This college student can help you forge the transaction volume, online CoinMarketCap, only 15,000 US dollars

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Crypto

Market manipulation is a disaster for cryptocurrency professionals trying to legalize the industry. But for 20-year-old Alexey Andryunin, this is a necessity for his survival.

Andryunin is a sophomore at Moscow State University and co-founder of Gotbit. Gotbit is a company that focuses on making anonymous cryptocurrencies look like they are actively trading. As long as the payment is made, the company with only two people will write programs for the robots to trade each other on other exchanges until it has enough “volumes” to be listed on CoinMarketCap. Once these tokens appear on that influential market data site, an asset can gain the attention of larger platforms and larger investors.

Andryunin is blunt when explaining why Gotbit is not registered in any jurisdiction:

“This business is not fully ethical.”

In a global market that is controversial in the absence of transparency, the business is not completely unknown. Bitcoin asset management company Bitwise estimates that 95% of Bitcoin trading volume is forged, and only 10 exchanges do not exaggerate data, and released reliable data on trading volume on its platform.

Bobby Ong, CEO of CoinGecko, a cryptocurrency ranking portal, says that companies like Gotbit exist. "It's not hard to find someone like this to help you with these services."

“These operators usually claim that they can make market for token projects and increase the volume of transactions through fees. This practice is also known as a dishwashing transaction and is illegal.”

Ong pointed out that it is possible to detect shampoo transactions from outside. Looking at the exchange's trading history and pending order records, you will notice some specific patterns and find some suspicious things:

“If the trade happens outside the bid-ask spread, or often within the bid-ask spread, this is a clear example of a 'washing trade'. You can also check the trade interval and trade size to detect common repeat patterns and discover the wash trade. activity."

However, for obvious reasons, it is rare to hear the operators openly talking about their transactions.

In an interview with CoinDesk, Andryunin revealed the operating mechanism of Gotbit, which helped the encryption project camouflage until it was successful.

Forging for trading volume

The interview took place in a high-end business district in Moscow, with skyscrapers, high-end cafés and a number of companies associated with cryptocurrencies. Andryunin is late, he has just met a client. This applied mathematics student has hardly gone to class. He said that almost everyone in his classmates are obsessed with cryptocurrencies.

In 2018, he founded Gotbit with another college student, and ICO was still very popular. His partner is responsible for writing the trading robot code, while Andryunin is responsible for contacting the token project to sell Gotbit's "market making" service. On the small exchange, the currency needs $ 8,000; by supporting the algorithm of normal market activity to support the false transaction volume, the monthly fee will reach 6,000 US dollars.

A coin on CoinMarketCap will cost $15,000. To do this, the first project needs to be listed on two small exchanges. Andryunin believes that if there is no man-made trading volume, these platforms will die out. One obvious sign is that the unnamed currency on the exchanges is much more active than Bitcoin.

Andryunin believes that exchanges often know when Gotbit's robots are raising the volume of trading, but higher numbers are in the interest of the exchange itself, rather than managing manipulation.

Andryunin said that these exchanges only charge a few bitcoins as the cost of the currency, and there are no other standards.

Alameda Research, an encryption trading company, said in a recent report:

“As we all know, many exchanges may adopt an exaggerated trading approach to increase interest in their platforms and attract new customers.”

Alameda analyzed the pending orders and transaction history of 48 cryptocurrency exchanges around the world and found that the real trading volume of 14 of the exchanges is likely to be zero. BitForex is one of them.

Andryunin said that on such exchanges, Gotbit seems to be the main source of liquidity. "These small exchanges, I don't even understand what they depend on, there is no real trading volume."

When a token is listed on two exchanges and the robot provides trading activity (each exchange can trade less than $100,000 per day), there is a chance to get it online at CoinMarketCap. Andryunin said that since then, Gotbit has retired. He said that other intermediaries will complete the final step.

What did they do? He didn't know. But the truth is: "We have 300-500 customers on CoinMarketCap."

Carinyne Chan, director of marketing at CoinMarketCap, said that in order to go live, the token must meet a range of criteria, including the use of blockchain technology; there is a well-functioning website; the two exchanges go online, and the two exchanges are CoinMarketCap is online; and communicates directly with project representatives.

When asked if it is possible to deceive them by expanding the volume of transactions, Chan said:

"Our position is to list as many cryptographic assets as possible, covering the entire domain of cryptographic assets. We are not reviewing information."

CoinMarketCap also identifies items with suspicious activity on its website based on regulatory notices or user-submitted information.

Reasons for counterfeiting transaction volume of token items

Andryunin said that Gotbit's customers usually have completed ICO, so they need to pass some marketing activities to appease investors.

He believes that most of these founders care about their projects and try to make them work, but only two or three of the 30 projects that Gotbit is working with “really create some value” have an effective business model, and It has reached the level of creating actual products.

Other projects can survive for a few months due to false trading volume, let the founder cash out, and then stop paying for the "marketing", after which the price of the token will fall sharply. They will announce a bankruptcy a few months later.

At that time, those who bought these tokens had to face reality, and Andryunin joked:

"The Lamborghini dream is impossible, and the bicycle is almost the same."

CoinGecko's Ong said:

“Token items are sometimes forced to use such market makers because they need to prove to investors and token holders that their projects have significant market interest and are going well. Some people do this because they I don't want the price of the token to drop suddenly, but I want to keep it at an 'optimal' price, or let it rise over time."

Ong added that part of the pressure comes from the exchange, the exchange requires the minimum trading volume, and may deduct the tokens with a small amount of trading.

“Therefore, in the face of the possibility of delisting, the token project can only allow these market makers to expand their trading volume,”

Andryunin claims that a project that had purchased Gotbit's market-making services entered the top 100 of CoinMarketCap's market capitalization. He declined to disclose the name of the token, but said the project had a strong team and business model from the start.

Why is a legitimate team going to fake the transaction volume? He replied:

“They want to be listed on a large exchange and want to get some cash.”

Nothing that robots can't do

To show the amount of false trades, Gotbit's robots fill up the exchange's orders (again, we're talking about small exchanges with very small trading volumes) and use the same or another account to close the order. Typically, customers have four accounts, but two are enough, Andryunin said.

In order to make these transactions look reasonable, Andryunin said, Gotbit programmed its algorithms to simulate normal trading patterns at different times of the day and year in different parts of the world.

Gotbit's pitch deck lists several trading charts, all from their customers, and the names of these tokens have been changed (Andryunin says he signed a confidentiality agreement with the customer). Sometimes, if only the Gotbit robot is trading tokens, and the customer decides to close the robot, the transaction volume will be zero.

The pending order of the trading robot should not be executed and settled, but merely creates the illusion of the transaction. In theory, the true holder of a token purchase during the ICO can go to the exchange to sell the coin – in this case, Gotbit may end up with a large amount of unrealizable assets.

To prevent this from happening, the robot monitors the exchange's wallet on the Ethereum block browser Etherscan. Gotbit is only available for ERC-20 tokens running on Ethereum, so it's easy to observe the movement of funds on the web.

Another Gotbit service is to buy and sell orders at a price range to control the bid-ask spread, which is the difference between the price the buyer is willing to pay and the price the seller is willing to accept. Usually, this spread is a strong signal that the market is mature or lacks maturity; the narrowing of the spread indicates that demand and supply are sufficient, and the demand can be met at a compromised price, while the spread of the spread indicates insufficient market liquidity.

Therefore, Andryunin said that some projects want to prove that their token trading spreads are small, indicating that they have an active and healthy market.

Gotbit also provides an algorithm that allows the robot to sell tokens without affecting the price: To do this, the robot will look for the existing buy orders in the order and fill them up quickly.

Trading volume is not reliable, Andryunin seeks transformation

Andryunin has no illusions about the future of his company.

He acknowledged that with the tightening of global cryptocurrency market regulation, small exchanges filled with junk coins will eventually be eliminated.

For example, the Financial Action Task Force (FATF) is an international guideline for regulating cryptocurrency-related services and exchanges, which will require an even more rigorous customer identification process similar to traditional banks.

“I think the FATF will close soon (such exchanges): cryptocurrency exchanges will be regulated like Nasdaq, and counterfeit trading volumes will be banned.”

Andryunin added:

“I am not good at legal issues, but I think what we do here on Nasdaq will be a financial crime. Exchanges must monitor whether people are making false transactions. Otherwise these exchanges will be blacklisted. ""

As a result, Gotbit's market-making business is gradually diminishing, and the team is turning to other services, the most popular of which is IEO, the ICO on the exchange.

In addition, Andryunin said that he and his partners have a more general concern: pass the final exam.