Summary: The reason for the jump in price on MtGox between other exchanges does not, in my opinion, have much to do with the withdrawal issues at that exchange. I think it might be that some large investors in the Bitcoin ecosystems (either in companies or BTC holdings) are attempting to push the price up to validate their investments or bring in new capital. The reason this would cause a hike on MtGox and not other exchanges is because MtGox is still the only exchange were large amounts of FIAT have room to play.
In the past few weeks MtGox, one of the primary Bitcoin exchanges, has been experiencing a %10+ spread between their price and every other exchange ($139 vs $124 currently). The conclusion many have made is that this is the result of many people currently holding FIAT at MtGox rushing to get their funds out as MtGox has increased the delays on bank withdrawals. I would like to present a different theory: investors are trying to increase price to protect their other Bitcoin related investments.
First, the nature of the hike up reveals that a few whales might be responsible. A few very un-clever whales at that. In the first day of the jump one can see a whale with more than $3m in BTC/FIAT combined placing phantom walls to hold asks low before sending the exchange into a shock as they removed the wall and then placed very large buys. Most traders understand if you do not want to effect price you stagger your buying and selling over time. If your desire is to convert FIAT holdings on MtGox into BTC so that you can sell on a different exchange than you would want to avoid creating a huge difference in price between the exchanges. The whales at play on MtGox have made no effort to avoid this, indicating that something other than the withdrawal issue at MtGox is at work.
11:19 “If you look at the total value of the Bitcoin ecosystem right now it’s at about $1.5 billion dollars. So, if you have a company that shows up and let’s say it’s at a post money of $30 million you’re basically betting that company is going to capture %2 of all the value of the Bitcoin ecosystem over time. Other wise you’re better off investing in Bitcoin itself.” 12:45 “If the Limited Partners have their underlying General Partners buying Bitcoin stocks they should also be holding some Bitcoin.” — Naval Ravikant
Influencing the market price of Bitcoin to make it higher is a quick way to increase the ROI for investors in Bitcoin services. So then why is this only taking place at MtGox and not other exchanges? Because MtGox is the only exchange available for whales. Every other exchange places very stringent limits on per account trading volumes. I know this first hand as recently I’ve been trying to diversify some of my BTC holdings into FIAT investments (“Stop saying Bitcoin is good for money transfer. It isn’t“). The reason for these limits at other exchanges is because they are trying to avoid the regulatory issues that MtGox ran into head first.
So the reason for the hike could be an attempt to push price up to shore up other investments in the ecosystem. Even though this can only take place on MtGox the other exchanges follow slowly. That, or it’s an exchange trying to kill MtGox. In the past few weeks of this episode MtGox has watched their market share drop from near 70% to %40. What it is not is just FIAT making an exit as the whales doing this would have to be complete idiots to willingly give up %10 of their holdings by making lump drop asks/sales.