Could BTC ever be manipulated like Wall Street is?

[Dr Bloggood]

I got the idea from another thread around here:

What would be the banksters best shot be to manipulate BTC as they please?

As I see it, there are no derivates on BTC. On the other hand, who stops me from giving out/selling a future myself on the price of BTC in 6 months?

Gold is hardcore manipulated, a big part of it is done with naked shorts. At least that's not possible with BTC, if I see it clearly.

The question is if we should be concerned about JP Morgan ever taking over BTC like they have taken over silver and gold and controlling it.

[justusranvier]

Exchanges can manipulate basically anything they want and you've got no protection if you leave your coins on one, at least until voting pools become feature that users demand from the exchanges.

Wall Street is getting involved in the exchange market, and as soon as they do be very, very careful. Keep as many of your bitcoins as possible in your own wallet and regularly withdraw your entire balance all at once just to make sure the exchange actually has them.

It's virtually guaranteed that they are going to play undisclosed fractional reserve games with customer deposits.

[Dr Bloggood]

Exchanges can manipulate basically anything they want and you've got no protection if you leave your coins on one, at least until voting pools become feature that users demand from the exchanges.

Wall Street is getting involved in the exchange market, and as soon as they do be very, very careful. Keep as many of your bitcoins as possible in your own wallet and regularly withdraw your entire balance all at once just to make sure the exchange actually has them.

It's virtually guaranteed that they are going to play undisclosed fractional reserve games with customer deposits.

I suppose you are talking about fraught here, just altering something in the exchanges themselves, with the help of the owners of those exchanges.

I'm talking about one step less though, about illegal manipulation of price. We are seeing unbelievable amounts on naked shorts dropped on the gold market and it would be good to know if something comparable is possible with BTC.

How is Wall Street getting involved in the exchange market, btw?

[justusranvier]

I'm talking about one step less though, about illegal manipulation of price. We are seeing unbelievable amounts on naked shorts dropped on the gold market and it would be good to know if something comparable is possible with BTC.

There's nothing stopping this from happening right now. Mt Gox, Bitstamp, etc don't trade bitcoins on their order book - they trade database entries that represent bitcoins (and USD).

Any of them could trivially create as many database entries as they want to trade with and get away with it as long as not all their customers try to withdraw at the same time.

[Dr Bloggood]

There's nothing stopping this from happening right now. Mt Gox, Bitstamp, etc don't trade bitcoins on their order book - they trade database entries that represent bitcoins (and USD).

Any of them could trivially create as many database entries as they want to trade with and get away with it as long as not all their customers try to withdraw at the same time.

Wow, that's interesting!

But it still means the exchanges are the only ones who have the power to do that, right?

Why would all the customers withdrawing at once be a problem - is it because if they don't "have" BTCs, they don't have database entries representing BTCs either?

[justusranvier]

Why would all the customers withdrawing at once be a problem - is it because if they don't "have" BTCs, they don't have database entries representing BTCs either?

People who trade on exchanges tend to leave large balances sitting there for a long time. For an unscrupulous exchange operator this is the perfect opportunity to start playing fractional reserves.

Suppose you're an exchange operator and you notice that only 90% of the customer deposits never move (as in get withdrawn to an external bitcoin address). You could take half those deposits and do whatever with them (speculate on an other exchange, buy hookers and blow, anything) and your customers won't notice until too many of them try to withdraw and you don't have enough bitcoins any more to comply.

[vendetahome]

Exchanges can manipulate basically anything they want and you've got no protection if you leave your coins on one, at least until voting pools become feature that users demand from the exchanges.

Wall Street is getting involved in the exchange market, and as soon as they do be very, very careful. Keep as many of your bitcoins as possible in your own wallet and regularly withdraw your entire balance all at once just to make sure the exchange actually has them.

It's virtually guaranteed that they are going to play undisclosed fractional reserve games with customer deposits.

Maybe exchange which proves it holds all the deposited Bitcoins in some way starts operating and people will preffer this proven no fractional reserve exchange.

[justusranvier]

Maybe exchange which proves it holds all the deposited Bitcoins in some way starts operating and people will preffer this proven no fractional reserve exchange.

http://bitcoinism.blogspot.com/2013/12/voting-pools-how-to-stop-plague-of.html

[pening]

Gold is hardcore manipulated, a big part of it is done with naked shorts. At least that's not possible with BTC, if I see it clearly.

Of course it is possible.  You can naked short anything, its normal shorts that are more difficult as it requires a third party to lend the underlying asset to be sold.  There are currently no derivatives in Bitcoin but there nothing but market appetite to stop them from coming along.  They fullfill a need and i expect alot of people wanting to capitalise on thier holdings in the future by writing options, rather than sell the bitcoins.

[Dr Bloggood]

Gold is hardcore manipulated, a big part of it is done with naked shorts. At least that's not possible with BTC, if I see it clearly.

Of course it is possible.  You can naked short anything, its normal shorts that are more difficult as it requires a third party to lend the underlying asset to be sold.  There are currently no derivatives in Bitcoin but there nothing but market appetite to stop them from coming along.  They fullfill a need and i expect alot of people wanting to capitalise on thier holdings in the future by writing options, rather than sell the bitcoins.

Can you clarify - how do I get naked shorts then? There has to be some minimum requirement, I can't just sit at home and draw them on paper for me to use.

[Dr Bloggood]

Why would all the customers withdrawing at once be a problem - is it because if they don't "have" BTCs, they don't have database entries representing BTCs either?

People who trade on exchanges tend to leave large balances sitting there for a long time. For an unscrupulous exchange operator this is the perfect opportunity to start playing fractional reserves.

Suppose you're an exchange operator and you notice that only 90% of the customer deposits never move (as in get withdrawn to an external bitcoin address). You could take half those deposits and do whatever with them (speculate on an other exchange, buy hookers and blow, anything) and your customers won't notice until too many of them try to withdraw and you don't have enough bitcoins any more to comply.

Thanks for your explanations, I learned something there!

[pening]

Can you clarify - how do I get naked shorts then? There has to be some minimum requirement, I can't just sit at home and draw them on paper for me to use.

  really?  At a minimum you need a contract to sell an asset in the future.  If the selling party doesn't hold the asset or an option on the asset to cover the trade, its naked.  If they have borrowed the asset or brought an option to cover, its not.  Maybe reading some material on how financial markets work would help, rather than conspiracy sites that say what they think JP Morgan is or isn't doing.

[Dr Bloggood]

Well, I'm so glad I have you.

[allthingsluxury]

Of course, if their intent is pure manipulation, not necessarly for profit.

[Dr Bloggood]

Of course, if their intent is pure manipulation, not necessarly for profit.

Why would the powers to be be unable to get profit out of their manipulation - please elaborate!

[Dr Bloggood]

With Bitcoin, the playing field is leveled. Everyone plays by the same rules.

You don't need to be a member of a special club (or pay a member of a special club) to get involved.

But the special club has the knowledge and the financial means to let things go a bit more its way...

[Meuh6879]

they trade database entries that represent bitcoins (and USD).

  well ... when i have 5 BTC in my wallet on my bitcoin-QT sofware ... it's not a database.

it's the real life.

bitcoin will survive again "massive selling" ... because people don't do this.
the industrial computing of traders do this.

[justusranvier]

well ... when i have 5 BTC in my wallet on my bitcoin-QT sofware ... it's not a database.

Exactly.

Until you withdraw from an exchange to your own wallet you don't actually have bitcoins - you have some company's promise to give you bitcoins on demand.

It's far easier to break a promise than it is to break cryptography.

[BitchicksHusband]

And all the withdrawal delays on Gox suggest that they are ALREADY using a large amount of fractional reserve.  It's a little foolish to think they're not.

[Meuh6879]

It's far easier to break a promise than it is to break cryptography.

OK, right ... if you use SEPA and "long and poor delay" to wire money.
That why i use the "more" fast method of virwox ... but restricted by fee and amount of money.