Topic: Why dumps are important - page 7. (Read 4748 times)

That's exactly my point

At the end of each cycle, the dumpster will have less coins (and more fiat), therefore dumps are useful. Apart from that, as I said in my previous post, there should not just be panic sellers (there will always be some), there should be a sufficient number of them. But since the price of Bitcoin is consistently going up at the end of each pump and dump cycle, there will never be enough panic sellers to offset the redistribution of coins (otherwise, price wouldn't be growing). In this way, higher prices play against the dumpsters since they inevitably lose their coins over time (accumulating cash instead)

I don't really see how profit taking is opposite to dumping

Since you seem to be opposing them. Care to explain? Further, it is not just the dumpers themselves who are buying back the coins that they have sold earlier at higher prices because otherwise buying back would be meaningless. If they were the only ones buying back their own coins, they would likely end up with losses since it makes sense to buy back if you assume to sell later at higher prices. But this is only possible if you are not the only one who is buying at lows. In other words, you would be able to buy back only a part of what you sold before, and thus dumps still necessarily contribute to leveling out Bitcoin wealth distribution. On the other hand, you still have to explain that folks that bought your coins at highs will be willing to sell these coins at all (back to you) even if the price went down. Either way, you are set to end up with less coins every turn of a pump and dump cycle

that is a very good point. but there is a big if involved and that is if others buy cheap bitcoins not sell after the dump and join the dumpers and then buy back more expensive coins.

lets say a whale dumps 500BTC at $1230 and creates panic, there will always be panic sellers and chain reaction without exception but if other traders know this and start buying instead of selling themselves that is when the whale is either forced to dump another 500BTC to force the panic or buy back his first 500BTC at $1250. meaning he buys 492BTC and if this continues happening each time there will be no whales.

Dumps are not important., but profit taking is. Dumps do not necessarily decentralize ownership of bitcoins, because in most cases it is dumpers themselves that end up buying the coins back after it has being undervalued.

I believe a periodic dump is good for both traders and users of any crypto be it bitcoin or any other coin.
It allows more people to get hold of coin which is not possible because of high rates.

But this theory is still not without its weak points

For example, while it is certainly true (well, at least, I think so) that unexpected, out of the blue dumps are caused by cryptowhales liquidating their stashes, but what about pumps? It could be said that pumps are in fact offsetting the leveling out effect of dumps. And while dumps contribute to more even wealth distribution, pumps certainly work in the opposite direction, i.e. contribute to wealth centralization (accumulation) in fewer hands. That challenge in its turn could be somewhat refuted by claiming that pumps necessarily cause price hikes and thus their effect would be less pronounced since with higher prices you would just need more fiat to accumulate the same amount of bitcoins. Further, dumps are more profitable overall, so they should be preferred in case of the price rising. For example, the twins bought 100M dollar worth of bitcoins at the price of, say, 600 dollars per coin, but to buy the same amount of bitcoins today they would need twice as much cash. Therefore, with the same stack of dollars they could buy only half as many bitcoins today, and that would work against Bitcoin wealth centralization at higher prices. The bottom line is that higher prices make wealth centralization less likely at large

After reading your post I've voted "Yes, they are". You have a good point, I have never thought about this issue that way. If you are right, and hopefully you are, the dumps work to the benefit of Bitcoin because it is dumped by a few and adopted by many.

Right now I can witness the confirmation of your theory on a Bitcoin exchanger I use: many people are buying BTC for the amounts from $10 to $30, and I'm pretty sure big part of them are buying their first Bitcoins now.

It is kind of important what you mentioned but it is also important that bitcoin gets a dump because it helps the smaller investors a lot as they normally wait for price to deduce and ya after a dump till date they growth in price has been stable. And after all bitcoin is like a stock itself so dump is something which will surely occur.

This is just a theory, so bear with me (constructive criticism is welcome)

And this theory asserts that Bitcoin dumps like what we've seen recently (i.e. today and right after the rejection of the Winklevoss ETF by the SEC) contribute to more even Bitcoin distribution over time and will help stabilize prices in the future (read make Bitcoin growth more consistent). What real world facts is this theory based on? We know that initially there were only a few users (so-called early adopters) who held the majority of coins, so they could easily move the price by dumping their stashes (at least, some part thereof). In the case of the lack of major news (either positive or negative), the price is pretty stable right now. So the only viable explanation for all of a sudden price crashes is most likely someone dumping huge amounts of coins (maybe, the bros themselves). This causes the price to plunge (even if momentarily). It is almost certain as well that the coins dumped are bought by a lot of independent traders, and therefore the wealth distribution is set to level out eventually. That's basically why dumps are important since they are caused via massive sell-offs by a relatively small number of large Bitcoin holders and get absorbed by the market