Trade Bot forcing price down

[cruikshank]

Someone with a shitload of cash would have much more direct ways of fucking up the Bitcoin economy than by using a bot to trickle it down, no?

They could easily rent a botnet and use denial of service attacks against the exchanges. That has the benefit of not only bringing them down temperately, but datacenters often drop clients if they are the target of a such an attack since it affects the servers/pipeline of the other customers. They rather prevent it from happening again by dropping the one target than let the rest of their clients be affected a second time.

If this works like that, why are there no such bots on the stock exchange?

There are:
http://www.youtube.com/watch?v=WstJM_aNSj8

[1714977106]

1714977106

[S3052]

It is not the bots driving bitcoin prices down, but the fact that overall more people are selling than buying.

Bots have no chance to drive prices down if enough people start buying bitcoin with significant volume and less volume is up for sale.

[bulanula]

Pyramid / deck of cards is falling in on itself. Get out while you can before price tanks to real value of this ( 0.1 USD ).

[Nagle]

They could easily rent a botnet and use denial of service attacks against the exchanges. That has the benefit of not only bringing them down temporarily, but datacenters often drop clients if they are the target of a such an attack since it affects the servers/pipeline of the other customers. They rather prevent it from happening again by dropping the one target than let the rest of their clients be affected a second time.

Mt. Gox prepared for that. They route through Prolexic, which is an anti-DDOS service with a big pipe, five "scrubbing centers" on three continents, and very good firewalls.  Prolexic has 375 Gbps of inbound capacity.

[ElectricMucus]

Efficient DDOS attacks aim to exploit the allocation of memory resources for the tcp/ip sessions. There is no defense against this without increasing latency. If the attacker has enough computing power and bandwidth they would need more ram than they can currently stick into a single machine.

The only real defense is massive cloud computing.

[runeks]

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.

How does the bot keep a steady supply of Bitcoins unless it's willing to purchase BTCs at a higher price than the other participants in the market? If it's continually selling Bitcoins at a slightly lower price than all other participants, it will run out of Bitcoins unless it's willing to purchase Bitcoins at a slightly higher price than what others are willing to offer. This hasn't been clarified by anyone as far as I have read.

[elggawf]

How does the bot keep a steady supply of Bitcoins unless it's willing to purchase BTCs at a higher price than the other participants in the market? If it's continually selling Bitcoins at a slightly lower price than all other participants, it will run out of Bitcoins unless it's willing to purchase Bitcoins at a slightly higher price than what others are willing to offer. This hasn't been clarified by anyone as far as I have read.

Well because you see it drives the price down by setting it's sell point, then buying up sell orders all the way down to that sell point. It's not worried about running out of fiat money because freemasons.

[ElectricMucus]

How does the bot keep a steady supply of Bitcoins unless it's willing to purchase BTCs at a higher price than the other participants in the market? If it's continually selling Bitcoins at a slightly lower price than all other participants, it will run out of Bitcoins unless it's willing to purchase Bitcoins at a slightly higher price than what others are willing to offer. This hasn't been clarified by anyone as far as I have read.

Well because you see it drives the price down by setting it's sell point, then buying up sell orders all the way down to that sell point. It's not worried about running out of fiat money because freemasons.

I'm sure it is the Annunaki or at least Israel or the Dutch Royalty 

[runeks]

Well because you see it drives the price down by setting it's sell point, then buying up sell orders all the way down to that sell point. It's not worried about running out of fiat money because freemasons.

But that wouldn't cause a decrease in the price of Bitcoins. That would mean that if I try to sell Bitcoins for a higher price than what the bot asks for, I am able to sell them, because the bot buys them. And the price won't go down.
You can't bring down the price of Bitcoins using USD. You need to have Bitcoins (or pretend to have Bitcoins) in order to bring down the price of Bitcoins.

If the bot is underbidding other asks and overbidding other bids, it's just decreasing the gap between the asks and bids, ie. decreasing the spread, not causing Bitcoins to decline in value.

[runeks]

I guess if it is overbidding buys by a minute amount, and underbidding asks by a large amount, then the price would be lowered. Basically instead of the price moving between X and Z, the price now moves between X and Y (Y is between X and Z). Everybody sees the highs lowered, and loses confidence in speculating on bitcoins, and so the price drops.

Hmm, I disagree. The sole fact that he is overbidding current bids by a small amount means that what I can get for one Bitcoin increases (by a small amount). The value of a Bitcoin is what anyone can sell them for on the market, not what some participant on the market is buying them for. The price of currency A can be brought down only by selling A, not by buying A.

If X is the is the current bid, and Z is the current ask, and someone is offering (asking) to buy Bitcoins at Y (which is between X and Z), the spread changes from Z-X to Z-Y. No change in the price of Bitcoins happens, only a change in the spread. According to bitcoincharts.com, the current spread at Mt. Gox is .66%. Mt. Gox charges a 0.6% fee, which means what there is potentially 0.06% to be made by trading Bitcoins. If the spread decreases to below 0.6%, someone is making less money trading Bitcoins than they are paying to Mt. Gox in fees.
If I recall correctly, the fee drops to 0.55% at some trading volume, but you get the picture.

[elggawf]

But that wouldn't cause a decrease in the price of Bitcoins. That would mean that if I try to sell Bitcoins for a higher price than what the bot asks for, I am able to sell them, because the bot buys them. And the price won't go down.
You can't bring down the price of Bitcoins using USD. You need to have Bitcoins (or pretend to have Bitcoins) in order to bring down the price of Bitcoins.

If the bot is underbidding other asks and overbidding other bids, it's just decreasing the gap between the asks and bids, ie. decreasing the spread, not causing Bitcoins to decline in value.

Yeah I know, I don't actually believe this shit I was just ironically reiterating the kooky theory for you.

IMHO: Bitcoins are sliding down because of downward pressure caused by new coins being minted and lack of interest outweighing new interest (slightly) and actual bona-fide economic activity (by a long shot).

I don't pretend to be good at technical analysis or anything - I have zero experience with it, but it strikes me (as an amateur) that as people begin to realize they won't "get rich quick" off Bitcoin if they haven't already, they will slowly cut their losses and withdraw, and the price will slide back down to what it should be, based off the economic activity and the people who are really, really long (ie, always planned on holding Bitcoin until we enter deflationary stage).

Unfortunately, even now, fools are working on convincing the next batch of suckers investors that the price can only go up, when there's absolutely nothing to indicate it has to for a good many years to come.

[gewure]

I guess if it is overbidding buys by a minute amount, and underbidding asks by a large amount, then the price would be lowered. Basically instead of the price moving between X and Z, the price now moves between X and Y (Y is between X and Z). Everybody sees the highs lowered, and loses confidence in speculating on bitcoins, and so the price drops.

Hmm, I disagree. The sole fact that he is overbidding current bids by a small amount means that what I can get for one Bitcoin increases (by a small amount). The value of a Bitcoin is what anyone can sell them for on the market, not what some participant on the market is buying them for. The price of currency A can be brought down only by selling A, not by buying A.

If X is the is the current bid, and Z is the current ask, and someone is offering (asking) to buy Bitcoins at Y (which is between X and Z), the spread changes from Z-X to Z-Y. No change in the price of Bitcoins happens, only a change in the spread. According to bitcoincharts.com, the current spread at Mt. Gox is .66%. Mt. Gox charges a 0.6% fee, which means what there is potentially 0.06% to be made by trading Bitcoins. If the spread decreases to below 0.6%, someone is making less money trading Bitcoins than they are paying to Mt. Gox in fees.
If I recall correctly, the fee drops to 0.55% at some trading volume, but you get the picture.

I think you are just looking at one moment, I was talking more of over a period of time.

Say on monday there is no bot, the price bounces from 5.0 (X) to 7.0 (Z). Average price is about 6.0
Then on tuesday the bot appears, price bounces from 5.1 (X+a bit) to 6.0 (Y, Z-a bunch). Average price is now about 5.55, so the price went down.

On Wednesday, Mr. Speculator, who was planning to buy some bitcoins, sees the price dropped, and so he does not buy bitcoins (hoping they will drop a bit further). Mr Miner, who needs to pay his bills, sells anyway, so the price drops again.

..pretty good if you have alot of money and want to hold bitcoins a long time - you simply buy them all

[realcoin]

Bucket shop? ...who can proof it isn't?

...Typically the criminal law definition refers to an operation in which the customer is sold what is supposed to be a derivative interest in a security or commodity future, but there is no transaction made on any exchange. The transaction goes 'in the bucket' and is never executed. Without an actual underlying transaction, the customer is betting against the bucket shop operator, not participating in the market. Alternatively, the bucket shop operator "literally 'plays the bank,' as in a gambling house, against the customer."http://en.wikipedia.org/wiki/Bucket_shop_%28stock_market%29

If the bot belongs to mtgox itself, to generate commission? On every trade they would earn 0,6% or 0.55%...

If trading at mtgox or other BTC "exchanges" there is no transaction in the network, right? E.g. if I buy BTC and sell USD, the exchange does send internally the BTC from customer A to costumer B (in this case, me), not through the network, right?

[cruikshank]

If the bot belongs to mtgox itself, to generate commission? On every trade they would earn 0,6% or 0.55%...

If trading at mtgox or other BTC "exchanges" there is no transaction in the network, right? E.g. if I buy BTC and sell USD, the exchange does send internally the BTC from customer A to costumer B (in this case, me), not through the network, right?

If MtGox was running the bot for commissions, they would have that money to begin with, and wouldn't be making any money with it. They would be paying themselves with money they already have.

Unless you to meant to mean that MtGox is using the bot to churn customer accounts, though that would be easily noticed.

[runeks]

I guess if it is overbidding buys by a minute amount, and underbidding asks by a large amount, then the price would be lowered. Basically instead of the price moving between X and Z, the price now moves between X and Y (Y is between X and Z). Everybody sees the highs lowered, and loses confidence in speculating on bitcoins, and so the price drops.

Hmm, I disagree. The sole fact that he is overbidding current bids by a small amount means that what I can get for one Bitcoin increases (by a small amount). The value of a Bitcoin is what anyone can sell them for on the market, not what some participant on the market is buying them for. The price of currency A can be brought down only by selling A, not by buying A.

If X is the is the current bid, and Z is the current ask, and someone is offering (asking) to buy Bitcoins at Y (which is between X and Z), the spread changes from Z-X to Z-Y. No change in the price of Bitcoins happens, only a change in the spread. According to bitcoincharts.com, the current spread at Mt. Gox is .66%. Mt. Gox charges a 0.6% fee, which means what there is potentially 0.06% to be made by trading Bitcoins. If the spread decreases to below 0.6%, someone is making less money trading Bitcoins than they are paying to Mt. Gox in fees.
If I recall correctly, the fee drops to 0.55% at some trading volume, but you get the picture.

I think you are just looking at one moment, I was talking more of over a period of time.

Say on monday there is no bot, the price bounces from 5.0 (X) to 7.0 (Z). Average price is about 6.0
Then on tuesday the bot appears, price bounces from 5.1 (X+a bit) to 6.0 (Y, Z-a bunch). Average price is now about 5.55, so the price went down.

I believe you need to separate the asks and the bids in your examples. You can't mix up the asks and bids and say the value is between the asks and bids. The value of Bitcoins is not somewhere between the highest bid and the lowest ask; it's the highest bid. In your example, X is the highest bid and Z is the lowest ask. The highest bid (X) is what I can sell Bitcoins for at the moment (to the one bidding), ie. the value of Bitcoins. The lowest ask (Z) is what someone else is willing to sell his Bitcoins for.
The value of Bitcoins (or any currency) is determined by what it can be sold for, ie. the bid price. Not what other people are offering their Bitcoins for, the ask price.

On Wednesday, Mr. Speculator, who was planning to buy some bitcoins, sees the price dropped, and so he does not buy bitcoins (hoping they will drop a bit further). Mr Miner, who needs to pay his bills, sells anyway, so the price drops again.

Mr. Speculator does not see that the value of Bitcoins has dropped. He sees that what he can buy Bitcoins for is now less than it was before, but what he can sell Bitcoins for is slightly more than it was before, ie. the spread has decreased.

Of course, psychology can have any effect on the market. If Mr. Speculator doesn't realize that only the spread has decreased, he could conclude what you do and sell all his Bitcoins, thus causing Bitcoins to decline in value. But this doesn't mean the decreased spread has caused a decline in the value of Bitcoins, it means that Mr. Speculator's ideas about finance has caused him to sell his Bitcoins, which then causes a decline in the value of Bitcoins.

[realcoin]

If the bot belongs to mtgox itself, to generate commission? On every trade they would earn 0,6% or 0.55%...

If trading at mtgox or other BTC "exchanges" there is no transaction in the network, right? E.g. if I buy BTC and sell USD, the exchange does send internally the BTC from customer A to costumer B (in this case, me), not through the network, right?

If MtGox was running the bot for commissions, they would have that money to begin with, and wouldn't be making any money with it. They would be paying themselves with money they already have.

Unless you to meant to mean that MtGox is using the bot to churn customer accounts, though that would be easily noticed.

This is normally called Market maker: http://en.wikipedia.org/wiki/Market_maker its not without risk, but the owner of the Bucket shop, would ahve has a great advantage for market making.

[runeks]

I see your point; it's a valid one.

As far as I can tell, the price you suggest - an average between fulfilled asks and bids - is the past price of Bitcoins, ie. what Bitcoins were traded for. The price I suggest - the highest current unfulfilled bid - is the current price of Bitcoins, ie. what someone is willing to pay for Bitcoins right now.