Ha! I needed a good laugh this morning. Thanks internet.
What I don't get, is how do these prices actually change? For btc or a stock. The mechanism seems very voodoo.
What I don't get, is how do these prices actually change? For btc or a stock. The mechanism seems very voodoo.
This is where the "supply vs demand" adage comes in. If there's 1000 copies of your laptop on ebay, and one person trying to buy one, then its a buyer's marker - the cheapest auction sells, and the market value of your laptop just fell.
But if there's thousands of people trying to buy one or two copies of your laptop, then its a seller's market - the highest bidders get their laptops, and the market value of your laptop rises.
So (ignoring deprecation/inflation) your laptop didn't actually change. Its intrinsic value, if any, didn't change. But the market's position towards your laptop did, and how much you believe it'd fetch at auction right now, did.
People panic sold on a lot of that news. As good news came in, like the reversal of those decisions the price recovered.
This time it's bizarre to see, especially after the Goldman Sachs announcement yesterday. There hasn't really been much other news the past few days. Considering everything is down in almost equal proportions, it certainly looks like something else is at play. Panic selling piled on top of ___?
When it goes crazy, it goes crazy I guess...
edit: Apparently there was a South Korean exchange hacked: http://money.cnn.com/2017/12/20/technology/south-korea-bitco...
So that could be a pretty big influence!
Easy, so take a look at this which was linked upthread: https://www.gdax.com/trade/BTC-USD
So the weird moving green and orange bars in the middle of the screen are the order book. Green is the 'buy' side of the book and orange is 'sell.' Buy and sell orders get matched, the sale goes through and both the buy and sell order disappear from the order book. If there's more demand to buy then the green bar starts eating into the orange section and pushes the price up. Vice versa in a crash, and it works the same way for stocks.
And you can see that the orange and green sections are cumulative. So if the price right now is $12000 I can scroll over $12,250 and it'll say something like 280 BTC, that number is how many bitcoins I have to buy to eat the order book up to $12,250 (which makes that the new price).
Alice has 1 BTC she wants to sell for $1k
Bob has $995 and places an order to buy 1 BTC at $995
Alice could wait around for someone to make a better offer, or maybe she needs $ for christmas presents NOW and lets it go for $995, at which point the price becomes $995
The listed price is the valuation at which the last transaction occured.
A lot of people I talked to really believed prices were being driven by some kind of market manipulation. Either within the coin exchanges or people who were finding a way to manipulate things on the blockchain.
There was this post not too long ago about how someone might be stealing coins using well known keys:
There are two types of orders: LIMIT and MARKET. Limit orders get added to a list. There is a list of standing BUY orders and a list of standing SELL orders. They are standing/LIMIT because no one has taken them up on their offer. For example, I can enter a limit order now: "I offer to buy BTC for $500."
You can only enter a LIMIT SELL order at 1 penny above the highest BUY offer or higher. Conversely, you can only enter a LIMIT BUY order at 1 penny below the lowest SELL offer or lower. This is because when you TAKE an order that already exists on the book (the lists), you execute a MARKET order, not a LIMIT order.
Executing a MARKET order means that you "eat up" the book/list until you have reached your order size. So if I place a market order to buy 3 BTC I will progressively buy BTC at higher and higher rates from the standing limit sell offers until my order is fully filled.
That is how an order book/market actually works. Now enter your claim:"Market manipulation. The prices are really set by the coin exchanges"
What exactly would this entail?
I guess you suppose that Coinbase simply increases the price of Bitcoin on their website, and pockets the difference between what people pay and what they acquire them for. Clever!
But wait a minute, in order to increase the price, they have to eat all of the orders between the starting price and the finish price. Otherwise people would notice that the price moved over their order without filling it, which should never happen, and which would thus prove fraud, which would probably completely destroy the company.
So Coinbase, knowing this, decides to eat up all of the orders from the original price (let's say $15,000) to the new price they want BTC to cost: $20,000.
In order to do this, Coinbase has to OVERPAY for every single coin they buy on the way up. There is a fair market price, which is what you can expect to get when selling a coin, and you would have to agree to pay above this price for every single coin in order to manipulate the market. As a result, your attempt to manipulate the market would almost certainly lose you a massive amount of money. The order book has a lot of orders in it. This appears to me to be one of the stupidest things anyone could ever try to do. It would move the market, but it's not clear that there's any reason to believe that it would be anything but massively unprofitable.
Imagine walking into a gold market and offering to buy all the gold that's for sale at higher than the current fair price. Wow, what a clever strategy! Surely you'll make a killing!
It doesn't really make any sense.
Whether it makes sense to you or not market price manipulation absolutely does work as shown by hundreds of lawsuits filed by SEC every year.
>The order book has a lot of orders in it. This appears to me to be one of the stupidest things anyone could ever try to do. It would move the market, but it's not clear that there's any reason to believe that it would be anything but massively unprofitable.
Given enough cash/coins you can easily manipulate order book (see "wash sales"). Even easier if you are running an unregulated exchange, duh!
The goal of bidding price up is to attract buyers and establish an upward trend, which later you can sell into at a higher price. Works even better when it causes a "short squeeze".
Works in other direction too, obviously. All this is rather pretty basic and also highly illegal in _regulated_ markets.