Trade Bot forcing price down

[paraipan]

I really don't have any objections bots be used at exchanges, as a poster before me said they regulate price, increase liquidity, etc. but this bot or group of bots is somehow different, it stomps on legal transactions very fast, downward every time, try to sell at market price you will see they put few lower orders lower right before yours, repeat your order at lower price, happens again very fast. I also believe they have huge amounts of both dollars and bitcoins, although dumping bitcoins over time.

Having the ability to make only one transaction every minute, as temporary measure, i guess would solve the problem and price would recover.

[elggawf]

Over the past few months I've personally witnessed the bot continually undercutting other trades in order to force the price of bitcoins lower. This isn't a matter of just simple trading, the bot is actually forcing the value of bitcoins lower by preventing sales at current market values, and dropping prices to force the markets lower.

What you failed to deduce however is that in order to have any BTC to sell, the bot has to continually over-cut other buyers as well so your downward pressure theorem just crashed through the window. All bots do is shrink the spread (that means more stable prices), it can't affect the price in any one direction long-term, nor is it in their best interests to do so. Your entire "analysis" completely disregards one whole side of the equation, and is therefore bunk.

What's pushing the prices down is the fact that the inflation isn't matching the growth of the market, and is actually outpacing it. No one seems to complain when the inflation can't keep up with the market, because everyone "gets richer" ($_$) it's only when the market falls behind people start whining and looking for something to blame.

That doesn't mean anything needs fixing, because it's fixing itself: If the market price keeps falling, that simply means it was too high.

[arsenische]

What's pushing the prices down is the fact that the inflation isn't matching the growth of the market, and is actually outpacing it. No one seems to complain when the inflation can't keep up with the market, because everyone "gets richer" ($_$) it's only when the market falls behind people start whining and looking for something to blame.

hm... inflation? if you mean emission, it is only about 35% a year and is doomed to decline.. do you want to say the market is growing even slower? I doubt it. the downtrend we saw is just a consequence of a bubble & broken expectations.. not sure if it is somehow related to real economy

[geebus]

I really don't have any objections bots be used at exchanges, as a poster before me said they regulate price, increase liquidity, etc. but this bot or group of bots is somehow different, it stomps on legal transactions very fast, downward every time, try to sell at market price you will see they put few lower orders lower right before yours, repeat your order at lower price, happens again very fast. I also believe they have huge amounts of both dollars and bitcoins, although dumping bitcoins over time.

This is the point I'm trying to make. Not that bots are bad, but that this particular bot is bad.

[bitfoo]

I really don't have any objections bots be used at exchanges, as a poster before me said they regulate price, increase liquidity, etc. but this bot or group of bots is somehow different, it stomps on legal transactions very fast, downward every time, try to sell at market price you will see they put few lower orders lower right before yours, repeat your order at lower price, happens again very fast. I also believe they have huge amounts of both dollars and bitcoins, although dumping bitcoins over time.

Having the ability to make only one transaction every minute, as temporary measure, i guess would solve the problem and price would recover.

If someone wants to dump more bitcoins than they buy, there's nothing you can do to stop it. It could either be a bot always undercutting the current asking price, or the owner of the bot could simply dump them all at once (or once a minute). Creating any kind of regulation does nothing to prevent that, it only hurts legitimate traders (and "good" bots).

[Nagle]

...  I also believe they have huge amounts of both dollars and Bitcoins, although dumping Bitcoins over time.

Could the 'bot just be liquidating a large Bitcoin position very slowly? There are known to be some early adopters with huge numbers of Bitcoins, and some of them must want to get out before the end.

[cruikshank]

Could the 'bot just be liquidating a large Bitcoin position very slowly? There are known to be some early adopters with huge numbers of Bitcoins, and some of them must want to get out before the end.

After the drop from ~$35 per Bitcoin, anyone who didn't cash out then would have just cut loses by now and emptied everything. Works better to unload all at once rather than try and drag it out, leaving the investment holding onto money that could be put else where.

[paraipan]

I really don't have any objections bots be used at exchanges, as a poster before me said they regulate price, increase liquidity, etc. but this bot or group of bots is somehow different, it stomps on legal transactions very fast, downward every time, try to sell at market price you will see they put few lower orders lower right before yours, repeat your order at lower price, happens again very fast. I also believe they have huge amounts of both dollars and bitcoins, although dumping bitcoins over time.

This is the point I'm trying to make. Not that bots are bad, but that this particular bot is bad.

yeah, thanks for bringing the issues again, i had a post while ago about this and didn't know how to explain it. There are "good" and "bad" bots from our point of view but this one is getting the prize for the worst. Mt.gox would not do anything to stop it, they gain to much from that i guess.
I sugested 1 minute as an example, to simulate a more humane trading because when you put an ask or sell order you don't have the need to cancel it and re-order 10 times a second.

[padrino]

It's funny (and sad) that all of the free market concepts and "freedom" represented by bitcoin changes when some don't like how others use it and in turn want to see some regulations that don't exist in some of the markets bitcoin is attempting to supplement with a "better" alternative.

[elggawf]

I don't get it - the bot can't force the price down without using up a supply of Bitcoins. If it is, then it's some early adopter cashing out, and they're doing it in such a way so as not to completely trash the market. Why the need to intervene at all then? It's going to run out of Bitcoins eventually, and the "early adopter problem is no problem".

Like others have noted about this community, I can't help but note the irony of "keep your filthy regulation off our people's currency" when things are going good, then when a few people don't like the direction something's headed they run and scream to MtGox to "regulate this shit". Personally I think the fact that the price is moderately stable even through this bad event and that to be a sign that the idea is working as expected. The success of Bitcoin is not tied to how high it's value is, particularly during the inflationary stage.

[geebus]

I don't get it - the bot can't force the price down without using up a supply of Bitcoins. If it is, then it's some early adopter cashing out, and they're doing it in such a way so as not to completely trash the market. Why the need to intervene at all then? It's going to run out of Bitcoins eventually, and the "early adopter problem is no problem".

Like others have noted about this community, I can't help but note the irony of "keep your filthy regulation off our people's currency" when things are going good, then when a few people don't like the direction something's headed they run and scream to MtGox to "regulate this shit". Personally I think the fact that the price is moderately stable even through this bad event and that to be a sign that the idea is working as expected. The success of Bitcoin is not tied to how high it's value is, particularly during the inflationary stage.

It's High-Frequency Trading with a trend toward lowered prices. The bot is still making a profit of micro-cents or cents per buy/sell, but trending the prices lower. It is buying as much as it is selling. It will sell at the open bids to drop the prices, and then set buys just slightly lower, it also undercuts the asks, even if only making 0.0000000001 usd profit per btc.

[elggawf]

If it's buying as much as it's selling how is the price trending lower?

[geebus]

If it's buying as much as it's selling how is the price trending lower?

It will continue to undercut on sells to force the price down, while lowering it's buys, and selling to fulfill buy orders that are higher than it's own. Thus, forcing the price lower.

[elggawf]

It will continue to undercut on sells to force the price down, while lowering it's buys, and selling to fulfill buy orders that are higher than it's own. Thus, forcing the price lower.

... and there's data to support this hypothesis?

How does it sell down to within 0.55% of it's own buys without eventually going broke?

Edit: actually, with the fees on both sides, don't you need a 1.1% margin to break even (I'm assuming that this bot is racking up enough volume to get the discounted trade rate)?

[geebus]

It will continue to undercut on sells to force the price down, while lowering it's buys, and selling to fulfill buy orders that are higher than it's own. Thus, forcing the price lower.

... and there's data to support this hypothesis?

How does it sell down to within 0.55% of it's own buys without eventually going broke?

Edit: actually, with the fees on both sides, don't you need a 1.1% margin to break even (I'm assuming that this bot is racking up enough volume to get the discounted trade rate)?

It's visible. You can watch it happen. Parse the order book and place competing orders, you'll see the previous orders shift to undercut or outbid you.

It doesn't seem as though the bot is too concerned with losing money on a few transactions as long as it is making money on others.

[TiagoTiago]

If two bots using that exact same algorithm were running on the same market, would that result into a downward spiral?

[geebus]

If two bots using that exact same algorithm were running on the same market, would that result into a downward spiral?

I would assume that would be the case, since this particular bot is trying to aggressively undercut/outbid other traders (while maintaining profit).

...and from the screenshot, you can see multiple trades that are shifting themselves in the same way that this bot generally does, which would indicate multiple threads of trading, or multiple users running the bot.

Likewise, I'm seeing it on MtGox, TradeHill, BTC-E, Exchange Bitcoins, etc... I even briefly saw it on Intersango, despite them not having an API to trade with (at the time, I don't know about now).

[TiagoTiago]

Btw, i think this presentation is kinda relevant: http://www.ted.com/talks/lang/eng/kevin_slavin_how_algorithms_shape_our_world.html

[the joint]

this bot activity is not nice at all, have been observing it for few months already and say that i would be more inclined to support exchanges that limit high freq trades from same ip or take some kind of measures to balance trading with humans and bots on the same platform. This is my personal opinion

Exchanges make money on commissions.

If you limit the high freq. trades, you'll probably get a massive transaction fee imposed.

[geebus]

this bot activity is not nice at all, have been observing it for few months already and say that i would be more inclined to support exchanges that limit high freq trades from same ip or take some kind of measures to balance trading with humans and bots on the same platform. This is my personal opinion

Exchanges make money on commissions.

If you limit the high freq. trades, you'll probably get a massive transaction fee imposed.

Higher prices directly cause higher commissions.

Commission = # of trades * value

So, as value increases, # of trades can decrease and commission will remain constant.