Reason why MtGox can go to 0 - without arbirage opportunity with Bitstamp - page 3.

EchoingUprise

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Quote from: jaybny on February 16, 2014, 01:21:56 PM

Quote from: ?? on ??

Quote from: jaybny on February 16, 2014, 01:15:14 PM

Quote from: ?? on ??

my question is: where are they getting the coins?

is bitstamp doing a backdoor deal? or other exchanges?

don't follow the question. mtgox gets coins from their depositors.

the coins to cover their asses.....

during a liquidation, if mtgox is out of coins, they will need to use their own fiat.

prediction: as soon as mtgox is shutdown/liquidates. BTCs prices will go to the moon, on the assumption that mtgox is short. typical short squeeze. "buy the rumor, sell the news"

everyone needs to realize that this is all "normal" market actions.. BTC trading is not special, or even very volatile. trading is trading. difference is that many BTC traders are newbies to the wonderful "war" of trading.

you are naively assuming that everything in the bitcoin world is legit.

it is not.

therefore normal market behavior cannot be applied.

gox will pull a rabbit out of it's ass, and continue functioning. at a loss, of course - but they will bounce back.

I have my doubts they will bounce back. They may still be good for people trading in Japan, which I have no idea how much market share that is compared to the world. I think after this only heavy risk takers will trade on Mt Gox.

Calavera

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Quote from: jaybny on February 16, 2014, 01:27:20 PM

Quote from: Barek on February 16, 2014, 01:21:26 PM

Quote from: jaybny on February 16, 2014, 01:00:30 PM

As MtGox BTCs price drops relative to Bitstamp BTC, more BTCs will be bought/withdrawn on MtGox, and the cost to MtGox to make customers whole also goes up

This is flawed logic. The amount of fiat at Mt.Gox is fixed as people cannot withdraw significant amounts.

Assuming you are correct and Mt.Gox is short BTC then a low BTC price is ideal for them because they can replace their losses for less fiat money.

If nothing else, they can borrow against all the fiat noone can withdraw anytime soon.

no, if MtGox exchange is short BTCs, the low price of BTC on mtgox is FAKE. there are no BTCs to be bought at $250. The price of $250 is probably
( (Actual number of BTCs on mtgox) * Bitstamp price ) / (Number of BTCs that mtgox is representing they have)

It was always GoxBTC you were buying on Gox, rather than real BTC. You were paying with GoxUSD too, for that matter. For a while previous to this current incident, GoxBTC has been valued at close to what other exchange's BTC was worth, while GoxUSD was worth less than USD on other exchanges.

If they can buy GoxBTC on their own exchange for less than they can sell it for elsewhere then they can reduce their BTC liability (i.e. they now "owe" the customer that sold them the GoxBTC fiat instead of BTC, and in fact they owe them less in fiat than what the BTC was "worth".

jaybny

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Quote from: Barek on February 16, 2014, 01:32:40 PM

Quote from: jaybny on February 16, 2014, 01:27:20 PM

no, if MtGox exchange is short BTCs, the low price of BTC on mtgox is FAKE. there are no BTCs to be bought at $250. The price of $250 is probably
( (Actual number of BTCs on mtgox) * Bitstamp price ) / (Number of BTCs that mtgox is representing they have)

You are assuming that someone stole more BTC than MtGox total profits divided by $250 (see how a low number here helps MtGox?).

And even if this is still the case, like I said, they could borrow against the fiat they are holding for their customers.

no - you cannot use $250, must use Bitstamp quotes. see how the low prices hurt them? Again, this is all assuming MtGox is shutdown and goes into liquidation. If these low prices do in fact attract more deposits, then yes, low prices help and it is in fact a ponzi scheme.. like MfGlobal.

jaybny

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Quote from: ?? on ??

Quote from: jaybny on February 16, 2014, 01:21:56 PM

Quote from: ?? on ??

Quote from: jaybny on February 16, 2014, 01:15:14 PM

Quote from: ?? on ??

my question is: where are they getting the coins?

is bitstamp doing a backdoor deal? or other exchanges?

don't follow the question. mtgox gets coins from their depositors.

the coins to cover their asses.....

during a liquidation, if mtgox is out of coins, they will need to use their own fiat.

prediction: as soon as mtgox is shutdown/liquidates. BTCs prices will go to the moon, on the assumption that mtgox is short. typical short squeeze. "buy the rumor, sell the news"

everyone needs to realize that this is all "normal" market actions.. BTC trading is not special, or even very volatile. trading is trading. difference is that many BTC traders are newbies to the wonderful "war" of trading.

you are naively assuming that everything in the bitcoin world is legit.

it is not.

therefore normal market behavior cannot be applied.

gox will pull a rabbit out of it's ass, and continue functioning. at a loss, of course - but they will bounce back.

you are naively assuming that everything in the trading world is legit. (mfglobal, jpmorgan silver short, CMOs, Enron, etc.. )

vpitcher07

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Quote from: Barek on February 16, 2014, 01:21:26 PM

Quote from: jaybny on February 16, 2014, 01:00:30 PM

As MtGox BTCs price drops relative to Bitstamp BTC, more BTCs will be bought/withdrawn on MtGox, and the cost to MtGox to make customers whole also goes up

This is flawed logic. The amount of fiat at Mt.Gox is fixed as people cannot withdraw significant amounts.

Assuming you are correct and Mt.Gox is short BTC then a low BTC price is ideal for them because they can replace their losses for less fiat money.

If nothing else, they can borrow against all the fiat noone can withdraw anytime soon.

Gox is starting to look more and more like a ponzi scheme to me... Especially if what you wrote is true.

Barek

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Quote from: jaybny on February 16, 2014, 01:27:20 PM

no, if MtGox exchange is short BTCs, the low price of BTC on mtgox is FAKE. there are no BTCs to be bought at $250. The price of $250 is probably
( (Actual number of BTCs on mtgox) * Bitstamp price ) / (Number of BTCs that mtgox is representing they have)

You are assuming that someone stole more BTC than MtGox total profits divided by $250 (see how a low number here helps MtGox?).

And even if this is still the case, like I said, they could borrow against the fiat they are holding for their customers.

jaybny

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Quote from: ?? on ??

Quote from: Barek on February 16, 2014, 01:21:26 PM

Quote from: jaybny on February 16, 2014, 01:00:30 PM

As MtGox BTCs price drops relative to Bitstamp BTC, more BTCs will be bought/withdrawn on MtGox, and the cost to MtGox to make customers whole also goes up

This is flawed logic. The amount of fiat at Mt.Gox is fixed as people cannot withdraw significant amounts.

Assuming you are correct and Mt.Gox is short BTC then a low BTC price is ideal for them because they can replace their losses for less fiat money.

If nothing else, they can borrow against all the fiat noone can withdraw anytime soon.

and then blame a technical glitch. as they always do. they are really a bad crew of liars and scammers.

this time market is betting on a court ordered bankruptcy / liquidation.

jaybny

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Quote from: Barek on February 16, 2014, 01:21:26 PM

Quote from: jaybny on February 16, 2014, 01:00:30 PM

As MtGox BTCs price drops relative to Bitstamp BTC, more BTCs will be bought/withdrawn on MtGox, and the cost to MtGox to make customers whole also goes up

This is flawed logic. The amount of fiat at Mt.Gox is fixed as people cannot withdraw significant amounts.

Assuming you are correct and Mt.Gox is short BTC then a low BTC price is ideal for them because they can replace their losses for less fiat money.

If nothing else, they can borrow against all the fiat noone can withdraw anytime soon.

no, if MtGox exchange is short BTCs, the low price of BTC on mtgox is FAKE. there are no BTCs to be bought at $250. The price of $250 is probably
( (Actual number of BTCs on mtgox) * Bitstamp price ) / (Number of BTCs that mtgox is representing they have)

jaybny

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Quote from: ?? on ??

Quote from: jaybny on February 16, 2014, 01:15:14 PM

Quote from: ?? on ??

my question is: where are they getting the coins?

is bitstamp doing a backdoor deal? or other exchanges?

don't follow the question. mtgox gets coins from their depositors.

the coins to cover their asses.....

during a liquidation, if mtgox is out of coins, they will need to use their own fiat.

prediction: as soon as mtgox is shutdown/liquidates. BTCs prices will go to the moon, on the assumption that mtgox is short. typical short squeeze. "buy the rumor, sell the news"

everyone needs to realize that this is all "normal" market actions.. BTC trading is not special, or even very volatile. trading is trading. difference is that many BTC traders are newbies to the wonderful "war" of trading.

Barek

full member

Activity: 168

Merit: 100

Quote from: jaybny on February 16, 2014, 01:00:30 PM

As MtGox BTCs price drops relative to Bitstamp BTC, more BTCs will be bought/withdrawn on MtGox, and the cost to MtGox to make customers whole also goes up

This is flawed logic. The amount of fiat at Mt.Gox is fixed as people cannot withdraw significant amounts.

Assuming you are correct and Mt.Gox is short BTC then a low BTC price is ideal for them because they can replace their losses for less fiat money.

If nothing else, they can borrow against all the fiat noone can withdraw anytime soon.

jaybny

sr. member

Activity: 410

Merit: 250

Proof-of-Skill - protoblock.com

Quote from: ?? on ??

my question is: where are they getting the coins?

is bitstamp doing a backdoor deal? or other exchanges?

don't follow the question. mtgox gets coins from their depositors.

jaybny

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Activity: 410

Merit: 250

Proof-of-Skill - protoblock.com

I've been trading on MtGox since $2 BTC. Just want to give a layman explanation on how/why MtGox is trading at $250 while Bitstamp is still obove $600, and why the "no arbitrage theory" is not broken.

Assumption is that MtGox lost some BTCs due to the malleability hack. If we assume that Silk Road 2.0 did in fact lose the BTCs due to a hack rather than fraud, its makes sense that MtGox also lost a fair amount of BTCs. Also, im sure a thorough analysis of blockchain can confirm how many BTCs were "stolen" from MtGox.
So, if everyone withdraws all their BTCs at once from MtGox, there would not be enough BTCs for everyone.
Big deal? MtGox can just use its own money to cover the difference, and everyone would be whole.
So only real risk is that MtGox runs out of all BTCs and all fiat and is insolvent!
As MtGox BTCs price drops relative to Bitstamp BTC, more BTCs will be bought/withdrawn on MtGox, and the cost to MtGox to make customers whole also goes up
Its a vicious cycle, a snowball effect, and a game of chicken. Once prices started diverging, smart traders would "rather be in fiat, in case of insolvency". Also they can always buy even more BTCs with the same amount of fiat at a later date.
Hence the "bank run" on MtGox BTC. End game is: MtGox shuts down and liquidates, and is short BTCs.

jaybny

Topic: Reason why MtGox can go to 0 - without arbirage opportunity with Bitstamp - page 3. (Read 5635 times)