JorgeStolfi
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February 24, 2014, 05:45:29 PM

I don't think we will ever know what was the lasting effect on BTC price of that 10,000 BTC sale on Bitstamp. for almost 6 million dollars.

As I understand it, the effect mostly depends on how much money and how many coins entered or left the "active bitcoin market", the sum of the working budgets of all day traders and other short and medium-term speculators.  That excludes money in the bank, and coins in private wallets, whose owners do not intend to use for frequent bitcoin trading.

From the way the sale happened, I would guess that the seller of those 10 kBTC will not be using those 6 M$ for further bitcoin trading.  On the other hand, at least some of the buyers must have been speculators who bought off their working budgets. Therefore, there must have been a net loss of money from the active bitcoin market, amounting to some fraction of those 6 M$.  By itself, that would tend to bring the price down.  However, the opposite conclusion would hold if the seller were to put all that money into active trading, and some of the buyers were new investors lured by his offer.

I would also think that those 10 kBTC probably were not in the active market before, and now some of them are.  (That round number points to a cold stash, rather than someone's working BTC budget; and It seems unlikely that all the buyers were "hodlers".) Thus the number of BTC in the active market probably increased, and this too would tend to bring the price down.  However, the opposite conclusion would hold if the seller was an active speculator, and at least some of the buyers were "hodlers".

As we saw, the sale had a large effect on the price while it was going on; but that immediate damage was quickly repaired by the market in few minutes (as it usually is).

However the sale probably will have more persistent negative effect, as discussed above.  This effect will not be visible in the price charts; the price will just increase more slowly or decrease faster than it would have done if the sale had not taken place.