Bitcoin Forum

Hey guys,

I wrote an article about "Fraudulent trading in Chinese exchanges " on 8/14 < http://weibo.com/3487056872/BifU0r6re > which gained tons of replies from chinese bitcoin community.

In short : Now Chinese exchanges really have big portion on whole global trading volume (about 80%). But they don't have proof of  100% reserve.As matter of fact , they are faking many "virtual bitcoins" in their trading system and selling them to players, that's the main reason why bitcoin price is keep dropping like a stone.

We need to boycott these exchanges. Any ideas ?

Bitcoin Exchanges Trading Volume Distribution(24hr)
http://bucks.qiniudn.com/volume.png

ref:
Pie chart:  http://p2pbucks.com/altcoin/pie.php
Fraudulent trading in Chinese exchanges:  http://p2pbucks.com/?p=12021

Since when the facts are kwown? Anything that correlates the fall time(around august 12) to the alleged lack of funds of the chinese exchanges?

And I cant see your article, when I go to the page, I got nothing but a blank page :(

Hope we don't see a Gox with steroids event cause of the chinese exchanges

Too bad I dont read chinese, but wont it eventually work its way out, when they can move those coins to another exchange? im assuming that they can trade and sell amongst themselves, but once it hits the blockchain it will be seen as a double spend or something?

I dont know how to prevent it. We couldn't prevent mt.gox and we knew something was fishy with them for months. I guess what someone can do is try to move their coins from the chinese exchanges to bitstamp and see what happens. or do I have it wrong?

So you are saying that the chinese exchanges are selling coins that they do not have, correct?

Yes, that's what i mean . (Really hope you can read chinese . )
We call for that many times  , but many of them still refuse to show their proof of reserves .
Now we try to persuade users to withdraw from these exchanges , but i doubt whether it's working

 If people thought that chinese exchanges were selling them non-existent coins, the way to quickly find out if its true or not is for people to pull their BTC off of the exchanges and see if all the sudden they run into "technical difficulties" and stop withdrawls.

Why they reluctant to withdraw ? because the situation is some of them provide interest of storing bitcoins by lending and borrowing (or some similar   financial product )on their platform . This strategy really works on many greedy guys  .

AND , many Chinese players are new to crypto they don't know how to withdraw bitcoins to onchain-wallet ( blockchain.info ,qt .etc) ,onchain-wallets are too difficult for them . So , they put their bitcoins on trading platform .  I know it sounds ridiculous but it's true .

Does Okcoin or huobi offer interest? (I doubt it) If not, then it must just be some smaller exchanges which would count for only very little fake trades.

Yes , they offer interest . OK has bishengbi project , huobi has bitvc.com

Hm... Can you show me the link (so I can have it translated online) where okcoin and huobi state that their deposits (on their exchange) are given interest? I also though Huobi was a fee-free exchange, so I have no idea how they could possibly afford that.

I thought Huobi does charge a fee for shorting.

Faking trading volume is one thing and "virtual bitcoins" being bought by actual users is another. I hope.

Even if they offer interest, you withdraw the coins, then within a few minutes, deposit back. Those few minutes that the coins are off the exchange is meaningless in terms of lost interest, however it does prove that they have the coins. Of course, everyone would have to do it relatively the same time for this to actulally work.

Can't read Chinese either, and google translate sucks. So how did you come to the conclusion that they're trading with coins they don't have?

It should be a large amount withdraw at the same time  ,  a small amount of withdrawing doesn't make sense.


They must provide proof of 100% reserve .

Even they show their proof of reserves, it is still difficult for us to see how many deposit and withdrawal, whether they match! If they plan to do something wrong, they will find a way. So we‘d better go away from this type of exchange.

Yes but not showing how much they have in their internal wallets doesn't mean they don't have it. So did you come to the conclusion that they're giving out "fake" btc just because they don't publicly show their wallets?

Again, I can't read Chinese, so it would be nice if you also provided an English synopsis to the article. Or maybe someone can translate (better than google).

I am on record going months back saying that I think the Chinese exchanges are cheating, creating fake sells and fake volumes, and operating on bitcoins (and litecoins) that don't exist and it was just a matter of time before they got slammed and a crash followed. 

I think it can get much worse than this too.   

To get 100% complete convincing proof you must investigate their backend servers and databases .
But look at the bitcoin volume chart in 24hr & litecoin trading volume in recent three days , these exchanges are highly suspicious .
And they refuse to provide proof of reserve even many chinese users ask them to. (check weibo in first post)
So what we should do ? ???

Once you get into lending and borrowing you fabricate coin that isn't there, just the same as a bank lends and borrows money that doesn't exist.

If this is true, they are doing quite well considering the price has dropped quite a bit.

They can buy back the coin at lower or possibly much lower price.

Simply contact them and ask for the cold storage wallet address to check it yourself. why would they deny you that address? Then get suspicious

Now i have concerns and I want to know how good are Bitstamp, coinsetter and BTC-e

There are legitimate reasons to not give out their cold storage addresses, one of which being that if you can figure out how much total BTC they have on deposit, then if you know how much they have in cold storage then you know how much they have in their hot wallet, potentially making them a target for an attack.

The fact that chinese exchanges do not charge trading fees certainly makes it look like they are somehow bilking BTC from their customers as it makes little sense as to how they are making their money.

Yeah, this does seem like a legit reason for the big drop in price.  And China doesn't have anywhere near the kind of regulations that exist in the USA and Europe around these sort of things, so I'd be surprised if they crack down on it.  These exchanges are bringing down the whole bitcoin economy, it's quite a shame imho.

If the Chinese exchanges have to acquire btc then this could push the price up

Perfect time to buy  ;)

There is always a possibility of exchanges faking of what they really have and using it to cheat so they would earn more money. But if there was a way to know what each exchange has that would be easier to find out and maybe it would avert some of them from doing it. 

i doubt it will happen that way. What if they took the same path with Gox? Filing bancruptcy since they don't have enough holdings to cover everything. Then price will go the opposite side.

Fractional reserves are still likely to be a problem for cryptocurrencies in the same manner that it is a problem for monopoly money. The difference is that it is much easier to prove you are solvent. People should get into the habit of checking their financial institutions independently.

Bingo. Anytime you can't figure out how a capitalist is making a profit, or their business model doesn't add up.... run.

The massive volumes on OKCoin and Huobi sure look suspicious, especially when compared to BTC-e and Bitstamp who've been around a lot longer...

I've said this all along… People who do not have and use a local wallet and put their trust in these exchanges are going to get hurt in a big way down the road just like the people of MtGox.

I bought my first Bitcoins yesterday, and I do not like how it has turned out today... What do you more experienced guys say? Will it ever get back over $550 or more?
Bought at $475....
I am quite a Bitcoin newbie, but thought it would be funny to try out, and I believe it is to be used in the future ( I hope at least )

Is there a way to prove that they don't have the funds to back up the coin they are selling? If there is indeed "virtual" coins being sold this could be a major problem, wouldn't that make Bitcoin more of a ponzi scheme rather than a currency?

This is probably true, however my question would be, how does this affect the price of bitcoin elsewhere? If exchange operators have already spent customer funds then the prices have already been affected. If the exchanges can only cover 90% for example of customer deposits, then they can simply force their customers to withdraw 90% of their balance into a wallet they control and take a loss on the other 10%, customers would not necessarily want to sell what they have left.

If the volume is real, that will mean China alone have more than 50% of the daily trading volume on bitcoin. This can't possibly be right.

Its not that odd. I dont think its all real volume (Bots, low fees, etc), but they are still really large exchanges.

AFAIK, BTCChina has real volumn, but Huobi's and OKCoin's volumn are both fake to some extent.