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> My big issue with this is if the reference price is manipulated by exchanges (there is a lot of speculation about that exchanges aren't being honest with thei
by runeks 9y ago
> My big issue with this is if the reference price is manipulated by exchanges (there is a lot of speculation about that exchanges aren't being honest with their trades) there is no way for the future to correct this.
How would this manipulation be done by the exchanges in practice?
a) If they lie about the last trade price, their order book wouldn’t match this.
b) If they use deposited USD to buy up BTCUSD sell orders (to push up the price), their USD assets would no longer match their USD liabilities.
And if only a single exchange does b), its USD assets would quickly drain from the exchange, as arbitrageurs would 1) buy cheap bitcoins at the other exchanges 2) sell on the expensive/cheating exchange 3) withdraw USD from cheating exchange (draining USD that is already in short supply because of the cheating) 4) deposit USD at low-price exchanges and repeat 1).
- jnordwick 9y agoI've worked in trading for a while now, and after talking to a could people specifically about bitcoin, inter-exchange arbitrage isn't as big as it should be. The issues tend to be around clearing and counterparty risk (BTC on two different exchanges have different prices reflecting the difficulty in moving BTC off the exchange). There is a lot of friction in BTC movement which really shouldn't exist. Also you assume exchanges operating financial information is open and trusted which is definitely not the case. It's easy for the exchange to paint the tape with false trades and it doesn't cost them anything. A large player getting a fee discount can self trade without much loss either. I don't think the order books are to be trusted with these BTC venues.
- chris_st 9y ago> There is a lot of friction in BTC movement which really shouldn't exist. Maybe this is protecting the BTC market from flash traders?
- jnordwick 9y agoI don't know how you call this massive volatility and fraud "protection" from me and my cohorts. BTC could use the depth provided by high volume electronic trading, and also the linkage between all the venues and alt coins.
- empath75 9y ago> their USD assets would no longer match their USD liabilities This is exactly what bitfinex is doing with tethers.