211–220 of 306 posts
Tumblers[0] contribute to this to some extent I presume. I wonder how much of the effect they are seeing is related to tumbling. [0] https://en.wikipedia.org/wiki/Cryptocurrency_tumbler
How are tumblers related to exchanges?
Not sure I understand. We're not talking about onchain stuff here, but just money moving around within an exchange.
Earlier quoted context omitted.
All exchanges, even legitimate ones, offer discount packages on anyone who has high volume. Ex: Interactive Brokers (a legitimate online exchange for stocks) hit it big with its monthly-subscription model: $$subscription / month $20 / for severely discounted trades (fractions of a penny per trade). https://www.interactivebrokers.com/en/index.php?f=1590&p=sto...
Yeah, I get it, but unlike stock transactions crypto exchanges generally take a % of volume traded unlike stock exchanges which take a per-transaction fee instead (I think options might be an exception where there's a per-contract fee..not sure).
They'll answer. You explain to them that you want to give them $50,000 / month (or something) for 10-million trades/month or whatever.
If they let you, you do it. If they don't, call up another exchange and give them the same offer.
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Its called business. When the $$$ amounts go up beyond a certain amount, you make it worth their while to treat you specially. They want the volume, you want the trades. Old-school business, just talk with them and things happen.
Tumblers[0] contribute to this to some extent I presume. I wonder how much of the effect they are seeing is related to tumbling. [0] https://en.wikipedia.org/wiki/Cryptocurrency_tumbler
> Tumblers contribute to this to some extent I presume. How are tumblers related to exchanges? Not sure I understand. We're not talking about onchain stuff here, but just money moving around within an exchange.
This paper jumps the gun. Detecting wash trading by examining distributions over rounded order prices is a strong and dubious claim for which they provide little evidence. The author's equate wash trading to non-rounded, clustered prices which really just indicates automated trading. Now automated ("bot") trading is a technology needed for exchanges wash trading sure, but not exclusive evidence of it. Automated tradi…
Benford's Law is a pretty established method of detecting fraud in forensic accounting.
Imagine you have a completely manual market which follows normal statistical distributions, including Benford's Law. Now you introduce one grid-trading bot with a large amount of capital. (A grid trading bot is basically a piece of software that automatically buys when the price falls below a certain level and then automatically sells when it goes above a certain range.) That one bot is going to make up the vast majority of transactions, because it's effectively "clamping" the price within its trading range. When random fluctuations take it below, it buys and sets a floor on the price. When random fluctuations take it above, it sells and sets a ceiling on the price. If you make the range small enough that most ordinary trades would end up occurring with the bot, it's going to take up the vast majority of volume.
There's nothing illegal about grid trading. They work to dampen random price fluctuations in a market. In exchange, they take on the risk that fundamental supply & demand might shift enough that they're left holding the bag, eg. they run out of inventory to sell and then the price jumps sharply higher, or they collect all the inventory and then the price drops.
But because they're non-human and take one side or another of most trades, they are going to account for a disproportionate amount of volume. This isn't fraud, it's that you don't understand the structure of the market.
Earlier quoted context omitted.
Benford's Law is a pretty established method of detecting fraud in forensic accounting.
Benford's law is extremely dubious in the field. [1] "Abstract. Is Benford's law a good instrument to detect fraud in reports of statistical and scientific data? For a valid test, the probability of ‘false positives’ and ‘false negatives’ has to be low. However, it is very doubtful whether the Benford distribution is an appropriate tool to discriminate between manipulated and non-manipulated estimates. Further resear…
Here [2] is Google Scholar on Benford's Law. Of the 36,000 papers it pulled very, very few claim the law is not useful and valid. The vast majority (actually, every one of the first many pages) show how it's useful and demonstrate uses of it. If you want only recent papers, select from the left panel. Same result.
In fact, the first several pages of results contain many papers showing empirical validation of the usefulness of the law.
[1] https://www.degruyter.com/document/doi/10.1111/j.1468-0475.2...
[2] https://scholar.google.com/scholar?hl=en&as_sdt=0%2C14&q=ben...
This paper jumps the gun. Detecting wash trading by examining distributions over rounded order prices is a strong and dubious claim for which they provide little evidence. The author's equate wash trading to non-rounded, clustered prices which really just indicates automated trading. Now automated ("bot") trading is a technology needed for exchanges wash trading sure, but not exclusive evidence of it. Automated tradi…
I recently had to go through extensive KYC/AML email conversations and phone calls with bunch of exchanges like Coinbase and others. Got me interested how wash trading could happen, when they were so strict with me, and which exchanges were investigated. These seems to be the exchanges they investigated. Would be interesting to see a breakdown of percentage per exchange, as I still don't understand how wash trading c…
> I recently had to go through extensive KYC/AML I'm not entirely sure how KYC/AML are related to wash trading ... In other words: how is the amount of checks they impose on their customers related to what goes on in their trading engine? Or do you assume that because they're very strict on one thing necessarily implies they're strict everywhere? That's quite a stretch.
The intersection between tech enthusiasts and libertarians is way too large.
Earlier quoted context omitted.
Take a deep dive into MEV (miner extractable value). Poorly named for what it is, but I think it is something that you're missing in this picture.
> Miner extractable value (MEV) is a measure of the profit a miner can make through their ability to arbitrarily include, exclude, or re-order transactions within the blocks they produce. Um. Wow. So... how much of crypto is just "things that are illegal to do with anything that's not crypto"?
Provided there is sufficient decentralization within a blockchain network (i.e. enough independent miners participating) no individual miner will be able to pursue a MEV strategy beyond a single block. The next block will be created by a different miner.
In addition, the right to include any transaction or to control the ordering of transactions depends on the miner winning the right to build the block via the consensus process (for instance, by being first to calculate the PoW). In a sufficiently decentralized network, it is unlikely that any one miner will have any certainty at all with regards to when they will actually be able to build a new block. Depending on the level of centralization, it is also the case that a particular miner will get to mine a new block infrequently at best.
So the worst that a particular miner can do will be to delay the inclusion of a transaction, because any other miner can choose to include the same transaction in a subsequent block. Excluding transactions is outright impossible without buying out the entire capacity of the network by paying massive gas fees to other miners.
And because there is no predicting when the power to choose the ordering or inclusion of transactions will be granted to a particular miner, any miner intervention strategy will need to be both opportunistic and somehow viable within the scope of only one block.
Keep in mind as well that Ethereum blocks occur less than once every 15 seconds.
We also did extensive analysis on this in 2018/2019 and presented it to the SEC: https://static.bitwiseinvestments.com/Research/Bitwise-Asset... Good news: it's getting better. Bad news: still very high.
This was very interesting analysis. Thank you for sharing. Did you look at Crypto.Com?