On the relationship between volumes traded and price

[miln40]

Hi all,

So I am looking at the charts from the past days, and I want to share my thoughts with you and get some feedback. If you observe the chart below:


you'll notice that around 7 am on the 16th of Aug there was a big amount of coins bought, yet the price stayed the same. When the downward spike occurred on the 17th around 6 pm, the amount of coins bought and sold (the volume) was more or less equal, yet the price continued going down.

This then shows that sometimes the price is decoupled from the actual purchases.

So on the 16th, 7am you have people wanting to buy coins and they do, and at the same time other people provide the same amount of coins so there is never any scarcity on the market and the price remains the same.
On the 17th, you have people starting first to sell, driving the price down from the overflow of supply, and then people respond by buying, yet because the supply was already there, the price did not increase substantially.

Am I right in my reasoning? Is there something I'm missing?

Thanks for your feedback!

[koin]

Is there something I'm missing?

there was knife catching volume at several levels, like 12.5, 10, 8.  but that happened when the banks were closed.   there were probably wire transfers from friday afternoon waiting to clear through mt. gox and if you notice the selling stopped and reversed right before those wire transfers would clear.   so it isn't just price, and supply and demand but other factors too.

[Meni Rosenfeld]

Your mistake is that you think green means coins were bought and red means coins were sold.

In fact green just means the price at the end of the period was higher than at the start. So for all we know during the hour of 8-9 am (or whenever that is) Aug 16, maybe 38K coins were sold (bids executed) and 2K coins were bought (asks executed) and it would still be green if it's higher at the end of the hour (and by the graph it's only slightly higher). Of course since the price was almost unchanged it's most probable to assume roughly the same number of buys and sells.

And anyway "buy" and "sell" is a bit fuzzy since for every trade there's a buyer and a seller and the bots keep changing their bids and asks all the time.

[miln40]

In fact green just means the price at the end of the period was higher than at the start.

I see, I assumed somehow that it gives a "net" difference between bought and sold. (and I would define buy and sell in the terms of converting fiat into bitcoin and v.v.)

I wish I could see what the bought and sold volumes are, and not just the total. Would be a good feature, no?

Thanks for the clarification.

[DeathAndTaxes]

In fact green just means the price at the end of the period was higher than at the start.

I see, I assumed somehow that it gives a "net" difference between bought and sold. (and I would define buy and sell in the terms of converting fiat into bitcoin and v.v.)

I wish I could see what the bought and sold volumes are, and not just the total. Would be a good feature, no?

Thanks for the clarification.

Step back for a second.  When you sell something (anything) to me what am I doing?  If you buy something from me what am I doing?

You sell a can of coke.  I buy a can of coke.
You buy a can of coke.  I sell a can of coke.

If 100,000 BTC changes hands then 100,000 BTC were sold AND simultaneously 100,000 BTC were bought.  The "net" difference between bought and sold is always exactly 0.

[miln40]

Haha, hope you guys cut me some slack, since this is the newbie area
Thanks for pointing out the obvious, DeathAndTaxes, unfortunately sometimes I fail to see it when I start thinking too hard.

However, if you consider a marketplace (Mt.Gox in this example) as a closed system, then the inflow and outflow of bitcoins and fiat is different. So maybe it would be quite nice to have a statistic that shows how much fiat and how many coins are entering/leaving the marketplace itself. Perhaps could be made a premium feature for Mt.Gox - it should attract some investors willing to pay for the extra info.