TL/DR: The founder of Bitfinex has a history of supporting ponzi schemes and the exchange was founded using stolen "swiss-cheese" source code. Read the first quote. Don't trust them. There have already been arguments on here about whether or not Bitfinex is solvent in light of their recent and past issues, so I'll approach this from a different angle. Take a look here at the first few posts in this thread. Here we see the founder of Bitfinex, "unclescrooge" - Raphael Nicolle, defending one of the biggest Ponzi scammers in Bitcoin's history and demanding apologies from those calling it out (he recently deleted the post itself, but it was quoted by the next person): https://bitcointalk.org/index.php?topic=101345.0
INow that Pirateat40 closed down his operatations thanks to all the fud that was going on and growing on the forum, I expect everyone that spreads this fud, accused and insulted Pirate and the people that supported him to apologize. Not only did Pirate brought us a great opportunity for investors (once in a lifetime actually), he did help stabilise and grow steadily bitcoin price, volume exchange, and thus contributed to the success of bitcoin. For that, Pirate, I want to thank you. You've done a wonderful work, and I hope you're stay around here. Now, apologies on.
Here's some background on the pirateat40 Ponzi scheme for those unaware: https://motherboard.vice.com/en_us/article/lawyer-reveals-details-about-the-man-behind-bitcoins-45-million-ponzi-scheme So what does that mean? In the best case scenario, the founder of Bitfinex is a colossal moron who can't even identify a blatantly obvious ponzi scheme - and is certainly not someone you would trust with your money. Worst case scenario, he knew what was going on and was looking for more victims to feed the scam - again, not someone who you would trust with your money. Had I known about this history, I personally never would have put a dime on Bitfinex. Here's some more info on the origins of Bitfinex - the gist of it is that the exchanged was bootstrapped on the stolen, leaked, bug-ridden source code of Bitcoinica (an exchange that itself was mysteriously "hacked" and all the money disappeared): https://www.reddit.com/BitcoinMarkets/comments/2c4kkg/what_do_we_know_about_bitfinex/?st=j1o2gmfd&sh=28098796 There's much more to dig into about the exchanges history of bugs, incompetence, and questionable actions (example: https://www.reddit.com/Bitcoin/comments/36uxxz/bitfinex_has_been_hacked/crhcaov/). Oh, and remember that the owners see no issues with trading on their own exchange. There are many ways to take advantage of privileged info (stops and liquidations, bfx token trading, etc.) if an owner is dishonest, let alone more serious possibilities of fractional reserve and gambling with user funds. Someone who has no issues with ponzi schemes probably has no issues with the above, either. This is just the surface of issues discovered, others here have far more knowledge of the history of issues that I do. And a final parting quote for the next time you hear someone accused of spreading "FUD" about Bitfinex - here's another "unclescrooge" quote about those calling out pirateat40 as a scammer:
Fuck everyone that spreads FUD. You could have made great profits while helping stabilising bitcoin price. Now back to scammers at 2% a week and great volatility that make bitcoin look like a laughing stocks. Fuck you. At least now you'll look ridiculous, that's my only pleasure.
Bitfinex chapter, quick preview: an attempt to explain WTF. Doesn't include latest developments. Please nitpick.
Currently trying to do a non-shit cover for the book, which is actually a huge amount of work given I have no artistic talent whatsoever (though I'm OK at graphic design). So instead of doing that, here's what I have so far on a current rich seam of comedy gold! Please look over this and flag any inaccuracies or unclear bits. What they did is convoluted and confusing, and a good example of why bankruptcy laws exist, so we need to maximise clarity. The latest developments are not included, except the redemption. But OH BOY WILL SAID DETAILS BE FUN! Bitfinex: software competence turns out not to be optional If you’re not interested in mining or selling something to get bitcoins, exchanges unfortunately haven’t improved much since Mt. Gox. Bitfinex is one of the closer things Bitcoin has, or had, to a reputable exchange. Advocates liked and trusted it and enjoyed using it – it has margin trading and other fancy features – and recommended it to others. Its software turned out to be made entirely of copy-and-pasted cheese and string that nobody at all knew how to fix. This is quite typical of Bitcoin-related code and systems, as if financial software and systems had never happened. Bitfinex was based on the codebase from defunct exchange Bitcoinica, which was founded by sixteen-year-old Bitcointalk user “Zhoutong” and shut down after being hacked in 2012. One of Bitfinex's early developers described what the system was like when he had been working on it:
It has proved impossible to cleanly modularize and upgrade zhoutong’s spaghetti code. (Or if it is possible, Bitfinex technical team doesn’t know how to proceed.) In the current system, everything is entangled. There is no clean separation of concerns. They inherited this steaming shitpile of a codebase and they're stuck with it. Their legacy data model, as implemented in their current system is insane. The system was designed by a 16 year old FFS! Everything is ad hoc, there is no specification, there was zero documentation, there is minimal accounting for edge cases, exception handling was tacked on as an afterthought. There was no thinking things through. Everything is ad-hoc! Therefore it kinda works except when it doesn’t!
A Bitfinex representative responded stating that “a grand total of 0 lines from Bitcoinica's code exist on Bitfinex” (the site moved at least partially to the AlphaPoint platform in 2015), but the poster asked him to explain, if Bitfinex had an all-new codebase, how they had accurately reproduced bugs that dated back to Bitcoinica. The software problems were glossed over for years, because day traders are otherwise known as compulsive gamblers, and cryptocurrency day traders are the worst. I don’t often use the word “degenerate,” but if I did, they’re who I’d apply it to: reduced to a lizard brain, typing and clicking obsessively and watching for a number to change and provide a hit to the pleasure centre, all other mental and bodily functions atrophied. They make foreign exchange day traders look sober, considered and balanced. On 12 August 2016, nearly 120,000 BTC (then around US$60 million) was stolen from Bitfinex customer accounts. The accounts were secured with multiple signatures, including from third party agency Bitgo, but the hacker seemed to know Bitfinex’s systems and even overrode Bitfinex’s transaction limits. On many accounts, two of the three signatures were Bitfinex, and Bitgo routinely allowed all requests from Bitfinex because there were so many. Usually a theft of this magnitude heralds an exchange disappearing or shutting up shop with apologies, or the regulators noticing their existence and swooping in. In this case, as the supplier of gambling trading facilities not available elsewhere, Bitfinex felt there was sufficient demand for their services that a drastic action would be considered acceptable to their users. To wit: a 36% “haircut” for all customers. Depositors who had been hacked would be compensated with money from depositors who hadn’t. You might think that compensating your customers using money from other customers, while the managers or owners don’t take a hit in any way, would be grossly illegal in any reasonable financial system. Particularly as bankruptcies usually go creditors, then depositors, and equity holders last. But welcome to Bitcoin. Why on earth did the users put up with this? Secondly, because this was claimed to be the haircut they’d take if Bitfinex were to liquidate. (No, Bitfinex didn't show their working.) But firstly, because they were obsessive gamblers, desperate for more access to their strip mall casino. Bitfinex promptly went back up to No. 1 on the Bitcoin exchange volume charts, because Bitcoiners never learn. Bitfinex didn’t want its users to feel they’d been left high and dry. So it offered them Bitfinex tokens (BFX) for their losses, saying (though not guaranteeing) that they’d totally come through at some later date on these IOUs and reimburse the holders with their face value:
The token is a notional credit, is dependent on the Bitfinex Group’s recovery of Losses, and is subordinated to any claims against the Bitfinex Group not related to the Losses.
Meanwhile, you could trade these tokens – trading away your right to reimbursement if the stolen coins were recovered – and use them as collateral for financed trades! Only on Bitfinex, of course:
The token and your rights pursuant thereto may not be assigned except with notice to, and the prior consent of, the Bitfinex Group, on terms to be determined by the Bitfinex Group.
You might think this would constitute offering an unregistered security, but welcome to Bitcoin. The price for BFX dropped below its $1 face value even before release, opening at $0.80 and ending the day at $0.32. Bitfinex redeemed about 1% of the BFX in early September. As it happened, they had enabled margin trading on BFX one day before, and the price went up from $0.40 to $0.56 just before the announcement. Speculation was that they had paid for the 1% redemption using insider margin trading on the BFX itself, thus looking good for free, but I’m sure it was all just pure coincidence. Bitfinex was getting their customers coming and going, and keeping them coming and going. Around the time of the 1% redemption, 30% of trading on Bitfinex was BFX, which they collected trading fees on. Furthermore, the BFX tokens kept their customers on Bitfinex in the hope of a payout, rather than just cashing out and never coming back. In October, they came up with another layer on the scheme: the Recovery Right Token (RRT), for everyone who had converted their BFX for further gambling. Should any of the stolen coins ever be recovered, Bitfinex would first pay back the BFX holders who had not converted their BFX to something else, then pay back RRT holders with the remainder. That’s a made-up token on a made-up token on money they would normally have had to pay back. Convoluted arrangements like this are part of why bankruptcy laws, let alone financial trading regulations, exist: so that creditors and depositors get paid first and fairly in a clear and open manner, rather than having what they are owed obscured in fast-talking flimflam. In the meantime, Bitfinex set a financial and security audit in motion. Not by any such tawdry profession as actual accountants; they used “Ledger Labs Inc., a top blockchain forensics and technology firm,” which happens to be run by Vitalik Buterin, creator of altcoin Ethereum (of which more later). They also posted an open letter to the hacker, seeking “a mutually agreeable arrangement in exchange for an enormous bug bounty”, i.e., if only they would explain how they’d hacked Bitfinex: “Our interest here is not to accuse, blame or make demands, but rather to discuss an arrangement that we think you will find interesting.” It was entirely unclear to any observer what possible arrangement would be more interesting to the thief than “I have all your bitcoins now.” The stolen bitcoins are slowly being sold off through other exchanges. This is very like a bank accepting dye-marked notes known to have been stolen from another bank and deciding they don’t care. At least Bitfinex will never have to cash in those RRTs. In April 2017, Bitfinex announced they would finally redeem 100% of the BFX tokens for their $1.00 face value! This involves paying back the dollar value of the stolen bitcoins at the time of the theft – i.e., about half what it was by April. They also shut down all margin positions on BFX, putting users with insufficient collateral into debt to them (on a margin position on their own debt). The founder of Bitfinex, Raphael Nicolle, has never seemed to appreciate the problem financial regulators tend to have with schemes that pay early investors using money from later investors. He enthusiastically backed the Pirateat40 Ponzi – though at least he later apologised for that one – and came up with a high-yield scheme of his own:
So I'm thinking of the following plan: when I need more coins than I have to fill an order, I will ask everyone that previously “registered” with me to lend me some btc. After 7 days, I will return all of it, principal + 2% interests. For you to be contacted, you would have to post here or in PM to say you might lend me bitcoins, and approx. how many you'd be willing to lend me.
Nicolle has not been seen online since the 120,000 BTC hack. The Bitfinex hack does answer one common question about Bitcoin: “If you're so down on Bitcoin, why don't you short it?” “Well ...” 1 elux. Comment on “[Daily Discussion] Sunday, October 04, 2015”. Reddit /bitcoinmarkets, 4 October 2015. 2 Bitfinex. “BFX Token Terms”. August 2016. 3 e.g., 7a11l409b1d3c65. "Buttfinex pays back 1% of their debt - Butters cheer, not realizing that they have been scammed again". Reddit /buttcoin, September 2016. 4 Zane Tackett. “Bitfinex: Update Regarding Security Audit, Financial Audit, And More”. Reddit /bitcoinmarkets, 17 August 2016. 5 Giancarlo Devasini. “Message to the individual responsible for the Bitfinex security incident of August 2, 2016”. Bitfinex blog, 21 October 2016. 6 Andrew Quentson. “Bitfinex’s Hacked Bitcoins Are on the Move; 5% Recovery Bounty Offered”. CryptoCoinsNews, 27 January 2017. 7 “100% Redemption of Outstanding BFX Tokens”. Bitfinex, 3 April 2017. 8 unclescrooge. “[shame thread]The sorry and thank you Pirateat40 thread”. Bitcointalk.org Bitcoin Forum > Economy > Marketplace > Lending > Long-term offers, 17 August 2012. 9 unclescrooge. "Unclescrooge 1-week deposit program at 2%/week". Bitcointalk.org Bitcoin Forum > Economy > Marketplace > Lending > Long-term offers, 13 September 2012. 10 Andrew Quentson. “Bitfinex’s Founder Seemingly Tried to Start a Ponzi Scheme”. Cryptocoins News, 8 June 2016. hai
ICO's are the new IPO's. Making Ethereum the new GBLSE
First, I may need to provide some background, as many of you may not have been around in 2012 and 2013, so you may not remember GLBSE, BTC.TC, havelock, bitfunder and a few other "bitcoin stock exchanges". On those exchanges, companies could list securities like company shares and bonds, which where traded for bitcoin. Initially, mining bonds where the most popular security, allowing people to invest in bitcoin mining without having to own and operate any hardware, while allowing miners to raise capital and sell off the risk of future difficulty increases. Revenue from mining was then paid to bond holders as "dividends". In theory, a sound concept and the precursor to cloud mining. In practice however, these bonds quickly became a mania. They where trading at prices that made no economic sense at all, anyone with a calculator could easily see it was impossible they would yield a positive ROI. Miners and scammers quickly caught on to that, and sold more bonds then they had hardware for. But they kept rising in price, and people kept buying them, expecting to sell them later with profit. Soon after, all kinds of companies launched IPO's on these exchanges. Some where legit, many dubious, most where pretty obvious scams. It didnt matter, IPO's where as much a hype as ICO's today, and virtually never failed to sell out in record times, raising millions of dollars. Almost nothing was scrutinized, anyone scammer with a tiny amount of photoshop knowledge or anyone promising to achieve some ridiculous ROI had no problem raising millions. After the companies, came the investment funds. Someone raised bitcoins through an IPO, and used that money to trade in other securities listed on that same exchange. Then they launched a second IPO for another fund, and used fund A to buy shares in fund B, and fund B to buy shares in fund A. Prices went through the roof. You couldn't make up stuff like that, it was hilarious. Almost nothing that was traded on those exchanges, had any real value. A few notable exceptions include Asicminer, which raised money to develop an asic, actually managed to get it produced as one of the first ever bitcoin mining asics, sold in large quantities and made a huge profit, paying back investors through dividens many times the IPO value. It was the largest success story by far, but even that ended with an exit scam when the anonymous founder ran off eventually. Around 2013, the SEC intervened, closed a few of the largest exchanges, charged and fined some of the operators and issuers. Other exchanges collapsed or vanished. Tens of thousands of BTC where lost. Im not aware of any company that was launched on any of those exchanges that still operates, except for the gambling site satoshidice (which was among the ones fined by the SEC). What caused this to happen? The enormous rise in value of bitcoin created a group of early-investor millionaires, who believed in crypto currency, who where accustomed to double or triple digit gains in a very short time and who had money to burn. Many of them got rich "by accident", not because they did a lot of due diligence or understood the risk/rewards or even the technology. This gullibility was clearly seen with Trendon Shavers aka Pirateat40, who at that time operated a gigantic, half million bitcoin ponzi scheme by promising 7% weekly returns. These people where very likely to invest large sums of money in risky crypto related startups, expecting a repeat of the success of their early bitcoin investment. This created a self fulfilling prophecy where IPO's always succeeded, prices always went up, creating gigantic bubbles. Fast forward a few years. Besides bitcoin millionairs, we now have ethereum and a few other altcoin millionaires. Instead of IPO's, we now have ICO's. Instead of GLBSE, we have ethereum as the enabling platform. Instead of tradeable funds, we will soon have things like iconomi. Instead of bubbles created by funds investing in each other, we will have blockchains that are denominated in each other. And instead of thinking security regulation can be avoided by denominating an investment in bitcoin, we have people thinking regulation can be circumvented by calling something a token. Am I the only one having a terrible deja vue?
Regulations or positions of some countries about cryptoworld Because governments can sometimes be a bit touchy about attempts to create alternatives to the legal tender they enjoy a monopoly on printing, a wise investor might wonder about the legal status of cryptocurrencies. Indeed, the disruptive potential of these technologies has made governments around the world nervous, as they have struggled to devise appropriate regulations for the cryptocurrency realm without stifling innovation. Most potential investors have nothing to worry about from a legal standpoint, but it pays to do one’s homework. Regulations or positions of some countries about cryptoworld Some countries have banned or ruled unconstitutional the use of cryptocurrencies within their borders, while others have embraced them or even announced plans to issue their own. Of course, due to the inherently decentralized nature of cryptocurrencies, enforcement has proven difficult. Taxes levied on profits made trading cryptocurrencies vary based on their legal classification. Check the laws in your country, and make sure you abide by them when investing. Questions of legality in major markets have caused temporary dips in cryptocurrency prices over the years, but they have always recovered. Keep reading for a brief history of legal rulings and government announcements related to bitcoin that have helped shape the current ecosystem. February 2012 Payments services firms Paxum and Tradehill temporarily cease bitcoin exchange activities due to legal concerns raised by Canadian regulators. 28 March 2013 Cypriot investors drive up bitcoin prices seeking a refuge for savings when a government bailout program threatens to tap bank deposits. 14 May 2013 The United States Department of Homeland Security seizes almost $3 million from a subsidiary of the Mt. Gox exchange, claiming that the business is illegally engaged in money transmission without a license. 30 August 2013 Tradehill stops exchanging bitcoin, again due to regulatory uncertainty, indicating a growing need for government clarification on the legal status of cryptocurrency. October 2013 The U.S. Federal Bureau of Investigation arrests operator of Silk Road dark web marketplace Ross Ulbricht, alias “Dread Pirate Roberts,” charges him with computer hacking, money laundering, drug trafficking and attempted murder, shuts down the site and seizes over 170,000 bitcoins. In the wake of the shutdown, numerous other illicit marketplaces emerge, but are prone to exit scams in which operators abscond with bitcoins held in escrow. 18 November 2013 U.S. Senate holds hearing titled “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies.” Members express reservations about the potential illicit applications of cryptocurrencies so vividly illustrated by Silk Road, frustration at the difficulty of regulating something so difficult to understand, but ultimately hope that government will be able to create a system in which decent people have a “chance to try and play by the rules.” 22 November 2013 China’s central bank issues an equivocal statement on bitcoin that nonetheless greenlights Chinese participation in cryptocurrency exchange and investment, prompting huge price gains over subsequent weeks. 05 December 2013 Backpedaling somewhat in response to the widespread use of bitcoin to circumvent limits on capital outflows, China bans banks and other financial institutions from dealing with or offering services relating to bitcoin, ruling that it is not a currency. 25 March 2014 The U.S. Internal Revenue Service issues its first guidelines for bitcoin, ruling that it is to be taxed as property, not treated as currency. 10 April 2014 Under government pressure, Chinese banks begin to shut down accounts belonging to bitcoin exchanges. Prices drop 10%, but many exchanges exploit loopholes and offshore parts of their businesses to continue operating. July 2014 The state of New York announces plans to develop licensing requirements for businesses dealing in bitcoin or related services, which proves extremely unpopular with cryptocurrency advocates. 06 November 2014 Trendon Shavers, alias “pirateat40,” arrested for defrauding bitcoin investors in Ponzi scheme in 2012. 19 December 2014 Bitcoin entrepreneur and proponent Charlie Shrem sentenced to two years in prison for illegal money transmission charges related to the Silk Road marketplace. 25 January 2015 Coinbase navigates regulatory frameworks to win approval to operate a fully-fledged bitcoin exchange in 25 U.S. states and sets sights on further expansion. 25 March 2015 Hong Kong officials warn against potential fraud on exchanges, but indicate they will take a light hand regulating cryptocurrencies, classifying them not as legal tender but as “virtual commodities.” 29 May 2015 Ross Ulbricht receives sentence: life in prison without parole. Judge Katherine Forrest explicitly seeks to make an example of him and thereby discourage others from using cryptocurrency and the relative anonymity of the Internet to flout the law. 01 August 2015 Mark Karpeles, former Mt. Gox CEO, arrested in Japan and charged with falsification of records relating to the solvency of the exchange during its collapse. 10 August 2015 Deadline hits for compliance with New York regulators’ “BitLicense” rules, leading many exchanges to stop serving customers in the State. 22 October 2015 Crypto advocates hail a European court ruling that VAT does not apply to bitcoin and other cryptocurrency transactions, thereby classifying them as currency, not property. 10 November 2016 The state of North Carolina creates legislation to address bitcoin and money transmission, which regards businesses dealing in virtual currencies as subject to the same set of rules and licensing requirements that govern transmission 10 March 2017 The U.S. Securities and Exchange Commission denies Cameron and Tyler Winklevoss authorization to create a bitcoin-based ETF, citing inadequate regulation of cryptocurrency exchanges. 28 March 2017 The SEC denies the Winklevoss brothers’ second request for authorization of a bitcoin ETF, again citing concerns about the lack of regulation and potential for fraud on the exchanges. 01 April 2017 Japan recognizes bitcoin and other cryptocurrencies as legal tender and lays the groundwork for supportive regulations intended to permit legitimate investment while discouraging money laundering and terrorist financing. 04 September 2017 China prohibits fundraising via initial coin offerings, which it considers illegal. 07 September 2017 The European Central Bank rules out the possibility of Estonia launching its own national cryptocurrency, reaffirms the privileged status of the Euro as legal tender, and cites concerns that national cryptocurrencies would undermine financial regulations. 06 December 2017 Softening its initial stance, Russian regulators indicate that new rules may allow the purchase of cryptocurrencies, but forbid or heavily restrict mining activities. 07 December 2017 Regulators in South Korea ban trading in bitcoin futures as well as initial coin offerings(ICO), but will permit cryptocurrency exchanges to continue operations.
Can someone explain, in simple terms, what the hell just happened to BTC?
I was looking to purchase some BTC as an investment for the long run and also to purchase some goods. While I was waiting for the bank transfer to process, the price of BTC has gone haywire. I saw the other post about pirateat40 manipulating, but I don't quite understand what happened there (between buy walls, etc.). Could someone throw out a quick explanation for us new people? This sort of thing makes bitcoin seem very bad.
PSA: Anyone referencing Metcalfe's Law to Bitcoin will lose you money
I've been seeing Metcalfe's Law referenced a lot in regards to Bitcoin as a utility network. A lot of these people are starting to remind me of VC's and entrepreneurs of the mid and late 90's clinging to it like a bible. In fact an article I referenced in an article on IEEE states:
During the Internet boom, the law was an article of faith with entrepreneurs, venture capitalists, and engineers, because it seemed to offer a quantitative explanation for the boom's various now-quaint mantras, like "network effects," "first-mover advantage," "Internet time," and, most poignant of all, "build it and they will come."
The mantras above seem familiar because you'll see it touted a lot by entrepreneurs looking to make a quick buck. I've also seen a lot of people who say "they are in the best interest of Bitcoin" reference this "law" when trying "amend" consensus rules. However, mainnet is a multidirectional network, (unlike television which utilizes Sarnoff's Law which is more accurate for obvious reasons), and on top of the network there is an economy. After seeing pirateat40, nefario, MagicalTux, etc. scam the community of millions, reducing the global BTC price in the process, I know for a fact "less than reputable" connections to the network will inevitably drain it of value. Bitcoin is about quality not quantity.
Explanation All achievements listed below are permanent upon accomplishment and stack. Achievements earned years ago are still valid today. Mining achievements Solo miner Mined a valid block all by yourself. CPU miner Earned at least 1 BTC using just your CPU to mine. Creative miner Built your own custom mining rig composed of graphics cards. Lazy miner Earned at least 1 BTC in dividend from investment in mining stocks. Virtuous miner Earned at least 1 BTC by mining in a pool that processes transactions with below standard transaction fees, thus helping out people whose transactions would otherwise get stuck. Price stabilizer achievements Silk road stabilizer Bought when the price dropped during the Silk road crash. Fork fighter Bought during the 11/12 march 2013 blockchain fork. Ponzi plunge protector Bought during the August 2012 pirateat40 Ponzi scheme collapse associated price crash. Holder Helped preserve the value of Bitcoin by not selling any Bitcoin in the six month period following the 266 dollar peak. Only valid for people who actually had any Bitcoin before the peak. Superholder Helped preserve the value of Bitcoin by not selling any Bitcoin in the six month period following the 2011 peak. Only valid for people who actually had any Bitcoin before the peak. Popularizer achievements Mother Theresa Gave away at least 1 BTC in donations and tips, expecting nothing in return. Shopaholic Spend at least 1 BTC on items not directly Bitcoin related. Businessman Sold at least 1 BTC worth of items not directly Bitcoin related using Bitcoin. Spreading the seed Sold at least 1 BTC through local Bitcoins. Bitcoin hoarder achievements Bitcoin hoarder achievements are permanent upon achievement, even if you later let go of your Bitcoin. Club Bitcoin Own at least 1 BTC. Fabulous Five Own at least 5 BTC. Interested investor Own at least 100 dollar worth of Bitcoin. Serious speculator Own at least 1000 dollar worth of Bitcoin. I did it for the children Invest at least 10.000 dollar in Bitcoin, on behalf of other people. Number of achievements unlocked 0 - You are literally Ben Bernanke. 1 - You may be new. 2 - You have a serious interest in Bitcoin. 3 - You have a serious interest in Bitcoin, and probably a serious stake in its success as well. 4 - You have a serious interest and stake in Bitcoin, and are likely partly responsible for its success. 5 - You have helped make Bitcoin the success it is today. 6-9 - You are likely a developer, early adapter or institutional investor. 10+ - You are literally Satoshi Nakamoto.
You blame the volatility on HFT, DDoS, Mt.Gox, day traders and speculators. What about early adopters and bitcoin thieves coming out of woodwork and cashing out big time?
When blame is pinned for the recent volatility, it usually lands on more or less unspecified malicious market manipulators and black hats. Other risk factors are rarely mentioned. Say, couple of people who got some coins before 2011, could have been reminded of their stashes lately by the media attention to Bitcoin. It seems obvious to me it's way easier to destabilize a market for a bunch of guys with a couple thousand each, than to a thousand of small time speculators with tens to hundreds of coins. To generalize, as long as there are Pirateat40 and similar players hidden in the sea of Bitcoin, there's no guarantee that at any moment markets won't be flooded with market-order Bitcoin sells. In my understanding, HFT and day trading on their own cannot manipulate prices. They try to skim a little profit from transactions, both asks and bids. If anything, they provide additional liquidity and a somewhat illusory stability with their bot-controlled depth "walls". I also want to make another point, that HFT (the 0.02 trades) is not DDoS and it very well may not influence Mt.Gox performance or prices at all. That's a separate topic though.
From the standardcrypto blog: I worry about MtGox. This week I worry less than last week, because the chatter about insufficient liquidity is dimmed, and the Gox/Bitstamp difference has recently been as low as $4, and is now under $10. Maybe everything will be fine. I speculated a couple of weeks ago that even with a serious bitcoin net short position MtGox could engineer its own bailout by supporting litecoin. Still, like my scoutmaster used to say before a backpacking trip: "Hope for the best, prepare for the worst." A meltdown at MtGox would panic the bitcoin markets, antagonize US regulators, and slow down adoption. The bitcoin community should seriously think about how to avert, or at least cushion, worst case scenarios. So, I worry. I think, too, about just not hitting the publish button. After all, who wants to start a bank run on what is morally the bitcoin central bank? But I think there are enough people talking about potential problems at MtGox, and the situation has dragged on long enough, that I won't be adding too much fuel to the fire with my speculative maunderings. To my serious readers, especially those with money at Gox: please don't take this in the spirit of shouting fire in a crowded theater. Instead, understand a plea to treat a dangerous situation with the gravity it deserves, and ideally to stock up on fire extinguishers while there is still time. To summarize the current situation, there is a problem withdrawing USD from MtGox, and here and there we see evidence of problems withdrawing EUR and even BTC. http://www.google.com/#q=site:bitcointalk.org+mtgox+withdrawals BTC therefore trades at a 8-15% premium on MtGox compared to the other major exchanges, and traders talk of "MtGox price" for bitcoin versus the price elsewhere. http://bitcoincharts.com/ Big traders keep patronizing MtGox for several reasons. Habit/Inertia. The higher prices are great, if you believe MtGox will eventually solve it's problems, or that failing that you can beat the stampede to get out in time. MtGox has high volume, good for buying a large amount of bitcoin without moving the price too much. MtGox is bot friedly, and bot trading is profitable, so the bot traders stay. But every day, they're a little more antsy. The last Gox trader I talked said he watches Gox ask volume, and as long as it's over 30k he feels secure. It's well over 30k now. But change happens fast. To understand the USD withdrawal problems, try to think like an AML/KYC (anti money-laundering/know-your customers rules) enforcer. A regulator's job, day to day, consists of attempting to open accounts under fake names or using fake documents, and then freezing accounts where that money resides, levying fines, and generally raining down bureaucratic hell on the offender. MtGox doesn't hold customer fiat funds. Banks do. MtGox doesn't have one bank account from customer. They pool funds from hundreds or thousands of accounts. It's unknown how may total US bank accounts are held but MtGox, but my guess is not that many. Maybe tens. So every account freeze really hurts. Unfreezing isn't easy, because it requires justifying all the cash inflows since the beginning of time, including when MtGox was being run with High School level IT as a trading card site for Magic nerds. It doesn't take much to screw up accounting, and lose track of what funds came from where. When business is booming and you are on a roll, screw ups can be papered up by just sacrificing some profits. But that doesn't wash with hostile regulators, whose primary concern isn't how much funds are present but how and for whom the funds are accounted for. As little inconsistencies leak up, unfrozen accounts may be refrozen if the banking cops aren't satisfied. My read on the situation is that USD withdrawal may never be a smooth and easy on MtGox, due to MtGox having fumbled the AML/KYC identity verification conditions in the early days. MtGox just don't have good relationship with any US bank, and while investigations proceed, they are unlikely to achieve one. And the investigations could continue forever for all intents and purposes, due to accounting irregularities early on. So, the key question is does MtGox have enough bitcoin to support an orderly wind down with customers taking funds out in BTC, going forward. Slow as molasses USD withdrawal isn't really a problem, as long as users can withdraw promptly via bitcoin, even if it is expensive bitcoin. But how secure is the MtGox bitcoin position? Absent audits from a creditable accounting company, there's no way to know for sure. There's a good write-up at https://pay.reddit.com/Bitcoin/comments/1lc3is/pulled_article_from_tgb_5m_seizures_provide/ that covers the basics of what is known. The good news is that MtGox made huge bitcoin profits over its lifetime, which are more than enough to cover the holes in operating capital due to seized accounts and the lawsuit filed by Coinlab. The bad news is that no one knows if MtGox kept the bitcoin, or traded it for fiat. A worst case scenario has the MtGox operations team panicking when the bitcoin price was low (like 60-80) and cashing out to USD to cover the lawsuit+seizure shortfalls. Now the price is high again, but how much bitcoin do they actually have? As long as miners keep sending bitcoin to MtGox, and the bot traders are waving their magic wands, bitcoin withdrawals are probably safe for the time being, even if the bitcoin position is net short. But bank runs can come out of nowhere, or even be engineered by hostile players who want to drive the bitcoin price up and then down, by provoking a panic. We saw it in April, and we could see it again. Who will buy MtGox? Someone, I hope. I think, for the right price, a deal could be made, and this would be very positive news for the bitcoin economy, . Whoever buys MtGox would be buying a headache. They would have to deal with the mess of unknown and unverified account holders from back in the day. They might never get some USD accounts unfrozen, or at least have to wait a long time. There would be fines. And of course there is the matter of the Coinlab lawsuit. But, it's a potentially very profitable headache. MtGox has enormous brand recognition and revenues to go with it, both bitcoin and fiat. And I think the right kind of buyer would inherit enormous goodwill for fixing what a lot of players known in their gut to be a serious problem. I think the ideal buyer would be an American credit union with a strong balance sheet, good IT, good relationship with regulators, and obviously bullish on bitcoin. I could also see a russian or chinese buyer. For the right kind of money, regulators can be made to see reason, and lawsuits go away. If no one buys MtGox, the next best thing would be to bring back credit default swaps, like we had for PirateAt40 debt in 2012. A CDS mediated bankruptcy would still be painful for bitcoin, but it would be a lot more orderly. As a parting thought, I'd like to take a second to recall everything good MtGox has done for bitcoin. MtGox took a lot of risks, and tGox put bitcoin on the map. Maybe the MtGox operations team is just out of their depth, though well intentioned. Maybe they just want a nice payout, and for the stress to be over. I know I would.
The SEC alleges that Trendon T. Shavers, who is the founder and operator of Bitcoin Savings and Trust (BTCST), offered and sold Bitcoin-denominated investments through the Internet using the monikers “Pirate” and “pirateat40.” Shavers raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 ... A community dedicated to Bitcoin, the currency of the Internet. Bitcoin is a distributed, worldwide, decentralized digital money. Bitcoins are... Some duped investors have taken to trying to hunt down the pesky pirateat40. There are rumors that he is based in Texas. But short of extracting some good old fashioned (and wholly illegal) vigilante justice, it's unclear what the scammed can do. Bitcoin Ponzi schemes are growing more frequent -- one lawsuit in California [Scribd] has already taken up the issue. But it remains to be seen how ... Pirateat40 was the biggest of the Bitcoin Ponzi schemers to date, and reading through his thread will provide insight into the ways of scammers, shills and their victims. Sadly, victims are often the fiercest defenders of such scams, at least until they lose their shirts. Bitconnect was another huge crypto Ponzi scheme. Carlos Matos, a victim of Bitconnect, explaining his experience in the ... The SEC alleges that Trendon T. Shavers, who is the founder and operator of Bitcoin Savings and Trust (BTCST), offered and sold Bitcoin-denominated investments through the Internet using the monikers “Pirate” and “pirateat40.” Shavers raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 ...
Today in Bitcoin (2018-02-15) - Bitcoin is noxious poison - Fake Nice & Subterfuge - $10K+?
Shavers raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and ... There's a FUD every year for why Bitcoin is dead: 2011 MtGox hacked 2012 Pirateat40 ponzi implodes 2013 China bans Bitcoin 2014 MtGox insolvent 2015 Silkroad shuts down 2016 Bitfinex hacked 2017 ... http://bitcoinsmining.org/buybtc - Buy Bitcoins IDG News Service - The largest bitcoin trade said Thursday it is fighting a powerful distributed denial-of-se...