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Traders Are Talking Up Cryptocurrencies, Then Dumping Them, Costing Others Millions (wsj.com)
Dozens of trading groups are manipulating the price of cryptocurrencies on some of the largest online exchanges, generating at least $825 million in trading activity over the past six months -- and hundreds of millions in losses for those caught on the wrong side, according to a Wall Street Journal analysis. From a report: In a review of trading data and online communications among traders between January and the end of July, the Journal identified 175 "pump and dump" schemes involving 121 different digital coins, which show a sudden rise in price and an equally sudden fall minutes later.
A pump-and-dump scheme is one of the oldest types of market fraud: Traders talk up the price of an asset before dumping it for a profit and leaving fooled investors with shrunken shares. The Securities and Exchange Commission regularly brings civil cases alleging pump and dumps using publicly traded stocks. Manipulations of cryptocurrencies are no different, but regulators have yet to bring a case in the more opaque market for them. The SEC declined to comment.
A pump-and-dump scheme is one of the oldest types of market fraud: Traders talk up the price of an asset before dumping it for a profit and leaving fooled investors with shrunken shares. The Securities and Exchange Commission regularly brings civil cases alleging pump and dumps using publicly traded stocks. Manipulations of cryptocurrencies are no different, but regulators have yet to bring a case in the more opaque market for them. The SEC declined to comment.
Yep, you got it.
That's how the market works in a capitalist system, comrade.
You lost the money the moment you gave it to someone for cryptocurrencies.
Not to be overly harsh, but...
Who could have possibly anticipated that a virtual "monetary system", which has absolutely no controls or laws governing it, by design, could be manipulated in the simplest way possible, just so someone could make a few million dollars?
I guess the same incredibly naive people who come up with it in the first place, and also, thought that there was absolutely nothing wrong or fishy when valuation increases by thousands of percent *with no actual value being created*. Has absolutely everyone forgotten the years 1999-2002? That's rhetorical, of course.
NEWSFLASH: "A fool and his money..."
It's very well known that thinly traded or illiquid assets are especially vulnerable to market manipulation. There's a reason why stock market pump-and-dumps mostly happen in "penny" stocks.
This is not an argument for or against cryptocurrencies. It's something that can happen in any market.
Just who exactly do you think these "investors" are who are BILKING others? That's right. Bankers, or those in banker adjacent industries.
Regulation exists because an industry has proven themselves UNTRUSTWORTHY.
"Oh my God. This is terrible. This is the end of my Presidency. I'm fucked."; ~ Donald J. Trump
and when pressed they'll admit it's basically gambling that they can get out of the market and leave someone else holding the bag.
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the housing crash was caused by deregulation. Clinton (Bill) repealed a bunch of laws meant to prevent Mainstreet and Wallstreet banks from intermingling. That's how you got Credit Derivative Swaps that let them hide their losses.
Also, most of the houses foreclosed during the crash were investment properties. Besides a few high profile cases touted in the media there wasn't a lot of folks borrowing outside their means for their main domicile. Again, a lack of regulation made this possible as there was no regulatory oversight when people were borrowing for these investment properties. Banks weren't required to check ability to pay much or at all, which further inflated the bubble.
Donald Trump & the Republican lead Congress (with a bit of help from the right wing Dems) have further deregulated the banks and given them license to go back to the kind of lending and over-extending that caused the 2008 crash. On the plus side for Trump & Co he'll likely be out of office by the time the effects take place, just like how the Bush/Clinton deregulation got handed off to Obama to fix.
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Legalized fraud/theft/robbery is the core of the entire problem.
Except in this case, the "victims" volunteered to be robbed.
When the same work should be worth the same.
Compensation should be proportional to the value produced, not the effort expended.
The 1849 boom happened for a different reason. President Polk has just siezed California from Mexico. They needed to rapidly rush a lot of white Americans onto the land to occupy it for the U.S.
Welcome to crypto currency trading. Enjoy your stay.
Yeah! If those old ladies didn't wanna be mugged, what were they doing in the park?
Cry me a virtual river. One group of people stupidly buy that which doesn't even objectively exist, hoping to make money out of nothing, and then whine when they get ripped off.
These people were trying to create wealth out of nothing, evolving from action that really serves no one, helps no one, and accomplishes nothing. Bitcoin speculation is like you gambling on what number I'm thinking of, when you have to tell me what your guess was, before I tell you whether or not you were right, and unsurpisingly, you always lose. You can never prove what number I either was, or wasn't thinking of, and I have an interest (being the person you're betting against,) in picking a different number from the one you state.
If lotteries are taxes on people who are bad at math, then losses from speculating on Bitcoin (and any other so-called "cryptocurrency" or "virtual currency,") are taxes on idiocy. Despite being a relatively new thing, there are old quotes that apply perfectly to this situation, including such classics as "there's a fool born every minute," and "a fool and his money are soon parted..." and probably others but you get the idea.
Or maybe you don't get the idea, because you're the sort of person who is holding Bitcoins. I wish I could help but, besides pointing out the painfully obvious, I don't know how. Bitcoins are a poor investment because you're gambling on something that doesn't really exist.
The really sad part is the amount of environmental damage done by all the waste-heat from all the computers of all the morons trying to, for all intents and purposes, pray their way into wealth, and the amount of e-waste generated on computers that will never be put to any real, constructive purpose, and will likely ultimately end up in scrapheaps leaching toxic compounds into the world around them.
Our reign has gone on long enough. Indeed. Summon the meteors.
Voluntary exchanges and park muggings are totally the same. The people who made these trades were not coerced and if they value crypto currencies improperly that is their own fault. Would you feel any remorse for them over this or any other investment that turned out a loss through natural shifts in the market?
If people are buying into crypto currencies as a long term investment, this small dip should matter little in the long run. If these people were trying to make short term flips to make money, they are not so different from the people who scammed them. In your analogy they are just other muggers in the park who were themselves mugged.
Shutup, man. Stop trying to talk the market down. Given enough time, they'll bounce back. I'll ride this out and be rich. You'll see. You'll all see!
When they came for the communists, I said "He's next door. Take him away. Goddam commies."
Step 1: Buy a non-productive asset.
Step 2: Somehow miss the point that the asset is not productive and the any wealth gain one may receive is an equal wealth loss for someone else.
Step 3: Be surprised that sophisticated investors are wiping the floor with your HODL BEFORE I SODL nonsense.
I thought he was speaking Yiddish.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
Would you consider fraud to be just another voluntary exchange? Because pump and dump is a form of fraud.
If it's that easy to manipulate the system, then there's something wrong with the system..
isn't this what traders do? it's just that they now added cryptocurrencies to their playbook.
On a long enough timeline, the survival rate for everyone drops to zero.
And tomorrow the sun will rise at dawn.
This isn't anything new. This is what's been done on Wall St. for decades. Why would anyone be surprised that it's now being done on something else that's traded???
Just another day in Paradise
Legalized fraud/theft/robbery is the core of the entire problem.
Except in this case, the "victims" volunteered to be robbed.
No one volunteers to be robbed. There is fraud involved here. Surely you don't advocate lying and deception as a normal part of doing business.
When the same work should be worth the same.
Compensation should be proportional to the value produced, not the effort expended.
I would question how much value is really produced by pump and dump schemes. If I tell you that I am long on a security when I'm actually short, and convince you to join me in a long term investment, and then sell as soon as you make your investment, causing the price to drop, what value is produced?
"What the American public doesn't know is what makes them the American public." -Ray Zalinsky (Tommy Boy)
Voluntary exchanges and park muggings are totally the same. The people who made these trades were not coerced and if they value crypto currencies improperly that is their own fault. Would you feel any remorse for them over this or any other investment that turned out a loss through natural shifts in the market?
They were not coerced, but they were lied to. Fraud is illegal for a reason, and is not something to be defended just because someone didn't know they were being lied to.
If people are buying into crypto currencies as a long term investment, this small dip should matter little in the long run. If these people were trying to make short term flips to make money, they are not so different from the people who scammed them. In your analogy they are just other muggers in the park who were themselves mugged.
Being short on a security does not imply fraud or a scam. So no, they were not the same as the people who scammed them, just because they had a short term investment.
"What the American public doesn't know is what makes them the American public." -Ray Zalinsky (Tommy Boy)
Would you consider fraud to be just another voluntary exchange? Because pump and dump is a form of fraud.
No kidding. Apparently, to some on this board, being a "sophisticated investor" means being able to discern all fraud and dishonesty.
"What the American public doesn't know is what makes them the American public." -Ray Zalinsky (Tommy Boy)
If the park requires you to sign a clearly explained document that any money you have on you (and that you're welcome to put your money safely in a bank before you enter if you don't want to bring any) is forfeit the minute you enter the park, your example is exactly like stocks. Well, assuming the muggers ask nicely and the person capitulates, because you don't often hear about people beating each other up over a stock certificate.
So, are we now openly acknowledging that Wall Street is full of criminals and frauds? I mean, I'm cool with that; it means I don't have to tiptoe around the issue anymore. But I'm not sure everyone knows that you should expect to be fleeced when you invest your money. Quite a market we have, eh?
"What the American public doesn't know is what makes them the American public." -Ray Zalinsky (Tommy Boy)
Y'know, I understand there are criminal laws against pump & dump. You read about them when people talk about penny stocks (and all the freakin' spam we get to pump).
Wonder when someone's going to hit the traders with those charges?
This practice goes way back... see Proverbs 20:14.
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Most of you don't know what shorting security means. Is not a short term investment.
Shorting a security means borrowing shares now and selling them at a high price, hoping the price will come down by the time you have to pay for the shares you borrowed, so you can net the difference. Does that sound right? While this does not have to be a short-term investment, it usually is, because there is a set time by which you have to cover the shares you borrowed.
"What the American public doesn't know is what makes them the American public." -Ray Zalinsky (Tommy Boy)
A market is like anything else in life, jump into the sea without knowing how to swim and you'll drown.
So, yes? Is part of knowing how to swim in this analogy knowing that there are a lot of dishonest people in the investment industry?
"What the American public doesn't know is what makes them the American public." -Ray Zalinsky (Tommy Boy)
What do you mean, the experts say Bitcoin is now poised to test $8,500....
waaaah???!!!! Bitcoin plummetting to $6.2K today! Oh noes, my kid's college! my retirement!
oh wait, I don't own any of that crap