Dumping coin - do exchanges hold coin?

[scribbles]

Occasionally I read reference to people dumping/selling large amounts of coin and it's effect on bitcoin price. However, for every sell there is a simultaneous buy. So you could just as easily say that there is high buying activity (the other side of the trade)...

... unless you can sell coin to an exchange without a buyer on the other side. Does this happen?

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[goregrind]

Not sure if it happens but for an exchange to do that it would mean they would be taking a risk which could offset their guaranteed earnings from exchange fees.

[scribbles]

Not sure if it happens but for an exchange to do that it would mean they would be taking a risk which could offset their guaranteed earnings from exchange fees.

If that's true, then can someone please explain why a large sell would negatively effect bitcoin price when that means there was an equally large buy happening at the exact same time?

[jump4ever]

I think you can sell without a buyer on the other side

[CEG5952]

I think you can sell without a buyer on the other side

LOL, no. You can't market sell without a limit buy on the other side. You can't buy or sell with no liquidity. The distinction here is market orders vs. limit orders. Market buying is what drives the price up -- limit buys just prop the price, until the market decides the direction.

[Skele]

Maybe the exchanges owners hold coins, very much coins, but exchanges are just exchanges, there is no selling without buying.

[AliceWonder]

Not sure if it happens but for an exchange to do that it would mean they would be taking a risk which could offset their guaranteed earnings from exchange fees.

If that's true, then can someone please explain why a large sell would negatively effect bitcoin price when that means there was an equally large buy happening at the exact same time?

I'm a country hick, no expert, but I think the way it works is this -

You have 200 BTC to sell. You set lowest price at $500

John is willing to buy 20 at $779 - so 20 of yours go to John at $779. Now there is no longer a buyer willing to pay $779, so value goes down.
Jane is willing to buy 30 at $750 - so 30 of yours go to Jane at $750.

Etc etc. until either all your BTC are sold or no one is willing to pay your minimum price.

That's why the value goes down. Yes there were buyers for all you sold, but at the end they were paying a lot less.

[hollowframe]

To determine if something is a sale or a purchase you could look at who is taking away liquidity from the market, this is what the actual trade is. For example if there is an offer to sell 1 BTC for $650 and a buyer accepts this offer and buys this 1 BTC then the trade is a purchase/buy.

[theonewhowaskazu]

Wow... do this many people not know the basics of how markets operate?

There is orders on the book (I want to buy x btc at price a, or I want to sell y btc at price b).

There is also market orders (I want to buy the cheapest x coins on the market, or I want to sell y coins to the highest bidder).

A market sell cancels out a certain amount of buy orders on the book. Since they cancel the most high priced buy orders to get the best value for their coins, only the next highest buy orders remain on the book. Therefore the price just went down.

Putting a new sell order on the book means that there is one more sell order for a market buy to cancel before the price can go up past the price at which the sell order was put onto the book. This suppresses upward movement, which also negatively affects the price.

. . . Fairly obvious

[AliceWonder]

You don't need to be condescending.

Fairly obvious to someone who has taken the right class or has experience in the market.

Most people don't fit either category, so the question is a fair one.

I for one haven't had an economics class since before 2000 - nor do I care about stock trading, that's why I use a broker.

And bitcoin exchanges - they are currently dangerous because they all require depositing bitcoins into a web wallet, and that is not secure.
So I don't use them. Especially since there is only one in US that seems somewhat trustworthy (CampBX) - all others in US smell like bad fish to me, scam waiting for right time.

Chances of getting burned if I only temporarily have the coins there are slim, but I can't afford that risk. Many are like me.

[dothebeats]

The reason why the price goes down after a purchase is because the orders at the market isn't similar; orders that meet the price of the seller/buyer is immediately executed and thus, the next price would either be above or lower than the first executed trade. The price is up to buyers preferences; if they want to buy lower, sure the price would also go down.

[Mieehayii]

without buyer is impossible, bur bitcoin is broke down

[keithers]

Exchanges often hold certain levels of BTC as reserves, and obviously upper management is likely holding BTC as well

[scribbles]

Wow... do this many people not know the basics of how markets operate?

There is orders on the book (I want to buy x btc at price a, or I want to sell y btc at price b).

There is also market orders (I want to buy the cheapest x coins on the market, or I want to sell y coins to the highest bidder).

A market sell cancels out a certain amount of buy orders on the book. Since they cancel the most high priced buy orders to get the best value for their coins, only the next highest buy orders remain on the book. Therefore the price just went down.

Putting a new sell order on the book means that there is one more sell order for a market buy to cancel before the price can go up past the price at which the sell order was put onto the book. This suppresses upward movement, which also negatively affects the price.

. . . Fairly obvious

Thanks for the clear info, this was helpful (in spite of the condescending comment at the end )

[cech4204a]

Exchange has no need to have bitcoins at all, they just need guys that hold bitcoins and guys that hold $ or FIAT in other words. You have to understand that every coin is exchanged for FIAT and therefore exchange needs no money at all, not FIAT , not Bitcoins.

[keithers]

Exchange has no need to have bitcoins at all, they just need guys that hold bitcoins and guys that hold $ or FIAT in other words. You have to understand that every coin is exchanged for FIAT and therefore exchange needs no money at all, not FIAT , not Bitcoins.

Exchanges need reserves to be able to run when errors occur.   Just like any other business errors occur...wrong amounts are sometimes sent, certain transactions don't go through correctly, etc.   If there are literally 0 reserves, there is 0 room for error

[titulng]

Some exchanges will market manipulation in china 

[theonewhowaskazu]

Some exchanges will market manipulation in china 

without buyer is impossible, bur bitcoin is broke down

Sorry but after seeing so many posts like these in a thread asking a question as clear cut as "why does price go down when people sell" it's hard not to get posed and make a snark remark. How can stuff like this go on?

[byt411]

Exchange has no need to have bitcoins at all, they just need guys that hold bitcoins and guys that hold $ or FIAT in other words. You have to understand that every coin is exchanged for FIAT and therefore exchange needs no money at all, not FIAT , not Bitcoins.

Exchanges need reserves to be able to run when errors occur.   Just like any other business errors occur...wrong amounts are sometimes sent, certain transactions don't go through correctly, etc.   If there are literally 0 reserves, there is 0 room for error

Seriously? Loads of people buy bitcoin, I know many people that constantly buy bitcoin. If no one buys and all coins are turned into fiat, Bitcoin would be at $0 right now.

[allsopfree]

They are not that stupid to dump coins, they would lose money with that.