[CaptainZapp]

Maybe I'm just too dumb to see the genius of it.

You're very welcome to add me to the dumb club too.

In addition I'm a smidgeon confused about how the bitcoin exchange rate is determined. It seems to be whatever exchanges say it is. There must be some metrics to determine that, but overall the market seems so illiquid and some of those exchanges seem a bit like easily hacked two bit shysters with some PHP scripts and a snazzy whitepaper.

But again, that's maybe just us in the dumb club.

[Nasrudith]

I suspect that volatility may be a feature to money launders - not as ransomware transmissions or anything like that but justifying balance transfers. Not saying that was even an intention as opposed to ideology but to paraphrase cyberpunk the street finds its own uses. The fact there are innocent users is what makes the conspiratorial useful.

This is all read and theoretical - I certainly don't have any practical experience with either combatting or committing money laundering.

Anyway fine art and wines are infamous as pretextual transfer vehicles because the values are often so subjective - bitcoin swinginess serves the same purpose, especially if the hypothetical enterprises control enough to manipulate the market. Big assumptions of course that such a thing exists but it highlights who it could be useful to (intelligence agencies and organized crime - which are arguably largely the same thing to the host country - both break the law in pursuit of their agenda).

Anyway that form of laundering involves buy something at a lower/normal price and selling high. The selling high can be from having a contact buy it for higher with your dirty money. Of course open sales would be preferrable - not only because deals only between connections are obvious but some bonus profit. If someone not involved outbids or provides enough of a margin to be worth backing off all the better - you can move the dirty money another day.

If one needs to funnel clean into dirty do it in reverse order essentially.

[heptathorp]

It's based on what people are willing to buy or sell it at. Like anything else...

[CaptainZapp]

Obviously, I'm not disagreeing per se.

What I'm arguing, though, is that the market making "algorithm" is highly intransparent.

[heptathorp]

The market making algorithm for Bitcoin is: the highest bid and the lowest ask.

[CaptainZapp]

Personally I have more trust into established banks as market makers than into unregulated crypto exchanges, when it comes to market making.

But we probably have to agree to disagree here.

[umanwizard]

The exchanges aren't market makers, they're exchanges. Totally separate concept. The NYSE isn't a market maker for stocks, for example.

Your confusion seems to be that the exchanges are coming up with the prices, which is not at all how it works. Again, the price is set exactly the same way as it is on the NYSE, by matching bids and asks.

[mateuszf]

You can just go to any online exchange and check the order books and history. How much more transparent can it be?

[friendio]

Bitcoin's price is governed only by market forces. There's no single algorithm setup by an exchange to determine it.