Bitcoin Forum

The lesson we are repeatedly and painfully learning is that Gox is simply not up to the job.  It is easy to run an exchange when times are calm, but when things get rough , you need an exchange that does not simply go opaque.

One solution is to copy traditional markets , suspend trading , and re-build the order book over say 15 minutes to find the new equilibrium price, this 'volatility auction' finishing at some random time after the 15 minutes.

Personally I think the community needs to fund not one, but say three new exchanges which should have widely shared ownership, and compete against each other for business.

This would then allow one , or even two exchanges to periodically close to perform maintenance -- something that must cause Gox all manner of problems.

You effectively have a market maker already, i.e MtGox, which I thnk is exactly the problem. Effectively many of the smaller exchanges, I assume, are (have been) using MtGox to keep liquidity, and the 'official' BTC$ exchange rate has always effectively been the rate dictated by MtGox. In 'real world trading' there is a strict separation of the market-making side and the brokerage side of any business.
Let's play the conspiracy theory for one moment, what's to prevent MtGox itself to 'help' the price tanking, hoard BTC, 'fix' their tech issues and sell those BTC's again at much higher prices once the market is stable and moving in the right direction again?

It is going to be a slow process but the only option is to start moving away from MtGox as it is insane to have one exchanger playing market maker and exchanger, moving 80% of the whole market and effectively being identified with BTC to the point that if (rather when!) MtGox has an issue, the mainstream media starts posting things such as 'Bitcoin tanking' and the like

Of course, right now the smaller exchangers are going to be flooded with sell orders since people are panicking and selling off for no reason other than MtGox troubles and those smaller exchanges may soon run into liquidity issues themselves so the main thing to remember is to reward those smaller exchangers with more and more business once the storm is over

 

I think this last little crash may have raised the awareness of other exchanges; while Mt-Gox was offline the others were still going.  Maybe more people will move their business to other exchanges, taking the pressure off Mt-Gox and reducing its risk as a single point of failure.  I trade in GBP so Mt-Gox is my only choice at the moment.  Max Keiser is supposed to be consulting for a new (and professional) exchange based in London.  That should help a lot.