* liquidity has to be "centralised". this is because orderflow is time-ordered. if you have order_1, ...,order_N, then each depends on the other. this is completely different than the blockchain for most (not all) goods. on the blockchain the tx (tx_1, ..., tx_n) are largely independent of each other (otherwise the block mechanism would not work!). arbitrage insures that liquidity flows to the most efficient pool, which is going to be "central" (although might be distributed in a different sense).
right on! ive been saying this for months. once its distributed, everyones order book looks different. |
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Can someone please explain what happens when two people try to sell at the bid price at the same time? Who gets the fill?
This is fundamental issue with Decentralized Distributed Exchanges.
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All this is conspiracy though and yes we are certain about the mtgox's fall.
why would they do this, if not for a theft? they are making bank. |
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- Through market manipulation with press releases & exchanges & closing withdraws say Mtgox acquires 500 BTC with average cost of $250 each.
unless the order book is completely fake, (we know its not, because we see our orders in the book), then why would rational traders sell 500 BTCs all the way down to $250? - Mtgox sells these cheap BTC's in the external market for $600 each. Totalling $300000.
so MtGox is already short customer BTC, and is actively stealing more customer BTC, transferring it to [bitstamp], and selling it? thus generating more fiat? their issue is lack of BTCs not lack of fiat. If its all a complete fraud then price analysis is useless. I believe MtGox is honest but incompetent. If what your saying is true, then everyone should be buying goxBTC, there should be no reason for a $350 discount to Bitstamp. At the end of the day, the only market based explanation for the discount, is that customer BTC were stolen, and there is not enough BTCs to cover customer BTC deposits. if MtGox is actively buying up goxBTC, and goxBTC is not real BTC, then they are in effect using their fiat to compensate their customers at .50 BTC for each BTC, which is exactly what would happen to all BTC deposits in an event of court ordered liquidation and insolvency. i think we can all agree that this does not end well for MtGox. |
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the assumption was that goxBTC is fungible with BTC, otherwise its just paperBTC. In fact, before this incident goxBTC was $100 above bitstampBTC, because goxUSD was impossible to withdraw and worth less than bitstampUSD.
Well, obviously we're in agreement there because it's almost exactly what I put in my post. I also agree that people clearly currently want to be in GoxFiat rather than GoxBTC So what are we not agreeing about? - As MtGox BTCs price drops relative to Bitstamp BTC, more BTCs will be bought/withdrawn on MtGox, and the cost to MtGox to make customers whole also goes up
They won't be withdrawn though, as the only people who can currently "withdraw" BTC from MtGox are MtGox themselves. Gox actually opening up BTC withdrawals again should see a large price jump on their exchange. I'm not saying that Gox can get out of any position by using an external exchange. I'm saying that if Gox purchase 1 GoxBTC on their own exchange then they now owe $200 instead of 1BTC, so they've clearly reduced their overall debt (assuming a you consider BTC and fiat liabilities to be equally important, certainly debatable) maybe im wrong regarding "more BTCs will be bought/withdrawn". but if gox is short BTCs, you would rather own goxUSD, but there will be some low were youd rather hold the goxBTC then sell for huge USD loss. this is what the market is currently doing, price discovery, at what price would you rather hold. that depends on how many btcs were stolen. Again we're (mostly) in agreement. I think there's just confusion caused by your somewhat ambiguous OP wrt "Reason why MtGox can go to 0 - without arbirage opportunity with Bitstamp" and why the "no arbitrage theory" is not broken Perhaps you were just aiming to explain why the BTC price was dropping on Gox, which isn't quite the same as it going to zero (zero as in no activity on the exchange? zero as in they enter liquidation and end up paying out a percentage of the fiat debts but zero on the BTC?) I also don't know what the "no arbitrage theory" is. In either case, I would have expected there to have been other threads explaining the price on Gox for those that require it. It's been going on for days. yes. correct. cant go to 0, can go to .0001... many people never understood why there was a gox premium over bitstamp in the first place. so many q's about arbitrage.. reason for post was simple basic explanation of gox discount to bitstamp. http://en.wikipedia.org/wiki/Fundamental_theorem_of_asset_pricinghttp://en.wikipedia.org/wiki/No_free_lunch_with_vanishing_riskhttp://www.realworldrobotics.com/readings/financial-engineering/principle-of-no-arbitragehttp://www.investopedia.com/terms/a/arbitrage.asp |
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but there are not enough real BTCs on their own exchanges. doesn't matter how low the price drops, if they don't have enough BTCs to cover the total clients BTC deposits, they will have to buy externally. nobody is depositing BTCs into gox to sell at 250. the only way they get more BTCs is to buy externally.
What do you mean by "there are not enough real BTC on their own exchange"? Worst case, they have to come up with BTC equal to the sum of all BTC balances of their customers accounts. They can reduce these BTC balances by using their fiat on their exchange to buy BTC. exactly, and how low must goxBTC drop for gox to cover their short? can this be done before the exchange gets shut down? if yes, then buy goxBTC! if no then sell! game of chicken.. kinda like merger arbitrage, post announcement. |
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the assumption was that goxBTC is fungible with BTC, otherwise its just paperBTC. In fact, before this incident goxBTC was $100 above bitstampBTC, because goxUSD was impossible to withdraw and worth less than bitstampUSD.
Well, obviously we're in agreement there because it's almost exactly what I put in my post. I also agree that people clearly currently want to be in GoxFiat rather than GoxBTC So what are we not agreeing about? - As MtGox BTCs price drops relative to Bitstamp BTC, more BTCs will be bought/withdrawn on MtGox, and the cost to MtGox to make customers whole also goes up
They won't be withdrawn though, as the only people who can currently "withdraw" BTC from MtGox are MtGox themselves. Gox actually opening up BTC withdrawals again should see a large price jump on their exchange. I'm not saying that Gox can get out of any position by using an external exchange. I'm saying that if Gox purchase 1 GoxBTC on their own exchange then they now owe $200 instead of 1BTC, so they've clearly reduced their overall debt (assuming a you consider BTC and fiat liabilities to be equally important, certainly debatable) maybe im wrong regarding "more BTCs will be bought/withdrawn". but if gox is short BTCs, you would rather own goxUSD, but there will be some low price were youd rather hold the goxBTC then sell for huge USD loss. this is what the market is currently doing, price discovery, at what price would you rather hold. that depends on how many btcs were stolen. |
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rephrase: in case of court ordered liquidation.
Liquidation of what?  There has to be some assets of value in order to liquidate and return even a token amount back to customers. Unless you're talking about a very large company with a complicated structure, buildings, land, contracts, patents, etc then just getting to that stage normally indicates there is very little left. they have millions of dollars in customer money... but that money is a liability. as soon as the have less money then is needed to cover all deposits, they are technically insolvent , and can be ordered to return all the millions of customer deposits.. |
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Once prices started diverging, smart traders would "rather be in fiat, in case of insolvency".
This just isn't true. If insolvent, then the money is gone. Gone. rephrase: in case of court ordered liquidation. Interesting ... under which court? even better ... under which legislation? Japanese bankruptcy courts? |
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If people are buying from MtGox at a very low price compared to the market average and then selling them back into the open market for tremendous profit (via another exchange), then that calls into question the other "legitimate" exchanges because it does not fit the economics 101 of supply and demand. If the market is being flooded with cheap bitcoins via MtGox, then the price must go down unless the other exchanges are artificially inflating the value to avoid losing money on their side.
That would call into question more than just MtGox honoring trades, but every other exchange out there for price fixing.
if they would be able to do this, prices would not be so low... because of arbitrage. you can buy low on gox, but are not able to transfer then to bitstamp and sell high. |
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Once prices started diverging, smart traders would "rather be in fiat, in case of insolvency".
This just isn't true. If insolvent, then the money is gone. Gone. rephrase: in case of court ordered liquidation. |
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Now they have to balance this by exchanging their fiat profits for BTC on their own exchange.
but there are not enough real BTCs on their own exchanges. doesn't matter how low the price drops, if they don't have enough BTCs to cover the total clients BTC deposits, they will have to buy externally. nobody is depositing BTCs into gox to sell at 250. the only way they get more BTCs is to buy externally. |
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- As MtGox BTCs price drops relative to Bitstamp BTC, more BTCs will be bought/withdrawn on MtGox, and the cost to MtGox to make customers whole also goes up
This is flawed logic. The amount of fiat at Mt.Gox is fixed as people cannot withdraw significant amounts. Assuming you are correct and Mt.Gox is short BTC then a low BTC price is ideal for them because they can replace their losses for less fiat money. If nothing else, they can borrow against all the fiat noone can withdraw anytime soon. no, if MtGox exchange is short BTCs, the low price of BTC on mtgox is FAKE. there are no BTCs to be bought at $250. The price of $250 is probably ( (Actual number of BTCs on mtgox) * Bitstamp price ) / (Number of BTCs that mtgox is representing they have) It was always GoxBTC you were buying on Gox, rather than real BTC. You were paying with GoxUSD too, for that matter. For a while previous to this current incident, GoxBTC has been valued at close to what other exchange's BTC was worth, while GoxUSD was worth less than USD on other exchanges. If they can buy GoxBTC on their own exchange for less than they can sell it for elsewhere then they can reduce their BTC liability (i.e. they now "owe" the customer that sold them the GoxBTC fiat instead of BTC, and in fact they owe them less in fiat than what the BTC was "worth". the assumption was that goxBTC is fungible with BTC, otherwise its just paperBTC. In fact, before this incident goxBTC was $100 above bitstampBTC, because goxUSD was impossible to withdraw and worth less than bitstampUSD. back in the day I used to sell goxUSD for $1.05, because everyone wanted BTCs and it took time to deposit into gox. so they were paying 5% for the time. used to do this on bitcoin_otc irc,using goxUSD codes. until now, mtgox traded as if they had enough BTCs to cover. this time is difference. |
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we're arguing with a 12 year old. i'm out guys.
sure rat. 20 years trading experience, series 3,series 7, coded HFT strategies for multiple hedge funds, and wrote the matching engine for a bitcoin exchange. |
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no, if MtGox exchange is short BTCs, the low price of BTC on mtgox is FAKE. there are no BTCs to be bought at $250. The price of $250 is probably
( (Actual number of BTCs on mtgox) * Bitstamp price ) / (Number of BTCs that mtgox is representing they have)
You are assuming that someone stole more BTC than MtGox total profits divided by $250 (see how a low number here helps MtGox?). And even if this is still the case, like I said, they could borrow against the fiat they are holding for their customers. no - you cannot use $250, must use Bitstamp quotes. see how the low prices hurt them? Again, this is all assuming MtGox is shutdown and goes into liquidation. If these low prices do in fact attract more deposits, then yes, low prices help and it is in fact a ponzi scheme.. like MfGlobal. |
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my question is: where are they getting the coins?
is bitstamp doing a backdoor deal? or other exchanges?
don't follow the question. mtgox gets coins from their depositors. the coins to cover their asses..... during a liquidation, if mtgox is out of coins, they will need to use their own fiat. prediction: as soon as mtgox is shutdown/liquidates. BTCs prices will go to the moon, on the assumption that mtgox is short. typical short squeeze. "buy the rumor, sell the news" everyone needs to realize that this is all "normal" market actions.. BTC trading is not special, or even very volatile. trading is trading. difference is that many BTC traders are newbies to the wonderful "war" of trading. you are naively assuming that everything in the bitcoin world is legit. it is not. therefore normal market behavior cannot be applied. gox will pull a rabbit out of it's ass, and continue functioning. at a loss, of course - but they will bounce back. you are naively assuming that everything in the trading world is legit. (mfglobal, jpmorgan silver short, CMOs, Enron, etc.. ) |
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- As MtGox BTCs price drops relative to Bitstamp BTC, more BTCs will be bought/withdrawn on MtGox, and the cost to MtGox to make customers whole also goes up
This is flawed logic. The amount of fiat at Mt.Gox is fixed as people cannot withdraw significant amounts. Assuming you are correct and Mt.Gox is short BTC then a low BTC price is ideal for them because they can replace their losses for less fiat money. If nothing else, they can borrow against all the fiat noone can withdraw anytime soon. and then blame a technical glitch. as they always do. they are really a bad crew of liars and scammers. this time market is betting on a court ordered bankruptcy / liquidation. |
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- As MtGox BTCs price drops relative to Bitstamp BTC, more BTCs will be bought/withdrawn on MtGox, and the cost to MtGox to make customers whole also goes up
This is flawed logic. The amount of fiat at Mt.Gox is fixed as people cannot withdraw significant amounts. Assuming you are correct and Mt.Gox is short BTC then a low BTC price is ideal for them because they can replace their losses for less fiat money. If nothing else, they can borrow against all the fiat noone can withdraw anytime soon. no, if MtGox exchange is short BTCs, the low price of BTC on mtgox is FAKE. there are no BTCs to be bought at $250. The price of $250 is probably ( (Actual number of BTCs on mtgox) * Bitstamp price ) / (Number of BTCs that mtgox is representing they have) |
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my question is: where are they getting the coins?
is bitstamp doing a backdoor deal? or other exchanges?
don't follow the question. mtgox gets coins from their depositors. the coins to cover their asses..... during a liquidation, if mtgox is out of coins, they will need to use their own fiat. prediction: as soon as mtgox is shutdown/liquidates. BTCs prices will go to the moon, on the assumption that mtgox is short. typical short squeeze. "buy the rumor, sell the news" everyone needs to realize that this is all "normal" market actions.. BTC trading is not special, or even very volatile. trading is trading. difference is that many BTC traders are newbies to the wonderful "war" of trading. |
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