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Author Topic: Who is driving the market prices?  (Read 571 times)
omarabid
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September 18, 2011, 04:39:24 PM
 #1

I have been reading about Bitcoin for several months. Well, a little everyday or a couple of days. I'm still a newbie, but I liked something about Bitcoin: It's open, and it's not regulated.

Well, this has obvious downsides. But I'm more to ignore them and consider them usual noise that alter the signal quality. I checked over bitcoinica, and it was a great trading platform, so I decided to get started there.

But, there is a question which makes me wandering: Who is driving the market prices? Bitcoin is different that every trading platform is closed to itself and has its' own prices, orders, and users. But what I'm noticing is that the price adjusts for the different trading platforms.

Check out: http://bitcoincharts.com/markets/

The prices are not exactly the same, but they almost are. These are different trading platform; which have different volumes and users. There is certainly something pushing the market in a particular direction  Huh

Any ideas?  Cool
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notawake
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September 19, 2011, 12:05:47 AM
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Why would the price of a Bitcoin change depending on the trade location when all these locations are, for the most part, equally accessible to buyers and sellers?

Bitcoin: 1HZRowLTkmF6M8V11vj2dmVf2r9VK7dVfo | Namecoin: MxT6tjJZcYZeWUGNgsAMxJ7wpDgKMdub4y

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nmat
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September 19, 2011, 12:17:30 AM
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I have been reading about Bitcoin for several months. Well, a little everyday or a couple of days. I'm still a newbie, but I liked something about Bitcoin: It's open, and it's not regulated.

Well, this has obvious downsides. But I'm more to ignore them and consider them usual noise that alter the signal quality. I checked over bitcoinica, and it was a great trading platform, so I decided to get started there.

But, there is a question which makes me wandering: Who is driving the market prices? Bitcoin is different that every trading platform is closed to itself and has its' own prices, orders, and users. But what I'm noticing is that the price adjusts for the different trading platforms.

Check out: http://bitcoincharts.com/markets/

The prices are not exactly the same, but they almost are. These are different trading platform; which have different volumes and users. There is certainly something pushing the market in a particular direction  Huh

Any ideas?  Cool

Bitcoinica is not a good place to start. 5:1 leverage with Bitcoin's volatility is insane. Why don't you try some calm waters at TradeHill/MtGox?

As for your second question, there are people doing arbitrage. For example, say I have two accounts, one at MtGox and the other one at TradeHill. I have USD and Bitcoins in both. If the lowest ask at TradeHill is lower than the highest bid at MtGox, I will earn money if I buy at TradeHill and sell at MtGox. That is why most exchanges have the same prices.
Asymptote
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September 19, 2011, 01:37:52 AM
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Prices are set on exchanges, where a buy order and a sell order have an equal bid price. If Bob puts in an order to sell at $10 each, and Nancy puts in an order to buy at $10 each, then the exchange makes the trade happen, and the market price is then listed as $10.

Now, on different exchanges you have different orders from different buyers and sellers. Thus, the market price on one exchange will always be different than other exchanges. However, the prices will tend to be very similar, because if one becomes much higher than another exchanges, people buy at the lower exchange and sell on the higher one, bringing the prices into alignment. The more efficient a market is, the less difference there will be between exchanges.

Make sense?

Bitcoin FTW
Dargo
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September 19, 2011, 03:48:53 AM
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So, the price is driven by the trading action (the buy and sell decisions of individuals). Sometimes trading action just makes the price chop around, but other times the trading action can gain momentum up or down and price trends up or down accordingly. If you were looking for a conspiracy theory, then, yes, sometimes the price can be manipulated by individuals who have a lot of money or who own a lot of shares in the security (whether it is bitcoins, shares in a stock, or whatever).
Als Pawnshop
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September 19, 2011, 09:58:25 AM
 #6

Obviously. arbitrage opportunities tend to equalize the exchange rates on various exchanges.  However my observations are that BTC valuations are lowest in the USA and higher in other countries.  This suggest to me that most of the selling pressure is coming from Americans or from people selling in USD whereas people from other countries are strongly demanding bitcoin and there is a lack of people providing them or preforming the arbitrage.
P4man
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September 19, 2011, 10:06:25 AM
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Obviously. arbitrage opportunities tend to equalize the exchange rates on various exchanges.  However my observations are that BTC valuations are lowest in the USA and higher in other countries.  This suggest to me that most of the selling pressure is coming from Americans or from people selling in USD whereas people from other countries are strongly demanding bitcoin and there is a lack of people providing them or preforming the arbitrage.

Or Satoshi is an American (or at least wants his wealth in USD)  Smiley

On a more serious note; I think bitcoin is slightly less unknown in the US than elsewhere. AFAIK, its not like its had massive media coverage in the US, but at least some. Where I live in the EU, I have yet to see any mainstream media attention whatsoever. I have yet to meet anyone thats heard of it. The result of that could be that most miners now are US, or most of the speculators that fueled the $30 bubble. But its only a matter of time before the Chinese take over Cheesy

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