HN Explorer

Is Bitcoin surge driven by paid-publicity (similar to US election story)?

48 points by anudeep2011 ↗ HN
Help me understand why this strategy would fail.

Let's assume I got 100M$ with me.

Step 1: Purchase 70M$ worth of bitcoins.

Step 2: Spend 30M$ marketing bitcoins as the next big thing

Given that bitcoin is a pretty good product, the additional marketing would help convince people to invest in it.

Step 3: Convince 1000 other 100M$+ net-worth individuals to do this.

Step 4: Let it surge. Wait till the combined worth of 1000 investments above is <30% of the market. Pull out.

At this point there is about 30B$ of marketing budget. 3 times of what Samsung spent on marketing in 2016.

Fake news, facebook & twitter ads that influenced US elections proved that it's possible to do something like this. At this point, it's worth mentioning that 'Bitcoin is a great product' unlike the former case.

Doing above is possible with any public stock but it's probably illegal. With Bitcoin I am assuming there is no such check.

So what's stopping people from doing this?

Anyone else thinks this is how it's happening already?

Related article:

[1000 people own 40% of the market]

https://www.bloomberg.com/news/articles/2017-12-08/the-bitcoin-whales-1-000-people-who-own-40-percent-of-the-market

62 comments

[ 3.8 ms ] story [ 141 ms ] thread
Sevii
Why does crashing the market make sense if it’s a good product?
rthomas6
A good product for what, exactly? Fast, decentralized, small monetary transactions? Because right now BTC is pretty awful at that.
drcross
>A good product for what, exactly?

Since its inception it's an exceptionally good store of value over the medium to long term.

Tepix
It used to be a decent currency, it stopped being that a couple of months ago.
wpietri
Not quite. Bitcoin has been an excellent bet. The economic notion of "store of value" requires stability, but Bitcoin is definitely not stable. Just today it fell 10%, and nobody would be surprised if it were to drastically exceed its previous peak next week.
polynomial
> nobody would be surprised if it were to drastically exceed its previous peak next week.

Apparently CBOE would be somewhat to very surprised.

kgwgk
Following the peak 4 years ago it was 80% down after 1 year, 50% down after 2 years and had not yet recovered after 3 years... it doesn’t look so exceptionally good as a store of value.
ct0
pump and dump without all the regulators coming after you post dump
anudeep2011
1. Most of the market at that point is filled with 'get-rich-quick' people. 2. It's not regulated and can be gamed like above. (I understand that not being regulated is also it's biggest selling point)

It's probably like a great social network totally filled with 'tag-your-friend' posts.

Tepix
Bitcoin is now in a situation where they have a very hard time doing a fork, because with every fork they risk having some people remaining on the old code and claiming to be the true bitcoin.

Thus bitcoin can no longer evolve. We all know what happens to things that do not evolve.

Ethereum on the other hand is putting a time bomb into their code that forces them to fork every year or so. There is no risk of people remaining on the old code.

alpos
I think the point would not be to crash the market. The point would be to use the unregulated market to harvest money from people who don't know better.

This happens all the time even in well regulated markets. Whether it's tricky fund rules, hidden fee structures, selling bogus investment strategies, ponzi schemes, market manipulation, front running, or simply choosing a trading strategy that plays off of other trading strategies, if there is a way to separate the pigs and sheep from their money, someone will try it.

https://www.investopedia.com/articles/economics/08/wall-stre...

bufferoverflow
If you can convince 1000 people to invest $100M each with just $30M in advertising, you're some kind of marketing Einstein of our generation.
anudeep2011
I actually did not mean to spend that 30M$ to get 1000 others. But yeah how do I convince 1000 others to invest 100M$ into this is a valid question.

If I am the one with $100M, I will likely have enough connections to start the ball rolling.

ghostbrainalpha
So you want to convince 1000 people to invest $100 million and spend 0 advertising on doing that.

That would be Einstein's Einstein. If you can convince 1000 people with 100 Million to do anything, you could accomplish ANYTHING.

Your plan is basically to create the ILLUMINATI, but instead of having it be a small circle of individuals, it would be the size of an army.

VMG
also known as the bitcoin pump-and-pump
dmschulman
Why pay for the marketing when every major news outlet in the country will continually cover the story as the price continues to rise wildly and as major financial institutions get invested?

I run multiple browser plugins to block ads on my browser, but has anyone actually seen Facebook, et al ads for cryptocurrency?

grey-area
I run multiple browser plugins to block ads on my browser, but has anyone actually seen Facebook, et al ads for cryptocurrency?

Twitter is full of ads for ICOs at the moment (probably only if you are in the subset of users who are targeted).

anudeep2011
news outlets cover news about bitcoins but not stuff like 'Secret revealed: see how this couple made million dollars in 3 weeks' sort of articles.

+ also to get the initial seed interest so that these news outlets keep talking about it.

I have seen A LOT of ads from ICO and bitcoin exchanges. For articles like above, myself (and most people here) might not be the target.

weavie
I saw some ads for some cryptocurrencies on the London underground a few months ago. I think it was for some exchange, but can't be certain.
geofft
> Why pay for the marketing when every major news outlet in the country will continually cover the story

Marketing includes convincing news outlets to actually run that story as opposed to other stories: http://www.paulgraham.com/submarine.html

cdurth
Not specifically for a coin, but i saw a FB ad yesterday for a magical cryptocurrency script that would make you millions off a small investment. I had a good laugh
jerkstate
Yeah, I get tons of ads for shitcoins, but I spend a lot of time on cryptocurrency sites.
PeachPlum
> Fake news, facebook & twitter ads that influenced US elections proved that it's possible to do something like this.

but Hillary lost.

Facebook has identified $100,000 of ads that came from accounts associated with Russia.

Clinton and Trump combined spent $81 million on Facebook. [1]

[1] https://techcrunch.com/2017/11/01/russian-facebook-ad-spend/

[dead] revmoo
If those 100k in ads moved the needle even the slightest then that was the most impactful 100k ever spent in the history of advertising.
jbob2000
I think it's a mistake to equate ad spend with ad effectiveness.

Russia only needs to sow discord, they don't need to follow you through the entire election season like Hillary does. A few targeted ads here and there are all that's needed to compound their other efforts across the web.

colordrops
Signals and noise are coming from every direction at much greater orders of magnitude during an election cycle. If her campaign was so weak that a little "discord" killed it then she already lost on her own.
anudeep2011
Are there any numbers about what's spent outside of facebook/twitter? Or at least any investigations going on?

Most of the crappy ads I see come from other ad networks (outbrain, taboola, etc).

thisisit
Well the assumption here is that general public or the dumb money can actually create a rally which increases in multiple of 1000s.

This is possible and does happen in penny stocks where stocks go from couple of cents to couple of dollars or maybe in 100s. But, in 1k or even 10ks? I seriously doubt it.....Unless there is a story behind the volume and there is some serious round trip trading going on: https://www.investopedia.com/terms/r/round-triptrades.asp

Buttes
It's certainly possible there are fraudulent trades driving price, it's pretty easy to do on BTC exchanges.
kkotak
It's called market making. Happens on all exchanges. Without them there won't be liquidity.
brucephillips
Huh? OP is describing appreciation, which has nothing to do with market making.
an_account
Almost no one I know buys a whole Bitcoin. You don’t have to put in 10K to get started.
[deleted]
(comment deleted)
brndnmtthws
You may want to just accept the fact that Bitcoin is valuable because of what it offers as a store of value and system of trustless, censorship resistant exchange of value.
aplummer
It’s definitely not all of those when >= 51% of the mining power is in the PRC.
brndnmtthws
Miners actually have a lot less power than people realize. Anyone can run their own fully-validating Bitcoin node. Miners do indeed mine the blocks, but _all_ nodes perform verification. If miners try to mine invalid blocks, Bitcoin nodes will simply reject them.
brucephillips
If you don't understand the danger of a single party controlling the majority of mining resources, you don't understand how BTC works.
geofft
What do you mean by "invalid"? My impression is that if you control 51% of the mining power and have at least some amount of control over the physical network path to your victim (e.g., ability to inject RST packets), you can execute double-spend attacks.

Are double-spend attacks not a concern?

If they are not a concern, why do we need so much computational capacity for mining?

EA
Why shouldn't it be? With the cheap electricity and their massive population, they have a very high mining power per capita potential.
make3
it's not super valuable as an store of value of it's this volatile, right? the inherent value of the Bitcoin, especially now that transactions are slow and cost 50$, especially compared to other crypto currencies. This is just a clear speculation bubble
deadmetheny
And everyone should also believe in God, because I say that God is real.

Bitcoin only has value because a bunch of nerds put a lot of real money into it and are convincing themselves and other suckers that it's actually got some sort of value, honest. At least other fiat has the backing of the economy and military of whatever nation backs it - at the end of the day, Bitcoin is a ticket you get stamped proving a bunch of electricity was wasted verifying the ticket with absolutely no backing if the whole thing goes tits up, and the fact that the prices are constantly in insane flux is all the proof needed to demonstrate that it's not a consistent store of value.

brucephillips
I wouldnt go this far.

You could say all this about gold, and it's still a reasonable investment. I can see BTC serving a similar purpose.

vivan
In financial markets this is called a pump and dump scheme. It is illegal for regulated assets (see Wolf of Wall Street). However as Bitcoin is unregulated there is nothing stopping this from happening (yet).
readhn
Fear and greed at work. They have driven many other other markets in the stratosphere in the past. Study history and what happens after :)
anilshanbhag
I have noticed this phenomenon called Sell the News. Once the future contracts are out, there will be nothing new to look forward to and price will dip. That is still a few days off, who knows what will happen till then.
leoplct
Why with futures there will be nothing new to look forward to?
dustingetz
bitcoin trended on r/all @ 10k, that's why the surge
kneel
For the majority of the population I'm willing to bet that immediately family is the only place they'll take financial advise, thus the thanksgiving holiday bump.

People went home for thanksgiving and told their families about the 700%+ gains that bitcoin made over the year. That's where the pump began, it's gone viral since. Memes, trending, hashtags are raging over bitcoin.

atentaten
> Fake news, facebook & twitter ads that influenced US elections proved that it's possible to do something like this.

Why is it treated like some sort of revelation that the media influences elections, Russians notwithstanding.

whamlastxmas
People are desperate for a scape goat after getting their egos thoroughly tied up in a terrible election.
chatmasta
There is almost definitely rampant sockpuppetry in the bitcoin community.

One question I’ve been interested in: is there a way to trick algo traders into buying an altcoin? Perhaps by spamming twitter and Reddit with positive sentiment text about that altcoin?

anudeep2011
Those algos, ideally should weigh the twitter handle. Or else it's a stupid algo.

One need to spam through authoritative handles.

Pretty much like tricking google ranking algorithm with site-farms and fake backlinks. But hey, a lot of people were able to do this before Google started to improve its algo.

chatmasta
Twitter can’t even tell the difference between an “authoritative” account and whatever the opposite is.

If any bots are scraping twitter for altcoin signals, I would be pretty surprised if there were any checks other than num followers / join date / etc. Determining if a twitter account is a bot, even with minimal certainty, is NOT an easy project. And many of these crypto traders are not exactly John Carmack either.

eitland
Possible example: a few months ago when the price tanked after someone gave away < 20 Bitcoin on Reddit.
deweller
People who are new to Bitcoin don't realize that there has been a growing grass roots movement to promote Bitcoin all over the world for years.

I realize that it may seem to have come out of nowhere, but the recent popularity is the culmination of years of hard work by people who are genuinely excited about it.

jaxn
At this point, I can’t imagine this isn’t a pump and dump. There are a lot of people who have spent a lot of time trying to figure out how to do a pump and dump without getting tripped up on regulation.

There may not be a single bad-actor, but rather a bad-actor friendly environment making this inevitable.

When everyone else is greedy, be scared.

synaesthesisx
The thing is 1000 people don't necessarily own 40% of the market - it's 1000 addresses. Many of those addresses likely belong to exchanges and hold multiple users wallets.