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Author Topic: How liquid are large stashes of bitcoins?  (Read 3016 times)
KajiMaster
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July 10, 2012, 02:52:39 PM
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So I've been reading lots of this form since I joined and haven't read about anyone asking about this scenario.  After reading the Forbs article about the largest bitcoin wallet (488k'ish coins valued ~2.8mil) I got to thinking.  While is value isn't over 51% of all coins what if he decides tomorrow he wants to cash out? What would be the process?  Just go to mt.gox and tell them to wire you the money for them?  How long would it take and would it require breaking up sales over various buyers?

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Kaji

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July 10, 2012, 02:54:58 PM
 #2

Problem with MtGox is their AML and KYC regulation. You can't just sell off your bitcoin, you gottach have your identity verified and mtgox gottach spy on you for da government.

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July 10, 2012, 03:00:10 PM
 #3

So I've been reading lots of this form since I joined and haven't read about anyone asking about this scenario.  After reading the Forbs article about the largest bitcoin wallet (488k'ish coins valued ~2.8mil) I got to thinking.  While is value isn't over 51% of all coins what if he decides tomorrow he wants to cash out? What would be the process?  Just go to mt.gox and tell them to wire you the money for them?  How long would it take and would it require breaking up sales over various buyers?

Thanks,
Kaji
Mt. Gox doesn't buy or sell bitcoins from anyone, it matches buyers with sellers. If the owner of 488K bitcoins wants to sell them he will need to find someone to buy them. You can look at Mt. Gox's orderbook to see how much people want to buy now.

If he tries to dump it all at once he will crash the price and not get a lot of USD for it. A sounder strategy would be to put up an ask at a low price and wait for people to execute it.

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July 10, 2012, 03:01:58 PM
 #4

Every once in a while someone comes in wondering what would happen if everyone liquidated at once.

It doesn't matter, because to do so would mean taking out every bid that exists in the order book if the amount to sell was large enough.

There is zero incentive to bail on a large amount if you know you'll crush the price - it would make more sense to liquidate slowly if that was your intent, so price could recover and the bids you take out get replenished over time.

So, to recap - nobody has dumped on the market enough to kill the price, even though they could if they really wanted to.

The world keeps turning, and fiat keeps burning...

fortitudinem multis - catenum regit omnia
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July 10, 2012, 03:03:10 PM
 #5

A market (any market) only has so much depth.

Taking a look here:
http://mtgoxlive.com/orders

Even 100,000 BTC would drop the price to $5.68.  Now that also assumes buyers won't react to falling prices (which they will so you likely couldn't sell 100K BTC and have the drop only drop to $5.68).  While someone could cash out 488K BTC all at once it would be foolish.  They likely would lose a million or more USD in value.   If you wanted to cash out just sell 1K BTC a day for the next year or so.

I would also point out that those large accounts may not be individuals they could be for example a MtGox cold storage address.
KajiMaster
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July 10, 2012, 03:07:27 PM
 #6

Makes sense that the amount that much of % would have on the price would be negligible on his part, preventing him from wanting to do so.  My overall curiosity was not of concern as much as curiosity of a true idea of the liquidity of that many coins.  I only have around 100 in my possession which I feel I could turn to cash in a few minutes if I wanted.  But 4880x more than that would make me have to rethink my strategy Cheesy

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July 10, 2012, 03:55:30 PM
 #7

A market (any market) only has so much depth.

Taking a look here:
http://mtgoxlive.com/orders

Even 100,000 BTC would drop the price to $5.68.  Now that also assumes buyers won't react to falling prices (which they will so you likely couldn't sell 100K BTC and have the drop only drop to $5.68).  While someone could cash out 488K BTC all at once it would be foolish.  They likely would lose a million or more USD in value.   If you wanted to cash out just sell 1K BTC a day for the next year or so.

I would also point out that those large accounts may not be individuals they could be for example a MtGox cold storage address.

Speaking of selling 100,000 BTC actually mtgox currently does not have enough USD in orderbook for last 24 hours.
Looking at http://bitcoin-analytics.com



Though in this case it is possible to speak about the whole USD market, which can absorb 100,000 BTC
and the price move will be at $6.05-6.06.



please also notice that currently there is no way to buy 100,000 BTC on the market

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July 10, 2012, 04:41:25 PM
 #8

Speaking of selling 100,000 BTC actually mtgox currently does not have enough USD in orderbook for last 24 hours.

There is money "on the sidelines" that is not in the orderbook.

Additionally, wire transfers can be processed in hours so if there was a huge selloff, there would be new funds arriving within the 24 hours period you mention.

Though I do respect that a even very small amount of bitcoin currency (percentage-wise) sold can impact the market rate drastically.

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July 10, 2012, 04:50:11 PM
 #9

Speaking of selling 100,000 BTC actually mtgox currently does not have enough USD in orderbook for last 24 hours.

There is money "on the sidelines" that is not in the orderbook.

Additionally, wire transfers can be processed in hours so if there was a huge selloff, there would be new funds arriving within the 24 hours period you mention.

Though I do respect that a even very small amount of bitcoin currency (percentage-wise) sold can impact the market rate drastically.

We can only guess what funds will be or are arriving and there always will be big uncertainty with this guessing.

On the contrary we can be sure about what actually visibly happend for the last 24 hours on the market.

As for any small amount sold impacting the price it should be obvious that selling 1 BTC and 10,000 BTC will move the price differently, depending on the market depth. And what can be said for sure that 1 BTC will more probably make significanly less impact then 10,000 BTC.

So I believe that always while talking about prices we need to say what volume is considered.
Without it the price alone does not make big sense for practical trading, only for chatting Smiley

KajiMaster
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July 10, 2012, 04:54:11 PM
 #10

A market (any market) only has so much depth.

Taking a look here:
http://mtgoxlive.com/orders

Even 100,000 BTC would drop the price to $5.68.  Now that also assumes buyers won't react to falling prices (which they will so you likely couldn't sell 100K BTC and have the drop only drop to $5.68).  While someone could cash out 488K BTC all at once it would be foolish.  They likely would lose a million or more USD in value.   If you wanted to cash out just sell 1K BTC a day for the next year or so.

I would also point out that those large accounts may not be individuals they could be for example a MtGox cold storage address.

Stop me if I'm moving this to a new topic, but this makes think even more.  So say $100k btc is dropped onto the market and the price goes back to $5.68. And (since the buying price has been steadily rising) those are purchased up.  Would the price stable back to current value rather quickly?

-kaji

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July 10, 2012, 05:00:15 PM
 #11

A market (any market) only has so much depth.

Taking a look here:
http://mtgoxlive.com/orders

Even 100,000 BTC would drop the price to $5.68.  Now that also assumes buyers won't react to falling prices (which they will so you likely couldn't sell 100K BTC and have the drop only drop to $5.68).  While someone could cash out 488K BTC all at once it would be foolish.  They likely would lose a million or more USD in value.   If you wanted to cash out just sell 1K BTC a day for the next year or so.

I would also point out that those large accounts may not be individuals they could be for example a MtGox cold storage address.

Stop me if I'm moving this to a new topic, but this makes think even more.  So say $100k btc is dropped onto the market and the price goes back to $5.68. And (since the buying price has been steadily rising) those are purchased up.  Would the price stable back to current value rather quickly?

-kaji

Here you enter purely speculative zone Smiley beginning with that it is not currently possible to sell 100k BTC on any single market.

If only that we know about market that you cannot even sell 100k it is more difficult predict how quickly the price will go back Smiley  

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July 10, 2012, 05:05:20 PM
 #12

i can tell you for my part at least, that i will be buying at any price below $6.
KajiMaster
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July 10, 2012, 05:28:24 PM
 #13

i can tell you for my part at least, that i will be buying at any price below $6.

Noted.  And I agree.

-kaji

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July 10, 2012, 07:08:09 PM
 #14

Here you enter puerly speculative zone Smiley beginning with that it is not currently possible to sell 100k BTC on any single market.

Not sure where you are getting that idea from (or you are reading your feed wrong).

Using MtGox API there is >100K BTC of buy orders at >$5.45 USD per BTC.   The sum of top 100K BTC bids is $625,696.50 giving a weighted average bid price on a 100K sale of $6.256 on the 100K lot. The entire market depth (going down to pennies) is hundreds of thousands of BTC.

Of course that assumes none of those buys are removed or modified which is a bad assumption. If one dumped 100K it would cause automated traders to react and some of that bid support would vanish.  Still that doesn't seem to be the point you are trying to make.  It would be beyond stupid to sell 100K in one giant market order but it could be done.

Code:
Limit Price BTC Available Total USD Average Price
$6.00 73,102.99 $476,188.87 $6.51
$5.00 117,733.39 $715,747.51 $6.08
$4.00 167,704.01 $933,876.68 $5.57
$3.00 220,031.20 $1,119,208.22 $5.09
$2.00 251,109.52 $1,196,528.85 $4.76
$1.00 525,553.92 $1,517,255.31 $2.89
$0.00 25,653,635.23 $1,563,645.45 $0.06

The table above is showing max limit order than can be executed against the existing order book. 
If you executed a limit order of $2.00 for more than 251,109.52 BTC you would drive the price down to $1.999999 and collect $1.196 mil USD for an average price of$4.76 per BTC.


Quote
If only that we know about market that you cannot even sell 100k it is more difficult predict how quickly the price will go back Smiley  

Well now we know we can so we are one step closer. Smiley
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July 10, 2012, 08:38:12 PM
 #15

Here you enter puerly speculative zone Smiley beginning with that it is not currently possible to sell 100k BTC on any single market.

Not sure where you are getting that idea from (or you are reading your feed wrong).

Using MtGox API there is >100K BTC of buy orders at >$5.45 USD per BTC.   The sum of top 100K BTC bids is $625,696.50 giving a weighted average bid price on a 100K sale of $6.256 on the 100K lot. The entire market depth (going down to pennies) is hundreds of thousands of BTC.

Of course that assumes none of those buys are removed or modified which is a bad assumption. If one dumped 100K it would cause automated traders to react and some of that bid support would vanish.  Still that doesn't seem to be the point you are trying to make.  It would be beyond stupid to sell 100K in one giant market order but it could be done.

Code:
Limit Price BTC Available Total USD Average Price
$6.00 73,102.99 $476,188.87 $6.51
$5.00 117,733.39 $715,747.51 $6.08
$4.00 167,704.01 $933,876.68 $5.57
$3.00 220,031.20 $1,119,208.22 $5.09
$2.00 251,109.52 $1,196,528.85 $4.76
$1.00 525,553.92 $1,517,255.31 $2.89
$0.00 25,653,635.23 $1,563,645.45 $0.06

The table above is showing max limit order than can be executed against the existing order book. 
If you executed a limit order of $2.00 for more than 251,109.52 BTC you would drive the price down to $1.999999 and collect $1.196 mil USD for an average price of$4.76 per BTC.


Quote
If only that we know about market that you cannot even sell 100k it is more difficult predict how quickly the price will go back Smiley  

Well now we know we can so we are one step closer. Smiley

Hi, thank you for your attention, we analyzed the problem and must admit you are absolutely right.

The problem turned out to be the following:

We use exchanges order book APIs for order books and bitcoincharts.com realtime TCP feed for trades.

It turned out that MtGox changed its API at some point to return truncated order book instead of full orderbook,
with an unspecified truncation boundary.

Now there is a separate API for full depth https://en.bitcoin.it/wiki/MtGox/API/HTTP/v1#Full_Depth so we
will work on switching to it.

Note that https://en.bitcoin.it/wiki/MtGox/API/HTTP/v1#Multi_Currency_depth doesn't
even mention truncation.

We archive order books from every supported exchange every 15 seconds, so the amount of data is pretty large.
Because of this it is not a simple matter of changing an URL - we need to test that increased data volume from
full mtgox orderbook won't have adverse effects. So our estimate on when full depth API implementation is 1 week.

Thank you for encouraging us with your subscription fee - we will work hard to prove that it is
worth every bitcent of it.

Bitcoin Development Team
(genuise and nimnul)

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July 10, 2012, 09:09:53 PM
 #16

So, to recap - nobody has dumped on the market enough to kill the price, even though they could if they really wanted to.


Except the guy that Hacked Mtgox and crashed the price From $17 to $0.01 but that doens't count since it wasn't a natural market activity. 

Set up the same thing..
http://bit.ly/btcrefs
Get more bitcoins.
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July 27, 2012, 08:59:03 AM
 #17

Here you enter puerly speculative zone Smiley beginning with that it is not currently possible to sell 100k BTC on any single market.

Not sure where you are getting that idea from (or you are reading your feed wrong).

Using MtGox API there is >100K BTC of buy orders at >$5.45 USD per BTC.   The sum of top 100K BTC bids is $625,696.50 giving a weighted average bid price on a 100K sale of $6.256 on the 100K lot. The entire market depth (going down to pennies) is hundreds of thousands of BTC.

Of course that assumes none of those buys are removed or modified which is a bad assumption. If one dumped 100K it would cause automated traders to react and some of that bid support would vanish.  Still that doesn't seem to be the point you are trying to make.  It would be beyond stupid to sell 100K in one giant market order but it could be done.

Code:
Limit Price BTC Available Total USD Average Price
$6.00 73,102.99 $476,188.87 $6.51
$5.00 117,733.39 $715,747.51 $6.08
$4.00 167,704.01 $933,876.68 $5.57
$3.00 220,031.20 $1,119,208.22 $5.09
$2.00 251,109.52 $1,196,528.85 $4.76
$1.00 525,553.92 $1,517,255.31 $2.89
$0.00 25,653,635.23 $1,563,645.45 $0.06

The table above is showing max limit order than can be executed against the existing order book. 
If you executed a limit order of $2.00 for more than 251,109.52 BTC you would drive the price down to $1.999999 and collect $1.196 mil USD for an average price of$4.76 per BTC.


Quote
If only that we know about market that you cannot even sell 100k it is more difficult predict how quickly the price will go back Smiley  

Well now we know we can so we are one step closer. Smiley

Hi, thank you for your attention, we analyzed the problem and must admit you are absolutely right.

The problem turned out to be the following:

We use exchanges order book APIs for order books and bitcoincharts.com realtime TCP feed for trades.

It turned out that MtGox changed its API at some point to return truncated order book instead of full orderbook,
with an unspecified truncation boundary.

Now there is a separate API for full depth https://en.bitcoin.it/wiki/MtGox/API/HTTP/v1#Full_Depth so we
will work on switching to it.

Note that https://en.bitcoin.it/wiki/MtGox/API/HTTP/v1#Multi_Currency_depth doesn't
even mention truncation.

We archive order books from every supported exchange every 15 seconds, so the amount of data is pretty large.
Because of this it is not a simple matter of changing an URL - we need to test that increased data volume from
full mtgox orderbook won't have adverse effects. So our estimate on when full depth API implementation is 1 week.

Thank you for encouraging us with your subscription fee - we will work hard to prove that it is
worth every bitcent of it.

Bitcoin Development Team
(genuise and nimnul)

Hi, just wanted to clear this question. On bitcoin-analytics.com we fixed this issue for several weeks already. So now mtgox orderbook volume is caclulated from the correct mtgox api request for full orderbook. So mtgox orderbook volume calculated on bids side is $2.29 mil and on asks side 0.16 Mil BTC at time of writing. These volumes of course significantly different from what was presented on our charts for mtgox and also for consolidated orderbook chart before this issue was identified.
Thanks to DeathAndTaxes pointing this issue to us.

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July 27, 2012, 09:17:19 AM
 #18

Problem with MtGox is their AML and KYC regulation. You can't just sell off your bitcoin, you gottach have your identity verified and mtgox gottach spy on you for da government.

It will be interesting to see what regulations fall into place in the future regarding bitcoins

SilkRoad sellers cashing out after a few years will be asked to account for a million dollars worth of BTC etc

I suppose they could say they mined them in the early days  when mining was easy?  Cheesy
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July 27, 2012, 09:25:38 AM
 #19

Someone go check what happens if you sell 10% of all USD for EUR in the morning.

Play Bitcoin Poker at sealswithclubs.eu. We're active and open to everyone.
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July 27, 2012, 09:27:22 AM
 #20

Someone go check what happens if you sell 10% of all USD for EUR in the morning.

But what actually do you mean?

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