Hacker News Reader

Comment by EMM_386 | Hacker News Reader

So essentially, I get together with my friends take a random business public. We agree on the number of shares, and then we keep trading the stock among each other, carefully moving up the price. "I'll pay $10", "ok, I'll pay $10.50", "I'm in at $11".

When this gets to a $100 million market cap by doing this, we land a story online about this crazy, useless business that's worth $100 million. It captures the imagination of hoards of new-found meme stock, one-tap-away, YOLO crowd and suddenly, it has volume.

Thanks to this new found volume, I can easily cash out my shares to all the suckers buying this at $13.

Am I seeing this right?

View on HN

this is the standard playbook for every cryptocurrency ICO since around 2013 (which IIRC is before the term ICO was even around). I'm sure it's no different for NFTs, which function rather like a single-coin ICO.

the only twist is that with crypto its possible to run this shell game much faster and with far less transparency thanks to pseudononymous accounts and the overall infrastructural obscurity that early stage crypotocoins enjoy, coupled with the near immediate price signal propagation possible in a purely virtual marketplace.

coinmarketcap owes its entire existence to its incredibly effective utility as a synthetic demand amplifier for extremely shallow, closely held token markets.

edit: forgot to add that when promoters need their own FOMO plant in the financial/tech media, one that talks up the amazing crypto-futurist potential of their new coin, a common payola tactic was to send the target journo a wallet preloaded with a "few coins to play around with, just to see how it works." Then simply sit back and let them figure out for themselves how to turn a routine $500 story assignment into an easy, practically untraceable $5k cash out. wash, rinse, repeat with a new ICO next month.

I'm very curious about the recent Signal announcement that they are "choosing" Mobilecoin for the payments. Mobilecoin being directly tied to the creator of Signal.

Look at this ramp starting March 28th, prior to the announcement:

https://coinmarketcap.com/currencies/mobilecoin/

It's called painting the tape. https://www.investopedia.com/terms/p/paintingthetape.asp

It's popular in the crypto world especially for NFTs where you just need to have a few wallets to trade assets amongst.

Thanks, a key take away for me was:

> Painting the tape is an illegal activity and prohibited by the SEC because it creates an artificial price.

So it sounds clearly illegal and fully under SEC jurisdiction in the deli stock case, but what about the crypto market cases? Can the SEC go after other/foreign market cases for people under US jurisdiction or SEC regulated entities participating in painting the tape in blockchain markets or international markets?

Not a complete answer but: the SEC has jurisdiction over securities, which the overwhelming majority of crypto tokens seem likely to be.

Yes, and you've just described a classic pump-and-dump scheme and the "painting the tape" tactics used for the pump.

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

https://en.wikipedia.org/wiki/Market_manipulation#Runs

Right, although taking the deli public apparently cost them in the low six figures, so pretty risky if the meme gods don't smile on you that day.

A lack of liquidity (a.k.a. shallow order book) will likely make itself apparent at some point. Just because you have 10 million shares and people bidding $10 for a marginal share, doesn't necessarily mean you would be able to find a willing buyer(s) for the whole company at $100M.

you just post it on wall street bets and short squeezing the hedgies and you have gauranteed buyers

Wsb has a 1B ticker filter precisely for this reason

Anyone dealing with $100M will be monitoring the book / market depth

It's a bit harder to do with s publicly traded company, because you have to file paperwork and there's some other overhead.

Try a cryptocurrency instead. It's all the rage right now...

> "I'll pay $10", "ok, I'll pay $10.50", "I'm in at $11". When this gets to a $100 million market cap...

Where I can see a list of all the individual trades that got the company to a $100M valuation? I'd like to see how it actually got bid up.

To be very clear, I'm looking for every single trade (Mr. X sold 62 shares to Mr. Y for $10.50 on April 7, 2021 at 10:52 am) going back to the beginning of the company. With or without the actual identities of Mr. X and Mr. Y.

I expect that the answer is that no such list is publically available. But why not? I can understand a privacy argument about Mr. X and Y's names, but why aren't all the individual trades public information for a public company?

Because the "smart money" investors don't want to be discriminated against in the market and they are big enough market participants that they write the rules.

If we did put a name attached to every trade, it'd become clear when someone is breaking up a big order into many small ones to avoid 'disrupting the market price' -- that is, getting a good price for at least some of their sale. Or buy order, I suppose.

The trades themselves (time and sales) are available to paid subscribers of various data services, but not identities. Only insiders/significant holders are required to disclose their identity. A search for "historical tick data" will yield plenty of results.

Much like everything in finance there is a gatekeeper, and they seek to extract every dollar they can.

https://www.ctaplan.com/index

https://www.ctaplan.com/publicdocs/ctaplan/notifications/tra...

> various data services

but where do these data services get their data from? Does the exchange itself sell this data wholesale?

yes, along with an even more lucrative stream called "order flow" which is practically an order book crystal ball that allows HFT shops to front run retail traders (and one another)

some crypto exchanges also sell order flow but they don't really need to, as its far more profitable to front run their own users, whose entire account activity including sidelines and account balance transfers, is completely exposed to exchange insiders, who can trade against it. "oh look, whale user #4457 just transferred $100k of $COIN into their account. I wonder what they plan to do next?"

And you can do this by trading back and forth just 1 share. From the valuation of that one share we extrapolate the market cap. Isn't this amazing?

Except if we transact shares privately it doesn't show up in the market. If we offer to buy shares on the market we don't get to chose who we buy them from and we can't offer to overpay for a share, we randomly get shares from whoever offers them the cheapest. Clearly people manage to pump and dump but I suspect it's a little more complex/expensive/risky than two friends swapping shares...

The idea that there would be a bunch of suckers to bail you out on the other side definitely shouldn't/wouldn't have been expected.

Reply on news.ycombinator.com