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Author Topic: Should exchanges have breakers?  (Read 1039 times)
Capitan
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June 12, 2011, 06:06:11 AM
 #1

The drop today had me thinking. Should exchanges automatically halt trading if price changes more than a certain percent in a small enough time window, say 5 minutes or 10 minutes?

I'm guessing there are a lot of people with massive amounts of bitcoins hoarded. Whenever the price rallies and one of them decides to take some profit they can crash the market. With the market this shallow this kind of cycle can only act to scare off more mainstream audiences before it ever gains significant adoption. What do you think? Mt. Gox, c'mon.
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fcmatt
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June 12, 2011, 06:43:40 AM
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i do not know off hand.. just how many bitcoins early adopters have. after all, they can only
sell them once and after that the pool of early adopter coins will shrink downward to 0.
so to create a breaker just for that situation does not seem like a good idea.
Valalvax
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June 12, 2011, 06:44:48 AM
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That would be artificial price fixing, which is what the entire market is supposed to avoid...

Or maybe it's not supposed to avoid that... not real sure what the ideals are...
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June 12, 2011, 06:47:31 AM
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no
Crazy
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June 12, 2011, 06:48:02 AM
 #5

Breakers would only work if every market agreed on those levels. Because, for instance, if there was a massive sell off at MtGox and a breaker was triggered and trading was haulted, and enough individuals hold accounts on other markets and are sincere in their desire to sell-off, they'll just conduct their business on that other other exchange. The original exchange (MtGox in this example), would then be achieving nothing but losing their trade revenue.
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June 12, 2011, 06:49:19 AM
 #6

That would be artificial price fixing, which is what the entire market is supposed to avoid...

Or maybe it's not supposed to avoid that... not real sure what the ideals are...

Of course there's always a more "organic" price fixing scheme... Miners are a lot less like investors and a lot more like workers or small business owners, so let's just start a union: http://forum.bitcoin.org/index.php?topic=15595.0

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June 12, 2011, 06:57:29 AM
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Breakers would only work if every market agreed on those levels. Because, for instance, if there was a massive sell off at MtGox and a breaker was triggered and trading was haulted, and enough individuals hold accounts on other markets and are sincere in their desire to sell-off, they'll just conduct their business on that other other exchange. The original exchange (MtGox in this example), would then be achieving nothing but losing their trade revenue.

one has to wonder though, down the road, if the largest exchanged just start cooperating on policies they make thus controlling things
that way. the smaller players may just fall in line...

picture some "fat cats" smoking their cigars and drinking their brandy coming up with ways to control the market via their power of
running the major exchanges.
Ruxum
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June 12, 2011, 07:00:23 AM
 #8

The exchanges could implement stop limits.  But it is up to them.  Dark pools are the big problem I think.  They are hiding the real depth of the market.  If big orders move the market, so be it. 

ribuck
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June 12, 2011, 07:03:03 AM
 #9

Breakers are counter-productive. If you don't want to trade in a volatile market, just don't trade. But don't try to stop willing traders from trading.
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June 12, 2011, 07:03:18 AM
 #10

A truly free market does not need circuit breakers - and that is what I am holding out hope for, so NO.

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Valalvax
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June 12, 2011, 07:14:43 AM
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A truly free market does not need circuit breakers - and that is what I am holding out hope for, so NO.

Then what would stop the amperage from burning your house down?


But yea, like I said, if you want Free Market, you cannot have the Government (Trading organizations) controlling the price, even if that means big moneysacks controls it

though... that's absolutely no different from our economy, moneysacks controls the government who in turn controls the money.. while moneysacks is also controlling it at the same time
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June 12, 2011, 07:15:12 AM
 #12

Dark pools are the big problem I think.  They are hiding the real depth of the market.  If big orders move the market, so be it. 

THIS!  It's like the old Wall Street quote "if you're not inside, then you're outside".  The mining aspect also contributes heavily to the instability as it makes an incentive to sell rather to hold because its found money.
Capitan
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June 12, 2011, 07:34:49 AM
 #13

The exchanges could implement stop limits.  But it is up to them.  Dark pools are the big problem I think.  They are hiding the real depth of the market.  If big orders move the market, so be it. 

So with dark pools you don't get to see the USD/BTC exchange that is being done right? Has anyone out there analyzed data from the block chain? I guess that wouldn't help shed any light on dark pools since you don't see the USD portion of the transaction right? How would one get in on a dark pool in mt. gox? Do the people in a DP get to see the ask & bid?
Crazy
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June 12, 2011, 07:37:18 AM
 #14

How would one get in on a dark pool in mt. gox? Do the people in a DP get to see the ask & bid?
You'll see in the "Advanced" drop-down/combobox - "Normal," "Dark Pool and Normal," "Dark Pool Only"
freequant
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June 12, 2011, 07:39:11 AM
 #15

The drop today had me thinking. Should exchanges automatically halt trading if price changes more than a certain percent in a small enough time window, say 5 minutes or 10 minutes?

I'm guessing there are a lot of people with massive amounts of bitcoins hoarded. Whenever the price rallies and one of them decides to take some profit they can crash the market. With the market this shallow this kind of cycle can only act to scare off more mainstream audiences before it ever gains significant adoption. What do you think? Mt. Gox, c'mon.

no
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June 12, 2011, 08:03:34 AM
 #16

I don't believe that the exchange should artificially prevent large price variations. Mainly because it will be inevitable by trying to do it artificially you give markers of the market going down or up which can cause it to crash even harder.

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ribuck
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June 15, 2011, 10:26:46 AM
 #17

An exchange is simply a way to bring together willing buyers and willing sellers at mutually-acceptable prices.

The notion that there is some "real, true, price" that must be "protected" by breakers is bogus. All that exists is a series of prices of trades between willing buyers and sellers, and a set of asks and bids.

On the other hand, a breaker really is a manipulation of the market, because it blocks the making of mutually-acceptable trades at the market price.
dr.bitcoin
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June 15, 2011, 12:38:41 PM
 #18

A look at economic history shows that market manipulation in any way, shape or form and for any purpose is rarely healthy...
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