Why is the bitcoin price being held from dropping below $14?

[Edward50]

Why and Who is holding the market from dropping below $14? It is pretty obvious in the last couple of days that something is trying to hold the price from dropping below $14.

Is this manipulation? Is this bitcoin owners trying to not sell below $14 for fear that the bitcoin will go lower? Is it not manipulation and just the free market think it is worth exactly $14.00099 and not $13.99?

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[Atom]

no.... it's someone deciding to sell a bunch of coins (470) at 14/ea

Its called trading

[grod]

One crazy theory has the early adopters (who have LOTS of skin in the game) stabilizing bitcoin.  It's in their interest for this to become a currency, they're not trying to "cash out" quickly.  The theory has them targeting a roughly 100M market cap.

So when BTC prices spike they start selling from their vast stockpiles.  They then use the proceeds to prop up the price if it craters too low.  Three birds with one stone -- they make money, they stabilize the currency and they make bitcoins boring enough that short term "easy money" speculators leave.

It certainly makes sense, but I just don't buy it for some reason.

[wumpus]

Simplest explanation: because no one is willing to sell under $14?

[Atom]

I believe it was the Bitcoin Report technical analysis show that recently made the case for much of the early adopter crowd cashing out in a big way during the last ramp and subsequent drop.  Frankly I don't buy the stabilization theory either, that implies some sort of implicit conspiracy and I just don't think the organization exists for that in this community.

[error]

Satoshi is doing it, of course.

[The_JMiner]

Actually I think it would be great if it was pegged at 14$ for a while so a person experimenting accepting them wont feel like their losing anything. This will be great for those business that adopt bitcoin

[S3052]

Nice dream but free markets dont work that way.

In the same way US exporters could dream that the USD/EUR, USD/JPY, etc. exchange rates would be stable to plan properly.

Instead, hedging is needed for merchants and traders.

The same is true for bitcoin.

[grod]

A large, truly free market perhaps.

Here we have essentially one web site, with fewer than 6000 people participating.  Well under 10% of all bit coins generated are on the market.  We know for a fact that 8% of existing coins were enough to drive the price from $17.5 to $01.  While it's a free market from a standpoint of "you can play or not", it's certainly not the ideal description of something trading for "true" value rational actors determine. 

I won't get into the whole existence of a rational actor in the first place, but there are many question marks and pieces of data only SOME of the trading parties have.  And the rest is pure guesswork.  What I'm saying is: the commodity may be fairly valued because we all agree on the value, but the agreement is based on invalid data.  Moreover, there are millions of people in the world with sufficient assets to dictate pricing in this tiny, illiquid market.  And yes, truly free markets do work exactly like that.

The longer I think about this the spookier all of this seems.  This action just isn't natural.  And whenever I see unnatural it doesn't end well for those not in the know (read: me).  If the intent was to get a bunch of cheap bit coins it worked, I've dumped the ones I've been generating & hoarding.  If someone understands investor psych this well and caused me to sell cheaply then they DESERVE the profits.

If I'm right there will be price movement soon enough, it'll be big, and I'll be able to get back in on the action.  If I'm wrong, this is natural and the currency keeps flatlining because demand and supply remain perfectly balanced forever I've lost nothing.

[Piper67]

A large, truly free market perhaps.

Here we have essentially one web site, with fewer than 6000 people participating.  Well under 10% of all bit coins generated are on the market.  We know for a fact that 8% of existing coins were enough to drive the price from $17.5 to $01.  While it's a free market from a standpoint of "you can play or not", it's certainly not the ideal description of something trading for "true" value rational actors determine. 

I won't get into the whole existence of a rational actor in the first place, but there are many question marks and pieces of data only SOME of the trading parties have.  And the rest is pure guesswork.  What I'm saying is: the commodity may be fairly valued because we all agree on the value, but the agreement is based on invalid data.  Moreover, there are millions of people in the world with sufficient assets to dictate pricing in this tiny, illiquid market.  And yes, truly free markets do work exactly like that.

The longer I think about this the spookier all of this seems.  This action just isn't natural.  And whenever I see unnatural it doesn't end well for those not in the know (read: me).  If the intent was to get a bunch of cheap bit coins it worked, I've dumped the ones I've been generating & hoarding.  If someone understands investor psych this well and caused me to sell cheaply then they DESERVE the profits.

If I'm right there will be price movement soon enough, it'll be big, and I'll be able to get back in on the action.  If I'm wrong, this is natural and the currency keeps flatlining because demand and supply remain perfectly balanced forever I've lost nothing.

Agreed, and while we're at it, can the bot programmes cut out this nonsense of going to the seventh decimal place? I mean, really? Are we making decisions on .0000001 of a USD???

[philipk]

We know for a fact that 8% of existing coins were enough to drive the price from $17.5 to $01.

Can you talk about this?

What happened that you are referring to?

Keep in mind I'm new to this.

[piramida]

We know for a fact that 8% of existing coins were enough to drive the price from $17.5 to $01.  While it's a free market from a standpoint of "you can play or not", it's certainly not the ideal description of something trading for "true" value rational actors determine.  

We also know for a fact that a currency backed with an over 2 trillion dollars economy (british pound) can be devastated by a SELL of measly 10billion pounds (less than 0.5% of that), lookup Black Wednesday. Meaning that any financial instrument will be completely crushed by a sudden sell of 8% of it's total worth. Bitcoin fared rather well, in fact, recovering and continuing only days after the crash.

[grod]

We know for a fact that 8% of existing coins were enough to drive the price from $17.5 to $01.

Can you talk about this?

What happened that you are referring to?

Keep in mind I'm new to this.

The One Exchange, mtgox, was storing their password data in unsalted MD5 hashes, which means any password < 11 characters long might as well have been in plaintext.   Script kiddies got ahold of the account name/email/password database and consequently mtgox's master wallet.  They sold.  One guy got 300k bitcoins at $.01, so in reality 200k bitcoins was enough to utterly wipe out all buy orders.  That's 200000/6800000 or 3% of the float, for those playing the home game.  Alternatively, roughly a third of a million dollars was enough to put the entire bitcoin market into a tailspin.

TL;DR -- a small fraction of a bonus check of a mediocre wall street trader is enough to play the fledgeling bitcoin market like a fiddle.  Which means anyone seriously playing this game is most likely a rank amateur ripe for plunder.

[philipk]

One guy got 300k bitcoins at $.01, so in reality 200k bitcoins was enough to utterly wipe out all buy orders.

WOW!

That really sucks for MtGox.

Not to mention everyone else.

I guess they had saved enough profit to start up again.

[grod]

We know for a fact that 8% of existing coins were enough to drive the price from $17.5 to $01.  While it's a free market from a standpoint of "you can play or not", it's certainly not the ideal description of something trading for "true" value rational actors determine.  

We also know for a fact that a currency backed with an over 2 trillion dollars economy (british pound) can be devastated by a SELL of measly 10billion pounds (less than 0.5% of that), lookup Black Wednesday. Meaning that any financial instrument will be completely crushed by a sudden sell of 8% of it's total worth. Bitcoin fared rather well, in fact, recovering and continuing only days after the crash.

British pound went to less than 1/20th of 1% of its previous value relative to other currencies?  Really?  I missed that part.   Bitcoin recovered mostly because trading was halted for over a week with all assets frozen while people came to their senses but most importantly the actual trade was backed out.  Recovered is relative, it's still down 20% since then.

If someone were actually to sell 200k bitcoins on the market you would definitely see an impact.  Just pretending to have done so caused a pretty big haircut.

[RodeoX]

I'm not an economist, but I'm also not sure that the volatility and weirdness in the market is that strange. Remember this is why regulation exists in other markets. Manipulation, wild swings, etc. Welcome to the real free market. Not what Ayn Rand told you it would be?

[grod]

I'm not an economist, but I'm also not sure that the volatility and weirdness in the market is that strange. Remember this is why regulation exists in other markets. Manipulation, wild swings, etc. Welcome to the real free market. Not what Ayn Rand told you it would be?

Precisely.  This isn't the kiddie pool.  While tiny, this pool is FULL of seaweed, undertow, jellyfish and floating mines.  While the starry eyed talk about mass adoption this is hardly the place for Grandma to splash around with her floaties.

I realize I sound very negative, but I think occasional reality checks are needed.  Otherwise bitcoining starts sounding like a cult.  Newcomers are all like, "wait, what's this about my balls being lopped off?  I just came for the free Cool-Aid..."

Oh, and mtgox lost very little due to their wise policy of only allowing $1000 in withdrawals per day.  They simply reversed all the transactions and only a few hundred bitcoins were truly "lost."  Less than a day's worth of profit.

[Edward50]

I'm not an economist, but I'm also not sure that the volatility and weirdness in the market is that strange. Remember this is why regulation exists in other markets. Manipulation, wild swings, etc. Welcome to the real free market. Not what Ayn Rand told you it would be?

Precisely.  This isn't the kiddie pool.  While tiny, this pool is FULL of seaweed, undertow, jellyfish and floating mines.  While the starry eyed talk about mass adoption this is hardly the place for Grandma to splash around with her floaties.

I realize I sound very negative, but I think occasional reality checks are needed.  Otherwise bitcoining starts sounding like a cult.  Newcomers are all like, "wait, what's this about my balls being lopped off?  I just came for the free Cool-Aid..."

Oh, and mtgox lost very little due to their wise policy of only allowing $1000 in withdrawals per day.  They simply reversed all the transactions and only a few hundred bitcoins were truly "lost."  Less than a day's worth of profit.

Didn't the hackers drop the price to .01 bitcoin so that they can pull out $1000 dollars worth of bitcoin at .01? Which would enable them to pull out 100,000 bitcoin?

[grod]

That was their theory.  In practice, once again, wisely mtgox used a weighed average over time to compute value.  So no, they only pulled out a few hundred coins.

Had the hackers known the limits precisely they'd have used a multiple account attack.  But they didn't, and that's why we still have an exchange site and a multi-dollar value for bitcoins.

[piramida]

British pound went to less than 1/20th of 1% of its previous value relative to other currencies?  Really?  I missed that part.

It very well could have, if it weren't pulled off the exchanges (i.e., protection kicked in). Really, 8% is a very serious portion of any economy. Any bank would go belly up if people attempt to withdraw 8% of it's money in one day.

And selling hacked money vs. actually selling bitcoins is absolutely the same from the exchanges point of view. Supply was overwhelmingly larger than demand, getting new money in takes several days, so it is absolutely clear to me - what happened and why it does not prove any weakness in the BTC economy. Just a poor exchange protection.