What if MT Gox goes under?

[MatTheCat]

What makes you so sure?  I think that is really interesting.  But what makes you think someone really stepped in?  I mean, they could  have just let it drop a bit more, I mean unless someone is trying to stabilize the market, in which case we have a battle between the stabilizers in the west and the manipulators in Huobi.

But, I did see a reversal in those bot buys on Huobi.  It looked clear to me they dropped the price but in order to avoid a panic sell off they stopped it and drove it back up.  Short then Long.  Think of it this way; no news whatsoever to drive that dip yesterday.  Lead by Huobi, the exchange who operate illegally (yes, I said illegally), where it is a speculators dream with 0 fees.  

And I know Huobi doesn't have an open API, but it would be nice to somehow get a .csv of trades from them to analyze even compare with Stamp and see what exactly happened.

Anyway Huobi is messing everything up right now.  In order to be legitimate this year Bitcoin needs to get rid of Huobi just as much as we did silkroad.

FYI, the only actual use of Bitcoins that I have beyond trading them in order to get more fiat, is on Silk Road. Silk Road is alive and well and thriving like never before....even if it is infiltrated by the FBI.

I had front row seats for the duration of the drop and the bounce, as I had a relatively large short sell on, which done me quite well, but would have netted me a massive profit had the $765 support been broken through as it looked like it would (and indeed was on BTC-E and Huobi). I watched the sell-off start on Huobi, and noticed that Bitstamp would not budge which kind of confirms my suspicions of price holding by the bots that are dominating that market. The Huobi sell-off however kept going. I suppose that the fact that one day, Huobi may sell right off and keep going to zero, which would mean a glut of coins hitting USD exchanges at fire sale prices (i.e. the holders of these coins happy to get anything they can for them); sits somewhere at the back of most Bitcoiners minds. At some point, the selling pressure obviously overcame the bot algorithms on Stamp, as Stamp slid, everywhere else started to slide along with it. Stamp in the end smacked right of the $765 support and bounced right back up to the high $790 level, I switched from short to long on the way up. However, it became clear that there just was not the support to hold this bounce at all. Sensing the coming change in momentum, I switched back from long to short, and was a few hundred buck in the green within minutes, with a massive ASK wall relentlessly pursuing the spot price with the Bid wall in hasty retreat. It looked like a forgone conclusion until out of knowwhere a 350BTC trade devoured a big chunk of the advancing Ask wall at 775. Then in the following minutes another 3 similar large bids (that did not appear on trade wall) took further sting out of the downward momentum and the markets stabilised.

After having broken a major support level, Huobi reached down into no-mans land, bounced back and hovered around on very low volume, looking ultra weak. Only after Stamp failed to plunge back down, did Huobi start to consolidate. All other exchanges followed Stamp. Stamp was the only exchange where there was these massive single bids that had the effect of stopping the sell-off pressure dead in its tracks. It took $750K worth of capital to pull this off. I have no proof that it was deliberate human intervention, but I would be a gullible naive fool to believe anything else.

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[Apostata]

I had front row seats for the duration of the drop and the bounce, as I had a relatively large short sell on, which done me quite well, but would have netted me a massive profit had the $765 support been broken through as it looked like it would (and indeed was on BTC-E and Huobi). I watched the sell-off start on Huobi, and noticed that Bitstamp would not budge which kind of confirms my suspicions of price holding by the bots that are dominating that market. The Huobi sell-off however kept going. I suppose that the fact that one day, Huobi may sell right off and keep going to zero, which would mean a glut of coins hitting USD exchanges at fire sale prices (i.e. the holders of these coins happy to get anything they can for them); sits somewhere at the back of most Bitcoiners minds. At some point, the selling pressure obviously overcame the bot algorithms on Stamp, as Stamp slid, everywhere else started to slide along with it. Stamp in the end smacked right of the $765 support and bounced right back up to the high $790 level, I switched from short to long on the way up. However, it became clear that there just was not the support to hold this bounce at all. Sensing the coming change in momentum, I switched back from long to short, and was a few hundred buck in the green within minutes, with a massive ASK wall relentlessly pursuing the spot price with the Bid wall in hasty retreat. It looked like a forgone conclusion until out of knowwhere a 350BTC trade devoured a big chunk of the advancing Ask wall at 775. Then in the following minutes another 3 similar large bids (that did not appear on trade wall) took further sting out of the downward momentum and the markets stabilised.

After having broken a major support level, Huobi reached down into no-mans land, bounced back and hovered around on very low volume, looking ultra weak. Only after Stamp failed to plunge back down, did Huobi start to consolidate. All other exchanges followed Stamp. Stamp was the only exchange where there was these massive single bids that had the effect of stopping the sell-off pressure dead in its tracks. It took $750K worth of capital to pull this off. I have no proof that it was deliberate human intervention, but I would be a gullible naive fool to believe anything else.

Wow, thanks for the detailed analysis.  I am very interested in the correlation between Huobi and the other exchanges.  I have been very skeptical of Huobi and have put a tremendous amount of work into researching them.  So correct me if I am wrong but you believe someone is deliberately putting through these massive buys in order to stop the price from going down further?  If that is true, why would it even affect Huobi, if it is the one leading the price?  If Huobi is indeed painting the tape, wouldn't it not matter what happened on Stamp? 

[hd060053]

As an european who uses SEPA, i keep taking profits of the gox situation, because EUR rate is also 20% higher than on other exchanges.

And you can withdraw EUR (1-6 weeks). Never had problems with that.

[MatTheCat]

Wow, thanks for the detailed analysis.  I am very interested in the correlation between Huobi and the other exchanges.  I have been very skeptical of Huobi and have put a tremendous amount of work into researching them.  So correct me if I am wrong but you believe someone is deliberately putting through these massive buys in order to stop the price from going down further?  If that is true, why would it even affect Huobi, if it is the one leading the price?  If Huobi is indeed painting the tape, wouldn't it not matter what happened on Stamp? 

Yesterday morning, that is indeed what happened. Market pressures had knocked out the Stamp/BTC-E price bot's price control algorithms and divine intervention was required in the marketplace to save it from plunging and I witnessed the particular out of the blue sudden buy order that knocked out the Ask wall which was sprinting after the spot price. Market manipulation goes on all financial markets and always has done, this is why there exists at least the facade of market regulators. No market regulators in Bitcoin though.

The entry of China into Bitcoin is accredited as being the reason behind that rampant rise in Bitcoin price. From $60 to $1200. Aside from the obvious consumption of Bitcoin supply, there was also the psychological factor of 'Bitcoin taking off in China'. At first, the Chinese exchanges operated at an often quite different price to the USD exchanges as the Chinese economy is very hard one to get into, but as arbitrage lines began to open up, the gap has closed and Bitcoin now trades at near parity between all high volume exchanges with Gox being a notable exception. Since the Chinese government turned cold on Bitcoin, the China factor has turned full 180 degrees. It was accredited as the instigator of the massive Dec crashes yet Chinese trade still accounts for 70% of Bitcoin volume today, a statistic that is helped by the fact that on Huobi, trade fees are 0%, which means it pays traders to chase and run from even the most minute of price shifts. Because of this, the CNY trade volume is clearly an inflated representation of the total amount of Bitcoins being traded in China, but there is still undeniably a significant amount of BTC in China. The date of the government ban, is now less than one week away. What will happen to all the Chinese Bitcoin if/when the likes of Huobi stop trading? Where they gonna go? I don't know how much Bitcoin you are sitting on but imagine if you had $500K worth of spending power tied up in Bitcoin if you were to liquidate today. How would the prospect of hundreds of thousands of Chinese coins affect your mindset and market behaviour? How would you react if you seen Huobi start to plunge? With it being so close to the doomsday (31st Jan), would it cross your mind that "here comes the big one". If so, what would you be looking to do with at least a part of your Bitcoin stash?

Markets never go straight down. There are always bounces caused by traders buying to take profits on short positions and/or trying to catch the falling knife and bag themselves cheap coins that they can turn a quick profit on or even hold. Huobi bounced well short of the next resistance level, and was looking weak as hell with practically no volume and trending slowly downwards (it was also well into the 'wee small hours' in China by this time). Bitstamp is the main USD and cash out exchange and Bitstamp set the example by bouncing and consolidating, but like I said, it took some very hefty market intervention to prevent it from bouncing and plunging. As you might expect, there was low volume on all exchanges at this point in time, all except Bitstamp. That high volume was the individual bids that saved Bitcoin markets across the globe, as trades everywhere all all nervously looking at action on other markets, with bots on all markets coded to take account of what is happening on other markets.

I have had a bit of a rant about this market manipulation and surprisingly enough, not many have denied that it exists. Many see it as a benevolent manipulation from Bitcoin whales looking to promote a good image of Bitcoin in order to enhance its long term prospects and to encourage big retail business to start dealing in it. To share in this rosy idealised view of Bitcoins, would require me to be either ultra naive, or to believe that the world's top Bitcoiner's remain ideological animals and haven't been corrupted by greed. I of course see things somewhat more cynically and believe that the Bitcoin price is being artificially held up so that whose whales in the know, can liquidise large quantities of Bitcoin at a much higher price than they would get by playing fair. I think the whales want to cash a significant amount of coin now, because they know that a complete collapse of Bitcoin in China is on the cards, and they know that this will drive Bitcoin to a fraction of what it is presently (over)valued at in a final post crash capitulation event.

The end of January is fast approaching and for my money, the organic market forces are pressing Bitcoin down but it is being held up by a temporary man-made dam. When this dam has served its purpose, it will be removed and Bitcoin will be left to its fate. Bitcoin will probably not be killed, but there is a chance that it might.

My advice to myself and to anyone else is don't be tempted long into Bitcoin at these prices by seeming rallies unless some very significant resistance levels are taken out.

[Kerrai]

I have a long analytic post on my blog about the MtGox situation:

http://theblogchain.com/2014/01/24/mtgox-is-mtvesuvius-the-full-story/

I've tried to provide a clear argument for the "bank run" that I see occurring using data and graphs of Gox. Thoughts?

[aminorex]

There is nothing wrong with the Japanese banking system.  Any problems are Gox's problems.

I see you've never tried doing any business in Japan. 

[Bono]

If Gox goes under I'll suck a cock.

[31337157]

If Gox goes under I'll suck a cock.

Are you sure you want to put that out there? You very well may end up eating your words here (or sucking in this case). Quoting for future reference.

[Apostata]

Again, very well thought out analysis, MatTheCat.  I think you raised the most important question of all:

What will happen to all the Chinese Bitcoin if/when the likes of Huobi stop trading?

I believe it is not a matter of "if" but "when".  Huobi is in defiance of government regulation, and not just regarding bitcoin:

1.) Their interest rates are usurious.  In China, the usury loan is defined by the judicial authority as any loan rate more than 4 times the basic rate set by the People’s Bank of China, which is 24% (6% * 4) per annum at the moment, while Huobi charges 0.1%-0.2% per day, meaning 36%-72% per annum.

2.) Using personal bank accounts is illegal (although we all know this has now stopped, it doesn't alleviate the fact that this was happening up until the 12th of January)

3.) Huobi's corporation is registered in Beijing, and its scope of business is listed as "sale of software; technology development, transfer, consultancy and service; design, develop, agent, issue advertisement."  Meaning Huobi's business is not operating within the scope of business for which it is licensed.

I can go on and on.  My point being, if the PBOC wants to shut Huobi down, they have more than ample reason to do so.  Therefore I believe this thread should be focusing on the fate of Huobi, not MtGox.

The date of the government ban, is now less than one week away.

Keep in mind, the only thing that is happening on the 31st is 3rd party payment providers (such as PayPal and Alipay) are no longer providing services to exchanges.  But this is merely a formality at this point, since they have already terminated services to exchanges.  Huobi and OKCoin are not using 3rd party payment providers (they use fund transfers between their corporate bank accounts and their customers' accounts).  

Therefore, some could say Huobi and OKCoin are operating in a "grey area".  However the December 5th Official Bitcoin Notice clearly stated Banks and Financial Institutions cannot "directly or indirectly" provide any service related to bitcoin, including trading.  Bottom line is that everything is dependent on what the PBOC wants to do about them.  The way I see it is essentially, these 2 exchanges are saying "screw you PBOC, we've found a way to circumvent your new regulations".  

But I can only speculate as to the PBOC's intentions here.  In my personal opinion, the PBOC is not going to like this.  Alibaba and 3rd party payment providers have all stopped supporting anything bitcoin related.  There was no "official" order for them to do so; each of them did so voluntarily (similar to Tencent's volunteering to terminate their own digital currency – QQ Coin - in 2009 at the request of the PBOC).  Therefore I can't see how banks could allow Huobi and OKCoin to continue to operate this way.  As far as I am concerned, this is a ticking time bomb.  

Many see it as a benevolent manipulation from Bitcoin whales looking to promote a good image of Bitcoin in order to enhance its long term prospects and to encourage big retail business to start dealing in it.
I of course see things somewhat more cynically and believe that the Bitcoin price is being artificially held up so that whose whales in the know, can liquidise large quantities of Bitcoin at a much higher price than they would get by playing fair.

I agree, the later seems more likely.  Even if "whales" are trying to prop up the price, they are fighting a massive uphill battle, since the result of Huobi closing down will eat through virtually any wall they put up.

My advice to myself and to anyone else is don't be tempted long into Bitcoin at these prices by seeming rallies unless some very significant resistance levels are taken out.

Good advice!

[Bono]

If Gox goes under I'll suck a cock.

Are you sure you want to put that out there? You very well may end up eating your words here (or sucking in this case). Quoting for future reference.

I'll give you 0.1 BTC to delete all evidence you ever quoted it.

[BitcoinAshley]

I have a question for the tin-foil hat people...

So, these gigantic manipulative buys that are solely for the purpose of keeping price up...
Are they somehow worse than another phenomenon we commonly see: Gigantic manipulative sells that are solely for the purpose of pushing price down?
(In both cases, we assume the seller's intent based on the amount of slippage the seller would incur, which can indicate that a buy/sell order is purely for manipulation - i.e. "who the heck would sell 10,000 coins at MARKET on an exchange, unless they were TRYING to drive price down?" etc.)

Whales are whales. There are whales who try hard to keep price up, and there are whales who try hard to push price down.

Battle of the whalez!

[Apostata]

I have a question for the tin-foil hat people...

So, these gigantic manipulative buys that are solely for the purpose of keeping price up...
Are they somehow worse than another phenomenon we commonly see: Gigantic manipulative sells that are solely for the purpose of pushing price down?
(In both cases, we assume the seller's intent based on the amount of slippage the seller would incur, which can indicate that a buy/sell order is purely for manipulation - i.e. "who the heck would sell 10,000 coins at MARKET on an exchange, unless they were TRYING to drive price down?" etc.)

Whales are whales. There are whales who try hard to keep price up, and there are whales who try hard to push price down.

Battle of the whalez!

I mean, my answer would be no.  But what I am seeing is not massive orders either way.  I'm seeing large movements initiated by Huobi with tiny little orders that are seeming to push the price in one direction or the other.  Why else would someone be placing multiple orders worth less than $1?

There is no denying there are many whales out there with their own agenda.  But Huobi is the one driving this thing.  They are the ones influencing each and every other exchange out there.  So I just have to reiterate the point I am trying to make; forget about MtGox closing.  What happens when Huobi gets shut down?

[T.Stuart]

If Huobi was shut down then there would be one less bogeyman for the doomsday scenarists. I expect it would cause the price to lift.

[fonzie]

So i have to expect if all exchanges would be closed over the next months the price would immediately go to 80000000, and we wouldn´t have to wait 5 years?

[spooderman]

Gox is currently "over"?