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RE: This biggest reason steem prices are falling: The Arbitrage Sabotage Steem-Dollar Teeter-Totter
also wanted to check to make sure, but convertible note/securities arbitrage is whats widely associated with the "black monday" stock market crash in 1987. SO yeah, it can and does have disasterous effects.
http://www.nytimes.com/1988/04/13/business/economic-scene-soft-case-against-index-arbitrage.html
That arbitrage was associated with does not necessarily imply that arbitrage caused the crash. See this quote from that article speaking against restriction on arbitrage on the basis of the crash.
yeah, i did see that. I realize in that case that its unclear whether the arbitrage was the apocaplyse or just the horn.
that said, i shipped 20 steem to you i think you had the best commentary of all the ppl that disagree with me.
Thanks for the steem. You are an interesting person, @sigmjin. I'm still trying to work you out. You have some insightful points of view, but also seem to attract controversy and heated debates. I try to look through the bravado and point scoring of who is right or wrong and learn more about how steem works and contribute constructively to the conversation where I can.
With regards to the current topic, I think you give a good explanation of how arbitrage works, but I don't (yet) see enough evidence that price movements only go one way. That is a strong claim that goes against my intuition of how arb works and I can not yet why that would be the case. It seems from other posts you mentioned somewhere that a month ago (from just before my time here on steem), the arbitrage was going the other way and it was also coincident with increasing steem prices. To me it seems the internal market lags the external. I think the solution is more volume and arbitrage on the internal exchange not less, to decrease the price difference users experience.
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@brendio I attract controversy here because i don't back down and i don't pander to whales. Mostly thats because 1.im a shithead. But its also because 2.i don't care about money (at least, not in the amounts that someone could make on this site) and 3.im not used to dealing with people who don't know im always right.
It can go both ways, but only when sbd and steem are simultaneously increasing in price (which was the case a month ago)... its basicaly the same as lifting a see saw up from both ends.
Your idea of arb (which is usually correct) is that a buy on the internal market and a sell on the external one would wipe each other out, and have 0 net effect on price. I can prove thats not true even without an arb.
I can prove this works by simply cycling a bunch of money through the internal and external market and using the mechanism discussed to crash the price of steem, which is precisely what i am going to do this weekend.. Since the transactions are so fast, i can most likely do so with 5 or 10K steem.