Cryptocurrency market manipulation is rampant. Industry professionals hate cryptocurrency market manipulation – but for some like Alexey Andryunin, it’s a living.
The sophomore at Moscow State University is the co-founder of Gotbit, a company that specializes at cryptocurrency market manipulation. For a fee, they’ll program bots to trade a token back and forth with each other until volume is high enough to get listed on CoinMarketCap.
Why would someone do seek the service if Gotbit? Coins on CoinMarketCap that also has influential market data like big volume can attract the attention of larger platforms and bigger investors.
Andryunin was blunt in explaining why Gotbit is not registered in any jurisdiction. He told CoinDesk: “the business is not entirely ethical.” A powerful understatement.
We’ve taken an excerpt from CoinDesk’s Article – you can read the entire article here:
Andryunin arrived late for our meeting in Moscow City, an upscale business district of metal-and-glass skyscrapers, fancy cafes and the offices of multiple crypto-related businesses. He had just seen a client. The applied math major hardly makes it to classes.
Among his classmates, almost everyone is now obsessed with crypto, he said.
He started Gotbit with a fellow undergrad in 2018, while initial coin offerings (ICOs) were still in vogue. His partner codes the trading bots while Andryunin reaches out to token projects to sell Gotbit’s “market-making” services. Listing on a small exchange costs $8,000; a month of supporting fake trading volumes via algorithms imitating normal market activities will run you $6,000.
Getting the token on CoinMarketCap is a bit steeper at $15,000. To achieve that, first a project needs to get listed on two small exchanges. These platforms would die without artificial volume, Andryunin believes. A telltale sign is that little-known cryptocurrencies trade on these exchanges much more actively than bitcoin, the original cryptocurrency and the industry bellwether with the largest market capitalization.
The exchanges usually know when Gotbit’s bots are inflating the volumes of altcoins, Andryunin believes, but higher numbers are in these exchanges’ own interest. Policing manipulation is not.
These exchanges charge a couple of bitcoins (about $20,000 at recent prices) to list a token, and have no other real criteria, Andryunin said. As examples of exchanges with such standards, he mentioned Hotbit, based in Shanghai, and BitForex in Hong Kong. Neither exchange responded to CoinDesk’s requests for comment by press time.
“It’s well-established that many exchanges likely engage in practices to inflate the volume they report in order to drive interest in their platforms and to attract new customers,”
Alameda Research, a crypto trading firm, said in a recent report. Alameda analyzed the order books and trading history of 48 crypto exchanges worldwide and found that on 14 of them, genuine trading volume might well be zero. BitForex is among the 14.
On such exchanges, Gotbit appears to be the main source of liquidity, Andryunin said. “These small exchanges, I don’t even get it what they are living off, there are no real volumes there.”
After a token is listed on two exchanges and shows some trading activity provided by bots — the volume can be less than $100,000 a day per exchange – there is a chance to get it listed on CoinMarketCap. From there, Gotbit is out of the picture, according to Andryunin, who said other intermediaries help accomplish the last step.
Exactly how they do it, he doesn’t know. But it gets done: “Our clients are at [the] 300-500 positions on CoinMarketCap.”
Carylyne Chan, CoinMarketCap’s head of marketing, told CoinDesk that to get listed on the site, a token must satisfy a set of criteria, including using blockchain tech; having a functioning website; being listed on two exchanges that are, in turn, listed on CoinMarketCap; and providing a direct line of communication with a project representative.
Asked if it’s possible to fool the system by inflating volume, Chan said: “Our stance is to list as many crypto assets as possible, covering the universe of crypto assets over time. We are not in the business of censoring information.”
CoinMarketCap also flags projects with suspicious activity on its website, she added, “based on regulatory circulars or user-submitted information.”
The clients Gotbit’s clients typically have done an ICO and now need to calm their investors by showing some market activity, Andryunin said.
Most of these founders care about their projects and are trying to make them work, he believes, but out of the 30 projects Gotbit is working with, only two or three are “really creating some value,” have a working business model and reached the point of building an actual product.
Others can live a couple of months on fake volume, allowing the founders to cash out, then stop paying for the “market-making,” after which the token’s price will plunge. They close down a couple of months later.
At that point, people who bought those tokens come to terms with reality, Andryunin said, joking:
“No more Lambo dreams, a bike would be fine.”
……………………..
The volume bot’s orders are not supposed to be executed and settled, just create an illusion of trading. In theory, some real holder who purchased tokens during an ICO can come to the exchange and take the orders – in this case, Gotbit would end up with a heavy bag of illiquid coins.
To prevent this from happening, the bot watches the exchange’s wallets on Etherscan, a popular block explorer for the ethereum blockchain, and when there is a big transaction of the coin in question, all orders are immediately canceled. Gotbit works only with the ERC-20 tokens which run on top of ethereum, so it’s easy to monitor the movement of funds on the network.”
You can read the whole article by clicking here.
Regarding cryptocurrency market manipulation, our own Kurt Wuckert Jr has this to say, on behalf of him and CryptoTraders Pro.
“At Crypto Traders, we’ve long been bullish on bitcoin and we tip our hats to the coins that are developed and mined by business-minded players who believe in fundamental economic activity and commercial circulation. The problem is that those projects are so few and far between that it makes it difficult to do any fundamental analysis at all. If the primary use case of an asset is trading, but the majority of trading volume is fake, and reports are true that even the fake volume is mostly being conducted in “fake” dollars like tether, then we have a major problem on our hands!
Wrapping fake value in multiple layers of other fake value is exactly how a Ponzi scheme is set up. In fact, in many ways it echoes the fundamental economic problems of the central banking system itself and also calls back to the issuance of mortgage-backed securities scams that created the 2008 economic downturn.
If we are to take bitcoin seriously, it needs to be used seriously in the real economy, and both the trading volumes and the trading pairs need to be auditable and trustworthy, or we predict it will all end with a giant, mortifying collapse.”
Kurt Wuckert Jr follow him on Twitter!
What do you think? Cryptocurrency market manipulation has many victims. We all remember scams like BitConnect. We need to remember that even volume can’t be the most reliable indicator of legitimacy. Let us know what you think on our Facebook Page!
