Going Infinite: The Rise and Fall of a New Tycoon

by Michael Lewis

Sam was less surprised that Binance was wash trading than by how badly they were doing it. “They were doing a B-minus job at market manipulation,” he said. One Binance bot would make a wide market in Bitcoin futures, and another Binance bot would enter and lift its high offer. If, to keep the numbers simple, the fair value of bitcoin was $100, the first Binance bot would insert a bid at $98 and an offer at $102. No normal trader would trade against either—why sell for $98 or buy for $102 on Binance what you could buy or sell on some other exchange for $100? But then, at regular and predictable intervals, the second Binance bot would enter the market and buy at $102. It looked as if a trade had occurred between two different parties, but it hadn’t. It was simply Binance buying from Binance. Sam loved this sort of thing: it was Jane Street trading all over again. In response, he had his traders at Alameda Research build their own, faster bots. Alameda’s bots inserted offers a tiny bit cheaper than the offers from Binance bots. The Binance bot would offer to sell a Bitcoin future at $102, and, moments before the second Binance bot showed up to buy, the Alameda bot would leap in and offer it at $101.95. Instead of buying bitcoin from itself at an inflated price, Binance was buying it from Alameda Research at a price nearly as high.