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Comment by londons_explore | Hacker News Reader

I know in the USA, placing bid/ask offers you have no intention of completing is illegal, but IMO this rule makes no sense.

It's like advertising a $1,000 plastic keyring. Sure, I as the store keeper think it's very unlikely I'll sell it, but it is still for sale, and if someone tries to buy it, I really will sell for that amount.

The fact that other keyring buyers see my $1000 advertisement and that affects their buying habits (for example buying more $3 keyrings now they look like a bargain) is their problem.

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Placing 1 million offers to sell at 1000 is akin to shouting fire in a movie theatre. It is going to start a panic and a big price swing. Which then means you can buy in the dip, pull your fake orders, and make some easy cash.

Trust me you don't want a market like this. Bullies with deep pockets will destroy you. Your comment looks like you have never traded outside of Scottrade.

But why do the other market participants panic? It seems like it's their own fault for panicking -- they should stop using the order book to make value judgments.

Isn't this a way to prevent traders from anticipating and profiting from arbitrage opportunities? In some sense, I see this as a sign of a healthy market, no? If traders are looking for signals like average the price of sell orders, they should remove outliers like this, or not do arbitrage.

I think this happens when a great percentage of participants of an exchange are merely traders, speculators, and bots than actually using the currency for transactions in every day life.

Does it matter why?

The fact of the matter is that they do panic, and it's not actually useful for market stability. Some might say "too bad so sad, don't be tools". But a market where people can actually trust the intent behind buy/sell orders is going to be better for everyone involved.

The objective isn't to have the least regulation possible, but to try to have the "best" market possible

This is a self-correcting problem. Traders who fall for fake walls lose their capital, and thus influence on the price, to those who do not. The feedback loops and incentives of the market cause it to evolve toward a more price-stable configuration.

Bullies with deep pockets can attempt to destroy a market, but value investors with sensible limit-buy orders tend to get paid.

(Accurately valuing bitcoin is fraught with risk, but a limit-buy at $1000 today is likely to be a net win. Let the bully sell, and let the limit order soak it up.)

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