Here is a theory: those who saw BTC as a way to earn USD have already left the market, too volatile
and unpredictable.  Those who remain are people whose goal is to grab as much BTC as theyr can.
So they are all trying to trick each other into selling their BTC, while holding fast to their own.

The exchanges Mt.Gox , Bitstamp and BTC-China still follow each other very closely.

However, there have been a few discrete adjustments in the apparent "exchange rate" between CNY on BTC-China and USD in the two other exchanges.

One such adjustment happened between 18:00 and 25:00 Dec/16 UTC  (from ~5.650 to  ~5.200).  Another one took place about 12:00 to 18:00 Dec/17 (from ~5.200 to ~5.000).  The rate may have increased again a bit earlier today, around 03:00 Dec/20 UTC (from ~5.000 to ~5.200) but it is too early to tell for sure.




My guess is that there is arbitrage going on, either by different players at different times, or the same player who occasonally changes his expected "worth rate" between having 1 CNY in a BTC-China account versus having 1 USD in a Mt.Gox account,

By the way, it seems that 1.00 USD in Mt.Gox is worth only 0.96 USD in Bitstamp.

I wonder how many people in the Bitcoin trade see BTCs as a tool to earn USDs, and how many see USDs as a means to grab more BTCs.

Actually Mt.Gox is still tracking BTC-China. (Or the other way around? Or both are tracking someting else?).
However the "exchange rate" jumped by some 10-15% since Dec/17.
The chart below shows hourly closing pricesfrom Nov/28 (day "-2") 00:00 to Dec/19 21:00.

In real life, traders would avoid a market that lets them sell their wares but will not allow them to take their money out.

So, if people cannot take their old-fashioned currency out of MtGox, why are people using it?

Every country tries to control the exchange rate of its own currency, e.g. to balance the interests of industries with domestic market that depend on imported materials versus those whose market is mostly overseas.

Bitcoin trade provides a way to bypass those controls, and usually results in transfer of actual wealth from some countries to others.  The latter will smile on Bitcoin trade, the former will move to stop it.

Right now it seems that the US is smiling while China is not.

Goodwill in the US may evaporate (as it did for Madoff's enterprise) if some large US player loses big on BTC trade. Until then, regulators will not be upset if a few whales become filthy rich at the expense of many small fish. Quite the opposite.

Yodel forever? http://www.youtube.com/watch?v=B00nfVc4FPI

For example, as of yesterday it would seem that pocketing one USD in Japan (that's where Mt Gox is?) is as good as pocketing 5.3 CNY in China, even though the official exchange rate is 6.07 or so.

OK maybe it is the wrong name. But it would explain why the exchanges track each other so closely.  Once the player figures out the actual ultimate "exchange rate" he can get, it is profitable to buy BTC in one market and sell them in another, whenever the price ratios deviate from that rate.

If you have deep pockets you do not need to transfer funds right before/after each purchase.  You start with a large pile of USD (or RMB) and end with a large pile of RMB (or USD) that is worth more than what you started with, even though it may take months or years to get it out (or in).

Would this work:

  * Buy BTC with USD outside China
  * Sell the BTC in China for RMB
  * Use the RMB to buy goods or stock in Chinese market
  * Sell goods/stock outside China for USD

or the other way around.   Not for amateurs, of course.

This would equalize prices but according to some "exchange rate" that is not the official one, due to extra costs.

Which is what we see, right? They track each other but not at the official exchange rate.

It is 9:00 am in China, is that bank opening time? Cybercafe opening time?

Trade volume on BTC-China spiked and price fell sharply by 100-150 CNY.

yesterday (and most f the time it seems) Bitstamp and Mt.Gox followed BTC-China rather closely, apart from certain scale factors.

However, when BTC-China fell too much and too fast the other two seemed to be trying to hold the price up:

Thanks, but that seems a question people should worry about: "will the IRS (or your nation's equivalent) consider BTC capital or cash?"

BTC-China is now well below 2530 CNY, 1/3 of its peak value (7600 CNY)

If you buy 100k USD in BTC, and by next April 15 these are worth 1 million USD, will you have to pay ~300k USD to the IRS?

Does it matter whether the IRS considers Bitcoin a "stock" or a "foreign currency"?

BTC-China is now at 1/3 of its peak value (7600 CNY).

Mt.Gox is now 50% below its peak value.

Someone mentioned Enron, here is what it looked like:
http://netwmd.com/articles/article202.html

Mt.Gox just reached 666. Who asked for it?

Bid "walls" cannot be expected to hold against a general drop in the perceived value of bitcoin.

Most of the bids 3-5% below the current price must be market players waiting for someone who must sell a few 100s BTC at any price;  whose coins they will promptly offer to sell at 3-5% above the current price, for someone who must buy a 100 BTC at any price.   Those players will ignore changes in price due to small transactions, but if they see that the whole Ask Mountain is coming down, they will quickly lower their bids too, to preserve their margin of play.