Is this sort of pure buy/sell manipulation actually profitable?  Does it actually occur, in bitcoin or any other market? I would think that such manoeurvers are effective only if combined with suitable advertising or rumors.   

I would guess that, in a pure "dump & slurp" manoeuver (as described above) there is a hight probability that the asks will not drop far enough after the dump, so that the average price paid by the trader on the "slurp" phase will be higher than the average price he got in the "dump" phase.  Also, during the "slurp" he will be competing with other traders, who will eat away some of his expected gains.

The same question, mutatis mutandis, applies to the reverse "pump & dump"  manoeuver.

Is it?

Have you heard the one about the overprotective mom who was worried about how her kid would react to his first day at school, and so she started preparing him two months in advance, by telling him how wonderful school would be and the great things he would learn there and the new friends he would make and playtime and so on, but naturally the kid only became more and more scared, until he was totally terrified and cried and screamed when the dreaded morning finally came, which left her mom agonizing all day; but she was quite relieved when the kid came back all excited and told her that she was right and school was wonderful, so in the next morning she woke him up cheerfully to go to school, and he asked surprised, "what, again?"?

No problem, you just write "private - don't read" next to them.

AFAIK, cash  is simply handed over to the Treasury,  and they are supposed to use it for the People's benefit.  The Treasury knows how to handle foreign currencies, so those are sent to them too.   Other stuff (including bitcoin) must be converted, by auction, into dollars  that can be sent to the Treasury.

The DPR judge did not rule that "bitcoin is money", only that it counts as money for the purposes of the trial, because it is what DPR took as his fees from SilkRoad's illegal businesses.   If he had taken his fees in diamonds, it would have been seized and auctioned the same way.

Courts and police understand that "money laundering" can be done with any valuable stuff, such as gold, diamonds, real estate, boats.

I suppose that "money transmitting business"  would include also a service that accepts gold from one person here and delivers it to another person way over there.

No, the economy is not just a "chaotic system".  That is a system with a very few parameters and simple deterministic rule that nonetheless has a very complicated and practically unpredictable behavior.  Even so, one can study such systems mathematically and prove rigorously statements about them (I even have a paper on them.)

The economy is MUCH worse, one cannot even start describing it mathematically.

(In case it is not obvious, I have an extremely low opinion of economists.  I don't think that it was a coincidence that the president of Brazil who was absolutely best for the economy was a mechanics worker without college education.  Dilma unfortunately has a degree in Economics, and picked an Economists as her chief of staff; even though she is politically committed to keep the country going in the right direction, she is visibly hampered by that handicap.)

 

The problem is not that the economy is non-linear, the problem is that the system is too big and complex, and it has so many unpredictable external inputs, that we cannot build a useful scientifically sound model for it.  To have any hope of being predictive, the model would have to include corporations and consumers of all size, governments, religions, the media, greedy dishonest bankers, etc. etc.  One cannot predict predict its behavior with a few simple equations of three or four variables whose values have to be guessed.  That is not science, it is pseudo-science.

Take the current bitcoin economy, for example (to stay on topic).  It has a single fungible "product" that can be moved instantaneously and for free across the globe, without "shelf life", etc..  It should be simple to make an economic theory for it that could predict its price, in the short or long range.

But one runs into problems right at the definition of "supply" and "demand".  The number of existing bitcoins is known and objective, but that cannot be considered the "supply" for price fixing purposes because some large holders will not sell (they say) for less than 10 k$/BTC, so it is like if those coins did not exist.  To simulate the price in the short run, what matters is the amount of coins that could be sold or bought for prices in the 200$--2000$ range.  The order books at the exchanges do not tell us that, because many traders keep their working assets outside the exchanges, and because there may be substantial OTC trading going on. 

As for demand, there is some demand for several utilitarian purposes, but we have no data about its magnitude. There is much evidence that it is dwarfed by the speculative demand for investment at various time scales.  And we do not have complete data about that either, for the same reasons above.

More importantly, the demand and supply of bitcoin can change drastically and unpredictably in a matter of hours, because they depend on the beliefs that buyers and sellers have about its future -- and those beliefs mat be radically changed by news, regulation, competition, etc..

So, what is the use of a neat and "rigorous" equation that relates price, supply and demand, if one cannot even objectively define -- much less measure and predict -- the future supply and demand?

No, the simplest "economic atoms" are suppliers and consumers.  Try making a mathematical model for either of them...

Agreed with all, except that statistical mechanics considers large numbers of SIMILAR atoms with VERY SIMPLE interactions (such as elastic collisions).  If you have several types of atoms mixed together, or they interact in slightly more complex ways (eg. by covalent bonds) then Statistical Mechanics has nothing to say.

That is the peisely point: "millions billions of individuals cooperating for the optimum outcome in pursuit of the Nash equilibrium" is just a longer name for the world's economy, including all the corporations, governments, regulations, criminals, etc., each one with its oun idea of what is the "optimum outcome"; and that is just too complicated a system to predict its future evolution with any confidence.  Including whether those billions will adopt bitcoin, or some other cryptocoin, or will stick to credit cards.

Physics does not want to understand all the universe.  It only wants to understands how its parts work, and generally limits itself to the smallest and simplest parts.

Phisicists may study the behavior of isolated atoms of generic bonds between atoms, but if you ask them to predict what a dozen atoms will do when they get together, they will tell you "sorry that's Chemistry, not Phisics".  Ditto if you want to predict tomorrow's weather, create a better strain of wheat, cook a good meal, pick up a girl at the bar...

And even the simplest "economic atoms" are already way more complicated than a tropical storm...

This was recently discussed in this forum, in the Wall Observer thread perhaps.

The conclusion was that GABI will be very different from SMBIT, more like a traditional generic investment fund.  GABI's assets will be a basket of commodities and instruments -- mostly bitcoins, presumably, but they explicitly allow for other things -- and trade them with the aim to increase their total value.  Each GABI share will be a fraction of those assets.  Therefore, the share price will not be pegged to the bitcoin market price (as it is for SMBIT) but will depend on the luck and skills of their traders.

Self-interest certainly plays a role.  For one thing, banks and financial companies employ the most economists and pay the best salaries.  That fact has an enormous influence on the axioms that economists choose, e.g. what should be the goal of economic planning and regulation, and what is taught at economics schools.  Even those economists who reject those axioms choose their own axioms based on their political preferences or business interests.  How could it be otherwise?

Lack of data is also another problem.  The world's economy is such a complicated system that no one can know its state and workings well enough to make any useful predictions.  Technological innovation is a major source of uncertainty. So are natural events and disasters (wars, droughts, eruptions, oilfield discoveries, nuclear meltdowns, etc.)

Yet another problem is that few if any economists have the mathematical knowledge and tools that are needed to usefully model a system of that size.

For example, some very crude models of the economy start assuming a linear feedback between, say, supply or price of each major product (oil, coal, electricity, grain, etc.) on the price of other products.  Mathematically, such a model includes a matrix of coefficients with tens of thousands of rows and columns, that express those mutual influences.    So, even if economists could get the data to fill that matrix, they would be unable to use that model for predictions or insight.  They would probably do what they do now: pick a few products, guess a few entries in that matrix, and pretend that they can make useful predictions from them alone, without considering the rest of the matrix. But one of the most important things one learns in linear algebra is that one cannot use intuition or shortcuts to predict the behavior of such linear feedback systems: small changes in just one of those millions of numbers could make the system behave in completely different ways.

Is there any similar information on PBP and other bitcoin funds?

The six-month lock-in and the heavy fees are expected to make the funds less volatile than the open markets.

Quite the contrary.  Believing that your belief is certain and objective, rather than just probable and subjective, is the mark of religion.

There can't be rigorous arguments in economics or other "soft sciences".  It is pointless to debate if we start disagreeing right there...

(Haven't you never read priests, politicians, and assorted pundits "prove rigorously" all sort of weird and contradictory ideas, from creationism to communism to why gun control is good/bad and beyond?  Why do you think that those sciences are called "soft"?)

Don't you see that there is a space between "the" and "around"? 

I am disqualified, I suppose... 

Do you mean particles, other than electrons, that are suspected of creating an electric potential in the around them?

There cannot be rigorous arguments in that sort of subject.  As in religion, the arguments will seem rigorous to believers, but fallacious to non-believers.

For any of your arguments, I am sure I can provide an equally "rigorous" argument that proves the opposite -- that one cannot have a peaceful, agreeable, and productive society without a strong democratic government.

(Plus, there is the small issue of historical examples...)