45. On Cornering the Market
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SATOSHI REPLIES to a comment about someone’s trying to buy up all of the bitcoins and references the Hunt brothers and the silver market of the late 1970s. Note that the Hunt brothers’ share of buying was actually a small percentage of the silver market. What doomed them was their trading on COMEX from a leveraged position on the future exchange. COMEX changed the rules by placing a cap on the total amount of contracts one could have, thus forcing anyone having more than the specified limit into a selling position, and so forced the Hunt brothers to liquidate. See the detailed writing on this subject by Mike Maloney at WealthCycles.com:
Satoshi Nakamoto July 09, 2010, 03:28:46 PM
Quote from: user on July 07, 2010, 06:15:28 PM
Hi. (I’m sorry if I don’t understand any concept).What you think if anyone intruder will buy up bitcoin currency and erase all binary data. This way can destroy bitcoin systems. Is btc network protected against that attack?
What the OP described is called “cornering the market”. When someone tries to buy all the world’s supply of a scarce asset, the more they buy the higher the price goes. At some point, it gets too expensive for them to buy any more. It’s great for the people who owned it beforehand because they get to sell it to the corner at crazy high prices. As the price keeps going up and up, some people keep holding out for yet higher prices and refuse to sell.
The Hunt brothers famously bankrupted themselves trying to corner the silver market in 1979: “Brothers Nelson Bunker Hunt and Herbert Hunt attempted to corner the world silver markets in the late 1970s and early 1980s, at one stage holding the rights to more than half of the world’s deliverable silver.[1] During Hunt’s accumulation of the precious metal silver prices rose from $11 an ounce in September 1979 to nearly $50 an ounce in January 1980.[2] Silver prices ultimately collapsed to below $11 an ounce two months later,[2] much of the fall on a single day now known as Silver Thursday, due to changes made to exchange rules regarding the purchase of commodities on margin.[3]”