If the 'manipulator(s)' are making massive profits, they will be joined by an increasing number of 'manipulators' (e.g., people with enough funds to move the market.)  Then they will play against each other.  I expect that that is already the case to some extent, but the trend will grow.

So, the bulk of the market participants will be well capitalized and there will be a gaggle of lesser players kind of along for the ride.  Sort of like lint blowing around which may or may not be worth sweeping up.

This outcome is not unlike the current mainstream capital markets in fact.

The saga continues.  For others who might want to play around with Bitcoinica, here's some details.

After deciding that I didn't need Bitcoinica at this time, I withdrew most of my BTC, but left a token amount in with the intent of losing it playing around with leverage.  That has not happened yet, but it seems that I am on my way with nothing I can do about it.

I had 8 BTC.  I decided to try to bet that the price would go up to 2.29 (from current 2.19 or something).  I put in a 'limit sell' at 2.29 for 25 BTC which I thought would execute if the price hit 2.29.  What I thought was happening is that I was borrowing Bitcoinica funds (25 - 8 BTC) and that if the price fell a small amount, I would lose ?? but if I bet right ant the price went up, I would win ??.  The experiment was to see what the ?? would be.

What happened was that somehow the 'order' was there, but I had no 'position'.  I was not sure if this was normal or what.  I waited for the lower number of the spread to exceed my target (the bet happened to be going in my favor) but when it did, nothing happened.

Oh well.  I canceled the order.  To what would have been my horror had I not been trying to lose my money, canceling an order turns it into a 'position' it seems.  Now I have a 'position' on the books with an immediate 1% loss.  Every time I try to 'liquidate' the position, I lose another chunk of money and need to settle, but it says I have 'insufficient funds' to actually liquidate.

I guess what I will do now is just sit on things until my goal is met (that is, until I've lost all my money.)  Any attempt to do otherwise seems to simply expedite that process.

I am actually quite concerned about the 'quality of users'.  Not for Bitcoin's sake, but fore the user's sake.  There are way to many sharks still, IMHO, and not enough time for the 'good' people to have proven themselves.  People getting ripped off immediately after taking an interest in Bitcoin is hardly a great way to grow the system.

I also have some concerns about certain aspects of Bitcoin.  Chiefly it's scalability under a giant waterfall of load.  I would want to see some well working implementations of some of the scaling theories before they are needed for real life.  (Though it is entirely possible that these are being worked on as I don't keep up with this stuff as much as I should.)

I think that the best trajectory is for people who have lost faith in fiat currencies drift in over a period of time.  These people will be generally better prepared to look out for themselves since it does not seem to be a high priority in the existing community.  I see no reason to get into a giant hurry about growing the system and increasing the adoption rate.  It'll happen as the actual need for the solution dictates.

Here's one person who's not buying that crap.  I personally never bought all the BS about Saddam and his WMD's, but even after that people still listen to the propaganda?  Amazing really.  In spite of all the garbage fed to use constantly by the mainstream media, I've not seen one sign that Iran has anything but a defensive posture and want's simply to be left alone.  But they also want to retain their Khuzestan region and have a history of fighting effectively when attacked.

I have little doubt that the political leadership in Washington would rather lose DC than see Tel Aviv harmed, and would rather lose 100,000 trailer-trash American grunts than 5000 of God's Chosen people if they had to make a choice.  So Iran's best chance is to make a credible threat to badly harm Israel.  I'm not saying it is a 'good' thing to do...just the most tenable defense against a clear and present danger and one which, with luck, means that an attack never comes and nobody needs to die in any country.

That's all I've ever done.  I've never seen the old or the new GUI and don't give two shits about it personally.  My main bitcoind runs on a headless machine which is currently a few feet away from me (I will admit) but could easily be on any VPS anywhere in the world so the last thing I want is a lot of graphics shit getting in my way.

I also only run someone else's binary only in very rare circumstances.  As it happens, I need to tweak the code a bit at the moment to get bitcoind to compile.  Even if I was interested in the GUI, it would be extra grief to get it to work.

@MysteryMiner:  I must say that whining about the GUI is not exactly good for your resume to my way of thinking.  Just FYI.

Not sure I see exactly what you are saying.  I think the dropouts are sometimes just a fat-finger and/or failure to look at the depth charts, and some people have admitted/whined about having done so.

Currently I believe that there are people who want out so badly and quickly that they are willing to take a monetary hit and are letting a build-up happen, then sweeping it up.

I played again after I wrote the above with the following results:

===
Date Completed   Filled Order   Price   Commission
Nov. 21, 2011, 3:27 p.m.   Obtain: 225.90 USD Gave: 100.00 BTC   2.259 USD   1.3554 USD Commission
Nov. 21, 2011, 5:28 a.m.   Obtain: 100.00 BTC Gave: 207.80 USD   2.078 USD   1.2468 USD Commission
===

Not that it is an especially 'tough' way to make a buck, but it's just not that satisfying somehow.  And there is a limit to the revenue.

One does not have to 'use' Bitcoin 'in' a particular locale if doing so is risky.  That is one of the more stunning beauties of Bitcoin (to me.)  But it is probably the case that using it from at an offshore locale in a secure way takes more technical skill than a lot of people might have.

Agreed.  There is exactly one country that has a legitimate and justifiable need for a handful of nuclear weapons, and that country is Iran.  It is a responsibility they have to their citizens else their country is almost certain to end up in the same miserable condition as Iraq.

It is in my interest (as an American and resident of Earth) that Iran gets nukes and delivery systems if they do not already in order to prevent an American attack (along with our normal pack of lackeys.)  That would probably be a hand on China's jugular that, for the life of their country, they could not tolerate and very well could spell WW-III.  Even if not, a marginal amount of support (like we gave the mujaheddin against the USSR) could very well end up in a painful and costly rout from the peripheries of our current empire.

Dead on (though I did not really get going with Bitcoin until around the time of the Mt. Gox outage thank God, and I bought a majority of my holdings on various large dips so my loss is much less than I would have thought.)  Lemme add a few things from personal perspective.

I based a lot of my decision to own Bitcoin on certain fundamentals which have really not (yet) changed.  The seeming robustness of the system, the usefulness of something which could be easily transported around the world, the non-single point of failure properties, etc.  I was dead wrong about how low the demand could get, but I've no reason to reject most of the fundamentals behind my decision.

I consider anything less than several years to be 'short-term' and did not really expect my interest in Bitcoin to be short-term.  I am only a short time into my anticipated involvement.  Again, I did not expect to lose so much USD so quickly, but I also put no more in than I could easily afford to part with.  It's just that I expected to kiss the money goodbye if Bitcoin was cracked rather than in a general market decline.  Oh well...the net effect is the same (although the market could re-bound which is more likely than if there had been a terminal exploit to the Bitcoin network.)

This stuff fascinates me, so if you have the ability and a few minutes, I would love to understand the mechanics of being 'put out of business the next day.'

The simplest explanation is that you will be liable to return or forfeit certain kinds of funds.  And if you send them on without meeting some sorts of AML or related requirements, it'll be sad day for you and you'll have to make them up out of your own capital.  If you could confirm or deny that this is roughly correct, that would be interesting to me and appreciated.

My take is that a lot of the exchanges actually started out with noble intentions and great bravado about sticking it to TPTB, but relatively quickly figured out that they were going to tow the line or exit the industry.  I'm sure that is not the way any of them would have wanted it, but reality has a way of running over fantasy.

A fair part of the reason I choose Tradehill was that I figured that being based in Chili (as best I can determine) it would be that much more difficult for the US authorities to demand their records, though I always assumed for the sake of defensive planning that every action I take is available to any authority who wants it (whether that is the case or not.)

As it happens, all of the transactions I have performed to date are squeaky clean and I have shifted a fair amount of funds around so I have pretty good and documentable reason to have BTC floating around in the ether.  Happy days...well...not as happy as I would have hoped for in certain ways...but anyway...

I can pretty much guarantee that this is what I would do.  I planned that from the beginning, and have planned it for every one of my unfortunate rounds of doubling down.  I'm both pig-headed about this kind of thing and also in no particular need of USD.

Another thing is that the original satoshi block chain is a rare and interesting item an who knows what uses for it might pop up in the future.  Having some secret keys with a positive value represented in it could still be worth having.  Worth a shot...or at least it is to me.

BTW, another interesting thing that I saw today was a gigantic ask wall at Tradehill right at the market get taken out out of nowhere.  It was an amount which was equal to the entire bid book.  It seemed to have been immediately re-set across the face of the ask side (I think).

The giant ask wall that had been doing interesting things for several weeks was reported to have likely been the allinvain stash.  I got to thinking, if I had that stash and Tradehill had started to give me grief about pulling out my USD (resulting from sales of stolen BTC), one thing I could do would be to get a buddy to set up an account and sell it all to him in a move much like what I (think I) saw.  Tradehill would probably have trouble justifying giving him grief even if they had their suspicions (as long as he was willing to provide his identity) and a cash-out could finally be done...albeit at a huge loss due to the collapse.

I hypothesis that a lot of a certain class of Bitcoin holders got a little panicky as the AML noose has tightened up with surprising and unanticipated speed, and have bolted for the door more quickly than would have been ideal.  If that is true, we may be at somewhat lower price levels than otherwise and an upswing could thus be a bit more violent than otherwise.  I could be wrong...I often am.

I also am delighted to see the likes of Kaiser mention and contemplate Bitcoin.

I think of Gold as pretty much the ultimate store of wealth (based almost exclusively on it's history rather than any hokus-pokus magical properties and what-not.)  It can be used as a currency in a pinch, and works fine for that in most situations, but is awfully cumbersome in the modern international and increasingly fascist world.

The nature of Bitcoin is, in my mind, not particularly clear at this point, but one scenerio that I could see working is for Bitcoin to be relegated to a pure currency in that it is used as a transmission medium almost exclusively.

A very good analogy would be to think about electricity.  The energy is stored in a suitable medium (chemical, gravity, etc) and converted to electricity (electro-motive potential) only for transmission and conversion to useful work.

I would be disappointed at this outcome because I wish to hold some net worth in BTC and be able to access it in almost any scenerio, but I'd take it as a second-best because of it's extremely good usability even in this limited role, and because I can still sit on a volatile pool of saving vs. a more stable one if need be.

'belong' is a funny term to use, but I voted anyway.  In fact, they 'belong' wherever they happen to be in any given situation sort of by definition.

I choose $30.00+ to indicate that that is where they need to be in order to have a semi-functional and semi-useful monetary system (given the various parameters of supply, user-base, etc.)

We may never get there, but I've been prepared for that all along.  I'd be bummed, but only partly because I have always had some suspicion that Bitcoin could turn out to be a terrible thing for society.  If we never find out it will be at least a mixed blessing.

OP:  I'll try.  This is all my personal opinion of course.

For historic and operational reasons, there is not a 100% overlap of users on Mt. Gox and Tradehill.  In other words, not everyone uses both services.  Some people probably cannot since one exchange or the other will not deal with them or give them satisfaction.  I think that Mt. Gox made some reference to not dealing with someone who almost certainly had a block of (purportedly) stolen coins on Tradehill.

So we see vastly different depths on the books of the exchanges from time to time.  At least a couple of people are doing arbitrage, but the only way to do that realistically is to fund both Mt. Gox and Tradehill accounts with quite a bit of fiat then balance out as time and opportunity allows.  At times the people doing this simply run out of funds and we see a gap open up.

I personally don't feel comfortable putting significant capital on the books of either exchange just to make a few nickels.  It is a combination of mis-trust, and a feeling that the exchanges are operating under the tender mercies of the larger financial and regulatory agencies which could shut them down at any moment.  Also, the depth on Tradehill in particular tends to be so lite that it's hardly a path to unlimited riches, and one decent sized player could monopolize what game there is.

---

A different game is to simply use the drop-outs on Tradhill to make a few bucks.  These drop-outs popped back up this weekend.  It's like someone throwing $20.00 bills in front of your feet and running off.  I finally couldn't stand it any more and picked one up earlier today (breaking my own rule of never selling a BTC.)  Worked, but it's hardly worth the effort and here again, I don't think that more than a few people can play.

That was basically what I concluded, and I appreciate a confirmation from someone who clearly understands this stuff much better.

If/when I develop any strategies which would benefit by having a need to short, I'll re-visit things.  OTOH, I have a fairly large collection of BTC by this time, so here again it may make more sense to self-fund.  Not sure yet, and probably I will never need to be

Hmmm.

I funded my account with at BTC transfer.

The first thing I did was to see if tops worked on the buy side.  I set a buy stop for a few cents above the current price.  Fortunatly the market went up and sure enough, I made a purchase and lost a few cents as anticipated.

Then Bitcoinica whined about a negative USD balance and offered to settle from BTC.  Settled to zero USD.  Fine.

I then (ignorantly in retrospect) decided that it would be good to have some USD to avoid that hassle going forward.  I tried the big red 'sell' button which I thought was a market order.  That seemed to do nothing except result in some more losses and again a negative USD to settle.

I then tried a limit sell below market price.  That kept some trade active (and losing money) and when I canceled it I am again underwater in USD and need to settle.

Then I read various FAQ's and such and seem to discover that I am trying to pound a square peg into a round hole by trying to get a positive USD balance and that Bitcoinica can (or will) only perform this action to zero an account.

In the end, it seems that if I don't care to use anyone's money but my own, and if I get nicked a few percentage points to put in a bid (and another few percentage point to cancel it) then it is not really what I happen to need at this time for my purposes.

I like to both splay out a trades over a range, and also move them around regularly depending on changes in market depth and times and such.  These adjustments cost nothing on an exchange.  It seems from my brief experiments with Bitcoinica that every adjustment one makes results in a pretty hefty fee.  Am I mis-interpreting something about this do you think?