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Author Topic: Manipulation of price by selling from your wallet into another wallet of yours?  (Read 1889 times)
Dr Bloggood
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December 05, 2013, 02:11:22 PM
 #1

So walk me through this - is it possible?

Also, maybe it's a stupid question, but localbitcoins can't be part of the price building process right? Because nobody but the traders themselves know how much cash was exchanged for the BTCs.
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December 05, 2013, 02:42:18 PM
 #2

I think you might be talking about Coin Days Destroyed.  By moving coins between wallets, you can create the illusion that the market is more active than it really is.

http://bitcoin.stackexchange.com/questions/845/what-are-bitcoin-days-destroyed

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December 05, 2013, 02:48:39 PM
 #3

At this point though, you would have to have an enormous about of bitcoin to really make a dent in transactions, and if you were sending a smaller amount an enormous number of times, you just lose money on trasnactinos fees for confirms.

more or less retired.
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December 05, 2013, 04:45:13 PM
 #4

Well if you speak of price you probably mean something like the actual price at mtgox. Now if you wanted to change the displayed price at mtgox you would have to sell for let's say 50% of the usual price to your own account. But at mtgox or any other exchange you don't trade with a specific account. You always go through the orderbook. So to buy or sell to your own account at the manipulated price you would first have to complete all orders inbetween. At that point it does not realy matter if you buy your own stuff because you actualy did change the price for real.
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December 05, 2013, 04:56:34 PM
 #5

You can do that but that won't change the price of a Bitcoin whatsoever.
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December 05, 2013, 05:31:02 PM
 #6

Well if you speak of price you probably mean something like the actual price at mtgox. Now if you wanted to change the displayed price at mtgox you would have to sell for let's say 50% of the usual price to your own account. But at mtgox or any other exchange you don't trade with a specific account. You always go through the orderbook. So to buy or sell to your own account at the manipulated price you would first have to complete all orders inbetween. At that point it does not realy matter if you buy your own stuff because you actualy did change the price for real.

the way a currency exchange works, the coins you would put up for sale would be INSTANTLY bought for MORE money than you asked for.

For example:

let's use Mt. Gox as an example, at this time of posting the prices are

Bid: $1048
Ask: $1050
Last: $1050

The Bid price is the HIGHEST amount someone is willing to pay [for a bitcoin] at that moment.
The Ask price is the LOWEST amount someone is willing to sell [a bitcoin for] at that moment.
The Last price is the most recent transaction. (a 'match' between Bid and Ask)

Now let's suppose you'd sell a bitcoin for $500, this would count as an Ask of $500. This will immediately be matched to one of the Bids that is considered the best deal for you. (and in case the best deal doesn't have enough money to pay you, it will partly proceed selling and than continue selling to the next highest bidder, until your transaction completed or until there are  no more bidders in your price range)

Since the highest bidder offered $1048 and $1048 is more than $500, you'll get paid $1048 and the price will drop from $1050 to $1048.

Unless you'd sell millions worth of bitcoin, you'd not even make a dent in the price.

This is also where the market depth comes in.

Let's suppose there are 5 people (Alex, Brian, Cindy, Dennis, Elisa) that either want to buy or sell bitcoin.

Alex has 12 bitcoins, and he wants to sell 2 bitcoins for $1500 and 10 for $1600
Brian has no bitcoins and he wants to buy 0.5 bitcoins for $900 per bitcoin
Cindy has 2 bitcoins and she wants to buy 1 more for $950 and sell 1 for $1100
Dennis has 3 bitcoin and he wants to sell 1 for $1100
Elisa has no bitcoins and she wants to buy 5 for $1000 each

The market debt would look like:

Buying Volume||Buying Price||Selling Volume||Selling Price
5$10002$1100
1$9502$1500
0.5$90010$1600

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btcrich
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December 05, 2013, 05:33:01 PM
 #7

Well if you speak of price you probably mean something like the actual price at mtgox. Now if you wanted to change the displayed price at mtgox you would have to sell for let's say 50% of the usual price to your own account. But at mtgox or any other exchange you don't trade with a specific account. You always go through the orderbook. So to buy or sell to your own account at the manipulated price you would first have to complete all orders inbetween. At that point it does not realy matter if you buy your own stuff because you actualy did change the price for real.

So that's probably not price manipulation in the sense that OP had in mind.  Like you said, that's through the order book and no coins are actually moving to different wallets.

You can do that but that won't change the price of a Bitcoin whatsoever.

Not sure what you're referring to.  If you're referring to DerKorb's comment, then yes, the price has in fact been changed.  I wouldn't call that manipulation though and it sounds like a good way to just lose bitcoins in trading fees.

OP, with regards to the idea of selling coins to yourself using localbitcoins to manipulate the price won't work as you said.  I'd say the volume is far too low to be of any significance.  I suppose you could make a trade on localbitcoins for 10x the current value and hope to get media attention though.

As for CoinDD, like Crazy_rabbit said, you would need huge amounts of bitcoin to create further hype and hence move the market.  This could only potentially work with some of the smaller altcoins.

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Jcw188
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December 05, 2013, 05:34:42 PM
 #8

Yes this would be price manipulation.  Selling to oneself just to change the price is manipulation I think.  Like a previous poster said though you'd have to have a lot of coins and then you'd need momentum from others to keep the increase or decrease going.
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December 05, 2013, 05:47:41 PM
 #9

Yes this would be price manipulation.  Selling to oneself just to change the price is manipulation I think.  Like a previous poster said though you'd have to have a lot of coins and then you'd need momentum from others to keep the increase or decrease going.

you can not sell to anyone specific at a free exchange.

localbitcoins isn't really an exchange, but a marketplace, you can choose who to buy/sell from, and therefore the price quote from localbitcoins is very unreliable and should be ignored for this reason.

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ashaw596
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December 05, 2013, 08:16:16 PM
 #10

Well something I thought about was what if you put in very large buy or sell orders at a certain point. It might make people feel like the price will rise (if you do a buy order) and you can sell for the higher level. If it actually gets too close to your "fake wall" you could cancel the buy. idk just somethign I was wondering about.
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December 05, 2013, 08:19:49 PM
 #11

Well something I thought about was what if you put in very large buy or sell orders at a certain point. It might make people feel like the price will rise (if you do a buy order) and you can sell for the higher level. If it actually gets too close to your "fake wall" you could cancel the buy. idk just somethign I was wondering about.


You need a lot of bitcoins or money to do that

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December 05, 2013, 08:22:31 PM
 #12


You need a lot of bitcoins or money to do that

Do you mean "money or fiat"?
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December 05, 2013, 08:25:25 PM
 #13


You need a lot of bitcoins or money to do that

Do you mean "money or fiat"?

I think whichever would be fine since you can always exchange. But true, you would need alot. However, woudln't the people with ALOT of btc also be the ones who would benefit the most from this kind of price manipulation.
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December 05, 2013, 09:15:32 PM
 #14


You need a lot of bitcoins or money to do that

Do you mean "money or fiat"?

I think whichever would be fine since you can always exchange. But true, you would need alot. However, woudln't the people with ALOT of btc also be the ones who would benefit the most from this kind of price manipulation.

Yeah I think so, traditionally it's always been when someone "corners the market" in a certain commodity that they manipulate the price up by withholding large amounts of the commodity.  This seems hard because there's so much BTC.
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December 05, 2013, 09:37:16 PM
 #15

Yeah, but some exchanges are small enough that "cornering the market" can be done with not that much btc. I mean look at the price differential between markets  sometimes ...
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December 06, 2013, 01:30:56 AM
 #16

Thanks for your comments, some of your comments are great!

Ok, so no Mt. Gox manipulation that way because you have to go through the orderbook. Can you think of any other way manipulation would be possible for a BIG player? And yes, we are talking about really big players, think JP Morgan, if you want to draw a parallel to the world of gold price manipulation. Those guys have supposedly cornered the gold market big time.

As far as I understand, you have to actually have BTC to be able to sell BTC though. This is different than with gold, where the big banks just pull some naked shorts out of their asses and practically sell out of thin air. No BTC derivates, no credit!
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December 06, 2013, 01:33:11 AM
 #17

Well if you speak of price you probably mean something like the actual price at mtgox. Now if you wanted to change the displayed price at mtgox you would have to sell for let's say 50% of the usual price to your own account. But at mtgox or any other exchange you don't trade with a specific account. You always go through the orderbook. So to buy or sell to your own account at the manipulated price you would first have to complete all orders inbetween. At that point it does not realy matter if you buy your own stuff because you actualy did change the price for real.

the way a currency exchange works, the coins you would put up for sale would be INSTANTLY bought for MORE money than you asked for.

For example:

let's use Mt. Gox as an example, at this time of posting the prices are

Bid: $1048
Ask: $1050
Last: $1050

The Bid price is the HIGHEST amount someone is willing to pay [for a bitcoin] at that moment.
The Ask price is the LOWEST amount someone is willing to sell [a bitcoin for] at that moment.
The Last price is the most recent transaction. (a 'match' between Bid and Ask)

Now let's suppose you'd sell a bitcoin for $500, this would count as an Ask of $500. This will immediately be matched to one of the Bids that is considered the best deal for you. (and in case the best deal doesn't have enough money to pay you, it will partly proceed selling and than continue selling to the next highest bidder, until your transaction completed or until there are  no more bidders in your price range)

Since the highest bidder offered $1048 and $1048 is more than $500, you'll get paid $1048 and the price will drop from $1050 to $1048.

Unless you'd sell millions worth of bitcoin, you'd not even make a dent in the price.

This is also where the market depth comes in.

Let's suppose there are 5 people (Alex, Brian, Cindy, Dennis, Elisa) that either want to buy or sell bitcoin.

Alex has 12 bitcoins, and he wants to sell 2 bitcoins for $1500 and 10 for $1600
Brian has no bitcoins and he wants to buy 0.5 bitcoins for $900 per bitcoin
Cindy has 2 bitcoins and she wants to buy 1 more for $950 and sell 1 for $1100
Dennis has 3 bitcoin and he wants to sell 1 for $1100
Elisa has no bitcoins and she wants to buy 5 for $1000 each

The market debt would look like:

Buying Volume||Buying Price||Selling Volume||Selling Price
5$10002$1100
1$9502$1500
0.5$90010$1600

Wow, great work! That made me really understand what DerKorb meant.

In the last regular line of your post, I suppose you mean "market depth", not "market debt". What do you want to illustrate with that example? I suppose it's just what you wrote above with the bid/ask price, or do you have any additional point here?
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December 06, 2013, 01:38:27 AM
 #18

Yeah, but some exchanges are small enough that "cornering the market" can be done with not that much btc. I mean look at the price differential between markets  sometimes ...

This is where it gets interesting (or maybe it doesn't...)

How is the overall BTC price calculated, by the way, the main chart? How is the price of all the exchanges brought into one?
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December 06, 2013, 01:39:11 AM
 #19

There is no overall BTC price. What do you consider the "main chart"?
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December 06, 2013, 02:34:59 AM
 #20

There is no overall BTC price. What do you consider the "main chart"?

Ok, I get it. I was about to post a link, then I saw it said "Mt. Gox".

But there is an overall chart for commodities, although they are traded on different markets, right? An overall chart for certain stocks. Maybe a stupid question, but I'm a little confused there.
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December 06, 2013, 02:49:58 AM
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A company typically only issues stock on one exchange. It's possible for situations to occur in which the same company is effectively listed on more than one exchange, in which case the prices should be similar but there is no longer any overall price.
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December 06, 2013, 08:09:09 AM
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I think you're confused about how trading works. There is no "main price" for bitcoin. Each exchange has its own price that does not directly affect the prices on the other exchanges. I can put up a buy order for 1 bitcoin at $1,000,000,000 USD on Mt Gox and it will not affect the price on Bitstamp at all.

If you're wondering then why the exchanges have (generally) the same prices, look up "arbitrage." Basically if the price on one exchange is vastly different from another, people will move to that exchange and the prices will move towards each other (ex. gox last is 1000, bitstamp last is 5000, obviously I'm going to buy on gox and sell on bitstamp, therefore the gox price will increase and bitstamp price will decrease until they're about the same).

So to answer your original question, localbitcoins has no effect on any exchanges, and since localbitcoins is not an exchange it will have no effect on other localbitcoins orders. Plus, if you offer some ridiculous price on localbitcoins, people will know it's fake and ignore it anyway.

Also, you asked if someone with enough funds such as JPMorgan could manipulate the price (let's say on a single exchange such as gox). The answer is yes, but this is where the market cap comes into play. To significantly manipulate bitcoin's price you would need to be playing with tens of millions, maybe even a hundred million dollars, and even the riskiest investment bank is not going to do that. I remember seeing a 2 million dollar sell order a couple weeks ago and it did nothing to the market. Coins with smaller market caps can be manipulated easier but you still need to risk a lot of capital to try it. I understand the basic idea of how to do this but would be interested to hear more about it if anyone else wants to chime in.
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December 06, 2013, 03:52:46 PM
 #23

I think you're confused about how trading works. There is no "main price" for bitcoin. Each exchange has its own price that does not directly affect the prices on the other exchanges. I can put up a buy order for 1 bitcoin at $1,000,000,000 USD on Mt Gox and it will not affect the price on Bitstamp at all.

If you're wondering then why the exchanges have (generally) the same prices, look up "arbitrage." Basically if the price on one exchange is vastly different from another, people will move to that exchange and the prices will move towards each other (ex. gox last is 1000, bitstamp last is 5000, obviously I'm going to buy on gox and sell on bitstamp, therefore the gox price will increase and bitstamp price will decrease until they're about the same).

So to answer your original question, localbitcoins has no effect on any exchanges, and since localbitcoins is not an exchange it will have no effect on other localbitcoins orders. Plus, if you offer some ridiculous price on localbitcoins, people will know it's fake and ignore it anyway.

Also, you asked if someone with enough funds such as JPMorgan could manipulate the price (let's say on a single exchange such as gox). The answer is yes, but this is where the market cap comes into play. To significantly manipulate bitcoin's price you would need to be playing with tens of millions, maybe even a hundred million dollars, and even the riskiest investment bank is not going to do that. I remember seeing a 2 million dollar sell order a couple weeks ago and it did nothing to the market. Coins with smaller market caps can be manipulated easier but you still need to risk a lot of capital to try it. I understand the basic idea of how to do this but would be interested to hear more about it if anyone else wants to chime in.

I'm clear about how the exchanges work and about arbitrage now, after 12648430's (nice nick...) explaination, but thanks!

In regards to your last paragraph - tens and hundreds of million of dollars are no problem for the likes of JP Morgan, that's change for them, they probably spend more on fines for their manipulations every month.... the question is what could be their motive? Can't short BTCs... but for sure they will find another way to make money off it, or maybe the motivation could be to destroy BTC and help the fiat currencies...?
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