Number go down: the single trade that crashed Bitcoin(davidgerard.co.uk)
davidgerard.co.uk
Number go down: the single trade that crashed Bitcoin
https://davidgerard.co.uk/blockchain/2019/05/18/number-go-down-the-single-trade-that-crashed-bitcoin/
35 comments
amazing that a $30 million selloff translates to $21 billion market cap drop. held up by toothpicks
Luck has nothing to do with it. Someone who is able to either buy or sell such amount in short period of time is not a first timer; they definitely have access to get that dough converted/moved out of computer systems into their banking account as flawlessly as they sold that $30MM in the first place.
Otherwise they would not have done such move at all.
Otherwise they would not have done such move at all.
I suspect they are a first timer. There are lots of very rich amateurs in the bitcoin world.
A pro would at a bare minimum split it into a few thousand timed orders.
A pro would at a bare minimum split it into a few thousand timed orders.
«Now the fun part, good luck getting the cash out of the exchange!»
Err... There are traders easily withdrawing tens of millions of USD every single week on Bitstamp. Bitstamp isn't MtGox.
Err... There are traders easily withdrawing tens of millions of USD every single week on Bitstamp. Bitstamp isn't MtGox.
Any reasons to expect that they won't be able to cash out? Why?
These fluctuations have been a part of Bitcoin for a few years now. And while most people think it's no big deal I think it's absolutely fatal.
It's fatal because bitcoin isn't supposed to be some kind of stock that you buy, sell and speculate on. It's supposed to be a currency and that's where it's supposed to get its value from. Unfortunately that's not how it's being used because unfortunately it's not a very good currency.
Nobody wants to use a means of exchange that fluctuates widely from day to day. No one wants to accept $ 1 in bitcoin for a loaf of bread if that $ 1 could be worth ten cents tomorrow. Currencies need to be stable for them to be usable as a means of exchange.
Unfortunately this sort of instability seems to be a feature of bitcoin rather than a bug. Unlimited anonymous transactions means the system will be easy to manipulate.
That said the dream of bitcoin could be one that saves humanity from the financial tyranny imposed by governments. This is particularly true for people who live in third world countries where governments play fast and loose with their currencies and their money can quickly become devalued.
It is also to an extent true for richer nations where government control of the currency led to things like the great depression the great stagflation of the 70s and heaven knows what ill effects it's causing today that economists of tomorrow will learn about.
It is clear to me that having independent currencies will result in a freer more prosperous world. I think what's needed is an alternative to bitcoin that is set up to actually work like a currency rather than a share or forex market with people buying currency that they don't plan to use.
I think the solution is to learn from paypal which also set out to create it's own currency and almost succeeded. Create an alt coin and brand it as a currency and have it be used that way. Maybe go to ebay top sellers or etsy top sellers and convince them to accept your alt coin. Have rules and tracking mechanisms in place to prevent manipulation of the money supply. And most importantly a widespread currency can't have anonymity. I'm not saying anonymity shouldn't be allowed in a currency. But widespread use of a currency requires being able to manually undo transactions that were done through fraud, the way banks and credit card companies can. This is why people tend to avoid making large payments in cash, they want a paper trail so it can be undone if necessary.
It's fatal because bitcoin isn't supposed to be some kind of stock that you buy, sell and speculate on. It's supposed to be a currency and that's where it's supposed to get its value from. Unfortunately that's not how it's being used because unfortunately it's not a very good currency.
Nobody wants to use a means of exchange that fluctuates widely from day to day. No one wants to accept $ 1 in bitcoin for a loaf of bread if that $ 1 could be worth ten cents tomorrow. Currencies need to be stable for them to be usable as a means of exchange.
Unfortunately this sort of instability seems to be a feature of bitcoin rather than a bug. Unlimited anonymous transactions means the system will be easy to manipulate.
That said the dream of bitcoin could be one that saves humanity from the financial tyranny imposed by governments. This is particularly true for people who live in third world countries where governments play fast and loose with their currencies and their money can quickly become devalued.
It is also to an extent true for richer nations where government control of the currency led to things like the great depression the great stagflation of the 70s and heaven knows what ill effects it's causing today that economists of tomorrow will learn about.
It is clear to me that having independent currencies will result in a freer more prosperous world. I think what's needed is an alternative to bitcoin that is set up to actually work like a currency rather than a share or forex market with people buying currency that they don't plan to use.
I think the solution is to learn from paypal which also set out to create it's own currency and almost succeeded. Create an alt coin and brand it as a currency and have it be used that way. Maybe go to ebay top sellers or etsy top sellers and convince them to accept your alt coin. Have rules and tracking mechanisms in place to prevent manipulation of the money supply. And most importantly a widespread currency can't have anonymity. I'm not saying anonymity shouldn't be allowed in a currency. But widespread use of a currency requires being able to manually undo transactions that were done through fraud, the way banks and credit card companies can. This is why people tend to avoid making large payments in cash, they want a paper trail so it can be undone if necessary.
> Have rules and tracking mechanisms in place to prevent manipulation of the money supply. And most importantly a widespread currency can't have anonymity. I'm not saying anonymity shouldn't be allowed in a currency. But widespread use of a currency requires being able to manually undo transactions that were done through fraud, the way banks and credit card companies can. This is why people tend to avoid making large payments in cash, they want a paper trail so it can be undone if necessary.
Regular money has basically all these features, plus the advantage of enormous institutional support (laws, systems, finance sectors, central banks, markets...)
Regular money has basically all these features, plus the advantage of enormous institutional support (laws, systems, finance sectors, central banks, markets...)
Do you think it would be possible to end up with two coexisting widely used currencies?
One currency like you say, traceable and hard to manipulate and another that preserves the anonymity that bitcoin provides but with a lot more fluctuation in the price? (Not to say that bitcoin is untraceable, but rather, suppose a currency with the same ideals of anonymity the creators held when they created Bitcoin)
One currency like you say, traceable and hard to manipulate and another that preserves the anonymity that bitcoin provides but with a lot more fluctuation in the price? (Not to say that bitcoin is untraceable, but rather, suppose a currency with the same ideals of anonymity the creators held when they created Bitcoin)
“The crypto blogs put forward all sorts of bad reasons — it’s capital flight from China! It’s Bakkt offering Bitcoin futures! It’s Flexa offering retail payments in crypto! It’s Microsoft experimenting with the blockchain! — even though this was really obviously a manipulated push like so many before.“
All reasons for the price to rise or drop are obvious in hindsight. I like to see pundits make these predictions before the price event. Better yet, buy or short sell BTC, make a screenshot and put your money where your mouth is.
All reasons for the price to rise or drop are obvious in hindsight. I like to see pundits make these predictions before the price event. Better yet, buy or short sell BTC, make a screenshot and put your money where your mouth is.
I have been saying this is how it works for a while, so I claim my "I told you so".
> Better yet, buy
you wish
> or short sell BTC
Shorting you can trust turns out to be something Bitcoin doesn't have yet.
> Better yet, buy
you wish
> or short sell BTC
Shorting you can trust turns out to be something Bitcoin doesn't have yet.
I think the author links to a post where they predicted this would happen during the upswing in the first few paragraphs actually.
So figure out when market manipulators are going to act? You'd have to be colluding along side them to know this.
I think you missed the point. All the poster is saying is that these crypto analysis people should actually attempt to predict price moves based on market forces instead of explaining movement in hindsight.
pundits have been pointing to market manipulation for a while
On BitCoin this type of behaviour seems quite easy to spot but it happens elsewhere too - eg the S&P E-Mini futures and probably the Nasdaq futures.
It takes remarkably few contracts to actually move the market - especially during the Globex session.
It takes remarkably few contracts to actually move the market - especially during the Globex session.
oh yeah - this sort of thing is rife on thinly-traded commodity and forex markets, especially if you think the regulators aren't paying much attention - you'll see Barts all over the place.
It's a symptom of just how thin trading is in crypto, even for the "biggest" one.
It's a symptom of just how thin trading is in crypto, even for the "biggest" one.
I'm not sure "thin" is the right word here. It took something like 20 minutes for someone to dump nearly $40 million worth of Bitcoin, and after the dust had settled, the price had dropped less than 12%.
There are many other factors that lead to this sort of thing happening with Bitcoin, including the lack of regulatory oversight you mention.
There are many other factors that lead to this sort of thing happening with Bitcoin, including the lack of regulatory oversight you mention.
The nominal market cap of BTC right now is about $129 billion. A $40m trade represents about 0.03% of the reported market cap. That a trade that small would cause the market to crash by double digit percentage points is absolutely a sign of a thin market.
Also, the slow speed of price propagation isn’t a sign that the market is thick, it’s a sign that the market is inefficient.
Also, the slow speed of price propagation isn’t a sign that the market is thick, it’s a sign that the market is inefficient.
>That a trade that small would cause the market to crash by double digit percentage points is absolutely a sign of a thin market.
It was only the market on a single exchange, Bitstamp, which is extremelly illiquid compared to the largest exchanges. The problem was that Bitmex, a much more liquid exchange, bases the settlement price of its popular perpetual Bitcoin swap on an index of just two exchanges, Bitstamp and one other, so manipulating the price on illiquid Bitstamp also screws with the price on liquid Bitmex.
It was only the market on a single exchange, Bitstamp, which is extremelly illiquid compared to the largest exchanges. The problem was that Bitmex, a much more liquid exchange, bases the settlement price of its popular perpetual Bitcoin swap on an index of just two exchanges, Bitstamp and one other, so manipulating the price on illiquid Bitstamp also screws with the price on liquid Bitmex.
I agree that Bitmex basing its settlement price on two less liquid exchanges is a bad thing. Personally given the number of margin traders being force liquidated, I suspect that BitMEX likes the lack of liquidity.
However, if the issue was only a thin market on Bitstamp, the price fluctuations would have remained localized to Bitstamp and the futures market on Bitmex. But instead the price for bitcoin dropped by about $1k across the board, which to me signals thin markets everywhere.
However, if the issue was only a thin market on Bitstamp, the price fluctuations would have remained localized to Bitstamp and the futures market on Bitmex. But instead the price for bitcoin dropped by about $1k across the board, which to me signals thin markets everywhere.
Coinbase's isn't much deeper.
The real problem is that the exchanges all have separate order books, and it's hard to arbitrage between them.
This is a recipe for volatility.
The real problem is that the exchanges all have separate order books, and it's hard to arbitrage between them.
This is a recipe for volatility.
That's not a relevant percentage. You'd need to look at the amount of Bitcoin that trades regularly.
Also, I wasn't saying anything about slow speeds. I was saying that the ability of the market, on a single smaller exchange, to absorb a $40 million trade in 20 minutes is not traditionally what you'd call a thin market.
Also, I wasn't saying anything about slow speeds. I was saying that the ability of the market, on a single smaller exchange, to absorb a $40 million trade in 20 minutes is not traditionally what you'd call a thin market.
Suppose for the sake of argument you knew that this wouldn't require blockchain confirmation because it's an exchange trade. And suppose you knew that indexes follow exchanges. And suppose you knew that these exchanges are poorly scrutinised.
To the point that, hmm, you could just trade with yourself to pump or dump the price.
A market composed of yourself and yourself is, by any measure, pretty thin.
To the point that, hmm, you could just trade with yourself to pump or dump the price.
A market composed of yourself and yourself is, by any measure, pretty thin.
Now, you might think wash trading is rampant on bitcoin exchanges, but that's because it is.
https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitf...
https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitf...
Maybe.
Remember it takes "something like 20 minutes" for _any_ bitcoin transaction to get two confirmations. That's kinda "the speed of light limit" for any transaction in bitcoin, whether it's 1 satoshi, or $40mil...
(I don't know if this $40Mil "dump" was one transaction or a significant portion of the ~4000 you can fit into one block, if it was in a series of transactions averaging less than $10k, if couldn't have been done in one block, and there's no way it could have been confirmed in 20 mins...)
Remember it takes "something like 20 minutes" for _any_ bitcoin transaction to get two confirmations. That's kinda "the speed of light limit" for any transaction in bitcoin, whether it's 1 satoshi, or $40mil...
(I don't know if this $40Mil "dump" was one transaction or a significant portion of the ~4000 you can fit into one block, if it was in a series of transactions averaging less than $10k, if couldn't have been done in one block, and there's no way it could have been confirmed in 20 mins...)
The author of the original article also cites that as some kind of reason for something.
It's pretty irrelevant, though. If you have your Bitcoins stored on a market, your "transactions" don't go through the blockchain. It's just a field in a database then, indicating how many Bitcoins a user has stored on an exchange.
The argument would be the same as as claiming "to transfer stocks, you have to deliver them by mail to the recipient, so it takes at least two days". Or indeed the same with money.
If you wire somebody some money, no actual money is moved. It is just fields in a database of banks changing, that indicate how much money the banks owe you. We are so used to it by now that we think of it as actual money changing hands, but it is not.
So I am sorry, I can only take the article half serious. The author seems to be driven too much by his disdain for Bitcoin than by actual facts.
It's pretty irrelevant, though. If you have your Bitcoins stored on a market, your "transactions" don't go through the blockchain. It's just a field in a database then, indicating how many Bitcoins a user has stored on an exchange.
The argument would be the same as as claiming "to transfer stocks, you have to deliver them by mail to the recipient, so it takes at least two days". Or indeed the same with money.
If you wire somebody some money, no actual money is moved. It is just fields in a database of banks changing, that indicate how much money the banks owe you. We are so used to it by now that we think of it as actual money changing hands, but it is not.
So I am sorry, I can only take the article half serious. The author seems to be driven too much by his disdain for Bitcoin than by actual facts.
Someone else mentioned it, but just to reiterate - these aren't transactions on the blockchain, they're trades on an exchange. They happen essentially instantly, because all that's happening is the exchange is updating its internal customer account balances. The only time this hits the blockchain is when someone withdraws Bitcoin from the exchange.
This is called pulling the stops, most trader has stops set by their borrowers. In this case is easy to pull the stops as a lot of people seem to use this thing to gamble
Ah so BitMex uses Bitstamp price (and Coinbase) - that's the link I was missing understanding price manipulation in Bitstamp and longs liquidated in BitMex.
Well, that was quick. The next round of "Bitcoin: Moon or Toilet?" started this morning at 02:00 UTC, with a $1000 price pump. Why? Well, it coincidentally wiped out this short:
https://twitter.com/whalecalls/status/1129931343838814208
https://twitter.com/whalecalls/status/1129931343838814208
When I read 'crashed' I didn't expect a 100% increase in two months http://bitcointicker.co/stamp/btc/usd/24hr/
I guess they orchestrate one more (last) pump&dump hype cycle.
I guess they orchestrate one more (last) pump&dump hype cycle.
Someone should chart all the dates and amounts that journalists have claimed BTC has crashed in percent or points, add it up, and then show how they're reporting on trend that does not exist and is in fact the opposite of reality.
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Yeah it moved the price. That’s a pretty big trade for BTC. Would BTC have cleared $30 million in actual trading volume a few years ago?
Now the fun part, good luck getting the cash out of the exchange!