The DRUG Trade: Daniel Keller and His Army of Pump-and-Dump Bots
At the close of trading on Sunday, October 25, 2015, Berlin-based artist Daniel Keller (dnlklr) was the top Forecaster and Activist, with a net worth of 601,024Å after a total of 947 trades. Having manually set up 174 separate accounts, Keller had created an army of investors to do his bidding, allowing him to pump up the value of the futures he was personally invested in before dumping his shares to make a huge profit.
His botnet’s trades in the Drug Decriminalization future clearly illustrate the effect. The sawtooth shape in the hero image above shows him pushing up the price, and then selling off, pushing it back down so his strategy can start over.
The Åzone Review discusses strategy, regulation, and ethics with Keller in the Q&A below.
ÅR: What’s the secret to your success in the market?
dnlklr: I guess I just have an extremely high threshold for tedious repetitive tasks for the sake of obsessive-compulsive competition—I justified it to myself as a bit of an endurance performance.
At first I was just playing around without much of a strategy, but once I noticed a few glaring structural issues with the market, attempting to exploit them became irresistible for me. I realized as long as there is no shorting (in essence, betting that a price will go down instead of up) that there would be zero risk to my strategy.
ÅR: There are a number of investors with derivatives of your username under your control. How did they help you amass your wealth?
dnlklr: My strategy was really very simple. I bought as many shares of an underpriced future as I could with my main account, and then created dozens (now hundreds) of fake accounts to subsequently buy the future. Once I decided I had enough, I liquidated my holdings in the main account and then repeated that down the line of fake accounts, pushing the price down to where I had originally purchased it. I then used the profit from the first trade to buy even more of the asset, and then used the same dummy accounts (plus many more) to buy and push the price back up even further. In essence it was a sort of pseudo Ponzi scheme followed by a pump-and-dump-and-pump.
ÅR: What motivated you to deploy this strategy?
dnlklr: At first it was simply to front-run what I figured other people would figure out how to do very quickly. I also realized that because of the rampant inflation built into a system which constantly introduces new users without any way (or incentive) to take money out of the market, the prices of all of the futures will soon climb to above 10,000Å, which means new users will be entirely priced out of the market, and the earliest and most successful adopters would soon have an insurmountable advantage.
It would have been just as easy for me to make random usernames for my army, but I decided to use the name dnlklrbot (although technically, they’re mechanical turks, not bots) to make what I was doing transparent. I was reminded of a great Adam Curtis short from Charlie Brooker’s 2014 Newswipe where he talks about the rather genius strategy of Vladimir Putin’s political advisor Vladislav Surkov. Surkov funded all sorts of oppositon parties ranging from Putin loyalists, social democrats to neo-Nazis but most cleverly, let it be known that he had done it, therefore fundamentally undermining the public’s faith in all dissenting narratives.
Similarly, I thought that if people (mistakenly) thought they were against an unstoppable bot army, it would be more demoralizing than my trying to do it sneakily, which would make people give up and further entrench my power.
Moreover, the future I chose for my initial pump-and-dump was basically arbitrary, except that it was cheap at the time and therefore easy to corner. I think this underlines a fundamental problem with the abstracting effect of market dynamics. For instance, technical stock analysis completely ignores all information about what a company actually produces what it stands for or, who works there in favor of looking exclusively at numerical “fundamentals” and price momentum. So I thought engaging in this ad absurdum could be an effective critique of the underlying reasoning behind using market mechanics to predict much of anything in the real world.
ÅR: Should this activity be regulated? How?
dnlklr: Yes! It would be extremely easy to prevent what I did from happening by making it a bit harder to sign up for new accounts—if you could only have one account per e-mail address/IP address and need to click a confirmation link in an e-mail to prove it is real and maybe fill out a captcha. It still wouldn’t 100% kill the bot problem, but it would effectively make it too annoying and tedious for me (or I imagine anyone else, since there is no actual money on the line) to keep doing it.
I think if you really want it to be fair, you should institute this new rule first and reset the market (deleting all of my 174 accounts) entirely.
ÅR: Does this relate to activity in other markets or environments outside of Åzone?
dnlklr: Certainly. The inflation that is baked into the system reflects some of the macroeconomic issues the world might soon be coming to grips with in the wake of years of endless global quantitative easing, or QE [see October 24 ÅR post: “Initial Public Offerings Recap: Over 3 Million Cåin (Å) Traded, Inflation, and Loose Morals”].
I would make a comparison to high-frequency trading (HFT) as well, but the only true similarity is that both HFT and my botnet activities give a distorted illusion of greater market depth or liquidity than is actually there.
ÅR: What would you like to be able to do with all the cåin you’ve accrued?
dnlklr: In a sense the leaderboard is plenty enough incentive to try to win. But one of the major issues I have with the market as it currently works is that despite how crucial it is for the market to continue functioning, there is no way or incentive to take money out of the market and spend it. I’m not sure what I’d spend it on if there is no way to convert cåin into any other currency, but I think some sort of funny badge system would be fun and could be a good way to periodically retire capital from the system and postpone or prevent the “+10k price for every future” apocalypse.