Article author actually makes a great point and it stands regardless of your ability to cash out within 1%. Big investors on current markets can whip out huge profits for themselves by using techniques such as front running, wash trades, willybot, spoofing etc. Exchanges are not even prohibited from doing their own secret trades and using their own internal database and full knowledge of all other players.

If you are a trader with deep pockets, you should immediately realize all above established techniques (which is illegal on stock market) can generate you huge profits in no time in crypto market. Big players would literally have all the strings to play the market according to their will. Currently prices are 100X higher and 1% difference seems irrelevant but in mature markets 1% move is news worthy event.

I think its also worth pointing out that less than 1000 entities owns 40% of the bitcoins. I wouldn't be surprised if set of entities are willing to burn short term cash to inflate the prices just to attract other large scale investors in the game. This is like burning tinder to start the fire. The end game usually is massive cash outs as soon as fire has started. Typically this would kill the fire but in some cases it may keep going. In any case, the bad news to small investors is that expect to get killed at any point in time when your big brother decides to cash out. Until then, party on.

> worth pointing out that less than 1000 entities owns 40% of the bitcoins

The fiat equivalent is saying 10 entities own most of the USD in the world. They are banks with liabilities holding money for others.

Of all the bitcoin conspiracies it's provably false yet people somehow gravitate towards it.

Do worry how easily people and especially journalists fall for this. Go click on the top 10 addresses in a chain explorer, please. They are all exchanges.

There's a top-heavy concentration of ownership from the information that's been disclosed.

* Satoshi Nakamoto's ownership is pegged at 1.5 mln bitcoins

* Chamath Palihapitiya and Social Capital own "about 5% of all bitcoins out there", so 600,000 BTC as of today http://thisweekinstartups.com/chamath-palihapitiya-david-eun...

* Winklevoss twins have disclosed ownership of roughly 200,000 BTC when filing for a Bitcoin ETF https://www.coindesk.com/winklevoss-twins-plan-nasdaq-listin...

> Until then, party on

Indeed. Earlier this year, mid-summer, I got curious about all this, so I decided to start an experiment, uploaded $100 to an exchange and started trading and programming against their API. Today, I am running fully automated bots which are winning, got about $25k in exchanges and cashed out about $15 to my bank account (no problem cashing out btw). That's 40000% in 6 month.

So all of this is absolutely crazy. I don't believe this can go on forever. But until then, yes, party on.

(I am using a throwaway for this - not being any careful, moderators should be able to easily track my other account if they want. I just don't want to associate my other account with this post.)

Without knowing your algorithms, is Bitcoin's 2,000% increase this year a heavy factor in your "win" rate. Or, are you confident in your logic that you can grow with a slower market?

Care to share general outlines of how your bots work?

"Buy Bitcoin, hold Bitcoin, buy some more Bitcoin."

It'll work until it suddenly doesn't.

I was thinking about doing something similar as an experiment, do you have any good resources to get started?

> I think its also worth pointing out that less than 1000 entities owns 40% of the bitcoins.

This is FUD. 1000 wallets own 40% of BTC. See here https://bitinfocharts.com/top-100-richest-bitcoin-addresses....

Not sure what your link proves. In reality, no one knows if this statement to be true because addresses and wallets can be shared. There was a Bloomberg article with lots of interviews on this topic with people in crypto business and no one seem to deny this: https://news.ycombinator.com/item?id=15877838

Many of these wallets are actually exchange cold storage wallets, so they hold the BTC but not per se "own" it

In practical terms exchanges do own these bitcoins in that they a physically capable of trading them.

You'd probably find that 40% of US equities are owned by fewer than 1000 asset managers as well, so I'm not sure that this is all that relevant. If Vanguard decided to liquidate their holdings overnight there would be pandemonium just as if these people decided to liquidate their BTC, but it's not going to happen in either case.

Yes, this. Of all the times I watched the price of bitcoin for the past 5 months closely, more closely than I watched my cursor in VSCode suck my laptop battery away. At first I noted a trend, where at 6 AM PST I would be able to make a buy and get out by 10 AM. I kept telling myself that its the new yorkers that got OUT because they were worried about the Pacific coasters waking up. Then the time shifted the next day, and I lost my "daily" shirt (the max I would promise to lose that day).

Over time I noticed these periods of a week or so where the price would then become a bear market. And it was so easy to blame it on Dimon or some other Wal street junkie that said Bitcoin was doomed.

Then these stopped lining up. Then some ICOs got pumped. Ether tanked while Bitcoin blew up. I started to think how unglued it all became from anything that Coindesk was saying. Coindesk always ended their prediction with "But if it ends up less than X then Y will happen" Basically making it so that hey, there's a chance this will happen instead and this is the secret clue. But nothing was lining up, it started to feel like the perfect storm where you know extremely experienced investors could lure the masses into pushing tones of coin after a large drop. Even with 1000 people rushing in after a 15% drop in the price that day, the week before the 15% drop meant the price was going to rocket. Not this week, this time, the price is going to drop another 10% the next day.

Finally 3 days later, an amount of time that didn't coincide with ANY news and the price finally rose. By now most of those 1000 people had already cut their loses, but it was too late, whoever was jacking the price around already took their gains. And who cares about those 1000 people - the price is rocketing again.

So I left when BTC was around 4.5k. I should have listened that you have to be in the long game. But even so, I absolutely agree with this article - the price is being controlled by some group - some secret group of well placed investors that have a set of companies that run bots across all exchanges. They will continue to do this forever because unlike a stock, a government can never control a crypto currency. It would require all governments to coordinate and make the same set of rules. It can all be subverted if one exchange can live outside of those rules.

> Exchanges are not even prohibited from doing their own secret trades and using their own internal database and full knowledge of all other players.

Are we sure about this? The two largest USD-exchanges are Coinbase/GDAX and Bitstamp, which operate out of California and London, respectively.

If someone were to reveal that these exchanges were trading against their customers, are we sure that the authorities would be unwilling to press charges?

> If someone were to reveal that these exchanges were trading against their customers, are we sure that the authorities would be unwilling to press charges?

Based on what ? Because some people might think that is immoral ? Trading in most things is not regulated. So there is no law to be broken, expect very basic ones (you have to deliver if you receive fiat money).

If I have a trading platform in art, then I can still buy and sell for my private collection. Crypto coins are not different.

The difference is that GDAX is part of Coinbase, which is registered as a regular exchange under the New York DFS which puts them under the same regulations as non-crytop exchanges.

>Because some people might think that is immoral ?

No because they're actually laws and you can go to jail.

> are we sure that the authorities would be unwilling to press charges?

> Based on what ?

Fraud?

One thing in particular I dislike about this is that the author lumps all crypto currency into the same bucket.

As the prime example of this, ethereum and Bitcoin could not be more different. Work done by groups such as 0x mean that these regulations can be enforced by public contacts. Sure, there is more work to be done, but the potential is to create decentralised exchanges that are safer and easier to regulate than existing Fiat exchanges.

Bitcoin's recent price has been crazy even for crypto, but it is short sighted to lump all crypto currencies into the same bucket. This is a fast evolving field, lessons are being learned and better and better implementations are being built.

In practical terms, the main point of interest in Ethereum is the price of Ether.

The prime "decentralised" exchange is EtherDelta, which is completely decentralised except the absolute decentralisation of the website (deployable only as 2MB of minified JavaScript with the original source unavailable). I wrote about how well this approach works: https://davidgerard.co.uk/blockchain/2017/09/28/etherdelta-h...

How decentralised can you make your "decentralised" exchange? There's not much point to "a bit decentralised".

Public contracts can't regulate USD trading though.

yes they can. written properly and with the right data, a smart contract can be very effective.

It doesn't matter how well a contract is written, if it comes into violation of US securities laws or other rules and regulations, it will be a problem in the US. I'd expect the number of crypto-related prosecutions to rise exponentially in the US as crypto markets have heated up. The various regulatory and law enforcement agencies generally work slowly, but they do work.

I think the point he’s making is that everybody could not cash out at the listed price at once if something were to happen that made holding bitcoin undesirable (such as say, a possible crack for their elliptic curve crypto implementation). However, the same is true for banks which only keep 10% of deposits. Bank deposits are FDIC insured up to $250,000 though.

But the same would happen for any similar-functioning market. If every AAPL shareholder tried to simultaneously sell for $173.97 (current price), many would end up disappointed.

Instead, the article seems like FUD that would confuse non-tech users into thinking they couldn't cash out their 0.5 BTC at the price they're seeing on their exchange (they can.)

They would however end up with more than 0$ because Apple has cash on hand representing real value. Bitcoin on the other hand is only worth bitcoins so it can crash to zero.

Historically, stock market corrections may be ~50% but they don't hit 95% because of underlying value. Other bubbles can be much harsher.

>But the same would happen for any similar-functioning market. If every AAPL shareholder tried to simultaneously sell for $173.97 (current price), many would end up disappointed.

Yes. But if one thinks Bitcoin, with its distribution of holders, price volatility, and "quality" of trading implementations etc has the same tolerances as the regular stock market (which indeed can crash too), one is beyond deluded.

It's like saying "sure, I can crash on my custom built hot-rod made from a modified jet ski if I go into a wall, but so can someone in their Hammer". The impact, and the implications are not going to be the same...

(Heck, when the market tried to go trashing, it got a 1 trillion bailout to help it out. Who is gonna do that for bitcoin?)

Did you mean Hummer?

Yes, I did.

Banks are also backed by the fed which is there to prevent failures, and the government through too big to fail. Even in the case of the Bank of the United States (which despite its name was just an ordinary bank) whose failure in 1930 kicked off the bank panics of the 1930s, when it was liquidated the depositors received 92.5% of their deposits.

Most failures of crypto exchanges have resulted in a total or near-total loss for depositors, and triggered rushes to the exit on other exchanges.

> if something were to happen that made holding bitcoin undesirable (such as say, a possible crack for their elliptic curve crypto implementation).

A much more realistic scenario that could make bitcoin undesirable to hold would be something like all major central banks collectively viewing bitcoin as a threat then working in concert to target the weakest link of the cryptocurrency: exchanges that facilitate conversions to fiat.

Yep. Everyone yelling "We're gonna replace the US Dollar! We have a superior currency and The System is evil!" are doing the equivalent of walking into a Wells Fargo, yelling out "Hey everyone! We should all rob this bank! We'll be rich! And these WF bastards are evil anyway!" and expecting the bank to do nothing.

I think 99% of people who have decided not to own any cryptocurrencies are basically just waiting for the other shoe to drop. Sooner or later, governments will figure out that cryptos are sucking money away from The System, which, if left unchecked, will drive down stock and bond prices and nullify attempts to control savings/spending rates via monetary policies. I'm betting it won't happen until market cap hits $1T though.

Sure, definitely. There are many possible scenarios, like a major exchange like Coinbase, Bitfinex, or some chinese exchange going down / getting hacked. Wouldn’t even have to be all the worlds central banks: could just be one new regulation or rule in China.

MtGox was a major exchange and it went down but it didn't deter people from investing in bitcoins, they merely moved their business to other exchanges.

Your original comment talked about a scenario where people decide against bitcoin and such a scenario can only play out if there is too much uncertainty to make them a viable investment. Because bitcoin is decentralized, the only way major governments can try to influence it and related activities like exchanges is by acting in concert. Anything short of this will not work against it as has happened repeatedly with past attempts by individual governments like China.

"They merely moved their business to other exchanges"

The price crashed from like $1200 to $200 and it took years for it to recover. All those Moms and Dads and Grandmas who bought $10,000 of Bitcoin after Thanksgiving dinner hoping it would turn into $100,000 within a month will certainly get hit if the price falls to $1600 and doesn't recover for 3 years. All it takes is a change in the media narrative that scares away a sizable chunk of the market (say, institutional investors or mom and pops, or Chinese people)

> All it takes is a change in the media narrative.

Every article I read in the media has huge negative sentiment already. Can you point to some positive articles about bitcoin? Seems to be very few going around, it's all bubbles, energy consumption, hackers, ransomware and terror funding.

Wondering how the narrative can change for the worse from here.

The nearly weekly articles about btc hitting all-time high milestones would count as the positive articles about bitcoin in my opinion.

Fair enough though I'd contend such articles are the motivation for the bubble commentary.

You might have missed the articles about people getting rich...

A scenario where the government makes crypto currencies completely impossible is unlikely, as that would mean that you essentially controlled all communication. There are many ways they can make it difficult, cumbersome and risky however, even on an individual basis. That could lead to a short term dampening effect on the global price until people figure out effective ways to get around the regulation in question.

No, the scenario is that the governments tell banks:

"Deal with BTC and lose your license. Kay, bye!"

Yep. It would be like what happened after they made online poker illegal: anyone sufficiently committed will either have to cut their losses or leave the country.

Ding! Ding! Ding!

Bitcoin is sea shell currency trading market pretending to be a currency.

That's the same for every asset ever.

The subconscious message of this article is "people that you've heard get rich from Bitcoin can't really become rich so easily, there has to be a catch"

What I don't get from the arbitrage side is why is the spread so much between exchanges? Surely if there is a $500 difference between two exchanges it makes sense to build up volume in both and simply move between them as the price fluctuates? Are the fees and transaction times really so onerous that $500+ differences are washed out in the process?

Exchange A price is $1000

Exchange B price is $1250

Makes sense to buy on A and sell on B for a nice profit. So I buy 3 coins on A and send them to Be, sell on B and have a nice $750 profit. Now you need to get fiat from B to A and this is where you hit your bottleneck.

Assuming you can legally operate on both A and B in your country, isn't it a matter of sending your $3750 from B to your bank then depositing $3750 from your bank to A? Obviously that step alone (fiat B => bank => fiat A => crypto A) could take well over a week before fiat in B is back to crypto in A.

I know I'm missing something because a lot of people a lot smarter than me are in this space. I just don't know what it is I'm missing from the outside.

Difference between exchanges is ~0% to 5%. Price can change 5% easily in an hour on a single exchange so if you take a day or more to transfer money from one exchange to another, it's very likely you would earn more just by holding BTC.

Not every exchange has perfect withdrawal to fiat methods. Wex.nz doesn't have the facility to move fiat to a bank account. Bitfinex you cannot withdraw USD others only allow EUR withdrawals etc.

Is there a way to verify this somehow? One of the biggest issues in the Bitcoin space seems to be counter party risk with the exchanges.

How do large Bitcoin traders price that risk? With most modern financial exchanges the accounts are open, audited and they’ve had a long time to generate trust with their members so pricing the counter party risk is straight forward.

if your treating bitcoin as anything short of gambling, you probably in for a big surprise one day.

Professional gamblers price counter party risk into their bets as well. Using similar methods now that the bet takers are frequently public corporations.

So which exchange are you using? How viable is it to cash out smaller amounts, few hundred or thousands?

If cashing out is easy and reliable, why can’t I withdraw from Coinbase, six months after verifying my bank account?

I’ll tell you: they don’t have the capital to pay anyone, so nobody can withdraw. It’s Mt Gox all over again.

I withdraw every month, usually in about ~1200€ worth: if you're having trouble with that you should contact coinbase support.

I did, in October. They send me an email every few week saying “is your query still important? Reply within 24h or we’ll assume it’s resolved.” Starting to think that there is no capital behind it and my money (>€100k) is gone.