[HN Gopher] Crypto Wash Trading
___________________________________________________________________
Crypto Wash Trading
Author : paulpauper
Score : 530 points
Date : 2021-11-19 16:44 UTC (6 hours ago)
(HTM) web link (arxiv.org)
(TXT) w3m dump (arxiv.org)
| rscnt wrote:
| anyone else having problems reaching arxiv.org?
| bonestamp2 wrote:
| It's working for me.
| hendryau wrote:
| Now look at the volume on the NASDAQ :D
| phillnom wrote:
| Title should be "70% of unregulated crypto exchanges..."
| capableweb wrote:
| No, regulated at as well it seems, see
| https://news.ycombinator.com/item?id=29279380
|
| Edit: sorry, misunderstood parent comment.
| loeg wrote:
| It's in the summary:
|
| > We quantify the wash trading on each _unregulated exchange_
| , which averaged over 70% of the reported volume.
| phillnom wrote:
| 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?
| tyrfing wrote:
| 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.
| whoisjohnkid wrote:
| title is misleading. 70% of unregulated exchanges.
| bobobob420 wrote:
| 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.
| yokem55 wrote:
| 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.
| psychlops wrote:
| Now do high-frequency trading.
| gitfan86 wrote:
| 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.
| Vespasian wrote:
| 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.
| bsamuels wrote:
| 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.
| [deleted]
| lekevicius wrote:
| 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.
| diveanon wrote:
| He doesn't know what he is talking about.
| jokoon wrote:
| 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.
| arberx wrote:
| 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.
| james305 wrote:
| This was very interesting analysis. Thank you for sharing. Did
| you look at Crypto.Com?
| capableweb wrote:
| If I remember correctly, crypto.com launched late 2019/early
| 2020 so unlikely it's part of the report.
| arberx wrote:
| If they had any volume, they must have been included in the
| analysis. But not enough to point out in the report it seems.
| EGreg wrote:
| 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.
| nabla9 wrote:
| Unregulated markets have maximum amount of fraudulence. There is
| no reason to assume anything else.
| DebtDeflation wrote:
| I'm surprised it's only 70%, are they sure they didn't miss some?
| Trias11 wrote:
| Reads more like a self-opinionated click bait.
| gillesjacobs wrote:
| This paper jumps the gun. Detecting wash trading by examining
| distributions over rounded order prices is a strong and dubious
| claim for which they provide little evidence. The author's equate
| wash trading to non-rounded, clustered prices which really just
| indicates automated trading. Now automated ("bot") trading is a
| technology needed for exchanges wash trading sure, but not
| exclusive evidence of it.
|
| 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.
| nostrademons wrote:
| 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.
| yrral wrote:
| 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.
| mgh2 wrote:
| If I had vested interest in crypto, of course I will dismiss
| this paper as bogus
| Closi wrote:
| Benford's Law is a pretty established method of detecting fraud
| in forensic accounting.
| gillesjacobs wrote:
| 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.1468-047
| 5....
| ChrisLomont wrote:
| 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.1468-0
| 475.2...
|
| [2] https://scholar.google.com/scholar?hl=en&as_sdt=0%2C14&
| q=ben...
| nostrademons wrote:
| 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.
| ur-whale wrote:
| > 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.
| MrMan wrote:
| Python ... Subsecond latencies
|
| Ok
| ur-whale wrote:
| >Python ... Subsecond latencies
|
| Lol, fair enough.
|
| But I believe my point stands even if you go to python-
| level latencies.
| wombatpm wrote:
| Bitcoin transactions with sub second latency
|
| Double ok
| tommek4077 wrote:
| 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.
| tata71 wrote:
| In Go, lol
| dustingetz wrote:
| 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
| solveit wrote:
| "I'm sure there is a lot of fraud" is very different from
| "This is the type of fraud that is going on and here is the
| evidence".
| bluecalm wrote:
| The difference matters for legal proceedings but not for
| much else, surely not for personal investment decisions.
| darawk wrote:
| 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.
| srdev wrote:
| 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).
| PaulHoule wrote:
| 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.
| gillesjacobs wrote:
| 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
| carnitine wrote:
| 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.
| londons_explore wrote:
| > 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.
| KarlKemp wrote:
| 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.
| krisrm wrote:
| 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?
| MuffinFlavored wrote:
| > 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?
| bluGill wrote:
| 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.
| tommek4077 wrote:
| Because the retail market is big. If you personally buy or
| sell, you don't care for the "perfect" price.
| mgaunard wrote:
| 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.
| santiagobasulto wrote:
| 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.
| casi18 wrote:
| you can make something up at the speed of thought. refuting
| it takes time and effort. peer-reviewing even longer.
| mediocregopher wrote:
| 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.
| biddit wrote:
| 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.
| duskwuff wrote:
| 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.
| [deleted]
| ryanlol wrote:
| 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.
| NineStarPoint wrote:
| 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).
| NikolaeVarius wrote:
| Literally anyone who had any idea what crypto markets are like
| knew that these markets were extremely illiquid.
| greatjack613 wrote:
| 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.
| capableweb wrote:
| 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?
| cblconfederate wrote:
| 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
| SavantIdiot wrote:
| > 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.)
| thebean11 wrote:
| 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.
| SavantIdiot wrote:
| 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.
| cblconfederate wrote:
| 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.
| xboxnolifes wrote:
| Ultimately you need to trust the blockchain, which runs
| on computers. Which is the commenter's point.
| meowkit wrote:
| 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.
| lottin wrote:
| > you don't have to trust the computers, you trust the
| open source code being executed by the network
|
| You're contradicting yourself.
| cblconfederate wrote:
| 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.
| lottin wrote:
| 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.
| cblconfederate wrote:
| https://en.wiktionary.org/wiki/trust
| thebean11 wrote:
| 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.
| lottin wrote:
| Yes, I have no objection to this usage of 'trust'. My
| objection is in 'trust the law'.
| cblconfederate wrote:
| 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.
| kranke155 wrote:
| 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.
| knodi123 wrote:
| 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.
| thebean11 wrote:
| That's not the comparison I made. I'm talking about a
| bank account not holding physical bills.
| knodi123 wrote:
| 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.
| JumpCrisscross wrote:
| > _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.
| thebean11 wrote:
| 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.
| lottin wrote:
| 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.
| thebean11 wrote:
| 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?
| nightski wrote:
| 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.
| kwertyoowiyop wrote:
| In the 90s a few of my friends decided to be day traders. It
| worked great until March 2000.
| [deleted]
| bellyfullofbac wrote:
| 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.
| CSSer wrote:
| > 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.
| dw-im-here wrote:
| I refuse to believe that as much as 30% of the volume is
| legitimate
| capableweb wrote:
| 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. 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 Gateio
| loeg wrote:
| > 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.
| capableweb wrote:
| 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.
| pja wrote:
| It's right there in the abstract.
| whyenot wrote:
| 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.
| ziddoap wrote:
| 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.
| pbhjpbhj wrote:
| Is there somewhere to read a quick summary of the
| regulation of crypto exchanges, I don't know they'd
| become specifically regulated?
| capableweb wrote:
| Answered in another comment:
| https://news.ycombinator.com/item?id=29279685
| mumblemumble wrote:
| 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.
| floatingatoll wrote:
| Email the site mods using the footer contact link.
| Sometimes they reply in minutes. Put "FP #1" and
| "misleading title" somewhere in the subject.
| PragmaticPulp wrote:
| 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.
| bugzz wrote:
| Yeah that's a pretty well known case, specific to Litecoin.
| Also crypto has come a long way since 2016
| PragmaticPulp wrote:
| 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_.
| loeg wrote:
| 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).
| mgh2 wrote:
| Coinbase CFTC $6.5 million settlement:
| https://www.cftc.gov/PressRoom/PressReleases/8369-21
| austinheap wrote:
| Great data! I am no longer confused as to why the Binance
| Bridge between ETH and BSC is getting shut down...in six days.
| bduerst wrote:
| How does Coinbase self-regulate wash trading?
| JumpCrisscross wrote:
| > _How does Coinbase self-regulate wash trading?_
|
| Coinbase follows KYC laws. That prevents one person from
| opening two accounts and trading between them.
| discodave wrote:
| Does that mean they don't try to prevent a group of
| individuals coordinating wash trading between their
| accounts?
| JumpCrisscross wrote:
| > _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_ coordinate that many people. But it 's hard. And
| it creates exhaust lights up law enforcement radars, as
| it's practically indistinguishable from money laundering.
| tw600040 wrote:
| Huh. What if 2 people decide to do it?
| JumpCrisscross wrote:
| > _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.
| bduerst wrote:
| 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.
| JumpCrisscross wrote:
| > _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.)
| bduerst wrote:
| 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.
| JumpCrisscross wrote:
| > _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.
| discodave wrote:
| Pretty sure that none of the honest and upstanding people
| in the crypto-world would attempt to circumvent
| regulations like that!
|
| /s
| anonu wrote:
| 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.
| hackingforfun wrote:
| The CFTC does have some jurisdiction.
|
| Coinbase:
| https://www.cftc.gov/PressRoom/PressReleases/8369-21
|
| Kraken: https://www.cftc.gov/PressRoom/PressReleases/8433-21
| capableweb wrote:
| 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://w
| ww.dfs.ny.gov/apps_and_licensing/virtual_currency_b.... (Last
| accessed: July 3, 2020)
| joshfraser wrote:
| 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.
| sokoloff wrote:
| What makes you think it was inadvertent?
| ur-whale wrote:
| > 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.
| capableweb wrote:
| 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.
| _xander wrote:
| 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.
| capableweb wrote:
| Thank you, missed that when skimming.
| cdiddy2 wrote:
| Ya I seriously doubt there is much wash trading at the Tier A
| exchanges you listed above.
| [deleted]
| nefitty wrote:
| 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.
| betwixthewires wrote:
| If you don't consider black markets a feasible use case
| you're cherrypicking.
| nefitty wrote:
| 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.
| betwixthewires wrote:
| 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?
| joshfraser wrote:
| Oh yeah?
|
| Ever tried to send funds to a family member on the other
| side of the world over a weekend?
| rvnx wrote:
| Western Union, cash money in minutes in nearly all over
| the world ?
| tata71 wrote:
| Fees, lack of security, in person?!, etc
| joshfraser wrote:
| 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.
| throwaway2037 wrote:
| 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?
| jacobr1 wrote:
| 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).
| lottin wrote:
| 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.
| betwixthewires wrote:
| > ...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(tm) for them. But if you
| expect them to, if you act like their behavior makes no
| sense, you're deluding yourself and nobody else.
| lottin wrote:
| > We didn't choose the mess, it was foisted upon us.
|
| What mess? Borders and customs? Yes, we chose that.
| betwixthewires wrote:
| 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.
| lottin wrote:
| 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.
| betwixthewires wrote:
| 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.
| coding123 wrote:
| Not on the other side of the world but my parents send me
| through Zelle and works pretty easily - hits the account
| same day.
| tata71 wrote:
| 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.
| mikegreenberg wrote:
| FWIW, cryptocurrency settles in seconds.
| NikolaeVarius wrote:
| 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.
| _3u10 wrote:
| 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.
| nefitty wrote:
| That's how all Ponzi schemes are marketed. "I got rich,
| so can you!"
| tata71 wrote:
| This is why I didn't get a desk job where I had to show
| up by 8am...seemed like a cyclical ponzi scheme.
| ur-whale wrote:
| 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.
| nefitty wrote:
| It's a cliche for a reason.
| carnitine wrote:
| How is QE even remotely wash trading?
| ishjoh wrote:
| 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
| abakker wrote:
| 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.
| ishjoh wrote:
| > 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
| abakker wrote:
| >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)
| Uehreka wrote:
| 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.
| temp8964 wrote:
| What if the reason of slow adoption is traditional
| institutions act against it?
| coding123 wrote:
| 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.
| sokoloff wrote:
| > 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.
| mikegreenberg wrote:
| 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...
| sokoloff wrote:
| 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.
| thenanyu wrote:
| 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.
| danans wrote:
| 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.
| arez wrote:
| 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
| ashwagary wrote:
| 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.
| sonthonax wrote:
| 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.
| dqpb wrote:
| > especially when there isn't really a penalty for doing this
|
| Executing unprofitable trades is its own perfect penalty, is it
| not?
| outside1234 wrote:
| How is it possible that there are unregulated exchanges still?
|
| This seems like a regulation failure.
| alpb wrote:
| 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.
| jollybean wrote:
| 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.
| xtat wrote:
| FWIW this is old data (and very old news) in crypto terms and
| there have been positive audits of the big players since.
| willcipriano wrote:
| 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
| ur-whale wrote:
| > 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.
| willcipriano wrote:
| I misunderstood. I thought activities within a exchange were
| still on the chain.
| citizenpaul wrote:
| Doubt it.
| nailk wrote:
| Oh look, another weekly crypto hating thread on HN
| Zamicol wrote:
| 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.
| teitoklien wrote:
| .... 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.
| joshfraser wrote:
| 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.
| xur17 wrote:
| 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.
| teitoklien wrote:
| 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.
| joshfraser wrote:
| 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.
| teitoklien wrote:
| 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.
| zeroxfe wrote:
| > 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.
| dannyw wrote:
| If you own most of the lp, most of the fees go to you.
| greatjack613 wrote:
| That's not true, the gas fees which are the largest part
| still go to the miners.
| yokem55 wrote:
| 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.
| teitoklien wrote:
| 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).
| latchkey wrote:
| 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.
| throwawaygh wrote:
| _> 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"?
| legutierr wrote:
| 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.
| lottin wrote:
| > 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?
| latchkey wrote:
| 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.
| lottin wrote:
| This makes sense, thank you.
| legutierr wrote:
| 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.
| latchkey wrote:
| I'd like to hear how you think it is centralized. I
| address the common point above, but maybe you have other
| ideas.
| MisterBastahrd wrote:
| 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.
| makotobestgirl wrote:
| ~80% of pools and tokens on Uniswap are scams and rug pulls and
| it's even harder to figure out what's real.
| Zamicol wrote:
| 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.
| greatjack613 wrote:
| I use https://cmcsnipe.com/honeypot to check for scams,
| easily detects if a token is a honeypot.
| chizhik-pyzhik wrote:
| Uniswap data is more reliable because of _gas fees_ , which are
| upwards of $50 per trade recently.
| koolba wrote:
| > 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.
| dannyw wrote:
| If I trade heaps on Bitfinex I get lower rates. Like a 100k
| trader might pay 0.2%, but a 10m trader pays 0.05%.
|
| Uniswap is the same for all.
| koolba wrote:
| That's "uniform", not "flat".
| capableweb wrote:
| 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.
| [deleted]
| gruez wrote:
| 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).
| habitue wrote:
| 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.
| gomox wrote:
| 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.
| catern wrote:
| 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?
| rossdavidh wrote:
| Can somebody explain to a crypto-naif what "wash trading" means
| here?
| winternett wrote:
| 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.
| jdaggers wrote:
| The creator of Bitcoin is most likely Hal Finney, who died in
| 2014. https://en.wikipedia.org/wiki/Hal_Finney_(computer_scie
| ntist...
| mhandley wrote:
| 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).
| [deleted]
| lfuller wrote:
| "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.
| realce wrote:
| 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.
| anonymousDan wrote:
| But wouldn't this be risky in that obviously you have to pay
| transaction fees etc?
| loeg wrote:
| The exchanges are probably the ones doing it.
| omellet wrote:
| 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.
| aeternum wrote:
| 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?
| mcintyre1994 wrote:
| 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.
| loeg wrote:
| The book is tiny and the exchange is probably the one doing
| the wash trading.
| jjk166 wrote:
| Why wouldn't the exchange just lie and say that volume is
| higher than it actually is?
| purple_ferret wrote:
| 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.
| whatshisface wrote:
| Well, the book can be tiny sometimes.
| scotty79 wrote:
| 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.
| tiagobraw wrote:
| also fees can be nonexistent for big customers, which are
| likely to engage in such things
| AutumnCurtain wrote:
| 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...
| loeg wrote:
| > 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
| flerovium wrote:
| This is not what the paper means. They mean a trade between
| two colluding parties to give the appearance of a trade.
| __alexs wrote:
| 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.
| vineyardmike wrote:
| Like a bug bounty?
| __alexs wrote:
| Like a bug bounty where you give attackers an SSH login.
| dragontamer wrote:
| 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.
| hirvi74 wrote:
| Just to clarify, wash-trading has nothing to do with wash-
| sales, right?
| cwkoss wrote:
| 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.
| aeternum wrote:
| Yes this works with NFTs but does not work with fungible
| money because there are typically thousands of people willing
| to sell once the price goes from 100 to 200.
| spoonjim wrote:
| That's why the nonfungibility of fine art is essential to
| its role in tax evasion.
| brianwawok wrote:
| 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
| dqpb wrote:
| Transferring money/assets between your accounts is a pretty
| normal thing to do...
| dragontamer wrote:
| > 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.
| thebean11 wrote:
| My guess is honestly just exchanges trying to get closer
| to the top of sites like coinmarketcap..
| dragontamer wrote:
| 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.
| thebean11 wrote:
| 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.
| dragontamer wrote:
| 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:
| $$subscription / month $20 / for severely discounted
| trades (fractions of a penny per trade). https://www.inte
| ractivebrokers.com/en/index.php?f=1590&p=sto...
| thebean11 wrote:
| Yeah, I get it, but unlike stock transactions crypto
| exchanges generally take a % of volume traded unlike
| stock exchanges which take a per-transaction fee instead
| (I think options might be an exception where there's a
| per-contract fee..not sure).
| dragontamer wrote:
| If you're about to dump $10,000 to $100,000 worth of fees
| upon an exchange per month so that you can perform price
| manipulation (or whatever), you give the exchange a call.
|
| They'll answer. You explain to them that you want to give
| them $50,000 / month (or something) for 10-million
| trades/month or whatever.
|
| If they let you, you do it. If they don't, call up
| another exchange and give them the same offer.
|
| -------
|
| Its called business. When the $$$ 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.
| chollida1 wrote:
| 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.
| ishjoh wrote:
| 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.
| vineyardmike wrote:
| 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.
| brianwawok wrote:
| I think he is trying to describe tax loss harvesting
|
| https://www.investopedia.com/terms/t/taxgainlossharvestin
| g.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...
| dustingetz wrote:
| "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
| belltaco wrote:
| 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.
| bonestamp2 wrote:
| 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
| all2 wrote:
| 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.
| shane_b wrote:
| You're right. I think wash refers to selling then buying at
| the same price resulting in a wash.
| loeg wrote:
| You're confusing wash trading (trading with yourself) with
| wash sales (a restricted form of capital loss harvesting),
| which are more or less unrelated despite having "wash" in
| the name.
| shane_b wrote:
| Thank you for the clarification
| avalys wrote:
| Boost the volume of trades appearing on the exchange, and the
| apparent market value of the asset.
| sabujp wrote:
| 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.
| SilasX wrote:
| There's a greater than 8% yield between the spot price and the
| future delivery price?
| [deleted]
| Cypher wrote:
| 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.
| coding123 wrote:
| I wonder how much is just automatic arbitrage bots trying to
| squeeze out pennies.
| young_unixer wrote:
| 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.
| kranke155 wrote:
| 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.
| csee wrote:
| 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.
| gota wrote:
| 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
| csee wrote:
| 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.
| wbc wrote:
| 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).
| tfang17 wrote:
| Wash trading much more common on international exchanges.
| woah wrote:
| 70% of the titles of top crypto articles on HN are fraudulently
| paraphrased
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