How liquid are large stashes of bitcoins?

[BkkCoins]

Someone with lots of BTC to cash out would be much smarter to sell it off-market. There is quite a bit of that going on anyway judging from OTC and these various buy/sell services that say they handle bulk and wholesale trades. The more it's spread around and across markets the less it will influence prices and also the less it's visible and tracked.

Man with USD to hide meets Man with BTC to sell. Or maybe it was diamonds...

[BkkCoins]

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

But what actually do you mean?

I think he means that the BTC market is teeny-weeny and if 400k BTC were thrown into the market the effect would be less than if an equivalent share of the huge USD money supply were thrown into a Forex market one morning. If for example, China went crazy insane and they all started selling their USD holdings.

[unclemantis]

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.

You can only sell what people will want to buy. I am sure there is not 488,000 buy orders out there at x amount of dollars.

[FreeMoney]

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.

You can only sell what people will want to buy. I am sure there is not 488,000 buy orders out there at x amount of dollars.

Yes, there is, where x = $1.15. You can unload 590,000 bitcoins at or above 1.15 immediately (you'll probably crash the Gox system though).

[FreeMoney]

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

But what actually do you mean?

I think he means that the BTC market is teeny-weeny and if 400k BTC were thrown into the market the effect would be less than if an equivalent share of the huge USD money supply were thrown into a Forex market one morning. If for example, China went crazy insane and they all started selling their USD holdings.

Yeah, no (reasonably normal) market can handle 3%+ of all inventory being sold at once without huge price fluctuations. The bitcoin market is very resilient and stable given it's size and the fraction of all coins which are often in play.