Is it possible to corner the bitcoin market? Would it matter if someone did?

[jimbursch]

I haven't found a serious discussion of the implications if someone or some cartel were able to corner the market on bitcoins. Feel free to point me in the right direction if this topic has been covered elsewhere.

Off the top of my head, without giving it a lot of thought, I think that it wouldn't be an existential threat to bitcoin if the market for bitcoin were somehow cornered. It wouldn't be in the interest of someone who invested in order to corner the market to then destroy that investment by destroying bitcoin.

Does that settle the question?

Note that I am not talking about mining. I'm talking about the currency market.

Does a market corner have essentially the same effect as hoarding? The only difference being that one is done consciously in a coordinated manner, and the other is done unconsciously in a collective manner?

[FenixRD]

Yes and no. Cornering it in the sense that an entity (cartel or otherwise) holds a large majority, would behave as hoarding. As in, not a concern due to the "infinite" divisibility of coins. However, the concerns you have probably -- whether you've played it out in your head or not -- stem from manipulation via artificially creating instabilities to profit from them. Dump many coins into the market, demand stays the same, price goes down for everyone. Buy up many coins, and the opposite happens. This is the same effect as large "cartels" and absurdly wealthy individuals inflict regularly to the stock market. Or even moderately wealthy individuals in penny stocks etc.

[jimbursch]

I tend to think that cornering a market, and then using the corner to manipulate the market would garner only short term profits, since manipulation would destabilize the corner. Of course this depends on how large and diverse the market is. Is the bitcoin market large and diverse? Probably not (I'm an econ amateur and even more amateur at finance).

[jimbursch]

... due to the "infinite" divisibility of coins.

Why is that term used? Bitcoin is not infinitely divisible. It is divisible to 0.00000001. Am I just being nit picky? I hate it when it is said that bitcoin is in infinitely divisible. Or am I not getting something?

[townf]

It wouldn't be in the interest of someone who invested in order to corner the market to then destroy that investment by destroying bitcoin.

What makes you think that?

If the power elite can't use it to their ends, then they will try to destroy it. Either way, it's as good as destroyed.

To do either they will have to buy a bunch of them. They can probably afford it. They're already doing it if they're smart and right next to a free fiat printing press spigot, which they are both. It's a relatively small investment for them if they are patient, and they are that too.

It makes me think that the best route for BTC to take now is to start being used as a medium of exchange instead of as a hoarding device. If most of the transactions are done on exchanges for fiat, bitcoins can slowly be acquired by these folks.

After they get a whole bunch of them, they can do several things. They can sell them all at once and plummet the value while getting rich (and start all over again), or they can effectively delete the currency, or they can go mainstream and start issuing notes on them to loan out and control the economy as they control all the marbles.

If it is used as a medium of exchange before they can hoard a bunch of them, they won't be able to do this so much.

[ThomasX]

This is why bitcoin generates xx new coins every 10 mins i would believe. (Currently 25) Not to completely prevent cornering/stall of bitcoin, but to make sure even if it does get "cornered" there will always be new bitcoins generated and delivered to a random miner which sells them on the market. The randomness in this "reward the miner" part makes sure no cartel can ever get 100% control. Maybe a cartel "could" get 99% control yes, but that very 1% left will make sure the bitcoin will forever work as "intended".

But hey, look at USD or any other currency these days, they are already completely "cornered" by the governmental cartels owning the rights to print them. (And they already own 100% of the control, and will keep 100% control, forever and ever in eternity) If they [the fiat cartels] decide, they can, and WILL create a hyperinflation in a flash, just to steal all your savings if they see it fit. They have done it before (1920's Germany, where a fresh bread once cost 1 billion D-Mark), and will do it again. And again. And again.

The risk of bitcoin being "cornered" is of zero concern to me. I trust bitcoin more than any hyper-inflatable "real" fiat you throw at me. And why? Due to the very randomness in miner rewards which keeps it running until 2140. And by that time (127 years), I'm sure there will be another even better system in-place.

My two cents of thoughts.

[FenixRD]

... due to the "infinite" divisibility of coins.

Why is that term used? Bitcoin is not infinitely divisible. It is divisible to 0.00000001. Am I just being nit picky? I hate it when it is said that bitcoin is in infinitely divisible. Or am I not getting something?

You are technically correct. The best kind of correct! (Futurama reference.) But you are also missing something.

The same way the open source nature and the original design of the code will allow a jump to a different key encryption system if an exploit is ever found of the current one, or when future compute advancements allow it to be even brute forced within a "short enough to be concerning" time period -- some estimates put this around 2030 depending on how quantum compute comes along -- the code can be (and indeed is generally planned on being) modified to allow further divisibility in the future.

[btc6000]

...some estimates put this around 2030 depending on how quantum compute comes along -- the code can be (and indeed is generally planned on being) modified to allow further divisibility in the future.

Further divisibility is irrelevant, there still can only ever be 21M BTC.

[aigeezer]

...some estimates put this around 2030 depending on how quantum compute comes along -- the code can be (and indeed is generally planned on being) modified to allow further divisibility in the future.

Further divisibility is irrelevant, there still can only ever be 21M BTC.

I don't think it's irrelevant. If something is divisible indefinitely through updates to the protocol, it doesn't much matter what the original count was. You have, in effect, infinite divisibility.

I dream of future units, say one Satoshi divided by a Googol and called a Bernanke or divided by a Googolplex and called a Bernanke-panky.     

I'm not sure how to reconcile that with the estimated 10E80 atoms in the universe though.     

[FenixRD]

...some estimates put this around 2030 depending on how quantum compute comes along -- the code can be (and indeed is generally planned on being) modified to allow further divisibility in the future.

Further divisibility is irrelevant, there still can only ever be 21M BTC.

Lol. That's one of the sillier things I've read this morning, so, thanks for that. I'm gonna be a dick now and tell you that there will actually never quite be 21M. In 2140 there will be a few Satoshis less than a full 21M and that is all there will ever be. And THAT is irrelevant. Not irrelevant? Infinite divisibility. As in, all almost-21M are nuked except for a half of one lonely bitcoin. Coupled with a divisibility patch and that alone is not the end of Bitcoin. As one example of many possible scenarios: We can trade in picosatoshi as the new arbitrary base unit, abbreviate them PCS, pronounce the plural as "Peeks" and come up with a clever "dollar" sign, and the show goes on.

1 PCS = 1e-12 Satoshi = 1e-20 BTC
In a world with 0.5 BTC remaining, there would be 5e+19 discrete PCS. And there is no reason we couldn't speak of kPCS ("kilopeeks") and so on; and likewise extend the other way to uPCS ("micropeeks" or "you-peeks") or whatever we need.
For comparison, currently it is set up so that there are to be 2.1e+7 BTC and 2.1e+15 Satoshi, the current smallest division.

Of course, this is such a nonissue I am almost foolish to respond, since it has been discussed and solved for years ad nauseum in various "Bitcoin doomed" threads.

[FenixRD]

Bernanke-panky

I genuinely just snorted some of my Bloody Mary, which is very uncomfortable FYI

[bb999]

Yes and no. Cornering it in the sense that an entity (cartel or otherwise) holds a large majority, would behave as hoarding. As in, not a concern due to the "infinite" divisibility of coins. However, the concerns you have probably -- whether you've played it out in your head or not -- stem from manipulation via artificially creating instabilities to profit from them. Dump many coins into the market, demand stays the same, price goes down for everyone. Buy up many coins, and the opposite happens. This is the same effect as large "cartels" and absurdly wealthy individuals inflict regularly to the stock market. Or even moderately wealthy individuals in penny stocks etc.

The problem with trying to profit from gathering a large quantity of them and manipulating the market is you can never be sure how much of your pile you will be able to get out of at the higher price.
It could end up like when the Hunt brothers tried to corner the silver market. http://en.wikipedia.org/wiki/Silver_Thursday  By buying up most of the available supply they drove the prices higher, but when the time comes to unload your hoard at those higher prices the volumes are typically not there to support unloading the whole amount, and you end up driving the price back down trying to get out of your position.

The cartel effect works much better if you are a natural supplier of whatever you are trying to manipulate (like OPEC) so you can control the supply more effectively.