Topic: If Pirate Runs: The Danger of one entity with 500K BTC - page 2. (Read 11492 times)

The problem is that anyone who understands this strategy can get the same profit he does without any of the expense.

Say the long-term, fair market value of bitcoins is around $10, and that's roughly where they would be if nobody manipulated them. To push coins above $10, you have to buy above $10. Anyone who understands your strategy can make you take a loss as you do this -- as big a loss as they want. To push coins below $10, you have to sell them below $10. Anyone who understands your strategy can make you take a loss as you do this -- as big a loss as they want.

Now, say you succeed. You push the price down to $7 and some people panic sell. Now, you have to compete with everyone who knows what you're doing for a share of the underpriced bitcoins. You have no special way to hog them. And say you push the price up to $13 and some people still buy. Now, you have to compete with everyone who knows what you're doing for a share of the better sale opportunity. You have no special advantage over everyone else.

Now, despite all this, you might still think you could make a profit. Maybe, because you know when and how much you're going to manipulate, that gives you an advantage. But the problem is this -- the further the price is from its natural price, the most it costs to move it and the easier it can return to its natural price. So while going from $10 to $11 might not be that expensive, going from $11 to $12 is much, much worse. Not only do you take twice as much loss on every bitcoin. But more people catch on that the price is significantly higher than it should be and more people are induced to sell. And the more easily it returns to its regular price.

I personally know several people who are just waiting for such a manipulation to be attempted and have the funds to profit from it. Any manipulator will have to make them as rich as he makes himself, and he will bear all the costs.

Many have tried this strategy. Billions have been lost.

No, the only implicit assumption I am making here is that he is able to drive the market up and down because of his clout and larger stash of cash. Each successful cycle would only increase his momentum. A failed cycle would signal the end of the attack. The key success factor is to start with a big enough cash reserve and solid nerves..

No, the only assumption is that he is able to drive the market up and down because of his clout and larger stash of cash.

That assumes he's the only one buying, though. He may be able to do this once, but when he tries it again (say next weekend) he'd find it harder to get away with.

As much as I would like to follow you, let me try to challenge your dismissal of the attack. Let's say George Soros sets aside 10 M USD to pump and dump bitcoins.
He pumps 500k bitcoins over a period of time when the price rises from 8 to 12 USD (buying @10 USD on average, spending 5 M USD). Then he dumps from 12 USD to zero (selling @ 6 USD average, getting 3 M USD). This first move cost him 2 M USD but now he can pump cheap bitcoins (starting at virtually zero) with 8 M USD in a second move.. Assuming he buys back at 5 USD on average (buyers are cautious because he has burned some), the remaining 8 M USD now yield 1.6 million BTC. Had he spent the 10 M USD upfront , he would have gotten only 1 million BTC (@ 10 USD average)..

So you're saying... he'll sell $1 of Bitcoin, sending the price down, then buy $1 of Bitcoin, sending the price up... and then he'll profit from that over and over?

Interesting business idea. Let me know how it goes.

There is zero danger of having one entity with 500k coins. The WORST outcome is if that person dumped all coins instantly. It would crash the price. Then what would happen? People like myself would buy up the cheap coins, the price would find some new stabilization level, and the "grave danger" would be gone. Someone with that many coins can crash the price, but only once. Problems solved.

It's a non issue.

That would be an incredibly generous gift to everyone who currently holds BTC.

What if pirate sent 500, 000 BTC to an invalid address? It's got to be the most extreme volatility you could subject the system to with that amount of coins. I do get that the 20.5 million BTC left will be worth more eventually, but the immediate aftermath of such an event would be more violent than any pirate antics so far (and easily exploited if he only destroyed some coins, as it would still give him BTC volume to make the market dance with).

You're missing the point... Even if I, or you don't play along with Pirate(s), others will. It seems like greed is in human nature, others have it more others less. Nevertheless Bitcoin's reputation is damaged every time something like that happens. If the people that don't know a lot, or anything, about Bitcoin, all they hear about it is scam, scam, scam, they will never want to use it.
Agreed though, that everyone should be more careful of Pirate(s).

There's a pirate every minute. Tom Williams, too. Nothing to do with Bitcoin specifically. They are junk merchants, except they don't exploit opiate addicts but greedy and lazy people. Same principles.  Bitcoin works, in many ways better than centrally-issued fiat, and that's what matters. Hell, if it didn't work, scammers wouldn't be using it. If you are worried about Pirate, simply don't play along. If you do play along, don't pretend like you care about Bitcoin.

People also tend to forget. So eventually it will be the same.

The only "danger" I see, is Pirate being "the government" or "the bank". A 51% attack on bitcoin to try to weaken or bring it down, would require too much funding. These operations though (all Pirate's operations), if shit hits the fan, could have a strong impact on people's trust on Bitcoin (usage, price, merchant adoption etc) providing at the same time a huge profit. No person could chase "the government" or "the bank" to "settle" the matter or even to just threaten them. Every time Bitcoin gains some popularity among users and merchants, a new Pirate appears... Repeat that for X number of times.

I know, I know.  BTW, has anyone looked in the lending forum?  If you happen to think Pirate will pay back, there are plenty of his lenders who seem to be less confident about that and are selling their accounts for super cheap.

There is zero danger of having one entity with 500k coins.

What do you think? 

Has anyone been paid back yet?

For bitcoin's sake, I hope Pirate doesn't return the money. Even if he pays out in full, anyone giving Pirate money took a huge risk. If that risk is rewarded, imagine how eager people will be to get in on the next big thing completely indistinguishable from a scam. It can only get worse if he pays out.

So you're saying... he'll sell $1 of Bitcoin, sending the price down, then buy $1 of Bitcoin, sending the price up... and then he'll profit from that over and over?

Interesting business idea. Let me know how it goes.

There is zero danger of having one entity with 500k coins. The WORST outcome is if that person dumped all coins instantly. It would crash the price. Then what would happen? People like myself would buy up the cheap coins, the price would find some new stabilization level, and the "grave danger" would be gone. Someone with that many coins can crash the price, but only once. Problems solved.

It's a non issue.