Bitcoin Forum

that's quite a bit of money.. it would explain why the price has crashed yesterday-ish. it seems bitcoin's market cap is not nearly big enough to absorb this kind of action.

http://www.siliconbeat.com/2014/08/12/tech-entrepreneur-pays-1-6-million-in-bitcoins-for-tahoe-parcel/

If the correlation is real, that would mean more merchants accepting bitcoin is bad for the price since the merchant probably won't hold the coin for long.

That's great to know, you guys better sell everything now while you still can.  Do it now.

So you are saying that Bitpay sold the coins in bitstamp the moment they got the order? I don't think that's the way things work.

I don't think so either
they may have a reserve of bitcoin and money and they do their own transfer in payments

i'm not 100% certain how the exchanges work, but i'm assuming it works under supply/demand economics. if $1.6 million in bitcoin flooded the supply side, then prices will end up dropping if demand is roughly the same.

That's a good purchase for a property
Not sure what the largest one is though but it must be close to the top.

The buyer purchased a 1.4 acre home site in what is the final offering of 42 home sites at the resort, which is near Truckee. Finished homes are pricey at the resort, selling for $3-5 million.

I'm pretty sure they do it off the exchange books. I'm pretty sure that they have some like Nigerian and Arabic princes they sell to.

Pretty nice investment if you ask me. That's prime retreat territory and will easily sell for more down the line once the area is more developed or maybe there's a deal w/ a developer to build a nice pad and they split the profits later or something. These parcels of land are straight out of the area known as the Ponderosa in the 60s-70s popular show albeit not immediately adjacent to the massive lake.

Well in fact the real thing is that, the market cap is not big enough, or the volume on the exchanges is not big enough.. but at the end this actions can help us, people will realize that they can put some savings on bitcoin and be safe.

This would have a negative effect on prices, however it is likely a small transaction when compared to total exchange volume. I would also assume that bitpay would likely sell their coins on multiple exchanges to avoid impacting the price on just one exchange, creating the opportunity to arb. 

Short-term bearish, but vital in the long term to the Bitcoin economy's success.

Every time another merchant supports BTC payment via instant-cash-out, it increases the sell pressure, yes. But it also makes bitcoins more useful as current money. Which means that the more merchants support BTC payment, whether through instant-cash-out or not, the less need there is for the next merchant to use instant-cash-out instead of just using the bitcoins to pay their suppliers.

Instant cash out is a necessary stepping stone. That the price would be depressed during this phase, especially in the case of big ICO purchases, is not a mystery.

The 24-hour volume of the top three exchanges is about $8 million on an average day. Even spread across all three markets, a $1.6 million sell is 20% of that - a huge ratio for a single trade.

As circumstantial evidence supporting this theory, it's worth pointing out that the drops on Bitstamp at least seem to be correlated to very large single trades:
https://i.imgur.com/F2NLgPc.png
(The time per candle is 1 minute, which is about as fine-grained as bitcoincharts will go.)

that is some big trade using BTC, how fast will the prices go normal again ?

Short term yes this has a negative on price. But increased utility is obviously accretive to value.

Hold it. Are you implying that that Bitpay doesnt sell the bitcoins to cover the purchase price?
In other words, you think they are gambling with their customers (the recipients) money? So, in case they wait "for the price to recover", and it doesnt (e.g. because a lot of other people are also spending a couple of $M shortly afterwards), the recipient might not get his money?
Who covers the risks in that case? Buyer will probably want whatever he bought, and seller his money ...

Exactly. That's precisely how it works mr. cow herder.

Which one. They sell immediatly, or they dump in small batches?

It definitely works this way actually, otherwise they would be exposed to a huge risk in case of fluctuations.

They obviously sell immediately, otherwise it would be gambling, as you yourself pointed out.

Seriously, that can hardly be the whole truth.
So basicly selling $1.6M worth of BTC caused market cap to drop by ~$400M?

The percentage of Bitcoin actually open for purchase and the amount of Bitcoin buy orders present at exchanges, are very small relative to all outstanding Bitcoins.

It's possible that it made the price go down by a awful not but im wondering when more people have a lot of money in btc and make big purchases such as this will that make bitcoin crash?

Hmm, we might want to check that theory.
Anyone want to buy this thing (https://www.bitpremier.com/9-yachts-and-watercraft/436-120-tri-deck-mega-yacht-new), its already heavily discounted (http://www.coindesk.com/expensive-thing-can-buy-bitcoin/) after all. ;)

Keep in mind that payment processing through Bitpay allows the recipient to set a percentage (from 0 to 100) in how much of the value he wants to receive in Bitcoin, and how much in fiat currency.

Let's assume the payout was requested completely, or at least: mostly in fiat. It is then up to Bitpay how to process such an order. They need to be liquid enough (in fiat) to be able to serve the customer without delay, but they also need to be profitable. Imagine for a second they'd process an even larger order: if they pay out 10M USD to a customer, but drop the entire Bitcoin amount valued at 10M in one big dump, they'll never receive the full USD amount, through slippage and market panic. They'd incur a huge loss for themselves.

For that reason, I consider it extremely likely that Bitpay will have a number of quants doing nothing but optimizing the above process: how much to sell, when, and at which rate, to remain a) liquid, and b) profitable. Which, in practice, can very well mean that they wouldn't dump the coins at all for some period after a transaction - but I also agree: to limit their risk, the bias will be on selling. Just not in the form of big dumps.

Hmm, does anyone know if they calculate the conversion rate a customer (buyer) gets based on current market rate or on average sales price they would get?
In other words, if a customer buys an item worth $100 its at current market rates (say $550), but if its something really expensive (e.g. >$1M) you only get the average conversion rate they could get by dumping immediatly (e.g. $540 or whatever)?

Hmm, actually i somehow dont expect anyone here to know for sure ...

I'd say it must be in the agreement somewhere. Happy hunting! ;)

So they just lose money from paying the exchange fees.
It is obvious that they buy and sell through exchanges but they don't do so for every single transaction...

Customer pays according to current market price, but at a rate fixed for the day, minus 1% fee. From their webpage:


To my understanding that means it is up to Coinbase to make a profit (or, if they fail, a loss) with the actual conversion on the market(s).

Let's be clear:

Market cap does not mean 7b$ USD in BTC. It means current BTC supply * current exchange rate.

People sell, and sell under someone else to sell faster, and then that person sell under the next lowest person, and they lower exchange rate

BTC stays same (relatively) so the lower exchange rate, the less effective value for market cap

It took 17k BTC to bring BTC from 585 to 535, 500m decrease in market cap value from 10$m in trade volume

Coinbase will also make a spread from the difference that they sell their bitcoin from what they buy bitcoin from customers. Since customers both buy and sell to them they will need to have very little activity on exchanges unless there is a lot of pressure on one side of the market.

Yeap , but the amount of bitcoins needed to reach some price is a fixed amount, you will need more usd to get from 400 to 300 than from 500 to 400.. he resistance levels can be changing

Burt this would mean they lose a ton on a $1.6M order. It's a bit difficult to believe this would be their business model. Why take risk when that's not needed?

Correct. That's why I said, I'm sure they dedicate a lot of resources internally to model the market, their risk exposure, and let it guide their actions.

Two remarks:

1) as Fray pointed out, customers also take coins from them. I disagree however that this means they have little use for external markets. I do believe that, at least currently, they'll have more coins than they can "get rid off" internally.

2) Funny that, after a half year bear market, having to handle a  1.6M USD order in coins is suddenly considered  a liability unconditionally. Wanna bet people feel differently if we're in an uptrend? "Wooohooo, 1.6M USD *slippage free*. Jackpot baby!".

Note: I'm well aware it's a huge risk. But assuming they have capital (USD) reserves to remain liquid, they might chose not to liquidate a huge order like that, but instead sell it off slower, possibly even on higher prices than when they received it (and what they paid for). I really depends on their willingness to be exposed to an exchange rate risk, imo.

I am pretty sure that the price given to customers when they checkout on conibase or bitpay is based on the exchange rate at the time. I would assume that the fiat price the merchant price is somewhat similar to what the customer gets. To do anything else would make little sense and would subject coinbase and bitpay to extreme levels of market risk and potential manipulation by merchants.

but where is stated that bitpay uses bitstamp?, bitpay can use two exchanges at the same time like coinbase and bitstamp so this way the dump cause half of the effect that if you dump all of them in one.

I think in small batches.

If you think about it, they would not be doing themselves a favor by selling the coins all at once.

Umm I don't know. I still believe that they actually do have people on contract who readily buy those amounts of coins. It would be better for BitPay than just dumping them on an exchange. Try wouldn't have to take care about the market depth or be afraid of a drop in the meantime.

You think they have people on contract for $1.6 M worth in a one time flat out buy? If so, Bitpay is even further along then I thought they were.