Bitcoin SV Wash Trading

Rick D. at BeInCrypto.com digs into a theory for the recent spikes in the Bitcoin SV price. Is it from a BSV miner mining BCH instead, selling that BCH, then “wash trading” BSV on exchanges which pumps the volume and price.

The original Twitter thread by @vinarmani can be found here.

It’s actually a pretty genius gambit with essentially no downside. He can actually use this tactic to keep BSV at basic parity with BCH.

@vinarmani on Twitter

How I Sold My Bitcoin SV Coins

The last time I wrote about Bitcoin on the blog here was back in 2013. Bitcoin had just hit $1000 per BTC and I was still bullish.

Since then, Bitcoin has “forked” a number of times. Similar to open source software, if stake holders disagree about how to build out the Bitcoin software and platform, they can fork the platform and let the market decide which fork to support. It’s not a winner take all proposition either. There is room for multiple variants of cryptocurrency. The Coinbase blog has a good post on what forks are.

Wikipedia has a list of the larger Bitcoin forks. The biggest fork was the Bitcoin Cash fork on August 1, 2017. Bitcoin Cash itself forked on November 15, 2018 into Bitcoin Cash ABC and Bitcoin SV (Satoshi’s Vision).

I could talk about forks and the various pros and cons of each flavor of Bitcion, but for this post I’m going to focus on the technicalities of gaining access to the “new” Bitcoin SV coins and how I “sold” them.

If you hold your own Bitcoin and other cryptocurrencies, this fork thing is going to happen every once in a while, and you’ll need to spend some time to claim your “free money”. These are the steps I used to sell my BSV specifically, but the general outline would be used for claiming any fork. Just different software or exchanges might be involved.

Step 1: Own the private key or seed phrase.

To really “own” your Bitcoin, you need to own the private key for the wallet the Bitcoins are stored in. The actual private key is a 256-bit number. The more typical version you will interact with is the “seed phrase” that your wallet and private key were generated from. This will be 12 to 24 words that almost all wallet software will generate for you when setting up a new wallet.

If you store your coins in Coinbase or something similar, you may not “own” your private keys. This is actually not a terrible idea if you don’t trust yourself to keep your key safe and not forget it. In this case, Coinbase will wait until a new fork gets valuable or important enough to worry about and then split your coins for you and issue you an appropriate amount of coins on the new fork’s chain. They did this with Bitcoin Cash and later with Bitcoin SV. If you want to claim your forked coins earlier though, you’ll need to do it yourself.

My seed phrase then is basically the password needed to spend or move my Bitcoin. After a fork, the same exact seed phrase will work to spend coins on either blockchain.

So I could use my Bitcoin Cash seed phrase to “claim” my coins in Bitcoin SV and move those coins wherever I want. The problem with this is that I don’t necessarily trust the people behind Bitcoin SV or the wallet I would use. I am worried that using the “password” for my Bitcoin Cash wallet to spend my Bitcoin SV will allow someone else to steal my more valuable Bitcoin Cash coins.

So I tried to protect my Bitcoin Cash first.

Step 2: Create a new wallet for your old Bitcoin cash and send your coins there.

I used Electron Cash to create a new wallet. I then sent a test transaction from my old wallet to my new wallet, followed by a transaction to send all of my Bitcoin Cash into the new wallet.

I now have a different set of seed phrase words to access my Bitcoin Cash.

Step 3: Claim your Bitcoin SV using Bitcoin SV wallet software.

I chose to use the ElectrumSV wallet to access my BSV. ElectrumSV is an open source wallet, and while I didn’t compile from source or even double check the code myself for malware or back doors, being open source makes it less likely that this wallet is sending my keys back to a malicious third party.

Once I booted up ElectrumSV, I just chose the options to restore a wallet from my seed phrase and there my coins were.

Step 4: Move your Bitcoin SV into an exchange.

I’ve been investing in Bitcoin and other cryptocurrencies for a while, but I’ve never really used an exchange outside of Coinbase. I’ve created accounts on a few exchanges, but mostly just tested the UI.

I read that the CoinEx exchange is pretty popular, especially for trading BSV, and so I setup an account there. I was surprised that I didn’t need to give too much personal information to start my account. I confirmed my email address, set up Googlel Authenticator, and then I was ready to go.

As a new user, I was able to withdraw up to $10,000 USD worth of assets per day. If you want to withdraw more, you need to verify more information or wait. The amount of BSV I had would only take a couple days to withdraw.

Step 5: Exchange your BSV for BCH or Bitcoin

CoinEx gave me an address to add BSV to my “assets” there. I sent a small test amount, which showed up after a few confirmations.

Step 6: Withdraw your BCH or Bitcoin from the exchange.

I then exchanged that BSV for BCH using the exchange. And then “withdrew” those BCH into my Coinbase account.

After the withdrawl went through (it took about an hour’s worth of confirmations), I moved all of my BSV into CoinEx, exchanged it, and withdrew it to Coinbase.

Step 7: Exchange your BCH or Bitcoin for cash on Coinbase.

You could technically withdraw cash from CoinEx, but since I’m comfortable with Coinbase, I moved my coins there to convert to USD.

In this case, I think I am going to hold onto the BCH for a bit. I also left some BCH in CoinEx to play around with. I’m trying to come up with a trading strategy to test there, but I’m mostly a longer term investor, so I’m struggling to come up with something.

Since I’ve sold my BSV, it has rallied $75 more dollars per coin, while Bitcoin and Bitcoin Cash have stayed flat. I feel that BSV is a scam in some sense, but there might be some virtue to it. I’ve been out of the loop. I think there is some value in making a coin that is useful and good for consumers and users, but also good from a mining standpoint to get them more involved. Maybe BSV will do that better than BCH or BTC.

Bitcoin hits $1000. Where is it going?


post on Howard Lindzon’s blog with some of my thoughts RE why Bitcoin is the perfect vehicle for speculators and why good or bad the price is likely to go up. I may post more about Bitcoins here from time to time along with other investing writing.

Bitcoin is really useful is so many ways and the technology is just getting started. But the asset is just perfect for speculation. It’s designed to have 0 inflation, which means it has basically infinite deflation. It trades 24/7. And there is no real way to value a Bitcoin. So unlike cerca-2000 internet stocks, where you can say “hey this company isn’t actually making any money”, with Bitcoin there is no “main street” valuation to add any sense into the price levels.

FWIW, my favorite valuation method is to compare the total amount of transaction activity to the GDP of US states or small countries. So if people do as much commerce using Bitcoins as is done in the state of Pennsylvania in USD, that would be about $400B per year or a $400B “market cap” for Bitcoin, which is about $20,000 per coin. Of course that makes hardly any sense, especially when a lot of the Bitcoin transaction volume is investing and moving money around in accounts. But that’s kind of the point. We have no f’ing clue how to figure out what the value of a Bitcoin is.

The 1% is sitting on a lot of money and as they put some of that into Bitcoins, the price is going to go up. It has some room to run IMO. As more companies, investors, and people in general get skin in the game, there will be a limit to how far prices can crash. Lots of people have a stake in making sure Bitcoin doesn’t become “worthless”.

Of course some more experienced investors who were paying close attention to other “bubbles” in the past probably recognize this as a case where smart/wealthy speculators are taking advantage of other dumb/wealthy and not-so-wealthy speculators.

So the speculation that is a large part of the current price level is going to stick around. I find it hard to believe that with increased use and spending of Bitcoins (public ATMs, everyone with a Bitcoin debit card, Bitcoin transactions baked into internet ecommerce) that the speculation will die down.

We have a few more waves left in this IMO. That log chart is probably a good way to try to time it, but be careful.