Bitcoin Forum

** I am LONG on BTC, but want to understand if this scenario would work **

The current market capitalization of crypto currency is about 13 bln.
See at footer / bottom of page of: http://coinmarketcap.com/

WHAT IF they would create/print some dollars, slowly buy significant amount of crypto currency at current market prices and then dump it all at once. They would do this in cycles, each time creating a crash.

The FED has about 4000 bln outstanding.
If they would just create 4 bln USD, buy BTC and dump it, it would already probably work.
But ok, let's suppose they do this (in cycles!) with 40 bln (who cares anyway..it is money out of thin air).
This 40 bln would represent only 1% of their current balance.
And this is only the FED.

Here is size of printed money from the 4 big central banks right now...

http://www.economicpopulist.org/files/u1/centralbankbalancesheets.jpg
Source: http://www.economicpopulist.org/content/bis-says-party-over-quantitative-easing

And here is projected increased size for the FED only...

http://blogs.r.ftdata.co.uk/gavyndavies/files/2012/12/ftblog357-590x387.gif
Source: http://blogs.ft.com/gavyndavies/2012/12/16/a-major-change-in-bernankes-policy-reaction-function/

alot easyer just to ban it, not to buy it.

How would this destroy Bitcoin? Bitcoin existed long before there was any analog-money numbers associated with it.

-> "alot easyer just to ban it, not to buy it."
i think it is much, much easier to just change a number on a system somewhere to create 40 bln easily and get rid of the BTC in a few hours. no effort needed on politics, legal stuff, etc etc

-> "How would this destroy Bitcoin? Bitcoin existed long before there was any analog-money numbers associated with it."
they would buy it for 900 USD and then sell it for 0.000001 USD on large volumes at once, in cycles, creating crashes, this would effectively destroy it. all miners would stop, etc etc

Are they going to buy up every single one of the 150+ altcoins?
What's to stop people just making more altcoins?
 ;D

In this scenario they would.
If I would give you 40 bln, you could :-)

It would not be worth to create more cryptocoins.
Every miner would stop.

good you pointed to  that possibility.
so i am not selling mine until price gets to 40000$, because who knows it might be FED buying...
so are you selling yours if FED pays 900? then whenever i have a sense FED is in market, I will pay +100 to you...

No way would it destroy anything. I'm not sure if you are aware that an exchange works on supply and demand. The supply at these prices is a tiny percentage of the total supply. If someone started buying continuously the price would go insane, easily going into 10s of thousands very quickly. To buy up a third of all bitcoin would drive the price to crazy levels. Then when they sold it the price wold plummet of course but all that would happen is that the market would stabilize at some level and then start going up again when enough people saw it as a bargain. It would surely hurt bitcoin by creating a period of wild volatility (as well as a lot rich members of the public who sold to the Central Banks during the rally haha) but the fact that the manipulation was so obvious might have unintended consequences. In any case bitcoin would just continue at whatever price it settled at. Mining would reduce but not stop, trading would increase wildly. Hey I think it would be fun to watch  ;D In fact if it starts I'll even put in a sell order at $200k per bitcoin and see if any central banks wants to dump some of their worthless fiat on me hahaaa

these graphs are exactly why we're doing this.

"so i am not selling mine until price gets to 40000$, because who knows it might be FED buying..."
"If someone started buying continuously the price would go insane, easily going into 10s of thousands very quickly."
- not true, if they would slowly buy 100.000 bitcoin in a batch and then dump all of it for 0.0001 USD, bitcoin would crash ... if they then would do this in cycles.

"these graphs are exactly why we're doing this."
- i know and i agree

EXACTLY!

Hahaaa so they would just buy it all at $900 and immediately dump it eh? Hahahaaaaaa have you ever seen an exchange? This isn't like going to Walmart and buying up all the socks at 99 cents each. There is a limited supply and the price changes every time there is a transaction. If you bought 100k bitcoin for just $100mil the price would go on a "scalded monkey" run. Can you imagine someone trying to buy tens of billions of dollars of bitcoins at the same time? There's no saying how high it would go when apparently limitless buying appeared and was noticed by everyone. People would be pulling sell orders like they were going out of style and the price would go straight vertical until it got to levels at which people couldn't resist selling. Hell it might go up so much that by the time they sold it all back to the public the price might settle at $10k instead of $1k, given the lesson the previous holders just learned. They'd be dying to get back in and there'd be millions of new gamblers wanting a piece of that volatility.

No, they couldn't easily destroy Bitcoin.

What they could attempt to do is manipulate the bitcoin to fiat price point. They have no bitcoins now so they first need to buy them. They would have to buy from bitcoins available for sale, and new ones being found by miners as scheduled in the inflation rate. They couldn't acquire any I have, for example, since they're not for sale.

So they could begin trying to acquire as many as possible which would drive up the price. Right now the price is about 1K each, and as I note above there are a limited number available, so their buying if they were seriously engaged could drive up the price quickly say to 10K each or beyond. At this point the multitudes of bitcoin owners would be greatly enriched (fiat wise).

The sharp uptick in price might slow down purchases as people hoarded bitcoins. At the same time the high price would create a larger news cycle, causing more people to learn about and probably be interested in Bitcoin. Now you have a lot of wealthy bitcoin holders who probably begin to sell a few, the central bank that now owns a number and looks to crash the market, and a lot of new people saying what the heck is going on.

So the price probably crashes from 10K back down to maybe as low as 1K, but I doubt it would get that far. Now people are taking bitcoin very seriously with such high prices, the new interest in it would fuel sales, and older holders still won't sell all their coins cheaply.

Now the central bank needs to buy coins again to try the cycle over. All they have successfully done is enrich a lot of bitcoiners, add in volatility which otherwise wouldn't have been there, and generate more interest and awareness for it. If you look at bitcoin's history you'll see tons of volatility, which hasn't killed it. Next.

Actors with unlimited purchasing power can determine prices fully:
http://stocks.about.com/od/gettingstarted/a/041711-How-To-Legally-Manipulate-Stock-Prices.htm

July 9, 2010: When someone tries to buy all the world’s supply of a scarce asset, the more they buy the higher the price goes. At some point, it gets too expensive for them to buy any more. It’s great for the people who owned it beforehand because they get to sell it to the corner at crazy high prices. As the price keeps going up and up, some people keep holding out for yet higher prices and refuse to sell. The Hunt brothers famously bankrupted themselves trying to corner the silver market in 1979.

Always interesting to see mr.Nakamotos opinion-..... ;)

http://crypt.la/2014/01/06/satoshi-nakamoto-quotes/

It is not about buy it all, but to manipulate the price.
They buy on current prices and then dump it with large volume and take losses (since they can afford to).
This will scare most investors who will leave.

The end result would be that the Central Banks would be giving a lot of money to people in the cryptocurrency community.

After the waves die down you could just start a new cryptocurrency.

If they are making huge losses like that, they would be tossing money (violently, blatantly throwing huge sums of money) at current Bitcoin owners.

This would be free advertising which would attract every investor in the world.

¨This will scare most investors who will leave.¨

maybe few bigger investors will leave, but 100 of thousands of smaller btc users will think itś a good moment to step in?

Would be a lot easier to just "ban" bitcoin. Create regulations so merchants arent allowed to accept it and exchanges are illegal. That would effectivly prevent bitcoin from ever becoming a mainstream thing.

Also I'm not sure how you would go about buying billions worth of bitcoin without people noticing and getting concerned.  I'm pretty sure no current exchange or payment processor would be able to accept a purchase that large , and even if they could it would obviously raise serious red flags and they would look into it pretty dang closely i would like to think.

All, as OP thanks for feedback and discussion.
I am less worried now on my long position on BTC :-)

Haha what nonsense. That article is totally irrelevant, did you even read it? First of all it is about manipulating individual stocks on a stock exchange. Secondly the article is extremely vague and basic. Thirdly it starts by saying "A big institutional investor (hedge funds, mutual funds, insurance companies, and so on) picks a stock that it owns and begins selling." So the central banks ALREADY OWN 40 billion of bitcoins??? Wow they own more bitcoins than actually exist!

Plus the article is about how to manipulate stocks UPWARD to sell at a profit.

Man some of y'all got to be Sockpuppet trolls... The quality of the anti-bitcoin flames and wannabe panic starting threads is really low here, but they do make up for it with quantity...


See:
http://en.wikipedia.org/wiki/Sockpuppet_(Internet) (http://en.wikipedia.org/wiki/Sockpuppet_(Internet))

http://en.wikipedia.org/wiki/Operation_Earnest_Voice (http://en.wikipedia.org/wiki/Operation_Earnest_Voice)

Pretty sure printing that much money would destroy the economy rather than Bitcoin.

WHAT IS THE MATTER WITH YOU??? HOW IN THE NAME OF CHRIST CAN YOU BUY $40 Billion of bitcoins at $900 each??? Hahahhaaaaa you are hilarious. I don't know if you are just trolling or you really have no idea that there are buy and sell orders for limited amounts of bitcoins on the exchanges. I would guess trolling...

Central banks might at some point in the distant future wellcome crypto currencies because when governments start collect taxes from bitcoin ecosystem in bitcoins, this would help resolving their (governments) fiat debt overhang problem... ultimately US, Europe and Japan could decrease the real value of their debts using BTC. Once again, Debt: The first 5000 years, debts won't be truly repaid. Hence any lenders beware, or you might be late on BTC train... In the meantime, all US, Europe and Japan are fighting the deflation ghost. E.g. if and when BTC ecosystem becomes worth 100bn USD, some central banks will have these 100bn helping their inflation targeting more then the ohers...

Also, building up at least some BTC reserves might be sensible policy for central banks and sovereign wealth funds to smoothen the future wealth redistribution effects created by cryptos...

"WHAT IS THE MATTER WITH YOU??? HOW IN THE NAME OF CHRIST CAN YOU BUY $40 Billion of bitcoins at $900 each??? Hahahhaaaaa you are hilarious. I don't know if you are just trolling or you really have no idea that there are buy and sell orders for limited amounts of bitcoins on the exchanges. I would guess trolling..."

:-) I did not say that they would buy 40 bln in one time.
They could buy slow in low volumes and then dump it all at once.
Again and again.
Each time causing a small crash.
This is how you could manipulate a price in all kind of markets.

if they're buying im gladly selling and move on to infinite alt coins, hoping they would buy em too

It is not that easy to just print dollars  ;D Just imagine how much people would involve a conspiration like this! If they wanted and could do something like that, they would have done a lot more nasty things (not going in details here) which they obviously didn't. Relax ;)

Are you crazy?
ok lets accept your fucking theory then who will gain?
They will buy in 900$ from Bitcoiners and sell in .000001 again then who is going to buy? Of course we again it mean we will gain all.
No crypto is going tp be destroyed but we could make our market capital similar to some single countrys GDP.

I believe what he is trying to say is they buy BTC up to a high price then dump all their BTC causing the price to crash.  Then buy it back up to a high price, then dump it and cause it to crash.  Rinse, repeat until they burn through their 40 billion dollars budgeted for their evil "Bitcoin Destruction Plan"

I hope an pray they start doing this.  I will simply sell into them at the high price and buy back on the crashes - THANKS idiot government for the USD.

Seriously, they will not do this because it will just make a bunch of BTC traders rich beyond their wildest dreams.

And it would not destroy Bitcoin.  It would only make it stonger.

 "The Hunt brothers famously bankrupted themselves trying to corner the silver market¨ ...(s.n.)

change huntbrothers for :fed,   and fill in bitcoin for: silver....what do you read now? ;)

The biggest threats to bitcoin are existing tech firms deciding to compete.
 
Who is to say apple or google arent going to bring out a coin at some point that instantly has 100 million users within a week?
 
Any coin that is more accessible to newcomers aswell as existing banking institutions could clean up, make bitcoin look prehistoric.  Buying or selling bitcoin, using it to buy goods or services, could be a hell of a lot easier, the time will come when something will be.

FYI

1. When the FED would dump high volumes and create crashes there is also an effect of market capitulation.
This market capitulation would effectively destroy the Bitcoin.
http://www.investopedia.com/ask/answers/189.asp

2. Here the FED is accused of lowering the gold price
(Fortunately, with Bitcoin we  do not have "paper BTC" ... like gold has paper gold)

http://www.thenewamerican.com/economy/markets/item/15116-after-gold-crash-experts-point-to-central-bank-manipulation

After Gold Crash, Experts Point to Central Bank Manipulation

In the wake of gold prices cratering in recent days, more than a few prominent experts have already started pinning the blame on Western central banks — especially the Federal Reserve and the European Central Bank (ECB). According to numerous analysts, the central bankers are desperate to salvage their fiat currencies and eliminate competition as "monetary authorities" continue to create ever-greater quantities of euros and dollars out of thin air.

Some experts, whistleblowers, traders, and former officials say the Fed dumped as much as 400 or even 500 tons of “paper gold” on the market — metals that it might not even have — as part of a naked short sale aimed at driving down the prices. Other analysts, especially among the establishment, pointed to the ECB chief’s recent suggestion that struggling European authorities in countries such as Cyprus would have to sell their precious metals to keep receiving bailouts.

Economist Dr. Paul Craig Roberts, assistant treasury secretary during the Reagan administration and former editor of the Wall Street Journal, is one of many experts who argue that the recent collapse in gold and silver prices was carefully orchestrated by the Fed and a coalition of allied mega-banks. In a widely cited analysis of the recent plunge in precious metals entitled “Assault On Gold Update,” he said the U.S. central bank was “rigging all markets” — bond prices, interest rates, and of course, the bullion market.

I think the central banks could take over bitcoin, or any other alt coin, if they wanted to.

They know it too... This actually reassures me though that bitcoin will not be banned, if they have control they are happy.

They can make an unlimited amount of fiat currency... Fractional reserve banking is the ultimate power (for now).

"Give me control of a nations money supply, and I care not who makes it’s laws." Mater Amschel Rothschild, founder of the Rothschild banking dynasty.

What if Satoshi was a fictional character created by the Central Bank?

"

dont think so
CB´s dont like honest money...

Right.  I am out of here.  Stupid thread.

Just who is going to buy back 'all' this Bitcoin?  It may be easy for 'Actors with unlimited purchasing power' to buy Bitcoin, but that does not mean they will be able to sell it.  You clearly have no idea how a market works.  Price is determined by supply and demand.  'Actors with unlimited purchasing power' cannot change the supply, as this is set by the difficulty of the network.  The only way to lower the price would be to reduce demand, 'Economics 101'.
I find it laughable, how so many people hear about Bitcoin, then all of a sudden think they are market guru's and economists.

No, the market is not always determined by supply and demand. Look what happened to gold and silver over the past year. The price dropped, demand went sky high, and the priced dropped more.

It is very much possible to manipulate markets...

The same people that sell something, can be the same people that buy it at the same time.

They would take a loss... but they wouldn't care. What's more or less fiat currency to a central banker?

You cannot compare a commodity like 'gold' that has an 'unregulated supply' to Bitcoin that 'has a regulated supply'.  What I said is correct, you are trying to compare things that cannot be compared.  (Again, people without qualifications becoming self proclaimed experts overnight)

I'm not trying to be an "expert"... Just trying to present a scenario where price manipulation would be possible.

I'm admit I'm ignorant, no economics major here, just read zerohedge.com, things like that.

Selling.. and then buying your own sale at a loss. If this is not at all possible with bitcoin please explain.

Do you think there was no price manipulation in the early days of bitcoin with Mt. Gox and other exchanges?

Wouldn't they be able to use their computing power to take over the network and kill it?  I'm sure Microsoft or Apple could if they wanted to, right?

It is called a 51% attack. Yes they can, with less than 100 millions $  they can buy enough ASICs to do that.

And it would be much more effective than trying to "ban" it or try to "manipulate" it

Hell, just look at what is happening, a single pool without even trying has almost reached 51% of total hashrate, so long for people that say "nah a 51% attack is so hard to do it is impossible"

The 'scenario' has already been outlined by others here in previous posts.  If someone were to start buying large quantities of Bitcoin the price would increase dramatically.  The people selling Bitcoin are miners, they did not have to pay someone for the Bitcoin's they are selling.  They would just say 'thank you very much for all your money'.  If you tried to sell it for less than you paid, they would laugh at you and say 'Ok, you can have some of your money back, and I get all my Bitcoin's back, and I get to keep the difference'.  You cannot 'win' by buying high and selling low.  It is not like a stock market, where to own a stock, you must buy it.  Here you can create Bitcoin's without buying them.

Thanks for the explanation.. I should have known that.  :-\

I was watching the Wolf on Wall Street last night, think it fried my brain...lol

Entertaining movie though....

lets wait for the first attack then....
it will probably be only once ...
and then it will ex/implode that particular  pool
that would be all,i think?

https://bitcointalk.org/index.php?topic=408566.msg4433859#msg4433859

For reasons already stated it wouldn't work, investors would capitalize, both small and large, and the demand isn't going anywhere, on the contrary, every day that goes by, there are more credible, respectable business and financial entities who are embracing it.

The demand (for a p2p currency free of regulation) will always be greater than the supply and system of the existing alternatives.

I am hoping Ghash.io gets 51 or more percent of the hashing, here is why:

https://bitcointalk.org/index.php?topic=407217.msg4434862#msg4434862

OMG. There is not enough face-palms in the world for this thread.
Need to move this under Newbies...

We sell some of the coins to FED and receive 40 billion dollars, and when it crashed 90%, we spend 4 billion dollars to buy them back, now we have same amount of bitcoin and extra 35 billion dollars :D

so why don't you tell us or show us a link where it explains clearly that this >50% attack is just FUD and wouldn't affect bitcoin.

RE Ghash.io and my sarcastic post referenced above:

Just because someone can do something does not mean they will do it.  They won't do anything.  They will make more money doing exactly what they are doing.  They will not throw it all away for some stupid double spend that everyone can detect and respond to.

As far as what exactly they can do and can't do - research it yourself - ever heard of a fancy new web site called Google?  It has been explained so many times in so many ways I sick of the subject.

The point of my post is that even though a large pool like Ghash.io will not do anything to harm the network the FUD storm that would accompany them going over 50% would almost certainly create a great buying opportunity due to the panic selling by the uninformed masses.

Reading the thread is nice but the one point that really resonates with me is -- sure, a huge corporation or state actor could destroy Bitcoin's value...but first that entity would have to care, and second it would need to be worthwhile to throw away whatever money and time it needed to do it.

I'm really not seeing that happen in the near future because of apathy and the fact that, on the state level, it's possible just to make something contraband.

I wasn't asking what they can or can't do.

So to summarize, you say that they can do but they won't do it. Fine. I also believe Ghash.io won't do it. This doesn't mean someone else won't do it. Someone whose goal is to disrupt Bitcoin.

It is clear you have no idea what you are talking about.  Making something contraband does not stop it from happening, or even reduce it's use.  In most cases it increases demand and drives the price higher.
http://www.cbsnews.com/news/new-us-drug-survey-marijuana-and-heroin-increasing/
Hoping that making something 'illegal' will stop it from happening is pure fantasy.  Stop dreaming my friend :)