[socillion]

I'm not sure why it's on HN, but it's real.

It was originally happening in the public channel #dogecoin-market on Freenode but was then moved to the private channel #marketmakers, which seems to have spurred people to start sharing it everywhere since now it's private.

Wolong is the guy who brought the Dogecoin price to where it is now by investing a ton of money into it, and due to that and some charisma he's attracted a cult following. He's now using that cult following to have them do pump/dump ops for him (with their money).

Here's his manifesto: http://pastebin.com/RdRAULtT

It's entertaining, I'm waiting for someone to do a solid article on the story.

Bear in mind that cryptocurrencies are currently an unregulated wild west, where activities like these are both common and legal. Do not invest anything you are not prepared to lose.

edit: just for further corroboration, here's logs from a few days ago: http://pastebin.com/1NTTBCXM

You can check the charts at http://bitcoinwisdom.com/markets/cryptsy/dogebtc and see how that was responsible for a drop to 212. From memory they were using about 36million dogecoins, which comes out to approximately 78btc or $65,000.

My pet theory is that wolong is just building trust at this point so he can eventually have his army of followers buy all his dogecoins at inflated prices, but who knows. No matter what happens, it's very entertaining to watch develop.

[cvos]

Once upon a time in a small village a man appeared who announced to all the villagers that he would buy monkeys for $10. The villagers knew that the jungle held countless monkeys, easily caught. The man bought 2 thousand.

As the supply diminished, they become difficult to catch, and villagers returned to their farms. The man announced that he would pay $20. The villagers renewed their efforts and caught 1,000 more monkeys.

The supply quickly diminished, but before they returned to their farms the man increased his offer to $40 each. Monkeys became so rare that it was difficult to even see a monkey let alone catch it. But they caught 500.

The man now announced that he would buy monkeys at $100 each! However, since he had to go to the city on some business his assistant would now buy for the man. The man departed.

Then the assistant told the villagers, “Look at all these monkeys the man has in that big cage. I will sell them to you at $50 each. When the man comes back you can sell the monkey’s back to him for $100.”

The villagers gathered up all their saving to buy the monkeys. The assistant took their money. They never saw either the man or his assistant again.

[hayksaakian]

What is the origin of this story?

[grugq]

it is a variant of "the fiddle game", or "the glim dropper". They are standard conman tricks from back in the day. All work on the principle: "you can't con an honest man".

http://en.wikipedia.org/wiki/List_of_confidence_tricks

[mcphilip]

Not having skin in the game, this is fascinating to follow. It's like watching primitive HFT algorithm battles slowed down to meatspace actor speed. I think it's safe to say that there are some participants in crypto currencies making massive percentage gains using lessons learned on Wall Street.

Which leads to an interesting thought: has someone figured out how to judge when an emerging crypto currency gains enough traction to start attracting sharks to the pond of early adopters?

[smtddr]

>>I think it's safe to say that there are some participants in crypto currencies making massive percentage gains using lessons learned on Wall Street.

Understatement of the year and it's only January. ;) That's pretty much everything of crypto coins right now, especially alt-coins(any coin that isn't bitcoin). The inexperienced people prone to fear-driven reaction are getting fleeced.

[mcphilip]

>Understatement of the year and it's only January. ;)

Yeah, an understatement for sure. I can only imagine what will be afoot in December... Wild guess: ransomware used to drive up the price of an alt-coin.

[shiftpgdn]

Isn't this already happening with cryptolocker? I had read the cryptolocker wallet has received something like 23 million USD worth of bitcoin at $900/btc.

[aw3c2]

> Do not invest anything you are not prepared to lose.

Let me fix that for you:

> Do not gamble anything you are not prepared to lose.

[gnur]

Investing always is a gamble.

[XorNot]

Gambling is when the game is purely driven by luck.

Investing is when the instrument has measurable properties and explanations for why it will become more valuable - i.e. you invest in making your factory larger, so it can produce product more cheaply.

Betting on completely unregulated currency markets (which have good reasons that they shouldn't have any value at all) is gambling, because you're entirely depending on irrationality. That said...quite a few businesses with that model.

[sliverstorm]

Investing has a luck component to it as well.

The way I like to think of it is, it's gambling when your expected rate of return is negative or zero. It's investing when it is positive.

This is why a gambler is gambling, but a casino is investing/running a business.

[DennisP]

Good point, but an even better definition would take variance and risk of ruin into account. If you just look at expectation, then buying insurance would qualify as a gamble. I think most people would say it's more of a gamble to skip insurance.

Betting all your money on one hand of blackjack is a gamble, even if you've been counting cards and know the odds are in your favor. A casino spreading its money over millions of small bets is investing.

[sliverstorm]

That's a good point, and I will have to incorporate it in my example in the future.

[cookingrobot]

Gambling and market speculation (and even theft) are related in that they're all 0 sum games. Every dollar you make is a dollar someone else wishes they hadn't lost. Investing is different in that when you win and earn a return, nobody feels that they lost.

[joosters]

How about all those people who sell shares and then see them shoot up in value? They certainly feel that they lost.

[dragontamer]

Indeed.

The best example would be bonds. If you buy the California Bonds... the people of California may get a High-Speed Railroad within a year. They will not be able to accomplish the building of the High Speed Railroad without investor support.

30 years from now, the state of California will finish paying off your bonds. And you'll make some money.

Win/Win for everyone. Investors make money, and California citizens get High Speed Railroads today... instead of 30 years from now.

[joosters]

What is your expected rate of return from a horse racing bet? It's certainly negative if you pick a horse at random, but what if you chose the horse based upon form, conditions, odds and so on? It's still gambling, but you cannot prove that the expected rate of return will be negative in this case.

There are people who make a living from this, just like there are people making a living from investments. Likewise, there are lots of people that lose at both.

[Atroxide]

nicely put, never thought of it like that.

[andrewflnr]

So, poker isn't gambling? That's news to most of the world.

It seems pretty clear to me that gambling and investing are a continuum, with craps at one end and Treasury bonds at the other.

[BrandonM]

Poker absolutely isn't gambling for skilled individuals, any more than a casino is gambling by offering games of chance that have a house advantage.

[socillion]

Some of these altcoins are the epitome of the greater fool theory, where most participants are perfectly aware that it is a rationally poor decision to invest in them but do it anyway because they think someone will buy it for more later.

It turns out people can make huge returns even from investing in known scams - certainly not guaranteed, but it's better odds than gambling.

[XorNot]

Really? Only "altcoins"?

They have the exact same mechanics, structure, and backing as Bitcoin...

[socillion]

I only intended to comment on the altcoins that are known scams, but draw investors anyway.

Imagine you started XorNotBux, announced you were planning to sell a billion of them in a few months, then inflated the price with a much smaller supply in circulation. Some people will buy this (and possibly profit) fully knowing that you plan to obliterate it in the near future.

[SectioAurea]

False. They do not all have the same structure as Bitcoin. Many of them are explicitly structured as pyramid schemes (premining, instamining, stealth launches, closed source launches).

While very few have unique selling points over Bitcoin, it is dangerous to assume they are 'at least as useful' as Bitcoin.

[joosters]

Not at all. Is betting on a football match purely luck? Of course not, there's the skill of the teams and luck involved.

Investing == gambling. You can buy shares. Or you can make a bet with a spread-betting financial company that pays out in the same way that the shares do. We call one investing and other gambling, but there is no difference.

[jbellis]

The crucial distinction is that buying shares is not a zero sum game; it's possible for all investors to "win."

This is not the case in gambling or commodities markets; for me to win, someone else has to lose.

[joosters]

Why is that different from share deals? There's a buyer and a seller... if one of them wins, the other by definition must lose.

Call whatever you do 'investing' if it makes you happy, but as I said before, you can replicate financial 'investments' with spread-betting 'bets' and you will make the same gains and losses.

[stevenj]

Two definitions of investing by notable people:

1. From The Intelligent Investor by Benjamin Graham: "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

http://www.amazon.com/Intelligent-Investor-Definitive-Invest...

2. From Mr. Buffett on the Stock Market: "The definition is simple but often forgotten: investing is laying out money now to get more money back in the future -- more money in real terms, after taking inflation into account."

http://money.cnn.com/magazines/fortune/fortune_archive/1999/...

[sliverstorm]

The distinction is fuzzy, but the difference is not imaginary.

[shin_lao]

There's always a gamble percentage in a gamble, but you don't invest like you gamble. Or well, you can, but it won't get you very far. ;)

[choult]

Yet gambling is rarely an investment...

[jeremyjh]

Why are you sure this is legal (everywhere)? No it isn't regulated by the SEC, but that does not mean that it isn't fraud.

[socillion]

Right now the prevailing attitude is that it's legal and nobody will get prosecuted for it. It's certainly possible for this to change, but premined altcoins (creators mine a % before making it public) and other alleged scams such as Quarkcoin (Max Keiser & Bill Still) have happened repeatedly.

My statement was from the angle that if you get ripped off in a situation like this, there is no recourse for you, and not legal advice that you cannot get in trouble for participating in these activities.

[DennisP]

I wouldn't expect premines to legally qualify as fraud, since by their nature they can't be done in secret. If someone releases a coin and you see it already has a long blockchain, you know it's premined and can make your investment decision accordingly.

[socillion]

You're right, that was a poor example.

[fnordfnordfnord]

>Right now the prevailing attitude is that it's legal and nobody will get prosecuted for it.

Probably because that's how it appears to go in regulated markets as well.

[dror]

While historically pump and dump was focused on penny stock, I wander if doing it with altcoins violate some of the laws mentioned in http://www.sec.gov/litigation/litreleases/2009/lr21053.htm

[XorNot]

How would it be fraud?

It's perfectly legal if it's not specifically regulated as a financial market. Tons of firms do things quite like this - over-the-counter derivatives are rife with various market manipulations.

[al2o3cr]

Pointing at a bigger gang of crooks and saying, "see, they're doing it too" doesn't make anybody involved less of a crook...

To me, the whole situation is an incredible demonstration of why "free markets solve everything correctly" is only (even potentially) true as N_participants -> infinity - and even more so a direct lesson in how thoroughly a "market" can fail when it's too small...

[clarkm]

Why does this make them crooks? This whole thing is just a very convoluted form of gambling -- it's a game. If you bluff when playing poker, does that make you a crook?

[Helianthus]

I think the relevant distinction here is that the 'crooks' we're discussing aren't likely to be held legally accountable for their activities.

[marme]

In the securities market is it illegal per the securities exchange act of 1934. It is called a bear raid and is normally done by short sellers who have heavily shorted a stock and then collude to drive it lower. It is not as common as the pump and dump and it is true that market manipulation happens all the time just people dont talk about it because it is illegal http://www.investopedia.com/terms/b/bearraid.asp

[busterarm]

Considering how little enforcement (none) there is over pump-and-dump scams with pink sheets and the forums those frauds take place in stay open for years, there should be no expectation of prosecution from doing this.

[wmf]

Let me remind people who think the SEC doesn't care of the case of Trendon Shavers: http://www.sec.gov/News/PressRelease/Detail/PressRelease/137... Market manipulation isn't as clear-cut as a ponzi scheme, but the man might pay attention if enough people get burned.

[Alex3917]

It's funny how so many people are avoiding trading now because they're afraid of him. If you can't even handle some bored 13-year-old princeling, do you really think you're going to somehow do way better going up against Goldman Sachs in the real markets?

[davidw]

"The only winning move is not to play" - index funds, and get back to creating wealth via a startup or something.

[pbhjpbhj]

There was a Dogecoin thread on here the other day that reeked of trying to inflate the prices - https://news.ycombinator.com/item?id=7114813.

There's so many people trying to pump these different coins that I can't see any efforts being too successful.

Sounds from the pastebin content that they weren't really managing to coordinate even a small group?

[MysticFear]

I'm pretty sure I saw hundreds of bitcoin threads on the frontpage, when it was going up in price as well.

[kerkeslager]

This is basically a classic confidence trick, using people's greed and overconfidence. The con artist leads the marks to believe that they can outsmart the market, when in fact the marks are the ones being outsmarted.

Ultimately, there are two kinds of people that these con artists make money off of, and both have this overconfidence that they can outsmart the market:

1. Collaborators: these are the people who think that they are in on Fontas or Wolong's plan, but aren't. Ultimately, some of these people will make money some of the time, but most will lose money.

2. Manic-or-panic day traders: these people fall prey to a these market manipulations because they are at the wrong place at the wrong time. If they're paying attention when the market spikes, they start buying high thinking it will rise further, and if they're paying attention when the market drops they sell low thinking it will fall further. It may actually be worse to be this kind of trader, because often the only person conning such people is themselves. Their emotional approach to investing causes them to fall prey to every market fluctuation, even ones that aren't caused by any manipulation.

The kicker here is that I believe most day-traders fall into that second group. A lot of them are still making money on cryptocurrencies simply because cryptocurrencies have been growing so rapidly, leading them to believe that their strategies have worked, but the vast majority would make more by simply investing their money and sitting on it. My theory is backed up by how people tend to invest on wall street, which has been well-researched at this point.

What I'm trying to say to anyone reading this is that if you're trading day-to-day, unless you have a very thoroughly proven mathematical model, you're likely in the second group. Don't let overconfidence and greed make you a mark. You aren't likely to outsmart the market. Besides, this market is doing pretty well anyway.

[maaku]

> Bear in mind that cryptocurrencies are currently an unregulated wild west, where activities like these are both common and legal.

Ah, no, it's not legal. Regulators just don't care (yet) to enforce the rules.

[pyalot2]

All traded things are subject to market manipulation. It helps though if there's a bunch of real volume and a dozen or two active exchanges, that makes it harder to move the market.

With Dogecoin however, barely any exchanges, and most of the circulation from their insanely steep on-ramp is in the hands of a handful of people... gonna be a lot of milking going on there.

[adrianwaj]

more logs: http://pastebin.com/cFfxW7xh

from the manifesto: "there are always trolls that add absolutely zero value to the community" -- you said it Wolong.