Quote from: neuralstar on May 29, 2017, 04:38:36 AM

Quote from: louisvuitoon on May 29, 2017, 04:36:11 AM

Imagine this:
in a market there are 10 sellers and 5 buyers.
the 10 sellers have to compete with each other to sell their btc.
because each btc is the same and the buyers dont care about who they get their btc from, the sellers have to lower their price to be competitive and attract buyers.
Buyers buy from the seller offering the lowest price because we assume that they are rational.
the price of the last transaction is what the market prices is. more sellers=more competition=lower prices.

now lets say that prices have dropped significantly.
5 of the 10 sellers think that the price is lower than what they think BTC is worth and want to buy BTC.
there are now 10 buyers and 5 sellers.
the buyers are now competing with each other to offer the most attractive price to the sellers, which is a higher price.
this now drives the prices up.

of course its a little more complicated than that but its the basics of how it goes. hope this helps.

Nice explanation! You didnt' consider the fact that buyers and sellers are trying to enact transactions of different sizes, but other than that, this is pretty much how it works.

I will support this one, this statement is very clear that that this things buyers and sellers will no longer get confuse on how to get their buyer or sellers. Though we know that not all exchange are having the same price of bitcoin.