Selling short in an exchange...the biggest scam of all

[sonysasankan]

I mean Im failing to see how the "conspiracy" works... how is someone able to say fix the price of Asia Coin to 1500? How are they able to stop buyers from posting a sell of 1600? How are they stopping a buy of 1600?

They can't.

Imagine though, if you were able to short sell any crypto coin. Do you think there would be times when the odds were so much in your favour that you make a profit by doing so?

Imagine say, as an obvious example, that the US government came out and said they were going to prosecute any person who used Bitcoin. You would probably make money if you short sold Bitcoin at that time.

That's what I'm saying.... the news is not secret right? Everyone gets the news. Everyone is selling. How is this guy making money from that? He will not have other's BTC because all of them would have sold it for other coins or USD.

[adhitthana]

Ya, but what's in it for the exchange owner if he allows someone to do that?

He is hoping to get more fees. Or he could be cutting a profit share deal.  

Not to mention they need to have access to all the exchanges that particular coin is trading at right?

No. But they do from what I know

And not just that, how is the "deep pockets" going to make money from this whole thing?

Because most crypto players are small fish. Enormous amounts of money have been spent working out when it is most advantageous to sell short by people with very deep pockets. Now those methods are being used to trade coins.

If he using other people's BTC to buy Asia coins, its basically visible to others and they too will buy those Asia coins.

What I'm suggesting is happening is this. They identify a weak coin, lets say AUR. They short sell AUR from the hot wallet, and all the way down short sell then when it falls, buy it back, then when the price pops up they sell again, then buy back when it falls.
This is how one makes money in a falling market...but....but... no one else can do this as they can't sell AUR short.

Everyone else has to buy first and then sell. But if the market is falling you still lose.

[adhitthana]

That's what I'm saying.... the news is not secret right? Everyone gets the news. Everyone is selling. How is this guy making money from that? He will not have other's BTC because all of them would have sold it for other coins or USD.

No...not all of them would have sold. Not everyone who has BTC in an exchange will sell on bad news. There would still be some left for the short seller to use.
So if the price is going down...the only person who makes money is the short seller.
No one else can make money. Because the price is falling

[dyask]

Exactly... please explain what a short sell and what a hot wallet is? Preferably without using these terms? Please... I am a noob  

EDIT: A good way to know if you understand a concept or an idea fully is to see if you can make someone else understand it.

When we put our coins into an exchange, most of them should be stored offline in a "cold wallet", As they are offline they can't be stolen.
Some coins however are stored in a "hot" wallet, or an online wallet, where they can be quickly accessed for trading.

But in a hot wallet they are vulnerable to being stolen. Several exchanges have recently had coins stolen. These coins were stolen from the hot wallet, or online wallet. The ones in the cold wallet were safe.

Short selling is selling something you don't own (probably in the hope of buying it back cheaper). It is common in share markets. But selling from a hot wallet is very different. In a share market you arrange to borrow the shares, which means you enter into a contract with the custodian or owner of the shares. So if you have loaned the shares you cant sell them. But the owner or custodian knows this.

If an exchange is allowing one player to sell other peoples shares from the hot wallet, then there is no arrangement involving the actual owner. The "owner" doesn't even know the exchange is doing this.
So if the excahnge allowed someone to short sell from the hot wallet then, if enough people try to withdraw their shares the pool will run dry.
 

Ok so that basically is how a bank works right?

Not really the same as a modern bank.  An exchange can allow short selling and still maintain 100% reserves.  It does this by limiting how much can be sold short.   A bank though often doesn't maintain 100% reserves.   If it maintains 10% reserves, it can loan out 90% of the money you deposit and then they do some funny accounting counting your 10% as a full 100% deposit and counting the 90% as 90% they had to loan making look like they had 190% of the deposit before they made the loan.   If it sound complex, it is.  Most US dollars are created this way.   With fractional reserve lending, money is created with it is loaded out and when you play back the loan you are actually destroying this created money.  

Short selling doesn't create any new assets.   A bank on the other hand uses fractional reserve lending to create money out of nothing.   If you want to look for scams that is a good place to start.   This robs everyone by inflating the money supply.   Everyone's money is worth less when a new loan is made using factional reserve banking.    

Edit: Here is a video that shows how fractional reserve lending works (about 6 minutes in) plus a whole lot more:  https://www.youtube.com/watch?v=iFDe5kUUyT0
(Hidden secrets of money ep #4)  I don't agree with their gold agenda, but that is pretty limited in this video and it is kind of fun.    

[sonysasankan]

Exactly... please explain what a short sell and what a hot wallet is? Preferably without using these terms? Please... I am a noob  

EDIT: A good way to know if you understand a concept or an idea fully is to see if you can make someone else understand it.

When we put our coins into an exchange, most of them should be stored offline in a "cold wallet", As they are offline they can't be stolen.
Some coins however are stored in a "hot" wallet, or an online wallet, where they can be quickly accessed for trading.

But in a hot wallet they are vulnerable to being stolen. Several exchanges have recently had coins stolen. These coins were stolen from the hot wallet, or online wallet. The ones in the cold wallet were safe.

Short selling is selling something you don't own (probably in the hope of buying it back cheaper). It is common in share markets. But selling from a hot wallet is very different. In a share market you arrange to borrow the shares, which means you enter into a contract with the custodian or owner of the shares. So if you have loaned the shares you cant sell them. But the owner or custodian knows this.

If an exchange is allowing one player to sell other peoples shares from the hot wallet, then there is no arrangement involving the actual owner. The "owner" doesn't even know the exchange is doing this.
So if the excahnge allowed someone to short sell from the hot wallet then, if enough people try to withdraw their shares the pool will run dry.
 

Ok so that basically is how a bank works right?

Not really the same as a modern bank.  An exchange can allow short selling and still maintain 100% reserves.  It does this by limiting how much can be sold short.   A bank though often doesn't maintain 100% reserves.   If it maintains 10% reserves, it can loan out 90% of the money you deposit and then they do some funny accounting counting your 10% as a full 100% deposit and counting the 90% as 90% they had to loan making look like they had 190% of the deposit before they made the loan.   If it sound complex, it is.  Most US dollars are created this way.   With fractional reserve lending, money is created with it is loaded out and when you play back the loan you are actually destroying this created money.  

Short selling doesn't create any new assets.   A bank on the other hand uses fractional reserve lending to create money out of nothing.   If you want to look for scams that is a good place to start.   This robs everyone by inflating the money supply.   Everyone's money is worth less when a new loan is made using factional reserve banking.    

Ya I understand how the Fed and fractional banking works, but I dont understand how it can work for a crypto or a bunch of cryptos, that too when there are multiple exchanges. If someone is selling AUR at low prices and trying to bring the price down, they see that its not budging in another exchange. They will all pull out their AUR from the current exchange. At that point the shit should hit the fan when they get an error saying withdrawal is not possible right?

[adhitthana]

If someone is selling AUR at low prices and trying to bring the price down, they see that its not budging in another exchange. They will all pull out their AUR from the current exchange. At that point the shit should hit the fan when they get an error saying withdrawal is not possible right?

AUR was an hypothetical example. But its probably as good as any. Go and see the different AUR markets. How many of them are active. Probably only one.
Poloniex for example, which used to have half decent volume, now has  a very wide spread between buyer and seller. There is only one exchange really trading AUR in any size I think, though it is listed on many exchanges. So hypothetically that is a good example.

[dyask]

If someone is selling AUR at low prices and trying to bring the price down, they see that its not budging in another exchange. They will all pull out their AUR from the current exchange. At that point the shit should hit the fan when they get an error saying withdrawal is not possible right?

AUR was an hypothetical example. But its probably as good as any. Go and see the different AUR markets. How many of them are active. Probably only one.
Poloniex for example, which used to have half decent volume, now has  a very wide spread between buyer and seller. There is only one exchange really trading AUR in any size I think, though it is listed on many exchanges. So hypothetically that is a good example.

The part that isn't talked about in this thread is margin calls.   You typically get a margin call when you assets don't cover the loses and you have to make up the deflect or you will be liquated.  Often you get liquated anyway, it is a risk of going short.   However you could also get forced out of your short position if there are liquidity issues.

However, if there are not enough assets in the first place you won't be able to get the coins to go short in the first place.   This happens all the time with stocks, even very large companies.   There is typically a limited amount of shorting that can be done.   The rules very all over the place so I don't know what they would be for coin like AUR.   My guess is that it would be very hard to actually short AUR.   

[adhitthana]

  The rules very all over the place so I don't know what they would be for coin like AUR.   My guess is that it would be very hard to actually short AUR.  

You have a some experience with shorting stocks, under one specific type of arrangement,where you have to borrow the stock, by way of a contract, and put up a margin.
What I am suggesting is very different.

1. We all deposit our AUR (as an example) with and exchange (or buy them there).
2.Some of these AUR are pooled into a hot wallet.
3. One player, the market maker, is allowed to sell those coins (our coins) on the promise he will buy them back.

It is not difficult as you suggest....but extremely easy for the market maker to short sell. He doesn't have to deal with all the red tape you have to when you short sell a stock. When you short sell a stock you have to deal with all the regulations  from the lawmakers, and the loan provider, and the one who loans the stock.

Here under my scenario the market maker just has to have a deal with the exchange. A deal you are never informed about and which you don't know the details of. Possibly a deal against your best interest and that makes more money for the exchange at your expense.

[dyask]

  The rules very all over the place so I don't know what they would be for coin like AUR.   My guess is that it would be very hard to actually short AUR.  

You have a some experience with shorting stocks, under one specific type of arrangement,where you have to borrow the stock, by way of a contract, and put up a margin.
What I am suggesting is very different.

1. We all deposit our AUR (as an example) with and exchange (or buy them there).
2.Some of these AUR are pooled into a hot wallet.
3. One player, the market maker, is allowed to sell those coins (our coins) on the promise he will buy them back.

It is not difficult as you suggest....but extremely easy for the market maker to short sell. He doesn't have to deal with all the red tape you have to when you short sell a stock. When you short sell a stock you have to deal with all the regulations  from the lawmakers, and the loan provider, and the one who loans the stock.

Here under my scenario the market maker just has to have a deal with the exchange. A deal you are never informed about and which you don't know the details of. Possibly a deal against your best interest and that makes more money for the exchange at your expense.

You clearly have no idea what you are talking about.   Also, I've have shorted a lot more than a stock or two, I once ended up short $250k worth of QQQ (before it was QQQQ) from some options that were exercised early.   Many of my short positions were related to some form of option spread, most of which are far to complex to talk about here.  (Multiple long and short positions)

1) There isn't any red tape or paperwork.  It is simply a order gets filled or not.  Margin requirements are setup in advance and loans are automatic at known rates.  
2) Market makers actually have to follow the same rules, the advantage they have is access to cheaper capital if needed, know how much of an item is available for shorting and they are closely watching the order books  (typically a higher level of data that is show to end users).  They are also forced to take positions as that is their role in the market.  
3) I'm pretty sure there aren't really any market makers in something as tiny as AUR.
4) If shorting in crypto coins happens it won't matter what kind of wallet the coins are in, that isn't a factor.  It is a zero sum game. 

The rules were things like a short position can't be started on a stock with less then a $5 price, etc.  Very basic.  

Of coarse most crypto exchanges are currently unregulated, but in general if they are going to be able to stay in business they are not going to be doing wild things.   The most important measurement is if there is 100% reserve of coins.    There is always scams out there like MtGox.    

[adhitthana]

(snipping the irrelevant stuff where you try to big note yourself)  

3) I'm pretty sure there aren't really any market makers in something as tiny as AUR.

But how would you know? You don't have any relevant experience. Despite trying to constantly big note yourself

The rules were things like a short position can't be started on a stock with less then a $5 price, etc.  Very basic.  

Again this shows you don't know what you are saying. This rule only relates to one market you have traded a little bit. There are dozens of stock markets around the world with different rules.

Of coarse most crypto exchanges are currently unregulated, but in general if they are going to be able to stay in business they are not going to be doing wild things.  

Yes...this practice will lead to problems at some point....but not worry you're an expert, and you have safely assured us based on your limited experience, and big noting,  that it can't be happening.

[dyask]

(snipping the irrelevant stuff where you try to big note yourself)

Having experience vs you not have any?

Again this shows you don't know what you are saying. This rule only relates to one market you have traded a little bit. There are dozens of stock markets around the world with different rules.

I gave one example rule.   You are doing a good job of proving you don't have any valid arguments.   

[adhitthana]

How it works IMHO.

1.The computer program identifies a situation where it is likely that there are more sellers than buyers or that there are more people wanting to sell then to buy. Programmers have been studying this stuff for at least 20 years, trying to work out strategies to take advantage of this.

2. Having identified such a situation, they take our coins from the hot wallet and sell some (knowing there are sellers around if they need to cover)

3. If someone else puts a sell order in the screen, they immediately jump in front and offer some coins. Then they often place lots of orders behind that for smaller amounts, trying to put pressure on sellers without risking too much.

4.Then they begin to tick small sales at lower prices. Again creating a fasle impression that there is selling around. And trying to put pressure on other sellers.

If their original "guess" is right (and they don't have to be right always), they continue these tactics, trying to tick sales lower, to never let anyone else be the best seller, and to sel more.

Lower down they put a buy order in, which often enough gets filled as real sellers decide it is too hard to try to be the best seller or to sell higher up.

This strategy is probably one of the most fool proof ones around if you have the exchange owners permission to take other peoples coins from the hot wallet. And they don't have to get it right all the time, just to make more than they lose.

There is no other market in the world where one participant would have such an enormous advantage. This is because in most markets they have to compete with others who also can short sell, but with smaller cryptos (not BTC) they can be the only ones who profit from a coin falling in price.

This really is the greatest scam of all........

I spent most of my working life trading professionally for banks or other financial institutions, and am very familiar with these strategies

I just don't like seeing the crypto community being taken for a ride.

[dyask]

How it works IMHO.

1.The computer program identifies a situation where it is likely that there are more sellers than buyers or that there are more people wanting to sell then to buy. Programmers have been studying this stuff for at least 20 years, trying to work out strategies to take advantage of this.

2. Having identified such a situation, they take our coins from the hot wallet and sell some (knowing there are sellers around if they need to cover)

3. If someone else puts a sell order in the screen, they immediately jump in front and offer some coins. Then they often place lots of orders behind that for smaller amounts, trying to put pressure on sellers without risking too much.

4.Then they begin to tick small sales at lower prices. Again creating a fasle impression that there is selling around. And trying to put pressure on other sellers.

If their original "guess" is right (and they don't have to be right always), they continue these tactics, trying to tick sales lower, to never let anyone else be the best seller, and to sel more.

Lower down they put a buy order in, which often enough gets filled as real sellers decide it is too hard to try to be the best seller or to sell higher up.

This strategy is probably one of the most fool proof ones around if you have the exchange owners permission to take other peoples coins from the hot wallet. And they don't have to get it right all the time, just to make more than they lose.

There is no other market in the world where one participant would have such an enormous advantage. This is because in most markets they have to compete with others who also can short sell, but with smaller cryptos (not BTC) they can be the only ones who profit from a coin falling in price.

This really is the greatest scam of all........

I spent most of my working life trading professionally for banks or other financial institutions, and am very familiar with these strategies

I just don't like seeing the crypto community being taken for a ride.

About how the programs work you are probably correct in some cases.    However, there isn't any taking of coins out of a hot wallet.   The wallet is just for deposits and withdrawals, it is all just accounting.   There isn't an moving of coins in/out of the exchanges, that is a very slow operation.   You need to learn how crypto currencies really work.  

As for it being a scam ... Why to you think seats on a real exchanges were worth so much before everything was computerized?  As long as people get the orders they wanted executed at the prices they wanted, it shouldn't be considered a scam to provide liquidity.   The profit margins here are extremely tiny so it is most unlikely this is going on yet with crypto currencies.   It happens all the time with stocks in large companies though.  

[sonysasankan]

How it works IMHO.

1.The computer program identifies a situation where it is likely that there are more sellers than buyers or that there are more people wanting to sell then to buy. Programmers have been studying this stuff for at least 20 years, trying to work out strategies to take advantage of this.

2. Having identified such a situation, they take our coins from the hot wallet and sell some (knowing there are sellers around if they need to cover)

3. If someone else puts a sell order in the screen, they immediately jump in front and offer some coins. Then they often place lots of orders behind that for smaller amounts, trying to put pressure on sellers without risking too much.

4.Then they begin to tick small sales at lower prices. Again creating a fasle impression that there is selling around. And trying to put pressure on other sellers.

If their original "guess" is right (and they don't have to be right always), they continue these tactics, trying to tick sales lower, to never let anyone else be the best seller, and to sel more.

Lower down they put a buy order in, which often enough gets filled as real sellers decide it is too hard to try to be the best seller or to sell higher up.

This strategy is probably one of the most fool proof ones around if you have the exchange owners permission to take other peoples coins from the hot wallet. And they don't have to get it right all the time, just to make more than they lose.

There is no other market in the world where one participant would have such an enormous advantage. This is because in most markets they have to compete with others who also can short sell, but with smaller cryptos (not BTC) they can be the only ones who profit from a coin falling in price.

This really is the greatest scam of all........

I spent most of my working life trading professionally for banks or other financial institutions, and am very familiar with these strategies

I just don't like seeing the crypto community being taken for a ride.

What you are saying makes sense if there is only one exchange in the world. Lets imaging this happening with AsiaCoin in polonix. People from Mintpal will flock in to buy the creap coins. The people from Poloniex will see the prices in mintpal are not going down like it is in Poloniex. They will all withdraw their money and go to Mintpal to sell it. That withdrawal cannot technically happen when this guy is "shorting" right? With three exchanges, it is next to impossible to do this unless this fellow is in control of all the exchanges.

[adhitthana]

What you are saying makes sense if there is only one exchange in the world. Lets imaging this happening with AsiaCoin in polonix. People from Mintpal will flock in to buy the creap coins. The people from Poloniex will see the prices in mintpal are not going down like it is in Poloniex. They will all withdraw their money and go to Mintpal to sell it. That withdrawal cannot technically happen when this guy is "shorting" right? With three exchanges, it is next to impossible to do this unless this fellow is in control of all the exchanges.

It works where there is one exchange that does most of the volume for a coin.

As I mentioned AUR could be a good example as most of the volume happens at 1 exchange. Same with Darkcoin. Most of the volume happens at 1 exchange. Both of these coins are active and popular enough for this strategy to work.
Asiacoin would be marginal at the moment.

For the last 20 years these types of strategies have been perfected. These outfits don't just randomly trade any old coin. They can with their computers analyse every market, and make "guesses" about where any one of dozens of different strategies might work.

If the circumstances suiting this strategy arise WRT Asia coin, the program will notice it.

There is no other reason that "bots" would deliberately try to force a price down. Pressuring a price down is what these programs have been designed to do when one is short....not at any other time.
So the obvious question is..why would a bot be trying to get the price down?

these trading systems are designed to be predatory...they examine all the data...they examine it in the light of what systems have been shown to work over many many hours of trading....then when the ducks line up they initiate the strategy.
If the exchange gives them the capacity to short sell 50,000 AUR...then you wont beat them...their pockets are too deep. They will win enough of the time

[adhitthana]

About how the programs work you are probably correct in some cases.    However, there isn't any taking of coins out of a hot wallet.   The wallet is just for deposits and withdrawals, it is all just accounting.  

Don't be silly. We have seen recently at Mt Gox, C-cex, Poloniex and Cryptorush that coins were stolen out of the hot wallets. If someone can steal coins from that pool of coins then a market maker can short sell them from there too

[dyask]

About how the programs work you are probably correct in some cases.    However, there isn't any taking of coins out of a hot wallet.   The wallet is just for deposits and withdrawals, it is all just accounting.  

Don't be silly. We have seen recently at Mt Gox, C-cex, Poloniex and Cryptorush that coins were stolen out of the hot wallets. If someone can steal coins from that pool of coins then a market maker can short sell them from there too

Yes coins can be taken *OUT* of an exchange from a hot wallet.   That is what a hot wallet is for, deposits and withdraws from an exchange or business.   Moving coins to/from a hot wallet is a very slow operation and wouldn't have anything to do with going short on a coin.   That is all just accounting and even on heavily traded stocks, you can only short a stock if your broker has shares of the stock available for shorting.    It all just accounting and the net sum of someone going short an asset is zero because the owe that asset back.   ( -1 + 1 = 0)  It is really that simple.  

You have made up some fruitcake scenario about hot wallets that is 100% nonsense.

EDIT:
I realize the message is falling on deaf ears ...
 
What coins are in an exchange and what is in hot wallets are not the same thing.   Typically a hot wallet will contain only some tiny amount of coins compared to the total amount of coins in the exchange.  Trading inside the exchange only results in balances being changed, not any actually movement of funds or coins.   Most money would be stored in banks and most coins would be stored in cold storage wallets.   

[adhitthana]

AUR just broke 0.0015. There has been a bot pushing the price down now for ages. They must be making quite a lot of BTC..if they are short. While the crypto community loses

[adhitthana]

Either way...there is a computer program employing a strategy that only makes sense if they have already sold short.....
And that means that the crypto community is being shafted.

You might not consider that an issue worth raising but I do.
There are computer programs trading some coins in a way that very clearly indicates that have short sold...and it's not a level playing field

[sonysasankan]

Personally I think you've got this whole "they're watching us" paranoia induced underdog worker vs CEO mentality. It makes everything seem like a conspiracy and be the ever lasting "i-told-you-so" fellow on that scenario that is always just around the corner. By giving the "environment" an impossible standard to live up to, you are fooling yourself info being content with failures and shortcomings. That's complete BS. I started trading with about 0.3 BTC about a month back, and through a series of deliberate moves of profits and losses, I'm holding a portfolio of about 5 BTC now. You just need to work hard on researching and looking for signs and snippets of news that you can use to your benefit. There are no bots pushing the price of AUR down. There are just simple people giving up on their hopes of AUR rising and using whatever BTC they get from selling to buy other alts.