3 ms·

Well, before Mt. Gox, bitcoins were about $80/coin. Its initial upward trajectory from $100 seems almost assuredly Mt. Gox pumping up the value. Who knows why

Well, before Mt. Gox, bitcoins were about $80/coin. Its initial upward trajectory from $100 seems almost assuredly Mt. Gox pumping up the value. Who knows why Karpeles did it, but it probably had some kind of avalanche effect which he had no idea would peak at $1,100/coin. Since then, the price has been slowly resetting to pre-Mt. Gox levels. By pre-Mt. Gox," I of course mean "pre-manipulation." That's my working theory. If true, the fact that bitcoin has slowly been resetting to pre-manipulated levels would be the first example of the market ever being rational that I'm aware of. (Besides, you know, the fact that insider manipulation of the market was successful in increasing the price, which is rational by definition. Just not in an open happy way that people normally associate with the phrase "market rationality.") But there are all kinds of problems with that theory. It's something so simple that you want to believe it's true. There's no reason why someone else wouldn't also be trying to manipulate the market now, like BTC-e. There's a financial incentive to try to pump up the price, so why is it continuing to fall, or rather why are current attempts at manipulation failing? Could it really be true that Mt. Gox was the only manipulator ever to have had a significant effect on the price? Seems unlikely. Maybe the true explanation is that there was all this pent-up unknown hype for bitcoin, which Karpeles' manipulation unleashed on the world like a crack that broke a dam, either to his joy at skyrocking the price or his shock and horror at skyrocking the price, and now everyone's resetting back to pre-hype levels. I still think bitcoin has value. Even after being used and abused, and dragged through a meatgrinder that shred away every ounce of my bitcoin fanboyism. There is true value there, and that is its ability to get money from you to me in seconds, and then my ability to sell those coins on an exchange for fiat that's deposited into my bank account within just a couple days. In that scenario, it doesn't even matter what bitcoin's current price is. All that matters is that the exchange honors the agreement at the time the coins were sold, because the flow is that the coins go from you to me to being sold on an exchange/middleman within a few minutes. So the current price of bitcoin is whatever it is, and I'm still paid however much I was expecting from you. And it seems like a solid upward trajectory could even be built on that foundation. But it's going to take patience and time.

maxerickson 12y ago
Why do you think Mt. Gox manipulating the price upward is so much more likely than the much simpler explanation of market dynamics? Speculative bubbles are nothing unusual.
- sillysaurus3 12y ago
  Yeah, I wrote a long rambling comment which said pretty much what you just said. Mt. Gox manipulation plus desire to speculate equals $1,100/coin, and now people's desire to speculate is settling. Maybe Mt. Gox's initial manipulation caused the price to curl upwards just enough to entice everyone else to jump onto the bandwagon back in August of 2013, but the manipulation probably wasn't the reason for the surge to $1,100. That was probably herd dynamics, like you said. (To be clear, there's some pretty hard evidence that Mt. Gox was manipulating the market, so if you're asking whether any manipulation ever occurred, it seems pretty clear it did: https://willyreport.wordpress.com/2014/05/25/the-willy-report-proof-of-massive-fraudulent-trading-activity-at-mt-gox-and-how-it-has-affected-the-price-of-bitcoin/ https://willyreport.wordpress.com/2014/05/25/the-willy-repor...)
  - maxerickson 12y ago
    I would call that article "speculation", not hard evidence. This article makes the point that the large round number trades could simply be large round number trades: http://hackingdistributed.com/2014/05/27/mtgox-willy-markus/ http://hackingdistributed.com/2014/05/27/mtgox-willy-markus/ A key statement: Slow, structured buys are designed to avoid, not cause, jumps in prices. Note, I'm not defending Mt. Gox, just pushing back against a quick conclusion about what they did.
    - sillysaurus3 12y ago
      Why did trades continue to execute even during Mt. Gox's downtime? The website and API were both down, yet trades were still being made by the bot. The reasonable answer is because the bot was running within Mt. Gox itself.

maxerickson 12y ago

Why do you think Mt. Gox manipulating the price upward is so much more likely than the much simpler explanation of market dynamics? Speculative bubbles are nothing unusual.

sillysaurus3 12y ago
Yeah, I wrote a long rambling comment which said pretty much what you just said. Mt. Gox manipulation plus desire to speculate equals $1,100/coin, and now people's desire to speculate is settling. Maybe Mt. Gox's initial manipulation caused the price to curl upwards just enough to entice everyone else to jump onto the bandwagon back in August of 2013, but the manipulation probably wasn't the reason for the surge to $1,100. That was probably herd dynamics, like you said. (To be clear, there's some pretty hard evidence that Mt. Gox was manipulating the market, so if you're asking whether any manipulation ever occurred, it seems pretty clear it did: https://willyreport.wordpress.com/2014/05/25/the-willy-report-proof-of-massive-fraudulent-trading-activity-at-mt-gox-and-how-it-has-affected-the-price-of-bitcoin/ https://willyreport.wordpress.com/2014/05/25/the-willy-repor...)
- maxerickson 12y ago
  I would call that article "speculation", not hard evidence. This article makes the point that the large round number trades could simply be large round number trades: http://hackingdistributed.com/2014/05/27/mtgox-willy-markus/ http://hackingdistributed.com/2014/05/27/mtgox-willy-markus/ A key statement: Slow, structured buys are designed to avoid, not cause, jumps in prices. Note, I'm not defending Mt. Gox, just pushing back against a quick conclusion about what they did.
  - sillysaurus3 12y ago
    Why did trades continue to execute even during Mt. Gox's downtime? The website and API were both down, yet trades were still being made by the bot. The reasonable answer is because the bot was running within Mt. Gox itself.