The Bitcoining of the $5 trillion Foreign Exchange Market

John Fitzpatrick and his partners are planning to spend $50 billion and use a gigawatt of energy to power an Exaflop computer data center to game the $5 trillion foreign exchange market. Foreign exchange markets are 500 times bigger than the Bitcoin market. Foreign exchange affects the price of goods and services imported and exported to other countries. Foreign exchange manipulation will affect the price that you pay when you go to buy stuff at Walmart or other stores. Gaming this system will affect what is in your wallet and bank account.

Technically it seems the plan is sound, but it is in like the Bitcoin mining arms race applied to Foreign Exchange. Bitcoin miners would get progressively more powerful computers to capture financial gains in the Bitcoin market. Previously high frequency and computer traders would use less powerful supercomputers to direct their market trading.

Now one of the players is going nuclear in the financial computer arms race.

The big participants in the foreign exchange market are not defenseless.

They are countries, big hedge funds, banks etc…

About 70% to 90% of the foreign exchange transactions are speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.

The Fitzpatrick move seems likely to increase volatility for the benefit of him and his partners.

George Soros has stated – “Speculation tends to exaggerate currency moves”. [from the Alchemy of Finance] George Soros was the person who made a billion dollars breaking the British pound.

If the Fitzpatrick exaflop data center goes ahead and succeeds it will mean that
* the financial system will be furthered gamed for no net societal benefit and probably societal damage
* the US will have the most powerful supercomputer in the world instead of China, but not for some scientific advancement like figuring out protein folding but for more powerful financial manipulation… Go USA ?

What will the other big forex players do ? China ? Russia ? Goldman Sachs ? Hedge funds ? Banks ?

Break it or co-opt it so that they make the most money.

But don’t worry the little people (everyone else like you and me) will still lose, however, the big guys decide to divide the pie.

There should be something like a one second quote rule.

Quotes for stocks, foreign exchange and other financial products should be good for one second and the system of trading should have some type of equitable queuing of trades such that there is no advantage for fast traders and less room for supercomputer systems to just game the markets.

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