Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Using Benford’s Law to Detect Bitcoin Manipulation

statmodeling.stat.columbia.edu

Post reply on HN
Print view View original

41–50 of 96 posts

Re: Using Benford’s Law to Detect Bitcoin Manipulation

#41

Post by JumpCrisscross »

mrfredward wrote: post #32

Benfords law is used to find evidence that the numbers came from a person, not a measurement or mathematical process, right? So anyone who knows what a limit order is should not be surprised to find evidence that humans are involved in picking the prices, right? It should be obvious that violating Benfords law isn't evidence of fraud or manipulation or even fomo, just evidence that the price is impacted by the people…

> If the author had spent 5 seconds thinking about how markets work

The author has spent a career thinking about this, and has written a good fraction of the textbooks on statistics in market contexts.

Re: Using Benford’s Law to Detect Bitcoin Manipulation

#44

Post by brighton36 »

JumpCrisscross wrote: post #41
mrfredward wrote: post #32

Benfords law is used to find evidence that the numbers came from a person, not a measurement or mathematical process, right? So anyone who knows what a limit order is should not be surprised to find evidence that humans are involved in picking the prices, right? It should be obvious that violating Benfords law isn't evidence of fraud or manipulation or even fomo, just evidence that the price is impacted by the people…

> If the author had spent 5 seconds thinking about how markets work The author has spent a career thinking about this, and has written a good fraction of the textbooks on statistics in market contexts.

Yet The author assumes theres' a moral/legitimate transaction vs an immoral/illegitimate transaction. I don't believe there is an economic distinction of faith...

Re: Using Benford’s Law to Detect Bitcoin Manipulation

#45

Post by malf »

Metacelsus wrote: post #14
Gys wrote: post #6

Earlier quoted context omitted.

The currency against which BTC is exchanged the most is very likely the one that shows the best fit (most perfect market). Assuming that currency is the USD I expect any other currency would result is an even worst fit

Presumably yen, being a smaller unit of money, would have the prices spread out over more logs. So Benford's law might be a better fit.

That’s not how logarithms work

Re: Using Benford’s Law to Detect Bitcoin Manipulation

#46

Post by abaga129 »

UncleMeat wrote: post #36
mrfredward wrote: post #32

Benfords law is used to find evidence that the numbers came from a person, not a measurement or mathematical process, right? So anyone who knows what a limit order is should not be surprised to find evidence that humans are involved in picking the prices, right? It should be obvious that violating Benfords law isn't evidence of fraud or manipulation or even fomo, just evidence that the price is impacted by the people…

Benfords law is a perfect example of something that is cool and compelling and then gets applied inappropriately all over the place by people who don’t know better. Voting, for example.

Or by people who do know better and have malicious intent.

Re: Using Benford’s Law to Detect Bitcoin Manipulation

#47

Post by mrfredward »

JumpCrisscross wrote: post #41
mrfredward wrote: post #32

Benfords law is used to find evidence that the numbers came from a person, not a measurement or mathematical process, right? So anyone who knows what a limit order is should not be surprised to find evidence that humans are involved in picking the prices, right? It should be obvious that violating Benfords law isn't evidence of fraud or manipulation or even fomo, just evidence that the price is impacted by the people…

> If the author had spent 5 seconds thinking about how markets work The author has spent a career thinking about this, and has written a good fraction of the textbooks on statistics in market contexts.

I guess we need to make a distinction between the blog post and the Gary Smith post it links to here.

Gary smith (the person I think you're referring to having spent a career in this) says this:

>The market manipulation, the irrational price gyrations, and the enthusiasm of so many investors for investing in bitcoin (and other cryptocurrencies) is ample evidence that market prices are not invariably equal to intrinsic values.

I entirely agree. A perfectly efficient market should follow Benford's law given enough data.

It's the blog post by Andrew that I think totally misses the point. He leaps from inefficiency which could be market manipulation to this:

>I saw this and I was like, well, yeah, isn’t all bitcoin use either crime or manipulation? But then I realized, no, that’s not all of it. Some bitcoin playas are motivated by politics, some by fomo, some are doing anti-virtue signaling...

And never considers the fact that the world is full of people who feel very different paying $100.00 vs $99.99

Re: Using Benford’s Law to Detect Bitcoin Manipulation

#48

Post by fungizid »

hhjj wrote: post #3

Maybe he should try with prices in yen...

With a fixed exchange rate, the choice of currency does not matter for Benford’s law.

Benfords’s law states that for many real-life numbers x, log(x) is uniform.

Converting to another currency using exchange rate E, so that y = E*x, yields log(y) = log(E) + log(x). This corresponds to a shift of the distribution of log(x) and does not change how uniform the distribution is.

However, if the exchange rate varies with prices, then it will matter.

Re: Using Benford’s Law to Detect Bitcoin Manipulation

#49

Post by SV_BubbleTime »

nootropicat wrote: post #28
xiphias2 wrote: post #13

Earlier quoted context omitted.

El Salvador's Bitcoin Beach project is a great example of people profiting from a debit based value network instead of a credit based financial system: even though both US and El Salvador had USD as the legal tender, it took $10 to remit $50 through the western union network. Lightning network (which is using Bitcoin as a settlement network) is both dramatically lowering the fees and provides instant debit transfer f…

LN isn't actually used - the way it actually works is: Strike holds dollars for the user. The user wants to send dollars to someone. Strike buys btc using dollars (from itself), sends btc via ln - to itself - and then sells btc for the same amount of dollars, again to itself, and credits the receiver. What's actually happening is that Strike is a normal payment provider like Paypal, Venmo, Revolut that fakes the btc…

I read that twice and now it makes less sense. What is the purpose of the fake transfer steps?

Re: Using Benford’s Law to Detect Bitcoin Manipulation

#50

Post by echopurity »

louwrentius wrote: post #12
Joeboy wrote: post #4

Earlier quoted context omitted.

> But I think at this point we know that all cryptocurrencies are ‘greater fool’ “investments” It seems to me to be very apparent that we do not all know that. It is in fact a point of significant controversy.

I don’t think so. It’s quite simple: where do the profits come from? Other people, who by definition will lose money because crypto doesn’t create value. A large amount of people will hold the bags of worthless currencies while a few laugh their asses off in their lambo’s.

>where do the profits come from?

Every heard a money printer go brrr?

Post reply on HN