Bitcoin Trading - some useful info and metrics
Hello folks I have been pondering about posting this and was reluctant due to having been into this many years ago in other public websites, I have deleted those accounts for safety so I don't end up doxing myself.
I have been into bitcoin since 2011 and have traded and made lots from it. Not trying to make this thread to brag or show off but from the years of experience and contact with many excellent traders (many I know who quit their jobs and trade for a living) there are some trading and non trading things crypto related many should know.
Exchanges
An important point to start with is knowing your exchange and all the contingencies that come with dealing with them. They are too many to list especially legal ones but let me give you some brief history of the two largest exchanges and some shocking truths that people just overlook. Two stories to put perspective on things and make you realize what it means to give someone power over your wallet and your money.
MtGox was the first large bitcoin exchange and dominated the bitcoin world. Seemingly good it was actually a disaster from the start. The first owner created an exchange platform for Magic the Gathering cards (Magic the Gathering online exchange) and heard of bitcoin, and decided to implement bitcoin trading on it. All went well early on 2011 and business was booming as was the price of bitcoin, until he noticed his balance sheets were off and he had missing coins (tens of thousands). He did not know what to do and sold the majority of the shares of the company to Mark Karpeles who then continued the business without fixing the issue at all. The exchange went on and the hacker had access to the exchanges wallets private keys and unloaded tens of thousands of bitcoins at a time for over two years, totalling hundreds of thousands of bitcoins stolen (I believe it was 600 thousand coins lost). Mark Karpeles never decided to even change the wallet or even implement cold storage with fresh private keys. For years people complained that their bitcoins were missing, or that they were unable to withdraw fiat to their bank due to MtGox having serious banking difficulties. On pretty much all forums this was silenced or the threads were left to die. Karpeles collected a $100k per month salary for his efforts and now that the company is still in bankruptcy proceedings he is trying to shortchange his customers (since he had 200k bitcoin left, he wants to pay back the customers in USD at the value bitcoin had back then, and make hundreds of millions $ off of this fiasco). Look up the story for yourself.
A little addition to the MtGox story is "bitcoinica", the first leveraged trading platform that came out of the blue, not even a registered company just a website made in days. Somehow it broke through and the supposed owner was a "14 year old genius named Zhou Tong" who was later found to be using a Microsoft IP address in China. This leveraged platform managed to amass lots of trading and was linked to MtGox (since it was just a website it didn't have a bank account, just redeemable USD codes through MtGox). It made volatility so high that a single trader with $10k managed to short bitcoin and made the price drop in half. When he tried to buy back there was no liquidity and he lost all his money. Most people got wrecked from this and exchanges made tons of money on fees. This exchange got supposedly "hacked" as it was hosted on a very cheap web hosting site with supposedly malicious administrators. Supposedly. Zhou Tong never to be heard of again.
Bitfinex was the next exchange to take over in terms of value. Bitfinex is a tricky company to try and figure out as it is three shell companies operating together, all located in areas where the specific services they provide are legal. It also makes it difficult to sue them or take them down, or make any company liable for damages. Bitfinex was created as a copy and paste off of bitcoinicas trading engine which was highly unstable and could liquidate your position pretty much any time at all due to the lack of liquidity and margin, and tons of bugs. Even a good trader got "ZhouTonged" or liquidated all of a sudden by random tiny market moves. Their historical feat is actually their loss of 172k bitcoin off of a supposed mistake. They had a third party company they worked with for secure storage and transacting. One day the hot storage wallets got filled with coins and someone with an admin password made a massive withdrawal totalling 172 thousand coins. Those coins are still unmoved so it was either a mistake or they are playing the long game. Users got a "haircut" on their accounts, they called it "socialized losses". They changed their policies to include this and they also after the incident mentioned they are not liable for their mishandling of your funds. Users got "Bitfinex USD" instead of "USD" for the USD or BTC value they had, which made for around a third of every users account value. This created token was possible to sell for USD for those who wanted to collect tokens and use them to buy shares of the company. So instead of Bitfinex shutting down the exchange and letting Interpol or local authorities seize the servers and inspect them, they closed access to the website/login and thought of this great plan. Whether this token scheme or lack of liability is legal anywhere, nobody knows. Or not reporting and working with authorities first. A month after the incident they sent users an email with an apology. I think it still is the largest exchange...
Hopefully this puts some sense into those who are unaware of what goes on in the crypto world and how deceiving the looks of a website can be. Google "list of bitcoin heists" for other stuff and look into what these unregulated IPOs really are. Scamming is a large part of the crypto economy.
Hopefully this sorts you out without having witnessed it first hand or experiencing it :)
