Something is wrong. We cannot just gloss over the $100 sell

[wachtwoord]

The sell-off had nothing to do with the use of bitcoin as a currency.  Bitcoin is worth the same today as it was yesterday.  Two factors caused a financial event for speculators:  A false PR report by a broken company, Mt. Gox, and leveraged long positions facing margin calls.  You may recall the same thing happened to the stock market in 2008.  Perhaps the NYSE has immature infrastructure that means the U.S. dollar is not ready for prime time?  Unlike the stock market, bitcoin resumed normal pricing within hours. 

Everything is working as intended, here.  Except of course for Mt. Gox.

Indeed. Being liquidated is the risk of leveraging. If you choose to use leverage be very sure to do it safely.

[licutis]

I think the issue we all keep ignoring is the broken trade matching systems these exchanges use. There have been posts from people on btc-e and bitstamp who did not have their limit orders executed even with the price moving through them. The same thing has happened on gox in the past, thats why we see big sells plow down through the order book and the price instantly recovers because of all the missed orders and orders placed during the execution of the large sell. These trade matching systems are broken and need to be rewritten or replaced with real off real off the shelf systems. We get lag in an exchange because of this as well, each transaction appears to be handled on an exclusive or semi-exclusive basis. Momentum locks up the db, limit orders do not get fully filled, traders can not react, market makeing bots can not update their orders, and we get a mini flash/lag crash. We need exchanges that operate like real financial market exchanges, written by people with experience in them or at least learning from their mistakes.

[TTBit]

Everyone is assuming all the trades were at arm's length, which they may not have been. If a broker has an order to sell at $500 if the price gets to it (a stop order), and you own a certain % of the orderbook, it is in your interest to fill your own orders down to a certain point, then bid for the offered coins. Yeah, some people got cheap coins at the expense of the large trader, but he was able to score the majority at $110.

It works because few people have large standing orders in the $200-$500 range, the only reason you would get filled is when you don't want them.

[Ibian]

Probably gox. Seen a couple posts saying they allow fiat withdraw now, if they were insolvent this could be how they got the money. Of course, this theory would imply that they are now insolvent in btc instead.

[Milotyc]

Don't fool yourself. The effects of the closing down of Silk Road are yet to come. Remember the 144,000 coins the FBI took? Not dumped yet.
So don't fool yourself, the closing down of Silk Road didn't have an effect... YET.

>Implying they'll ever dump it for dollars (of which they have infinite).

[pietje]

It appears that someone dumped around 20k bitcoins all at once, probably scared that Bitcoin was broken. Or it could have easily been an early adopter with insider knowledge at MtGox who shorted just as the news came out.

Speaking as someone who has been paranoid about the 25k the FBI is preparing to sell the reaction of the market gives me hope. It dropped on a 20k sell and bounced right back. That is pretty significant. It eases my worries about a 25k sale quite a bit.

Plus I am glad I had a big purchase set up at around 600/BTC.

The majority of the bounce back could be just the same people who sold buying back once they read the issue was a not a big deal or closing their shorts and trades, rather than it being new investors. But if the FBI dumps 25K, NONE of those coins are getting rebought by them.

If bitcoin drops to 100 again, im pretty sure alot of people will buy a few more bitcoins
Sp yea the coins are getting rebought. Maybe not back to Original level, but they will be bought.

[sraosha]

I'm sure by now everyone knows about the freak $100 Bitcoin sells on BTC-e and Bitfinex yesterday.
…

In conclusion, I see all three of these options as more probable than a dumb whale losing millions of dollars. If it is option #2, we have something to be concerned about. In fact I was posting in the comments on Yahoo News today, in both of the front-page articles about Bitcoin, and I noticed that my pro-btc posts were getting deleted. I must've posted the same thing 15 different times on two computers on two different Yahoo accounts. I swear this happened. We are getting censored on the mainstream news sites...

Very good points. Exceptional 

Some were suggesting that MtGOx or parts of their core owners is/are directly involved - to rebuy coins cheaply and thus avoid going over the cliff.

What is your thought on this? Thank you.

[sraosha]

A similar event occurred on bitcoin-24 during last years april rally (although not simultaneously with an actual 'crash'). In that case, the reason was that someone figured out how to hijack users login sessions, and then proceeded to transfer all their coins all to his own account by placing a buy order in the very thin USD order book and then selling all the coins in the hacked accounts to himself. Perhaps his bid order was too small, but it took the price down all the way to $0.

However, I think Hanlon's razor is appropriate here.
>Never attribute to malice that which is adequately explained by stupidity.

Just a big panicky whale that made a typo in the heat of the moment and bought a very expensive ticket for his spot in bitcoin history.

You are 100 % wrong since this happened on BTC-e AND Bitfinex simultaneously. In both cases down to a price of 100 / 102 $

This is not just a 'mistake'.

[sraosha]

I think the issue we all keep ignoring is the broken trade matching systems these exchanges use. There have been posts from people on btc-e and bitstamp who did not have their limit orders executed even with the price moving through them. The same thing has happened on gox in the past, thats why we see big sells plow down through the order book and the price instantly recovers because of all the missed orders and orders placed during the execution of the large sell. These trade matching systems are broken and need to be rewritten or replaced with real off real off the shelf systems. We get lag in an exchange because of this as well, each transaction appears to be handled on an exclusive or semi-exclusive basis. Momentum locks up the db, limit orders do not get fully filled, traders can not react, market makeing bots can not update their orders, and we get a mini flash/lag crash. We need exchanges that operate like real financial market exchanges, written by people with experience in them or at least learning from their mistakes.

I believe this is not accurate - at least not for Bitfinex. I had limit buy orders executed well and was watching it happen and stay at 100buy vs 600sell for several minutes. The platform appeared to be working and intact during this time. So, the "flash-crash" was not a matter of seconds, but rather at least minutes.

[teukon]

They were certainly very, very strange. In fact I don't think we've seen a move like this in the entire history of bitcoin.

It certainly was a large flash-crash, nearly 10-fold.  I remember witnessing a near 1000-fold flash-crash on Gox (mid-2011, it turned out someone hacked the exchange).

We need to wake up and pay more attention to this.

Why?  Given the much more substantial problems of scalability, dominating mining pools, and government regulation, why should we worry about such a non-issue?

If a whale is able to profit from creating a flash-crash then I say good for them.

[seleme]

You can't sell on BTC-e at market price so it's not mistake/typo/thin orders.

Probably either panic, stolen coins or some leveraging got busted.

[wobber]

We need to wake up and pay more attention to this.

Why?  Given the much more substantial problems of scalability, dominating mining pools, and government regulation, why should we worry about such a non-issue?

If a whale is able to profit from creating a flash-crash then I say good for them.

This kind of crashes show how weak the whole ecosystem is. I agree with OP, what happened on BTC-E should be written in the damn history books of bitcoin.

The market is unstable. And while I don't advocate for 'SELL AND RUN', I'd say that only the ones that have the guts to watch falling to 100s to HOLD. Other's should sell portions now and diversify.

[teukon]

We need to wake up and pay more attention to this.

Why?  Given the much more substantial problems of scalability, dominating mining pools, and government regulation, why should we worry about such a non-issue?

If a whale is able to profit from creating a flash-crash then I say good for them.

This kind of crashes show how weak the whole ecosystem is. I agree with OP, what happened on BTC-E should be written in the damn history books of bitcoin.

The market is unstable. And while I don't advocate for 'SELL AND RUN', I'd say that only the ones that have the guts to watch falling to 100s to HOLD. Other's should sell portions now and diversify.

To clarify.  I see this flash crash as a non-issue as far as Bitcoin is concerned (which is what I believe OP was considering).  People that are worried by this spike certainly should be paying more attention and should reduce their holdings until they feel comfortable.

It is a neat event for the history books, I'll give you that.

[Ojanpera]

I had a buy order at 515 and hit during the Bitfinex flash crash. Made a killing... all luck. My friend had a short position that should have closed during that time but it did not.

[Cluster2k]

My theory: the current DDoS of bitcoin is done to destroy bitcoin, not to profit from it.  Maybe it's an entity that wants to destroy competition (a government), or someone who is jealous they missed the bitcoin billionaire boat and wants revenge.

MtGox et al still haven't declared how many bitcoins have been stolen using the DDoS.  They simply don't know at this point.  If I was trying to destroy bitcoin I would take some of my plundered goods and dump them on an exchange and see what happens.  Maybe I would spark a mass sell off and crash that helped me in my anti bitcoin goal?

Was it a whale panicking and dumping their load all at once?  Unlikely.  The market was pretty stable right before the flash crash.  It's not like a speculator was sitting there looking at their millions disappear into the ether and wanting to salvage something, anything, from the situation before the value crashed to zero.

[TERA]

Maybe the hackers are actually good guys. They've brought the issue up before but the dev team was too lazy to fix it. Now they have no other choice than to exploit it so that it get's fixed. They want to do it now while there's still a chance before bitcoin becomes mainstream and commercially used and it's too late. If it happened later it might damage bitcoin and everyone involved too much.

[vokain]

My theory: the current DDoS of bitcoin is done to destroy bitcoin, not to profit from it.  Maybe it's an entity that wants to destroy competition (a government), or someone who is jealous they missed the bitcoin billionaire boat and wants revenge.

MtGox et al still haven't declared how many bitcoins have been stolen using the DDoS.  They simply don't know at this point.  If I was trying to destroy bitcoin I would take some of my plundered goods and dump them on an exchange and see what happens.  Maybe I would spark a mass sell off and crash that helped me in my anti bitcoin goal?

Was it a whale panicking and dumping their load all at once?  Unlikely.  The market was pretty stable right before the flash crash.  It's not like a speculator was sitting there looking at their millions disappear into the ether and wanting to salvage something, anything, from the situation before the value crashed to zero.

you can't destroy bitcoin by just selling it to death. the selling has to have some substantial fundamental reason behind it in order to do so

[ScaryHash]

The answer is really easy.

The feds butt RAPED the Silk Road guy in jail with a 2 by 4, until he squealed out his private key that unlocks his wallet.

So, with the 600,000 or so bitcoins in there, they went ahead and started selling lots at $100 per BTC, just so they could fuck with the exchanges.

Then they arrested the Bitstamp CEO and buttraped him too, and told him the story to put out. They found some skeleton in the Mt. Gox closet to black mail them also.

It's pretty fucking obvious, a caveman could figure this one out.

Start buying folks. The gubbamint is handing out free money, essentially, which is what they do best.

[JimboToronto]

The feds butt RAPED the Silk Road guy in jail with a 2 by 4, until he squealed out his private key that unlocks his wallet.

Oh, that's awful. I thought they just waterboarded him at Guantanamo Bay or fed him scopolamine. 

[Cluster2k]

you can't destroy bitcoin by just selling it to death. the selling has to have some substantial fundamental reason behind it in order to do so

Exploiting a vulnerability in bitcoin's design while stealing bitcoins, causing exchanges to shut down transfers would be a pretty good time to dump bitcoins on the market if you wanted to affect the useful stability of the commodity.  At the very least it spawns "Major bitcoin exchange shuts down" headlines and makes people who want to conduct business and trade using bitcoin wonder if they can handle the massive daily swings and risk of losing their money.