Understanding Cryptocurrency Markets Sudden Rallies and Crashes

Since yesterday we are experiencing another sudden cryptocurrency markets crash between %5 to 10% and beyond. The usual silly explanations of self-styled crypto-experts started to appear on Forbes, Bloomberg, and a few other minor sites. As I have written in the past here on my blog, the reason for such sudden and violent volatility has nothing or very little to do with the real-word events capable of influencing the so-called ‘market sentiment’.
The sudden and violent volatility has nothing or very little to do with the real-word events capable of influencing the so-called 'market sentiment.' In my professional understanding, the wild volatility of the cryptocurrency markets is made possible, but not necessarily caused, by the massive use of bots in an HFT (High-Frequency Trading) context. This statement becomes clear if we consider that currently more than 95% of all crypto trades by value are arguably conducted by bots versus the approximately 50% on the US stock market an…

Sad day for the cryptocurrency world: Is this the end of a decade of dreams?

Earlier today the 10-year Treasury note fell below two-year yields for the first time since 2007. It sparked a nearly 3% decline in the S&P 500 and sent investors toward safe-haven of utilities and real-estate stocks. The obvious expectation was that at least part of the investors would have moved toward the cryptocurrency market. But that did not happen. Not only. The cryptomarkets heavily crashed in parallel and across the globe. It seems there is only one single explanation for such a largely unexpected event in the crypto realm: The cryptocurrencies appear as being highly vulnerable to the traditional financial and stock markets. I stress the qualifier 'highly because in front of a 3% decline of the S&P 500 we assist to a fall of crypto markets way beyond 10%. Should we declare the end of a decade of dreaming an alternative to the traditional dysfunctional financial system? Too soon to conclude. We still need more studies to better understand the underlying factors. Ho…

Is high volatility inherent in cryptocurrencies?

My short answer is no! The long answer needs more clarifications. 
After 18 months or so of observing the globally aggregated crypto data posted in real-time, I haven't seen yet anything intrinsic to mineable cryptocurrencies that could be considered as a built-in cause of the stunning market volatility. 
In my perspective, the current high volatility could be explained by 2 factors that are only partially present in the conventional stock markets: 

[1] Massive market manipulation via bot-based automation enabled by High-Frequency Trading (HFT) context, and broadly exacerbated 

[2] By the cryptocurrency holders' demographics often made of a very young and largely unsophisticated cohorts who tend to develop swarm-styled collective behaviors induced by social media's echo chamber effect. 

While the behavioral determinants could and would eventually evolve over time, the market abuse tends to remain immutable until a regulatory intervention supported by trade surveillance would be…
Draining the Crypto Swamp

It was just a couple of months ago when Elon Musk got sued by SEC with a substantial fine for a series of tweets that resulted in stiff market manipulation. But, when it comes to cryptomarket boisterous manipulations by the high school dropout celebrities and self-styled crypto experts, we still do not see any actual and consequent reaction by the US Regulator nor by any other authority in other countries. Why?
One important reason appears to be the lack of specific legal instruments. The other reason is indeed the overall murkiness of the cryptomarkets, which is sadly misconceived as the expression of market freedom.
The opacity of the cryptosphere has become a fertile pasture for all kind of predators, fraudsters, reckless market manipulators, celebrities either directly organizing or on the payroll of pump & dump gangs, token hooligans for hire, etc.. The worst are the self-styled online crypto publications and broadcasts including those under the well-k…

Crypto Crash: Beyond Crydiving and Voodoo Dolls

BTC, LTC and a few other mineable coins are all good vehicles for value transfer. This has been proved time and again. They currently allow for around $200B dollars transfer every single month. They work efficiently as a unit of account as well. The real problem is how effectively they perform as storage of value in the mid to long term. Extreme volatility is what we are globally witnessing across all exchanges. Everybody agrees on the diagnosis, nobody offers a convincing culprit. However, in my view, the market manipulation bears a major responsibility. Right now the exchanges (possibly except Gemini) are no man's land where all doors are open to reckless crypto bot launchers and P&D gangs. Add also the internecine warfare of tokens and coins hooligans against each other across both social media and exchanges. Can we put some order into the chaos? Yes. We can experiment by forcing the exchanges to abide by the international regulatory rules. This should be done with 2 initia…

Crypto Crash: When Market Manipulations Generate Disaster

Based on the behavior, we have to distinguish between 2 main classes of bots across the cryptomarkets: - Traders - Manipulators The first group operates based on the anticipation of trends and patterns by feeding on historical and real-time data. The 2nd class of bots follows increasingly a swarm logic that serves a different purpose: Poisoning the market "wells" to feed the first category of bots with real-time fake data. By serving such strategies, these bots constantly act to promote or to prevent certain trends and patterns and hence behaviors in and by the average trader bots (and humans) that move along a predictive line of reasoning. This is a de facto poker game: Trading has become gambling!! Given that these hostile bots are run by rival Pump & Dump gangs and franc tireurs across highly fragmented and unregulated exchanges, there is always the possibility of triggering either a virtuous or vicious cycle that could become very powerful via an echo chamber effect…

What does it take to generate a significant crypto FOMO wave?

FOMO, or fear of missing out, is defined as a "Pervasive apprehension that others might be having rewarding experiences from which one is absent, FOMO is characterized by the desire to stay continually connected with what others are doing." (Wikipedia)

Here is the break down of a crypto FOMO wave:

1- Ad hoc and well-publicized interviews followed by huge bots- operated retweets, Reddit messages, LinkedIn posts, etc. 

2- News leak of a "new product" bringing about an unclear "disruption", followed by bots and humans social media amplification. 

3- A huge wave of 'wash trading' to generate the appearances of a sudden expanding market liquidity. 

4- A massive 'swarm layering' operated in one of the main crypto exchanges across the world to create fake 'support'. 

5- 'Arbitrageur' bots push to flatten the market prices upward while 'front-runners' fill up their bags as never before. 

HFTs and their armies of bots are indeed th…