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Author Topic: mtgox might just kill Bitcoin's chances of success  (Read 10284 times)
hazek
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June 13, 2011, 09:26:25 AM
 #41

My point was that 90% of all trade being concentrated on mtgox and them providing a skewed picture of supply and demand is the cause of this crazy volatility.

And davout one more time, no one but the person who placed a dark pool order knows about it. Anyone can use a trade bot and everyone can see their bot working. I really really don't understand what is so hard to get about this? I also don't care what this forum has had endless dabates on and the conclusions you drew from those debates if they are wrong.

Btw what makes you think people aren't using trade bots already? (In case it's not clear, this is a rhetorical question)

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davout
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June 13, 2011, 09:38:49 AM
 #42

Anyone can use a trade bot and everyone can see their bot working.
There's absolutely no way to know from mtgox's public info that there is a bot hiding the amount of a big order by placing small orders at chosen moments.
There's usually no way to tell there's a bot at all.

Btw what makes you think people aren't using trade bots already? (In case it's not clear, this is a rhetorical question)
I never said people weren't already.


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June 13, 2011, 09:41:53 AM
 #43

Mtgox has its flaws (I for one think the trade is much too large for its capacity to handle it) but the volatility has nothing to do with mtgox. Dark pools can more or less emulated with bots and you will never know what is the market. Moreover, anybody can have gazillion dollar/BTC deposited and just waiting for a good moment to trade. Let me repeat it: you never know the true demand and supply.

The volatility is inherent to Bitcoin. I think one of the biggest reason of it is that we don't know the ownership structure of bitcoins. For publicly traded shares, we know how much is free float, how much belongs to the major stockholders. The major stockholders have no incentive to dump the shares all at once on the market. Instead, they negotiate deals outside of market. Bitcoin price should stabilize when there will be more bitcoin "free float". However, I'm afraid bitcoin will never be as stable as currencies. It might be only as stable as major stocks at best.

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hazek
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June 13, 2011, 10:03:21 AM
 #44

Btw what makes you think people aren't using trade bots already? (In case it's not clear, this is a rhetorical question)
I never said people weren't already.

So what's your god damn point about no dark pool orders then? Are we done with these childish posts and are you going to finally admit that the market has less info with dark pools then they would have without? Actually don't bother answering.

Raulo, yes small volatility sure, but not 40 or 50% swings in price in a mater of hours. Please realize that these swings happened because the market was getting incomplete information for a longer period of time, especially because we can only see up to 27% under spot bids and 73% over spot asks and just because dark pool orders.

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Raulo
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June 13, 2011, 10:18:02 AM
 #45

Raulo, yes small volatility sure, but not 40 or 50% swings in price in a mater of hours. Please realize that these swings happened because the market was getting incomplete information for a longer period of time, especially because we can only see up to 27% under spot bids and 73% over spot asks and just because dark pool orders.

No, it had nothing to do with that. The swings were a result of an impatient seller who dumped about 100,000 BTC (my educated guess) in a few pieces triggering some additional selloff from others. There is really nothing you could do about it.

At best, you could have mitigated it and slowed it down. Mtgox Saturday problem was that the database couldn't handle the load and for instance I tried several times to pickup these dumped BTCs without success. The system made me wait until the trading is over.  And when the mysterious seller stopped his dumping for a moment, the price rocketed because it was the first chance anybody could put some buy orders. So, yes, Mtgox is guilty of some of the swings but the drop to a bit over 10 BTC would have probably happened anyway (may be it have had stopped a bit higher). Because it was the point where the mysterious seller lost his motivation to sell or run out of BTCs.

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June 13, 2011, 10:26:43 AM
 #46

quote author=hazek link=topic=16032.msg211912#msg211912 date=1307959401]
Raulo, yes small volatility sure, but not 40 or 50% swings in price in a mater of hours. Please realize that these swings happened because the market was getting incomplete information for a longer period of time, especially because we can only see up to 27% under spot bids and 73% over spot asks and just because dark pool orders.
[/quote]

Hahahahaaha.

Seriously.


Hahahahahaha.

Think that does not happen in the real financial markets?

It did not. It does now. Well, the trades then get cancelled. Nanex (also my financial data provider) is really nice investigating them. We talk of stocks going from 100 USD to cents in seconds, then back up.

Some examples:

http://www.zerohedge.com/article/todays-flash-crash-690-009-two-seconds - yes, that is a crash

And this one the other way:

http://www.zerohedge.com/article/2880-2600-two-second-thank-you-skynet

The second is some whares going from 28.8 USD to 2600 (!) usd in two seconds thanks to robots and a thin market.

Thank heaven in a real world the exchange is primarily (!) responsible for an orderly market, nothing else, and thus cancels all the trades afterwards.

The volatility is not bbecause of incomplete information, it is beacuse of bad exchange rules at MtGox, a small illiquid market, no circiuit breakers and trade limits in place over weekends when money flow and attention is limited.
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June 13, 2011, 12:51:39 PM
 #47

hazek: You are actually totally wrong about all your points. This volatility has nothing to do with clipping the orders way outside of the normal price range or darkpools.

1) The market was this volatile or even more before darkpools and before I clipped the order book.

2) You can't see the complete orderbook for any currency pair. There are dark pools for every currency pair. There is so much more hidden info for every other currency pair on earth. Yet all have less volatility.

3) The merchant problem is easily solved by not holding BTC like I explain above.

4) Multiple exchanges will only increase volatility since each market will be thinner. The only thing that will decrease volatility is liquidity. It may seem like there is a lot traded a day but it is really nothing compared to any other currency pair.

5) The recent crash had been building for days since the peak. It was predicted by many people. It was greatly exacerbated by one person dumping a ton of coins. If they had used a dark pool instead there wouldn't have been such a huge drop. So actually use of the dark pool would have decreased volatility.

6) Look at this chart: http://mtgoxlive.com/orders <- see all those straight lines in price. Those are dark pool orders being hit. They are reducing volatility as you can plainly see. If they weren't there there would be spikes instead of straight lines.


I should have used a different word for it other than "dark pool". I guess "dark" scares people and they don't understand it. So when something happens... "The market crashed. It must have been that evil dark pool that confuses me!"

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yeponlyone
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June 13, 2011, 01:50:59 PM
 #48

What are the advantages to dark pools over bots as far as the user is concerned? It seems to me dark pools give mt gox trading information that the general public is unable to have, while a bot would accomplish the same goal for the user, just not give extra information to mt gox. I guess it doesn't matter assuming mt gox wouldn't use this information for their own personal gains or share it with anyone who is(after all, they are in place to help bitcoiners, not rip them off!), so I guess there really is no difference. Besides, it's a pain to make bots or switch exchangers so might as well just leave well enough alone.

As far as the volatility goes, the market is clearly unpredictably volatile, so any effort to make it less so by providing the public with all the information that the main exchanger has would at most decrease the volatility some amount that no one will ever know anyway.

So, in conclusion, I say don't bother taking the time to change something that is working just in exchange for little transparency and the hope for an unidentifiable amount of decreased volatility. There are more important things to do, after all, whats the problem with a little trust. I'll continue to support mt gox until they give me a solid reason why I should not to trust them with a little extra information, I just think of it like a little tip for all the good work they are doing!

and Hazek, I appreciate your concern, but man don't worry so much, everything will work itself out, it has so far!
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June 13, 2011, 03:35:52 PM
 #49

If I sell Bitcoins to my neighbor, isn't that a dark pool of sorts?  Why should that effect anyone else?
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June 13, 2011, 04:09:24 PM
 #50

If I sell Bitcoins to my neighbor, isn't that a dark pool of sorts?  Why should that effect anyone else?

Quite right. We already have 'dark pools' happening in the blockchain. I've seen large sums change hands, (unless it was for some odd reason - a transfer to a wallet under the originators control), and I have to say they dwarf what lies in the pools on the exchanges.

I don't quite understand the fury and noise of people railing against the pools. They provide depth to the market and actually reduce volatility. Most of the rambling comments on this forum are of the "OH NOES MANIPULATION" variety, which of course are never backed up with any kind of proof. (The verifiable kind, not the tinfoil-pulled-it-from-my-ass-kind.)

I'll just keep on trading, like usual. Smiley

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June 13, 2011, 04:24:14 PM
 #51

If I sell Bitcoins to my neighbor, isn't that a dark pool of sorts?  Why should that effect anyone else?

I think the difference that the nitpickers would claim is that it would be like every time you sell coins to your neighbor you call up mt gox and tell them the specifics of that transaction and then they keep that information for just themselves, along with all the other neighborly deals in the world, and make their own personal buy and sell decisions based on that. But like I said in my post up there ^, just look at it as if this information you are giving mt gox is a tip(since they can use it to make money off the market), and it is fine, they don't charge much in the way of fees, and by tipping them this way we are making it more likely that it will be worth it for them to stay in business, which is what we all want. Other sites, such as TradeHitt or whatever, are just too stupid to think of this clever little tip jar idea.

Knowledge of the market is key to profiting from the market, we are just giving mt gox a little extra knowledge so they can get a little extra profit. No harm, no foul. Now can we end this thread or what?

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June 13, 2011, 04:49:04 PM
 #52

If I sell Bitcoins to my neighbor, isn't that a dark pool of sorts?  Why should that effect anyone else?
.... Most of the rambling comments on this forum are of the "OH NOES MANIPULATION" variety, which of course are never backed up with any kind of proof. (The verifiable kind, not the tinfoil-pulled-it-from-my-ass-kind.)

lol, proof? proof of what? proof that a guy who is known to have knowledge nobody else in the world has about a rapidly increasing market is using it to his own personal gain? why would he not, and why should he not? If he is not, then he is just as dumb as the sites that don't have dark pools, and doesn't deserve the extra income anyway. I'm seeing nothing here that needs proven. If you don't want mt gox to be tipped your information then don't friggin tip him it, some will and some won't and life goes on. It would be like complaining that other people are sending him donations. We are all free to do what we wish with our money and knowledge, and people who complain about it are probably just jealous that nobody tips them, and in time hopefully they will grow up and accept it.
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June 13, 2011, 04:58:04 PM
 #53

bitcoin is growing by leaps and bounds while coupled with uncertainty, how can you ever expect price stability at these growth rates? wait a couple of years, and THEN we will start talking about price stability.

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June 13, 2011, 05:16:49 PM
 #54


lol, proof? proof of what? proof that a guy who is known to have knowledge nobody else in the world has about a rapidly increasing market is using it to his own personal gain? why would he not, and why should he not? If he is not, then he is just as dumb as the sites that don't have dark pools, and doesn't deserve the extra income anyway. I'm seeing nothing here that needs proven. If you don't want mt gox to be tipped your information then don't friggin tip him it, some will and some won't and life goes on. It would be like complaining that other people are sending him donations. We are all free to do what we wish with our money and knowledge, and people who complain about it are probably just jealous that nobody tips them, and in time hopefully they will grow up and accept it.

If posts were food, that paragraph would be a greasy unidentifiable deep-fried mass of ... something.

But since I don't specialize in dubious deep-fry 'cuisine' found at state fairs and unlicensed traveling carnivals, I'll let my original post stand. If you do make it long enough to pound your keyboard in a convincing way to construct an argument that can be parsed by an actual english-speaking native, please let me know.


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June 13, 2011, 05:43:34 PM
 #55

tl;dr: mtgox creates an environment of imperfect information which causes crazy volatility

The volatility is adequately explained by:
  • Bitcoin being new
  • (Which leads to) Uncertainty
  • New traders
  • Delays in getting USD into an exchange

As people start to get bored of trading them for profit, the price will settle.
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June 13, 2011, 05:53:49 PM
 #56

the 'guy i am refering to here is the guy who runs mt. gox. the knowledge i am refering to is knowledge of the dark pools which he surely has. the personal gain i am referring to is the gain that he can get from having said knowledge by using it while trading in the bitcoin market.


If he is not using this knowledge to his gain, then in my view he is dumb.


If you do not want him to have this knowledge and use it to create personal wealth for himself, then it is unwise to provide him with it. if you do want him to have this knowledge and use it to create personal wealth then do give it to him.


I've reread your post and my best guess is that you want it to be proven that he is not using this information to aide him in his quest for wealth, I am saying if he is not then he is stupid, why would he not? Either way, it does not matter to me, I willingly give him this information, knowing he can use it to make an easy buck because i like what he does. No big conspiracy, no fancy metal hats, just a simple case of a guy with information using it to make some money.
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June 13, 2011, 05:59:21 PM
 #57

/signed. Either Mt. Gox deletes the dark pool functionality entirely or I jump ship to Trade Hill as soon as it gets big enough to be a main trading hub.

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June 13, 2011, 06:06:57 PM
 #58

/signed. Either Mt. Gox deletes the dark pool functionality entirely or I jump ship to Trade Hill as soon as it gets big enough to be a main trading hub.

Thats fine, i'll stick with what i know works. I don't care if there is a 'required' tip since this is a tip of knowledge(knowledge of the dark pools that i use) and does not come solely out of my pocket, but rather out of the pocket of every individual who is buying and selling bitcoins, and thus effects each of us very little, but for him, hopefully, it is quite substantial.
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June 13, 2011, 07:48:20 PM
 #59

Lots of issues, for sure.  will these issues be worked out? or more correctly asked, can these issues be worked out? Huh
They will be worked when more people spend their Bitcoins on products and services so that the actual economy is larger than the speculative economy.

Wrong. We will first have to have stability before we can have more products and services offered for Bitcoins. This kind of was my whole point in the OP.

For this to happen market needs transparency.

Supply side again. The demand side needs to start producing what it wants. Linux didn't get big because it beat the competition. It got big because there was a community already serving its own interests.

Transparency won't change the fact that the market is thin and people don't know what THEIR value for a product is. Forget dollars. If a video card produces 1 coin a day and you are going to upgrade every month then it's not going to be worth buying for more than 30 coins now is it? Regardless of street price. There's enough video cards being bought that at least a couple dozen people should already be trading them on this forum and viciously.

Quote
We don't need to grow, we just need all the information available so everyone can make better decisions.

Oh and again, I'm not asking mtgox to change how they do business, I'm asking you, their clients to reconsider and switch to a different exchange, one that reveals all the available information, like tradehill for example does.

Stop blaming mtgox for not knowing what you want. Would you give up your bitcoins in the market if you had a use for them? We don't need to grow. We need to evolve. And everyone either blames lack of information or lack of controls in the client.

It's ridiculous. More information will lead to more precise confusion.

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
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June 13, 2011, 07:53:29 PM
 #60

It's possible to make use of the Mt Gox API to immediately (within transfer time) sell all Bitcoins received (or the portion thereof for which USD is needed) for USD after they're received. Anyone too retarded to figure this out shouldn't be running an online business anyway. They should go start one of those stupid convenience stores, with a sticky floor, which doesn't take credit cards for purchases under $5.  Roll Eyes

The change in value during that sort of time period ought to be proportional to interchange fees anyway. If they're really worried about volatility they can store some Bitcoin up front and sell it while the transfer is taking place. Thereby allowing more sales to occur as soon as the reserve is replenished and the transfer has gone through.
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