More Than Half of All Bitcoin Trades Are Fake | Hacker News Reader

More Than Half of All Bitcoin Trades Are Fake

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45 pointsMikeAshley17811 comments

I found the actual Forbes article to be far more stimulating than the summary in the linked slashdot post (or re-post, really)

https://www.forbes.com/sites/javierpaz/2022/08/26/more-than-...

Question: how is an IPO price "maintained" by the banks? Isn't that "fake trades"? Basically a kind of pump until they can get out, showly without affecting the stock price too much.

Banks can support an IPO, it’s part of their service to the issuer. But it’s not a way to get out - it’s exactly the opposite, because the way they support the price is by buying shares.

My point is that they never intend to hold it thus I see their "support" as a kind of "fake trades"/ pump. They "support" the price until enough bag-holders start buying. Isn't that the very definition of pump & dump? Perhaps more correctoy it's pump<with limit> & dump.

The difference, like many things in traditional finance and cryptocurrency, is disclosure.

The activities of the market makers are well disclosed in a comprehensive IPO disclosure document. Importantly, any relationship between the underwriters and the company they are underwriting is well disclosed.

Meanwhile, folks tout the transparency of the public ledger, but actually the transparency is very shallow and disclosure is very poor, particularly around conflicts of interest.

Additionally, if the company lies to make the "pump" you can put the shares back to the company (per the securities act).

You just have to look at what happened to WeWork to see the IPO disclosure process successfully killing a bad company.

Beyond that point (is it necessary?) an IPO in the US is heavily regulated, disclosure by the SEC, underwriter activities by FINRA and the listing itself by the stock exchange.

I don't think you can call IPO market support "pump and dump".

Don’t banks put a fair amount of work into evaluating the valuation of these companies whose equities they are putting out on the public market the first time? The company is putting their trust in the bank that the banks valuation isn’t too far off from what the market would think. There have been botched ipos where the price of the ipo was too high and the stock sunk like a rock, and also where they were too low and the company didn’t make as much on the offering as they could have. Don’t ask me how its done, because banks are the experts at these valuations (some combination of math and convincing the right group of people they want to get in on the offering at a given price) and thats why companies work with them on ipos :)

If the bank buys a share from someone else without any arrangement they are taking a risk. Their motive may be to support the price but people buy and sell shares with all sorts of motives.

If you buy a share from your self or from a party where you have an agreement to trade back at a fix price, no risk is taken. That's called a "wash trade" and is illegal for securities.

Trading money for money, instead of labour for money.

> "More than half of all reported trading volume is likely to be fake or non-economic"

I wonder what basis they use to determine "likely to be fake or non-economic". Seems highly unlikely they have any concrete evidence.

Makes me want to start a "think tank" where I can just publish whatever speculation I'm feeling at the moment with fabricated numbers built from specious methods to add a veneer of substantiation.

(Also, kind of amusing that an article about how bitcoin exchanges are fabricating numbers is fabricating numbers itself.)

> I wonder what basis they use to determine "likely to be fake or non-economic". Seems highly unlikely they have any concrete evidence.

I suspect what they're classifying as Wash Trading are actually tumbler services that essentially launder the source and destinations of transactions. Strictly speaking, those are arguably economic because the tumbler takes a (sometimes substantial) cut but it would fall out of the line of thinking of "buying goods or services" that people think more traditionally.

That said, the methodology is right there at the end of the article[1]. It does seem rather open to thumbs on scales.

[1]: https://www.forbes.com/sites/javierpaz/2022/08/26/more-than-...

There a probably a lot of people attempting to profit with arbitrage bots as well - I'd imagine that behavior would look a lot like wash trading to this analysis.

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