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Comment by anilshanbhag | Hacker News Reader

I don't get the point of this article. The bot he says is buying 95 BCH at 8500. I don't see how this is profitable as the the price quickly falls and the bot lost a lot of money. This is just a bunch of bots trying to catch trends. You can see this on the stock market as well. See stocks like LFIN or LTEA.

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The bot is buying it from itself.

From the article:

> Painting the tape is a form of market manipulation whereby market players attempt to influence the price of a security by buying and/or selling it among themselves so as to create the appearance of substantial trading activity in the security.

You are getting it wrong. The bot is not buying, but placing an order / intention to buy. This pumps the price. Just before the order is filled-in, the trade order is canceled, but the price is already pumped.

First, the last traded price doesn't change by bids or asks, only trades. So you can spoof with passive orders, but that only affects the "midpoint" and never the "last" price. The article discusses painting the tape which means trades.

Second, outside of a "last look" type of market, no market participant can identify the time "just before [their own] order is filled". Can you identify any Bitcoin market where last look is in effect? It would be plausible (it is common in spot FX markets) but clear evidence would be available.

That's not how it works. Placing an order does not change the price, it only adds it to the book of orders. If the order executes (a buy and a sell orders are matched), then that's the current price.

That's where author's theory makes little sense. It's quite expensive to sell to yourself. Even if you're a high-volume trader on GDAX, you pay 0.1% on each executed trade. So you make 400 trades, you lose half of your money to the fees.

I couldn't help but think the same thing regarding this article. It doesn't seem worth it for the bots to price-paint unless they are owned by the exchanges. In that case, this could be a much bigger story, but the author asserts that they are not owned by the exchanges. I think this assertion is merely for face and the author probably thinks the exchanges are involved. This doesn't add up unless the exchanges are involved.

Even then, let's say they are involved. Occam's razor? Was it a carefully engineered price-paint by the bots owned by the big bad corporations, or was it just a bunch of people who had live bots that didn't know what the fuck to do with an empty orderbook?

It seems way too easy to write a bot that has no idea how to trade, or gets influenced by very arbitrary anchors.

Now that's a decent hypothesis. An exchange wanted to create an illusion of high liquidity, they wrote a stupid bot, which worked in unexpected ways, they had to shut everything down.

It's funny because I was on GDAX (looking at it) when the price of BCH jumped to over 9000. It didn't "start" at over 9000 like the "tape" suggests. Right when it was added to the exchange, it was at maybe 4000. Then, a series of jumps occured in a timeframe of about 1 second and the price was at 9500 or so (or was it 8500?). Anyway, clearly my memory is spotty, but I found that very strange.

your memory is right. it was showing both those numbers at the same time. one on the chart the other on the bid. made no sense.

One was the last price, the other was an average of some sort.

It makes a lot of sense because the buyer and the seller are the same person or group. Even if you lose 0.1% on that transaction, you can easily get that back if you can manipulate the price high enough. We are not talking about people that have 100 BCH but rather 100.000 or more.

You can't if there's no actual support for that high price from the community. And that's what the whole article is about. Without the support, the price just crashes to the natural levels, as soon as people see some idiots trading at much higher prices than everywhere else. Which is exactly what happened.

Two independent bots that got caught in each other's lies and spiked the price makes at least some sense. One bot trading with itself makes no economic sense.

It does make a lot of sense. Especially in markets without any "natural value" like cryptocurrencies. So much sense that there is even a word for it: Wash trading

https://en.wikipedia.org/wiki/Wash_trading

Wash trading is any trading with no change in beneficial ownership. The type of price "manipulations" being discussed are potentially the result of wash trading, but fundamentally the goal is momentum ignition, so the igniter can coax other participants to bid large size at a high price (or buy at even higher prices), and sell to them. You don't have to buy from yourself to show the world that you are buying new highs.

Momentum ignition and wash trading may overlap in a single circumstance, but they are distinct concepts.

i don't think there is a natural crypto price which is what is being exploited here

I don't know why anyone hasn't mentioned the hours long confirmation delays for BTC transactions. It's not possible to effectively arbitrage (without exposing yourself to risk in the form of hourly price changes) between exchanges. You can't flip BTC that fast at the moment.

You can use a faster blockchain to move between exchanges if they both support it. But there are still the inflated confirmation requirements for withdrawals, that most exchanges impose, to slow you down. Not to mention daily withdrawal limits.

> the price quickly falls and the bot lost a lot of money

If the trader already holds 1,000 BCH and is able to spend $800,000 to raise the price he can get rid of it at by $1000, he didn't lose money.

Doesn't necessarily mean it was a bot, though.

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