Could the market cap be intentionally raised by a single party?

[Topazan]

Say you were a government or major corporation that wanted to carry out a multi-billion dollar transaction in bitcoin.  Would it be possible to raise the market cap up to where it needs to be for you to do it?

The first thing I'd try would be to place a huge order, offering a large amount of money per bitcoin.  Say, $10,000 per coin.  You'd probably need to invest quite a bit more than you want to transact in keeping the price high.

This would raise the price to where you need it, but then the question is would it stay that high?  In addition, would the receiving party be able to cash out?  Obviously they can't just sell it back to you, or it would defeat the purpose of using bitcoin.  Could the market be counted on to pick up the slack once the original bid is withdrawn?

[1714830824]

1714830824

[1714830824]

1714830824

[1714830824]

1714830824

[1714830824]

1714830824

[1714830824]

1714830824

[Piper67]

It depends on how much money you have, and how much you want to raise it by. Technically, it is possible. In fact, if I were the economy minister of one of a handful of countries, that's exactly what I would do, but only after solidifying a position beforehand.

[Topazan]

How would you go about it?

I wonder if it's possible to derive a formula to determine how much money you'd need to raise it by what percent...

[FreeMoney]

How would you go about it?

I wonder if it's possible to derive a formula to determine how much money you'd need to raise it by what percent...

It requires knowledge of many bitcoin sellers desires to sell or not at various prices. Many times those people themselves do not know until they see the offer and how they feel about it, also their observation of other people's willingness to sell or not will affect them so it is very difficult to predict. Difficult to predict over large scales that is, you can just look at the order book on major exchanges and do arithmetic for small amounts and short times.

[Piper67]

How would you go about it?

I wonder if it's possible to derive a formula to determine how much money you'd need to raise it by what percent...

I doubt you could come up with anything too precise, as the number of unknown variables is just too big (how many people out there have large holdings of BTC, for instance, and at what price point would they be persuaded to part with theirs... there's just no way to know). It would also depend highly on how obvious the move is. Presumably, if your intention is to raise the market cap, you'd want to make that intention fully known and then follow through on it.

And again, raise it to how much, and starting with how much?

Too many unknowns.

[Topazan]

I'm just speaking in hypothetical here, so I can't tell you how much.  As I said, the scenario is if a major corporation or government wanted to conduct a multi-billion dollar transaction in bitcoin.

[Piper67]

I'm just speaking in hypothetical here, so I can't tell you how much.  As I said, the scenario is if a major corporation or government wanted to conduct a multi-billion dollar transaction in bitcoin.

Remember back in September when someone claimed they would release Romney's tax records unless they were paid 1 million dollars in BTC. Someone calculated that it would actually cost quite a bit less than 1 million USD to get the right amount of BTC. All they had to do was to solidify a position with the initial 100 thousand or so, then go on an all out spree for the rest and they'd reach the magic number fairly quickly.

It would be a bit harder today, as a 20k purchase or dump doesn't seem to have the same effect. But the principle is the same.

The difference is if it was a government... say, for example, Iceland or Greece, they'd have the resources to keep the market depth at such a level that they could raise the cap and maintain it (pretty crucially) long enough to effectively turn it into the new market cap.

[Topazan]

You know, I didn't think about it that way, but you might be right.  It could take less money, not more as I thought.

The question is whether or not it would be sustainable long enough for the other party to cash out.  In order for that to happen, the market has to follow the lead of the major purchaser and start buying at that volume and price.  I don't think that could be counted on to happen.

[twolifeinexile]

Of course they can if they have a big pocket, but the questions is why??If they speculate, then it has to be substantiated and recognized by general market participant to make the market value stay that level

[Topazan]

I said why.  Twice.

If, as I suspect, the market cap can't necessarily grow as quickly as needed, that's a huge barrier to adoption by large institutions.

[crazy_rabbit]

Depends on which country needs to funnel funds into a sealed autocratic nation with the intention of destabilizing the regime and funding revolutionaries.

Just saying.

[Topazan]

That's the question, though.  If they wanted to transfer an amount of money greater than the market cap, would they be able to?

[Grinder]

Say you were a government or major corporation that wanted to carry out a multi-billion dollar transaction in bitcoin.  Would it be possible to raise the market cap up to where it needs to be for you to do it?

Sure, but it would be stupid if you intend to get out afterwards. People are not going to buy the coins back at the same price as they sold them, so you would lose money.

[Piper67]

Say you were a government or major corporation that wanted to carry out a multi-billion dollar transaction in bitcoin.  Would it be possible to raise the market cap up to where it needs to be for you to do it?

Sure, but it would be stupid if you intend to get out afterwards. People are not going to buy the coins back at the same price as they sold them, so you would lose money.

Hmmm... the coins ARE money 

Just don't sell them, like you don't sell gold.

[johnyj]

Even a small country's stock market could be controlled by a group of investment banks, BTC surely can be manipulated by them, and they have been doing this for many years in every possible market - future, commodity, mbs... But currently BTC is still too risky for them, I'm sure when BTC becomes mature enough, wallstreet boys will come one by one

[phelix]

This should be quite simple and profitable if you have enough reputation.

1.) Slowly but steadily buy tons of coins for say a billion dollars. This drives the price to 100-1000 usd/btc
2.) Announce you will use bitcoins. Price rises by a factor of 10.
3.) Sell/transfer some of your coins.
4.) Keep the rest as profit. A couple billion of dollars.

 

[sunnankar]

Even a small country's stock market could be controlled by a group of investment banks, BTC surely can be manipulated by them, and they have been doing this for many years in every possible market - future, commodity, mbs... But currently BTC is still too risky for them, I'm sure when BTC becomes mature enough, wallstreet boys will come one by one

There is a major flaw with this argument. Bitcoin is not as 'elastic' as other currencies.

They are limited in amount, instantly verifiable both in quantity and quality (gold's problem), not subject to counter-party risk (equity based and no need for a lender of last resort), function as a settlement currency (MPEx options and futures) and are, most importantly, censorship resistant (another of gold's problem).

All of these reasons make the traditional methods of market manipulation much less, if not completely, potent. Coupled with gold, because every currency needs a mirror, Bitcoin becomes a Kryptonite dagger aimed at the heart of the State (fiat money central bank monopolies).

[Grinder]

Hmmm... the coins ARE money 

Just don't sell them, like you don't sell gold.

What's the point of having money which lose their value if you try to spend them?

[Piper67]

Hmmm... the coins ARE money 

Just don't sell them, like you don't sell gold.

What's the point of having money which lose their value if you try to spend them?

You didn`t say spend in the previous comment I`m referring to. You said get out. If everyone holding USD decided to "get out" of USD at the same time, it would also lose its value.

BTC doesn't lose it's value if you spend it for something, even if at some later point in the chain it converts back to fiat, because if there's something out there that you can spend BTC on, that BCT will be re-purchased to be used for that purpose. It's a funny little concept called money. Which is what Bitcoin is... which is the point of my reply to your comment.

[Grinder]

BTC doesn't lose it's value if you spend it for something, even if at some later point in the chain it converts back to fiat, because if there's something out there that you can spend BTC on, that BCT will be re-purchased to be used for that purpose. It's a funny little concept called money.

Actually, this is all a "funny little concept" called trading. It's irrelevant whether you spend the bitcoins on fiat currency or goods. You will be flooding the market with BTC, and that will push the value down. It won't be easier to find someone who will trade for the full value in goods than in fiat, so instead of getting less fiat you will get less goods. It would have exactly the same effect as printing fiat and spending them on goods.