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Author Topic: Trade Bot forcing price down  (Read 8713 times)
geebus
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September 27, 2011, 11:16:51 PM
 #1

It's taken a few month to verify that this is actually the case, but it appears as though there is a (read: possibly many) trade bot on most of the major exchangers that is continually forcing the markets to be low.

The bot functions by buying bitcoins at a low value and then selling them back for a minimum of 1 - 2 cents profit, and a max of no more than 30 cents, consistently undercutting other sellers by sometimes only fractions of a cent (a single digit, 8 - 10 digits after the decimal lower) on bids, and other times multiple cents at a time in order to insure that it's bitcoins are traded primarily above everyone else's, and that the markets stay relatively balanced at all times.

The bot is identifiable by it's consistent patterns in trading, bidding and asking for amounts that are constantly changing in line with each new trade posted in order to undercut other posters and continue to drive the prices down while maintaining a relatively small window of profitability for itself.

A few notes about it's behavior:
  • It wont bid for an amount higher than it's last trade unless other exchanges have dramatically increased in exchange rate.
  • It wont ask for an amount lower than what would cause it to still generate a profit, even if that profit is 0.0000000001 USD.
  • Easily identifiable by bids/asks with 5 to 10 digits following the decimal (ex: Asking 4.970209065 USD per BTC, bidding 4.76442 USD per BTC).
I believe this bot is the primary reason that the value of Bitcoin has maintained a low value and has not gone back up. I also believe that this bot has a large amount of BTC and/or USD behind it, which makes it very difficult to counteract it's movements in the market without a risk of significant personal loss.

If something isn't done to stop this bot from functioning, or to significantly impair it's advantage in speed to match that of what a person would be capable of doing (i.e. trades per minute) then it's only a matter of time before it forces BTC into the ground.

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September 27, 2011, 11:28:08 PM
 #2

Is TM behind that bot?

(I dont always get new reply notifications, pls send a pm when you think it has happened)

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September 27, 2011, 11:57:07 PM
 #3

Has it been identified how often is this bot trading?

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geebus
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September 28, 2011, 12:11:51 AM
 #4

Has it been identified how often is this bot trading?

The bot is always active, with only short periods of downtime per day (30 mins to an hour), and as far as I can tell, it is on most of the available exchanges.



This is a snapshot of the current trades on Tradehill from about 5 minutes ago. All the entries that I can verify are the bot are highlighted.

I can verify those entries by subtle manipulation. Clone the bid, or out-price them by fractions of a cent and almost as quickly as you can pull the trades from API again, it has you beat.


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TiagoTiago
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September 28, 2011, 12:19:36 AM
 #5

I wonder if once the operator notices the bot has been made they will tweak the behavior of the bot to try to make it appear as if the bot isn't there anymore...

(I dont always get new reply notifications, pls send a pm when you think it has happened)

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deslok
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September 28, 2011, 12:33:30 AM
 #6

well if it's trades can be identified the exchanges can locate it, unless it's a bot net then we have a diffrent mess on our hands altogether

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September 28, 2011, 12:34:16 AM
 #7

why would the operator even bother to stop this, they both earn $$. I could see the bots algorithm getting tweaked now that you've pointed it out though.

https://imcex.com// a totally worthless exchange, trade orders are fake
geebus
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September 28, 2011, 01:07:18 AM
 #8

well if it's trades can be identified the exchanges can locate it, unless it's a bot net then we have a diffrent mess on our hands altogether

I've already spoken with Tradehill about it. Their stance on the subject is that they don't want to hinder the free-trade aspects of the market, and I agree that the bot should not be banned, but implementing a delay between posting trades to more closely match what a human being could do from the web interface would eliminate it's [the bot's] ability to so greatly control the markets. I strongly believe that this bot is the primary cause of the decline, as well as the maintained low value of Bitcoins.

This effects the entire community, reduces the profits the exchanges are receiving, and greatly reduces the appeal of Bitcoins to new markets. No one wants to invest in something that shows a steady and consistent decrease in value.

I've made some moderate projections over the past 2 months that I've been researching this bot's activity, and based on the trades that were made and the bot controlling declines, as well as some assumptions of what the markets may have done had the bot not been there, I can estimate that the current value of bitcoin would be somewhere closer to $10 - $15 USD without the bot running.


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TiagoTiago
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September 28, 2011, 01:37:05 AM
 #9

Do you think this is intentional or is it an unexpected sideeffect of the algorithm and the operator is unaware of the connection?

(I dont always get new reply notifications, pls send a pm when you think it has happened)

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geebus
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September 28, 2011, 01:39:20 AM
 #10

Do you think this is intentional or is it an unexpected sideeffect of the algorithm and the operator is unaware of the connection?

I honestly don't know if it's intentional or just a side-effect of the design. I only know the cause and effect in the markets.

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September 28, 2011, 01:40:32 AM
 #11

Has it been identified how often is this bot trading?
I'm running a custom one on mtg, having no problems with it.

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September 28, 2011, 03:54:11 AM
 #12

this bot activity is not nice at all, have been observing it for few months already and say that i would be more inclined to support exchanges that limit high freq trades from same ip or take some kind of measures to balance trading with humans and bots on the same platform. This is my personal opinion

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September 28, 2011, 04:23:26 AM
 #13

Won't there always be at least one or two big exchanges that will still allow such usage?

(I dont always get new reply notifications, pls send a pm when you think it has happened)

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geebus
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September 28, 2011, 05:44:15 AM
 #14

Won't there always be at least one or two big exchanges that will still allow such usage?

If the bitcoin community as a whole could convince even the 2 largest exchanges (MtGox & Tradehill) to institute delays between trades, or some other countermeasure to bot activity, it would correct the issue.

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September 28, 2011, 07:15:42 AM
 #15

The bot functions by buying bitcoins at a low value and then selling them back for a minimum of 1 - 2 cents profit, and a max of no more than 30 cents.
So what's the problem? So someone has a trading bot that tries to make small profits on short term variations. That's legitimate. Some people are grumbling that someone else is better at short term trading than they are. Tough.

This bot shouldn't affect long term price trends much, since this bot apparently doesn't hold positions for long.  Unless it's a net buyer or seller, its effect over a day should cancel out.  Except, of course, that it's beating out inferior short term traders.
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September 28, 2011, 07:30:40 AM
 #16

I believe this bot is the primary reason that the value of Bitcoin has maintained a low value and has not gone back up. If something isn't done to stop this bot from functioning, or to significantly impair it's advantage in speed to match that of what a person would be capable of doing (i.e. trades per minute) then it's only a matter of time before it forces BTC into the ground.

Your analysis of the bot's behavior was objective, except for the above statements, which seem to be conclusions without grounding. It isn't possible for one bot to drive the price down, it can only stabilize it (unless it's simply dumping BTC and not buying any). Bots that look for small profits actually create liquidity, stabilize the market, and are a good thing IMO.

If you want to compete with a bot on speed, write your own - it isn't too hard. Or hire someone to do it for you. Bots and high frequency trading algorithms play a big role in standard financial markets; I see no reason to ban them or implement delays for them on bitcoin markets.

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September 28, 2011, 08:06:35 AM
 #17

I agree with bitfoo. Moreover, there is no significant difference between people and bots. The difference is only in level of automation of decision process and speed. Some people automate their analysis (for example use different indicators) but take decisions and make orders manually. Others write high frequency bots and don't care about long term analysis. Limiting bots doesn't make any sense. To my mind it is the same as forbidding to use graphs, indicators, excel, etc.

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September 28, 2011, 08:33:59 AM
 #18

I believe this bot is the primary reason that the value of Bitcoin has maintained a low value and has not gone back up. I also believe that this bot has a large amount of BTC and/or USD behind it, which makes it very difficult to counteract it's movements in the market without a risk of significant personal loss.

Website hacks, wallet.dat stealing malware, scammers/hucksters, and a single bot is the main reason for the low market value? Could you please elaborate more on why you think this one bot is the primary reason for that and not because of the fluctuations the market has had previous or people holding back on bitcoins?

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geebus
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September 28, 2011, 11:15:06 AM
 #19

I believe this bot is the primary reason that the value of Bitcoin has maintained a low value and has not gone back up. I also believe that this bot has a large amount of BTC and/or USD behind it, which makes it very difficult to counteract it's movements in the market without a risk of significant personal loss.

Website hacks, wallet.dat stealing malware, scammers/hucksters, and a single bot is the main reason for the low market value? Could you please elaborate more on why you think this one bot is the primary reason for that and not because of the fluctuations the market has had previous or people holding back on bitcoins?

Over the past few months I've personally witnessed the bot continually undercutting other trades in order to force the price of bitcoins lower. This isn't a matter of just simple trading, the bot is actually forcing the value of bitcoins lower by preventing sales at current market values, and dropping prices to force the markets lower.

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September 28, 2011, 11:25:25 AM
 #20

I noticed the bot too...

I think it is unintentional.

This bot, was designed to profit in USD, it works by buying BTC and selling it lower... It means that it constantly draws USD from the market, thus lowering BTC market cap.


Bot designed like that is not a problem... usually...

But this particular bot (or group of bots) have MASSIVE amounts of money, and with its 0.0000001 profits per BTC, it can still draw USD very quickly and heavily.

The problem is not the bots
The problem is not a "Manipulator"

The problem is both summed, in the form of a bot that CAN manipulate, and do it all the time to lower the price, plainly because it profits from selling lower...

Of course, that design means the author had no intention to hold BTC, it is quite probable that he does not give a shit, and will continue doing it until the market stagnates at the bottom or crash completely, then he will move on to another investment that allow bots...

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