Quote from: Hiro_Y3k on September 26, 2014, 08:09:45 PM

The institutional traders using HFT bots are indeed dictating the direction of the exchanges.
Some observations:

#1 Most large bitcoin block transactions are occurring outside of the exchanges through brokers. This is a way for large investors to accumulate bitcoins without spiking the price of bitcoin. They are like market makers insuring that the volatility in bitcoin remains steady as possible for the interest of their clients. Secondly, this insures that the miners will always have a large buyer. With a lower exchange spot price, brokers can negotiate even better prices. One interpretation is that a low price indicates heavy accumulation off the block transactions by large investors.

#2 Many of the major exchanges are unregulated. There is no way to prove or disprove any price collusion, but the lack of regulation leaves the door to suggest it is possible. The bitcoin ecosystem is dominated by only a few major players creating an almost self-interlocking monopoly on all sides from production, investment and distribution of bitcoin. This isn't a conspiracy theory or a shill post. News at this point - either favorable or unfavorable for bitcoin is just noise for amateurs. The big boys aren't reacting to the news because they're creating it and the market.

#3 Bitcoin is going to stay around, and this isn't a bullish pump and dump signal. In the short term, bitcoin's price may bounce around more, but there are a number of factors that suggest bitcoin will have a very significant place in global finance for the long term.

*Skype. It is probably the most comparable parallel to bitcoin. Skype uses Voice of Internet Protocol (VoIP) and its global growth has accelerated like a classic model of Metcalfe's law. Bitcoin as a cryptographic protocol presents similar features as VoIP.

*PayPal. Bitcoin needs a major global payment system to educate, promote and legitimize bitcoin. PayPal is the company that can do that. They publicly endorsed and will experiment with it. At this point, incorporating bitcoin in their payment model is probably the best corporate strategy in order to remain the #1 payment systems in the world and keep possible competitors like Apple at bay. Whether Google or Amazon joins is another matter as they may go the way of tokenization. Bitcoin though has much greater implications beyond centralized produced tokens. If you look at a window horizon of 30 years rather than 3 years, bitcoin as a protocol will have a very strong chance of surviving. Open source, peer to peer, decentralized and built atop of the internet.

*Merchants. They will have a choice. Pay the credit cards fees around 2% or the significantly lower bitcoin fees. Perhaps attract a younger demographic as well as one that has grown up on tablets and smartphones. The world is becoming far more digitalized, and bitcoin presents a fit for it.

*Consumers. Bitcoin has obviously placed the cart before the horse. It has only reached a fringed group of buyers who have speculated on its price. The target users will not be in developed countries initially, but in underdeveloped countries and emerging markets. A younger market in developed countries are likely to experiment with it. The tipping point will be when more companies begin paying salaries in bitcoin. It will create a fully integrated bitcoin economy. When that happens, people will use it not hoard it. That will be years in the making.

*Other factors. Lawsky's NY reg, the Bitcoin ETF are other factors which can accelerate adoption. However, that does not mean the price of bitcoin will automatically rise.

Independent of all the factors contributing to bitcoin's adoption rate, bitcoin cannot function or fulfill its promise as digital currency until its reach a higher market cap. If the exchanges or bitcoin market economy is somehow manipulated, the price will need to rise much higher than it currently is.

Great post. Solid high-level summary of the current state of crypto (with only mild speculation interspersed). Bookmarked.