Wow, looking at the order book of bitstamp [1] through the eyes of someone who lives in the world of market microstructure is eye opening:)
There are huge holes everywhere in the order book and the liquidity at each offering level seems to be completely without reason.
I just spent 20 minutes applying the sort of algorithms that'd we'd normally run on each stock to make markets in it and it can't detect any real patterns or justification for the bid/ask levels.
Is this just a case of everyone in the bitcoin market being "unsophisticated" in the quantitative sense? or is there some new form of market micro structure being created here?
Thoughts??
EDIT
For people asking about what you'd expect to see:
1) After the initial price level, you'd generally expect the next 10 or so price levels to be pretty tight. In the bitcoin case some of the spreads between price levels are larger than the bid/ask spread.
The price levels don't appear to have any logical basis behind why they are placed where they are.
2) volume at each price level. Similarly to above the volume at each price level doesn't appear to have any discernible pattern. Typically volumes would increase at each price level, up to a point, as more people join the market at each price level.
They don't break out a level 3 quote( order book by order, as opposed to price) so you can't really see how many orders are backing up each price level but given how small the volume of many of the price level are you can probably assume its only one person/order at most levels.
For more lols check out the trading API. There is no TIF for orders and there isn't any obvious way to get fills as they occur. I guess you just poll the api to check for fills but they also say they'll ban your IP if you poll too often. Nice. Also no mechanism for cancel on disconnect or whatever the HTTP equivalent of that would be.
Maybe there is some money to be made there, but it's hard to imagine trading with that kind of tech.
The btc-e API is far far worse. Some of the messages are in Russian and some are in English (randomly). Even worse (and a deal breaker for me) is that the order id can change underneath you if your transaction is split to fill the order, so there is no way to tell if your order completed or not. I've talked to people on Reddit who say they've made it work, but I'd never trust a bot spending money against an API like that. It's amateur hour when it comes to these exchanges and their API designs.
That's the same (almost) issue that Mt.Gox supposedly famously had with the actual blockchain, transaction malleability. I've read that Mt.Gox actually lost tens of Bitcoins in this way and it was a red herring for the whole actual giant scam that was perpetrated, but it was still a real vulnerability that needed patching or working around.
Most of the exchange APIs are pretty dreadful to work with. Shameless plug, but I've had to a build a unified library to deal with this at Tradewave[1] and it has been challenging.
Some of the newer, more professionally managed exchanges support FIX but those are at very low volumes right now.
Do you provide any access to raw tick-by-tick event data or just bars?
How do you secure your users' scripts so they don't worry about you stealing their ideas or front-running them?
It might be useful to provide FX rates as a feed so users could come up with a synthetic price for non-USD pairs.
For guys who want to work passive orders, an API where they can pass a dictionary of prices/sizes they're willing to buy/sell at into a goal seeking algorithm that handles canceling/placing individual orders might be a better match and more convenient.
> Do you provide any access to raw tick-by-tick event data or just bars?
The minimum granularity is 1-minute candles, where the latest candle becomes available at the close of each clock minute (e.g. 02:00:01 if we're fast enough).
> How do you secure your users' scripts so they don't worry about you stealing their ideas or front-running them?
There's certainly an element of trust here. There's a clause in our license agreement stating that we'll never access user strategies unless you ask us to, or it's needed for some kind of maintenance.
We don't trade on user strategies. That's not the model here.
>It might be useful to provide FX rates as a feed so users could come up with a synthetic price for non-USD pairs.
More generally I'll be adding a way to load in arbitrary data via HTTP requests within a strategy.
> For guys who want to work passive orders, an API where they can pass a dictionary of prices/sizes they're willing to buy/sell at into a goal seeking algorithm that handles canceling/placing individual orders might be a better match and more convenient.
These kinds of features (e.g. VWAP orders) are in the pipeline. There's certainly a need for tools like that.
I think one reason is that many people in the bitcoin market are unsophisticated compared to your normal market traders.
But also, Bitcoin is an asset all by itself. You can't hedge it against other assets, like you can do with corn or tech. You can't easily short it. So, there's no "true" reasonable price range like with most assets, and no normal influences on the price. It's basically truly a bubble of hot air everybody is bidding on, except with the hope that the bubble will never burst, and be used as currency.
I think the primary reason you don't see large amounts of sophisticated market makers is that the Bitcoin exchanges don't provide rules that are very favorable to them. The per-trade fees are high and liquidity rebates rare.
Well, a big part of the sparsity of the order book is that the tick size is tiny for a market this immature.
Take the USD/JPY rate for example, which moves in ticks of 0.01 and is currently sitting at 101.83, so the tick size is 0.0098% of the price (or about 1 basis point). This is a mature currency market between two giant countries.
By comparison, BTC/USD also moves in increments of 0.01 but its price is 655, so the tick size is 0.0015% of the price (0.15 basis points) which is absolutely tiny for such a thinly traded market.
I'd suggest that it should be trading in ticks at least 10 times larger. A cursory glance at the order book (top of book is currently 654.03 and the tenth level is 653.00 on the bid) shows that this would result in the first ten levels being filled most of the time. If it traded in increments of $0.20 (20 times the current tick) then the first ten levels would easily be filled.
That should create opportunity for automated trading. Identify large orders and place small orders a de minimis amount ahead of them when the bid-offer spread is sufficiently large. If someone trades with your bid (offer), try to be the best offer (bid) to exit and make the spread. If the large order behind you starts trading, trade with it to lose 0.01.
I've traded these markets by hand before using relative value signals from other exchanges (e.g. buy on bitstamp if btc-e moves up and bitstamp hasn't yet). You can't really do pure arbitrages since it takes so long to move money around but if you can identify which market leads you can use that as a starting point for coming up with a fair price to trade around. I made money easily but gave up on trying to automate it since the volume is so low, bid-offer spreads are often tighter than 2*trading fees, you can't short-sell easily/cheaply, exchanges seem incompetent or downright crooked, laughably bad APIs, etc.
These markets are wildly inefficient though. For a home day-trader or hobbyist there's easy money to be made. It's absurd how slowly price discovery trickles from one market to another. Most modern markets don't even get mispriced by a penny for more than a few microseconds, but there are nickels, dimes, quarters and even dollars of mispricing to capture in BTC/USD markets clicking on the screen.
You could probably dominate with an algo, but how much can you really make in a market that trades 10s of millions in notional value a day? There are also way too many exceptional conditions to let it run even semi-unattended since the exchanges are too immature. Anyone who's capable of doing it can make more doing the same thing on a real market.
ETA: Exchanges in this space are really, really bad. Some don't even know about rounding errors when using floating point for prices. Or would you trust trading on a market that can't even match trades as an atomic event? http://www.reddit.com/r/Bitcoin/comments/1r4d6t/bitstamps_st...
It looks like the spread if you wanted to trade 10BTC is around $2 (just looking at the last hour or so of data).
On BitStamp the exchange fee is 0.2% (at minimum - can be higher) so trading 10BTC twice (one buy, one sell) would cost you $20 in bid-offer spead, but about $26 in exchange fees - insanely high!
Usually you expect the exchange fees to be 1/10th to 1/5th of the spread. With fees this high and no rebates, I wouldn't even be sure I could make a profit as a market maker even if you could exit every position immediately.
The presence of FIX in their offering indicates the company was built by or is run by someone who has some (possibly dated) understanding of what is going on when it comes to implementing trading systems.
Genuinely interested here. Would you mind explaining the terminology, or even better, expand on your thoughts in a blog post or something?
Bitcoin exchanges are generally very illiquid, in the meaning that little funds are kept on the exchanges. (Because there are no regulations and guarantees.) Would you not expect "huge holes" in such an order book? Why not?
What does "price level" mean? I read it as the distance between orders in the order book, but then your comment does not make sense. You are surprised these levels are farther apart than the bid/ask spread. Why?
What does "unsophisticated" mean? It seems to me you mean this in a specific sense rather than the dictionary meaning of the word. How is it that no discernible pattern is indicative of a less sophisticated market? In the layman definition of the word, one would expect the opposite.
I don't know if other markets behave the same but Bitcoin exchanges have large dark components to them. If the price moves dramatically, lots of coins move in/out of the exchanges. Some people believe the days-destroyed metric is indicative of these movements, but in practice things are of course not that simple.
As you might understand, I do dabble with Bitcoin trading on the side on a pure hobbyist basis and I would be very interested in your views on this. I don't know if there is a personal message function on the HN board but any answer would be appreciated. I think a lot of traders on Bitstamp and other exchanges are hobbyists too, but I have the feeling that something happened during the runup to the October rally and would not be surprised if there are quite a few pros among us now.
I've been holding Bitcoin since it was $10. In my view, Bitcoin has always been thinly traded because most people new to Bitcoin learn that they should acquire as much of it as they can afford to, and then withdraw all of it from a centralized service. For example, they learn that decentralized, trustless money can only be decentralized and trustless when there's no middlemen involved. Storing BTC on an exchange just invites back the middleman. Which is just not part of the narrative.
Because of this, Bitcoin exchanges have always lagged the market, and BTC-denominated trading volumes will almost certainly always remain small. The real demand comes from people who want to hoard all of it that they can. It'd be a lot like Pogs if it weren't for the sorry state of government issued currencies.
Can this drive more and more people to currencies backed by nothing and governed by algorithms? Any news that affects this picture, moves the price, often times significantly, e.g. China. So in effect, the price of Bitcoin moves on whether the dream of breaking free from government issued currencies worldwide can actually happen.
In order to buy Bitcoin, you pretty much have to get over the fact that the only sustainable demand could come in the event that public trust towards mainstream institutions continues to erode to the point that people at large no longer trust the money. Or no longer trust the money for other reasons. The people who bought into BTC early on for pennies, viewed the situation like this, and many of them refuse to sell. I've seen people try to claim half of all Bitcoins have been deleted from hard drives in the early days or lost, which I find unbelievable. Then again, having been involved in the Bitcoin space for several years now, there's very little left that I find unbelievable. There's an enormous amount of disingenous players, and it's completely cut throat actually. If you're crazy enough to get on board with Bitcoin, chances are non-zero that you're also crazy enough to do and say anything to take people's BTCs. Because really, the narrative states that the price of BTC can only go up as more and more people lose faith in government backed currencies. The whole concept of a currency is based on mutually shared delusions, so it's really not without merit.
To cut it short, this results in poor liquidity. I haven't run the numbers myself, but I very much doubt the BTC trading volume, as measured in BTCs, as done anything but gone down now that the price reached $1200. That _really_ got the early adopters dreaming.
I'm honestly become extremely jaded and cynical over the last year in particular. If you think the idea of cryptocurrency can't work, there's not much you can do besides short it or ignore it. The latter is really quite hard, because anyone, even someone with less than 1 BTC to their name, inevitably finds it worth commenting on Bitcoin stories, and submitting Bitcoin related news of their own on social networking sites.
Bitcoin exchanges are moving to reduce fees to zero and add leveraged trading, because that's all you can really do to offer substantial liquidity in a market where all of the "real" participants aren't interested in trading, or spending the underlying. There's just not enough trading activity. It goes back to the narrative. The sad part is most exchanges are shoddy or even outright fraudulent, see: MtGox (Mark Karpeles in all likelihood stole 850,000 BTC, and no i don't find this surprising in the least bit).
All of you coming at this from the angle of HFT are playing with fire. That's all I can say.
I'm not saying any of this is a good thing, quite the contrary. The price of Bitcoin is effectively determined by day traders, payment processors like Coinbase and BitPay with clientele that effectively accepts BTC and then dumps it on the market, along with the odd miner or newbie looking to acquire coins en masse. Not to be mean spirited, but what the heck. Everyone else doesn't matter, because they don't have enough money to affect the market.
Truly, the Bitcoin concept itself more closely resembles MLM / network marketing than any one traditional financial instrument.
Finally, anyone who has invested or lent BTC over even a short timeframe in the past two-three years will tell you that there's no incentive to invest or lend or spend BTC. It is what it is. The only interesting game is acquiring as much BTC as you can afford and then playing with altcoins, which are mostly P&Ds.
Maybe it's a racket, maybe Bitcoin is only useful to spend on illicit items. Even so, the fact that more and more people are becoming interested in the idea of a currency governed by an algorithm just goes to show how little trust there is in mainstream institutions. This is why I'm very begrudgingly bullish. I don't think anyone who day trades Bitcoin knows what they're doing. I think it's profitable to sell at the top of pure manic phases, but it's not worth doing that when you consider taxes and reporting requirements. Buy and hold BTC in a wallet only you control. This has always been the best option, and it explains the overall shoddiness of the Bitcoin exchange scene.
Sorry, but you can't compare MtGox to the NYSE. Two points:
1. Bitcoin is _very_ thinly traded. I'm speaking as someone who sold at $1100 and bought back in at $450, which at the time was very near the bottom. In a matter of seconds, the price was $500. In those precious seconds, I'd be shocked if more than 10000 BTC traded hands. That's barely enough room for a handful of traders to call the bottom. Like I said, very, very thinly traded.
2. I would never do the above, ever again. Speaking as an American citizen, there's no good domestic exchange. If you're dealing in amounts above $10,000 say hello to the FBAR. The BSA's online efiling site isn't quite as bad as healthcare.gov, but JFC. Ultimately you have to use IE on Windows, load a PDF through IE's Acrobat extension, and then fill out the form inside IE. You then have to sign the form with your given PIN, which execs some JavaScript if I remember correctly. Obviously the FBAR form isn't fun. I picked up a few more coins but at the cost of having to disclose all of my financials to the BSA, and I'm just praying that I did things correctly. On top of that, taxes. YMMV, but IMO it's not worth the hassle to sell.
I didn't, in fact I never mentioned Gox at all. Gox is not Bitcoin. I commented on your mention of taxes/filing being too burdensome, nothing more. Saying trading is not worth doing because of taxes/filing being too burdensome is just silly; the requirements are the same as for any other capital asset. People don't avoid trading the stock market because the taxes/filing of capital gains is too burdensome and they shouldn't avoid trading bitcoin for that either. If you can trade profitably, then it's worth it.
Is this just a case of everyone in the bitcoin market being "unsophisticated" in the quantitative sense? or is there some new form of market micro structure being created here?
Not everyone, but a lot of people heavily involved with bitcoin and other cryptocurrencies are rather unsophisticated.
Anyone reading this comment: Has someone started doing automated round trip trading between the various cryptocurrencies and conventional currencies?
What would you recommend as introductory reading to a person interested in market microstructure and market making? (Background in finance and programming)
Bitcoin trading is mostly done by bots/day traders and the orders shift around all the time a whale/bad news moves the market, so I wouldn't try to find much justification apart from people trying to make short term profit
Rob from Gliph here. Gliph is a Bitcoin company from Boost VC Class 2. Tim Draper led our angel round (with Pantera) and is a mentor to Gliph.
Tim has been excited about Bitcoin and its potential for some time. Well in advance of other VCs, Tim was talking about its potential, particularly with regard to "competitive governance."
He starts describing solutions for competitive governance around 28:05. At 29:10 he brings up Bitcoin. I believe this was the first time he spoke about Bitcoin publicly but may be wrong. He states in the video:
"[bitcoin is] the most valuable currency now on the planet because it is under no one's control. It is out of people's control. It is no longer regulated by any government. They can't print Bitcoin."
The developers and miners are, in effect, the government of bitcoin. The developers act like the federal reserve, in that they can change the code to raise the max amount of bitcoin, increase the mining difficulty, etc. just as the Federal reserve would conduct open market operations or set interest rates to target inflation. So it's completely wrong to say that Bitcoin is "under no one's control". [0]
The key difference is that a majority of the miners have to accept the developer's changes and run the new client. The average US citizen cannot refuse interest rate hikes. So it's a transfer of power away from the few and corrupt (Fed + banks) to the few who are limited in their ability to be corrupt (developers + mining pools).
If the developers implement a terrible policy, the miners will refuse to update their clients to avoid devaluing the currency they are working hard to generate. So the power distribution and incentive structure are different. Whether thats a good or bad thing remains to be seen.
I think a problem in your analysis is that the miners are the equivalent of the Fed, not the developers. The developers are technical experts on whom the miners rely for tools, but are not the equivalent of the substantive decision makers.
But the bigger problem, whether you view miners or miners+developers as parallel to the Fed, is that you've failed present any argument or evidence supporting your key point, to wit, that the "few" who form the "government of bitcoin" (by your description) are somehow inherently "limited in their ability to be corrupt".
The Fed makes the rules. The banks/people perform the actions under those rules that create economic activity in the US.
The Developers make the rules. The miners perform the actions under those rules that create economic activity in the Bitcoin markets.
Say the Fed is corrupt/stupid and enacts a bad policy. The banks/people have no choice but to accept the decision of the Fed. Theoretically you could emigrate, but that is neither desirable nor feasible for the majority of the population.
Say the developers are corrupt/stupid and decide to raise the Bitcoin cap to 30 billion and lower the difficulty, effectively hyperinflating the currency. The mining community has the choice to either a) not accept the changes to the client or b) to vote with their digital feet by moving to another cryptocurrency. They are more likely to choose a) assuming they've been mining for a while/have a reserve of Bitcoin.
The key is that the miners "rely [on the developers] for tools" as you put it. The tools = the client = the rules of the game. So the developers make the rules and the miners decide whether or not to play by them.
They can change the code, but they can't force anyone to adopt the new version. Ultimately, it's the majority of the people running full nodes in the network who are in control, and if they reject a change made by the developers and refuse to upgrade, or even go with a fork, then that's where bitcoin goes.
I'm confused as to why anyone would invest in Bitcoin companies as opposed to Bitcoins directly. The impression I got was that investing in companies provided added risks (co-founder separation, business failure, legal risks), without providing a significant advantage (risk mitigation, upside multiplication) over just buying Bitcoins directly.
The distinction is subtle, but important. Let's say, for example, that I have no real idea what the price of bitcoin should be in five years -- but I am confident that enthusiasm for, and interest in, bitcoin buying and trading will grow dramatically all the while. I'd rather own the company processing the transactions than the bitcoin itself. The bitcoin might soar, and it might tank, and it might do both of those things in a mostly unpredictable, haphazard fashion. (As has been happening.) But the companies trading bitcoin don't necessarily need to buy and hold. They can make money off of transaction volume, or off of leverage against their bitcoin assets, or off of any number of things only tangentially affected by the nominal value of bitcoin.
This is sort of like the old saying about how to make money in a gold rush. You don't mine for gold; you sell picks and shovels.
There are scenarios in which the Bitcoin "sector" grows without the value of Bitcoins themselves appreciating significantly (or at least, to the same extent). For example it could become a common medium of exchange but an uncommon medium to hold, if a large portion of the growth is in Bitcoin exchange platforms that convert payments immediately to national currencies, like BitPay. In such a situation there could be a large volume of business going through companies like BitPay, but with only transient demand for the coins themselves.
Without the infrastructure to support bitcoins, the value bitcoins will remain stagnate or may even go down. Investing in companies to build out infrastructure for this currency is only "sure" bet you can take unless you gamble on someone else to make the investment.
Bitcoin companies may quickly move to focus on properties of the blockchain that are not related (and, perhaps more importantly, more profitable), than the bitcoin currency.
Also, importantly, bitcoins may be extraordinarily profitable for a bitcoin company, but never increase in value, whereas if you purchased a bitcoin today for $700, and 5 years from now, the bitcoin was still $700, you would likely be unhappy.
The consensus based global ledger of script based transactions. Bitcoin currency is just one application of such a system. Others, such as Contracts, Escrow, Title Assignment have been proposed as well - and the transaction fees of such might be much more profitable than simply identifying a input/output of a bitcoin transaction.
Cashflow. The company can sell a service and have perpetual income. If bitcoin losses value, you are still generating income, as opposed to having your money invested directly in the currency.
“Bitcoin frees people from trying to operate in a modern market economy with weak currencies. With the help of Vaurum and this newly purchased bitcoin, we expect to be able to create new services that can provide liquidity and confidence to markets that have been hamstrung by weak currencies”
The issue that I take with this statement is that so far, bitcoin is far from a strong stable currency. I reserve judgment on whether it will ever get there, but I am not convinced that doing business in bitcoin is currently safer than doing it in Indonesian rupiah (for example).
Mr Draper states that Bitcoin is badly needed in resource-poor countries with unstable currencies. How does he expect Bitcoin to compete with mobile currencies such as M-Pesa?
Thinking about it, I imagine that the advantage of Bitcoin is that it can be sent globally, whereas M-Pesa type currencies are restricted to specific countries.
Isn't M-pesa backed using the country's currency? What logic of what you're saying sounds like it could imply that "Paypal is it's own virtual currency"...
No, he didn't buy it on the open market as this was essentially a private transaction between two parties. What it means is there's now someone trying to sell (instead of hoard) bitcoins worth $what_he_paid_for_it + %target_return.
That will have an effect on the price, but he's not going to dump them and drive the price down because he paid a lot for them and wants to make a return (unless there's some kind of panic in bitcoin and he just says screw it). Kind of interesting actually.
At the very least, bitcoin is going to be a data driven economists wet dream for years to come.
Well, in TFA, it's pretty clear that he plans to team up with Vaurum "to provide Bitcoin liquidity to emerging markets."
So, it sounds like he may end up selling them to other people but only as part of a broader strategy to (and I'm guessing here) make it easier to transfer money to and from emerging markets.
If that's what he's doing (and bear in mind I'm just guessing here) it's a very ambitious goal. I used to trade emerging market equity swaps (which involved hedging FX exposure) and I've worked on international, cross-currency payments systems for one of the biggest banks in the UK. You need to know what you're doing when you're playing around in the FX space. You really need to know what you're doing when you're dealing in emerging markets currencies. I once lost $16,000 in the space of twenty seconds because I made a single, simple mistake.
You turn to the desk head and say "Boss, I just lost $16,000." and he says "Don't worry. It's happened before, it'll happen again."
That incident happened just a few weeks into my (short) career as a trader. I later learnt that everybody makes a mistake once in a while. It's unavoidable. It becomes a problem if you try to cover it up or if you keep making mistakes.
Until you have every losing bid, you can't make these claims.
Can't reply, so I'll add it to this comment. As stated by others, the only way to purchase a large amount of bitcoins without jacking up the price is to do it in one large sum. By bidding over market price, he ensured that he would get this chunk of 30k coins without affecting the market.
If he had bought that many on the open market it would have driven the price up by a large amount. Just go look at the current order book on Bitstamp.net one of the major exchanges. There are only about 5k coins on offer and many of those are for prices well above market.
That's a terrible indicator. Unless the guy was a complete moron, he wouldn't just submit an order to the market to buy 30k coins at the market price. It would be trickled over the process of a couple of weeks.
By your same logic, the coins he bought are hardly worth anything because if he tried to sell them it would just crash the price. There is only about 5k worth of buy orders in the book at the moment.
In fact, if he paid above market price, it would be in his interest to make sure the number got 'leaked' to encourage rampant speculation to drive up the price beyond what he paid.
Yeah, that's the point. You would have to go through a lot of work slowly buying coins over several weeks to get to 30k and even then it would affect the price. So it makes sense to bid a little high and get them all in one go.
What 'work'? It would be trivial to just keep setting small orders until you reach your target. With how volatile bitcoin is there is no reason to chase the price up.
They don't seem to show their whole order book on that page. If you look at the cumulative depth chart at http://bitcoinity.org/markets/bitstamp/USD, it currently shows over 12K BTC asks. Buying all that in one fell swoop would drive the price to over $4000 though.
>Vaurum has launched trading platforms in emerging markets, and we will be partnering with Tim to leverage the pool of 30,000 bitcoins as a liquidity source
Building on the momentum of mainstream adoption and giving access to emerging markets, GogoCoin (500 Startups) is working to get Bitcoin and digital cash into everyone's hands.
I applaud Tim Draper and all the other notable bidders who help push Bitcoin one step closer to Wall Street and the mass market.
To simplify: Bitcoin miners race to discover a code that gives them 50 bitcoins. This code gets harder to find each time it is found. This decision is pre-baked in using the bitcoin system (other e-currencies have different traits.)
If you join a mining pool then you split the 50 coins with everyone else in the pool (and they'll split with you) if you are the lucky machine than found the code.
The analogy is pretty direct: mining is the same as going and doing work to dig up gold, buying from the market is the same as buying gold in the market.
It's interesting that they didn't communicate the amount and I haven't found any sources that provide one. You would think there would be more transparency seeing that the money is going into the government's pocket.
Someone should submit a freedom of information request...
The FAQ (http://www.usmarshals.gov/assets/2014/bitcoins/faqs.pdf) specifically says they will not disclose. I guess if someone really wants the information, they will challenge this intention. I find it interesting that it was leaked that 1 party won the bid--that seems in contradiction to the above...
There are huge holes everywhere in the order book and the liquidity at each offering level seems to be completely without reason.
I just spent 20 minutes applying the sort of algorithms that'd we'd normally run on each stock to make markets in it and it can't detect any real patterns or justification for the bid/ask levels.
Is this just a case of everyone in the bitcoin market being "unsophisticated" in the quantitative sense? or is there some new form of market micro structure being created here?
Thoughts??
EDIT For people asking about what you'd expect to see:
1) After the initial price level, you'd generally expect the next 10 or so price levels to be pretty tight. In the bitcoin case some of the spreads between price levels are larger than the bid/ask spread.
The price levels don't appear to have any logical basis behind why they are placed where they are.
2) volume at each price level. Similarly to above the volume at each price level doesn't appear to have any discernible pattern. Typically volumes would increase at each price level, up to a point, as more people join the market at each price level.
They don't break out a level 3 quote( order book by order, as opposed to price) so you can't really see how many orders are backing up each price level but given how small the volume of many of the price level are you can probably assume its only one person/order at most levels.
[1] https://www.bitstamp.net/market/order_book/