Manipulating the bitcoin market

Bitcoin exchange markets

Lets talk a little about the recent market movements which have been spotted on both BitFinEx and BTC-E – recently in an article on Reddit where Josh Rossi from BitFinEx tried to explain what was happening on the market and some of the ‘speed bumps’ this trading platform had implemented to try to stop people who were purposefully attempting to manipulate the market for profits.

Regrettably BitFinEx is one of the few platforms which has pro-actively tried to slow down bad minded people from doing this and as a result a lot of these same players in the market have moved to different platforms/exchanges to continue to shift the price down.

In a quote from a Redditor MrMadden which has some nice accuracy he explains why we have to adapt to this manipulation through awareness:

“Bitcoin trades on many exchanges where buyers and sellers are matched very quickly. These markets are essentially the same environments where stocks, bonds, commodities, and currencies trade.

lingerie_dr_evil_surgeryThere are thousands of incredibly smart people who do nothing but build computer programs to exploit prices and profits on open markets. When “news” breaks, like Dell taking bitcoin, or ebay talking about bitcoin, someone already cheated and bought bitcoin on that news, bringing the price up long before the public knew. Even with an SEC monitoring stocks, this is assumed in stock markets. There are no such rules for bitcoin.

This is why there is an old addage amongst those who trade, “don’t trade on the news”.

In fact, many make their living doing the opposite. Using the “news” as what’s called a “contrarian indicator”. Meaning, good news = sell, bad news = buy. This strategy naturally takes advantage of people who don’t know any better, and panic sell on bad news, or buy on good news.

There are trading algorithms that sense market depth. Depth is how many buyers or sellers there are at certain price levels. These algorithms know that if they sell enough or buy enough to punch through certain levels, it can move the price far without much money. This makes people panic, sell or buy more, and reinforce the trend. The programs then can cover their position, but with the other fools jumping on the trend, they can cover their position at a steep profit, and make another profit when the price swings the other way.”

bitcoin-whaleAs you read above – he touches on the human element (emotion) being exploited for personal gain through ‘good’ news on the media and the same for ‘bad’ news. In light of what we have been observing in recent times and if you have a peek at the historical charts of bitcoin. You may form a correlation between the dips and rises in the market, dates which reflect good and bad news being posted have the same trend which was discussed in the article above. Which raises a question that most people do not wish to see at this point – Can bitcoin the currency be prone to manipulation by a BTC WHALE – Given the relatively small market cap of this infant currency and the supply/demand ratios, bot technology, low adoption/awareness the answer is a firm YES.

Regrettably the people who manipulate the currency with such a blinded lust for coin completely overlook how much they impede the over all adoption of the people who are less educated in this space. The average consumer just sees the wild volatility and say “Nah I’m good ill just keep my fiat thanks.” By attempting to make a quick buck you guys really undermine where we could have been by now and make it easier for more bad actors to enter the space and try to slow down our progress.

The plus side is people who are now becoming educated in this space have a chance to ‘buy in’ the four hundred range as opposed to the 1000′s which is good for wealth distribution.

We realize that buying bitcoin is extremely cumbersome for the average Joe, add to that the understanding of how to use it and store it safely just makes the pursuit of it not worth the stress in their minds. We are putting things in place to make the acquisition of BTC easier and we are very excited about the promise this holds for the overall use and understanding of what this application of the block chain technology can do for a lot of people.

rip-current-flag-bigPlease note guys – Rather than throw our hands up in the air and yell doom and gloom, we prefer a pro-active approach which works in tandem with the people who are manipulating this fledgling application of block chain tech. In simpler terms… If you see the current about to change and you get caught in a rip tide.. Don’t try to swim against it or you will drown. Just go with the flow and await more mass adoption and overall market growth which will ease these wild volatile rides (I know some people who genuinely enjoy the ride lol)