Who is peppering Mt. Gox with teeny tiny orders?

[keatonatron]

This may have been discussed before.

If you take a look at the Mt. Gox order book, you will see tons of small (less than 0.03 btc) orders, each for just a few cents more or less than the last.

It looks like an attempt to manipulate the price, hoping that most people will simply top the best price with their big orders causing the market to move. (e.g. spend 1btc in spread out, tiny ask orders, constantly pushing down while others place their asks ahead of yours, filling bid requests in the process. When the price is lower, buy a bunch and yank your ask requests to make the price go back up)

I think is what causes the crazy spikes of $5-10 over the course of a couple minutes, because a 10btc bid order at the right time can fulfill all the tiny ask orders at once, making the price jump up a good amount in a matter of seconds.

Who's doing this? And can they stop?

Unless it's working and people are making money off it.... are they making money off it??

[Elwar]

Bots.

[Pangia]

Saw the exact same thing on Bitfloor.com

[keatonatron]

I thought about doing the same thing (manually), a year ago before the market was so chaotic. But I knew there was a big risk the prices would just rebound quickly and I would simply end up with a lot of btc or USD for a bad price. With the exchange fees and currently high price of btc, you need to create a gap of $5+ to really make any kind of profit. Sounds likes a lot of risk with little payoff.

[empoweoqwj]

And also probably helps perpetuate the infamous MtGox trading lag.

Tiny trades could be restricted very easily by exchanges if they are slowing the whole system down.

[keatonatron]

I guess it could be legit in certain situations--like coffe shops accepting bitcoin for their $3 cup of coffe and trying to cash in immediately to not lose any revenue due to price fluctuations. But if that were the case, you would expect them to post at the current bid level, and not make standing ask orders.

One thing Gox could do (semi unrelated, maybe) is not allow such accuracy in USD prices. You can outbid someone by $0.00001 and your bid goes first!

What if they followed Bitstamp and only allowed prices to the nearest whole cent, or took an even bolder step and only allowed 10 cent increments or even whole dollars? Just guarantee a first-come-first-serve system where immediate request get penalized more (by having to pay a whole dollar more to get processed first).

That should make things not so crazy...