Central Bank Speculative Attack

[monkeybars]

I've been searching around and haven't been able to find anyone talking about this possibility.

In short, players with the most to lose in the transition to a Bitcoin economy could "spend" (i.e. print fiat, i.e. steal from all other users of a fiat currency) fiat in losing trades in order to suppress the exchange price of bitcoin. The point of this would be to delay a rise in the Bitcoin market cap, and perhaps prevent the price from rising to a tipping point or price of no return.

It is conceivable that the market cap could remain too small for the motivation to improve and grow the infrastructure and investment needed to flesh out the ecosystem. On the other hand, central banks (for example) would simply be enriching traders by doing this, and if interest in Bitcoin remained high regardless, the strategy could still lose. Pouring fiat into the traders' hands would end up in the economy in this scenario, hastening a hyperinflation or hyperbitcoinization event.

Do you think such a scenario is likely, or are there factors to discourage legacy institutions from engaging in such an attack? Or do you think it's already happening?

[Wilhelm]

Ok you mean banks buying bitcoin and spending it in losing trades.....

Price goes sky high due to a constant fiat injection to aquire bitcoin at high prices.
Then throw away the bitcoins to some lucky fucks putting in a low buy order then buy more with new fiat.
Trading will become more easy due to high volatility.

IMO this means an unstable sideways movement or we all smart up and ask high prices.
The US economy cannot sustain a fiat throw away and bitcoin(or foreign fiat) cannot sustain such a radical adoption (if US $ goes to hell).

This is not plausible IMO. 

[monkeybars]

Ok you mean banks buying bitcoin and spending it in losing trades.....

Price goes sky high due to a constant fiat injection to aquire bitcoin at high prices.
Then throw away the bitcoins to some lucky fucks putting in a low buy order then buy more with new fiat.
Trading will become more easy due to high volatility.

IMO this means an unstable sideways movement or we all smart up and ask high prices.
The US economy cannot sustain a fiat throw away and bitcoin(or foreign fiat) cannot sustain such a radical adoption (if US $ goes to hell).

This is not plausible IMO. 

Thanks for your reply. So in essence you believe that the markets would not be convinced that the lower price sold by the attacking banks is valid and would simply take their fiat losses. I can see the validity in this point perhaps. Then again, big selling of this type could cause market sentiment to sink.

In addition, you believe that the damage to the fiat economy would be too great for them to try this. Not sure I'm convinced about this since the Bitcoin economy is so small at present, and considering their past willingness to risk very high inflation and worse.

[brg444]

Ok you mean banks buying bitcoin and spending it in losing trades.....

Price goes sky high due to a constant fiat injection to aquire bitcoin at high prices.
Then throw away the bitcoins to some lucky fucks putting in a low buy order then buy more with new fiat.
Trading will become more easy due to high volatility.

IMO this means an unstable sideways movement or we all smart up and ask high prices.
The US economy cannot sustain a fiat throw away and bitcoin(or foreign fiat) cannot sustain such a radical adoption (if US $ goes to hell).

This is not plausible IMO. 

Thanks for your reply. So in essence you believe that the markets would not be convinced that the lower price sold by the attacking banks is valid and would simply take their fiat losses. I can see the validity in this point perhaps. Then again, big selling of this type could cause market sentiment to sink.

In addition, you believe that the damage to the fiat economy would be too great for them to try this. Not sure I'm convinced about this since the Bitcoin economy is so small at present, and considering their past willingness to risk very high inflation and worse.

This video here explains very well why this is not likely to work

https://www.youtube.com/watch?v=Epb14q7jcOk

[Wilhelm]

Why screw over bitcoin if it can be your salvation

Here is a US government rescue plan with bitcoin 
1. Buy bitcoin with government tax-payer money until you have a million BTC or so.
2. The price will inevitably rise but who fucking cares since you're buying them with tax money screwing over all tax payers.
3. When the price is high and you're government is loaded with bitcoin do a big order of physical gold from a foreign country. This will dump BTC back into the system indirectly screwing foreign countries out of their gold.
4. Wait for everyone to panic the shit out of themselves because some gold vendor is dumping the BTC for fiat. Everyone will hate these foreign gold vendors and not the government.
5. Go to 1 and rinse and repeat until your federal reserve is full of shiny bars of gold.

[brg444]

Why screw over bitcoin if it can be your salvation

Here is a US government rescue plan with bitcoin 
1. Buy bitcoin with government tax-payer money until you have a million BTC or so.
2. The price will inevitably rise but who fucking cares since you're buying them with tax money screwing over all tax payers.
3. When the price is high and you're government is loaded with bitcoin do a big order of physical gold from a foreign country. This will dump BTC back into the system indirectly screwing foreign countries out of their gold.
4. Wait for everyone to panic the shit out of themselves because some gold vendor is dumping the BTC for fiat. Everyone will hate these foreign gold vendors and not the government.
5. Go to 1 and rinse and repeat until your federal reserve is full of shiny bars of gold.

 

What happens when everyone dump their fiat for BTC because of the rise in price? Then the gov is left with worthless fiat and tons of shiny metal worth not much

[traderCJ]

They would just buy off market directly from miners, then execute market sells when certain triggers are reached.  Pretty simple, just takes a lot of fiat ..

[Raystonn]

Think bigger.  If I was going to do this, I'd open my own bitcoin exchange and commence with naked shorting.  I would repeatedly borrow bitcoins, sell them to others, borrow from those I sold to, sell them again, repeat ad infinitum.  I would offer huge interest to anyone lending me bitcoins to ensure they left them on my exchange.  This would reduce the chance of a run on bitcoins.

[Bernard Lerring]

Could the governments of the US/EU fuck up Bitcoin if they wanted to, by buying and selling to play with the price?

I would have thought that the US economists have been thinking of ways to do this, but as to whether they have come up with a feasible plan yet remains to be seen.

I should imagine that they're secretly in so much shit with their national debt that they haven't the money to buy up enough BTC in order to screw the prices.

What if they've been secretly/steadily accumulating large numbers of BTC over time so that they own a large proportion of coins in existence? Could they then use that as a threat?

I think that they have so much expenditure just to maintain law and order and the military industrial complex that they haven't the spare cash to buy a significant amount of BTC (apart from what's been seized from the drug markets).

They could always print more dollar and quickly buy BTC like crazy but then the price would escalate too fast for them to buy an amount big enough to control Bitcoin.

Just my thoughts. As you can tell, I'm no economist.

[monkeybars]

I appreciate the creative brainstorming going on in this thread! Unfortunately, I'm not convinced the speculative attack I mentioned isn't already going on. As mentioned, it's not likely to work forever, but could delay Bitcoin's ascendency. Article about governments mining is here http://futurerant.tumblr.com/post/96462129809/under-reported-attack-vectors-on-the-bitcoin

[kwukduck]

Banks and government won't have to do anything. Trolls and FUD will do their task. People are gullible and scared easily to crawl back to their 'safe and trustworthy' scam fiat.

[fewcoins]

Why do you guys remain in a fantasy world???
The US government was just the single largest holders of bitcoin... They had more than anyone!
Why do you think they started selling them off after much careful thought & many economic recommendations... Think about how many advisors they have!
They decided this is junk, not going anywhere, they know the plan they still have for the dollar to take over.
The global collapse we have been experiencing is caused by them to make sure the dollar now rises against all other currencies & assets.
In case you haven't noticed... or this year wasn't proof enough for you... They are already doing this to bitcoin.
Just like they are to gold, silver, gas, oil... What makes you think BTCitcoin is any different??? It is actually much easier to crush than those other assets.

[botany]

Wouldn't they have a lot of other avenues to attack Bitcoin - taxation, regulation, etc.
Why would they have to engage in market manipulation to destroy Bitcoin? This would be the last resort when all other venues have failed. First, they have to recognize that Bitcoin is a big threat.

[fewcoins]

Wouldn't they have a lot of other avenues to attack Bitcoin - taxation, regulation, etc.
Why would they have to engage in market manipulation to destroy Bitcoin? This would be the last resort when all other venues have failed. First, they have to recognize that Bitcoin is a big threat.

Regulation is already happening man open your eyes & do some research...
Local bitcoin sellers getting arrested in Florida. Localbitcoins shutting down in Germany. This is just new stuff, regulation has been sneaking up all year, insiders who know this have beeeeeeeennn cashing out. You guys on this forum are the only ones still late!