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What are the costs of cryptocurrency fraud?

Started by Bitcoin, Apr 02, 2022, 04:44 am

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Bitcoin

What are the costs of cryptocurrency fraud?

I have heard many claims that transaction volumes can be "faked" for cryptocurrencies, but I am skeptical about how this is possible. I want someone to walk me through the math describing what you need to believe in order to make money by boosting transaction volumes.



1) First, assume a constant velocity of money but a positive transaction cost t. Suppose t is relatively high. Is it possible to make money as a market manipulator? What would these profits be? Is there a point where t prevents you from making money as a manipulator?



2) Second, assume it is possible that coin velocity declines because momentum-driven speculators enter on news that prices rose due to "fake" transaction volumes from the market manipulator. What is the required velocity change as a function of the transaction cost t?



I am not sure whether I understand the math here, but I suspect that coin manipulation is possible. However, there is a point where t exceeds the possible change in coin velocity, which creates a limit to market manipulation.


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