
'Picasso', the Painter on GDAX? - hw
https://medium.com/@bitfinexed/meet-picasso-the-painter-on-gdax-c478ff8f50e5
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adjkant
As someone using machine learning to identify the patterns of bots on GDAX and
riding the waves accordingly, I can say this is certainly happening. It's not
just one bot though. There is huge money right now in crypto markets, both
illegally and legally.

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thisisit
While I don't doubt there are bots out there. How are you able to
differentiate between bots and human trades?

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adjkant
Personally, I'm not fully, though I'm sure there are methods. Realistically,
right now the naive solution is working just fine, which is just identifying
market trends. Because so much is bots, it inherently learns the trends of
bots, allowing me to write an algorithm that reacts to said trends. The human
trading more or less accounts to be the noise level over the bot patterns,
though I'm sure some bots also react to the noise, increasing the noise in
practice for my purposes. All I know is I can get a good enough accuracy right
now to make pretty accurate guesses.

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multibit
What is your naive method? Like what is the algorithm?

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adjkant
The learning method is really quite naive, I'll put it that way. The algorithm
I chose is designed to be risk averse and crash resistant. The learning method
and algorithm are orthogonal/separate, and what learning you pair with what
trading algorithm can make a big difference in risk and returns obviously.

I'd prefer not to say more than that simply because if the algorithm was run
at any large scale I worry about its effect on the market as a whole. Imagine
a bunch of bots all following the patterns of a few other bots and what
happens if one of those big player bots errors or even if there's a change in
the bot and people don't retrain their model. That's just one way it could all
go south quick. I'm frankly worried that this risk doesn't already exist.

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dahdum
Author is mistaking basic exchange dynamics, arbitrage issues with USD, and
drawing up a wild conspiracy from almost nothing.

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ojr
he is trying to trigger a bank run, but doesn't realize our whole financial
system runs on fractional reserves

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mempko
Fractional reserve blanking is not a real thing.

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irln
Do you mean that it's not "a real thing" because some banks are not limited to
loans amounts within reserve requirements?

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mempko
Because the majority of banking systems dont require any reserves. Even in the
USA certian household debt like mortgages require reserves while most other
debt like commercial does not. And even with mortgages banks have 30 days to
come up wuth the reserve.

In other words, it doesn't exist as the texbooks describe.

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tobltobs
Shameless plug: The orderbook visualizations of
[http://www.dancingbots.com](http://www.dancingbots.com) help to understand
the different kind of bots on various exchanges. However, for some/most
strategies one would need a higher resolution (seconds, not minutes) and more
focus on the area around the current price.

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modo_
It's also worth mentioning this [1] blog post from 2014 on orderbook
visualization. It has a great explanation of the methods and insightful
analysis.

[1] [http://parasec.net/transmission/order-book-
visualisation/](http://parasec.net/transmission/order-book-visualisation/)

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anilshanbhag
I don't get the point of this article. The bot he says is buying 95 BCH at
8500. I don't see how this is profitable as the the price quickly falls and
the bot lost a lot of money. This is just a bunch of bots trying to catch
trends. You can see this on the stock market as well. See stocks like LFIN or
LTEA.

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gchokov
You are getting it wrong. The bot is not buying, but placing an order /
intention to buy. This pumps the price. Just before the order is filled-in,
the trade order is canceled, but the price is already pumped.

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bufferoverflow
That's not how it works. Placing an order does not change the price, it only
adds it to the book of orders. If the order executes (a buy and a sell orders
are matched), then that's the current price.

That's where author's theory makes little sense. It's quite expensive to sell
to yourself. Even if you're a high-volume trader on GDAX, you pay 0.1% on each
executed trade. So you make 400 trades, you lose half of your money to the
fees.

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anonytrary
I couldn't help but think the same thing regarding this article. It doesn't
seem worth it for the bots to price-paint unless they are owned by the
exchanges. In that case, this could be a much bigger story, but the author
asserts that they are _not_ owned by the exchanges. I think this assertion is
merely for face and the author probably thinks the exchanges are involved.
This doesn't add up unless the exchanges are involved.

Even then, let's say they are involved. Occam's razor? Was it a carefully
engineered price-paint by the bots owned by the big bad corporations, or was
it just a bunch of people who had live bots that didn't know what the fuck to
do with an empty orderbook?

It seems way too easy to write a bot that has no idea how to trade, or gets
influenced by very arbitrary anchors.

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bufferoverflow
Now that's a decent hypothesis. An exchange wanted to create an illusion of
high liquidity, they wrote a stupid bot, which worked in unexpected ways, they
had to shut everything down.

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anonytrary
It's funny because I was on GDAX (looking at it) when the price of BCH jumped
to over 9000. It didn't "start" at over 9000 like the "tape" suggests. Right
when it was added to the exchange, it was at maybe 4000. Then, a series of
jumps occured in a timeframe of about 1 second and the price was at 9500 or so
(or was it 8500?). Anyway, clearly my memory is spotty, but I found that very
strange.

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moab9
your memory is right. it was showing both those numbers at the same time. one
on the chart the other on the bid. made no sense.

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anonytrary
One was the last price, the other was an average of some sort.

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thisisit
_I believe that the reason we saw Bitcoin Cash start out trading like this,
several hundred percent higher than the rest of the market, is because the
tape painting bot was unleashed on this trading pair too early._

So, the Coinbase spike was not due to "insider trading" but a bot and they
should investigate the bot? The amount of wild theories is just mind boggling.

While there are serious doubts on Tether this seems a stretch just to tie
thing to Bitfinex.

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tehlike
The theory was, price increase prior to announcement (couple days) was insider
trading. After announcement might be bot.

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johnwheeler
His assertion that no humans would place certain irrational trades seems
dubious. Sure they would. What am I missing?

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asenna
When the news went out that BCash is being listed, the price on Bittrex shot
up to $5k and then started settling down at around $4k. At that exact time,
the price on Gdax was showing over $9.5k after which they halted trading for
the day.

I am with the author on this one, no human with good intentions would put a
buy order at that price.

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xorcist
That there is software trading these order books is not disputed. They even
publish APIs for the purpose. However the argument that no human would place a
buy order at a significant premium over market value is not a good one.

Many people issue market buy orders. (Why? Some exchanges prioritize them over
limit orders. That might be one reason. Another might be that Coinbase's
customers aren't predominantly day traders.)

Coinbase is known to have issues with their trading engine. They have outages
every time there are large market movements. They can be very slow to execute
places orders and there have been spurious reports of people having their
orders executed out of order.

If the order book was empty, the execution engine lagging the user interface
considerably, and many people placing market buy orders, this outcome is
expected. Coinbase probably did the right thing to disable trading for a
while. If a trading engine that could keep up with the user interface was a
possibility for them that would probably have happened years ago.

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alex_young
Question is why wouldn't this be going on? When there are different exchanges
each with their own price it invites arbitrage.

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dahdum
Author is claiming that a single bot is able to drive up the price on GDAX and
then arbitrage the difference, ignoring the fact that more than 1 bot is in
operation.

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fapjacks
A lot more than 1 bot in operation. All you have to do is just sit there and
watch the trading. It's fairly obvious there are a bunch of bots trading at
any given time.

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exabrial
My brother and I were talking tonight about arbitrage and how it's likely
happening on Bitcoin considering how close the exchanges are tracking each
other despite being independent from each other.

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modeless
Arbitrage is legal and beneficial.

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lgats
Or perhaps all this painting is coming from the market orders placed on
coinbase

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senatorobama
What's a good BTC trading firm that pays in BTC?

