Is "the price" "the price"?

[4/3/15, 11:34:58 AM] joshunseth: @Shannon, the price is the price. This “the price on the exchange is not the real price” that I hear all the time is nonsense.
[4/3/15, 11:35:20 AM] Shannon Code (ZTC): the price on the exchanges is pure manipulation based on the whim of a handful
[4/3/15, 11:35:26 AM] Shannon Code (ZTC): it’s a centralized mess of fraud
[4/3/15, 11:35:40 AM] Shannon Code (ZTC): and ends up blurring the work of some crypto projects
[4/3/15, 11:35:50 AM] joshunseth: @Shannon, the price is the price
[4/3/15, 11:36:50 AM] J-Dog: I see uses for tokens that have NOTHING to do with price… sure, eventually someone will trade one of these assets for something of value, and then the token will have a set value…. but the value doesn’t really matter to the token operator…. so, why not make it easy in the short-term to say “we are going to allow you to disable DEX trading of this asset, because really, you don’t care about the price”
[4/3/15, 11:37:18 AM] joshunseth: If you don’t care abut the price, then you shouldn’t care whether it’s traded
[4/3/15, 11:37:25 AM] joshunseth: caring about whether it’s traded is caring about the price.
[4/3/15, 11:37:43 AM] J-Dog: the alternative is to leave the DEX open… and have the perception that any users token can be just as easily manipulated as any of the altcoins….
[4/3/15, 11:38:05 AM] Shannon Code (ZTC): But to what J-Dog just said, if a project has an asset used in some money making scheme and the price driven down it’s now tainted and harder for users to accept it’s use (oh that price tanked last week, must be a scam product…)
[4/3/15, 11:38:34 AM] joshunseth: The price is the price. I don’t know how else to convey that.
[4/3/15, 11:38:50 AM] J-Dog: a token is a token, it shouldn’t have to be tied to a price
[4/3/15, 11:39:31 AM] J-Dog: sure it has some value, but why does it have to be represented in BTC and traded as such?
[4/3/15, 11:39:37 AM] joshunseth: You cannot tell people not to sell their personal property. If you do that, you are going to end up with a black market. And in this space, where the regulation doesn’t exist, a black market will just mean someone will just make another dex/market for the token. It’s not a real idea.

[4/3/15, 11:57:19 AM] J-Dog: The asset reputation/feedback system is not going to solve this issue…

example… I have a bunch of FLDC and I use that to set buy/sell walls and drive the price of FLDC up, sell to the suckers, and then crash it…. lots of people get upset because they were manipulated into buying FLDC because they thought the pump was related to the project… so they see price going up and jump on board… they were scammed, so they leave negative feedback about FLDC…… we now have a situation where FLDC has hundreds of negative feedback on their FLDC asset… and this greatly impacts their project, and its ability to do good, attract new users, etc

the FLDC project had nothing to do with my pump and dump… yet, they are greatly effected by it… and a reputation system helps people scream foul, but doesn’t help FLDC re-establish their credibiity

Simple short-term solution is to disable DEX trading for FLDC… This makes it more difficult in the short-term to manipulate asset prices

Longer-term, clearly someone will build a centralized market and allow trading of non-DEX traded assets… but it would be a bit of work, and not something someone is going to do until there is decent CP/asset volumes.

I’ll stop beating the dead horse… but I fail to see why disabiling DEX trading at this point is an issue… 1) not technically tough to add another flag and check it before entering a DEX order… 2.) This will help make CP attractive to new developers who don’t want to worry about price pumps/dumps in the short-term.
[4/3/15, 11:58:35 AM] J-Dog: just using FLDC as an example since it would be effected by something like this…. I imagine they still want DEX trading :slight_smile:

If you’re asking this question, you should strongly read and understand this article in full: http://en.wikipedia.org/wiki/Efficient-market_hypothesis

Note that “stocks always trade at their fair value on stock exchanges”. In the case of Counterparty, the markets are very inefficient so that complicates things a bit.

Also, for any “Technical Analysis” people who stumble onto this thread, the ramifications of this hypothesis is that you’re a gambler.

For anyone who continues on to read the View of Economists section, Counterparty is a wonderful example of the intrinsic value of Bitcoin, which is not understood by pretty much anyone.

Another way to easily understand this point is by answering the question of how the hell else would you value a unit of FLDC? :smiley:

The notion of manipulation is ridiculous. People that have the capability to “manipulate” the markets are generally people we would refer to as market makers. They hold so much of any one stock or asset that when they can crash or soar the price. The result… people get the opportunity to buy cheap or people get stuck holding the bag when the market crashes. One such person in Bitcoin would be Satoshi Nakamoto. If even 1 satoshi of his holdings moved, the markets would react in a really big way. Is this market manipulation? No! It’s new information that the market bakes into the price.

http://www.marketplace.org/topics/business/what-it-means-say-kraft-manipulated-wheat-market

Listen to the audio on this. Kraft is being sued for manipulating the wheat market. The facts of manipulation, hilariously, are argued in court because it is not obvious. The answer to the question, “did Kraft manipulate the market?” is decided by a judge after the fact. And it’s based on nothing but whether the judge decides that something they did moved the price up or down thus causing something like a squeeze. In this story, when an economist was asked about how you prove something is an “artificial price” the economist interviewed laughs and says basically it’s impossible but that it has to do with the intent of the actor.

The absurdity is that if you are the actor, you’re goal is to make money in the market. So if one of the ways you can make money is cleverly buying and selling, you should do it. It is an amoral act. By the way, the cost of externalities such as the possibility of being caught and subsequently sued, are probably also baked into an actor’s decision to “manipulate” the price.

The best way to understand markets, in my opinion, is to break them down into their constituent parts. The simplest market is an auction wherein two participants are bidding on the same item. What is the fair market price of that rare painting? Going in, people were estimating that it would sell for $10 million. One of the participants is willing to spend $12 million because the painting is worth that much to him personally (his/her significant other really wants it on their wall). The other wants to get it for a real steal and is hoping that it will go for abotu $8 million. He’s willing ot pay up to $9.5 million. Neither knows anything about the other buyer. How much will the art go for? Well, it will go for something like $9.6 million to the first buyer, just short of the $10 million estimate. If you add a third party to this, and that party is willing to pay $11 million, the price of the painting will go for $11.1 million or something like that. The point is, the more actors you have in the market, the more likely it is that you will end up nearest the price that the highest bidder will pay. If someone comes into the market who wants to “manipulate” the market and offers $20 million for the painting, he’s going to be left holding the bag unless he can unload it for more. This is the case for these so-called manipulators. They are taking on an inordinate amount of risk by “manipulating.”

A lot of times, they win because of market exuberance or something related to the price elasticity of the product. But a lot of times they lose, and they lose big.

Markets are really about information. If, for example, there were rampant speculation that the painting were a fake, but I knew for a fact that it wasn’t because I was an expert, I might be able to get it for a steal. Or, if I knew that it was a fake, I wouldn’t participate at all. The more information you have, the more I can know about the price’s reflection of that information. When I have more information than the market, i will know the disparity of the price, and I will put my money into the market until the gap is closed and the opportunity cost of making money elsewhere is greater.

In this world, volatility can look a lot like manipulation. Generally, in investments, volatility is equated with risk. So… sure, maybe it is what you think of as manipulation. Chances are, the reason alt coins go way way up and way way down is simply because the risk of holding that alt coin is a bit of a black box… especially when there are almost no participants putting information into the market (information being people purchasing at a price they believe reflects their risk).

This “the price on the exchange is not the real price” that I hear all the time is nonsense.

Well, it is the real price that you can buy or sell for right now. If you believe it will be higher tomorrow; buy. If lower; sell :smiley:

the price on the exchanges is pure manipulation based on the whim of a handful

The price is always the result of people buying and selling for whatever reason. If you believe the buyers are pumping the price, fine, you sell now that you have the chance. It’s a gift to you from the pumpers. If you believe the price is too low due to manipulation, perfect, it’s the time to buy.

eventually someone will trade one of these assets for something of value, and then the token will have a set value…. but the value doesn’t really matter to the token operator…. so, why not make it easy in the short-term to say “we are going to allow you to disable DEX trading of this asset, because really, you don’t care about the price”

Disabling the DEX would surely make it more difficult to set a price, but as long as an asset is transferable people will find a way to trade. Soon I hope there will also be a centralized exchange with native support for all CP assets. It is an interesting discussion though - how much control the token operator shall have. It deserves its own thread.

If you’re asking this question, you should strongly read and understand this article in full: http://en.wikipedia.org/wiki/Efficient-market_hypothesis

It is a hypothesis - not a theory - for a reason. Indeed, it is very difficult to make money in the markets, hence you can say markets are quite efficient. However, it is not always true. My personal conclusion is that illiquid markets such as XCP are in no way efficient. Do your own research, and you might find that it is possible to make money trading. More liquid markets (e.g. most listed stocks) are a lot more efficient. I have to admit I do not know how to make money trading them. The large swings, however, such as the years-long trends in stocks and commodities, I believe are more predictable because the manipulation of money by central banks is quite predictable (certainly not efficient).

Back to the original question;

Is “the price” “the price”?

I think people are concerned / frustrated because many view a project in light of its price. When an altcoin increases in price it gets a lot of attention. Sometimes the price trend even fuels itself as more attention means more buyers (and also more developers). This is why it is so popular (profitable) to pump and dump coins. However, easy come = easy go. From this perspective it is clear that “the price” is NOT“the price”. My advice is

  1. If you have your own project with a token, do not care about its price. The market has a life on its own. If you want attention, there are cheaper, more honest, and more long-term ways than a pump.
  2. If you are a speculator, be careful not to get burned. A pump is a negative-sum game.
  3. If you are an investor, try to predict how the underlying project will be in five years from now. Don’t care about short-term swings.

I can’t agree with the last paragraph and the following 1-3 enough. Well said.

I think the strategies and ideas for pricing assets and cryptocurrencies are still very underdeveloped, and because anyone has access (e.g. previously unbanked counteries, teenagers with too much free time, people for whom this is the first exposure to ‘finance’) it ends up skewing everything to some degree.