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April 16, 2013, 07:36:25 AM |
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The leading market price is BTC/USD rate at MtGox. It seems like all traders look to this when they set the price on other exchanges and does bitcoin-otc deals. But when larger amounts of BTC is traded at the MtGox market price, let's say 1000 BTC sold for dollars off exchanges does that in any way affect the MtGox BTC/USD rate at all ? What about all the other trades that goes on on other exchanges, those those prices affext the BTC/USD Mtgox rate at all ?
To me, it seems like MtGox is entirely the market leader, and everyone looks at MtGox BTC/USD rate for what the price should be.
Currently the 2nd largest exchange (Btc-e.com) has 11% of the volume of MtGox. I guess however that in the future we will see more exchanges popping up, and liquidity will be a problem for many of them. However, I think if big investors create such an exchange, they could be able to provide artifical liquidity to the market, making it seem like there's a lot of activity, and those giving an incentive for users and traders to get over there. There could be bots for example, trading over and over with themselves to give the impression of a big volume. As bitcoin exchanges are not regulated, they could also give out false data to grow their userbase. Done in a way that makes it look plausible, this could be done to aid their growth, just like Reddit had many fake users in the beginning to give other users an incentive to get over there and start participating, after all, neither Reddit or a bitcoin exchange is worth anything if it's not for the users. And the users go where the liquidity is.
Like the mining pool chart shows that the market consists of several large pools, the exchange market should be something similar. One exchange should not have this much of the total market. It makes bitcoin centralized, when in fact it should be decentralized. But also, we really don't have any idea about how much coins are traded off the exchanges.
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