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Author Topic: Price stickiness at $5 USD/BTC?  (Read 9150 times)
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May 20, 2012, 08:55:58 PM
 #21

I agree that the price stickiness is eerie and inconsistent with some of the fundamentals. Front-running doesn't seem to explain price stability though, although it could certainly be happening. If anything, Front-running should just change who materializes the profits from the market, it still relies on fundamental market direction for its usefulness.

All that being said, having a bot to search for front-running would be useful. Such a bot would still be dependent on accurate reporting from the exchange...

-s
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May 20, 2012, 09:36:20 PM
 #22

Maybe there's a big player buying them up progressively, in greater quantities when the price is towards $4.80, and in lesser quantities (or zero) when the price moves towards $5.20.
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May 20, 2012, 09:58:13 PM
 #23

That would imply that the net demand other than the big buyer is sell-heavy. Which it may be... but then it would be a poor move for that big buyer to keep on purchasing.

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May 20, 2012, 10:08:41 PM
 #24

There is a way one could construct a robber bot that would flatline trading at $5.00.  A bot could be designed to sell bitcoins once it saw an incoming wave of buy orders.   With bids coming in at $5.25 it would sell as many coins as necessary to quench demand.  It would continue selling until price neared $5.00.   Since it can see the order book in advance it could be confident that there was enough demand available to meet its supply.

Likewise the bot could buy bitcoins once the bid dropped to $4.75 for bitcoins.  As before the bot would keep buying until price returned to $5.00

With advance knowledge of the order book the bot could generate consistent and reliable profit over time. In this example the bot would make on average somewhere between $0.25 and $0.50 per trade.  On market volume profits would be very high as it skimmed money off trades.

Advance knowledge makes front-running possible.  

That is the simplest example of a way to front-run bitcoin trading.  You can extrapolate from this example and come up with more elaborate methods of swindling traders.   With more sophistication the scam becomes more difficult to detect.   The good thing is that we have sensitive statistical analysis tools available.  Under scrutiny it would not be possible to keep the scam going over time.  Insider trading and market manipulation are illegal.  Knowledge that the markets were being watched would be a strong deterrent.  Scammers would know that the odds of getting caught would be near certain with increased scrutiny.  

Your point is well made about what a market surveillance bot would need to have to be effective.  Without complete information the market surveillance bot could not be fully effective.  The bot needs accurate and complete information.   Mt. Gox is the only source for that information and they have not made it available.  Mt. Gox is not a transparent exchange like the NASDAQ and the NYSE.    We should lobby the SESC (Securities Exchange Surveillance Commission) to correct this.  The SESC is located in Japan and regulates Mt. Gox.  The SESC is similar to the Securities and Exchange Commision (SEC) in the USA.   The SESC could enforce full transparency upon Mt. Gox through regulation.  

http://www.fsa.go.jp/sesc/english/index.htm






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May 20, 2012, 11:10:24 PM
 #25

In a true market-moving demand situation, the bot's supply of bitcoin would be exhausted. A similar argument would result in exhaustion of dollars to buy with in a true market-moving supply situation. However, if the bot is colluding with the exchange, then the exchange can have effective unlimited supply/demand by 'printing money' in either mtgox usd of mtgox btc subject to avoiding a 'run-on-the-bank' and trying to balance out the accounts over time.

This scenario makes a strong argument for having exchanges operate on the bitcoin network so that at least the btc side of the exchange is subject to global auditing.

-s
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May 20, 2012, 11:34:34 PM
 #26

In a true market-moving demand situation, the bot's supply of bitcoin would be exhausted. A similar argument would result in exhaustion of dollars to buy with in a true market-moving supply situation. However, if the bot is colluding with the exchange, then the exchange can have effective unlimited supply/demand by 'printing money' in either mtgox usd of mtgox btc subject to avoiding a 'run-on-the-bank' and trying to balance out the accounts over time.

This scenario makes a strong argument for having exchanges operate on the bitcoin network so that at least the btc side of the exchange is subject to global auditing.

-s

Yeah, it gives the exchange an enormous amount of unchecked power.  Power is so easily corrupted. We need assurance that we are not getting ripped off.  In the midst of a global crisis caused by financial institutions you now have to be able to verify before you can trust.   As you said the exchange could be colluding with a bot they created.  Or a hacker could who got in could front-run the market.   For the hacker it would be a better long-term strategy than stealing directly from accounts.   Milk the cow instead of slaughtering it.  And Mt. Gox as well as other exchanges have been hacked thoroughly.  It's a daily occurrence now.

We need transparency.  One way or another.  
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May 22, 2012, 12:53:37 AM
 #27

It just doesn't seem right to me that the market suddenly went stable within a 4.8 - 5.2 range over the past 4-5 months when it has NEVER been that stable before.

Something isn't right.
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May 22, 2012, 01:22:09 AM
 #28

Maybe there's a big player buying them up progressively, in greater quantities when the price is towards $4.80, and in lesser quantities (or zero) when the price moves towards $5.20.

The BitCoin economy has grown significantly, more services have been developed, there is greater liquidity with things like BitInstant, Bit-Pay, foreign currency trading/arbitrage bots have been deployed, etc. and therefore more capital has moved into bitcoins. This has resulted in it taking at least 10-20x as much capital to move the price $.10 as it did 12 months ago.

Additionally, there is tremendous potential buying still sitting on the sidelines. I have had numerous discussions with people whose net worth is in excess of $100m and even helped one make a five figure bitcoin investment. BitCoin has made a proof of concept and proven itself worthy of additional capital which is starting to flow in. I know of at least 4-5 potential six figure bitcoin investors that are seriously sniffing around and other VCs who are looking for some serious BitCoin related businesses to invest in.

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May 22, 2012, 03:37:46 AM
 #29

Maybe there's a big player buying them up progressively, in greater quantities when the price is towards $4.80, and in lesser quantities (or zero) when the price moves towards $5.20.

The BitCoin economy has grown significantly, more services have been developed, there is greater liquidity with things like BitInstant, Bit-Pay, foreign currency trading/arbitrage bots have been deployed, etc. and therefore more capital has moved into bitcoins. This has resulted in it taking at least 10-20x as much capital to move the price $.10 as it did 12 months ago.

Additionally, there is tremendous potential buying still sitting on the sidelines. I have had numerous discussions with people whose net worth is in excess of $100m and even helped one make a five figure bitcoin investment. BitCoin has made a proof of concept and proven itself worthy of additional capital which is starting to flow in. I know of at least 4-5 potential six figure bitcoin investors that are seriously sniffing around and other VCs who are looking for some serious BitCoin related businesses to invest in.

I'm glad you brought up the fact that big players are coming in. That's another reason why we should have more volatility. Market cap of bitcoin is roughly $45 million right now.  It wouldn't take anything for those big players to move this market.  If a big player bought any significant amount of bitcoins the price would soar.  Volume is roughly 30k bitcoins a day which is about $150k of bitcoins.  $150k is pocket change for "people whose net worth is in excess of $100m."  You can't have all of the activity described above and not have significant price variation.  So far the only thing we haven't ruled out market manipulation by insider trading.    Those players may realize this happening and be wary of entering the market now.  Those guys are professionals and study trading patterns and fundamentals under a microscope.  Why would they buy if the market is rigged?  Arbitrage bots don't explain it.  They are small players.  Arbitrage bots take advantage of subtle price differences across different exchanges.  Keeping price at a given level on one single exchange would not be profitable.  With 10-20x more capital invested we should see double digit bitcoin prices at the minimum.  

Last year we were well above $10 until negligent security practices brought down the entire exchange.  Bitcoin was itself was tarnished by investors who concluded bitcoin was at fault. Guilt by association was their first conclusion.  We had far less interest from big players then and yet price is lower now with high interest from big players.  Before the exchange became a monopoly you could take your money to an exchange that wasn't rigged.  For various reasons we lost market competitors.   Price stabilization happened to have coincided with monopoly formation.  

If we had more exchanges we would have more assurance of fair play.  Market manipulators would have a hard time running scams simultaneously on multiple exchanges.  On a monopolistic exchange that colluded with stealing from traders would be relatively easy.  They wouldn't have to worry about the arbitrage bots foiling their scam by trading against the insiders positions on fair exchanges.
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May 22, 2012, 03:41:50 AM
 #30

It just doesn't seem right to me that the market suddenly went stable within a 4.8 - 5.2 range over the past 4-5 months when it has NEVER been that stable before.

Something isn't right.

I am having a hard thinking of any commodity this stable.  Bitcoin should be very unstable given how exotic it is. 

Something isn't right.
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May 22, 2012, 05:17:09 AM
 #31

It just doesn't seem right to me that the market suddenly went stable within a 4.8 - 5.2 range over the past 4-5 months when it has NEVER been that stable before.

Something isn't right.

I am having a hard thinking of any commodity this stable.  Bitcoin should be very unstable given how exotic it is. 

Something isn't right.

It's being held stable by someone with deep pockets.  Eventually, they will accumulate what they want and then it will become very volatile.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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May 22, 2012, 04:06:38 PM
 #32

First of all being around 5$ +/- 10 cents for what? 2-4 weeks? is not THAT stable.

Secondly the BTC economy is growing as others said it keeps things more stable.

Thirdly someone was manipulating the market up and down with fake walls a month or two ago and I bet a lot got burned on that, well we all learned our lesson and don't panic so easily anymore - markets are alive.

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May 22, 2012, 04:09:52 PM
 #33

It just doesn't seem right to me that the market suddenly went stable within a 4.8 - 5.2 range over the past 4-5 months when it has NEVER been that stable before.

Something isn't right.

I am having a hard thinking of any commodity this stable.  Bitcoin should be very unstable given how exotic it is.  

Something isn't right.

It's being held stable by someone with deep pockets.  Eventually, they will accumulate what they want and then it will become very volatile.


the someone's pockets would have to be very deep.  they would also have to have insider knowledge. without insider knowledge they would be losing a lot right now trying to keep the price at a stable level. they would have to see ahead of the order book to be sure of how much they could scalp off the market   symbols made a good point in a previous response.  He said mtgox could effectively be "printing" mtgoxUSD and mtgoxBTC. If that's the case then the scam will blow up when they print too much and fail to deliver real BTC and real USD on redemption requests.  A run on the exchange would expose the scam. No speculation anymore once we saw the results of a run.   Historically, these scams always fail when the run starts.  
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May 22, 2012, 04:19:53 PM
 #34

First of all being around 5$ +/- 10 cents for what? 2-4 weeks? is not THAT stable.

Secondly the BTC economy is growing as others said it keeps things more stable.

Thirdly someone was manipulating the market up and down with fake walls a month or two ago and I bet a lot got burned on that, well we all learned our lesson and don't panic so easily anymore - markets are alive.

That's real tight for something this volatile.  Past history demonstrates that bitcoin has been extremely volatile.  Now for some reason trading has been flat for 4-5 months.  Invariance is increasing steadily.

Cue Twilight Zone Intro

http://www.youtube.com/watch?v=XVSRm80WzZk

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May 22, 2012, 04:41:07 PM
 #35

It just doesn't seem right to me that the market suddenly went stable within a 4.8 - 5.2 range over the past 4-5 months when it has NEVER been that stable before.

Something isn't right.

I am having a hard thinking of any commodity this stable.  Bitcoin should be very unstable given how exotic it is. 

Something isn't right.

It's being held stable by someone with deep pockets.  Eventually, they will accumulate what they want and then it will become very volatile.


the someone's pockets would have to be very deep.  they would also have to have insider knowledge. without insider knowledge they would be losing a lot right now trying to keep the price at a stable level. they would have to see ahead of the order book to be sure of how much they could scalp off the market   symbols made a good point in a previous response.  He said mtgox could effectively be "printing" mtgoxUSD and mtgoxBTC. If that's the case then the scam will blow up when they print too much and fail to deliver real BTC and real USD on redemption requests.  A run on the exchange would expose the scam. No speculation more once we saw the results of a run.   Historically, these scams always fail when the run starts.  

$100k in the hands of a skilled trader would do it.  They don't have to hold the line all the time, just smack it around a little when the indicators get too bullish above 5 or too bearish below 5.  Yes, eventually this will stop working, but who's got the balls to stand up against the pattern?

https://www.bitcoin.org/bitcoin.pdf
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May 22, 2012, 05:39:38 PM
 #36

It just doesn't seem right to me that the market suddenly went stable within a 4.8 - 5.2 range over the past 4-5 months when it has NEVER been that stable before.

Something isn't right.

I am having a hard thinking of any commodity this stable.  Bitcoin should be very unstable given how exotic it is.  

Something isn't right.

It's being held stable by someone with deep pockets.  Eventually, they will accumulate what they want and then it will become very volatile.


the someone's pockets would have to be very deep.  they would also have to have insider knowledge. without insider knowledge they would be losing a lot right now trying to keep the price at a stable level. they would have to see ahead of the order book to be sure of how much they could scalp off the market   symbols made a good point in a previous response.  He said mtgox could effectively be "printing" mtgoxUSD and mtgoxBTC. If that's the case then the scam will blow up when they print too much and fail to deliver real BTC and real USD on redemption requests.  A run on the exchange would expose the scam. No speculation more once we saw the results of a run.   Historically, these scams always fail when the run starts.  

$100k in the hands of a skilled trader would do it.  They don't have to hold the line all the time, just smack it around a little when the indicators get too bullish above 5 or too bearish below 5.  Yes, eventually this will stop working, but who's got the balls to stand up against the pattern?


I think with 100k a trader could manipulate it into this pattern for a short period of time.  Like you said, just smack it around.  Long-term it doesn't work.  There's no way he could pull this off for more than a week.  It doesn't take much capital to break resistance levels.    Since it wouldn't take much capital to exhaust his offerings we should have seen a price breakout by now.  You can look at the cumulative depth chart see how little capital it would take to move the price wall outside the trading range.  In addition to starting capital, the trader would need inside knowledge.

http://bitcoincharts.com/markets/mtgoxUSD.html

I think people with balls are making stands.  We got VCs and other big shots who are getting in.  Bitcoin attracts headline news every day.   Events are occurring that should result in big moves by making herds of traders sell or buy at once on a major news headline.   Whoever is on the side of these trades most be a big, big player with knowledge, more knowledge than public indicators provide. Everyone can see bullish and bearish indicators which means all that information is "priced in" at any given time.    This trader needs inside information to make this scam reliably profitable.    He would also need a lot of capital at his disposal.  He needs enough ammunition to control an entire market.  



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May 22, 2012, 10:10:22 PM
 #37

could the sticky-maker and insider perhaps be this guy? https://bitcointalk.org/index.php?topic=82849.0

https://localbitcoins.com/?ch=80k | BTC: 1LJvmd1iLi199eY7EVKtNQRW3LqZi8ZmmB
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May 22, 2012, 11:06:36 PM
 #38

could the sticky-maker and insider perhaps be this guy? https://bitcointalk.org/index.php?topic=82849.0

Possible.  He just stated it's in his interest to prevent sharp upswings: https://bitcointalk.org/index.php?topic=82849.msg915349#msg915349

https://www.bitcoin.org/bitcoin.pdf
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May 22, 2012, 11:26:10 PM
 #39

I've been wondering whether pirate is involved as well. The one confusion is that he mentions local customers, and if he's doing bitcoin HFT to profit off of volatility (thus smoothing it out) then I don't understand why he would have local customers... but this is probably explainable.

-s
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May 22, 2012, 11:43:28 PM
 #40

I've been wondering whether pirate is involved as well. The one confusion is that he mentions local customers, and if he's doing bitcoin HFT to profit off of volatility (thus smoothing it out) then I don't understand why he would have local customers... but this is probably explainable.

-s


https://bitcointalk.org/index.php?topic=82849.msg915349#msg915349

Pirate said :


Quote
The only thing that would affect my profits would be a huge spike in price over a very short period of time.

That is consistent with what we have been talking about.  A spike would break through a ceiling or floor he had set up.
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