Warning Signs About Another Giant Bitcoin Exchange
nytimes.com
nytimes.com
https://medium.com/@bitfinexed/are-fraudulent-tethers-being-...
https://medium.com/@bitfinexed/wash-trading-bitcoin-part-ii-...
It was widely believed that the tethers being "sold" weren't really backed by anything and were being used to inflate BTC prices. Now they are claiming 30M were stolen? I'm betting it's going to end up being a lot higher. They are using 30M to soften the blow of the higher number. I believe this tactic has been using by Yahoo and others in announcing the number of stolen accounts as well.
The @bitfinexed narrative is so flaky, especially the chart "proving" that Tether issuance pumps BTC. I could post a similar chart showing that my trips to Costco pump BTC.
There are legitimate concerns around Bitfinex and Tether^^ but the FUD has gotten out of hand.
Things to keep in mind if you disagree:
1) There is increased demand for Tether mostly from exchanges other than Bitfinex. They aren't even the largest holder of Tether by a long shot. This explains increased issuance as much as any conspiracy.
2) There are no widespread complaints about being able to withdraw from Bitfinex
3) There is no premium on BTC price on Bitfinex as there would be if there were problems withdrawing in things other than BTC, a la Mt. Gox.
All this being said -- all this would go away if they would prove they had the funds backing Tether.
^https://twitter.com/petertoddbtc/status/932862730415017984
^^Mostly, IMO, around 1) making themselves a target for FinCEN, 2) the market not pricing a proper risk premium into Tether
Obligatory mention: http://www.tylervigen.com/spurious-correlations
A relevant analogy would be a correlation between "trips to Costco and dollars spent at Costco". Do more trips to Costco definitely cause more dollars to be spent there? Maybe, maybe not, but there is strong reason to believe so.
How can they create new tether on demand if it's backed by a blockchain? Do they control all the mining?
That’s not the case anyway, since Tether can retroactively refuse to honor tokens that were allegedly stolen. What if the attacker had traded his 30m Tether-USD in exchange for bitcoins? Then the seller of these bitcoins would be left holding the bag, because the central party that is Tether refuses to honor these obligations.
Tether can never be trustless, because it’s credit. Some party needs to redeem tether tokens for USD, and if that party refuses to do so then your money is gone.
Also, how is something "trustless" if all the miners and validators are run by the same person?
I have no idea what the truth is there, but this sounds a lot like "people said Y2K would be a big deal and spent millions fixing code and then nothing happened!"
Tether has since issued 600 mill new tokens.
Source: https://tether.to/announcement/
Tether has claimed to have audited bank statements from the start. To date, they've never performed a real audit from an internationally recognized auditor.
In Sep '17, Tether paid for Friedman to state that they had ~$350m in USD in certain bank accounts. The bank names and locations were blacked out. If you know how to read audit statements, Friedman bent over backwards to make sure they're not culpable for fraud (whereas normally their function is to rubber-stamp for authenticity). Over the past two months, Tether has issued another $300m in USDT while transparency remains opaque
Can you expand on this?
In the note (not a formal audit, but literally just a letter) they gave Tether, Friedman consistently uses language like this:
- "We have not performed any procedures or make any conclusion for activity prior to or subsequent to September 15, 2017."
[note: audits are usually for periods of time, not snapshots at a certain point in time]
- "Screenshots from the Client of the balances in each Tether address purportedly controlled by the Client".
- "FLLP ... makes no representations about the Client's ability to access funds from the accounts or whether the funds are committed for purposes other than token redemptions."
Basically, Tether is representing to the world and their clients that Friedman has rubber-stamped the USDT-USD relationship Tether claims. On their website, Tether claimed their bank balances are audited (they're not), and Friedman happens to be an auditor who sent them a letter.
Friedman is saying that "all we know is that Tether had matching funds attributed to their names in certain banks on a certain date."
Tether could very well just have placed those funds in there temporarily, or have a side-letter with these unnamed banks to move funds in and out of the account for a snapshot in exchange for a fee, or have an arrangement via which they've borrowed using the funds as collateral. These are scenarios that either a full audit or a regulatory body would protect against.
-
Note: looks like Tether took down all references to their past audit issues from their website, but they forgot to remove the Friedman letter: https://tether.to/wp-content/uploads/2017/09/Final-Tether-Co....
1. either divide it by the market cap then and now
2. or divide it by the size of the order book(s) then and now
The first should give you a longer term view of the effect (I'd guess maybe a month?), the second a short-term view of it (within hours).
The effect is exactly comparable to how much value will disappear. That’s how many lives will be affected, people disillusioned, etc.
I honestly don’t know what you’re trying to argue in the last paragraph.
Let's do some math:
In Feb 2014, ~12,400,000 BTC had been mined. In the case of BTC, that's not really equivalent to "being in circulation", as many of those were probably forever lost in various unrecoverable wallets, but we'll pretend it was 12.4 million anyway(^1). 850,000 BTC ($450 mil) were stolen in the MTGOX day parade. That equated to nearly 7% of BTC in circulation.
This whole Tether thing, though also valued at around $500 mil, is not equivalent.
$500 mil right now is 61,000 BTC. There are currently 16,700,000 BTC in circulation. Making the Tether stuff only equate to 0.3% of all Bitcoin. I'm assuming that is what OP meant, and they are right - 7% is very different from 0.3%.
[1] - this actually makes my estimates more conservative than they could be, because I can almost guarantee that the BTC mined from 2014-2017 are more accessible than BTC mined from 2009-2014.
That's also not the correct way to look at it. The price hasn't been a constant $8200 during the issuance of those tethers, it was lower earlier. So way more than 61,000 BTC could have been bought with that money.
Besides, to figure out what effect tether has had on the price you need to factor in liquidity, not the total supply of BTC. If the real value of tethers is much lower than their nominal value (because they are not actually backed by dollars), and they were used to take a significant percent of BTC off the market, then the price of BTC is significantly higher than it ought to be.
The same holds for the bitcoins bought with dollars at Mtgox.
But to end the discussion:
Dec 31, 2013: Marketcap 10 bn, Vol 34 mn
Today : Marketcap 240 bn, Vol 8 bn
If this is some sort of Ponzi/exit scheme like many people are thinking, and all that BTC is effectively stolen by Bitfinex, I'm sure they'll spend it eventually. It's not like they're taking Bitcoin, giving people Tether, and then burning the Bitcoin.
So you're saying the same amount of money in 2013 will have the same impact today? I don't think so, market cap is a proxy for this. It's not a good one but it is one.
> The effect is exactly comparable to how much value will disappear.
Yes but it will be shouldered by many more coins and many more dollars.
> I honestly don’t know what you’re trying to argue in the last paragraph.
You can compare the 600 mn mtgox impact using either of the two proxies, liquidity will give you a view of what will happen in the short-term, market cap will give you a glimpse of what will happen after the initial shockwave went through the orderbooks.
PS: It's "ridiculous" not rediculous.
"We lost personal information of 57M users, but no credit card leaked and we paid the hackers to delete it"
There are certainly patterns in the environment (maybe marketplace) which are repetitive and reminiscent of the early days. Confusion around price is one. Two viscerally opposed schools-of-thought is another.
One thing I think, though, that has suffered is the availability of information assessing the market structure or environment on it's merits/deficiencies without bias. This is likely hard to achieve, in general, but these days you cannot find reliable news without being sucked in to the swirl. Coindesk is pulling a CNBC-of-crypto, articles flying out every hour with opposing themes. I totally understand the model, captivating the audience, but it makes it hard to observe what's happening fundamentally (without having a grasp on the core narrative).
I continue to follow, in a casual way, but as I said continuously impressed by how the environment remains young -- trends from '13 persist to '17 and probably '18 (still young!).
This isn’t Reddit. If you make wild accusations, back them up.
As I said in another comment: "As far as I can tell, they both share a minor investor, Barry Silbert. And anyone who thinks that means anything hasn’t been paying attention to what went down regarding the New York Agreement, where Blockstream (standing alongside many others) opposed Barry and won."
> the company that has gone to great lengths to take over the github repository,
I have no idea what this is in reference to. The Bitcoin Core repo? The release manager for Bitcoin is employed by MIT DCI. The largest group of contributors is from ChainCode Labs. Of the half-dozen or so people who have commit access (a meaningless metric since no one has unilateral authority and they operate by consensus), only one works for Blockstream, and he has some sort of special contract where he is independent and isolated in his decision making capacity and can leave, with pay, at any time for any reason.
> censor /r/bitcoin,
There is no relationship I know of between r/bitcoin and Blockstream. r/bitcoin seems to like Blockstream, but that's not their fault. r/bitcoin has also had some issues with excessive moderation, but none of the mods there work for the company or are in any way tied to Blockstream afaict.
> and ultimately keep the block size limit at 1 MB so that they can profit from fees on their own 3rd party chain.
Blockstream's supposed scaling solution is Lightning, a peer-to-peer protocol where the users collect fees from each other, which they are developing in an open source basis with multiple compatible implementations and no vendor lock-in. It will probably reduce the fees paid to miners for comparable levels of transactions, but with those fees being collected by users directly. There doesn't appear to be any profit opportunity for Blockstream here except perhaps consulting income in helping people and industries setup and maintain such networks, which has been their "RedHat of Bitcoin" model from the beginning.
Thus, everything that makes BTC interesting for use the real world -- trying to use it to buy stuff, to put it somewhere safely, etc, it fundamentally broken by design, because none of that real world stuff has the mathematical strength of the core bitcoin protocol, and all the players are trying to operate on the assumption that none of the stuff that makes the real world work is important in the BTC world. It's an anarchic paradise, bubbles and scams as far as the eye can see.
> it fundamentally broken by design
Mining pools don't store funds, you tell them your payout address.
It's still the wild, wild west in that world. Those few that saw it 6-7 years ago, made bets that were relatively small, sorta buying lottery tickets. It takes a lot of "faith," for a lack of better term to invest serious money now.
The temptation to sell was far stronger in the early days, mostly because people were unprepared for the sheer volatility of BTC. It's been the most lucrative tulip farm in history, and unlike tulips BTC is useful. It's hard to know where it will top out.
This is not entirely true because I sold a little (very little) in November 2013 just to be able to “touch” those paper profits. I needed to see they were real and could impact my life. Anyhow 95% of my stash remained untouched until very recently.
The rationale for me was crystal clear: this technology has the potential to change the world forever (yes, I’m a true believer). This shit can be the biggest revolution since the internet. Sure, it can go to 0, but the downside is clear: I could just lose everything that i invested, which definitely was money I could comfortably afford to lose. On the contrary the potential upside is enormous, 1 dollar could easy become 10k.
Therefore I simply decided I was not going to sell unless I could comfortably retire on the profits. And that I would leave a little btc for my kids, no matter what.
I really can’t understand how anyone could buy Bitcoin early on with a different mindset.
But then, even if a government ban could really destroy Bitcoin (i’m certain it wouldn’t, I remind you that Russia banned it for a while and 0 fucks were given... what about sharing films on Bittorent? Did the ban do something?) you say there’s a 5% chance the ban will not happen.
I will take any day a bet that gives me a 5% chance that every dollar i bet becomes $10k. And I won’t exit that bet unless i’ve made enough money to retire comfortably, which is what is happening to me now.
In this case forking does not help as they maintain control of the equipment and have access to massive CPU and GPU resources to swap to alternative architectures.
Now, if you think bitcoin maintains value if there are zero transactions for ~6+ months you are clearly mistaken.
Right now you can use bitcoin's network effects to some degree with altcoins. eg. You use xmr.to to buy anything that you can buy with bitcoin with Monero.
This is a band-aid of sorts for the time being but I don't see why services that currently allow you to use bitcoin could not upgrade to include a better currency/currencies?
Because of that, the largest cryptocurrencies with the most work behind them will naturally be the most secure the quickest.
Monero might have some very good benefits, but the much smaller size of the network means it's a magnitude easier to attack from a state level adversary.
And the fact that Bitcoin can (and will) evolve over time means that the benefits from other cryptocurrencies can be put into Bitcoin as they become useful or proven.
This is already happening with Bitcoin, and it's not going to stop.
That being said, I don't think that other cryptocurrencies are pointless, and I do believe that they can continue to happily coexist. Ethereum is focused on the "smart contract" side of things. Monero is focused on privacy. They can all have their uses and specializations, and they can all exist together in the same ecosystem.
Even if Bitcoin ends up not being able to adapt and evolve for whatever reason, being a "store of value", your cryptocurrency savings account, is still a valid use case, and can continue to be one even if there are cryptocurrencies that do everything else objectively better.
BTC is going to die to a gen 3 VM that learns from the ETH mess of gen 2 and just ungimps the BTC VM.
I don't believe BTC has the political leadership to fix that poor decision, given that a) they've demonstrated poor leadership until now and b) some of the people involved in the gimping are still in positions of influence.
I can't find a single reference on them that contains actual details on the computational model because the internet is full of vapid circular search bait, particularly about cryptocurrencies.
The last I checked, the BTC VM disabled most useful opcodes, which meant you couldn't actually make money automatically redeemable for a large number of constraints you would want to impose.
My quick search seems to support that the VM still disables many opcodes: https://en.bitcoin.it/wiki/Script
What specifically would you like to see done with Bitcoin scripts that can't be done?
For various reasons, you probably want to use arithmetic and string operations for encoding certain problens. You could do it in bit operations, but efficiency.
I can't take credit for it -- it's one of those things that was floating around as a usage early on, but the features were killed.
It is a huge chicken-and-egg problem, but looks like Bitcoin has solved it at least some level, since it is accepted on quite many places. We might start seeing services and merchants adopting other cryptocurrencies as well, but currently those alternatives don't seem that widely adopted.
Edit: found my Gox emails - it was in June 2012.
Just the fact that the company has not definitively disproved the accusations of fraud against it, which have been instesifying for weeks, is evidence that there is something to the charges.
There is a not much discussed point I'm curious if anyone here has a perspective on.
Tether has claimed that their business model is based, in part, on earning interest on the reserves they (supposedly) hold to back the issue tether tokens.
It was pointed out by Bitcoin analyist Tone Vays the other day that such a business account should not be interest earning, as it is not supposed to be put at risk (by being lent out.)
This strikes me as rather suspicious: that a significant part of the explanation for how Tether earns money doesn't make sense.
Even zero-risk loans (usually) have a non-zero return. The yield on 1 month US treasuries is about 1% [1]. That is about the lowest risk asset you'll be able to find. Certainly lower risk than a business account at a bank.
[1] https://www.treasury.gov/resource-center/data-chart-center/i...
And yeah, assuming all the funds do exist, I'd be amazed if they were being held in a risk-free non-interest bearing form. Which is why it's a bit crazy that Tether sticks to the peg so well -- the NPV of a Tether accounting for even non-conspiratorial risks has got to be less than $1
The point is that Tether and Bitfinex have the power to publish their bank balances, and they could authorize their banks to confirm the deposits if they wanted to.
Why would they refuse to do this, even while under intense suspicion of actually not controlling 1:1 reserves, unless the accusations were true?
The question of interest is a distraction. Businesses usually hold cash in money market accounts or do short-term repo agreements to get a little yield with very low risk. But that yield would be at most 2% a year, so not relevant to the real question.
Like at bare minimum and for the survival of crypto nobody should trade on unaudited exchanges.
Or a step further despite Coinbase's scaling issues the fact that they have both insurance coverage and FDIC coverage on all accounts makes me much more likely to refer people interested in starting w Bitcoin there than anywhere else.
But this is also the kind of centralization that Crypto is designed to avoid.
https://support.coinbase.com/customer/en/portal/articles/166...
Very misleading statements.
The FDIC coverage does not include any bitcoin wallets. The bitcoin insurance only covers their hot wallets (something like 2% of all the bitcoin they hold). Yes, cold storage is a bitcoin security best practice, but it obviously does not eliminate the chance that a breach could occur, and if it does, none of that 98% is covered.
With that said, to Coinbase's credit, they haven't been hacked yet, which is actually quite an achievement considering the landscape.
They have been victims of massive USD chargebacks. I think Coinbase is bleeding so much money to chargebacks that co-founder Fred Erhsam figured out company is never going to turn a profit and resigned.
Coinbase is a Bitcoin-Fiat company, and fiat is reversible while Bitcoin is irreversible.
With easily transferrable assets it gets tough. The charge back window is on the order of 30+ days.
You buy BTC via ACH at $X and a week later it's $X/2? Chargeback "I was hacked!". You can fight it as the merchant, but it takes time, tons of documentation, and dealing with traditional bank compliance departments that a) don't know what BTC is or are trained to distrust it, b) are trained to protect their customers, c) are overworked, and d) have no vested interest in resolving it correctly irrespective of evidence.
You can get ACH charged back for up to 180 days with more involved procedure.
Chargebacks for small amounts are often paid by the bank itself because it's cheaper than actually disputing with the merchant, so banks will certainly terminate accounts of customers who abuse that.
It would be somewhat surprising if bitfinex doesn't go down in a spectacular ball of fire within the next 4 years.
In the cryptocurrency wild west, there are no government regulations, no deposit insurance, no SIPC.
But a new kind of exchange could hold themselves accountable and publish their assets and liabilities every day.
They could publish the addresses that hold cryptocurrency and sign messages to prove they control these addresses.
They could authorize their banks to confirm deposits of national currencies.
With this data, audits of their positions could be automated and updated every day.
Why would traders risk losing their funds to sketchy, secretive exchanges?
A radically transparent exchange would have an enormous competitive advantage and attract large volumes.
This liquidity would drive down spreads and the exchange could operate profitably with lower fees, further driving up volumes.
So why doesn't this exist?
There are thousands that are boycotting Coinbase because their KYC systems take too long, or their deposits/widthdraw take 2 weeks sometimes. Just today I was reading a thread on Reddit where someone was claiming to be currently sueing Coinbase because their account was closed due to them depositing from a bank account that didn't match the name on the coinbase account...
Or people don't use them because the fees are marginally higher.
I just don't get it. If I'm going to put my money somewhere, I want the place to be following every US law, and charge enough fees that I'm not worried they will go bankrupt or resort to shady tactics to make money.
I used to be pretty Randian/anti-regs but I now see that places like this need to operate under some level of regulation to ensure they aren't massive conduits for money laundering, and are subject to basic rule of law (e.g. following court orders).
The real question is the extent to which people see operating outside the law as a good thing. Sure, it may be cheaper in the short run, but in the long term, having recourse to courts, police, and other standard norms of civilized society might be worth more than people realize.
Rand speaks of an ethos of personal accountability versus one that hides their crimes behind a facade of claimed social norms. It's not an issue of private business vs public regulation other than the sort of people each group tends to attract.
Rule of law is pretty important to having a fluid economy. I've looking into starting businesses in parts of the world with fewer regulations - hard-to-attain power becomes the defacto currency in those economies. In crypto, the corollaries are Tether-like frauds and electricity-theft driven mining pools.
I say, fine - run it anonymously from Hong Kong for all I care, just be transparent about assets and liabilities so everyone can see that you're solvent.
If someone did this, wouldn't they quickly take the lion's share of volume away from the sketchy exchanges?
Bitfinex has been undergoing third party audit from Friedman for months now. No one cares though and still throw accusations around like confetti.
Anyone who knows this fact and doesnt trust Friedman as a multinational auditor/accountant should say as such, rather than repeating blatant falsehoods.
It quite easy to see what others have to gain from the negative coverage.
Exchanges ddos each other all the time, its a shady industry, 15mins downtime for poloniex can double the weekly income of small exchanges.
I'd hope hn readers see between the lines a bit more rather then jump on bandwagons.
Is there proof of this? All I've seen (and I may be ignorant of the rest, so this is a legitimate request :) ) is that "note" from Friedman LLP that explicitly stated it was not an audit.
3rd result from googling "friedman bitfinex":
http://www.friedmanllp.com/insights/auditor-engagement
Now you said Friedman "explicitly stated it was not an audit", I searched and all i can find is blog posts and reddit threads. Any chance you could procure this explicit statement? Thanks.
The url I provided says the compete opposite and itself links to the original source I offered.
http://www.mcclatchydc.com/news/politics-government/article2...
http://www.chicagotribune.com/news/chi-0209010315sep01-story...
They seem symbiotic to me (exclusively mutual?).
http://fortune.com/2017/03/19/irs-bitcoin-lawsuit/
Though the claim was lowered to 20k:
http://fortune.com/2017/07/10/bitcoin-irs-coinbase/
But with BTC prices increasing even this might prove troubling and net more than 14k customers which coinbase reported earlier: https://blog.coinbase.com/coinbase-irs-update-ed9c966c7747
People want to believe. They're willing to risk lots of money to obscure systems for that. The last thing they want is transparency ruining the illusion.
I think Gemini was trying to be the most legitimate of Bitcoin exchanges, but without the shadow puppets trading producing fake volume on other exchanges it looks very empty.
As a store of value, you’re depending on its continued use as a tool for criminals for it to appreciate in value beyond pure beanie baby-style speculation, so you depend on you still depend sketchy exchanges to drive the price.
When the futures contracts come out, there is going to be a massive price correction as bitfinex isn’t going to be able to print enough tether to counteract all the shorts.
Once the price of bitcoin starts dropping, people are going to try and cash out of bitfinex en masse, causing a run on the bank and collapsing the whole house of cards. I wouldn’t be surprised to see sub-1000 bitcoins by January.
Bitcoin is actually terrible for these use cases since the blockchain is public and more traceable than your credit card. If you're really trying to hide your financial transactions then a better option would be something more anonymous like cash, or one of the other cryptocoins that actually does provide anonymity.
Your inaccurate and misconceived perception of what bitcoin's use case is would be laughable if it weren't so popular and wrong. I fear you're completely misunderstanding the new world economy. You think that bitcoin is a sideshow for criminals, and seemingly failed to see that maybe a large parallel economy is being created digitally.
You see, Bitcoin was created after the 2008 crash where the banks, the organizations we've trusted with our money for a century, made some deliberate and knowingly poor decisions and they lost a lot of money for many of us.
Bitcoin was invented so that never has to happen again, so that we can have a secure storage for our money without someone else controlling that money. You might say that bitcoin was created to get away from the wall street criminals. I suggest you pick up some cryptocoin (of any kind) so you're not completely left in the dust as the centralized banks lose power and the decentralized economy reigns.
I hadn't heard about that. Which banks lost their customers' money in the 2008 crash?
Banking involves a lot more than simply money in checking accounts so I didn't think it needed to be established that a lot of people lost value in different ways in 2008. A number of banks packaged subprime mortgage lots that were misrepresented, sold and when they defaulted, they crashed the lending market which rippled through other parts of the economy causing job loss, real estate price crashes, stock value crashes and other types of lost equity for millions of people.
But I guess if you want to take it literally, then you're right... nobody had cash go missing from their checking account. I personally lost about $60,000 in equity, but my checking account was not affected if that makes you feel warm and fuzzy about saying no banks lost anybody's "money".
If I were to rob you, claiming that the overall robbery rate was lower that year, so you weren't robbed by others, so your expected losses were lower does not change the fact that I robbed you.
If it succeeded in displacing existing currencies as you attest, it would amount to an unprecedented and catastrophic redistribution and concentration of wealth.
80% of all bitcoins that can ever exist have been mined and are already owned; this is a monstrous design decision far more unjust than the inflation bitcoin sought to prevent.
Our current corrupt and stinking financial system is far preferable to the neo-feudal world of bitcoin where all spending power is concentrated in the hands of a tiny number of tech overlords who had the sheer good fortune to literally own all the money.
Not saying there aren't a lot of dodgy transactions going on, or that the legitimate use cases will take off, but ignoring the practical use cases is misleading.
The reason banks are regulated in the US is because the banking system pre 1930s wasn't too dissimilar from crypto now.
I think it's somewhat realistic to envision a future where there is substantial transaction value of legitimate, legal uses. Maybe that future isn't probable, but the idea that the price of bitcoin would ever reach its current price seemed rather unlikely at one point, too.
Bitcoin cannot crash because you cannot sell and cash out in timely manner.
I meant libor as in a futures price that was disconnected from anything meaningful not a direct comparison. The comparison was to how libor was easily rigged by those submitting quotes that weren't correct. Libor wasn't just a vote but a collection of informal (and incorrect) quotes.
When financially settled against a manipulated number the standard ways a future affects the spot (by taking delivery) doesn't apply.
Go read the proposed contacts for the future and real time BTC index. If the index is being manipulated the future doesn't stand a chance at correcting it.
This reminds me of potential VIX options manipulation. Not quite the same thing, and probably not as susceptible to manipulation, but a similar concept nonetheless: https://www.bloomberg.com/view/articles/2017-05-24/vix-tradi...
My experience is equity options, btw.
I'm going to hit you up on linkedin. Always good to have good tech contacts.
So, with Bitfinex (1) trading 10 times more currency pairs than GDAX, (2) being older, and (3) having somewhat smaller fees, it's perfectly plausible they have manage to trade (only!) twice the volume of GDAX.
BTW the fact that GDAX has high fees doesn't mean it's expensive for them to create fictitious trades... they don't have to pay themselves fees!
Besides, I personally day-trade an average daily volume of ~$200k on GDAX's BTC/USD pair. And I am just one small fish. Imagine about a thousand other persons like me and it would easily explain their $250M daily volume...
There are whale volume discounts available on almost every exchange. Mid-level whales can get 0% rate for trading over certain number of Bitcoins. Back in 2013-14 you could even get NEGATIVE rates for trading large amounts. I.e., if I trade a certain number of BTC, I get a rebate at the end of the month. High volume boosts exchange's rating and brings more customers, so it is a no brainer to offer rebates.
If you remember early days of Chinese exchanges, they were doing millions of coins a day in first week of their launch. That was clear example of Exchanges themselves doing wash trading. All volume data is available in public domain for verification.
Bitfinex has traded 1 trillion (not billion) dollars in volume. How did a hacked exchange with no USD deposit or withdrawal method did it? Answer: wash trading and self-manipulation.
Bitfinex traded $1 billion, not $1 trillion: https://coinmarketcap.com/exchanges/bitfinex/ ($1,168,128,071)
«First, I know of at least one instance where it appears that a wash trade was not charged a fee for a trade.»
Absolutely zero evidence is provided. Just the author saying "trust me, I've seen it."
«Second, even if a fee is charged, that doesn’t mean a wash trader paying fees is really paying fees. If you’re a shareholder in Bitfinex, you’re allegedly paid dividends.»
This is mathematically false. Even if you hold, say, 10% of the shares (huge shareholder) you will still lose ~90% of your fees.
That's it. It's a thousand+ words post with ZERO evidence of massive wash trading.
The rest of the post is just ramblings on unrelated things.
I don't disagree there are shady/unethical practices occurring at Bitfinex, but wash trading is not one of them.
Re Tether-Bitfinex-washtrading, the paper trail indicates that Bitfinex and Tether have the same controlling interests. Dividends aren't the deciding factor - figuring out how both businesses can generate income (Tether via issuing unbacked USD; Bitfinex by driving real volume via pretending to have fake volume).
Unlike the issue of unaudited bank accounts, the wash trading issue isn't as easy to point out, since it requires (a) knowledge of trades taking place behind a black box, (b) high volumes capital to test these trades that requires sending that capital to these exchanges you're skeptical of.
If not, then you should definitely not let British Virgin Islands based Bitfinex hold them either. Use less risky options based in USA or EU, so you are at least protected by a decent legal and regulatory system.
https://coinmarketcap.com/exchanges/bitfinex/
I put some btc on bitfinex to quickly buy some NEO and move it off the exchange this year.
> BTC is failing as a currency because
> it's in a speculating bubble
It's also -- comparative to fiat or commodities -- massively untested, so price shocks seem inevitable. Regulatory or technical risks that could reduce (or massively inflate) the value seem almost certain.
https://multicoin.capital/2017/09/21/bitcoin-better-digital-... https://medium.com/@tuurdemeester/bitcoin-digital-gold-or-di...
It seems too volatile to use as a unit of account or store of value, but almost perfect as a medium of exchange.
So the best digital currency is one that is valuable to be _held_ but still has high transaction counts.
The article that stimulated my thoughts on the matter: https://docs.google.com/document/d/1-ix9BDmGie8tPAwrfRKqe9CN...
That is a common misconception on HN, almost repeated on every Bitcoin thread. There is, in fact, evidence usage for payments is sharply increasing:
The increases in transactions are due to HFTs speculating: https://www.bloomberg.com/news/articles/2017-01-16/high-spee...
Also, 70% of bitcoins won't be moved for 6+ months, making it more speculative than currency: https://www.coindesk.com/analysis-around-70-bitcoins-dormant...
Please go back and read the article, or just look at their homepage...
Source: I ran exchanges before. That's one of the first trick you learn.
Could Bittrex push all the blame onto Tether and just keep operating as if nothing happened? I don't think this would work very well. At the very least this would suddenly point a ton of law enforcement scrutiny in Bittrex's direction which might end the unlicensed money transmitter party over there.
It's ironic, since the US gloated heavily when they took over the BTC-e domain. They thought that this would be another cut and dry Liberty Reserve, but this time they're caught in an international tug of war.
A year ago, Bensouda made some noise and said her administration at ICC wanted to investigate Afghanistan. (They’ve been looking at it informally for eleven years. They’ve been investigating Darfur since 2005; how’s that going?) Now, she has made more noise and requested formal authorization to investigate. She doesn’t have it yet. This seems like a pedantic point but is actually extremely important, otherwise we could say President Trump is facing obstruction of justice charges. He isn’t. They’re looking for them, and they don’t exist yet. Big difference.
https://www.icc-cpi.int/Pages/item.aspx?name=171120-otp-stat...
It’s certainly possible, though I consider it extremely unlikely given the political situation and resources of ICC, that charges will surface in the future. That said, ICC does not charge nations. It charges individuals. Long ago, we had our own debate on this under Gonzales regarding the applicability of the Geneva Conventions to unlawful combatants, which is how multiple administrations (and nations) have considered detained terrorists. The Hague is late to the party.
Worth noting that Bensouda is looking to investigate the “Situation in Afghanistan” (that’s a quote) as a whole, lumped us in with the Taliban and Afghani forces, and hedged our alleged crimes to 2003-2004, a courtesy she did not extend to other parties. I think it’s safe to say we all know what that’s about.
1) The state is a party to the Rome Statute; or 2) Referral by the UN security counsel; and 3) The internal judicial processes of the state cannot deal with the apparent crimes
The US is not a party to the Rome statute (see "Invasion of the Hague Act" https://en.wikipedia.org/wiki/American_Service-Members%27_Pr...), and with veto power on the security counsel it seems unlikely to be referred to the Court by that body.
Therefore any suggestion that any US citizen/president is tried by the ICC is ridiculous. The threat is toothless. The ICC has no enforcers.
As with most legacy thinker its almost impossible to change there mind with arguments, they like to ponder on the risks and counter arguments, just to stay comfy in the status quo.
Banking, Finance, VC is one of the oldest industries with the least innovation in the last century.
The really smart VCs did already realize that and instead of shuffing their head into the sand. They started proactivaly getting involved into the field
Tim Draper of DFJ, (Tesla, SpaceX, Skype Early Investor) holds over 1B$ in the crypto space.
https://blogs.cfainstitute.org/investor/2014/02/10/top-anecd...
Millions in funds with zero accountability... ok that's a pretty decent deal, I can't argue with that.
> were dismissing the new innovation that is happening on the internet
Where is the innovation? The innovation with regard to print and commerce on the internet was that people could access publications and products without having to leave their home; a very clear benefit for consumers that was prohibitively impractical at best before the internet. Where is the innovation for cryptocurrency? It is clearly a marvel of technology that money can emerge from code, but, as has been repeated over and over again, it doesn't solve any problems for the vast majority of people. Credit cards and banks service all the financial needs for the vast majority of consumers and cryptocurrency offers no compelling benefits at the cost of serious risk, a technical learning curve, and an ecosystem full of scammers.
> As with most legacy thinker its almost impossible to change there mind with arguments, they like to ponder on the risks and counter arguments, just to stay comfy in the status quo.
And that right there is a great technique for engendering hostility: condescending ridicule in response to criticism. Yeah, we're all just bitter naysayers stuck in our ways, probably just jealous because we didn't get on the bitcoin rocket to the moon back in the early days.
> Banking, Finance, VC is one of the oldest industries with the least innovation in the last century.
Bitcoin has nothing to do with banking or finance, it's a first-of-its-kind digital commodity that can be traded on the internet... that's cool... that's noteworthy... but completely unremarkable as it relates to banking or finance.
> Tim Draper of DFJ, (Tesla, SpaceX, Skype Early Investor) holds over 1B$ in the crypto space.
With nothing to show for it besides middle-men businesses like exchanges. Can you name even a single cryptocurrency venture where the business model isn't "charge fees for the service of moving around blockchain tokens"?
And only hostile about the mainstream media "get rich quick by speculating on crypto" narrative.
But be careful on that "tanks" part. If it really tanks, there might be a whole lot of people trying to catch knives.. And that could be real bad indeed.
It's a plausible scenario anyway - although strongly differing views on the probability.
Always amazed that some fail to grasp this, tether disintegrating is a solid buy for bitcoin, apart from the bad media coverage, which going by current standards has no effect on price. So that's $600m desperately trying to get into bitcoin all at once, this likely happening within a space of ~72 hours, think about it for a moment.
Would a crash of tether be a source of concern for the value of Bitcoin? If bitfinexed hypothesis is correct, that is to say that Tether is printed out of thin air and used to buy Bitcoin thus artificially inflating its value, then yes, absolutely: a crash of Tether would cause massive distrust in the entire crypto space...
Also remember this saying: "Don't catch a falling turd."
People have had cheaper alternatives to Bitcoin for a while now (ETH? LTC?) and yet BTC is still valued significantly higher. There’s more to this game than a cheap digital payment.
PHILIP G. POTTER, who develops investment products for high-net-worth clients of Morgan Stanley, Dean Witter, Discover & Company, likes to think of himself as an ''uberconsumer.''
Last year, he spent his bonus on a 50-inch TV and a $3,500 Rolex watch. He wears custom-made $800 suits, custom-made $80 shirts -- always with white collars and white French cuffs -- and $200 shoes. He is ''totally wired,'' as he puts it: His home phone forwards messages to his pager; he answers them over a tiny $800 cellular phone."
...'I can continue to come up with new products, to add value, [in a downturn market]'' he said. ''I'm not responsible for getting money. Getting it's hard when the market goes down. But there will still be products to sell. It'll just force me to be a little more creative.''
http://www.nytimes.com/1997/10/19/business/faces-of-the-new-...
That made me chuckle
They pose a certain risk with accepting dodgy transactions though.
Just make sure to chose a good pin and passphrase (I recommend setting up both). Ideally somehow compute or derive this pin/passphrase so that you never forget it. I mean generating a random pin is a very bad idea as you will almost surely forget it over time and you will lose the wallet.
This insanity surrounding: "store your fortune on a piece of paper under you mattress/buried in your backyard/etc" has got to stop. Pay coinbase to do that for you.
Today, your fortune is either (1) bits you protect through physical custody (including your password manager's master passphrase that you have memorized (or "buried" in the mattress/back yard of your brain, if you will) -- and what are you going to do to pass that passphrase on to your successors when you die?) or else (2) trust in institutions such as your bank, your employer, your county recorder, and Coinbase that they'll honor your claim to the rights/property they manage for you. Bitcoin gives you the _option_ to eliminate (2) and rely only on (1). You're right that you don't need to eliminate (2) if doing so doesn't interest you. But even if you do choose to rely on (2), you still have no choice but to use (1) as well for at least _some_ of your secrets.
For whatever that set of secrets is for (1) -- especially when the question of inheritability is addressed -- ink written on paper is a very good solution.
If anything that's much safer.