3 ms·

Was part of the rise last year due to MtGox's increasingly desperate market manipulation? I remember reading the theories, but don't know if a better picture ha

by thom 12y ago

Was part of the rise last year due to MtGox's increasingly desperate market manipulation? I remember reading the theories, but don't know if a better picture has developed since then.

sillysaurus3 12y ago
Yes it was. There was an Mt. Gox bot which was consistently buying bitcoin over a long period of time. The reason we know it was an Mt. Gox bot is because when Gox's API went down, the bot was still able to execute trades on Gox even though no one else could. Of course, Karpeles will never stand for his crimes, because they weren't crimes. This is just what happens in an unregulated market, and everyone who buys into it is along for the ride. Here's the rub: A price fluctuation at one exchange will always affect every other exchange. If Bitstamp drops by $50, someone is going to buy at Bitstamp and then sell at some other exchange in order to take advantage of that. That means any exchange that manipulates the market will literally be manipulating the entire Bitcoin market. There's no way for outsiders to know the difference between an artificial, manipulated price spike and a true increase in value. So if you see bitcoin rising sometime in the future, beware buying into it: you may be buying into a manipulation. I don't know whether this problem is solvable. Even if America enforces regulations for American bitcoin exchanges, the rest of the world won't be playing by the same rules, and it only takes one dishonest exchange to mess with the global price. I'd like to know how the regular stock market deals with this. Are all stock exchanges regulated worldwide? Is there such a thing as a dishonest stock exchange? If so, how is that dealt with?
- mikeyouse 12y ago
  > I'd like to know how the regular stock market deals with this. Are all stock exchanges regulated worldwide? Is there such a thing as a dishonest stock exchange? If so, how is that dealt with? Holding a stock certificate entitles you to a percentage of the profits of that company (via dividends / buybacks). So when Facebook lists on the NASDAQ, only those who have shares recognized by NASDAQ & FB have any claim to the profits of the company. There are shitty foreign exchanges full of speculation and manipulation and you can trade "Facebook" there, but if you own a share of "Facebook" on some third-tier Armenian exchange, you have zero claim to Facebook's profits. Your arrangement in that situation is with the exchange or the counterparties on that exchange to swap the shares back and forth, not actually with the company in question -- so they have no way of impacting the 'real' stock price.
  - Animats 12y ago
    The regular stock market deals with this by separation of functions. The NYSE doesn't own stocks; it's just a matching service. Mt. Gox performed the functions of an exchange, a broker, a custodian, a transfer agent, and a depository institution. In the real world, those are usually separated.
- tim333 12y ago
  >Is there such a thing as a dishonest stock exchange? If so, how is that dealt with? I'm not sure there is such a thing as a dishonest stock exchange but there are unethical players trading on most exchanges. The reputation for honesty of the traders varies a bit from exchange to excange, for example the reputation of the NYSE is generally good and of the Vancouver exchange generally bad. There are quite a variety of different scams and ways of dealing with them. The Mt Gox manipulation worked out as something like a ponzi scheme where players selling at a profit were bought out by Mt Gox's bot using money coming in from new players. To avoid that in the stock market I would recommend only buying shares backed by assets and earnings and avoid buying things with no intrinsic value because they are going up. So it's a bit buyer beware at the end of the day.

by thom 12y ago

Was part of the rise last year due to MtGox's increasingly desperate market manipulation? I remember reading the theories, but don't know if a better picture has developed since then.

sillysaurus3 12y ago

Yes it was. There was an Mt. Gox bot which was consistently buying bitcoin over a long period of time. The reason we know it was an Mt. Gox bot is because when Gox's API went down, the bot was still able to execute trades on Gox even though no one else could. Of course, Karpeles will never stand for his crimes, because they weren't crimes. This is just what happens in an unregulated market, and everyone who buys into it is along for the ride. Here's the rub: A price fluctuation at one exchange will always affect every other exchange. If Bitstamp drops by $50, someone is going to buy at Bitstamp and then sell at some other exchange in order to take advantage of that. That means any exchange that manipulates the market will literally be manipulating the entire Bitcoin market. There's no way for outsiders to know the difference between an artificial, manipulated price spike and a true increase in value. So if you see bitcoin rising sometime in the future, beware buying into it: you may be buying into a manipulation. I don't know whether this problem is solvable. Even if America enforces regulations for American bitcoin exchanges, the rest of the world won't be playing by the same rules, and it only takes one dishonest exchange to mess with the global price. I'd like to know how the regular stock market deals with this. Are all stock exchanges regulated worldwide? Is there such a thing as a dishonest stock exchange? If so, how is that dealt with?

mikeyouse 12y ago
> I'd like to know how the regular stock market deals with this. Are all stock exchanges regulated worldwide? Is there such a thing as a dishonest stock exchange? If so, how is that dealt with? Holding a stock certificate entitles you to a percentage of the profits of that company (via dividends / buybacks). So when Facebook lists on the NASDAQ, only those who have shares recognized by NASDAQ & FB have any claim to the profits of the company. There are shitty foreign exchanges full of speculation and manipulation and you can trade "Facebook" there, but if you own a share of "Facebook" on some third-tier Armenian exchange, you have zero claim to Facebook's profits. Your arrangement in that situation is with the exchange or the counterparties on that exchange to swap the shares back and forth, not actually with the company in question -- so they have no way of impacting the 'real' stock price.
- Animats 12y ago
  The regular stock market deals with this by separation of functions. The NYSE doesn't own stocks; it's just a matching service. Mt. Gox performed the functions of an exchange, a broker, a custodian, a transfer agent, and a depository institution. In the real world, those are usually separated.
tim333 12y ago
>Is there such a thing as a dishonest stock exchange? If so, how is that dealt with? I'm not sure there is such a thing as a dishonest stock exchange but there are unethical players trading on most exchanges. The reputation for honesty of the traders varies a bit from exchange to excange, for example the reputation of the NYSE is generally good and of the Vancouver exchange generally bad. There are quite a variety of different scams and ways of dealing with them. The Mt Gox manipulation worked out as something like a ponzi scheme where players selling at a profit were bought out by Mt Gox's bot using money coming in from new players. To avoid that in the stock market I would recommend only buying shares backed by assets and earnings and avoid buying things with no intrinsic value because they are going up. So it's a bit buyer beware at the end of the day.