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Ask HN: Why is crypto wash trading legal?

5 points by moose_man ↗ HN
The data on public attention and the latest run up in crypto are totally out of sync so it just seems to be a large crypto holders trying to restart the hype they saw before the previous crash. Why is this allowed?

10 comments

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smoldesu
> Why is this allowed?

Because computer networking systems are protocol-agnostic, and we never anticipated that we'd need laws to control digital asset settlement.

moose_man
But the clear end point here is lure in consumer investors which end up losing by getting in at the top? Shouldn't the SEC step in at this point? They have ways to track and do forensics on crypto, they could use undercover agents ect. Seems like someone should be looking out for the little guy and not Michael Saylor.
smoldesu
Iunno. I'm not sympathetic to either side really, but after a certain point regulating digital currency is outside the US's purview of control. They can regulate the exchanges for fraud pretty easily, but fully regulating P2P crypto transactions is an unattainable nightmare scenario on most blockchains.

My best guess is that custodial wallet (eg. "we'll handle your finances, trust us...") services will be regulated into submission a-la banks, and P2P transfers will be an ongoing issue a-la cash. If war is declared on cryptocurrency, it will probably be for national security or economic superiority reasons. My $0.02, I haven't held crypto in years.

logicalmonster
As an investor in crypto, I feel very confident that I am getting what I'm paying for. The basic facts about a coin or token, like how many are supposed to exist, are completely verifiable on some sort of public blockchain. That is the safest possible system.

In contrast, the stock market is a total mystery box as to even how many shares are even being traded with all of the tomfoolery with shares being borrowed and sold short, dark pools, and lots of crazy things that you'd need a decade in finance to even begin to understand.

smoldesu
In fairness, nothing stops cryptocurrencies from cooking the books either. A public blockchain is only as trustworthy as the code it runs, and with L2 chains and inter-chain bridges it's a goddamn mess. You're correct that due diligence can be easier with cryptocurrency, but you'd be remiss not to mention the lack of standardization, legislation or regulation. If you get played, you have no safety net.

The stock market is comparatively stable because the dialectics of "scammer" and "businessperson" are more clearly defined. By filing with the SEC you are using your credibility as collateral with a central authority; even if we both agree that government mediation is a bad idea, it's been the standard since the ancient times and will probably continue to be valuable for as long as we have sovereign states and people that live in them.

wmf
It's not legal but it's allowed because regulators aren't equipped to handle so many violations. There have also been some pro-crypto (under the guise of "innovation") members of Congress who have encouraged a light touch.
moose_man
It's just insane the number of tiny investors that got crushed financially by the last crypto hype cycle, that they are trying to reignite another cycle so artificially and that they might get away with it seems so socially nihilistic.
hamoodhabibi
Today the SEC ruled that stablecoins are securities.

It is a moving goal post.

muzani
When someone doesn't understand a phenomenon, they usually dismiss it as cheating or luck. It's usually the only visible factor, which is why they assume it's the dominant one in determining the behavior of a system. But it's best to factor it out and look for others.

There's a reason prices go up, there's a reason prices go down. Perhaps the reason prices went down are all gone, leaving it to float up. Scarcity is built into many cryptos and so it's only natural that prices go up even with no action taken on anyone's behalf.

There's a popular saying in investing that be greedy when others are fearful and fearful when others are greedy. The data on public attention might well be inversely correlated with the price. With crypto, most of the assets are in the hands of a few and those few can move the needle more than the masses.