Mt.Gox and the influence on the market

[cschmitz]

Many argue that Bitcoin is not being influenced or possible to game. Right now we are seeing quite the opposite: Tux increased the Darkpool size from 1k$ to 10k$ orders and with little delay, the BTC valueation skyrockets since the orders under 10k$ now affect the market and exchange rate. I believe that in a way or not, the exchanges to real economies are indeed able to game the market until there is enough competition in that area and vendors accept BTC straight, reducing the need to convert.
What do you think would happen to BTC if the "Darkpools" were fully removed?
Discuss!

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[BeeCee1]

Many argue that Bitcoin is not being influenced or possible to game.

This sounds like a strawman to me, I don't recall hearing it and I doubt "many" people suggest it.  MtGox is an unregulated exchange and bitcoin trades relatively low volumes (far less than a million coins) a day.  It would be easy for someone to game it, they'd just have to have a sufficient number of dollars or bitcoins. (as the price and volumes go up the definition of sufficient goes up too).

[ddod]

Tux increased the Darkpool size from 1k$ to 10k$ orders

So this is what is going on.  It would have been nice if there was a broad announcement about this. Mt. Gox should have announced this more clearly on their site because was a significant change.  If I had known that this rally was being influenced by a new factor, my trade behavior would have been very different over the past 48 hours.

[Etlase]

can someone explain the darkpool size? I have no idea what that means and I'm curious

[cypherdoc]

Many argue that Bitcoin is not being influenced or possible to game. Right now we are seeing quite the opposite: Tux increased the Darkpool size from 1k$ to 10k$ orders and with little delay, the BTC valueation skyrockets since the orders under 10k$ now affect the market and exchange rate. I believe that in a way or not, the exchanges to real economies are indeed able to game the market until there is enough competition in that area and vendors accept BTC straight, reducing the need to convert.
What do you think would happen to BTC if the "Darkpools" were fully removed?
Discuss!

as a user of the darkpool myself i have always argued that it is unfair to the "normal" order folks.  as a buyer of btc over the last few months, i could sit hiding in the bushes so to speak with my large orders waiting for selloffs to occur.  non pro sellers look at the accumulated order mountains over on bitcoincharts.com to determine liquidity on the bid side and don't see the real depth.  these are totally false representations of the bid side in this bull market.  they then get nervous and sell in large chunks and are then surprised by how little the price drops and how fast it recovers and then shoots to the upside past their original sell price.  i admit to having taken advantage of this and i don't think its right. 

[cschmitz]

can someone explain the darkpool size? I have no idea what that means and I'm curious

darkpool means that orders over a certain size, previously 1k $, now 10k $, are secret from the public mtgox orderstream and do not affect the pricing.
to put it mildly: it allows large traders to game the market and effectively influence pricemovements to their advantage.
given that mtgox is the only, for bitcoin economy at least, large trading entity, the darkpool size effectively governs the size of orders that are not affecting the valueation of bitcoin.

this in effect allows professional traders to buy btc cheap in darkpool at market price with huge volume, then drive the price with a smaller, but for normal trade large order, then selling off to the normal market at now increased pricing, effectively gaming the system.

i think for the bitcoin community as a whole, not having darkpools would make the system alot fairer to the average joe user.

[Timo Y]

Can you prove a causal relationship between the two events?

The exchange rate shot up a few times in the last 30 days - even without mtgox changing their policies.

[Bimmerhead]

i think for the bitcoin community as a whole, not having darkpools would make the system alot fairer to the average joe user.

This presupposes the 'average joe user' is short-term speculating, and that speculating is a zero-sum game to which everyone is entitled to all the facts.

Individuals should be making buying and selling decisions based on their own circumstances and where they think the value of bitcoin is going.  If someone is playing the very dangerous game of day-to-day speculation, then they should be sophisticated enough to live with the fact of dark pools.  Note that dark pool users also have no idea what other dark pool users are doing.

The idea that everybody is entitled to know what everybody else is doing is somewhat akin to those forum members who seemingly want to punish early adopters because they had the 'unfair advantage' of finding out about bitcoin before everybody else.  Your own happiness shouldn't depend on other people being unhappy.  Your own buying/selling decision shouldn't depend on everyone else's buying/selling decision.

[duffmanhb]

Soon as BTC hit Reddit, all this shit happened. It may have hit Reddit TO GAME it. The increase in popularity, since it hit Reddit, is crazy. I am attributing this entirely to that as well. Fucking 8 to 18. God damnit I should have invested.

[cloud9]

Some other neutral (should all press be neutral?), positive, & negative mainstream articles on bitcoin:

http://news.search.yahoo.com/search;_ylt=A2KJ3CfWh.pNCUIAbYjQtDMD?fr2=sort&p=bitcoin&ei=UTF-8&fr=news-us-ss&sort=time

[ddod]

Of course I can't prove causation (especially without the data from the dark pool trades).  But this is the largest and most long lasting rally (with no real correction) that I have seen since I have been watching bitcoins. 

I understand the risks of trading and largely am not all that concerned about dark pools.  However, when those that set the rules change the rules (especially changes that stand to quickly and drastically change the market dynamics), it is reasonable to expect some level of communication to all those who have money in that market.   

Now I am not making accusations; the experiment is still relatively new and mistakes will be made, but this kind of activity is often investigated and prosecuted in the world of regulated trading.  I like to give the folks at MT. Gox the benefit of the doubt on this one, but I also want to encourage a higher level responsibility from those holding all the chips.  We all trust that Mt. Gox won't just up and take off with everyone's money and bitcoins.  But in reality, there is nothing stopping them.  I don't even know where they are located or who they are (typically a big no, no when it come to someone who I trust to hold onto my assets).

So far they have done a good job at maintaining my trust (and like I said, this is still a fun experiment with a huge potential investment).  But that can change if it starts to appear as though they are gaming the system.  I don't yet think they are, but they need to be careful and understand their level of responsibility in this.  Because with this recent, and unannounced from my perspective, change they stood to greatly benefit from inside knowledge (i.e, insider trading).

May the bitcoin experiment continue forward.  However, if we want this to hit mainstream and to be taken seriously, we need to maintain some level self regulation.  Anarchy may be the ultimate form of freedom.  But in true anarchy typically lies chaos and degeneration.

[cypherdoc]

i think for the bitcoin community as a whole, not having darkpools would make the system alot fairer to the average joe user.

This presupposes the 'average joe user' is short-term speculating, and that speculating is a zero-sum game to which everyone is entitled to all the facts.

Individuals should be making buying and selling decisions based on their own circumstances and where they think the value of bitcoin is going.  If someone is playing the very dangerous game of day-to-day speculation, then they should be sophisticated enough to live with the fact of dark pools.  Note that dark pool users also have no idea what other dark pool users are doing.

The idea that everybody is entitled to know what everybody else is doing is somewhat akin to those forum members who seemingly want to punish early adopters because they had the 'unfair advantage' of finding out about bitcoin before everybody else.  Your own happiness shouldn't depend on other people being unhappy.  Your own buying/selling decision shouldn't depend on everyone else's buying/selling decision.

this makes no sense.  first, no one said they were presupposing the avg joe was short term speculating. individuals never make buy/sell decisions based ONLY on their own circumstances; they view what they can of the market and incl. that info into their decision.  dark orders obscure that view.

lets say i have 10 million dollars that i want to trade for btc.  we all agree thats a huge order and could move the market up if normal order joes knew i was out there.  why should i be able to obscure that order in a dark pool?  w/o dark pools i would be forced to buy up small batches to obscure the fact that i have alot to buy.  yes, it would be tough but the market doesn't owe me anything just b/c i have more money to invest than the next guy.  i know that i have 10 million to buy and adding that info to what i can see of the market depth gives me more info than the normal traders in a dark pool situation.

[TraderTimm]

All I see is a parent poster who doesn't know how exchanges work, or trading.

How can you actually make a logical argument against increased volume? I hear things like 'gaming' and I have to laugh - the market depth may not be the same as a major index, sure, but overall supply/demand still rule here.

One other benefit of the blockchain and the 1-block-per-ten-minute throttle is that High Frequency Trading can't take hold in this market. Which relieves me immensely, since I consider their influence far more damaging in any market than a few darkpools of orders flitting about.

[cypherdoc]

Of course I can't prove causation (especially without the data from the dark pool trades).  But this is the largest and most long lasting rally (with no real correction) that I have seen since I have been watching bitcoins. 

I understand the risks of trading and largely am not all that concerned about dark pools.  However, when those that set the rules change the rules (especially changes that stand to quickly and drastically change the market dynamics), it is reasonable to expect some level of communication to all those who have money in that market.   

Now I am not making accusations; the experiment is still relatively new and mistakes will be made, but this kind of activity is often investigated and prosecuted in the world of regulated trading.  I like to give the folks at MT. Gox the benefit of the doubt on this one, but I also want to encourage a higher level responsibility from those holding all the chips.  We all trust that Mt. Gox won't just up and take off with everyone's money and bitcoins.  But in reality, there is nothing stopping them.  I don't even know where they are located or who they are (typically a big no, no when it come to someone who I trust to hold onto my assets).

So far they have done a good job at maintaining my trust (and like I said, this is still a fun experiment with a huge potential investment).  But that can change if it starts to appear as though they are gaming the system.  I don't yet think they are, but they need to be careful and understand their level of responsibility in this.  Because with this recent, and unannounced from my perspective, change they stood to greatly benefit from inside knowledge (i.e, insider trading).

May the bitcoin experiment continue forward.  However, if we want this to hit mainstream and to be taken seriously, we need to maintain some level self regulation.  Anarchy may be the ultimate form of freedom.  But in true anarchy typically lies chaos and degeneration.

this proves my pt about why dark pools should be disallowed.  all it takes is one person with superior knowledge to destabilize the level playing field.  MagTux is the only one who has the complete view of all orders and this is enabled by the dark pools. (this is not an allegation against him at all)

[TraderTimm]

this proves my pt about why dark pools should be disallowed.  all it takes is one person with superior knowledge to destabilize the level playing field.  MagTux is the only one who has the complete view of all orders and this is enabled by the dark pools. (this is not an allegation against him at all)

Well, in the spirit of open competitiveness, shouldn't the market decide? If you don't like it, trade somewhere else or start your own exchange. Trading in large volumes with partially open books or not doesn't make a market any less 'stable' or 'gamed'.

I don't know how you can squeak by on 'no offense' when you make a statement like "MagTux is the only one who has the complete view of all orders". So, what are you implying? He's 'working' the book now for his own benefit? I mean, dude, really? It makes no sense. Why would an operator of an exchange do that when the potential risk is lack of trust in his exchange? Nobody would take that kind of risk if they wanted to stay in business, period.

[bitcoinconnection]

Demand Destruction will stop the rise of Btc price. And when this occurs the price should fall over 50%.
I am working on software that should help alert traders when to get out of the market.
More information at http://www.bitcoinconnection.com

[pokermon919]

this proves my pt about why dark pools should be disallowed.  all it takes is one person with superior knowledge to destabilize the level playing field.  MagTux is the only one who has the complete view of all orders and this is enabled by the dark pools. (this is not an allegation against him at all)

I don't know how you can squeak by on 'no offense' when you make a statement like "MagTux is the only one who has the complete view of all orders". So, what are you implying?

He just stated a fact that's all, and he is right. MagicTux(and his staff if he has one) is the only person with eyes on everything. Even the dark pool orders can't see other people's dark orders

[cschmitz]

He just stated a fact that's all, and he is right. MagicTux(and his staff if he has one) is the only person with eyes on everything. Even the dark pool orders can't see other people's dark orders

Indeed, which is kind of the point of my OP, to have a public debate on this. If one would be far fetched, it could be claimed that by setting darkpool size, Tux can directly influence the price of the publicly traded BTC, much like a Central Bank can use prime rate/federal funds rate to adjust the market indirectly.

[TraderTimm]

He just stated a fact that's all, and he is right. MagicTux(and his staff if he has one) is the only person with eyes on everything. Even the dark pool orders can't see other people's dark orders

Indeed, which is kind of the point of my OP, to have a public debate on this. If one would be far fetched, it could be claimed that by setting darkpool size, Tux can directly influence the price of the publicly traded BTC, much like a Central Bank can use prime rate/federal funds rate to adjust the market indirectly.

Wow, just wow... You read what I posted, right?

Why would one person ruin all their work by trashing the reputation of their exchange? Its self-defeating and makes no logical sense. Unless you actually have something to back this up with, you're just defaming someone on a 'hunch'. This doesn't seem wrong to you?

[cschmitz]

Why would one person ruin all their work by trashing the reputation of their exchange? Its self-defeating and makes no logical sense. Unless you actually have something to back this up with, you're just defaming someone on a 'hunch'. This doesn't seem wrong to you?

Where have i implied that Tux actually a) intends to do so b) has done so c) has any malicious intent? You assume that i have said or implied that, which is simply false. I am simply pointing out that, given the size of btc economy and the predominant role of mtgox, darkpool sizing could be employed as a tool of monetary policy since it has a rather strong impact on the global btc<->fiat exchange rate, either directly on mtgox or, via arbitrage, on other trading places.
Before ad hominem attacking me, maybe you should invest time to play along with my train of thought that is in no way judging on tux.
Given the infancy and size of the economy it surely cant hurt kicking ideas around on how things actually affect the btc-verse.