Topic: [2017-08-07] Bitcoin Wrestles With Spoofy the Trader (Read 2509 times)
I have noticed an increase of massive orders popping up to briefly push the market into a certain direction, which allows its trader to scoop up a tiny profit margin in a very short time, or to unload a certain number of coins at one price range. In 99% of the cases when a large order pops up, you'll instantly see bots place buy orders on top that larger order, and that's exactly what these traders are aiming for. If you kept an eye on the orderbook of Bitfinex, you from time to time would have seen 2000BTC buy and sell orders pop up, where they later get withdrawn without anyone having bought or sold into that large order.
Bitcoin has hit a new record of more than $3,300. Just another day at the office for a crypto-currency that's risen 50 percent in one month, 200 percent in six months and 30,000 percent in five years.
But the surge tells us more about the speculative games being played by Bitcoin traders than its future as a credible method of exchange. With the currency's rules going through some potentially big changes, volatility and complexity are increasing. Bitcoin might be more valuable but it's not getting any less risky.
The latest price jump has the hallmarks of a kind of relief rally, as traders bet it can ride out those changes to its underlying market structure.
The launch this month of an offshoot called Bitcoin Cash was one test. It was designed to fix many of the technical issues hampering the broader adoption of Bitcoin, but its price has gone south even as Bitcoin's has kept rising. That reassures those faithful to the core Bitcoin currency.
This is only a prelude to an even deeper potential split, driven by two competing visions of how Bitcoin should handle bigger transaction sizes. So the past week's price moves have soothed fears about a shock to the biggest crypto-currency out there.
Outperformer
Yet the early response to Bitcoin Cash shows us how labyrinthine and erratic this world can be, with exchanges and investors behaving in unpredictable and inconsistent ways. The Coinbase exchange, for instance, said it wouldn't support Bitcoin Cash. That prompted users to withdraw their holdings from Coinbase and led to 12-hour withdrawal delays, according to reports.
The rival Bitfinex platform, meanwhile, supported Bitcoin Cash and even came up with a solution to help Bitcoin short-sellers. But it found itself attacked by "large-scale manipulation tactics" from traders who sniffed the opportunity to get Bitcoin Cash for free, as Bloomberg View colleague Matt Levine noted.
These kind of antics explain why Bitcoin is becoming ever more volatile, even if the price is rising. Its 30-day volatility index is at its highest since early 2015, according to Bloomberg data. Being forced to move Bitcoins from one exchange to another and working out what to do with a fresh influx of Bitcoin Cash won't do much for price stability.
More Volatile
Bitcoin 30-Day Volatility Index is at its highest since 2015
There are also fears that big traders are having an undue influence on the price of Bitcoin, with one blogger flagging the actions of "Spoofy" -- a nickname for traders who apparently place million-dollar orders without actually executing them. Bitcoin is essentially unregulated, so risks are abundant.
Still, plenty of people are willing to bet Bitcoin will just keep on rising. They may be right. But if volatility goes up too, that won't help its take-up in the real world.
The changes being made to Bitcoin are meant to speed up transaction processing times, which are acting as a deterrent to the currency's wider adoption, though they haven't been implemented yet. While Spoofy and his or her chums might be having fun, that's not so reassuring for those wanting something more solid.
https://www.bloomberg.com/gadfly/articles/2017-08-07/bitcoin-has-a-spoofy-problem
But the surge tells us more about the speculative games being played by Bitcoin traders than its future as a credible method of exchange. With the currency's rules going through some potentially big changes, volatility and complexity are increasing. Bitcoin might be more valuable but it's not getting any less risky.
The latest price jump has the hallmarks of a kind of relief rally, as traders bet it can ride out those changes to its underlying market structure.
The launch this month of an offshoot called Bitcoin Cash was one test. It was designed to fix many of the technical issues hampering the broader adoption of Bitcoin, but its price has gone south even as Bitcoin's has kept rising. That reassures those faithful to the core Bitcoin currency.
This is only a prelude to an even deeper potential split, driven by two competing visions of how Bitcoin should handle bigger transaction sizes. So the past week's price moves have soothed fears about a shock to the biggest crypto-currency out there.
Outperformer
Yet the early response to Bitcoin Cash shows us how labyrinthine and erratic this world can be, with exchanges and investors behaving in unpredictable and inconsistent ways. The Coinbase exchange, for instance, said it wouldn't support Bitcoin Cash. That prompted users to withdraw their holdings from Coinbase and led to 12-hour withdrawal delays, according to reports.
The rival Bitfinex platform, meanwhile, supported Bitcoin Cash and even came up with a solution to help Bitcoin short-sellers. But it found itself attacked by "large-scale manipulation tactics" from traders who sniffed the opportunity to get Bitcoin Cash for free, as Bloomberg View colleague Matt Levine noted.
These kind of antics explain why Bitcoin is becoming ever more volatile, even if the price is rising. Its 30-day volatility index is at its highest since early 2015, according to Bloomberg data. Being forced to move Bitcoins from one exchange to another and working out what to do with a fresh influx of Bitcoin Cash won't do much for price stability.
More Volatile
Bitcoin 30-Day Volatility Index is at its highest since 2015
There are also fears that big traders are having an undue influence on the price of Bitcoin, with one blogger flagging the actions of "Spoofy" -- a nickname for traders who apparently place million-dollar orders without actually executing them. Bitcoin is essentially unregulated, so risks are abundant.
Still, plenty of people are willing to bet Bitcoin will just keep on rising. They may be right. But if volatility goes up too, that won't help its take-up in the real world.
The changes being made to Bitcoin are meant to speed up transaction processing times, which are acting as a deterrent to the currency's wider adoption, though they haven't been implemented yet. While Spoofy and his or her chums might be having fun, that's not so reassuring for those wanting something more solid.
https://www.bloomberg.com/gadfly/articles/2017-08-07/bitcoin-has-a-spoofy-problem
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