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

[stylin]

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

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. Yet too many people seem to be willing to dismiss this as an action of a dumb whale, perhaps magnified by trading bots/stop losses, and other traders panic-selling.

We need to wake up and pay more attention to this. What could've caused that whale to sell off? Even in December's crash which was more bearish and FUD-like we never saw this. From what I heard swirling around these forums it was somewhere around 5000 coins all at once on BTC-e. If a whale (or group of whales) were smart enough to accumulate that many coins, how could they have been stupid enough to sell off like that all at once? They must have lost millions of dollars.

Additionally, apparently MT4 went down for both BTC-e and Bitfinex during those brief candles. So far BTC-e owners have not acknowledged this, while Bitfinex has. This may or may not be relevant to the overall picture but it is another "weird" thing that happened.

I believe it can only be one of the two options below.

1. (Most likely IMO) It truly was a whale or group of whales selling off, and with a profit motive. They intended to quickly and swiftly induce a months-long bear market where they would be able to pick up cheap coins at the end. A bold plan, and it makes sense: if they could've sold the price down and held it down at an extreme price (say $300) for a couple hours, the momentum and panic after not seeing prices go up could induce a bear market. The conditions were very optimal: we were in the midst of Gox FUD and crash conditions to begin with, and it was 3am in the US, when most buyers would be sleeping. As mentioned before the trading bots and stop losses work in their favor with a drop that deep. Also, given the exchanges it occurred on, (low-volume btc-e), maybe there simply wouldn't be enough buyers online to buy the price up against panic sellers.

Some problems I see with this are:
-The entire "crash" was contained within a 1-hr candle on the charts, if they were going to be bold and smart about this they would have saved up some bitcoins to hold the price down in the next candles for appearances. They didn't.
-Why skip Bitstamp? Maybe they didn't have the coins to bring Bitstamp's books down, and expected Bitstamp to follow (or at the very least, equalize against BTC-e and Bitfinex) so that the price is still overall low enough to induce the bear. I still think this would be a gaping hole in their strategy, however.
-Completely wiping out the orderbooks all at once still seems like an inefficient way of doing things; there's not enough time for sell orders to pile up in all that space so the price can get bought up fast (which is what happened)

2. The government wants to bring Bitcoin down. It would make sense to do this in post-bubble conditions when you don't need as many coins to burn through the books since trading volume is down. Also, a large number of bitcoin-days were destroyed a couple days before this crash: maybe it was an off-the-books purchase for this exact purpose? Anyhow, if they were going to destroy Bitcoin, it would make sense to do so now, when the stock markets are shaky and people are looking for other places to store their money. In fact a fraction of the Silk Road coins alone would have been enough to pull off last night's shenanigans. And what better exchange to manipulate than BTC-e (anonymous owners, back-room deal possibly)?

Some problems:
Why would they do this before they've sold their Silk Road coins?
Why would they even sell their SR coins in the first place when they can use them to kill Bitcoin?
If they really wanted to destroy Bitcoin, infiltrating the mining pools and killing it from the inside would probably be less expensive. (However this is a technical kill, so people might move to Litecoin or make another coin in response. Maybe it's better to have people believe that market forces (themselves) are killing Bitcoin?

EDIT:
3. Somebody wanted to dump stolen coins. (Thanks Le Happy Merchant!) They dumped in a crash to camouflage their actions.

Some problems:
They still could've gotten a lot more money for their coins if they had patience and sold them off more slowly. In fact, selling coins off slowly would be blending in more wouldn't it? Still, a very likely scenario.

4. A mistake/typo, and somebody somewhere committed suicide today.

Some problems:
On both BTC-e and Bitfinex? Two exchanges at the same time, same typo, typo'd exact #'s of Bitcoin needed to sell to $100?



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...

[c0dex]

I'd be interested to hear other opinions on this as well.

[Le Happy Merchant]

Even the stock market has flash crashes.

Also, what if the coins were stolen and the owner thought a period of panic would be a good time to dump and avoid suspicion?

[TERA]

Forced margin liquidations into thin books. What do you think a solution is?

This is a new occurence on btce problably because they just implemented MT4.

[sidhujag]

During higj volume mt4 will time out trades and also server can control when to stop updating clients etc.. so they may have known .. the thing is im sure margin calls were hit on leveraged long traders and mt4 will automatically close you out even though you cant trade...

Ive said it a million times on this forum do not trade via mt4 if your leveraged!!!! Use it for charting thats it.

Im sure it was more than just a whale.

Im interested to know who all got in sub $200.. it happened in daytime uk so north america was sleeping i caught the end of it.

[TERA]

I was paralyzed with fear when this was happening. I had an array of orders on bitfinex between 250 and 550 but I cancelled them all because I didn't want to have my account liquidated in the event that bitcoin was actually dying due to irrepairable protocol exploitation or failure. If I left the orders, I'd be about $100,000 richer right now (or I'd be liquidated, I'm not sure... or maybe the trades would have been rolled back)

[akujin]

the got hacked  


--source: my cat

[Elwar]

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.

[sidhujag]

I was paralyzed with fear when this was happening. I had an array of orders on bitfinex between 250 and 550 but I cancelled them all because I didn't want to have my account liquidated in the event that bitcoin was actually dying due to irrepairable protocol exploitation or failure. If I left the orders, I'd be about $100,000 richer right now (or I'd be liquidated, I'm not sure... or maybe the trades would have been rolled back)

Dont leverage bitcoin maybe?

[TERA]

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.

[stylin]

Even the stock market has flash crashes.

Also, what if the coins were stolen and the owner thought a period of panic would be a good time to dump and avoid suspicion?

On BTC-e though? I hear fiat transfers out don't always work...

But this is good thinking. Actually a very valid scenario, thanks for sharing.

Forced margin liquidations into thin books. What do you think a solution is?

This is a new occurence on btce problably because they just implemented MT4.

This makes sense on the surface but if so, very many people lost a LOT of money liquidating their positions yesterday. A LOT of money. You'd think there would be more stories and people sharing their nightmare experiences.

[seanneko]

In conclusion, I see both of these options as more probable than a dumb whale losing millions of dollars.

I don't. The sale was either a mistake (typo, etc), or it was made by an idiot. Perhaps they didn't check the order book before selling, and hence weren't aware how much the price would fall. Maybe they were drunk at the time and had a lapse in judgement.

If you wanted to manipulate the market and cause panic, selling your entire stash in one sale doesn't seem like the best way to do it - it gives away the fact that it's just one person doing it. You want people to think that everybody is selling all at once, so it'd be much more sensible to make multiple continuous sales of smaller amounts.

The $102 sale doesn't bother me at all. Someone really regrets it now, and that's the end of it as far as I'm concerned.

[c0dex]

Even the stock market has flash crashes.

Also, what if the coins were stolen and the owner thought a period of panic would be a good time to dump and avoid suspicion?

On BTC-e though? I hear fiat transfers out don't always work...

But this is good thinking. Actually a very valid scenario, thanks for sharing.

Forced margin liquidations into thin books. What do you think a solution is?

This is a new occurence on btce problably because they just implemented MT4.

This makes sense on the surface but if so, very many people lost a LOT of money liquidating their positions yesterday. A LOT of money. You'd think there would be more stories and people sharing their nightmare experiences.

maybe we know better than to come cry here about our losses expecting sympathy. 

[Elwar]

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.

Perhaps. But I am sure that a lot of people are holding fiat ready for that day.

That was the only reason I was able to buy a bunch when it crashed. I am surprised that one long position I have lent out on BitFinex did not get squeezed out and they still hold my loan.

[stylin]

Updated the OP with new possibilities. Keep them coming! I believe with crowdsourcing we can figure the most likely possibility.

[stylin]

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.

It could be, but take into account that the orderbooks were just wiped out after that huge sell. It wouldn't take a lot of buying to buy the price back up, just a couple hundred people in fiat in the right place right time should do the trick.

[byronbb]

Someone explained it to me rather simply. There were 3k bitcoins on the orderbooks IN TOTAL. For whatever reason an order went through for 3k coins and BOOOOOM down to $100 for a split second. Why someone bombs the orderbook like that is another question, but it probably was some sort of leverage unwind that created a domino effect.

[jl2012]

I didn't want to have my account liquidated in the event that bitcoin was actually dying due to irrepairable protocol exploitation or failure.

The so-called bug is known for years. This suggests that you have no idea in what you are investing, and even worse, investing with margin

The most recent incident that might really have killed bitcoin was the hardfork in March 2013: https://github.com/bitcoin/bips/blob/master/bip-0050.mediawiki

[miketonic]

Very good theories from the OP. I find it very difficult to believe that someone was so stupid that just accidentally set a huge sell order without price limit..

[Mythul]

Someone explained it to me rather simply. There were 3k bitcoins on the orderbooks IN TOTAL. For whatever reason an order went through for 3k coins and BOOOOOM down to $100 for a split second. Why someone bombs the orderbook like that is another question, but it probably was some sort of leverage unwind that created a domino effect.

Maybe they where hacked dirty coins ? They were trying to clean them up ?