Topic: i dont get it, almost put this in the noob section cus its kinda a noob question (Read 974 times)

this kind of play can work in futures markets where there is leverage involved

consider

someone puts up a huge bid wall at $100 and a few people start selling into it. its very likely that some of those sellers are simply leveraged short sellers, day traders, who will need to close out their positions. so they will be looking to buy back to cover their short. its gonna be quite hard for them to bust thru your wall. also, other participants will see your wall, and then will front run your order, since you are now showing a huge wall of support, and then will start buying up everything at 101, 102, etc. this will start the move up, and then all those shorts who sold into you at 100 will now be in the red, and they will need to buy back in to cover their position, and their buys will also push the price up. now the coins that you bought at 100, you can sell at 102, 103.

obviously this works only on short term time scale. but it all depends on the participants. bitcoin markets have no leverage and no short selling so this is a moot point

totally wrong, thats why different exchanges have different prices. each exchange is its own marketplace




there is no 'god' of what the price of what a bitcoin is. the price is whatever people are willing to pay. if you can find someone to buy a bitcoin for $200 on the corner of the street, even though the mtgox market price is $90, then you've still traded for $200. you've found a different market. the only reason mtgox is accepted as the most accurate price is because it transacts the most volume. usually the largest dollar amounts are the most accurate, otherwise someone with big money would just buy up cheap coins or sell expensive coins, and then the market would move anyway to reflect that. consider the street corner market. once people realize that people are buying coins for $200 on the street corner, all the big fish will go to the corners and try to sell massive amounts of coins. this would push the price down on the street corner and that marketplace would become more 'accurate' or 'efficient'

any big fish can put up walls wherever they want. but what if they are wrong? suppose someone throws up 10,000 btc for sale at $91 right now. maybe the 'true value' of bitcoins is $120 and the some other big fish who is smarter buys up all 10,000 at $91. and then over time the price rises to the true value of $120 and the initial big fish loses.

but who knows what the true value is?

why dont you try trading yourself and you'll figure all of this out. try to buy and sell one coin and make profits. much cheaper than getting into the stock/futures markets to learn how auction markets work

There's not just a risk, there's a guarantee that anyone who tries this will lose money. Say you don't want the price to fall below $100. Easy, you say. Just put up a bid wall at $100. Now whenever someone wants to sell bitcoins for less than that, they instead sell them to you for $100. But wait - that means you just bought bitcoins for $100 each, from someone who was perfectly willing to sell them to you for a lower price. Whoops, you just ripped yourself off. The same thing happens if you put up an ask wall to keep the price from going up: you end up selling your coins for less than what the buyers are willing to pay.

As you continue to buy overpriced coins and sell underpriced coins, you'll very quickly run of money, your walls collapse, and now the price is free to return to it's natural level. All in all, a complete waste of time and money.

Just think of it as gold or silver or stocks.  If you think the price will go up you should buy.  If you think the price will go down you should sell.  When the price was going up to 260 the people who sold at 180 were betting that it would crash quickly and the ones who bought those coins at 180 were thinking it would rise higher.

lastly, if the order book is the god of what price a btc is, then why couldn't a big fish put up large walls on eather side? then you would have a set price for the coin and no fluctuation. I mean hypothetically. to much risk involved? also when the price went up as much as it did why would people be selling then? some one was saying that ok i have five and ill sell if you give me 180. even though they saw it sky rocket to 260. seams strange. but at the same time make even more sense now. when it was going up i guess i thought that there were way fewer of them so you had to spend more to get them. the rarity made them more expensive. but there is not one satoshi that does not have a home its there? so how could that be. why would i think that? huh funny.

oh! yes I get it now.

and yes I did think that there were some mathematical calculations producing the price of a BTC  I thought that if there were x amount of coins and x amount is bought up then the price would reflect that. as in the total amount of money spent on bitcoins divided by the total amount of coins in existence then you would get the price per bitcoin. Thank you very much to take the time to explain this to me. much appreciated

there is no 'should'

it all depends on what kind of orders get placed as the market moves

consider your example


bid              |     ask
-----------------------------------------
10 at $99.00    |     10 at $100.00
10 at $98.00    |     400 at $100.10

first
a person buys 10 coins at $100, so last price is now $100, order book now looks like:


bid              |     ask
-----------------------------------------
10 at $99.00    |     400 at $100.10
10 at $98.00    |     100 at $100.20

now
400 coins get bought at $100.10 so this will show as the last traded price. order book now looks like:


bid              |     ask
-----------------------------------------
10 at $99.00    |     100 at $100.20
10 at $98.00    |     10 at $100.30

now
if only 1 coin gets sold at the market at $99, the last trade will show $99 and the order book will look like:


bid              |     ask
-----------------------------------------
9 at $99.00     |     100 at $100.20
10 at $98.00    |     10 at $100.30

now
suppose someone decides that they are willing to sell 200 coins at $99.03, however no one is currently willing to buy at that price (the highest bid is only 99) so he puts in his order and it goes into the book waiting for someone to match his trade, the book now looks like:


bid              |     ask
-----------------------------------------
9 at $99.00     |     200 at $99.03
10 at $98.00    |     100 at $100.20
10 at $97.00    |     10 at $100.30


so now there are coins for offer at $99.03, a mere increase of 3 cents over the last price of $99, so anyone is capable of now buying at 99.03 if they choose

as previously suggested, you should watch clarkmoody instead of bitcoinity if you want to learn how a market works because you need to see the order book in combination with the last trades that go by

free market in action

You're missing that you're buying and selling to people who are setting the price they want to buy and sell at.  The price is not set by some mathematical function of the number of coins bought or sold at.

thank you, i have looked at order books and see what you mean. so a wall of say 50 bitcoins to move it a few cents then only a few more btc to move it 50 cents. i get it kinda. but how does that explain a buy of abut 700 btc to go up a few cents then only a few bitcoins to go down a dollar. it would seam that you would have to sell almost 700 coins to make it drop that amount since that amount was taken off the market. you know what i mean.


buy 400 goes up ten cents a few sells goes down a dollar another 200 buy and goes up three cents.... it should go up that dollar it just lost then eat the wall that is set above the sell that it just went down right?

Bids:

100 BTC for $100
0.01 BTC for $99

Sell 100 BTC into it, the price won't move. Sell 0.01 more and it will go to $99.

Maybe you should have a look at an order book to understand how it works: http://bitcoin.clarkmoody.com/

It boils down to the fact that there are larger and smaller orders, and their concentration isn't even.

what im seeing is that it does not matter the ammount of coins bout at a price that moves the price but if there is a purchase at that price to move it.

what I am saying is on bitcoinity you will see the price say at 91.00 then on the right you see that oh some one just bout one bitcoin at 91.02 so then the price is that. then you see ten more buys all with .02 that are bought that push the price up to 92.86 now how can this be. a whole flippen bitcoin was bought and it pushed the price that high??? wtf please explain this. also on the flip side of selling.

ALSO! i do not get this bit as well: you see some one buy 289 bitcoins at 91.00 then you see some one buy one bitcoin at 90.02 then you see some on buy 465 bitcoins at 90.04 why would the price not go way up since 700 bitcoins just got bought. but then .02 .02 .02 .02 .02 all sell bitcoins and it drops the price more than a buck. what the fuck is that how can less than one bitcoin being sold make it go down a whole dollar but buying seven hundred makes it go up a few cents. but then you see. .04 .18993 1.23 3.4 .02 .02 .02 buys and then its up 95 cents. how is that even possible after 700 made it move only a few cents.

clearly im an idiot and im missing somthing here cuz this is just blowing my minde.

btw im looking at bitcoinity and on the usd mtgox

but bitstamp on bitcoinity im sure is just the same.

please explain- and try not to be to much of a jerk about it. i know its simple but i guess im still a noob.