I guess you are correct. I mean now on mtgox you can buy bitcoins for 0.01$, so that is where the trades happen
Who needs built-in price protection mechanisms, not mtgox for sure. What a bad idea, right?
They tried that with some commodities futures exchanges. Remember in the 70's silver locking limit up when the Hunt brotheres tried to corner the market? The price protection rule could not keep up with the market and the first trade of the the day would lock the limit and nothing else got traded for the entire day. This repeated day after day until the price reached market value. Only then did the market unfreeze.
I don't know how that worked, but in the case I proposed it's not a fixed limit, it changes every time a trade is executed or a second elapses. If the market were to go rapidly into one direction, it would stall every few minutes and continue into the specific direction.
Why would there be a reason for the price to be 17$ and not 15$? Right now it's because more people buy than more people sell. Any preferred percentage could be used, or time period or whatever, but in any case it would protect agains bombing like we had last two weeks on mtgox. Once it was a stolen quantity of bitcoins from a wallet, another instance was a hacked mtgox account. In both cases two individuals basically fucked up everyone's participation in the project, especially for the two people that happened to lose their bitcoins. With such limits in place, it would have taken days to sell out the whole quantity of bitcoins.
It's not like we have a healthy mass of market moderators (that buy and sell close to the moving price to shorten the gap), which instead prefer to oscillate the price rapidly and rake in shallow bids at great profit, again, manipulating the market since there are no limits.