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Author Topic: Creating the Bitcoin floor @ 1/2 the current price  (Read 1423 times)
FandangledGizmo
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April 18, 2013, 12:09:10 AM
 #1

I just thought about this tonight so apologies if it's been discussed before and or if my maths/assertions are wrong. I'm fairly new to BTC but I hate the idea that nefarious entities or speculators may be able to control the future of BTC by bringing huge volatility to what should be a fairly stable rising store of value. (even if it goes up fairly fast in the short term giving it's low starting point.)

Right now nefarious entities can drive the price down by selling a large amount of coins and then buy up again at the lower amount.
 
Eg. If you bought 100 coins at $50 sold at $250 and then bought at $50 again you would have 500 coins. If you have enough coins to control the price moves in thinly traded times A government/nefarious entity can quickly amass a substantial share of Bitcoins which can be used to control the price even further.

This is their plan but I think it is very easy to fight back if supporters of BTC work together.

Putting a strong floor @ +-1/2 the current BTC price.

As I hope to show this will reduce volatility to the upside and the downside. It also only requires a few big players/accounts to take part to make it 'self fulfilling' and it also very much in their interest.

How do we put the floor under the price?

Lets call it the 'BTC TEAM' (People who help stabilise BTC by contributing to the floor)

Once the BTC price passes $100, the BTC Team  slowly trade out 10% of their BTC and put in a buy order order @ $50.
This will give us a buy order for at least double the BTC we just sold.

E.g Round numbers for simplicity (10 Mil)  

If there are 10 million BTC in existence & you were able to get 20% of BTC to support the floor idea, that would be 2 Million BTC.

So once the price passes $100, they sell 10% of their holdings (200 000 coins) and put in a buy order at $50. This will create a 400 000 BTC Buy order at $50. So now a nefarious entity or people panicking have to have enough coins to sell to all the people buying all the way down to 50% of BTC's current value $50 & then have another 400 000 coins to sell to break the $50 Wall. (Not easy considering 60%+ of BTC or something don't move.) Furthermore any new money wanting to buy BTC, even us, will be aware of the wall and so in a crash they will know they are unlikely to be able buy below $50 and so will put their buy orders above it. This will create a very very big support level at 50% of the price in this example $50.

If the price of Bitcoin doubles from $100 to $200 the floor can move up to $100, but of course now there will only be 200 000 coins supporting the floor not 400 000. (Because the 200 000 coins the B team initially sold @ $100 can only buy 200 000 coins at $100 obv.)
So as the BTC price passes $200, the 1.8 million 'B Team' coins sell 5% of their coins, this will be 90 000 coins. They then put in a buy order at $100 which will be at least 180 000 coins added to the new existing 200 000 BTC buy order at $100 so 380 000+ coins.
(Then the same scenario applies as did at $50, even in a crash buyers will put their orders above $100 because they know the $100 wall is unlikely to be broken thereby creating a 'Super-floor'.)

Using this 10% of coins at $100, 5% at $200, 2.5% @ $400 etc. the 'BTC-Team' will never have to sell more than 20% of their coins and in return they will know their BTC holdings are very unlikely to lose 1/2 their value and if it does they will be getting double the coins they sold back.

While it seems like the big dormant accounts are doing BTC and themselves a favour by not selling in the panic, they are possibly doing it a disservice by not selling into the rise and then putting orders back for their full profits at lower amounts?

This floor process will have two great effects, it will slow the price rises because the big holders of BTC won't stay put with non-active BTC, thereby letting the speculators chase a few coins, but will be selling a small portion into the rising market thereby creating a more stable rise. But more importantly it will create a strong floor at about whatever 50% of the current price of BTC is.

Exchanges can even contribute by agreeing to put some of their profits into supporting the floor. People may choose to use them based on how much they are contributing to supporting the stability of BTC

I think something like this is very important because without it people who want to harm BTC can potentially amass enough of a position to wipe out 80% of BTC value very quickly or at least create absurd volatility.

What do you think?
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Stephen Gornick
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April 18, 2013, 12:37:30 AM
 #2

Right now nefarious entities can drive the price down by selling a large amount of coins and then buy up again at the lower amount.

I stopped reading right there.

None of my coins were sold at the lower amount.

Markets work the way markets work.  Attempts to manipulate them can be gamed.  I prefer to not try to tell the market what it should do, and instead react to what the market is telling me.

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FandangledGizmo
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April 18, 2013, 08:00:42 AM
 #3

Hi Stephen, thanks very much for taking the time to reply!  Smiley

Quote
None of my coins were sold at the lower amount.

Me too. I thought this helped BTC or was at least free-market neutral, I no longer think it is...

Quote
Markets work the way markets work.  Attempts to manipulate them can be gamed.  I prefer to not try to tell the market what it should do, and instead react to what the market is telling me.

Me too. The above post was my reaction.


The BTC market is new & fragile. In free markets without regulation, monopolies and cartels can prevent new competition by selling their product/service at a loss.  Given 'their' resources vs. BTC market cap, it is & has been very easy for 'them' to manipulate BTC and continue to do so for decades if they can withstand a small loss.


& though you say you are against a co-op to support  BTC price as that would be manipulation or could be gamed, I believe that by using a buy & hold/hoard strategy you are unwittingly part of the largest co-op group that is manipulating the fragile BTC free market in a way that could destroy it.

1. A buy & hold/hoard strategy (ironically used by people that think they are supporting BTC) manipulates the volatilty of BTC to the upside. (It removes those BTC from the actively traded BTC amount.) BTC is volatile enough as it is with a small market cap but even worse if only a small % of coins are actively traded as small $ or BTC inflows/outflows drastically move the market.

2. Your co-op strategy manipulates the price of BTC to the downside
(Once hoarded/held - 'I didnt sell in bubble or panic'' then your BTC  don't contribute to the future buying pressure only additional selling pressure whenever you sell.)
Even if you think a co-op strategy is excessive manipulation, why not at least on an individual level sell some BTC into large rises and buy on dips with profits, that way at least you'll be manipulating Bitcoin in a way that supports it, (stabilises rising markets and supporting falling ones)

Till the BTC market is fairly mature, it is not a 'free market'  it is in fact very fragile and can (& is) being negatively manipulated both intentionally & unintentionally, as the case may be.

Once it reaches critical mass and is a true free market then trying to structure trades in a way that supports it will be futile and as will structuring them in a way that destroys it. Why not help support/create that situation vs. the opposite?

(All of the above is only my opinion, I apologise if the tone is confrontational, also I am new to BTC so please point out any errors etc., any feedback is appreciated.)
loanexpress
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April 18, 2013, 11:53:52 AM
 #4

Interesting idea. Let me sleep on it.
Killdozer
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April 18, 2013, 12:53:27 PM
 #5

It's a free market. Get over it.

Ivanhoe
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April 18, 2013, 01:00:47 PM
 #6

Prisoners dilemma.
FandangledGizmo
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April 18, 2013, 02:42:41 PM
 #7

It's a free market. Get over it.

Try telling that to JFK, Gadaffi, or even Aaron Swartz.

Maybe you think the consistently rising US share prices, or the Gold slamdown less than 24 hours after Obama had a closed door meeting with the heads of every major bank is a result of the free market at work.

Personally I think there are mighty forces that conspire (usually successfully) against any change in the status quo & as such can and do attack BTC

While sometimes the winning move is not to play, luckily BTC was constructed in such a way that the early adopters and supporters still have the power to defend BTC if they so choose.

I believe someone smarter than me can create a zero-sum counter strategy or defence against those who seek to attack BTC.

If you think they are not engaged in attacking the price of BTC or that the free market can successfully counter them well then I'd love to live in your world for a day.
bitbadger
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April 18, 2013, 03:06:45 PM
 #8

It's a free market. Get over it.

Try telling that to JFK, Gadaffi, or even Aaron Swartz.
Try telling it to George Soros as well. The Bank of England tried that in the early 90s when the Pound was under pressure and finally crashed out of the European ERM.  Soros made around a $1bn or more in profit as a result.

FandangledGizmo
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April 18, 2013, 03:34:09 PM
 #9

It's a free market. Get over it.

Try telling that to JFK, Gadaffi, or even Aaron Swartz.
Try telling it to George Soros as well. The Bank of England tried that in the early 90s when the Pound was under pressure and finally crashed out of the European ERM.  Soros made around a $1bn or more in profit as a result.



Thanks for the reply, I think that's a good point and very relevant.

In my opinion I also think it's futile and ultimately negative to try to support or manipulate a mature free market or one that has attained critical mass, eventually the free market will win. E.g as you just showed the £ and also soon I think all the efforts to support the $ may go the same way.

But I think a small market like BTC is very easy to manipulate and attack if you have enough $, conversely it's also easy to defend against said attacks if you have enough BTC

I think someone who looked at the maths could find a zero sum solution and in my example, even if the floor is broken, you get twice as many BTC back as you sold which would be a long term positive for supporters of BTC
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