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It would only push the price up on the untrustworthy exchanges, and it would lower the price everywhere else because it indicates the asset is not useful, it co
by gwern 9y ago
It would only push the price up on the untrustworthy exchanges, and it would lower the price everywhere else because it indicates the asset is not useful, it could be stolen & dumped on the market, it discourages anyone from getting in, it forces them to use alternative usually less convenient exchanges, etc. And even the counterparty risk doesn't produce that much increase: right up to the end when it was too late, the Mtgox premium was only like 10%. Such a mechanism can't possibly explain all or even a little bit of a runup from $2k to $7k (not to mention, the market cap being an order of magnitude or two higher).
- thisisit 9y agoThat is assuming bitcoin and other cryptocurrency markets are mature and perfect. They are not.
- gwern 9y agoWell then, why do you think they're mature and perfect enough to worry about counterparty risk? What's sauce for the goose is sauce for the gander.
- thisisit 9y agoUm? Let me use an example to explain what is happening here: Me - Cryptocurrency markets are not mature that is why we have lot of arbitrage opportunity between exchanges. You - Why do you think they're mature and perfect enough to worry about arbitrage opportunities? So, let me repeat again - It is exactly because they are not mature there are issues. If they are mature, there is nothing to worry. And that is the sauce you are looking for.
- gwern 9y agoYou're claiming they are efficiently pricing in a particular risk, pushing up prices to reflect the counterparty risk, but then denying they are efficient enough to price in the other consequences they should be. This is not consistent or at least is very stretched.