Topic: Selling short in an exchange...the biggest scam of all - page 3. (Read 4494 times)

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.

Having experience vs you not have any?


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

(snipping the irrelevant stuff where you try to big note yourself)  But how would you know? You don't have any relevant experience. Despite trying to constantly big note yourself
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.

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.

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.    

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.

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.   

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.

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?

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.    

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

He is hoping to get more fees. Or he could be cutting a profit share deal.  No. But they do from what I know
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.
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.

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.

Ya, but what's in it for the exchange owner if he allows someone to do that? Not to mention they need to have access to all the exchanges that particular coin is trading at right? And not just that, how is the "deep pockets" going to make money from this whole thing? If he using other people's BTC to buy Asia coins, its basically visible to others and they too will buy those Asia coins. Eventually, its gotta run out, and there will be others who will start to sell it for higher, but technically it should just disappear from his hot wallet because the deep pockets sold everything right? I mean how does that work? The market price corrects itself because of the other people keeping a watch on the prices.

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.

Yes. Except we put the coins in. They aren't the "owners coins". Though perhaps in the fine print the owner might have said "if you transfer coins to my site then I own them......suckers"  

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?

Ok so that basically is how a bank works right?

So basically every trader's wallet in an exchange is a hot wallet. Its not something exclusive to "deep pockets". Ok.

As for shorting, then basically its like a bet you are doing with the guy who runs the exchange owner. Or am I understand this wrong? Or is it like a loan you are taking out from the exchange owner and putting it for sale for a higher price, then buy it back when its lower and return teh BTC to the owner? So what this fellow's talking about is like a "previlaged" access to the owner's stash of gold coins to play with?

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.
 

Short selling is simply borrowing an asset and then selling it.  You pay it back by buying the asset back.   You are hoping the asset goes down in value more than your cost of borrowing it.

Hot Wallet is a wallet that coins can be quickly withdrawn from and deposited too.   Cold storage is typically offline and may take more than an hour to access, but it is safer.   A hot wallet is online and ready for use at any time.   When a hot wallet is empty it is typically refilled from a cold storage wallet.   

Cold storage just means it has never been online.   

Note you don't actually have to move an asset to short sell it, it can all be done by accounting.   Since short sold assets have to be bought back at some point, it is a zero sum game to the market in the long term.