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Question: How easy is it for, say, a minority of large holders to stave off drops in value? For instance, if I am holding ~250k BTC and notice an oncoming sell-

by Haywain 13y ago

Question: How easy is it for, say, a minority of large holders to stave off drops in value? For instance, if I am holding ~250k BTC and notice an oncoming sell-off, how easy would it be for me to trade back enough in order to reinstate confidence on an exchange? Is it a viable enough scenario to make it plausible? I'm not a BTC holder, so I'm curious as to how easy the market is to "prop up" in short term panics like this.

eterm 13y ago
To prop the price up would require buying not selling BTC, so how much BTC you currently hold doesn't matter so much as how much USD you can pump in to keep the price up. As for how well that would go, well the UK government tried something similar once: http://en.wikipedia.org/wiki/Black_Wednesday http://en.wikipedia.org/wiki/Black_Wednesday
sp332 13y ago
I think you're talking about market depth? You would have to buy enough to exhaust the people who are willing to sell cheaply, before you could start buying at a higher price. http://bitcoincharts.com/markets/mtgoxUSD_depth.html http://bitcoincharts.com/markets/mtgoxUSD_depth.html This graph shows how many bitcoins you would have to buy/sell (on this exchange) to get to a given price.
ye 13y ago
It actually doesn't take much to move BTC price up or down. For instance, buying 16.6K BTC on Bitstamp would move the price to $2000. Selling the same amount would move the price to $360. http://bitcoinity.org/markets/bitstamp/USD http://bitcoinity.org/markets/bitstamp/USD
- eterm 13y ago
  It would move the buy price to $2000, but in theory the sell price wouldn't be moved and so there would simply be a large margin until liquidity improved. If no one is willing to buy a bitcoin for $700 right now, there's no reason to think anyone would be willing to buy a bitcoin for $700 even if you were offering $2000 for any bitcoins on the market. Of course people aren't rational and you might catch out people ignorantly trying to follow a graph they don't understand. This is in part why it is irresponsible for exchanges such as mtGox to report a single "price" for bitcoin, they should always report the current prices as a tuple of (Offer, Bid) prices.
  - ye 13y ago
    > This is in part why it is irresponsible for exchanges such as mtGox to report a single "price" for bitcoin No, it's not. They are reporting the price of an actual trade, where buyer met the seller. At that point the spread is effectively zero.
    - eterm 13y ago
      The spread is only zero instantaneously however, and is much more open to manipulation than (bid, offer) is. In reality all three should be reported together when one is as they are all very important.
      - ye 13y ago
        The whole market depth is very important. Should they report thousands of numbers now? Just because there's a buy bid at $700 for 1BTC and a sell bid at $703 for 200BTC, doesn't make these two prices equivalent or equally important.
  - wmf 13y ago
    It's no different than any other market. Noobs look at "the price" and traders look at the book.

by Haywain 13y ago

eterm 13y ago

To prop the price up would require buying not selling BTC, so how much BTC you currently hold doesn't matter so much as how much USD you can pump in to keep the price up. As for how well that would go, well the UK government tried something similar once: http://en.wikipedia.org/wiki/Black_Wednesday http://en.wikipedia.org/wiki/Black_Wednesday

sp332 13y ago

I think you're talking about market depth? You would have to buy enough to exhaust the people who are willing to sell cheaply, before you could start buying at a higher price. http://bitcoincharts.com/markets/mtgoxUSD_depth.html http://bitcoincharts.com/markets/mtgoxUSD_depth.html This graph shows how many bitcoins you would have to buy/sell (on this exchange) to get to a given price.

ye 13y ago

It actually doesn't take much to move BTC price up or down. For instance, buying 16.6K BTC on Bitstamp would move the price to $2000. Selling the same amount would move the price to $360. http://bitcoinity.org/markets/bitstamp/USD http://bitcoinity.org/markets/bitstamp/USD

eterm 13y ago
It would move the buy price to $2000, but in theory the sell price wouldn't be moved and so there would simply be a large margin until liquidity improved. If no one is willing to buy a bitcoin for $700 right now, there's no reason to think anyone would be willing to buy a bitcoin for $700 even if you were offering $2000 for any bitcoins on the market. Of course people aren't rational and you might catch out people ignorantly trying to follow a graph they don't understand. This is in part why it is irresponsible for exchanges such as mtGox to report a single "price" for bitcoin, they should always report the current prices as a tuple of (Offer, Bid) prices.
- ye 13y ago
  > This is in part why it is irresponsible for exchanges such as mtGox to report a single "price" for bitcoin No, it's not. They are reporting the price of an actual trade, where buyer met the seller. At that point the spread is effectively zero.
  - eterm 13y ago
    The spread is only zero instantaneously however, and is much more open to manipulation than (bid, offer) is. In reality all three should be reported together when one is as they are all very important.
    - ye 13y ago
      The whole market depth is very important. Should they report thousands of numbers now? Just because there's a buy bid at $700 for 1BTC and a sell bid at $703 for 200BTC, doesn't make these two prices equivalent or equally important.
- wmf 13y ago
  It's no different than any other market. Noobs look at "the price" and traders look at the book.