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May 01, 2013, 07:28:37 PM |
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There are tons of conspiracy theories about entities attempting to artificially lower the price of bitcoins in order to destroy the virtual currency. However, it will be the entities attempting to support the price of bitcoins that will ultimately lead to its permanent demise.
I'm referring to the obvious and blatant manipulation occurring at MtGox and other btc exchanges. Anytime bitcoin prices drop suddenly, MtGox immediately slows trading, then shuts down. It does not have this problem when the price is increasing on similar volumes traded. When MtGox reopens, the bid prices are suddenly 20%+ higher than they are elsewhere. Similarly, when MtGox re-opens at the higher bid price, the "current" price at btc-e.org jumps and the bid and sell stream is suddenly 20%+ lower than the "current" price. When the bid and ask streams on btc-e "catch up," there are suddenly countless orders for 0.05 or 0.01 btc at the prices between the new current value and the price it most recently traded approximately 20%+ lower. During normal trading, the bid and sell streams are populated without such neatly rounded orders at each price level, reflecting a traditional market. They are added as place holders to shore up gaps in the tables when the current price is manipulated, resulting in the requisite lag between the current and the bid/sell stream values at times of btc drops. Interestingly, the sell stream suddenly starts to populate with orders to sell at prices at the current, suddenly re-elevated price, in the same neatly rounded quantities- 0.05 and 0.01 btc.
Price fixing, then dumping at higher levels, in order to shore up the btc trade price is going to result in a lack of trust in the exchanges and charges of a "rigged game" will destroy the currency. A currency only require one thing to be viable- trust. The obvious manipulation of the market by the exchanges will destroy that trust and, ultimately, bitcoin.
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