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Author Topic: Doesn't seem like Bitcoin value is too easy to manipulate?  (Read 1084 times)
Xiaoma
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April 12, 2013, 10:34:27 PM
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There is something I really don't get about the current situation:

I seem to notice on exchanges that selling a tiny amount of the Bitcoin existing (like 500 out of 10 million) can cause the market price to fall 50% or 60% its value. I never seen anything similar in a "real life" exchange. To cause Apple shares to go down in value 50% you need to have a noticeable share of the company.

Trader's speculation can only work because is exceedingly easy to push the Bitcoin value up and down with small money.
This seem to imply there is something totally wrong in the way BTC exchanges work, or not?

Am I totally wrong?  Huh
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LeTanque
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April 12, 2013, 10:44:22 PM
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It's still a small market, my friend.

Apple to bitcoin is apples to oranges, no pun intended... although the often used orange bitcoin logo makes that pun extra juicy.... again.. no pun.. oh forget it.

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April 12, 2013, 10:50:53 PM
 #3

There is something I really don't get about the current situation:

I seem to notice on exchanges that selling a tiny amount of the Bitcoin existing (like 500 out of 10 million) can cause the market price to fall 50% or 60% its value. I never seen anything similar in a "real life" exchange. To cause Apple shares to go down in value 50% you need to have a noticeable share of the company.

Trader's speculation can only work because is exceedingly easy to push the Bitcoin value up and down with small money.
This seem to imply there is something totally wrong in the way BTC exchanges work, or not?

Am I totally wrong?  Huh


If I go on Mt Gox with a very small number of Bitcoins and start putting in ultra low or ultra high ask/bid offers with my left hand, and then start meeting them with my right hand, this may cause the 'spot' price to move rapidly on either direction in that moment, but since other traders will be able to see that their is an extremely low volume being moved at these amounts, it is not going to ruffle anyone's feathers either way, and I would hope that real economic transactions using Bitcoin are constructed in such a way that could do the  they are immune to such small potatoes manipulation.

If I had a sizeable portion off Bitcoins in my possession however, I could do to the Bitcoin market exactly what has been done to the Bitcoin market, ensure prices keep on rising and rising, watch with glee as the herd comes stampeding into Mt Gox to buy a big pile of vastly overpriced Bitcoins, that I will sell to them, then after I have taken all my profits, just sit back and allow the inevitable to happen.

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Xiaoma
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April 12, 2013, 11:29:51 PM
 #4

It's still a small market, my friend.

Apple to bitcoin is apples to oranges, no pun intended... although the often used orange bitcoin logo makes that pun extra juicy.... again.. no pun.. oh forget it.

Funny, but that was not my point. I don't think Apple has any "special immunity" to speculation for being cool. Somebody dumping 10% of Apple share in NY exchange would cause a serious mess. My point is that in the case of Bitcoins just a 0.001% of shares can easily manipulate the value. Forget Apple for a moment and choose another example, some VerySmallCorp with a total value of a billion dollars. Can you imagine somebody pushing its value down 50% in 10 minutes with 0.001% of its shares?
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April 12, 2013, 11:49:19 PM
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If there are people owning 1% of all the current coins on the market, they will be able to manipulate the price to a certain degree.

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April 13, 2013, 01:05:18 AM
 #6

It has nothing to do with the protocol itself though, ultimately the exchange rate is not a good indicator of the health of the system. It is true there are ways to manipulate it now simply because it so young. Hackers put the exchanges through the ringer to drop the price, then buy, let it grow and cash out, then do it again. If MTGox didn't carry 80% of transaction traffic this would be much harder to do. But that 80% is why they keep attacking it and not others so much. The network will only grow more resilient with time, not less.

http://www.blockchain.info

Look at the charts, despite the fluctuations overall use is increasing.

Bitcoin is also linked to fiat, so it will fluctuate when things occur in the real world. Cyprus was one example of this happening, when Bitcoin suddenly found itself with a lot of new users, added boost from the media and speculators, demand was so great it actually knocked MTGox offline. Bitcoin only stuttered because the network couldn't handle the sudden and large volume, not  a selloff due to loss of confidence in the currency, though many did pull out as indicated by the severe 50% drop in market cap.

This is just the first true stress test, and now we know of a weakness that needs to be fixed to move forward, which is exchanges need to be more diversified. Remember that the original core group 3 years ago began this as a hobbyist experiment for cryptography and tech geeks, but now we all need to grow up with Bitcoin as it ventures to garage project to real business, and the powerful infrastructure needed to go along with it for system security and redundancy. I imagine MTGox is not a professional IT operation, since it obviously has no redundancy built in to mitigate problems if something goes wrong.

Bitcoin is treading toward mainstream, I think this the beginning and the first showing to the pubic of Bitcoin's fluid power. Even as a curiosity the public wants to know more about this now that it is in the eyes of the media.

I look forward to the exchange jumping to $500 next push.

slakeco
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April 13, 2013, 02:48:29 AM
 #7

+1 for the above two posts
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