Price manipulation going on right now at the big exchanges

[AceOfWands]

Price manipulation may be going on, but the price of a bitcoin is still high compared to the cost of mining it. When the hashrate curve flattens out again (as it has before), or at least when the "cost of mining a bitcoin" flattens out near (but less than) a bitcoin, we will have a correct bitcoin price. This will happen either if the bitcoin price goes low enough or the hash rate goes high enough. Since the current hash rate is still going up, we don't have a low enough bitcoin price yet.

Have you got any idea how much it costs to mine 1 BTC currently?

No, but he likes to open his mouth anyway to sound like hes smart.

Too bad, the dumbest usually sound the loudest.

Way to say that nice and loud there. The principle that bitcoin mining cost should determine the price of bitcoin was given by Satoshi in the white paper, and is reiterated many times in the early posts on this forum. Here's Hal Finney in 2010:

One reason price might follow difficulty is that mining should not be too profitable (because nothing should be too profitable, the world doesn't leave free money lying around). Therefore the price of Bitcoins can't rise too much above the cost of mining (counting equipment depreciation among the costs of course). The cost of mining is proportional to the difficulty (approximately). Therefore we might expect to see price proportional to difficulty.

[Hiro_Y3k]

The institutional traders using HFT bots are indeed dictating the direction of the exchanges.
Some observations:

#1 Most large bitcoin block transactions are occurring outside of the exchanges through brokers. This is a way for large investors to accumulate bitcoins without spiking the price of bitcoin. They are like market makers insuring that the volatility in bitcoin remains steady as possible for the interest of their clients. Secondly, this insures that the miners will always have a large buyer. With a lower exchange spot price, brokers can negotiate even better prices. One interpretation is that a low price indicates heavy accumulation off the block transactions by large investors.

#2 Many of the major exchanges are unregulated. There is no way to prove or disprove any price collusion, but the lack of regulation leaves the door open to suggest it is possible. The bitcoin ecosystem is dominated by only a few major players creating an almost self-interlocking monopoly on all sides from production, investment and distribution of bitcoin. This isn't a conspiracy theory or a shill post. News at this point - either favorable or unfavorable for bitcoin is just noise for amateurs. The big boys aren't reacting to the news because they're creating it and the market.

#3 Bitcoin is going to stay around, and this isn't a bullish pump and dump signal. In the short term, bitcoin's price may bounce around more, but there are a number of factors that suggest bitcoin will have a very significant place in global finance for the long term.
 
*Skype. It is probably the most comparable parallel to bitcoin. Skype uses Voice over Internet Protocol (VoIP) and its global growth has accelerated like a classic model of Metcalfe's law. Bitcoin as a cryptographic protocol presents similar features as VoIP.

*PayPal. Bitcoin needs a major global payment system to educate, promote and legitimize bitcoin. PayPal is the company that can do that. They publicly endorsed and will experiment with it. At this point, incorporating bitcoin in their payment model is probably the best corporate strategy in order to remain the #1 payment systems in the world and keep possible competitors like Apple at bay. Whether Google or Amazon joins is another matter as they may go the way of tokenization. Bitcoin though has much greater implications beyond centralized produced tokens. If you look at a window horizon of 30 years rather than 3 years, bitcoin as a protocol will have a very strong chance of surviving. Open source, peer to peer, decentralized and built atop of the internet.

*Merchants. They will have a choice. Pay the credit cards fees around 2% or the significantly lower bitcoin fees. Perhaps attract a younger demographic as well as one that has grown up on tablets and smartphones. The world is becoming far more digitalized, and bitcoin presents a fit for it.

*Consumers. Bitcoin has obviously placed the cart before the horse. It has only reached a fringed group of buyers who have speculated on its price. The target users will not be in developed countries initially, but in underdeveloped countries and emerging markets. A younger market in developed countries are likely to experiment with it. The tipping point will be when more companies begin paying salaries in bitcoin. It will create a fully integrated bitcoin economy. When that happens, people will use it not hoard it. That will be years in the making.

*Other factors. Lawsky's NY reg, the Bitcoin ETF are other factors which can accelerate adoption. However, that does not mean the price of bitcoin will automatically rise.

Independent of all the factors contributing to bitcoin's adoption rate, bitcoin cannot function or fulfill its promise as digital currency until its reach a higher market cap. If the exchanges or bitcoin market economy is somehow manipulated, the price will need to rise much higher than it currently is.

          

[venlo]

1st: the western markets are insignificant. China has the vast majority of volume and coins. Nobody cares about bitstamp.

2nd: yes, price is heavily manipulated out in the open since day 1. Bitcoin inflates with 10% a year. So there is your pricemanipulation. All the stats and numbers are available. Bitcoin is just a practical joke by some satoshi-dude who is porbably running the largest mining-operation himself and dumping since day 1.
Bitcoin is for miners, not for everyday people.

I don't need a large conspiracy to explain why it'll go back to 200$. Nobody wants it because it can't hold its value. Too much coin being dumped by miners.

[oda.krell]

The institutional traders using HFT bots are indeed dictating the direction of the exchanges.
Some observations:

#1 Most large bitcoin block transactions are occurring outside of the exchanges through brokers. This is a way for large investors to accumulate bitcoins without spiking the price of bitcoin. They are like market makers insuring that the volatility in bitcoin remains steady as possible for the interest of their clients. Secondly, this insures that the miners will always have a large buyer. With a lower exchange spot price, brokers can negotiate even better prices. One interpretation is that a low price indicates heavy accumulation off the block transactions by large investors.

#2 Many of the major exchanges are unregulated. There is no way to prove or disprove any price collusion, but the lack of regulation leaves the door to suggest it is possible. The bitcoin ecosystem is dominated by only a few major players creating an almost self-interlocking monopoly on all sides from production, investment and distribution of bitcoin. This isn't a conspiracy theory or a shill post. News at this point - either favorable or unfavorable for bitcoin is just noise for amateurs. The big boys aren't reacting to the news because they're creating it and the market.

#3 Bitcoin is going to stay around, and this isn't a bullish pump and dump signal. In the short term, bitcoin's price may bounce around more, but there are a number of factors that suggest bitcoin will have a very significant place in global finance for the long term.
 
*Skype. It is probably the most comparable parallel to bitcoin. Skype uses Voice of Internet Protocol (VoIP) and its global growth has accelerated like a classic model of Metcalfe's law. Bitcoin as a cryptographic protocol presents similar features as VoIP.

*PayPal. Bitcoin needs a major global payment system to educate, promote and legitimize bitcoin. PayPal is the company that can do that. They publicly endorsed and will experiment with it. At this point, incorporating bitcoin in their payment model is probably the best corporate strategy in order to remain the #1 payment systems in the world and keep possible competitors like Apple at bay. Whether Google or Amazon joins is another matter as they may go the way of tokenization. Bitcoin though has much greater implications beyond centralized produced tokens. If you look at a window horizon of 30 years rather than 3 years, bitcoin as a protocol will have a very strong chance of surviving. Open source, peer to peer, decentralized and built atop of the internet.

*Merchants. They will have a choice. Pay the credit cards fees around 2% or the significantly lower bitcoin fees. Perhaps attract a younger demographic as well as one that has grown up on tablets and smartphones. The world is becoming far more digitalized, and bitcoin presents a fit for it.

*Consumers. Bitcoin has obviously placed the cart before the horse. It has only reached a fringed group of buyers who have speculated on its price. The target users will not be in developed countries initially, but in underdeveloped countries and emerging markets. A younger market in developed countries are likely to experiment with it. The tipping point will be when more companies begin paying salaries in bitcoin. It will create a fully integrated bitcoin economy. When that happens, people will use it not hoard it. That will be years in the making.

*Other factors. Lawsky's NY reg, the Bitcoin ETF are other factors which can accelerate adoption. However, that does not mean the price of bitcoin will automatically rise.

Independent of all the factors contributing to bitcoin's adoption rate, bitcoin cannot function or fulfill its promise as digital currency until its reach a higher market cap. If the exchanges or bitcoin market economy is somehow manipulated, the price will need to rise much higher than it currently is.

Great post. Solid high-level summary of the current state of crypto (with only mild speculation interspersed). Bookmarked.

[Warrior B]

1st: the western markets are insignificant. China has the vast majority of volume and coins. Nobody cares about bitstamp.

2nd: yes, price is heavily manipulated out in the open since day 1. Bitcoin inflates with 10% a year. So there is your pricemanipulation. All the stats and numbers are available. Bitcoin is just a practical joke by some satoshi-dude who is porbably running the largest mining-operation himself and dumping since day 1.
Bitcoin is for miners, not for everyday people.

I don't need a large conspiracy to explain why it'll go back to 200$. Nobody wants it because it can't hold its value. Too much coin being dumped by miners.

How much incidence in BTC price do you think China has? I'm very curious

[panju1]

1st: the western markets are insignificant. China has the vast majority of volume and coins. Nobody cares about bitstamp.

2nd: yes, price is heavily manipulated out in the open since day 1. Bitcoin inflates with 10% a year. So there is your pricemanipulation. All the stats and numbers are available. Bitcoin is just a practical joke by some satoshi-dude who is porbably running the largest mining-operation himself and dumping since day 1.
Bitcoin is for miners, not for everyday people.

I don't need a large conspiracy to explain why it'll go back to 200$. Nobody wants it because it can't hold its value. Too much coin being dumped by miners.

How much incidence in BTC price do you think China has? I'm very curious

The Reality of China's trading volumes
http://www.coindesk.com/reality-chinese-trading-volumes/

[hyphymikey]

Price manipulation may be going on, but the price of a bitcoin is still high compared to the cost of mining it. When the hashrate curve flattens out again (as it has before), or at least when the "cost of mining a bitcoin" flattens out near (but less than) a bitcoin, we will have a correct bitcoin price. This will happen either if the bitcoin price goes low enough or the hash rate goes high enough. Since the current hash rate is still going up, we don't have a low enough bitcoin price yet.

Have you got any idea how much it costs to mine 1 BTC currently?

No, but he likes to open his mouth anyway to sound like hes smart.

Too bad, the dumbest usually sound the loudest.

Way to say that nice and loud there. The principle that bitcoin mining cost should determine the price of bitcoin was given by Satoshi in the white paper, and is reiterated many times in the early posts on this forum. Here's Hal Finney in 2010:

One reason price might follow difficulty is that mining should not be too profitable (because nothing should be too profitable, the world doesn't leave free money lying around). Therefore the price of Bitcoins can't rise too much above the cost of mining (counting equipment depreciation among the costs of course). The cost of mining is proportional to the difficulty (approximately). Therefore we might expect to see price proportional to difficulty.

Totally agree. I set my "long term" buys at fixed rate above mining costs. I doubt the cost of Bitcoin will cross below the price of mining, but it might come close. Depending on hardware and electricity costs miners are still profiting 20-30%.

Once the price gets low enough or the difficulty high enough "manipulation" will stop and hoarding will increase, causing the price to go up due to no selling pressure.

[shields]

Another classic example of a double sided argument of why Bitcoin will fail: Some say Bitcoin has bad distribution with large industrial miners having all the coins, others say Bitcoin suffers because all the miners dump all their coins immediately.

(Other examples: Bitcoin will become worth so expensive that it will fail, and the government will never allow Bitcoin/The government obviously created Bitcoin.)

[Boxman90]

I'd just like to note that Coinbase is not an exchange.

Coinbase does all it's trades completely and solely on Bitstamp. Just compare their 1 minute graphs on bitcoinwisdom, it's a 1:1 copy.

[Ibian]

I think the mining theory might have some merit. The higher difficulty goes the less profit to miners the more they will have to dump to remain solvent.

I also think the price is being manipulated. For example, buy off exchanges, dump some of it, buy the next batch cheaper.

This could go on for a while.

[sbrzol]

Some chinese billionare use bitcoin to convert their yuan to usd without any limit, so btc price could go under the mining cost ( + 10-20 % ) in short term ( ask yourself how many billionare live in china and how many of them want to convert their yuan to usd and how many of them enough to keep the price down by dumping btc on usd exchanges) (+ otc buying and exchange selling)

[inca]

Some chinese billionare use bitcoin to convert their yuan to usd without any limit, so btc price could go under the mining cost ( + 10-20 % ) in short term ( ask yourself how many billionare live in china and how many of them want to convert their yuan to usd and how many of them enough to keep the price down by dumping btc on usd exchanges) (+ otc buying and exchange selling)

Where is the buying on Chinese exchanges to support this theory?

[fonzie]

Some chinese billionare use bitcoin to convert their yuan to usd without any limit, so btc price could go under the mining cost ( + 10-20 % ) in short term ( ask yourself how many billionare live in china and how many of them want to convert their yuan to usd and how many of them enough to keep the price down by dumping btc on usd exchanges) (+ otc buying and exchange selling)

Where is the buying on Chinese exchanges to support this theory?

The theory is that they bought mining equipment. 

[POM]

$350 would be nice 

[sbrzol]

Some chinese billionare use bitcoin to convert their yuan to usd without any limit, so btc price could go under the mining cost ( + 10-20 % ) in short term ( ask yourself how many billionare live in china and how many of them want to convert their yuan to usd and how many of them enough to keep the price down by dumping btc on usd exchanges) (+ otc buying and exchange selling)

Where is the buying on Chinese exchanges to support this theory?

The theory is that they bought mining equipment. 

Buy directly from miners or build their own mining farm ( payed with yuan, electricity too )

[pitham1]

Some chinese billionare use bitcoin to convert their yuan to usd without any limit, so btc price could go under the mining cost ( + 10-20 % ) in short term ( ask yourself how many billionare live in china and how many of them want to convert their yuan to usd and how many of them enough to keep the price down by dumping btc on usd exchanges) (+ otc buying and exchange selling)

Where is the buying on Chinese exchanges to support this theory?

The theory is that they bought mining equipment. 

Doesn't help the price.

[PenAndPaper]

The institutional traders using HFT bots are indeed dictating the direction of the exchanges.

Care to tell us how exactly institutional traders run hft bots on exchanges that lack infrastructure for hft... 
The trading bots you see on bitstamp, btc-e etc have nothing to do with hft...

[boumalo]

Some chinese billionare use bitcoin to convert their yuan to usd without any limit, so btc price could go under the mining cost ( + 10-20 % ) in short term ( ask yourself how many billionare live in china and how many of them want to convert their yuan to usd and how many of them enough to keep the price down by dumping btc on usd exchanges) (+ otc buying and exchange selling)

Where is the buying on Chinese exchanges to support this theory?

The theory is that they bought mining equipment. 

China is very active in Bitcoin but saying Billionaires use bitcoins to change their Yuan in USD is false because they don't; it would be a hassle and there are easier way to change it + They prefer buying businesses, other currencies or Gold than USD and they are correct

It is crazy that people buy the USD against the Yuan

[Hiro_Y3k]

The institutional traders using HFT bots are indeed dictating the direction of the exchanges.

Care to tell us how exactly institutional traders run hft bots on exchanges that lack infrastructure for hft...  
The trading bots you see on bitstamp, btc-e etc have nothing to do with hft...

Atlas ATS, Huobi

[ravenjt]

The typically low levels of trading on the exchanges, followed by massive increases in trading during times of price volatility,  suggests to me that there is very little hft going on during normal times.