Topic: my theory about Mtgox fiasco (Read 1564 times)

Maybe I am uninformed well or my knowledge about Mt Gox and its story are outdated but my memory tell me that there were a hacking tentative in this company which has stolen thousand of bitcoins.

"Police suspect Mark Karpeles padded his bitcoin outstanding balance by illegally manipulating his company's computer system.

His Tokyo-based company, MtGox, suddenly stopped all trading in February last year and filed for bankruptcy. Karpeles announced that 650-thousand bitcoins, worth more than eight billion yen at that time, had disappeared.

He claimed the exchange collapsed after hackers stole most of his clients' Bitcoins. But police say most of the bitcoins held by the company were sent to another account.

Police believe Karpeles knows what happened to the virtual money." [emphasis added]
See: http://www3.nhk.or.jp/nhkworld/english/news/20150801_05.html

My theory about the Mtgox fiasco is this:

Karpeles used mtgox's clients (fiat /btc) deposits to manipulate the market. He probably was doing that with the help of bots. For example, if he wanted to increase the price he was "borrowing" fiat from mtgox's depositors and with that fiat he was buying btc, creating an uptrend. As more mtgox's clients were buying bitcoins there was a moment when the clients who had fiat in their accounts and wanted to buy bitcoins couldn't  because Karpeles had already bought bitcoins with their money. So, at that point Karpeles had to sell the bitcoins that he had already bought in order to give the Mtgox's clients fiat to buy also. ( this also explains the huge lag, he needed time to do this).

So this strategy should had given Karpeles a lot of profit because he was buying cheap bitcoins with borrowed money (which caused an uptrend) and when he was forced to sell bitcoins (which were more expensive) to cover his clients needs, he was selling less, so he had profit in bitcoins.
But this is not true because there is also one more parameter, the liquidity. When he was forced to liquidate bitcoins he might had to sell more bitcoins than he had bought if liquidity was very low.  So the extra bitcoins had to be created from thin air which caused a btc fractional reserve. Same logic applies if he wanted to create a downtrend with a fiat fractional reserve as a consequence.

this is our theory, based on the latest Gox investigations:

first Karples does not play a prominent role in it. Instead someone just found a possibility to create accounts with (fake) fiat money. He then bought LOTS of Bitcoin - that caused the raise last November - and chased them out.

With sources and a little bit more details here: http://blog.fairlay.com/2014/08/connecting-the-dots-a-possible-connection-between-the-raise-in-november-mtgox-disaster-and-recent-price-drop/

this is getting old, we should put mtgox behind us

he damn sure maniuplated the market. look at what the price went to, and now that no one is doing it, it geos back down to what it should really be.

My theory about the Mtgox fiasco is this:

Karpeles used mtgox's clients (fiat /btc) deposits to manipulate the market. He probably was doing that with the help of bots. For example, if he wanted to increase the price he was "borrowing" fiat from mtgox's depositors and with that fiat he was buying btc, creating an uptrend. As more mtgox's clients were buying bitcoins there was a moment when the clients who had fiat in their accounts and wanted to buy bitcoins couldn't  because Karpeles had already bought bitcoins with their money. So, at that point Karpeles had to sell the bitcoins that he had already bought in order to give the Mtgox's clients fiat to buy also. ( this also explains the huge lag, he needed time to do this).

So this strategy should had given Karpeles a lot of profit because he was buying cheap bitcoins with borrowed money (which caused an uptrend) and when he was forced to sell bitcoins (which were more expensive) to cover his clients needs, he was selling less, so he had profit in bitcoins.
But this is not true because there is also one more parameter, the liquidity. When he was forced to liquidate bitcoins he might had to sell more bitcoins than he had bought if liquidity was very low.  So the extra bitcoins had to be created from thin air which caused a btc fractional reserve. Same logic applies if he wanted to create a downtrend with a fiat fractional reserve as a consequence.

My theory about the Mtgox fiasco is this:

Karpeles used mtgox's clients (fiat /btc) deposits to manipulate the market. He probably was doing that with the help of bots. For example, if he wanted to increase the price he was "borrowing" fiat from mtgox's depositors and with that fiat he was buying btc, creating an uptrend. As more mtgox's clients were buying bitcoins there was a moment when the clients who had fiat in their accounts and wanted to buy bitcoins couldn't  because Karpeles had already bought bitcoins with their money. So, at that point Karpeles had to sell the bitcoins that he had already bought in order to give the Mtgox's clients fiat to buy also. ( this also explains the huge lag, he needed time to do this).

So this strategy should had given Karpeles a lot of profit because he was buying cheap bitcoins with borrowed money (which caused an uptrend) and when he was forced to sell bitcoins (which were more expensive) to cover his clients needs, he was selling less, so he had profit in bitcoins.
But this is not true because there is also one more parameter, the liquidity. When he was forced to liquidate bitcoins he might had to sell more bitcoins than he had bought if liquidity was very low.  So the extra bitcoins had to be created from thin air which caused a btc fractional reserve. Same logic applies if he wanted to create a downtrend with a fiat fractional reserve as a consequence.