Yes, this is a very unusual aspect of bitcoin exchange solvency.  Several people have noted this before, but it's still underappreciated.  I cringe every time people say "price is falling because gox is in trouble".

Since bitcoins are actually more liquid than cash you get the result that when an exchange loses the public trust the price there goes up.  I can't think of another asset in the modern economy for which this is true -- normally when trust disappears, cash flees first and prices go down.  Even if you consider gold more "moneylike" than cash you still don't get this effect on precious metals exchanges since taking physical delivery is slow and a hassle -- bailing out of a teetering PM exchange is done with fiat transfers.



Huh, interesting.  I hadn't considered that.  So in addition the strange "higher prices on insolvent exchanges" effect might even be a positive feedback loop.  A true meltup.

What I really want to know is whether people running arbitrage bots are taking all of this into account.  I shut mine off five or six months ago when I no longer had time to monitor them, but this was something I always worried about.  To a bot doing price arbitrage this thing is a black hole of death… the dying exchange actively sucks in the arbitrageurs with its rising prices.  If you let your bots move coins unattended it will actually pull all your coins across the net to the doomed exchange.  I had some clumsy hacks to limit the damage in a situation like this, but nothing I'd trust with other peoples' money (or enough of mine to be a serious problem).