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Author Topic: MtGox makes more money the higher the price of bitcoin - conflict of interests?  (Read 1868 times)
Terk
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May 11, 2013, 01:07:58 PM
 #21

Weekly chart is more clear to read:



Compare the two blue periods. The second one has slightly lower volume, but the price is three times bigger.
Compare the two orange periods. The second one has similar or slightly lower volume, but the price is many times bigger.

What does it mean? That price and volume aren't that much related.

I understand the rationale of many forum posters here contending that volume does not go up as price goes up. However, whatever experimental evidence we have does not seem to support this assertion.

It's actually the other way around. The recent price raise was because of increased demand, which created bigger volume - as there were many new people wanted to buy-in, the price raised. But price and volume aren't related that much. If more people wanted to sell than buy, the price would go down despite having big volume.

Let me give you an example.

If there are 10 people that want to buy 1 BTC each and 50 people that want to sell 1 BTC each, the price will go down as sellers will compete for the buyers. If there are 5 people that want to buy 1 BTC each and 1 person who want to sell 1 BTC, the price will go up, as buyers will compete for the seller. You can have increasing prices at low volumes and decreasing prices at high volumes. Or the opposite. Price is the result of the ratio [how many people want to buy] / [how many want to sell]. Volume is just [how many people want to buy and sell]. With people wanting to buy 10,000 BTC and other people wanting to sell 10,000 BTC, the price will most likely won't change. With people wanting to buy 10 BTC and other people wanting to sell 1 BTC, the price will most likely go up.

Price, volume. Not related. The only thing connecting the two, is that when volume significantly raises, the price usually changes a lot. But it can change up or down. MtGox doesn't care that much if the price is high or low. They care for the volume. They're as much happy with people creating volume by panic selling as with people creating volume by horny buying.

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May 11, 2013, 02:45:16 PM
 #22

0.6% is a bit too high, would like to see something like 0.1% plus a small fixed fee(or better) sometime in the future.

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monsterer
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May 13, 2013, 09:14:32 AM
 #23

Ok, I accept that it is possible for the market to automatically adjust to rising fees by lowering traded volume - if there were no limit on the minimum volume, this would be easier.

As it stands now, the minimum volume limit will get more and more restrictive.

Right now, the minimum sell fee you can expect to pay is roughly $0.006.

At $1000 it will be $0.06.

To be honest, a percentage fee is horrible no matter what value is has (apart from 0) because it's unintuitive and it causes the spread to widen the higher the price of bitcoin.

Quote
I'm sorry but you don't understand the market at all. Let me give you one last example. I am taking historical data.

1) 2012-08-17.
Average daily price 13.26 USD.
Daily volume 221,033.9 BTC = 2,930,580.33 USD.
Their fee income is 17,583.48 USD

2) 2013-05-09.
Average daily price 111.66 USD.
Daily volume 26,894.46 = 3,003,068.41 USD.
Their fee income is 18,018.41 USD

3) 2013-05-02
Average daily price 106.49 USD.
Daily volume 234,129.17 = 24,932,099.53 USD.
Their fee income is 149,592.59 USD

Ok, help me out here because it seems like 1) and 3) are the perfect illustration of my point about rising prices? 1 and 3 have similar volume only the price has changed and look at the fees.

Cheers, Paul.
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May 13, 2013, 09:28:25 AM
 #24

Ok, help me out here because it seems like 1) and 3) are the perfect illustration of my point about rising prices? 1 and 3 have similar volume only the price has changed and look at the fees.

3) has 8.5x bigger volume than 1) - 24,932,099.53 USD vs 2,930,580.33 USD - and that's why there are more fees.

You have 9.1x price increase between 1) and 2) - from 13.26 USD to 111.66 USD. Where is your fee increase? Please tell me.

monsterer
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May 13, 2013, 10:14:32 AM
 #25

3) has 8.5x bigger volume than 1) - 24,932,099.53 USD vs 2,930,580.33 USD - and that's why there are more fees.

You have 9.1x price increase between 1) and 2) - from 13.26 USD to 111.66 USD. Where is your fee increase? Please tell me.

Volume in 1 is 221,033.9 BTC
Volume in 3 is 234,129.17 BTC

The volume looks similar to me. Only price has changed between these two examples?
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May 13, 2013, 10:27:28 AM
 #26

It's all proportional I think you'll find..

As price goes up, people will be buying less Bitcoins on average. If the volume stays the same after this, that means their is more market action. I guess that's a direct link to Bitcoin going up though...

I think your thinking of it in the completely wrong manner however.
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May 13, 2013, 10:33:50 AM
 #27

I am obviously talking about USD volume. You can't compare BTC volume and USD fees. If you want to talk BTC volume, then calculate BTC fees and they're roughly the same in 1) and 3).

Also, volume on bitcoin exchanges still depends more on USD supply than on BTC supply, so it's another reason why it's the USD volume that matters.

If you tell me, that it's the same volume when people traded $24.9M and when they traded $2.9M, then you are probably trolling me.

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May 13, 2013, 10:38:27 AM
 #28

percentage fee discourages high frequency trading. I bet if they make a reasonable fix fee structure, they will get much much higher volume, since at least 70% of trade volume in global markets these days is responsible by frequency bots.

Oh I forgot that Gox cannot handle volume, but new exchanges with good trading engine shouldn't follow Gox fee structure.
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May 13, 2013, 11:01:28 AM
 #29

I am obviously talking about USD volume. You can't compare BTC volume and USD fees. If you want to talk BTC volume, then calculate BTC fees and they're roughly the same in 1) and 3).

How are you separating that in your numbers? Your figures for USD volume must only be sell-volume then, not a combination? Can you give me a link to your information source?
Terk
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May 13, 2013, 11:27:41 AM
 #30

How are you separating that in your numbers? Your figures for USD volume must only be sell-volume then, not a combination?

Not separating and not sell-volume only. Total transaction volume. BTC volume is equivalent to USD volume and it's total transaction volume. It's just the USD volume that matters when we're comparing USD fee figures (and also because this market at this point is driven mostly by USD supply).

Can you give me a link to your information source?

As I wrote before, I take data from http://www.bitcoincharts.com/charts/mtgoxUSD (you can pick date range that you like and then there's “load raw data” link under the chart).

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