Bitcoin Forum

So, all prices are pretty much determined by the prices on the exchanges.. but why? What makes Mt Gox the determining factor for all Bitcoin dollar prices?  It seems like a self fulfilling prophecy, people expect to use Mt Gox as the value, so set their prices accordingly, even if they don't have any relation to the site. Is it just because those are the biggest markets? But are they? How would we know if another market was bigger?

btc -china was bigger than gox before the chinese govt news
and coins traded for higher prices there as well

I recommend doing some reading on the topic of "Price Discovery" in mainstream economic theories.

Basically, it's whatever price you can sell and/or buy it for.

If I offered to sell you 1 BTC right now for $1750, I would say the price is $1750. If you bought it, then you are agreeing that $1750 is the price. Others could disagree by offering to sell it to you for a lower price. But if you don't have access to other markets and people, then your only way of knowing the price is haggling with me until we both agree on a price.

The big marketplaces such as MtGox, Bitstamp, BTC-e, etc. are ways of making that price discovery more transparent to the wider public. Trade volume may influence people's opinion on which price is "right".

I don't think you understand the concept of price in a marketplace. Who says that milk costs $3.50/gallon? The grocery store? Not really - it is determined by the people who want milk - how much are they willing to pay? If no one wants milk for $3.50/gallon, I guaranteed the store won't sell it for that - it will sell it for what people are willing to pay (assuming they can make a profit).

Likewise the "price" of one BTC. It is determined by what people are willing to pay for it. If someone today offered BTC for $20,000, no one would buy it at that price, because no one currently perceives that as its value. If they suddenly offered it for $2, then there would be a mad rush to buy it up, because people perceive it to be worth more than that. Thus, the price of one BTC is determined by the market, i.e. what people are willing to pay for it.

Yes, exactly, it's because they're the biggest markets. When a trade takes place on a market. that means a buyer and seller agreed on a price, which suggests that the price accurately reflects the value of the thing traded. (Assuming there are no confounding factors, such as difficulty withdrawing from the exchange inflating the price.)

If you want to know the price of eggs in dollars, what do you do? You go to the places that exchange the most eggs for dollars and see at what price those exchanges are happening.

In order for an exchange to happen, the buyer and seller must agree that the price is fair, and both must be able to get to the exchange. This generally means the places that can attract the most exchanges have the most accurate prices.

Mt Gox hasnt been the standard for quite some time. I use Coinbase or Bitstamp price, thats the "real" price in the circles I travel.

I feel like the gox number is usually higher isn't it?  But from what I understand people can't really get money out of gox so how legit are those numbers?

That's why they are high.  Nobody sells there, because selling just gets you fiat, and you can't take it out.

 I'll pay a dollar for something as an investment, if I think it will be worth 1.50 in the future. As long as 51% of people trading what I have are willing to pay more than a dollar for it, the price will go up. The risk is that people may only want to pay 99cents for it. Then the next guy is only gonna want to pay 98cents, and the 3rd guy, even less as he see's the 'value' dropping and doesnt want to pay 97cents of the price is 50cents in a week.

This is the only concept behind capital gains, the only trade of the United States; Take someone elses money, hope they lose more of it so you can gain profits with no extra work.  Its also why the United States is screwed, when China decides they want to be paid what they're owed and dont want the worthless paper money we keep printing off,which is backed only by the fact that the majority of people generally accept the idea that it is worth anything.  Currency not backed by value or labor = unstable. Failure by design. Pres. Kennedy tried to re-back the dollar by silver. See where that got him.

 In other words, Bitcoin price is no different than fiat value. Its just what the majority values its trade power at. The price changes because people are willing to pay a little more with the hopes of the value increase continuing. Then when people realize 'This is ridiculous!' and the price evens off, everyone gets scared and starts selling coin lower than they initially intended, to cut their losses or break even,etc.  This is supposedly why wall street pays lower income taxes than main street.

The thing Im not sure of is how mining difficulty/btc volume affects value.

MyGox is a scam operation. Ponzi scheme. They do their own trading and market manipulation.

i understand that it's supply and demand, but how do they computate the exchange rates? is it an algorithm? is it an average?

is it  not calculated by the last traded  or average trade price of the last few trades ?

     mtgox is the biggest market!

Several different prices are reported, typically very close to each other. These are usually the bid, ask, and last. The "bid" is the highest amount a buyer is currently willing to pay -- which means you can sell at least a fraction of a Bitcoin at that price. The "ask" is the lowest amount a seller is willing to accept -- which means you can buy at least a fraction of a Bitcoin at that price. The "last" is the last price at which the asset changed hands. As I type this, the bid at Bitstamp is $639.86, the ask is $640.00 and the last is also $639.86.

alright, thanks.. that makes some more sense to me then.

you can take it out

Recently??  I have one friend who's been waiting over a month on a supposed withdrawal and a few threads around here sound like others have similar problems...

Like others suggested, it's the price people are willing to buy and sell for. It's not the owners of exchanges setting the price but the users and market setting the price.

I don't know a whole lot about economics but I remember as a kid collecting baseball cards I would tell my father "this card is worth $20!!" because I saw it listed as that in the price guide books. My father would always remind me "It's whatever someone is willing to pay".  When I went to local card shops to try to sell my cards I learned the harsh reality that things aren't always worth what you think they are (card shops pay you way less since they have to resell it obviously).

he should just talk to them directly and see why its taking so long, i can only guess about all the extra information you are not providing,

has he even started a support case with Mtgox on the issue ?




 

Maybe things have improved more recently but one of the biggest reasons I ended up leaving mtgox there was an instance where customer support NEVER RESPONDED to a question I had about my verification getting denied and another case where it took weeks to hear a response from customer support.   Best of luck to mtgox in the future and if things improve I might consider going back but there's simply no way I will ever do business with a company that flat out doesn't respond to customer questions/complaints , in addition to all the problems I had with getting money out or the nearly 2 months I ended up having to wait to get verified and having to submit it multiple times with not clearly understanding what was wrong with the first submission.

Again, best of luck to them and I'm sure the huge boom in bitcoin made it hard from them to scale out properly but nowadays I feel there are better options out there.

Yeah about two weeks ago or so... no response so far.