[New Crypto Rumor] BitMEX is Victim to Anyone With 100 Accounts Who Can Spoof Millions of Fake Orders ‘For Basically Nothing’
Anyone With 100 Accounts Can Spoof Millions of Fake Orders on BitMEX “For Basically Nothing”, According to New Report
BitMEX is more prone to price manipulation than other exchanges, according to a new report online. The popular cryptocurrency exchange reportedly facilitates “spoofing” – the practice of posting orders to an exchange’s order book without intending to fill them.
The report was shared online by Bitfinex’ed earlier today. Bitfinex’ed posted a video showing a BitMEX trader with dozens of accounts placing over $70 million of spoof orders.
Bitfinex’ed argues that anyone with an army of bots can manipulate the price on BitMEX.
Typically, other exchanges prevent this by requiring users to complete KYC verification. BitMEX, however, does not require KYC verification: they just require a username and verified email address. This makes it easy for spammers and scammers to post virtually limitless spoof orders onto the orderbook, thereby manipulating the price.
Noted Bitfinex, Tether, and BitMEX critic Bitfinex’ed online earlier today:
There’s nothing wrong with posting $70 million of orders on an exchange orderbook. However, there is something wrong if you post $70 million of orders on an orderbook without intending to buy or allow the order to execute. In this case, you’re manipulating the price and it’s called spoofing.
All exchanges can fall victim to this in some capacity. BitMEX, however, is particularly vulnerable due to its lack of user verification requirements.
That’s a problem because BitMEX is processing the vast majority of liquidity in the crypto marketplace right now.
If BitMEX Falls, It’s Going to Be Very Bad for Crypto
As pointed out by Nicholas Merten on Twitter, nobody in the crypto community should want BitMEX to fall. If BitMEX falls, it’s going to be very bad for the crypto community:
I'm gonna say it again. The shear threat of having the mass majority of liquidity on a leveraged exchange in an already low-volume market can't be ignored. It's a big reason for the bart charts, why we haven't had "muh altcoin" bull run, and why you'll lose 50-100x faster. pic.twitter.com/RZcCrRYS0K
— Nicholas Merten (@Nicholas_Merten) October 9, 2018
Merten linked to an image showing BitMEX’s liquidity. It takes an order of 39,000 BTC to move the price of BTC 10% on BitMEX. The only exchange that comes close is Bitfinex, where you need 5194 BTC to move the price 10%. Other exchanges require an order of just a few hundred BTC to move the markets 10%.
BTC Volatility Is Nearing an All Time Low
If BitMEX and other exchanges fall – as predicted by Bitfinex’ed – then it would come at a very bad time for the bitcoin community.
Bitcoin has a reputation as a volatile cryptocurrency, and that volatility purportedly makes bitcoin a bad medium of payment.
Bitcoin has been gradually shedding that reputation over the past few months as the price has remained surprisingly stable.
As pointed out by Alex Kruger on Twitter, bitcoin’s volatility is nearing all-time lows today. Bitcoin’s price has remained surprisingly stable within the $6400 to $6600 range over the last few weeks. Aside from a few deviations, the price of bitcoin has remained relatively constant:
Bitcoin's volatility, as measured by Bitmex's BVOL24H, is again hitting all-time lows today. This volatility index, available since January 2017, uses the daily (non-annualized) standard deviation of logarithmic returns, based on sampling 1 minute. pic.twitter.com/h9FiyGKZdp
— Alex Krüger (@krugermacro) October 9, 2018
If BitMEX and other exchanges fall, then it would likely set off a period of major uncertainty for bitcoin. Stay tuned to see what happens next with controversial crypto exchange BitMEX. Last week, the FBI shut down controversial exchange 1Broker for failing to abide by regulations – including KYC verification. Could BitMEX suffer a similar fate?