Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[JorgeStolfi]

Here is a personal experience I had once with audits and reports.  Read if you have nothing better to do, or if you suffer from insomnia and ran out of sleeping pills.

Public universities in Brazil, like all government institutions, have lots of red tape and restrictions on things like hiring temporary workers, buying equipment, charging for consultancies, etc..  In order to dodge thos restrictions, every university created at least one "supporting" Foundation, that is not formally part of the university, whose stated mission is to "do things that that the University wants to do but the law forbids it from doing." (Yes, it is as fishy as it sounds.)

Being private or semi-private, a Foundation in Brazil has fewer restrictions than a government institution; but it still must keep good accounting, prepare yearly financial report, have the report formally approved by its Board of Trustees, and submit it to a specific branch of the Judiciary.  The latter is  supposed to check, through the financial report, that the Foundation's money is not being pocketed by the trustees or staff, and is being used to foster the Foundation's mission as stated in its "constitution". 

A few years ago, when I became department chairman, I became automatically a member of the Board of Trustees of UNICAMP's support Foundation.  (On my first meeting I learned that the Foundation was actually insolvent, since it had about 2 million USD in the bank, turned about 2 million USD per year, and owed 6 million USD to the government in labor taxes.  It had not been shut down yet only because it kept telling the law and tax officers that closing it would force the university to close its public hospital, etc. But that is not relevant to the story.)

Eventually I was assigned to the Board's Financial Committe, which was tasked with analyzing the Foundation's financial report (prepared by the Executive Director and lower staff) and issuing a recommendation for the full Board to vote on. (I was the "junior" member of the Commitee; the other two were the head of the Economics department, and the head of the Geology department, who had served before as financial provost of the University, overseeing a budget of half a billion dollars per year.)

However, the "financial report" we got from the Executive Director was a skimpy two-page summary with gross totals, but no details and no original supporting documents (invoices, receipts, payrolls, etc.). And with some rather dubious items to boot.

The three of us were rather uncomfortable about recommending approval of that report.  But we were told that the deadline was tight so there would be no time to ask for the missing details and documents.

Then we saw the recommendation letter that had been written by the previous incarnation of the Committee, for the previous year's report: "The undersigned Financial Committe has thoroughly examined the attached Financial Report, and hereby forwards it to the Board of Trustees to vote."   (Note the studied absence of the word "approved".)

Quite relieved, we copied that letter verbatim and sent it on to the Board with that "report".

A couple of days latter, the Committee was recalled and given a terse note from the Board's president, "You must rewrite your letter to say that you approved the Financial Report."  We sheepishly did that (he was also Vice-President of the University), but I quit the Committe and stopped going to the Board meetings after that.

I am telling you this story because it came to my mind while reading that statement by Bitstamp's auditor.  I wonder why... 

[TakeTheSkyRoad]

That does not change the fact that the report was not published; it only gives an excuse for it.

I'm not about making excuses for anyone, just looking for reasons.

Banks don't have to be solvent in that sense, unfortunately.  However, they must keep a certain fraction in the central bank, and the government audits them (or should audit them) to make sure that they do.

Banks have extremely detailed internal accounting procedures, with multiple checks and records, to prevent their own staff from embezzling their money.  They may cheat on the government in many other ways, but AFAIK not by doctoring their books.

Well I wasn't thinking of the banks cheating the government, more their customers.
That's a whole other subject though which I don't think is relevant here.

That is certainly the safest policy.  However an exchange could keep clients' EURs as USDs or treasury bons, for example,  without being technically insolvent.  Of course there would be a risk of it becoming insolvent if the currency rates change too fast in the wrong direction. If it did that with BTC x USD, that risk would be enormous; but that would not make it insolvent either.

To avoid those risks, clients should make sure that the company at least promises to keep their BTC as BTC, in the service contract. Which ones make such promise?

Well in the context of an exchange still an exchange shouldn't be trading a clients BTC with other clients USD/EUR and neither should it be selling that BTC outside of the company so yes I think the BTC should stay as BTC. As soon as it does then a unfavorable change in the exchange rate would instantly make it insolvent since they wouldn't be able to buy back the same amount of USD.
There is a solid model in making money from exchange fees and/or deposit/withdrawal fees and exchanges should keep it simple. In the bitcoin model exchanges (& funds) are the closest things to banks there is but they shouldn't try to behave like one and I wouldn't want anything to do with an exchange that does.

No, a real audit must include everything, otherwise it is worthless.  If the exchange has just enough funds to cover the client balances, but also owes 100 million USD to a bank, then it is insolvent.  The clients do not have priority over the bank, they are all creditors.

I see your point but I disagree with the priority and faced with a choice between two exchanges, one offering each perspective I'll go with the one who ensures the customer deposits first and pays the bank back second. Banks accept the risks of loans as part of their business plan and have insurance for defaults but I don't.

Depending on how the auditing was done, they did not even prove that they have access to the private keys.

But who provided them with the client balances?  ....  How would the auditor check whether the database is complete?

Both good points and accepted.  They do boil down to trust again though and any financial relationship has to involve some trust.

The answer to your second question though can be solved with a technical solution. This is purely off the top of my head so might not be feasible but it would be theoretically possible to keep track of all the input and outputs to the wallet addresses used by the exchange.  The required BTC balance is then the sum total of all the BTC paid in minus the BTC paid out.
Further technical checks could be added on top, some I'm sure stolen from current banking practice and some added from the capabilities bitcoin and the block chain offer.
 

Read that sentence CAREFULLY and try figure out what it EXACTLY means; why they used those words, specifically,  and why the words are in that order. 

It may help to think what the auditor could say that he meant, if he were to be questioned in court after an eventual collapse of Bitstamp. 

Sometimes there's something to read between the lines and sometimes there isn't.  Politicians and lawers are the worst for that and at the end of the day you have to make your own mind up

In my mind at the time that transaction occurred the USD rate was roughly $750 so 194,993.5 would have been valued at $146,245,125 so this would be tough to sell on to anyone in a single block.
Also note that the address which that payment was sent to is still active and has received BTC as late as yesterday and this is not the pattern of wallets used to move stolen coins.

Remember bitcoin isn't the same as any currency, it's a new thing and should be assessed as such.
Not *throw away the textbooks new* but different enough that existing ideas/preconceptions should be re-assessed.
A generation of economics students are going to have bitcoin rammed down their throats in the coming years whether it takes off or drops to $0 and vanishes.

Now I'm getting preachy so time to agree to disagree I think... plus these posts are turning into small essays lol

[Speedie]

"the world's a stage." - some famous lunatic

That would be Macbeth...

Tomorrow, and tomorrow, and tomorrow,
Creeps in this petty pace from day to day,
To the last syllable of recorded time;
And all our yesterdays have lighted fools
The way to dusty death. Out, out, brief candle!
Life's but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more. It is a tale
Told by an idiot, full of sound and fury
Signifying nothing. — Macbeth Act 5, Scene 5

Bzzzzzzzzzzzzt. It's the beginning of Shakespeare's "Seven Ages of Man" spoken as a monologue by Jacques in "As You Like It":

All the world's a stage,
And all the men and women merely players;
They have their exits and their entrances,
And one man in his time plays many parts,
His acts being seven ages. At first, the infant,
Mewling and puking in the nurse's arms.
Then the whining schoolboy, with his satchel
And shining morning face, creeping like snail
Unwillingly to school. And then the lover,
Sighing like furnace, with a woeful ballad
Made to his mistress' eyebrow. Then a soldier,
Full of strange oaths and bearded like the pard,
Jealous in honor, sudden and quick in quarrel,
Seeking the bubble reputation
Even in the cannon's mouth. And then the justice,
In fair round belly with good capon lined,
With eyes severe and beard of formal cut,
Full of wise saws and modern instances;
And so he plays his part. The sixth age shifts
Into the lean and slippered pantaloon,
With spectacles on nose and pouch on side;
His youthful hose, well saved, a world too wide
For his shrunk shank, and his big manly voice,
Turning again toward childish treble, pipes
And whistles in his sound. Last scene of all,
That ends this strange eventful history,
Is second childishness and mere oblivion,
Sans teeth, sans eyes, sans taste, sans everything.

Amusing how I can drop in on this thread and see everything from Shakespeare, to some random Japanese guy playing with trains, or even jiggling boobies and butts. It really is a one stop shop for all your cultural needs  

[adamstgBit]

[solex]

I'm normally a perma-bull, but Satoshi waking up brings nervousness that his coins are more likely to move than before, when some people even considered that he may be dead and his coins were frozen long-term.

So, unlike the Dorian antics, the market may take a bit of a hit with the latest development. Retest of 600 possible.

[SheHadMANHands]

What it I told you 24 hours ago that in only a day's time you would be surfing over to CNN and finding headlines like this:



I mean, you can't make this shit up..

only in Bitcoin.

[JorgeStolfi]

Amusing how I can drop in on this thread and see everything from Shakespeare, to some random Japanese guy playing with trains, or even jiggling boobies and butts. It really is a one stop shop for all your cultural needs  

+∞

[lyth0s]

Should we be expecting satoshi to start posting on the forums again?

[billyjoeallen]

Should we be expecting satoshi to start posting on the forums again?

No.

[SilverandBitcoins]

Should we be expecting satoshi to start posting on the forums again?

Wow, the man, the myth and the ledgend.

[bassclef]

http://bigstory.ap.org/article/ap-exclusive-man-denies-hes-bitcoin-founder

Several times during the interview with AP, Nakamoto mistakenly referred to the currency as "Bitcom." When shown the original bitcoin proposal that Newsweek linked to in its story, Nakamoto said he didn't write it, and said the email address in the document wasn't his.

lol

We desperately need a Dorian Bitcom meme.

[Nicholas-Carraway]

It's not him. http://p2pfoundation.ning.com/m/discussion?id=2003008%3ATopic%3A9402Satoshi replied.

How do we know that isn't Dorian trying to trick us?  

WOW...  You seem to be onto something Walsoraj.....  that is really really funny to NOT hear from Satoshi in that particular thread for 5 years ... and then all of a sudden for some reason Satoshi Nakamoto, if that is really Satoshi, feels such a need to comment within that particular dormant thread and to say that he is NOT Dorian... ... I thought that we had NOT heard from Satoshi since about mid-2011 or so... which would then cause me to begin to believe that maybe Satoshi is Dorian.. b/c why would the real Satoshi care enough to reply in a dormant thread concerning whatever is going on with Dorian...   In this regard, the real Satoshi should NOT give a flying fuck about whatever is going on with Dorian or that Dorian is being confused for Satoshi.. unless Dorian is the real Satoshi...

Friend,

Please read again what you just wrote, as though you were another person reading it for the first time.  Your mind is cluttered with trifles.  This has nothing to do with what brought you here.

Sincerely,
Nick

[JorgeStolfi]

a real audit must include everything, otherwise it is worthless.  If the exchange has just enough funds to cover the client balances, but also owes 100 million USD to a bank, then it is insolvent.  The clients do not have priority over the bank, they are all creditors.

I see your point but I disagree with the priority and faced with a choice between two exchanges, one offering each perspective I'll go with the one who ensures the customer deposits first and pays the bank back second. Banks accept the risks of loans as part of their business plan and have insurance for defaults but I don't.

Unfortunately, no exchange can guarantee that.

The owner of an exchange who finds himself in an insolvent situation simply cannot keep operating the business in an ethical way.   To keep it open, he will have to  stall and deceive his clients and other creditors any way he can, no matter what he promised.  MtGOX showed that clients are much easier to "manage" in this sense than a bank.

The only ethical alternative, in that situation, is to close the exchange and file for bankruptcy.  But then the owner loses control of who gets paid first; indeed, the main goal of the bankruptcy process is to ensure that all creditors are treated fairly.  (Some creditors may have priority by law.  If I understood correctly, in Japan employee salaries and benefits are paid first.  I don't recall any such fine distinctions as client vs bank.)

[podyx]

http://bigstory.ap.org/article/ap-exclusive-man-denies-hes-bitcoin-founder

Several times during the interview with AP, Nakamoto mistakenly referred to the currency as "Bitcom." When shown the original bitcoin proposal that Newsweek linked to in its story, Nakamoto said he didn't write it, and said the email address in the document wasn't his.

lol

We desperately need a Dorian Bitcom meme.

not the right meme but it looks like him :p

[billyjoeallen]

a real audit must include everything, otherwise it is worthless.  If the exchange has just enough funds to cover the client balances, but also owes 100 million USD to a bank, then it is insolvent.  The clients do not have priority over the bank, they are all creditors.

I see your point but I disagree with the priority and faced with a choice between two exchanges, one offering each perspective I'll go with the one who ensures the customer deposits first and pays the bank back second. Banks accept the risks of loans as part of their business plan and have insurance for defaults but I don't.

Unfortunately, no exchange can guarantee that.

The owner of an exchange who finds himself in an insolvent situation simply cannot keep operating the business in an ethical way.   To keep it open, he will have to  stall and deceive his clients and other creditors any way he can, no matter what he promised.  MtGOX showed that clients are much easier to "manage" in this sense than a bank.

The only ethical alternative, in that situation, is to close the exchange and file for bankruptcy.  But then the owner loses control of who gets paid first; indeed, the main goal of the bankruptcy process is to ensure that all creditors are treated fairly.  (Some creditors may have priority by law.  If I understood correctly, in Japan employee salaries and benefits are paid first.  I don't recall any such fine distinctions as client vs bank.)

If an exchange is holding my bitcoins, it owes me bitcoins. If a kennel is holding my dog, it does not owe me the monetary equivalent of my dog. If my dog is lost, they must find it. Proof of solvency is so easily achievable than any exchange that doesn't provide it should be suspect. This should be a MINIMUM security precaution. 

[KeyserSoze]

We desperately need a Dorian Bitcom meme.

[podyx]

^ lol

[JorgeStolfi]

Daily volumes of BTC trade to/from USD and other national currencies (in kBTC):


             !    Thu !    Fri !    Sat !   Sun !    Mon !    Tue !    Wed !    Thu !
  EXCHANGE   !  02/27 !  02/28 !  03/01 ! 03/02 !  03/03 !  03/04 !  03/05 !  03/06 ! Currencies considered

  Bitstamp   |  17.05 |  22.63 |  14.30 |  6.44 |  64.91 |  28.03 |  12.72 |  10.40 | USD
  BTC-e      |  14.60 |  12.74 |   9.55 |  4.58 |  41.71 |  28.83 |  11.19 |   5.69 | USD,EUR,RUR
  BitFinEx   |  12.04 |  15.29 |   8.62 |  3.13 |  50.92 |  25.03 |   8.38 |   7.06 | USD
  Kraken     |   0.89 |   1.34 |   0.39 |  0.32 |   2.82 |   1.81 |   0.87 |   0.71 | EUR
  Bitcoin.DE |   0.50 |   0.70 |   0.31 |  0.32 |   1.34 |   1.02 |   0.40 |   0.34 | EUR
  CaVirtEx   |   0.31 |   0.33 |   0.15 |  0.19 |   0.55 |   0.33 |   0.22 |   0.22 | CAD
  CampBX     |   0.05 |   0.07 |   0.08 |  0.07 |   0.28 |   0.14 |   0.04 |   0.03 | USD

  SUBTOTAL   |  45.44 |  53.10 |  33.40 | 15.05 | 162.53 |  85.19 |  33.82 |  24.45 |

  Huobi      | 123.38 | 122.00 | 104.12 | 40.64 | 253.71 | 268.47 | 196.00 |  92.40 | CNY
  OKCoin     |  83.60 | 129.17 |  73.29 | 34.99 | 126.48 | 137.35 | 286.05 | 139.37 | CNY
  BTC-China  |   6.71 |   7.17 |   5.02 |  2.64 |  16.59 |  15.36 |   8.04 |   5.58 | CNY
  Bter       |   0.31 |   0.29 |   0.30 |  0.24 |   0.67 |   0.64 |   0.31 |   0.32 | CNY

  SUBTOTAL   | 214.00 | 258.63 | 182.73 | 78.51 | 397.45 | 421.82 | 490.40 | 237.67 |

  TOTAL      | 259.44 | 311.73 | 216.13 | 93.56 | 559.98 | 507.01 | 524.22 | 262.12 |


All numbers were collected by hand from the site http://bitcoinwisdom.com. Beware of possible errors.

For each exchange, the numbers include only the trade volume to/from the currencies listed in the rightmost column. Trade between BTC and other cryptocoins, such as LiteCoin, is NOT included.

Dates on the header line are UTC. Specifically, "01/15" means "from 01/15 00:00:00 UTC to 01/15 23:59:59 UTC". (Beware that Bitcoinwisdom uses your local time, so the date may appear to be off by 1 day.  For example, if you are 2 hours west of Greenwich, it may show "01/14 22:00" when the UTC time is "01/15 00:00".)

[JorgeStolfi]

Total trade volume today (Thu Mar/06 00:00--23:59 UTC), in the exchanges that I monitor, was only ~262 kBTC.  That is almost exactly half of yesterday's, but close to that of last Thursday Feb/27.

Volume in the Chinese exchanges decreased  52% (from 490 to 238 kBTC). The loss was evenly distributed among Huobi and OKCoin, so that OKCoin retained the advantage that it suddenly won yesterday -- namely 59% of the Chinese volume, against Huobi's 39%.  BTC-China had only 2.3% of that volume (5.6 kBTC).

Volume outside China decreased only 28% (from 34 to 24 kBTC).  Bitstamp recovered the lead with 10.4 kBTC, followed by Bitfinex with 7.1 and BTC-e with 5.7. 

China´s slice of the total trade volume decreased slightly, from yesterday's 94% to 91%.

[JayJuanGee]

Let me get this straight.  You are obtaining your probabilities by detecting a pattern of behavior of the bots?  or how else would you be able to get percentages that change daily?    So maybe for example approximately on average every 4 days the bots break up or down... and the longer they go without breaking out, the more the likelihood for breaking out?