Things I am afraid to ask ( Steemit )
This post is about my suggestions. I can not say "this guy is bad" because I have no bullet proof evidence. I don't see whole picture. What I see is part of it and frankly, I don't like it at all. This topic is not a problem only for steemit. You can see this behavior almost everywhere. Especially on stock markets where the brokers and dealers are involved in trading against their own clients.
The beauty of blockchain
I like blockchain even if I don't understand all technical things. What I understand is the thing that you can get lot of data to analyze. I like discovering things base on data analysis. So let's analyze.
You can see the table of estimate dollar value on the picture above. The way I am looking at this table is a bit different. People are trying analyze who is the biggest whale and who has highest curation rewards and so on. I don't care if someone make more money in fair competition. I am looking at the picture from traders perspective.
Who has a real power - the power of liquid asset
Let's look at the table once again. Who are those players with no Steem power . Yes, some of those players with highest percentage of liquid assets are Poloniex and Bittrex. So why they hold tons of Steem and Steem dollars ? Probably because they do "exchange operations" (exchange operation staff is guy who make better service for the customers). That is what I thought from first day I joined to steemit. The problem is that I found their contribution to community as a not very positive.
First Suggestion
My first suggestion was that Idea of Exchange operator as shareholder of the company (steemit) is very positive. Because he has plenty of features to protect market manipulations. The situation like this.
internal market manipulation part 1
internal market manipulation part 2
internal market manipulation part 3
It seems that I was wrong. Because those guys have nothing to do with monitoring the market manipulations. I wanted to figure out what they do exactly. I checked one of the wallet and I found something interesting. This data-set is just very small overview of daily activity of poloniex account.
This is just small piece of the daily transactions. Ok , now I understand. The Exchange operators are very valuable members of community, I guess. I thought that everything is probably fine and contribution is valuable. There is just very small issue I don't understand. What a hell is doing bittrex on the list of the transaction? He has own account. He should act like an exchange operation specialist as well. This is very weird. isn't it ?
I used the filter to check all transactions between Bittrex and Poloniex. Let's look at this.
Almost all transactions are one sided. isn't that weird ? Ok, lets look at the Steem dollars all transactions together.
All transaction in one direction again. This is a problem because once you are the exchange provider you shouldn't be involved at any trading activities against your clients. This could be taken as a market manipulation or insider trading in real world. Let me share my opinion what is this all about.
Second suggestion - Arbitrage trading
This is the most reasonable explanation of what a hell is going on in here. Poloniex is buying STEEM in the Bittrex exchange pool. Then he make a transfer to his own account (one side direction) to his own exchange pool. He can get rebate of 0.01% on the bittrex side and then he can sell it with no fees on his own pool (he don't need to pay commissions to himself) . Poloniex can do this over and over again. And this is not the end of the story. There is plenty ways of trading if you have advantage over other participants and free access to the marketplace. I have explained only easiest one.
Why we should care ? I don't know guys if you care if someone who is yours counterparty at trading is selling over and over again against your long term assets but I do. I am also not very happy with situation when one big trader has a massive advantage of free trading over the rest participants who have to pay 0.25% or 0.15% commissions. Maybe I am completely wrong and I am missing something but let me ask you one question. Try to imagine that you are the steemit CEO. Would you cut 1.7 million $US from steemit market cap just for listing on the exchange even if you know there is some bad impact to other shareholders ? Because this is exactly what we are. We are shareholders of the company. One of us is taking money out of our pockets without contribution to community.
- no rewards for community
- permanent sell side behavior on main exchange
- unhealthy internal market
it seems like too much reasons to not invest my own money as I did in the beginning. There is plenty of other things I can talk about. I think that pictures will tell the better than my poor English. Take a look at the comparison of Bittrex and Poloniex activity.
Do you see the difference? No. Let me show you other comparison.
Conclusion
I don't know guys. Maybe I am just paranoid and everything is ok. The problem is that I don't see any communication or explanation what is the contribution of those guys. They hold the most liquid assets in here and I am not sure if somebody can guarantee those assets will not be used to kill the market. I want to buy more shares. I really do but question is there and I need answer. Well , this is all I wanted to talk about. My questions are here. I just hope that answer will not be a one big FLAG, because I had few already for this type of investigation.
Exchanges aren't active members of the community on their accounts. They just have to use a steemit account to be able to transfer funds back and forth.
I think poloniex has a lot of history to buy assets from other exchanges to have them available for the demand their users if the time comes. They bought a lot of eth at one point too.
You have to remember though that everyone knows this is open-source and anyone van analyze and check for shady things, with this in mind you have to remember that if something fishy really is happening, it won't be this obvious and open to the public.
I moved most of my assets away from Poloniex when they implemented the changes to trading fees and basically made it cost nothing for whales that trade a lot and like to manipulate the market and I think that's what's happening now with so many altcoins having daily pump and dumps.
If you aren't profiting from it, someone else is and someone else is losing from it too. That's why I don't day-trade anymore and invest for tje long hauls instead.
Thank you for your comment. I think that my post is almost invisible and there is no many people who understand markets. I am pretty sure that some guy is doing triangular arbitrage right now between our internal market and poloniex. He has at least minimal fess or 0 . This was a reason why I brought this post.
I do trade a lot and I see market manipulation on daily basis. I am not happy when I see similar behavior at steem market as well.
I just started but have to admit at this point my faith in #steemit is waning.
I hope I am wrong :)
Wow, that is some impressive investigation you have done. Sad for Steemit :(
thank you
Leaving comment only to make it hot.
How long can this trade work?
what trade exactly you mean. ? could you please specify what trade ?
I think the big point of confusion here was about the poloniex and bittrex accounts. The liquid steem in these accounts isn't really owned by these exchanges. These accounts hold the funds of all their customers. These exchanges accept Steem deposits from their customers and hold them in these accounts while their customers trade internal IOU tokens on the exchanges. The funds going in and out of these accounts are when people deposit and withdraw from the exchanges. The memo field is used by the exchanges so that the exchange can recognize which of their customers to credit for each deposit.
There's really nothing shady going on here, this is just standard method for cryptocurrency exchanges to handle customer deposit/withdrawals.
Thank you for explanation of this liquid steem issue. That is all I wanted to know. The problem is that I couldn't find any announcement or answer from respected authority.
Sure, I understand, this stuff isn't always obvious at first.