replying here due to nesting:
It makes no difference whether an arb trader connects the markets in a single order or whether he recycles the same steem over and over. I hope this isn't your point of contention. Any selling he's doing in one place, he is buying the same amount somewhere else. The net sell or buy pressure from an arb trader is zero. If he's selling 10k Steem on Bittrex, hes buying 10k steem on Poloniex.
YES... thats exactly my point of contention.
What youre saying, that the sell orders on the one exchange and the buy orders on the other negate each other, is absolutely whats supposed to happen. And on bittrex and polinex, for example, it works exactly like that.. thats why theyre not dragging each other down.
But theres something about the internal market that makes it not work the same way. Partt of it is because theyre not really the same trades on the internal market (theyre direct sbd-steem conversions)
That is to say, on the internal market, they must move in opposition to each other, but on the exchanges they can move independently. So for example, on the external market, the price of steem can increase without the price of SBD decreasing, and on the internal market it can't because they trade directly.
TBH, i feel like there is a term for this on the tip of my tounge that i just can't remember. It fucked up the price of silver once too thats why they had to create silver certs.
I think anyone buying at market A is foolish because market B evidently will always have the better price.
Market B sellers would also be foolish to continue selling on B when they can get a better price selling on A.
RIght, so lets say market A is the external market, and market B is the internal market. When price started to go up on the external market, there is always a better price on the internal market. So everyone wants to sell on the external market and buy on the internal market. This will cause the price on "A" to go down until there is no longer a price difference. Which is exactly what im saying is happening.
What devilry is this!? : )
what is the market without the individuals voluntarily setting their own price. This flaw is pretty wild.
The thing is, individuals can voluntarily set their own price. Just not in the same currency. So for example, lets say we start at the 2:1 ratio i describe in my post in the internal market. Then the price goes up on the external market. This creates buy pressure for steem on the internal market. So lets say all that buying steem raises the external market price to 2.5:1
That doesnt actually change the bitcoin price of steem.
This is just a "triangle" arbitrage which has exactly the same results. You would sell steem for BTC, Buy steem for SBD, and Buy SBD for BTC. You are both buying and selling each of the 3 items. Again in all of these examples the orignal buyer could do all of these trades himself to get the best price but he doesn't because he is either too lazy, unwilling, or unable. So the arbitrager does it for him. These are all legitimate markets and you cannot say you know the true price of something until you considered all of them. Thankfully you don't have to consider them. The free market does this on its own. But anyway, the price cannot move up or down until it exhausts the orders on the books for all these markets.
If I have a banana farm and there is some dude who has lots of Steem and loves bananas. We can trade Steem/Bananas until I am out of all my bananas. The fact that he sold them to me in exchange for bananas means there was less selling pressure on Poloniex. This is just to illustrate that every market needs to be considered if your trying to determine the real price. I can also trade Steem for Gold, Steem for silver, Steem for Ethereum etc etc. The fact that these other markets exist is not sabotaging the price of steem. They are all elements necessary in order to determine the real market price.
If i can buy more bananas with the steem I earn from selling them. I will continue to do so until the market price of bananas increases too much from my buying them all, or until the steem i can get from selling bananas is too little to replace the bananas i sold. There are millions of markets like this and they will all effect the ultimate price of steem (and bananas)
Sorry for the somewhat silly examples. It gets complicated to describe pretty quickly and evidently I'm not finding an easy way to say it. : )
Here's one last attempt: If there is a buyer for Steem with USD at $1.50 and he has an infinite amount of USD. If you can buy Steem with $1.40 worth of gold. or $1.30 worth of pumpkins, or $1.35 worth of Ethereum, or $1.38 worth of BTC etc etc... Someone will do all those things and sell the Steem to this infinite USD buyer at $1.50 until the price of steem in gold is $1.50 or more, the price of Steem in pumpkins is $1.50 or more, the price of Steem in Ethereum is $1.50 or more etc etc. This is just the market. How it equalizes. How price discovery works.
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How are you boss? I need to contact you about lending if possible @enki
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