
Why Bitcoin is so volatile - paulpauper
http://greyenlightenment.com/why-bitcoin-is-so-volatile/
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patio11
It is in fact not the case that there is a single exchange on which IBM trades
(it is listed on the NYSE, CsE, and at various places abroad). Liquidity
factually does exist in different amounts at different places; this is a major
reason why HFT works.

Bitcoin is volatile because it has a small float, terrible market
infrastructure [1], a relatively unsophisticated set of traders, a Wild West
of market manipulation [2], and no fundamentals to get in the way of wild
gyrations.

[1] The biggest Bitcoin exchange presently is functionally incapable of
transacting in dollars.

[2] As one of many things that could be said here, the biggest Bitcoin
exchange earns commissions in Bitcoin and then “dollarizes” then by selling
the Bitcoins on their own exchange, to their customers.

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decentralised
What you say is mostly correct but the undertone "wild west",
"unsophisticated", "manipulation", etc fails to address the point because that
is true of most hedge funds as well.

~~~
decentralised
While the downvotes serve to show disagreement the lack of arguments also
shows where the downvotes come from.

~~~
decentralised
:-)

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JepZ
While the described effect might not be the most important reason why bitcoin
is changing its value so rapidly, the effect was visible during the past week
after bitcoin past the 10k USD mark.

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leoplct
How do you calculate how much price will drop if X $ of Bitcoin will be sold?
What's formula?

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rejschaap
You check the order book of the exchange, in this case gdax

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leoplct
But how you calculate how much % change on price based on order book? Can you
give me an example?

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rejschaap
Basically you simulate the sale based on the order book. Let’s say the order
book contains the following bids ordered by price:

    
    
        Person A wants to buy 10 coins for 100 dollar
        Person B wants to buy 4 coins for 97 dollar
        Person C wants to buy 3 coins for 96 dollar
        etc
    

Now someone wants to sell 12 coins, he will sell 10 coins to person A and 2
coins to person B. The order book will now look like this:

    
    
        Person B wants to buy 2 coins for 97 dollar
        Person C wants to buy 3 coins for 96 dollar
        etc
    

Before dumping the 12 coins you could sell a coin for 100 dollar, after
dumping you can sell a coin for 97 dollar. You could say the price has dropped
3%. Obviously this is a very naive calculation, but it should give you the
basic idea.

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bitconion
perhaps, the uprise of derivatives like LedgerX, Deribit as well as the recent
CME decision will increase market efficiency and help us better to understand
the underlying bitcoin market

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goldenkey
Bitcoin has a somewhat arbitrary denomination. What is the ratio of
information transfer in 1 bitcoin versus a half of a coin? The answer is
....close to 1. How about 1 Satoshi? Well, gas fee needs to be a fraction of
the payment, so 1 Satoshi is close to 0 utility. How accurate does gas payment
need to be? Well, for starters, gas payment seems to be a fixed fee of the
payload, not a ratio of the amount sent. Lets analyze this.

Higher fiat pinnings allow for higher remittance transfers using less coins,
but ultimately the same network resources (mining.) How do most regular people
buy coin, do they bargain? No, they just buy $500 or however many dollars IN
BTC and take whatever ratio is given to them. This is because stock does not
come in fractional amounts...but BTC does. Meaning there is a stabilizing
force in the form of common people "settling" for a small piece at their
desired fiat amount.

In summary, until Bitcoin hits amounts close to 10^5, the Satoshi as the
smallest sendable amount, 10^8 coins, continues to provide close to the same
amount of utility, whether you are sending 1000 satoshis, or 10 bitcoins.

