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RE: The Economics Behind the Steem Dollar Arbitrage..
Hello @cryptogee
I have read it, and the main assumption in this article is completely false IMO.
The only thing that is happening is, some user working orders on the internal market are giving away edge. These users want to sell Steem, they are working an order on the internal market to do so. The market move dramatically so that, they could get a better price elsewhere, a middle man steps in and takes profit, and matches the sellers request
The Arbitator doesn't add to selling volume, they just match volume that is already there.
Let me know if that answers your question. If not, I will happily post something more comprehensive... I am an Oil Trader (who also plays Arbitrage games) by day, so this is something I like to think I know about..
big shock here.
As i explained in my post, the internal market is denominated in convertible notes, not cash. And that means the buy volume on the internal market won't effect the cash price, only the exchange rate between convertible notes and steem. As i also noted in my thread, you can actually watch the price getting pulled down on the external markets with no movement at all on the internal market.
Its unfortunate that the whales (and their cheerleaders) are so obsessed with either making a quick buck or projecting an image that everything is alright that they are willing to ignore/cover up an obvious flaw rather than acknowledge and correct it.
If you want to take Ollie's advice, obviously thats your option. Just like it would have been your option to take his advice to power up right before steem lost 75% of its value. But ask yourslef this-- how far down does the price have to drop before you quit believing the cheerleaders. According to @hisnameisolllie 70% is nothing to be concerned about. Is 80? 90?95?99? I gotta wonder at what point (if ever) most people will start to question the propaganda.
As i noted in Rok's thread, I am providing proof and a demonstration of this tomorrow afternoon. you can read the details of that below.
Your buying 5-10k Steem, and then selling it to see what happens..? You net affect on the market is zero in this case.
I don't see how this proves anything. When you buy, you either prop up the price , or force it up. When you sell, you either keep the price at a floor, or it falls..
My point is that, the net affect of you action is zero. The same way the net affect of an arbitration trader is.
Well, buying and selling it a bunch of times, but yeah effectively.
What youre saying is true if both of the markets are denominated in the same currency. ANd if one of the markets isnt based on a pegged convertible note.
WHat it comes down to is that in two properly functioning markets the buy and the sell will cancel each other out. If one of the markets is less responsive they will not.
WHat i'm going to prove is that theinternal market is less responsive.
The hilarious thing is that after I do this and tank the price by half of however much is left of it by this afternoon, you'll be right back on here (along with the usual suspects) calling it a coincidence. Because to do otherwise would be to admit a there was something wrong, and lets face it, thats not how you make money on this site.
side note -- if you want to watch, i think its about to happen right now. you should see prices drop dramatically in the next hour or so
What were the results of your market manipulation play? What happened?
It hasnt happened yet, and may have to wait till monday. I ended up severely underestimating the volume of client payouts for this week, so found myself with a several thousand dollar BTC shortfall that i had to make up on LBC (at an absurd 7% markup)