Funny Money

A few days ago I wrote about participating in some demo cryptocurrency challenges and, despite saying that they're not very fun anymore, I've kept joining the weekly challenges. The excuse I tell myself is that this is an opportune way to see how people will try to game a financial system in order to spot similar patterns in the "real" market. This has proven to be completely baseless, though, as the patterns that are seen in the demos are clearly vicious to the point of criminality. There's the saying "don't hate the player, hate the game" but, when I look at how easy it is to manipulate the selling price of a cryptocurrency that is operating in a sandbox environment with tens of thousands of participants, I can't help but wonder what sort of manipulation is happening with the markets where people actually invest a substantial amount of their savings.

Maybe the real reason I'm still doing these things is because I'm looking for the thrill that comes when a person gambles, even with funny money.

Shortly after the most recent blog post, the weekly challenge reset so that everyone had $5,000 USD to invest in various coins again. I had pulled in a respectable $2-million after seven days, which was quite a bit better than the $10,500 USD the week before. However, during the third challenge, I invested a bit more time into spotting the patterns that bots would use in order to artificially inflate the value of a currency, then sell out, only to repeat the cycle on a predictable basis. Doing this from my phone or tablet for 20-minutes here and there throughout the day proved to be rather profitable. By the end of the challenge, the total earnings for the third week turned out to be $216-million:

The End of the Third Week

Being somewhat of a pessimist as of late, this seemed like the maximum one could expect. Taking five grand and turning it into $216-million over the span of seven days while also spending a great deal of time offline for work, family, sleep, and walking the dog seems almost absurd. The best investors on the planet would likely struggle to do something similar in the real market, and I could see over the course of the week that the bots that were manipulating the price of coins were starting to notice my interference. There were changes afoot.

Yesterday, being Monday, saw the start of the fourth week. Once again, everyone was reset to $5,000 USD to invest in various cryptocurrencies. I put half into Etherium and sat on the remaining $2,500 until lunchtime. However, when I checked my balance just before noon, I found that the price-tampering bots had all but destroyed the value of Etherium. The coin was worthless, leaving me with just $2,505 in total to try and invest with. Just as before, I started looking through the different coins for volume patterns. Which ones were up more than usual? Which ones were unnaturally down? Which ones were fluctuating at regular intervals?

It's this last pattern that is the most pernicious and profitable. If I were a Ferengi, my lobes would tingle every time I stumbled across one of these repeating patterns. They're easy to exploit, too. A currency goes up like a rocket to some ridiculous value, usually north of $300,000 USD, then gradually drops to its expected price. Then the pattern repeats. And repeats. And repeats again. If there are no people interfering with the bots, this cycle can repeat for hours, "earning" the machines trillions in profits. However, once people start buying and selling, the bots react very quickly in an effort to reduce their losses. So long as a person pays attention and reacts fast enough, though, they can earn several million in an hour. Or, in my case, over a billion:

Over One Billion

Today is the second day of the week-long challenge.

As the screenshots will show, I'm doing all of this with an iOS application. I have no bots manipulating prices or watching the market on my behalf, nor do I have any intention to get into that game. However, I am curious to know who has made these bots and what their goal might be. Manipulating demo markets may be fine as an academic exercise in how financial markets can be gamed by people with excessive wealth, but this is hardly news. Wealthy people have been gaming systems for millennia. Could this be just something a few people are doing "for the lulz"? Maybe this is just a testing ground before the bot(s) are released on the real markets with a decent-sized initial investment? Maybe this is just all in my head and the cryptocurrency fluctuations are the result of a poorly-implemented faux supply-demand mechanism in the demo provider's service. I really do not know.

All this aside, given my propensity for numbers, I have a feeling the personal goal will be to consistently out-do my previous week's worth of pseudo-plundering.