Placing 1 million offers to sell at 1000 is akin to shouting fire in a movie theatre. It is going to start a panic and a big price swing. Which then means you can buy in the dip, pull your fake orders, and make some easy cash.
Trust me you don't want a market like this. Bullies with deep pockets will destroy you. Your comment looks like you have never traded outside of Scottrade.
But why do the other market participants panic? It seems like it's their own fault for panicking -- they should stop using the order book to make value judgments.
The fact of the matter is that they do panic, and it's not actually useful for market stability. Some might say "too bad so sad, don't be tools". But a market where people can actually trust the intent behind buy/sell orders is going to be better for everyone involved.
The objective isn't to have the least regulation possible, but to try to have the "best" market possible
This is a self-correcting problem. Traders who fall for fake walls lose their capital, and thus influence on the price, to those who do not. The feedback loops and incentives of the market cause it to evolve toward a more price-stable configuration.
I think this happens when a great percentage of participants of an exchange are merely traders, speculators, and bots than actually using the currency for transactions in every day life.
Isn't this a way to prevent traders from anticipating and profiting from arbitrage opportunities? In some sense, I see this as a sign of a healthy market, no? If traders are looking for signals like average the price of sell orders, they should remove outliers like this, or not do arbitrage.
Bullies with deep pockets can attempt to destroy a market, but value investors with sensible limit-buy orders tend to get paid.
(Accurately valuing bitcoin is fraught with risk, but a limit-buy at $1000 today is likely to be a net win. Let the bully sell, and let the limit order soak it up.)
Trust me you don't want a market like this. Bullies with deep pockets will destroy you. Your comment looks like you have never traded outside of Scottrade.