approved by the SEC.
Theres no such process (AFAIK) with "panel A" firms. Its still the wild west.
Does regulation mean KYC for client onboarding? Thats a completely different thing. We're not talking about on-exchange trading rules and compliance monitoring in that case.
Theres no such process (AFAIK) with "panel A" firms. Its still the wild west.
Does regulation mean KYC for client onboarding? Thats a completely different thing. We're not talking about on-exchange trading rules and compliance monitoring in that case.
Why don't you read through the paper?
Here is the short answer:
> We adopt the definition of regulated exchanges from the state of New York, which has one of the earliest regulatory frameworks in the world. [6]
> 6 Regulated exchanges are issued BitLicenses and are regulated by the New York State Department of Financial Services. Bitlicence carries some of the most stringent requirements. Our main results are robust to alternative classifications of regulated exchanges. As of June 2020, NYDFS has issued licenses to 25 regulated entities, six of which provide crypto exchange service. They are Itbit, Coinbase, Bitstamp, Bitflyer, Gemini, and Bakkt (futures and options only). Further information can be found at: https://www.dfs.ny.gov/apps_and_licensing/virtual_currency_b.... (Last accessed: July 3, 2020)
Here is the short answer:
> We adopt the definition of regulated exchanges from the state of New York, which has one of the earliest regulatory frameworks in the world. [6]
> 6 Regulated exchanges are issued BitLicenses and are regulated by the New York State Department of Financial Services. Bitlicence carries some of the most stringent requirements. Our main results are robust to alternative classifications of regulated exchanges. As of June 2020, NYDFS has issued licenses to 25 regulated entities, six of which provide crypto exchange service. They are Itbit, Coinbase, Bitstamp, Bitflyer, Gemini, and Bakkt (futures and options only). Further information can be found at: https://www.dfs.ny.gov/apps_and_licensing/virtual_currency_b.... (Last accessed: July 3, 2020)
Lest anyone think that the solution is more regulation, it's worth looking at the impact of the BitLicense. This overbearing regulatory framework has stifled innovation and forced crypto startups to leave the world’s leading financial hub and build their companies elsewhere. Compliance costs millions of dollars, leaving most startups with no viable option except to block their users from accessing their services in NY. No one wins. In their misguided attempt to protect their citizens, they inadvertently blocked New Yorkers from participating in the best performing asset class of the decade.
What makes you think it was inadvertent?
The CFTC does have some jurisdiction.
Coinbase: https://www.cftc.gov/PressRoom/PressReleases/8369-21
Kraken: https://www.cftc.gov/PressRoom/PressReleases/8433-21
Coinbase: https://www.cftc.gov/PressRoom/PressReleases/8369-21
Kraken: https://www.cftc.gov/PressRoom/PressReleases/8433-21
Breakdown of percentage per exchange is available on table 7 (pp 46).
Binance, for example, is measured at 46%. Typically the lower tier exchanges have higher levels of measured wash trading.
Binance, for example, is measured at 46%. Typically the lower tier exchanges have higher levels of measured wash trading.
Thank you, missed that when skimming.
Basically the lesson here is: don't underestimate how stupid HFT algorithms can be, especially when there isn't really a penalty for doing this.
I've worked at an above board HFT with a big crypto desk, and this happened constantly.
I've worked at an above board HFT with a big crypto desk, and this happened constantly.
> especially when there isn't really a penalty for doing this
Executing unprofitable trades is its own perfect penalty, is it not?
Executing unprofitable trades is its own perfect penalty, is it not?
Extremely sceptical that the volume is fake in the largest exchanges. You can see it's real for yourself by putting an order in the book and simulating when it should be filled and compare that to the actual fill. You'll see that they line up closely for the large exchanges which is strong evidence that the volume is real.
Can you explain in more detail, please?
Sorry if it should be obvious. I'm used to being 100% stupid at least 10% of the time
Sorry if it should be obvious. I'm used to being 100% stupid at least 10% of the time
Sure. Suppose there's 8 on the best bid and then you send a limit buy order of 1 quantity to the same price, making it 9 in total after your order arrives. Then after that, suppose a trade is shown with volume 9 at that price level. What this event implies is that someone sold into the best bid and took it out completely. If this trade volume is fake in any way, then your order won't get filled. But in reality, that never happens on the large exchanges. Your order will always get filled when you expect it to, meaning that the volume is real. If the volume was fake it'd be easy to prove. Just put a limit order in the book, record your screen, and prove that you didn't get a fill that you should have gotten. That won't happen in the large exchanges because the volume isn't fake.
There's some misunderstanding here. The paper is asserting that the volume is fraudulent, due to wash trading, not that the trades are fake.
In your toy scenario, I put 8 on the best bid, you put in 1 more, then I go on another account and hit the bid for 9 volume. 1 of that is legitimate volume, and 8 is fraudulent because I'm trading with myself (aka wash trading). Sure you get your fill, but the paper asserts that the stated volume is too high (in this case by 8).
In your toy scenario, I put 8 on the best bid, you put in 1 more, then I go on another account and hit the bid for 9 volume. 1 of that is legitimate volume, and 8 is fraudulent because I'm trading with myself (aka wash trading). Sure you get your fill, but the paper asserts that the stated volume is too high (in this case by 8).
No, there is no misunderstanding. The paper has falsely defined wash trading to mean fake trades.
With so many 'technical traders' out there on youtube, you could easily know what the rubes are looking for before they buy and then make that happen.
I'm not surprised at all
Many actors (including core devs) in the Ethereum (and other crypto) ecosphere see front running (known as MEV) and the payment for protection thereof (known as flashbots) as a "feature" so it's no wonder that other "creative trading techniques" run rampant.
It seems like the reason for every financial regulation in traditional banking is rediscovered in the crypto space just much faster.
Many actors (including core devs) in the Ethereum (and other crypto) ecosphere see front running (known as MEV) and the payment for protection thereof (known as flashbots) as a "feature" so it's no wonder that other "creative trading techniques" run rampant.
It seems like the reason for every financial regulation in traditional banking is rediscovered in the crypto space just much faster.
There's a lot of uninformed takes in this thread, but this really takes the cake. There is literally nobody in the Ethereum space who sees MEV as anything other than rent extraction.
Flashbots' mission is for MEV to disappear. They're doing that by making it a more open process and to prevent MEV extraction from making the chain unusable via high gas fees.
Flashbots RPC exists as a feature because private txPools/RPCs are the only way to be absolutely sure your transaction won't have MEV extracted from it. If Flashbots wanted more MEV, they would only allow transactions via Flashbots RPC that cannot be MEV extracted.
By allowing MEV-extractable transactions on Flashbots RPC, they effectively reduce the amount of MEV that is mined.
Flashbots' mission is for MEV to disappear. They're doing that by making it a more open process and to prevent MEV extraction from making the chain unusable via high gas fees.
Flashbots RPC exists as a feature because private txPools/RPCs are the only way to be absolutely sure your transaction won't have MEV extracted from it. If Flashbots wanted more MEV, they would only allow transactions via Flashbots RPC that cannot be MEV extracted.
By allowing MEV-extractable transactions on Flashbots RPC, they effectively reduce the amount of MEV that is mined.
I think you are right and I should have put more thought and research into my response.
Looking back I've no idea where I got the impression from that MEV is welcomed by the core client Devs.
Looking back I've no idea where I got the impression from that MEV is welcomed by the core client Devs.
[deleted]
What do you mean by "as a feature"? Devs agree that MEV is a problem (a very hard one), and are trying to solve it.
He doesn’t know what he is talking about.
We also did extensive analysis on this in 2018/2019 and presented it to the SEC: https://static.bitwiseinvestments.com/Research/Bitwise-Asset...
Good news: it's getting better. Bad news: still very high.
Good news: it's getting better. Bad news: still very high.
This was very interesting analysis. Thank you for sharing. Did you look at Crypto.Com?
If they had any volume, they must have been included in the analysis. But not enough to point out in the report it seems.
If I remember correctly, crypto.com launched late 2019/early 2020 so unlikely it's part of the report.
It launched in 2016
Tumblers[0] contribute to this to some extent I presume. I wonder how much of the effect they are seeing is related to tumbling.
[0]https://en.wikipedia.org/wiki/Cryptocurrency_tumbler
[0]https://en.wikipedia.org/wiki/Cryptocurrency_tumbler
> Tumblers contribute to this to some extent I presume.
How are tumblers related to exchanges?
Not sure I understand. We're not talking about onchain stuff here, but just money moving around within an exchange.
How are tumblers related to exchanges?
Not sure I understand. We're not talking about onchain stuff here, but just money moving around within an exchange.
I misunderstood. I thought activities within a exchange were still on the chain.
70% of the titles of top crypto articles on HN are fraudulently paraphrased
Now for the paper on NFT’s being used ONLY for money laundering. Then hopefully I won’t have to listen to someone talk about how much money other people are making. With NFT you can get any illegal income into the country. Keep your illegal funds outside. Go to your country and make an NFT thats “worth” 1 million dollars. Go out of your country and buy it. Congrats u just made art and washed 1 million. Yes a very simple example but still… No jpegs are not being sold for thousands of dollars for legitimate speculation.
You could look for the proportion of addresses trading on opensea that haven't been funded from a KYC exchange either directly or within 1 or 2 degrees of separation.
Wash trading would be less of a problem if there was an independent way of valuing the asset, and we didn't derive our 'value' of the asset from what 'the last guy traded at'.
It's an inherent, infallible weakness of the type of asset.
I can't fathom how we haven't arrived at the general consensus that it's just a big scam.
I suggest that large portions of our economy depend on hype.
People Magazine generally won't say hugely negative things about celebrities, because celebrities are their currency, it's what they are selling. They're selling the illusion of celebrity, and they work with press agents etc. to concoct all of it. Talking any kind of 'reality' would be detrimental to their core business.
In much the same way, the press, including the Tech Press relies on a kind of naive, hopeful, optimism, blended with the dream of riches, or at least for others. The 'drama' of Musk, Zuck etc. keeps the clicks moving.
It's an inherent, infallible weakness of the type of asset.
I can't fathom how we haven't arrived at the general consensus that it's just a big scam.
I suggest that large portions of our economy depend on hype.
People Magazine generally won't say hugely negative things about celebrities, because celebrities are their currency, it's what they are selling. They're selling the illusion of celebrity, and they work with press agents etc. to concoct all of it. Talking any kind of 'reality' would be detrimental to their core business.
In much the same way, the press, including the Tech Press relies on a kind of naive, hopeful, optimism, blended with the dream of riches, or at least for others. The 'drama' of Musk, Zuck etc. keeps the clicks moving.
I'm surprised it's only 70%, are they sure they didn't miss some?
I have used sniper software such as https://cmcsnipe.com/ and the ease of use of web3 has allowed automated trading to be taken to the next level. Not surprised that so much fake volume exists when it is so easy to create.
This sounds like spam, but is somehow not flagged (yet?). This is from the website:
> CMCSnipe uses insider information to know minutes before a coin is going to be listed on CoinMarketCap or CoinGecko.
How is this website relevant to wash trading?
> CMCSnipe uses insider information to know minutes before a coin is going to be listed on CoinMarketCap or CoinGecko.
How is this website relevant to wash trading?
> According to CoinMarketCap, the distribution of institutional investors is primarily correlated
with the exchange volume than its regulatory status. We also find no significant difference regarding
the volume and distribution of transactions on regulated exchanges compared to unregulated
exchanges around the time they became regulated. For example, Coinbase received Bitlicense in
2017. But there is no exodus of traders. If anything, its volume grew significantly.
Does anyone have any thoughts on why or how this is the case? I'm having trouble wrapping my head around how there is no departure if fraudulent trading is so rampant pre-regulation. I suppose it's worth noting that this largely seems to be speculation on their part anyway. Their data sample is comprised of only roughly one quarter of 2019. Meanwhile, Coinbase received their bitlicense in 2017. It's unclear to me how they can even be sure of the claim they're making at all. I wish they had included a citation here.
The paragraphs following appeal to Benford's law and Power law to explain away any concerns, but it's also unclear to me how it's directly applicable. The premises seem sound, but the conclusion doesn't seem all that cogent to me.
Does anyone have any thoughts on why or how this is the case? I'm having trouble wrapping my head around how there is no departure if fraudulent trading is so rampant pre-regulation. I suppose it's worth noting that this largely seems to be speculation on their part anyway. Their data sample is comprised of only roughly one quarter of 2019. Meanwhile, Coinbase received their bitlicense in 2017. It's unclear to me how they can even be sure of the claim they're making at all. I wish they had included a citation here.
The paragraphs following appeal to Benford's law and Power law to explain away any concerns, but it's also unclear to me how it's directly applicable. The premises seem sound, but the conclusion doesn't seem all that cogent to me.
How is it possible that there are unregulated exchanges still?
This seems like a regulation failure.
This seems like a regulation failure.
Because there are other countries around the world? The largest exchange in cryptocurrency trading volume is Binance, which is headquartered in Cayman Islands. Not sure why this question is even asked, cryptocurrencies are largely created in response to regulations and restrictions.
Oh look, another weekly crypto hating thread on HN
The obsession with trading and how much fraud there is in the crypto space (enormous amounts) is distracting from the people building useful things - for both the common folk and us technical.
Look for the builders. You’ll see something special.
Look for the builders. You’ll see something special.
Spoofing, wash trading, etc have always been common in crypto. Market microstructure is much more adversarial than most markets. If you have an automated strategy that uses and assumes orderbook data and execution data accurately represents market conditions, you will lose your money.
Most exchanges will have "liquidity partners" who have better fee structures, possibly even zero fees. Most of these arrangements are not publicly disclosed. It's also commonly possible to open an order and then trade into your order yourself, although I haven't checked in quite a while and controls may be better now. (Doubt it.)
On a macro level, all this is mostly meaningless, and just a reason everyone ignores volume numbers for these exchanges. There's no reason for this net-neutral trading to affect market prices outside a second/minute time scale.
Most exchanges will have "liquidity partners" who have better fee structures, possibly even zero fees. Most of these arrangements are not publicly disclosed. It's also commonly possible to open an order and then trade into your order yourself, although I haven't checked in quite a while and controls may be better now. (Doubt it.)
On a macro level, all this is mostly meaningless, and just a reason everyone ignores volume numbers for these exchanges. There's no reason for this net-neutral trading to affect market prices outside a second/minute time scale.
title is misleading. 70% of unregulated exchanges.
How exactly would someone distinguish wash trading from legitimate trading? Someone could just be generating volume from one account, or legitimately swing trading.
The only way I can see to distinguish it is if there are fees to making too many transactions per week. Like a "free tier" of transactions and then you pay if you want to transact a lot. That's the proper way to charge fees for mainstream payment networks, btw, rather than how they do it now. Anyway, then the problem becomes how do you mitigate sybil attacks.
Wash trading is a bug in the SYSTEM, and it should be the designer's responsibility to prevent it, not the government's. But the SYSTEM designers don't necessarily WANT to fix it, anymore than they want to fix sybil attacks when they're growing (Twitter or YouTube in startup phase being able to detect and deplatform oodles of new active accounts or content, is against their incentives to attract more money by reporting higher numbers, even if they are bots and illegally uploaded content). Same here.
The only way I can see to distinguish it is if there are fees to making too many transactions per week. Like a "free tier" of transactions and then you pay if you want to transact a lot. That's the proper way to charge fees for mainstream payment networks, btw, rather than how they do it now. Anyway, then the problem becomes how do you mitigate sybil attacks.
Wash trading is a bug in the SYSTEM, and it should be the designer's responsibility to prevent it, not the government's. But the SYSTEM designers don't necessarily WANT to fix it, anymore than they want to fix sybil attacks when they're growing (Twitter or YouTube in startup phase being able to detect and deplatform oodles of new active accounts or content, is against their incentives to attract more money by reporting higher numbers, even if they are bots and illegally uploaded content). Same here.
Unregulated markets have maximum amount of fraudulence. There is no reason to assume anything else.
If you think this is a problem, then cryptocurrency speculation is just not for you. When you get into cryptocurrency speculation, you know there's not a lot of regulation, and that's the beauty of it. You get what you're paying for.
We are seeing a market evolve naturally, without too much government distortion, which is pretty cool.
We are seeing a market evolve naturally, without too much government distortion, which is pretty cool.
Now look at the volume on the NASDAQ :D
Now do high-frequency trading.
Reads more like a self-opinionated click bait.
What's the actual harm done by fraudulent volumes? I've been around crypto for a long time; I basically just ignore trading volumes on most exchanges, and go off other signals. I see this kind of thing come up now and then, with lots of hand wringing about the fraudulent nature of crypto and whatever... and I just don't get it. You can't trust the volumes, just move on.
I refuse to believe that as much as 30% of the volume is legitimate
There's also "legal" wash trading, e.g. the same institution/person putting in large BTC spot buy orders and then shorting the BTC future. This is how companies like crypto.com, celsius, blockfi, etc are now able to give investors 8%+ on their USDC because the investors need the cash for expensive futures contracts. The companies loan the cash out to hedge funds at high interest rates, take a cut, and give the rest to you.
There’s a greater than 8% yield between the spot price and the future delivery price?
[deleted]
I wonder how much is just automatic arbitrage bots trying to squeeze out pennies.
Money is such a poor tool, it's funny when some nerds pretend they're smarter because they use new techs, while they just forgot to implement all the plumbings that makes older concept work just well.
The intersection between tech enthusiasts and libertarians is way too large.
The intersection between tech enthusiasts and libertarians is way too large.
Doubt it.
70% seems a tad bit high.
I think their expectation that real traders would use rounded numbers overlooks that crypto is hyper fractionalized. If someone is exiting their Doge position they're not going to use a rounded number as fee's are paid in a % of that crypto.
I think their expectation that real traders would use rounded numbers overlooks that crypto is hyper fractionalized. If someone is exiting their Doge position they're not going to use a rounded number as fee's are paid in a % of that crypto.
Wash trading much more common on international exchanges.
FWIW this is old data (and very old news) in crypto terms and there have been positive audits of the big players since.
Automated trading strategies (e.g., "grid trading") are really popular and there are many third party bot providers that integrate in multiple exchange APIs. Maybe the unregulated class of exchanges here just has more permissive APIs/automation than the regulated ones. Automated trading is still legitimate trading where a party puts their capital on the line.
I agree that the lack of rounding and trade size clusters is a likely approximate indicator of non-human orders. The presence of automated orders does not automatically mean there is fraudulent wash trading by the exchange.
The authors also do not cite previous research or evidence of their methodology working for traditional finance. It all makes for weak evidence of actual wash trading.