Bitcoin Forum

There has been quite a strange rise in MtGox exchange rate today, from approx 0.745-.765 to .8-.81.

I say strange for a good number of reasons, one was the speed at which the rise occured.

Looks also strange to me that the difference between bidding and asking sides was approx .02 btc relatively constantly (with a 0,65% fee, i.e. approx. 0.005 btc), and now the difference is only 0.001 btc. The difference between first offers of the asking and bidding sides is now so low (ask : .81 ; bid : .80901, i.e. 0.12%), that I can't see the point of making an offer so close to the other without matching them if you really want to buy or sell  ??? (such a small difference is well under exchange fees or usual variation of the price). Can someone see a reason ?

Moreover the volumes implied in the first offers on both asking and bidding sides are quite big (~ 400 btc) considering the relatively low volumes that have been exchanged on MtGox for a moment (ask : .81, vol. 339.44 ; bid : .80901, vol. 419.74), whereas there were before usually under 50 btc.

This concretely "forces" the price to remain between .80901 and .81, which is equivalent to setting the price to .81. .The only reason I can see for not matching bid and ask offers while they are so close would be that it is the same person or a coordinated group of persons with 1000+ btc behind the offers on both sides, doing this in order to drive the price as desired. Seems to me the price was driven to the actual level in a few stages using this technique :
1. Buy all bitcoins up to the desired price,
2. Propose the lowest ask price with a large volume,
3. Propose the highest bid price with a large volume at a price very close to ask price so as to closely surround the price,
4. Wait until everyone updates his offers, including automated robots,
5. and repeat a few times until desired price is reached.

Do you think MtGox exchange rate is artificially moved ? Are there any known techniques for doing so ? In which ways could moving the market be profitable ?

I wonder how many distinct active MtGox users there are, and I wonder how wealth is distributed among those users. That would give a good idea of how the market can be manipulated. Any clues on this ?

Perhaps the rise is because funds added to Mt. Gox (sent after seeing the prices the $0.70s last week) have finally reached Mt. Gox?

It is trivial to manipulate the price in Mt. Gox, ... if you have the bank and tolerance for risk.
More is described here:
  http://bitcointalk.org/index.php?topic=2436.msg32962#msg32962
  and
  http://bitcointalk.org/index.php?topic=4424.msg65056#msg65056

Every fast rise and fall must be manipulated! OMG!

You may just try to drop the exchange rate back if it was really manipulated. ;)

I looked at the diagram of rate BTC/USB on mtgox yesterday when it surged by 0.08 points. Really, instantly dollars rate moved up with Bid offers at amount of approximately 1500 BTC

Think we should look at the history of order book at sites that provide such statistics. May be bitcoincharts.com can show 3D diagram of market depth for such interval of time?

Wow! Cool!

Yeah! :)

I've just assessed that would require around 1500 btc, which I don't have. You can send your donations at the address abcdefghijklmnopqrstuvwxyz0123456789  :P

You're right, maybe. I haven't monitored previous fast rises /falls though.

I wouldn't talk of manipulation if sell and buy bids had not been so close during the rise. I understand if the price goes up because there is a rush on bitcoins for any reason. But I don't understand why the rise in price on the asking side was so closely followed by a rise in price on the bidding side with offers not matching (and large volumes). I do not understand why one would not match his bid to another bid that is only 0.1% away from his. Can you see any reason ?

It's possible someone's running a trading bot, well designed or not, to automate bids and sells and try to take advantage of market fluctuations.

I don't know of any sites that provide order book history. Anyone ?

>btc: Seriously: can you please rename the title of this thread into something less invasive?
Feel free to discuss about market fundamentals and learn how markets work, but stop this manipulation talk (or are you again Baron?).

If I were an owner of an exchange, I would get an injunction against you granted you for this accusation.

The rise yesterday was a normal market movement.

I thought I would deserve that comment  :)

So the question would be : "do you think MtGox exchange rate is manipulated ?"
- definition of manipulate by http://wordnetweb.princeton.edu/perl/webwn?s=manipulate : 'influence or control shrewdly or deviously' -  hahahaha gonna take control of the world :)

Sorry, but I'm not claiming the market operator is manipulating the exchange rate, so there is no reason why anyone should be offended. In this case, the manipulation would not come from the exchange owner but from some participants, so no harm intended to exchange owner (/ creator). And those 'manipulating participants' would just smartly use the system, which is legitimate in a way.

I don't see yesterday's rise as a normal movement, and I've explained why. Maybe you could answer my questions ? This is exactly about learning market fundamentals : can the market be "manipulated" when you have 1000+ btc. Do you know approx. how many active distinct users are on MtGox ?

PS : propose a better title that fits my question and I will change it.

Yes, I think it might be a trading bot (considering the speed at which it happened), using this method : backing up the rise on the sell price by surrounding the exchange rate with very close buy and sell prices and rather large volumes. A smart automated buying /selling bot wouldn't buy and sell back and forth at prices that don't even allow to recover trading fees, unless the intention is to move the market.

 

o.k.I will explain more later (I am on the run now and will get back to you this evening)

"Cause of MtGox exchange rate rise?"

There is no "manipulation".

The rise of Bitcoin value is caused by 2 things:

1. Slashdot effect, http://bitcointalk.org/index.php?topic=4827.msg70553#msg70553
2. Weusecoins.com / http://www.youtube.com/watch?v=Um63OQz3bjo&feature=player_embedded

Every time the total amount of goods & services rise faster than number of avaiable coins, the Bitcoin will rally. Every time the opposite happens, it's value will fall. It is as simple as that.
Therefore, every bigger influx of people into the system will rise the value of Bitcoins, which is what is happening when we are slashdotted / redditted / digged.

I like that, so yes, >>>btc, please change it.[/b]

As explained also by others, yesterday's rise was absolutely normal. I followed the market almost every 30mins over daytime, since I do not work this week.
Some observations over the past 7 months since I started to cover bitcoins as analyst:

1) The BTC/USD exchange rate follows technical patterns known from other financial markets in an almost textbook manner. There is herding psychology involved as for every other market: Flat, almost dead periods are followed by sharp rises or declines. As for stocks, commodities, etc. typically markets move in only 20% of time, but this makes up for more than 80% of the price changes.


2) The specific rise yesterday was predictable on the 10 day chart where prices coiled under the 50 day exponential moving average and once breaking above this line, accelerating quickly to much higher levels (0.8, 0.82..)

http://bitcoincharts.com/charts/chart.png?width=1331&m=mtgoxUSD&k=&r=10&i=&c=1&s=2011-03-14&e=2011-03-24&Prev=&Next=&v=0&cv=1&ps=0&l=0&p=0&t=S&b=&a1=EMA&m1=50&a2=&m2=25&x=1&i1=Vol&i2=&i3=&i4=&SubmitButton=Draw&1300911606645

3) The spread is typically in the range of 0.5-5%, depending on the market dynamics. The small spread you observed yesterday was within the normal range and changed back to typical 2-3% right after. The spread just depends on what people put as bid and ask orders, and it can always happen that they get very close. Nothing special about that.

by the way, you will find my analysis soon also on bitcoincharts.com


and if you would be so kind, please change the thread title now.

vladimir,
sure.
the 50d EMA is a often successfully used technical indicator for financial markets. I realized that it fitted very well the hourly charts over the past month.
As you can see in the chart, the 50d average could be used as a trading signal.
i) Once BTC/USD prices are below, we remain in a downtrend
ii) Once BTC/USD rates are above we are (at least in a short term) uptrend

does this help? Let me know if not and I will try to address it asap

Thanks for the answer, I will read (& understand) & answer tomorrow ! This title was not intended to be an accusation, but the expression of what I thought happened, and what was an interesting question to me : can the market be 'easily' manipulated, and how. This allows me to assess the value of bitcoin and the value of market signals.

I was monitoring the market every minute at this time or even 30s (to try understand some behaviour when I noticed a strange behaviour). I still feel there was a technique used by one or a coordinated group of persons behind the rise, but I'll see tomorrow if it resists your analysis.

I have changed the title in the meantime.

Super btc, thanks a lot.

And to be clear, I do not say prices can't be driven in a certain direction. What I am saying is that this was a typical action that exchanges enable.
In normal stock markets, you can always buy up the value of certain stocks that are illiquid. But then the decisive phase comes aftwr: Either othere people jump on the bandwagon and prices stay up and move higher, or the next trade will be down again and then nothing happend (except of you losing some money).

As you can see on BTC/USD, the price has stayed up, which means we saw a decent rally, with rising volumes, which is a healthy sign. There were previous price spikes caused by some few individuals which were not sustainable, but this one currently is.
Overall, the market moves in a very similar fashion as stock markets or forex markets.

If you want to know how the market can be "manipulated", this is quite easy. If you look at the order book https://mtgox.com/trade/history (https://mtgox.com/trade/history), you see how much money it takes to move the market into a certain direction. This is not 100% accurate as there are dark pool orders on top of visible orders.
In any case this is a good overview.

i.e. you need:
on the upside
6 $M to break 0.90$
18 $M to break 0.95$
21 $M to break 1.00$ (parity
36 $M to break 1.10$ and make a new all time high

on the downside
4 $M to break through 0.8$
9 $M to break through 0.7$


This means that the small size of the market enables big price moves with low funds. On the other hand, this will change with time. Once BTC economy will have moved from 5 $MM to 50 $MM or 500 $MM, you need much more funds and market will be much more liquid.

Hmm, it must've got busy. Coinpal ran out of coins.

Thanks for the explanation, and sorry for the delay in replying.


That would be true on the dark pool, but on the normal pool, I think people put their orders according to others' bid and ask orders. It seems to me very unlikely that you would buy 300-500 btc without looking at other orders, and also very unlikely that you wouldn't be meeting some other bid by 0.05% while you already placed yourself 1-2% above the second buy order.

By the way, I don't know if this information is confidential, but does someone know approximately how many "active" users there are on MtGox ?

no idea how many active users on mtgox

Based on how little trading goes on currently, its probably a handful or a dozen maximum who trade regularly
this is just my opinion as I am not part of any exchange management or related in any way.

You should ask Jed or magicaltux directly

Hi Everyone,

what would cause the BTC exchange rates to rise?
 FUND INFLOWS INTO THE EXCHANGES from existing and / or new users. To make the BTC/USD exchange rate rise, the economy needs around 8000 BTCs worth of inflows every day (160 blocks per day * 50 = 8000 BTC). This of course assumes that all miners convert all back to USD regularly and dont save bitcoins at all, which is not 100% correct.

Still, there needs to be significant money inflows into BTCs regularly as we know that miners need to offset their costs and pay off hardware, pay electricity etc.

What could make BTC rates fall: no further money inflows make the BTC/USD rate fall on its own weight (because of the BTC inflation due to mining)


This means that ideally every current bitcoin users should convince another new user to start getting into bitcoins.

Perhaps we can start a tell-a-friend mechanism where there are incentives for existing users?

Very true, although it’s 7200 BTC per day at constant hashrate and difficulty (50*6*24).

Of course investments help, but they aren’t much more than a limited stimulus which wears out fast, as we have seen – real growth will come from shops accepting Bitcoins which create a larger, long-term demand.

Maybe people should check this thread (http://bitcointalk.org/index.php?topic=4667.0) out, I think it’s a very important thing.

We need more FUND INFLOWS.   We know what supply is.  Over 5 million in circulation and a small fraction of that floating.   More currency exchange is what we need.  More points of entry.  The Bottleneck is the conversion of fiat into BTC and vice versa.   it's too difficult for most people.   Mt Gox is important but we need larger and more numerous points of conversion.    That is the key.   Goods and services available for bitcoin directly will help but the explosive growth comes from BTC/fiat convertibility and the ease with which that is provided. 

Source code (http://gitorious.org/intersango/master/trees/master) for Britcoin (https://britcoin.co.uk/) is free. You can either try to set it up yourself, or I will do it for 600 BTC. Or 2 people at the same time for 800 BTC.