Sunday, June 17, 2018

Cryptocurrencies Correlation Coeficient: Bitcoin The King

In the financial markets, the correlation coefficient is used to measure the correlation between two securities. When two stocks, for example, move in the same direction, the correlation coefficient is positive. Conversely, when two stocks move in opposite directions, the correlation coefficient is negative. (Investopedia).
 If we extend the concept to cryptocurrencies and make the measurements for the last 30 days we obtain the table above. (Thank you, John Young!) Solid green represents the max linear correlation (+1) and the solid red for no linear correlation (0). 
It is not difficult to see a small group walking in lockstep while solidly headed (dragged?) by King Bitcoin. I do have my explanation but am damn curious to learn about yours. 
Please chime in.

Wednesday, June 13, 2018

Cryptocurrency Market Manipulation via Swarm Intelligence: A Crime or Cryptomonetary Policy Tool?

Is cryptomarket manipulation via Swarm Intelligence a financial crime? In all my previous analytical notes, I have always considered the cryptomarket manipulation from a negative point of view and as a potential financial misconduct.

What if we reverse the perspective and analyze the manipulation via Swarm Intelligence in terms of a de facto implementation of cryptomonetary policies similar in their effects to those policies traditionally exercised by the Central Banks?

In other words, the use of Swarm Intelligence allows managing both the inflation and the exchange rate for every single cryptocurrency offered across the world regardless of any given nation-state jurisdiction. It also allows creating a dynamic hierarchical structure among the cryptocurrencies based on a mathematically predefined and enforced correlation coefficient to Bitcoin as the (currently) leading cryptocurrency. Therefore, it would be enough to feed core cryptobots with the needed parameters just for Bitcoin on a relatively important exchange in order to trigger in realtime a spontaneous Swarm-powered price readjustment across the markets partially thanks to the tireless work of thousands of 3rd party cryptobots running an arbitrage strategy.

If we consider the cryptomarkets especially during the last few months, we should recognize that manipulation via Swarm Intelligence has been almost in full control by clearly setting the main variables of the "cryptomonetary policies." However, we still do not know how the interest rate would be set in such a context.

At this point, the main question that comes to mind is not anymore about "how" but about *who* sets the fundamental parameters of such a "cryptopolicies framework"?

We should know that "manipulation via Swarm Intelligence" is more about the technology rather than fiat or cryptocurrency holdings. Therefore, this seems like a policy game where a "virtual whale" (as distinct from a "physical whale") with a more sophisticated army of cryptobots has the upper hand. In other words, the cryptomonetary policies are dynamically set or at least strongly influenced by those entities that advance more rapidly in the application of Artificial Intelligence to the cryptomarkets. These entities are not necessarily anything similar to Central Banks as established by traditional nation-states across the world. Nor are they easily addressable through conventional political and legal instruments.

In such a context as briefly described, any demarcation line between legal and illegal, licit and illicit, authorized and unauthorized, is totally blurred. All that pushes the analysis into uncharted waters of an ocean we still need to explore. Hic Rhodus, hic salta!

Friday, June 8, 2018

Cryptomarket Manipulation, Swarm Intelligence, and Market Stagnation: Cui Bono?

Can cryptomarkets survive the extensive manipulation based on bots running swarm intelligence? The global, massive and uninterrupted presence of 1000s of cryptobots manipulating their way throughout the globe, seems to wreak havoc across all the exchanges.
The main critical signs of this crescendo are low and stagnating prices accompanied by the weakening volume of transactions both the current and the projected ones for the upcoming quarters. The manipulation largely follows the same game plan of a couple of weekly short-breathed P&D succeeded by annoying spoofs and apparently foolish wash trades.
Some cryptobots are still profiting from yet possible arbitrage thanks to tiny but evanescent spread across the exchanges but the overall scene remains problematic.
  • A first relevant question is whether there is any actual endgame in sight for this apparent trade lullaby. 
  • The other question is whether bigger exchanges are doing some heavy lifting underneath to keep things going as they are, and why. 
  • Last but not least: Who is strategically benefiting from this enforced (temporary?) stagnation and bearish cryptomarket?

Sunday, May 27, 2018

Cryptomarkets Manipulation: The Rise of Virtual Whales

The average crytpotraders work around opportunities based on predictions. The statistics-based prediction and prediction-based market moves are the very foundation of the average trader's strategy. This is about the trading based on the anticipation of market dynamics. "Market shaping" or "market manipulation' strategies pursue a totally different goal: Their purpose is to impact traders behavior at any given moment. Market shaping strategy is arguably based on a binary methodology that proceeds along the double helix of "Self-Fulfilling Prophecy" and "Self-Defeating Prophecy" principles. By adopting such strategies a market whale acts to promote or to prevent certain beliefs and hence behaviors in and by the average traders who move along a prediction-based line. The manipulator's goal is to dynamically shape the market reality to achieve certain results. The major transformation we are witnessing is the gradual transition from 'whale' (needing large funds and/or particular facilitation to operate) to 'virtual whale' (need for large funds replaced by applied 'Swarm Intelligence'). The emergence of 'virtual whale' extremely complicates the market intelligence and surveillance, and tends to blur the line between legal versus illegal trading practices. Stay tuned for more analysis on this topics.

Friday, May 25, 2018

Crypto World: Eppur Si Muove!

Interesting events buried under the daily politainment (political entertainment) lava coming out of Washington D.C. volcano:
  • The Marshall Islands formally launched its sovereign cryptocurrency 'SOV'. Although a tiny republic, this country is the first one that, without being under any foreign sanctions, is launching a sovereign cryptocurrency as its legal tender in parallel to the U.S. dollars. Besides the Venezuelan 'Petro', the success (or failure) of this experience offers a real-world model and an alternative solution for many countries either having serious difficulty with their own disgraced legal tender or are forced to use US dollar. 
  • The Argentine Banco Masvestas abandons for good SWIFT for its international money transfer in favor of a new solution based on Bitcoin. This is the first official bank putting an actual nail in the coffin of U.S. dominated SWIFT. Santander might be the next one. 
  • Russia has developed its own system for financial transfers that would protect it from a potential shutout of the SWIFT global transfer system in the event of harsher U.S. sanctions. Sources close to the Russian central bank said the Financial Communications Transfer System (SPFS) would be converted to a blockchain system by 2019.

Thursday, May 24, 2018

Is Cryptocurrency Trading a Rigged Game?

Is cryptocurrency trading a rigged game? Can it survive the AI-powered *market shaping*? Can criminal probe and regulatory interventions make any difference? How does the rise of cryptobots impact the markets? and what is the relationship between cryptobots and P&D online groups?
During my most recent empirical studies, I realized that bots use two techniques to heavily impact the market according to a dynamically adjustable implementation plan:
a) HFT with a massive use of both fake buy and sell traffic as well as "wash trading" by single account holders, which inevitably require access to a very large fund and/or some significant "assistance" by the trading platform.
b) HFT with the same effects as above but implemented by using *swarm* approach that generates a gigantic *virtual cryptobot* or Virtual Whale without any large fund. The latter seems the result of a very close integration between P&D schemes and HFT. This integration is reinforced by a carefully elaborated media and social media tactics and strategies to *shape the markets*.
Here is the question:
Can a US Justice Department Criminal Probe into price manipulation or any regulatory intervention rein in this sophisticated "mechanism"? What do you think?

Friday, April 13, 2018

How to Understand Cryptomarket Turbolences

There are 3 important market forces whose actions and interactions seem largely determining the cryptomarket rises and falls. They are as follows:
A) The generalized actions of *Cryptobots* that run arguably 60% to 80% of the transactions and the overall Order Book activities across all the major exchange platforms;
 B) The *Pump or Dump Signals* generated by all size online P&D groups increasingly with 10s of 1000s of members recruited on a daily and/or permanent basis;
C) The manipulative maneuvering of media outlets, social media peddlers, celebrity influencers all working as *bounty hunters* for the so-called *team investors* aka P&D online groups.

If we carefully keep track of these 3 factors including their combined interactions then we simply discover that both the traditional *technical analysis* and the analysis based on some hypothetical "intrinsic value" of this or that coin or token become largely irrelevant.

What should be the guideline for the small trader in such a confusing context? I do not have any actual solution but I can recommend learning as much as possible about Buy and Sell Walls.

Here is a good starting point: