UPDATED: Fake Chinese Bitcoins Crash Entire Crypto Market

Fake Chinese Bitcoins & Litecoins Commonplace At Chinese Exchanges Evidence Shows

The accusations came fast and furious Sunday when a Reddit thread appeared in r/BitcoinMarkets describing the heavy manipulation of Bitcoin and Litecoin in China. The story is that OKCoin, Huobi, and BTC China are introducing fake fiat currency, fake Chinese Bitcoins, and fake Chinese Litecoins on their exchanges. Since it is unlikely all users will cash-out at once, the Chinese exchanges can increment a user’s fiat balance or Bitcoin/Litecoin balance by whatever amount.

These three exchanges charge no fees for trades, while most other worldwide exchanges charge significant fees. Many are wondering how these companies are still running if they do not have an obvious business model. Additionally, the trading volumes at these exchanges are so staggeringly large that it points to mass market manipulation by bots and trading algorithms. Is it possible these three unregulated Chinese companies could be playing Russian roulette with company Bitcoins?

Chinese Bitcoins

Chinese Bitcoins

Chinese Markets Show Unusually High Volume

BitcoinWisdom lists volumes for the last 30 days as follows:

Bitcoin USD: 1,076,481 BTC

Bitcoin CNY: 3,583,043 BTC

Litecoin USD: 5,618,361 LTC

Litecoin CNY: 249,009,181 LTC

There are 3.32x as many chinese bitcoins changing hands than dollar denominated bitcoins. And the Litecoin volume is stunning: 44.3x the number of trades in Yuan vs. Dollars.

The classic explanation of this has been that Litecoin is more popular in China than in the rest of the world. With Chinese exchanges offering no fees, it would make sense that more Litecoins would trade on Chinese exchanges.

Chinese Bitcoin Volumes

Chinese Bitcoin Volumes

That is until you consider that there are only 32,500,000 total Litecoins in circulation according to CoinDesk. This means that each Litecoin is being traded on average almost 8 times in a single month. With a 24-hour volume of 14 million Litecoins (Sunday’s volume), that means almost half the Litecoins in circulation saw action (on average) this Sunday.

The exchanges explain the volume by saying it is just a small number of Litecoins trading lots of times. However, the exchanges refuse to say who is operating the bots on their site. Most traders are not sophisticated enough to write custom software for a bot that integrates and trades on a Bitcoin exchange. We are supposed to believe it is single person home traders who are programming bots and trading hundreds of millions dollars worth of Litecoins?

The allegations here will be difficult to prove due to a lack of transparency by Chinese exchanges. According to Forbes Chinese accounting fraud is so commonplace that it is considered standard to cheat. These Chinese exchanges should definitely not be trusted until they reveal why there is so much Litecoin volume, and who it is coming from.

As it stands, these three Chinese Bitcoin companies of OKCoinHuobi, and BTC China are more like Chinese banks, than Chinese Bitcoin exchanges. They are loaning and leveraging Bitcoins and Litecoins in incredible ways.

Let us not forget that it was a MTGox Willy bot that had a big impact on the last bull run. And now it could just as easily be a similar bot, but trading in the opposite direction.

It the end, it is possible that government regulation could help Bitcoin in this case. This would mean a greater integration into mainstream culture as well.

If you have more information about this developing story, leave BitcoinPriceLive a comment below!

 

Author: Satoshi Nakamoto

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22 Comments

  1. Wow, this is actually a really informative and useful post. Thank you.

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  2. I don’t trust any crypro exchange for the simple reason that no transparency is a very big deal and begs for fraud, when it comes to absolutely any monetary exchange system.

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  3. Its just hard to except these exchanges to play fair , when the others dont. Its a “if you cant beat them, then join them” type concept but in the worse form. Anyhow, thanks for the information, we will definitely look into it.

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  4. file a dispute paypal get yo money back

    simple

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  5. The market is crashing and people are clutching at straws as to why it’s happening. This article neglects to mention that the three major Chinese exchanges have all gone through publicly verifiable third-party audits to prove their bitcoin reserves (all well over 104%).

    The Chinese exchanges work on a fee free model in China because they are purely focused on growing their user base. This is actually quite common in China’s tech industry – build the user base first and work out the monetisation later. Each exchange has received millions in VC funding, enough to support them for a good long while, with more funding rounds on the horizon.

    The volumes of the fee-charging exchanges cannot be compared with fee-less exchanges. Without fees two bots could trade the same 1BTC back and forth every millisecond for a day and have more volume than all the exchanges combined. While certainly involved in the last bull run, the significance of the Willy bot’s role has been far from proven. The idea that only fraudulent bots can make significant movements in the bitcoin market is also a little farfetched.

    The Chinese exchanges are leading the world at the moment in terms of features, trading tools, and customer service. They are in it for the long run and are not going to risk that on trying to make a quick bitcoin.

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    • -“Chinese exchanges have all gone through publicly verifiable third-party audits” Could you reference the link to this?

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    • What about a Litecoin audit? The main story is the volumes on the Litecoin exchange. Why are there so many bots on the Chinese exchanges? There are many more people in China, but the vast majority are not technical traders writing high frequency trading bots.

      “The Chinese exchanges are leading the world at the moment in terms of features, trading tools, and customer service.”

      Given how many Chinese companies are known to make up balance sheets, even publicly traded companies, why do you give the benefit of doubt to all three?

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      • A fair point that a litecoin audit has not been performed yet, but still wouldn’t let the high volumes fool you. Technically a couple of bots trading the same bitcoin back and forth fast enough could create the litecoin volumes seen on the exchanges. With zero fees there’s nothing to stop them doing this. I’d like to repeat again that you cannot compare volume between fee-charging and fee-free exchanges.

        That’s not to say the Chinese are not using a lot of high frequency trading bots, which they are.

        As for Chinese companies being creative with their balance sheets, it’s not really giving them the benefit of the doubt, it just seems a bit harsh to level the accusation without any evidence, especially after the audits. You could just as easily level the accusation at Alibaba or any other Chinese companies with global intentions.

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        • After MT Gox I am not putting trust in any Bitcoin exchange. Gox was said to be totally secure, offering 2-factor authentication, extra security, etc. and look what happened. Now you newer companies, and they do not even charge fees, so of course they are going to be looking for extra ways to juice their results. Litecoin market seems like a prime target for manipulation to me.

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    • A dishonest exchange could enter bids based on bids that are not yet made public. How can we prevent this aside from decentralizing the exchange in some fashion?

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      • It would be nice if there were easier ways to buy Bitcoins. Unfortunately the main way to do this is to go to a Bitcoin exchange right now.

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    • The number of Litecoins traded in last 30 days, was 44.3 times higher, not 10x. With 275 million Litecoins trading hands, that means at a price of $4, over $1 billion of value traded hands in the Litecoin market. Are people in China really using Litecoin this much?

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    • Do you guys have any more information about the story? Why are there so many Litecoins trading hands?

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  6. Government no! Are you crazy?

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  7. LOLOL Yanko Americaners aren’t the only screw-ups in the Capitalist markets that know how to manipulate commodities. Just look at the derivatives market on stocks and commodities and the total fuck up volatility it creates. Crypto currencies are even more susceptible to manipulation owing to their inherent imaginary fairy-tale not-even-ZERO value, but everybody “believes in it”.

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  8. The crash of the last week is thanks to OKcoin. Its is very clear to see that rest of market is healty and try to pull up. The volume of Okcoin is crashing other exchanges. Most interesting is that the drop feel when okcoin introduced the 0 fee system. Buyer are bying at a steady rate and this means a botmodel happening right now. I think its even no coincidence chinese goverment has stated his sympaties for the bitcoin. In other words the fall of the Bitcoin is because the Chinese goverment wants to profet from it with bots. Communist destroying communists.

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