All last week, public attention was focused on the BTC-E exchange - even the upcoming bitcoin hard fork did not occupy the minds of users as much as the intrigues and investigations surrounding a large Russian-language exchange, which suddenly went offline. We suggest recalling all the events related to BTC-E and suggesting what awaits the exchange and its users now.

What happened to the BTC-E.com exchange?

The cryptocurrency trading platform called BTC-E started its work back in 2011 and until today was the largest Russian-speaking exchange in the world. At one time, the exchange was in the TOP in daily turnover of funds, and although the golden times for BTC-E in the past and the site lost its position, it cannot be denied that the exchange was popular and in demand.

All the hype, which is more like the plot of an American blockbuster than real events, began on July 25, when users lost access to the site. In general, exchanges often carry out technical work and other frauds, so leaving offline initially did not seem strange. When it dragged on for several hours, and then for a day, then many traders began quite reasonable unrest, which only intensified after sensational statements in the press.

July 26, it became known that in Greece a certain Alexander Vinnik was detained - a native of Russia, who was relaxing peacefully in the most expensive hotel in Chalkidia and did not even suspect that he had been under surveillance for several months. As it turned out, the Greek authorities had nothing against a rich tourist, but acted at the request of American colleagues. But from the US side there are very impressive claims to Vinnik - a citizen of the Russian Federation is charged with laundering $ 4 billion in bitcoins.

It would seem, well, where does the arrested comrade with billions go to BTC-E? The connection is very direct - it was through the gateways of the exchange that these large sums were laundered, and at the same time a version appeared that Alexander Vinnik was one of the leaders of BTC-E. The news is overwhelming - that it is true here, and that fiction is extremely difficult to establish, but the further course of events is similar to a real theater of the absurd.

Developments: Who is Vinnik and did he lead BTC-E.nz?

Despite the promise of the exchange management to return to normal operation very soon, access to the site was never restored. Following the arrest of Vinnik, new charges followed: the owner of the VTS-E was allegedly to blame for stealing funds from the main cryptoscam Mt.Gox, while BTC-E itself was charged with the fact that 95% of the withdrawals of stolen funds during cyber attacks are not without her participation. On this positive note, the US authorities announced the arrest of the exchange domain, and the situation was aggravated even more, after which the exchange said that the technical work would last another 5-10 days.

As for the person of Alexander Vinnik himself, there is information that he is indeed the co-director of BTC-E. In particular, this is stated by the admin of the qugla.com service, which had a business connection with the exchange. But the most interesting thing is that the exchange representatives commented on the situation at the main crypto forum Bitcointalk and stated that they did not know Vinnik and know, especially since he was not a leader.

BTC-E exchange representatives answer: news for today

For quite a long time, the representatives of the trading platform themselves did not comment on what was happening and did not clarify it, but when the situation grew tense to the limit, messages began to appear in them from T witter and on bitcoin forums. According to the BTC-E exchange itself, already on July 25, FSB officers appeared in the data center and arrested the server. The fact that the representatives of the exchange are presented and what they should wait is silent, it is said only that if the situation cannot be stabilized by the end of August, then compensation will begin to be paid to the victims.

The main thing that representatives said is that part of the exchange’s funds has been confiscated by the feds and it’s currently being established what remains available on BTC-E accounts. The exchange administration says the truth or not, but on July 29 a major withdrawal of $ 95 million occurred from the ethereum wallet belonging to the site. It is not known who made this transfer and who got the money.

Law Enforcement Version: What Happened to BTC-E

Greek law enforcement officials confirmed that Alexander Vinnik is related to the cryptocurrency exchange. As for their American colleagues, they even connected the entire federal apparatus in order to punish the criminals for their deserts. The U.S. Department of Justice claims that Vinnik was a member of a money laundering group, and the Financial Crimes and Prisoners Directorate and the Stock Exchange issued fines of $ 110 million and $ 12 million, respectively. In addition, the exchange is accused of all mortal sins: from promoting ransomware to discussing with platform participants directly in chat about how best to launder money.

What awaits BTC-E.com: will the exchange return to work?

The likelihood that the exchange will return from offline and begin its previous work or pay something to someone in compensation is negligible. Too serious charges are brought to her by US law enforcement officers, and several cases are being charged at once. It will be extremely difficult for the project organizers to get out of such a mess, it’s more logical to simply collect the remaining money and hide, because it is very likely that BTC-E admins will face Vinnik’s fate.

Many fear that the closure of the exchange will affect the cryptocurrency market and lead to a collapse in rates. Most likely, this scenario should not be expected. Firstly, the exchange is not the main giant and, compared with the most vicious trading floors, its turnover is quite modest. Secondly, the expected outflow of investments from cryptocurrencies should not be expected - the problems of the exchange with the law are not a cyber attack or scam in the literal sense of the word - they did not deceive anyone and, in fact, did not rob, so you should not think that traders will leave the trade, and investors investment, and go to do other things. Thus, in the cryptocurrency world, collapse is not worth expecting, if the influence is provided, it will be very insignificant.

Nevertheless, of course, we wish the exchange a speedy recovery and return, and users full compensation for losses, but whether this will be a big question, the answer to which will show time.

If the mirror does not work exmo.me,  try again exmo.com  - the exchange is working !!! If you carry out maintenance work, you will see the corresponding announcement on the page.

On July 27, users of the Exmo cryptocurrency exchange faced the fact that the exchange stopped working due to technical work. After waiting a few hours, traders were unable to enter the exchange. On July 27, EXMO on Twitter and Facebook announced that the work was being delayed, and asked to exclude transactions for entering the bitcoin exchange wallet. Message on the official Facebook page:

Dear users!
  Due to a failure on the side of our data processing provider, we are moving the data to a new server.
  We apologize for any inconvenience! The transfer will be carried out for quality, and we do our best to finish it as quickly as possible.
  Please note that after installing and opening new servers, there will be new addresses for deposit wallets and hot wallets for cryptocurrency withdrawals. This is why you are encouraged to stop using your current storage address.
  Cold wallets where user funds are placed will remain unchanged.
  EXMO team.

This means that wallet addresses will change. Support promises that all funds in the wallets will be saved, and if there are new transactions during the inoperability of the site, they will seek funds and bring it manually. In order not to then wait for the queue to search for the “stray” cryptocurrency, we recommend changing the EXMO wallet addresses in projects to temporarily different ones. For example, for such purposes, cryptocurrency exchanges with Russian support are suitable:

  We monitor what is happening and constantly add incoming information, as well as versions of what is happening.

Added: 00:10 Moscow time

Added: 19:40 Moscow time

Added: 18:00 Moscow time

We do not claim that this is so, but there are too many coincidences.

Added: 14:30 Moscow time

BTC-E has not been working for more than a day.

Friends, while there are no movements in the official Twitter account, many participants suspected that the “preventive” work of BTC-E is another scam.

In particular, Twitter and Reddit users prepared information related to the movement of 66,000 bitcoins from a cold storage wallet hours before the exchange was turned off.

"And although BTC-e" fell ", about $ 169 million in bitcoins successfully laundered through hundreds of wallets," the description says.

Added: 11:00 Moscow time

So, the BTC-E exchange has not been working for almost a day, to be precise, the exchange stopped responding to user requests in the interval between 15: 00-16: 00 Moscow time. Many players report that they have absolutely all accumulations of cryptocurrency assets stored on this exchange.

The currency market has noticeably fallen over this period. So, for example, and by analysis,.

  The editors of Good Click remind their readers that they should not store ALL of their assets on third-party services.

Added: 22:30 Moscow time 07/25/2017

We continue to monitor the situation and the twitter account of the exchange. The current exchange shutdown time is already more than 8 hours. According to messages in the account of the exchange, work is still underway.

During this time, managed to fall almost 100 dollars.

Recall that if we compare this time with, then this is the time of the average working day.

6 hours ago, a message appeared on the Twitter account of the popular BTC-E exchange that technical work was underway in their data center. For the same reason, the exchange has become unavailable to its users for more than 6 hours.

Due to technical work in the data center, btc-e may be temporarily unavailable

Economist Andrei Movchan, who has extensive experience working in management companies in the stock market, expressed his extremely skeptical opinion about algorithmic trading, which is again becoming fashionable. (Algorithmic trading / robot trading is when you buy a program that decides when to buy and when to sell).

Numerous proposals to give money for algorithmic trading (anything - stocks, currency, oil, derivatives, etc.) fly by, in paper, electronic, verbal, and perhaps not tactile forms, sweep, swam, drag and drag and fro. The offers are different - illiterate and very neat, indicating a proven successful history and without it, for retail and for large customers. In the opposite direction, the opinions of investors fly past me - from “how cool it is” to “again scammers spam.” By the nature of my service, I am well aware in general about investment management and in particular about algorithmic strategies - maybe it is time for me to speak about homeopathy, astrology, and investment algorithms.

The investment market is huge and there are a lot of players on it - just like in wildlife. Regarding real costs, investing is a game with a very small positive amount (formed by the overflow of part of the income from real business to the markets in the form of fees for the capital provided by the markets), in which the participants redistribute mainly what they brought to the market among themselves, not forgetting to pay tribute to banks, brokers, lawyers, tax authorities, fraudsters, etc. That is, translated into butthead language, the vast majority of players simply give their capital to more skilled and fit, or - crooks. Decades of experience and billions of dollars, of course, gave many players the opportunity to adapt to the market environment and adapt markets - just as in the wild some have grown their teeth, others have claws, others have become very fast, others have become very large, others have died. Who are these surviving champions? These are insiders. These are large intermediaries, global players who are able to see flows and get ahead of them in their actions. These are pirate teams, consisting of professionals of the highest class, with decades of experience and nerves of iron that they don’t even see - they feel the quality of this or that investment, simply because they have repeatedly watched something like this on the market. These are monsters that can invest more than others, conduct on-site analysis with the help of dozens of analysts and experts, agree with those who determine politics, organize market manipulations, forcing the crowd to go in the right direction. Finally, they are those who managed to build technologies that guarantee them the advancement of other players - powerful servers, unique processors, programs that notice arbitrage opportunities earlier than anyone and react to them before everyone else. These "technologies" cost hundreds of millions of dollars simply because they are constantly becoming faster - in this case, the first gets everything, the second - losses. And yet, even all these champions are steadily earning non-impressive philistines. The best (if measured on, say, a 10-year horizon) show 11-12% per annum. Normal, cautious and smart - 7-8% per annum, but much more stable. It is quite good if the investor receives 4-5% per annum - he still wins the market and inflation with a margin. Oh, yes, there are certainly those who receive any income, at least 1000%, at least 1,000,000%. Those who won the jackpot accidentally hit the bullseye. Once. Two times - it is not excluded by probability theory, but it did not occur in nature. And if we talk about stable indicators, then showing 15% per annum on a sane horizon (the same 10 years) - it simply does not exist - with rare exceptions, those who (a) received a random excess profit 1 time and have not eaten it since (well, let’s say, he took Apple with his shoulder at the right time), or (b) he was stupid enough in the position, but this position grew (for example, if he took RTS in the fall of 2008 and lived to see the end of 2013). In neither case is there any art or technology - there is luck.

What is algorithmic trading if it is not based on technologies worth hundreds of millions of dollars? Especially - if she also brings or promises to bring the notorious "5% per month"? Fraud? Sometimes. But not always. Sometimes it’s just “survivorship bias”. Children are going to study the mathematics course at a technical university and trade for their 5,000 dollars in shares in BCS. And they decide to cut the algorithmic trading. Someone believes in their genius from a lack of knowledge; someone because of self-confidence normal for a prolonged childhood; someone was lucky during trading in the BCS and he believed in his star. They write slow robots (no equipment, normal channels) tuned for simple algorithms (and where they get complicated ones from their preparation and experience) - they mainly trade on pair divergences with stable covariance, factor recognition of trends, search for simple images, etc. Groups Hundreds of such guys gather in a year, the benefit of universities stamping techies and economists, they have little use, and today almost every stupid teenager from a large city 25 years old, and brokers willing to connect them to their boards, can program in Russia Orme, and many in Russia and in the world - the casino is always a profitable business.

In essence, their trading strategies are white noise, with a small fraction of long positions relative to the market, and a sauce of short-term patterns that they correctly find using regression analysis (only these patterns “creep out” before our eyes). But according to the law of large numbers, their results will be distributed quite randomly, half in plus, half in minus. In the first year, half will receive losses right away and for the most part will merge from the market. Thirty percent will make a small profit and decide that they are on the right track, and will look for new algorithms. Twenty percent will receive a decent profit and will believe in their genius. The ratio will be the same next year - as a result, in 2 years there will remain 4% of those who made huge profits in two years, 6% of those who made huge profits in the first year and small profits in the second year, 6% of those who made small profits in the first year and the huge in the second, and finally 9% of those who received a small profit in both years. After the third year, we will still have approximately 2% of those who either earned very high profits for all three years, or made small profits in the first year and very high in the second and third. These will walk with halo and sell themselves right and left quite sincerely. If in the first year 300 teams entered the game, then such great teams will be no less than 6 teams in three years. They will add about 15 more teams with more modest, but also good results, they will also sell themselves. If we assume that 10% of those who entered the game are scammers, then on top of this 21 group of genuinely mistaken people, we will have another 30 groups that falsify their results and claim that they are doing fine and also collect money. In total, each year we conditionally add 51 groups of algorithmic traders who sell their services to customers. I draw your attention - more than 40% of the "successful" really believe in their success.

What will happen to these groups a year later (that is, what will happen to your money if you gave it to any of these groups)? Half of the honest and all scammers will get you losses - your chance to earn with a team selling you your three-year successful experience is about 20% (in total, I remind you, 51, only half of 21 non-scammers will bring you profit). Your chance to earn big money is approximately 8% (20% of 21 teams out of a total of 51 offering). Your chance to make big money for 2 years in a row is already less than 2%. Your chance to earn 10 years in a row with such guys is approximately 1/1024 if we talk about any kind of income and 1/10000000 if we are talking about large incomes every year.

And inside the ecosystem of algorithmic traders, a complex life is going on, which makes your chances even lower. In particular, part of the “geniuses” are being converted into fraudsters upon their first loss. They cannot reconcile themselves to losses, and therefore they still sell “results for the selected period” or “average over three years” for a long time, for example, + 60%, + 80% and -90% do not become 1.6 * 1.8 * 0.1 \u003d 0.29 (i.e. 71% loss), and (0.6 + 0.8-0.9) / 3 \u003d 16.7% per annum, which they give out as their sustainable result. Fraudsters are also improving themselves: in addition to simply sampling the period, fake reports and artificial transactions to change the result, for example, they open two accounts with opposite strategies, and show an official report on the account that is earning this year. Managers crave high commissions and calmly enough experience the quick departure of a client who has lost money - he paid anyway during the investment, and another lover of gratuitous extra-income will come in his place. Those who use two opposite products at the same time generally simply divide their assets in their mind into two - one half brings huge commissions and generates new customers, the second half simply merges customers; in the next period they change places.

The question arises - is it possible to earn by transferring money to such a team? The answer is yes. You can earn more than one year. Out of 1024 teams, 1 team must generate profit for 10 years in a row. If “your guys” have been making you profit for 10 years in a row, then somewhere around at least 1023 investors have lost money. What is the probability of earning 11 years? 50%.

Another question arises - is it really impossible to assume that suddenly in the Moscow (St. Petersburg, Nizhny Novgorod) apartment there is a genius who will build such an algorithm, well, just a well-developed algorithm, that he will earn a lot of money in the markets and all his clients will be happy, and are all non-customers unhappy? The answer is no, and here's why:

First, markets are basically random processes in which the determinate component (a) is small, (b) is carefully studied by thousands of powerful players. Whatever the algorithm, you can’t argue against a random process, which is why all real “algorithms” do not predict the future, but catch microscopic discrepancies - between the index and the basket that makes it up, between the cost at different sites, between the asset and the combination of derivatives, which Recreates an asset’s income profile. These discrepancies are born and die within nanoseconds - because hundreds of major players are waiting for them and being caught, as soon as they appear. You don’t have mega-gear - relax, all the arbitrage opportunities will be taken away a few nanoseconds before you wake up.

But suddenly we were mistaken - and in the markets somewhere is a regularity hiding somewhere? Then comes the second. What is the probability that hundreds (thousands !!!) of numerous teams with Nobel laureates in the squad, burdened with expensive equipment and tens of years of individual experience, did not discover such a pattern, but the genius discovered it? What resources does this genius have? Where and how does he take time series of data that cost hundreds of thousands of dollars to acquire and maintain? On which computer does he calculate them? - for the minimum reasonable calculation mainframes are necessary. I do not want to say that the probability of this is exactly zero, although the number of discoveries in modern science made on the knee is exactly zero. But even if it is equal to one thousandth, and the probability of earning with a random investment is 50%, then I can not distinguish 50% from 50.1% - if you want to believe in genius, consider that the probability of a positive outcome for investing in a product of local algorithms is 50.1 % Oh, do not forget that they will take 2% for management and 20% for income, and broker's commissions will be another 0.5 to 3%. It is more profitable (statistically) to throw darts into the screen of the Bloomberg system.

Well, "thirdly." Suddenly, a pattern was found and it works. What happens if you start using it? On the market, right on the exchanges, are strategy analyzer robots engaged in identifying visible patterns. There are already a lot of them and there will be even more. They will immediately catch a successful strategy, collect enough data on it, decrypt and copy it, and finally, use large players who are engaged in the cultivation and selection of strategies. They will be faster, and will eat up your profits from decryption to zero. Moreover - their actions will change the market, the pattern will stop working - in the market, as in the quantum world, observing already means changing, and investing means changing everything.

Where do happy investors come from, successful local algorithms, adepts and apologists, hundreds of posts and articles glorifying successful algorithms? From where the expensive homeopaths, chiropractors, Tibetan medical practices and even folk signs come from. Their father is human psychology (the ability to remember only that which corresponds to desires, the ability to take randomness as a pattern, the willingness to believe logical arguments, even if they operate on an absurd basis, the tendency to ignore facts that are contrary to our desires, etc.). Their mother is human greed: if you tend to be mistaken, be calm - there are many who will make money on this. Their nanny - the asymmetry of managers' incomes: you earn or lose - the manager is always in the black.

There was such a story - about a Georgian obstetrician-gynecologist, who invented a special method to ensure the desired sex for an unborn child. He was so honest that he took money from his parents only if the gender of the child coincided with the desire. You can’t imagine how many parents were grateful to him! Why am I? Yes, I remember ...

The second part of 01/20/2017

One of the laws of social communication says: no matter how you explain, someone still does not understand.
  I seem to explain in great detail about the market and algorithmic trading, but not everyone understood me - it means that I did not explain it well. The arrivals and cries of "God Alive" I will not comment, it makes no sense. Reasonable questions and comments boil down to the following:
  (1) Are markets random?
  (2) How do you know?
  (3) So what are no successful managers at all? But what about my friend Petka?
  (4) What then to do?
  I will try to comment.
The main misunderstanding is expressed by the words: “You say that the market is completely random, but then nothing matters at all - neither size, nor equipment, nor team”
  At the non-quantum level, nothing accidental exists. When you toss a coin, at the moment when it comes off your hand, it is already reliably determined which side it will fall on. The trouble is that you do not know and cannot know. Who will be born to a woman who just found out that she became pregnant - a boy or a girl? Before ultrasound is a random process. After - the answer is exactly known. By chance we call a process whose result we ex ante CAN'T KNOW. In this sense, there are no random processes at all - they are all random for SOMEONE (sometimes for everyone), and, in addition, the expectation of the result is different for everyone. For a couple of young people in a rented office in Moscow City sitting at the computer, the US stock market is absolutely random, the probability of success is 50%. For a program that has the fastest access to the exchange and is configured to catch a price difference between the index and its basket, the appearance of such a difference makes the situation much less random - the program knows that the difference will almost certainly close in milliseconds. For an investor from Moscow who is busy building office centers and on the advice of a friend buys a bond from a small company from rural Indonesia, the process of paying it off is just as random as the hair color of the first person you meet when you go outside. For an experienced investor who has studied the creditworthiness of companies for many years, who studied the reporting of this company, talked with analysts on the spot, with lenders, with the director, with the owner, with suppliers, with customers, with competitors, the repayment issue became much less random. In both cases, it remained random, but the likelihood of a favorable outcome has greatly increased. For an ordinary manager, the question of whether the stock will grow tomorrow or not is a random one. For the board member who just approved the merger is almost certain.
  WITHIN THE FRAMEWORK OF ACCIDENTAL PROCESSES THAT HAPPEN ON THE MARKET, THE WINNER IS THOSE WHO ARE ABLE TO MOVE THE MATCHING OUT OF RESULTS OF ITS ACTIONS IN THE POSITIVE. How? Having more information than most players, or having it faster than most players, or having more features than most players.
Hence the moral for the investor: give money to those who prove to you that they have one of three advantages, and preferably two or three:
  (1) More information (experience + the ability to do analysis and, no less important, its thorough implementation + information channels + work in a niche market where a big person’s foot doesn’t);
  (2) The speed of obtaining information and the speed of reaction (most expensive systems; insider trading, as unauthorized receipt of information ahead of others, is prohibited by law);
  (3) Unique opportunities (for example, trading in an extremely closed market, structuring very complex derivatives, influencing markets, etc.)
  The sad thing is that in real nature you are likely to find only advantage No. 1, and it does not give very large incomes, today its limit is 5-10% per annum in dollars (more correctly, 3-7% is higher than inflation). But - this is sustainable. Advantage No. 2 is used by mega players, they don’t need your money. Advantage No. 3 is usually the lot of the largest brokers and banks, your money is also unnecessary to them.
You can certainly say: “Isn't a unique algorithm a way to increase the amount of information?” Of course, a way. Only unique algorithms cannot be - they are perfect commodity, there is only one mathematics. The algorithm can only be used by taking it from a thick book on systems theory. And the days have already passed when algo was new and algorithms first entered the market, realizing their advantages. Today, one can safely say that all the methods known to science and not requiring the yet unexisting power of systems have been applied in large markets and even, perhaps, in small ones too - and the markets have changed for these methods. In low-income (up to the same 5-10% per annum) regions there are niches where powerful players do not climb - it is not adequate for them to build cars for such incomes. In these niches, you can beat the public who goes ahead (index funds, pension funds, sectoral funds, institutional, private banks - all of them go ahead, for them, additional analysis is superfluous, they feel good too; hedging corporation risks also go ahead, they generally do not need income, they would not lose). But in the Algo region, as well as in the double-digit profitability zone, the competition is fierce. Few groats, which are the fastest and absorb all inefficiencies; few intelligence robots and sabotage robots that reveal other people's strategies or make other robots make mistakes in their favor; There are still large collectors on the market - they are looking for lucky newcomers, hire them while their algorithms still generate profits and throw them away as soon as profits begin to fall.
  Of course, the world does not stand still. A substantial part of the mathematical apparatus cannot yet be realized — there is not enough computer power. In the same pattern recognition, the possibilities are endless, and of course, with the growth of power and speed, new players with new capabilities will appear. But this is not a hope for beginners, but a risk for market sharks; this is a competition of iron, it is the lot of the largest and most capable of hiring the most talented. On our Tatooine, on the outskirts of the galaxy, you can not even dream of such a thing.
And do not suspect me of ignorance of trading, colleagues. I know him from all sides - and traded, and led indirectly, and was a client (and fought a lot with traders). And I, a mathematician by education, statistics and the theory of optimal processes (controlled systems), are my specialty. I somehow understand the mechanisms of simple multi-parameter optimization, even if it is done on fuzzy sets with training and pattern recognition. And I have been managing money for a very long time. Nevertheless, biased - I do not like stocks (I think that the stock market has been practically a casino lately), I mainly deal with bonds, derivatives, macro, I like old proven methods.
  I don’t grab stars, slowly, on average, 8% in dollars over 15 years, volatility is less than 7%, over 15 years income is 7.6%, over 16 years about 7% (last 3 quarters - 4.3%, the first quarter was good), in 17 it will be clearly less than 7% (but it’s stable and always with its money along with client money). I always say the same thing to all comers: if you want “asset management” - this is not for me, there are a lot of heroes. To me only instead of a deposit. Well, or when you play enough with "profitable products." I try to maximize the development of Advantage No. 1 (experience, knowledge, analysis of issuers, alerts, accounts, direct contact with everyone I can, a network of friends all over the world, work in niche markets), I don’t think about Advantage No. 2 and a little - I try to add Benefits No. 3 a little by working with the best brokers - I understand the limits of my capabilities well. Am I making mistakes? Of course. In the portfolio - rarely, outside the portfolio - often. I seem to be a macro specialist. In the year 13, I predicted a drop in oil and the ruble, I correctly predicted a rebound in the American markets after the crisis, a fall in the price of gold, the restoration of the Russian market at 14m. But I did not trade on this. Why? Because in 16 I was sure that the 1.31 pound is too much and it will go back. And now he is 1.2. Could I, on the basis of past years, give me money for a macro strategy at the beginning of 16? And how. What would you have? I think - minus 20 - 25% per pound for sure. So I don’t give myself money for a macro strategy and I don’t advise you - I have no advantages in it. But in the bond - is.
  But more importantly, it is confusing and compelling to believe: players who do not have the above advantages can also show high returns. This is due to one of two factors:
(1) Accident. There are five boys in the family, and the manager sometimes has chains of successful operations. The probability of 5 years randomly guessing the market is 1/32. Sixth - ½.
  (2) Portfolio correlation with a long uptrend of a market asset or a combination thereof. This correlation is not always immediately visible. For example, in 2013 - 2016, a fund correlated with a combination of long DJ and short oil would show excellent results, and even in 2016, with a certain combination, it would show even growth. But simply imposing it on oil or S&P would not have been possible. This is a particularly dangerous thing - not all managers can reflect on the fact of such a correlation and honestly believe that they came up with a perpetual motion machine, while in reality their algorithm is simply “long (short) biased” to some combination of assets. Over the course of my career, I have reviewed hundreds of products, including hundreds of “successful strategies”. About 80% of such bias are caught. It means that the manager does not understand how he made money, and as soon as the trend changes, he will magically begin to lose.
  Smart people rightly write: what about the well-known patterns identified by Fama, for example, such as “large companies versus small companies” or “regression to the average”? Yes, there are such patterns. Can I trade on them? No you can not. Why? That's why:
  (1) These patterns do not have time limits and a normal distribution of deviations. Yes, a deviation from the long-term trend can be found. But whether it is big is impossible to say; perhaps it will increase many times before going “back”, and “back” will go in 10 years. It is these types of patterns that are used in managing global macro strategies. This strategy is the most unprofitable. That is why.
  (2) These patterns do not always converge: over a long distance, the influence of random factors - swans can become decisive. Swans are idiosyncratic (the CEO fool came and the company collapsed, a new invention killed a product, etc.) and systematic (financial crisis, revolution, new taxation, etc.). The longer the bet, the more likely it is to fall under such a factor.
(3) Since these patterns became known, and their authors received bonuses, all large houses began to try to use them. Because of this, the patterns themselves have changed significantly. To understand how this happens, try recalling the street where traffic jams form during rush hour. Imagine that you find a detour through the yards. You happily ride it for several days. Then you discover that other discerning motorists are driving around you. After a month, there is almost the same traffic jam on the bypass road (only nonresident and newcomers are aware of it), and sometimes there is a bigger traffic jam, because for some reason there was no traffic jam on the main road (the traffic light broke), but still drove yards .
  (4) Multiple studies show that the margin of these factors is so low that it does not cover brokers' fees and the cost of short positions. There are studies that say no, it still covers, but gives a low Sharp, but what do they need with a low Sharp?
  And again, again, again: of course, many will argue that there are successful algo-traders from small houses and generally successful managers with high incomes (that is, those who SUSTAINABLEly show more than 7-8% per annum with SMALL VOLATILITY).
  First of all, it’s true. The Richard Dietz Foundation has been showing almost 14% per annum for about 10 years, and not only because he fell into the era of lower rates and hyper-liquidity, but also because his team is bison in distressed debt, ready to rip out the rest of the bonds from borrowers; they are the best on the market, they manage 1.5 billion and can afford a powerful team and influential contacts around the world. But this is 14% and 10 years, and they make distributions, this is not compound interest. There are few such teams in the world; they don’t really need your money. Or, for example, players who straddle a completely niche market - only developing, tiny, with tax inefficiencies - they can make double-digit income in a short period of formation of this market on very small volumes (by the way, the Russian market is still such a niche, it does arbitrage easier than in the United States, smart guys with good equipment earn during periods of volatility by a percentage per month, although when everything is calm, they may lose).
  Secondly, this is true for all trend followers - conscious and not. Since 2010, a simple RTS shortcut would yield almost 30% per annum stably until the beginning of 2016.
Thirdly, have you seen a lot of track records for more than 3 years? And I have not seen - so, a dozen. And on the horizon of 3 years, one in eight randomly trading should look like a great trader. Was there 80 teams on the market 3 years ago? Of course it was.
  Fourthly, there are a lot of professional garbage sales on the market who will sell your mother inexpensively to you for a commission. Take a look at the website capitalogy.io - these are the same people as the deceased investment technology laboratory. Listen to what they say on Echo of Moscow. These at least fools can only be believed by completely incomprehensible people, but there are a lot of smart sales.
  Fifth, if I just wrote that the divine fire did not descend to Jerusalem, or that Jesus did not heal the blind, or that King Solomon did not exist, or that Muhammad did not ascend from the temple mountain, or that homeopathy alone does not affect health - you know how many commentators would come running with statements to the contrary and even with the articles “Denial of the divine fire - ignorance or incompetence?” Faith is a great woman and unrivaled in proximity, but absolutely blind. We tend to believe in what we were taught in childhood, in what we ourselves do, in what protects us from fears. Why are ingenious trading algorithms worse than holy relics in the sense of faith? Nothing. But science requires testability. And here comes the “sixth”: do not argue with me, gentlemen of the faithful, just bring the results - show me money. Convince me - and I am ready to give a lot of money to management, and pay any commission. I’ll also be marketing you.
  So, sixth. We are in an Orthodox country and therefore simply must believe in a miracle. But even the Vatican checks miracles. Therefore, if you still come across managers who show, as it were, attractive results, before giving them money, I advise:
  (1) Test yourself for knowledge of mathematics. Calculate the annual income by 1 dollar, with returns from 10% to 50% and a period of years from 3 to 35 years, for example. Very well brings to life.
  (2) Verify their identity: who are they? Does anyone know them? Where did families, children, who worked with them, study? What are their previous achievements - in science, in business, in finance? If it is not clear - to out; if they are still nobody - out, let them come when they do something in life. If the team does not have anyone older than 35 years - go out. Young geniuses are found everywhere except the latest news.
(3) Check them for arrogance: if they boast, promise a lot, speak quickly and persistently, are very touchy, shout that they are benefactors and just about you will miss the chance - these are scammers;
  (4) Check for certainty: if they promise profitability (any other than minus 1% per annum) - immediately (!!) out: they are not only scammers, they do not know the rules of behavior of decent financiers; if they talk about income and do not talk about risks - also out; if they operate with the concepts of "average income over several years", and annual incomes vary greatly - also out, they do not understand the limits of applicability of statistics; if they show a track record for several months or even years, and say that it proves something - to go out for the same reason;
  (5) Check for benefits: do not give them money unless they can explain in detail which of the three benefits they are exploiting. Note that the “unique algorithm” is not included in the list of such advantages, the algorithm is a spoon, the advantages are soup. No soup, no spoon needed;
  (6) Check on the premises: What is their education - can they even understand what they are talking about? How much money they have - if less than yours, then why? How much of their own money is in the strategy? If less than a few million dollars per person - immediately out, they have not earned anything and / or do not believe their own strategy;
  (7) Check for honesty: how openly do they tell what they are doing? How honestly talk about problems? They hide how much they have in control - immediately out; not ready to show the essence of the strategy - immediately out; Do not call to the office - immediately to out; they cannot represent all the managers - out and so on. Talk in detail with the girl who draws up the documents - you can find out a lot of interesting things, as she is usually not instructed in what to lie and will say what she knows;
  (8) Finally, check the strategy: find a specialist in investments, in mathematics, let him talk with them on the subject of whether they are carrying a blizzard. If carried - to out;
(9) Check the structure: where do you give money? “To their account” - immediately to the out; it is not clear that it is not clear where - immediately to out; either let them manage your account with your broker, or let them substitute a licensed fund managed by a licensed administrator, it is better if there is a track record audited by the big four, there must be ISIN, it should be reflected in Bloomberg. Unless it is the product of people with an impeccable long-term reputation (for example, Lanisters, they always pay), then do not be too lazy to talk with the administrator - this should be a global player, and check in the securities commission of the fund's home country that it really exists and is regulated. The same goes for the broker. By the way, good structures are forced to make good compliance. If you are not asked to confirm the sources of income, place of residence, biography from birth, nationality of great-grandmother (all with an apostille) - out;
  (10) Check without money: if it is HFT, immediately go out, those who can do HFT will not go to you for money. If not, ask to send you transactions upon completion. At least a quarter. Refuse - immediately to out.
  (11) Check yourself for attractiveness: players who are not going to undress you will earn 1-1.5% per year on commissions for you, and cover all the costs of their work from this (well, well, well, let them they take 2/20 and from your income with a show off of 15% they will have even 4.6%). Do you think that $ 1000 a year from you (despite the fact that you need reporting, answer your questions, feed lunch and input / output, and sales want your salary, etc.) they will suit them if they really know how to work ? Here it is. If they are willing to take less than $ 100,000 from a client (well, well, less than $ 30,000 if 2/20) - out, they do not plan to work honestly. Do not confuse it with Alpari-type cuisines - they provide casino services, the client leaves all their money for them on average for 3 months, so they will take $ 100, but they at least honestly say what they are doing.
  Yes, of course, a lot of people came running to me with the words “how can anyone so indiscriminately fit into one comb. What if he’s a genius? ”
  To this I have a quote from Pelevin (I bring it for any reason, it is universal):
  “Elementary, Watson: if a girl sucks x * y in a brothel, it follows with a high degree of probability that we are facing a prostitute.
  I felt resentment for my generation.
“Why a prostitute,” I said. - Or maybe it's a seamstress. Which just yesterday came from the village. And she fell in love with a plumber repairing a shower in a brothel. And the plumber took her to work with her, because she was temporarily nowhere to live. And there they had a free minute.
  Samartsev raised a finger:
  “It is on this unspoken assumption that the whole fragile mechanism of our young democracy rests ...”
  That is, for optimists: If a team of twenty-five-year-old children without their own money offers you a unique money management strategy that, according to their assurances, brings 25% per annum in foreign currency, and wants you to give them money (you can start at $ 1,000) in cash or by transferring it to the company’s account Seychelles, because their unique algorithm works only on these islands, it follows with a high degree of probability that we are fools or scammers.
  But not necessarily. Maybe these are young scientific geniuses who happened to meet in Moscow (who are born one in one hundred million), but their souls are so wide that they give all their earned billions to orphanages and want to make all investors happy, even small ones, with high incomes. In addition, difficult childhood developed paranoia among them and therefore they involuntarily hide all data about their strategy and do not even license the fund. It is on this unspoken assumption that the whole fragile mechanism of attracting money of Russian investors under the promises of 25% per annum rests.

Why the BTC-e exchange does not work

Exchange BTC-e scam or just temporarily not working

On July 25, the BTC-e cryptocurrency exchange unexpectedly suspended its work (btc-e.nz). A little later on news feeds there was a message about the arrest in Greece by the FBI and the local police of 38-year-old Russian Alexander Vinnik. His extradition to the United States is being prepared. There were few comments on this subject, except that Vinnik is suspected of laundering $ 4 billion through bitcoins.

It quickly became clear that the arrested person was connected with BTC-e, as well as with the largest at that time hacked in 2014 mt.gox.com, which was hacked in 2014. The accusation from paragraph 21 boils down to the fact that A. Vinnik created a network to launder and cash out funds from illegal tax evasion transactions, drug trafficking, as well as proceeds from hacking. The head of the group was both the administrator and ultimate beneficiary of the exchange.

What happened to the BTC-e exchange

Almost immediately, investment and cryptocurrency forums “got excited”, the most famous of which is BitcoinTalk. Numerous questions rained down and even more numerous versions of what was happening. Emotions went off scale, as always, in such situations.

Prevailing versions of the DDOS attack and that in a couple of hours everything will work. Also, many thought that exchanges were preparing for the long-awaited Segwit x 2, scheduled for August 1 (separation of the algorithm), and that exchanges are carrying out scheduled work on this issue. Some predicted a cue ball tomorrow for $ 7,000, others for $ 700, while others announced a complete collapse of the cryptocurrency. Conspiracy theories about the Masonic conspiracy and the upcoming apocalypse can also be found. But almost no one doubted the reliability of one of the oldest exchanges. Now, for sure, all interested people are already aware of what really happened.

Now on the site you can see a standard ad in such cases, which is unlikely to reassure anyone. The announcement hangs now, investors can only hope that the previous site will appear in its place with an accessible conclusion to.

A bit of history. The BTC-e exchange has a New Zealand domain and American registration. Since 2011, it has become one of the largest in its niche. Private investors from the CIS have long mastered this site, thanks to reasonable tariffs, a good selection of tools, reasonable support and familiar ones.

The most valuable thing is that with BTC-e it was relatively easy to exchange bitcoins for the dollar, euro and ruble at the market price. The friendly Russian-language interface is of considerable importance, because the platform was developed by Russian programmers and was originally registered in Bulgaria.

The exchange consistently entered the TOP-5 in its segment, which could not but arouse investor confidence. Finally, the withdrawal in rubles through payment services familiar to us is not available at all sites, BTC-e in this sense is one of the pleasant exceptions. The volume indicators of the exchange speak for themselves: almost $ 400 million revolutions per month, more than a million registered users around the world. It was unlikely that anyone could have guessed 3 days ago that BTC-e would be called the "largest cybercrime site in the world."

As it turned out now, the Vinnik group created the fictitious company Canton Business Corporation, which controlled the exchange. Part of the funds was deposited in the suspect's personal bank accounts. It is not surprising that he was arrested in an expensive Greek luxury hotel, where he led a relaxed lifestyle. What is funny, they figured out the fraudster elementary by his wallet, through which he almost openly made a withdrawal of money of dubious origin.

The exchange provided users with complete anonymity without and was not interested in the origin of the funds. You naturally ask, but what exactly is wrong here? After all, cryptocurrencies are created to comply with anonymity and conclude smart contracts directly. That's right, but now try to explain it to the FBI and the US Securities and Exchange Commission. I think we should expect new steps to establish control over the circulation of cryptocurrencies, at least on the part of the American authorities. Add to this the big buzz around the “Russian hackers”.

What are the consequences of suspension of the exchange for private investors?

The return on my investments for 2017 is about 30% per annum, you can see the latest news of my investments in weekly ones. I recommend that each reader receive training on a lazy investor course. The first week is absolutely free.

Unfortunately, I saw reviews from colleagues who kept hundreds of thousands of rubles in BTC-e wallets. Needless to say, I personally had several hundred dollars on the balance of the exchange, which I used to speculate on the cryptocurrency rate from time to time. Most users unconditionally trusted the exchange and kept on it not only all their investments, but also their savings. They write that if the exchange does not open after all this story, they simply will have nothing to eat. It is likely that among the 16,163 BTC illegally withdrawn the day before from the exchange, there is also Russian money.

From my previous publications, you already know that cryptocurrency exchanges give absolutely no guarantees. Bitcoin itself cannot be hacked, but the services for its exchange and trade, unfortunately, are very vulnerable. Including in relation. Therefore, compliance with security measures should be a priority for a private investor. Let's remember the basic rules in dealing with cryptocurrency:

• Careful attitude to the cryptographic code of your wallet;
• Careful handling of the device from which you are making an entrance;
• The maximum possible study of all available information about the exchange team or about the organizers of the ICO;
• not only by asset classes, but also inside cryptocurrencies - on different exchanges, wallets, currencies, etc.

I don’t think this story will undermine confidence in Bitcoin and cryptocurrency exchanges. For example, this did not happen after the dramatic story of the hacking of mt.gox in 2014. Of course, much will depend on whether BTC-e resumes work after the current crisis. Even if the exchange resumes work, it is not at all a fact that it will withstand the wave of withdrawal of funds by alarmists.

I invite all readers to participate in the survey, as well as express their opinion on the situation in the comments.