A Theory on what pirateat40 is doing

[Raize]

A couple of things regarding the chart:
1. I still think it is more likely a Ponzi, I only made the chart to show how it could be done as a legitimate but still not legal investment scheme, because the issue was brought up. The two particular Bitcoin-based businesses that Pirate chose to implement very well could work hand-in-hand towards these ends, but it does not mean they *do* work to these ends.

2. I am not making the claim this is a couple million per week, I'm saying it could be a few million every couple of weeks. MtGox alone handled 11.5 million in the last 30 days. At least a handful of estimates stated BS&T handled ~300k coins. These are reasonable estimates based on other's estimates, I'm not manufacturing anything new with regards to the amount of money that could be cleaned via this manner.

3. The title of this thread contains the direction of the discussion, the chart is relevant towards such discussion. Giving pirate the right or wrong kind of attention is irrelevant to the chart.

4. Nearly everyone that has responded saying it is impossible he is doing this does not understand smurfing. Smurfing is exactly why no one ever asks any questions, and a compromise at this level is how a launder will eventually be "caught". Some recent smurfing methods don't even have the smurf know what they are doing, many of them think they are handling financial accounts for online "work-at-home" companies, you've no doubt seen these reports in the media. More info is here: http://money.howstuffworks.com/money-laundering2.htm

5. It doesn't have to be a huge cartel, but it could be, these guys have millions lying around accumulating, and they've tried real world laundering methods that do not work. They could easily try something Bitcoin-based and not be worse off, but yes, they would very much want more and more business, and it would explain why pirate was absolutely livid when people accused him of a Ponzi. Less interest in BS&T means less profit. But that said, it could just as easily be a Bitcoin hacker or hacking group laundering through him.

6. Many of the people complaining the most about MtGox->Dwolla delays seem to be miners, maybe some traders. Some mine at GPU Max, others do not. This is worth noting. The more recent the coin, the more scrutiny I would give to it being immediately sold on Mt Gox if I worked in law enforcement. I would especially be watching people who are withdrawing money from MtGox that have absolutely no technical or economic background at all if I thought this was an elaborate money-laundering scheme. And yes, a laundering scheme *has* to be at least somewhat elaborate, because if it isn't, it won't be profitable.

I just want to end on a final note where I again reiterate I don't necessarily think any money laundering is being done, but if I was asked to provide "clean" coin, this is exactly how I would have developed my system.

[adamstgBit]

I have a new theory!

Pirate is allowing ovr X million dollars of new money to enter the market below 10$ ( by keeping the price down as much as possible as he buys over 1 million coins )

once he's done his investors (wtv you wana cal them) will simply hold on to over 1million coins and watch the market naturally rise to over 50$ each!

[Serge]

I have a new theory!

Pirate is allowing ovr X million dollars of new money to enter the market below 10$ ( by keeping the price down as much as possible as he buys over 1 million coins )

once he's done his investors (wtv you wana cal them) will simply hold on to over 1million coins and watch the market naturally rise to over 50$ each!

genius

[smoothie]

I have a new theory!

Pirate is allowing ovr X million dollars of new money to enter the market below 10$ ( by keeping the price down as much as possible as he buys over 1 million coins )

once he's done his investors (wtv you wana cal them) will simply hold on to over 1million coins and watch the market naturally rise to over 50$ each!

If I had the money I would do the same. I would buy slowly over time.

[adamstgBit]

I have a new theory!

Pirate is allowing ovr X million dollars of new money to enter the market below 10$ ( by keeping the price down as much as possible as he buys over 1 million coins )

once he's done his investors (wtv you wana cal them) will simply hold on to over 1million coins and watch the market naturally rise to over 50$ each!

If I had the money I would do the same. I would buy slowly over time.

and you get someone with 500,000BTC on hand. and make a deal to have him help keep the price down with huge ask walls, as you buy slowly

it makes perfect sense, think about whats been happening on the market
some how the market was tricked into dumping 30,000coins at 6.55 ~200,000$

https://bitcointalk.org/index.php?topic=85687.msg966751#msg966751
the same huge buy small price bump has been happening for 2 months

the price actually dropped after that buy.
https://bitcointalk.org/index.php?topic=85687.msg970293#msg970293  <- 1 day after the big 6.55 bid wall gets sold into

look at the quot for that picture

"My wall was sold out? Oh, lets jut put another."

[adamstgBit]

they supported the market at 5$

they saw they had bought enough coins at 5$ so that if they hold them the market slowly rises

they Pump the price over 6$, and get huge wall after huge wall sold into

the market moves up, Huge ask walls are put in place to drive the price down again.

they Buy as much coins as they can at the lowest price they can push it down too

they are in it for the long term, and are playing smart

they won.

[Serge]

Adam, I had similar idea posted somewhere on the first page of this thread


It makes a lot more sense for big money to move in into bitcoin with slow strategy without effecting market much, and then ride it for interim profits with ability to purchase more at lower rates. The tricky part which is hard to figure out is re-buying what is owed to lenders.

[ArticMine]

Adam, I had similar idea posted somewhere on the first page of this thread


It makes a lot more sense for big money to move in into bitcoin with slow strategy without effecting market much, and then ride it for interim profits with ability to purchase more at lower rates. The tricky part which is hard to figure out is re-buying what is owed to lenders.

But why borrow 250000 BTC at 7% per week in order to do this?

[adamstgBit]

Adam, I had similar idea posted somewhere on the first page of this thread


It makes a lot more sense for big money to move in into bitcoin with slow strategy without effecting market much, and then ride it for interim profits with ability to purchase more at lower rates. The tricky part which is hard to figure out is re-buying what is owed to lenders.

But why borrow 250000 BTC at 7% per week in order to do this?

who borrowed 250000 BTC ?

[smoothie]

Adam, I had similar idea posted somewhere on the first page of this thread


It makes a lot more sense for big money to move in into bitcoin with slow strategy without effecting market much, and then ride it for interim profits with ability to purchase more at lower rates. The tricky part which is hard to figure out is re-buying what is owed to lenders.

But why borrow 250000 BTC at 7% per week in order to do this?

who borrowed 250000 BTC ?

I wanna borrow 250k btc!

[ArticMine]

Adam, I had similar idea posted somewhere on the first page of this thread


It makes a lot more sense for big money to move in into bitcoin with slow strategy without effecting market much, and then ride it for interim profits with ability to purchase more at lower rates. The tricky part which is hard to figure out is re-buying what is owed to lenders.

But why borrow 250000 BTC at 7% per week in order to do this?

who borrowed 250000 BTC ?

Is not 7% per week that pirateat40 is paying? As for the 250000 BTC that is approximately what it would take to drive the price down on MtGox to 1.80 USD to 1 BTC.

<proudhon> pirateat40, could you stop another "rally" if one were to ignite right now and buy up above $10?
<pirateat40> proudhon, i could take use to 1.80 if i needed to.

[adamstgBit]

Adam, I had similar idea posted somewhere on the first page of this thread


It makes a lot more sense for big money to move in into bitcoin with slow strategy without effecting market much, and then ride it for interim profits with ability to purchase more at lower rates. The tricky part which is hard to figure out is re-buying what is owed to lenders.

But why borrow 250000 BTC at 7% per week in order to do this?

who borrowed 250000 BTC ?

Is not 7% per week that pirateat40 is paying? As for the 250000 BTC that is approximately what it would take to drive the price down on MtGox to 1.80 USD to 1 BTC.

<proudhon> pirateat40, could you stop another "rally" if one were to ignite right now and buy up above $10?
<pirateat40> proudhon, i could take use to 1.80 if i needed to.

he needs all these coins to put put huge ask walls / sell some, when he needs the price to go down

[adamstgBit]

bitcoin broke a record yesterday

Most Volume in Currency in a 6 hour time frame

[CoinCidental]

It is a legitimate topic of discussion for the speculation board because if pirateat40 does get caught up in a short squeeze, he is a big enough player that it will have an impact on the price at least in the short term.

Here is a helpful tip:

1. Withdraw your money and profits with him (if you have any with him) ASAP.

2. Don't sell below $10 in the short term.

Here is another view on things  :

1. Move all your disposable cash to pirates 7.2% deal

2. Enjoy the interest rates while they last ,every 4 months  you double your outcome

3. If you are worried pirate will default ,withdraw the interest every week and invest it in something safer until you have 100 % of your stake back (then your only gambling with money
 you made from pirates "program " anyway )

If the wheels fall off ,pirate may return your coins or he may steal them but show me some deal that has no risk attatched and similarly enormous weekly  payouts  ? didnt think so.....

[ArticMine]

Adam, I had similar idea posted somewhere on the first page of this thread


It makes a lot more sense for big money to move in into bitcoin with slow strategy without effecting market much, and then ride it for interim profits with ability to purchase more at lower rates. The tricky part which is hard to figure out is re-buying what is owed to lenders.

But why borrow 250000 BTC at 7% per week in order to do this?

who borrowed 250000 BTC ?

Is not 7% per week that pirateat40 is paying? As for the 250000 BTC that is approximately what it would take to drive the price down on MtGox to 1.80 USD to 1 BTC.

<proudhon> pirateat40, could you stop another "rally" if one were to ignite right now and buy up above $10?
<pirateat40> proudhon, i could take use to 1.80 if i needed to.

he needs all these coins to put put huge ask walls / sell some, when he needs the price to go down

This is very true, but only for the last 7 months. Why? What changed in the market?

Let me explain: pirateat40 is fundamentally a bear. He has however built a business that involves selling BTC to his clients who are bulls. In order to run his business he needs an inventory of BTC estimated from more than one source to be say 250000 BTC. Now like any business he needs to finance his inventory. He has two choices:
1) Borrow USD
2) Borrow BTC
(1) is cheap; however he runs the risk of a sudden drop in the BTC price leaving him with a warehouse full of worthless BTC and 2.5 million USD in debt. Let us remember we are dealing with a bear here. So instead he chooses option (2) and pays a premium rate of 7% a week to borrow BTC. He has now effectively hedged his downward risk. If the price of BTC were to drop to zero tomorrow he can repay his lenders in the now worthless BTC together with the 7% per week interest also denominated in BTC.

Now when a buyer comes along he sells the buyer BTC from his inventory and then goes into the market buys back the sold BTC. He needs to generate say 10% a week in commissions in a flat market in order to pay his lenders and make a profit. This is actually not that hard to do. In a bear market July 2011 - December 2011 he makes an additional profit because he is effectively short the market between selling his BTC from inventory and buying them back in the market in order to replenish his inventory. Now in a bull market is where the situation starts to get interesting. I suspect he can tolerate a small rise in the market, but not a sharp sudden rise so he has to use ask walls in order to moderate a rise in the market and apparently has been doing this quite well for the last 7 months. There is a serious risk here. A long term well capitalized investor who does not mind paying a small premium say 10% - 15% over market comes is out of the blue and buys out his ask wall. Now he is effectively short not only the BTC sold to the client but also the BTC from the now sold ask wall in a rising market. This is when the fun and the real risk of a short squeeze starts.

There is no need here for a ponzi or any kind of money laundering to explain this theory.

By the way I have deduced all of this from pirateat40's own comments, the comments of both his supporters and detractors and correlating these comments with the historical market behavior, as part of my own due diligence on Bitcoin.

[Cluster2k]

Here is another view on things  :

1. Move all your disposable cash to pirates 7.2% deal

2. Enjoy the interest rates while they last ,every 4 months  you double your outcome

3. If you are worried pirate will default ,withdraw the interest every week and invest it in something safer until you have 100 % of your stake back (then your only gambling with money
 you made from pirates "program " anyway )

If the wheels fall off ,pirate may return your coins or he may steal them but show me some deal that has no risk attatched and similarly enormous weekly  payouts  ? didnt think so.....

You're assuming his scheme will last 4 months...  Are people seriously expecting a 7% return on their investment per week?  LOL

[conspirosphere.tk]

2. Enjoy the interest rates while they last ,every 4 months  you double your outcome

If you compound, you double the investment in 10 weeks (if you are lucky).
http://en.wikipedia.org/wiki/Rule_of_72

[CoinCidental]

Here is another view on things  :

1. Move all your disposable cash to pirates 7.2% deal

2. Enjoy the interest rates while they last ,every 4 months  you double your outcome

3. If you are worried pirate will default ,withdraw the interest every week and invest it in something safer until you have 100 % of your stake back (then your only gambling with money
 you made from pirates "program " anyway )

If the wheels fall off ,pirate may return your coins or he may steal them but show me some deal that has no risk attatched and similarly enormous weekly  payouts  ? didnt think so.....

You're assuming his scheme will last 4 months...  Are people seriously expecting a 7% return on their investment per week?  LOL

the fact is ,he is paying these rates at the moment and you are still free to walk at anytime with you coins + interest

how long it can last is anyones guess ,i believe market manipulation is a major factor and as long as pirate has an enormous  share of  BTC  then he can continue to apply the scheme for a while yet

(that doesnt mean im saying he wont run with all the coin at some stage ,just not yet     )

[Serge]

This is very true, but only for the last 7 months. Why? What changed in the market?

Let me explain: pirateat40 is fundamentally a bear. He has however built a business that involves selling BTC to his clients who are bulls. In order to run his business he needs an inventory of BTC estimated from more than one source to be say 250000 BTC. Now like any business he needs to finance his inventory. He has two choices:
1) Borrow USD
2) Borrow BTC
(1) is cheap; however he runs the risk of a sudden drop in the BTC price leaving him with a warehouse full of worthless BTC and 2.5 million USD in debt. Let us remember we are dealing with a bear here. So instead he chooses option (2) and pays a premium rate of 7% a week to borrow BTC. He has now effectively hedged his downward risk. If the price of BTC were to drop to zero tomorrow he can repay his lenders in the now worthless BTC together with the 7% per week interest also denominated in BTC.

Now when a buyer comes along he sells the buyer BTC from his inventory and then goes into the market buys back the sold BTC. He needs to generate say 10% a week in commissions in a flat market in order to pay his lenders and make a profit. This is actually not that hard to do. In a bear market July 2011 - December 2011 he makes an additional profit because he is effectively short the market between selling his BTC from inventory and buying them back in the market in order to replenish his inventory. Now in a bull market is where the situation starts to get interesting. I suspect he can tolerate a small rise in the market, but not a sharp sudden rise so he has to use ask walls in order to moderate a rise in the market and apparently has been doing this quite well for the last 7 months. There is a serious risk here. A long term well capitalized investor who does not mind paying a small premium say 10% - 15% over market comes is out of the blue and buys out his ask wall. Now he is effectively short not only the BTC sold to the client but also the BTC from the now sold ask wall in a rising market. This is when the fun and the real risk of a short squeeze starts.

There is no need here for a ponzi or any kind of money laundering to explain this theory.

By the way I have deduced all of this from pirateat40's own comments, the comments of both his supporters and detractors and correlating these comments with the historical market behavior, as part of my own due diligence on Bitcoin.

Very plausible explanation how it could be done without it being a ponzi.

[Cluster2k]

You're assuming his scheme will last 4 months...  Are people seriously expecting a 7% return on their investment per week?  LOL

the fact is ,he is paying these rates at the moment and you are still free to walk at anytime with you coins + interest

how long it can last is anyones guess ,i believe market manipulation is a major factor and as long as pirate has an enormous  share of  BTC  then he can continue to apply the scheme for a while yet

(that doesnt mean im saying he wont run with all the coin at some stage ,just not yet     )

If history is any guide then one of three things is likely to happen:

1) Interest decreases to a sustainable level as the market adjusts and reacts to the trader with all the coins.  This is the best case scenario.

2) The market moves against the trader in a way the trader didn't anticipate, realising a large loss of customer bitcoins.  Not everyone can be paid out.

3) The trader disappears / gets hacked / whatever and the customers lose their bitcoins.

If it sounds too good to be true, it probably is.  It's not really different this time.  It's not a new paradigm where all the old rules no longer apply.

Watching the market action with interest.