JorgeStolfi
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February 02, 2014, 09:10:49 PM

Now, on topic:

One would expect that a big "wall" - an offer to buy or sell 100 BTC or more, sitting in the order book - would be a barrier for the price, halting its fall or rise for a while.

But could it be that a big wall also attracts large transactions that "eat" it instantly?  

Suppose that the highest bid is at 900$ and there are only small bids all the way down to 700$, adding to 20 BTC.  

Someone who wants to sell 100 BTC at 800$ minimum will probably wait.  If he sells 10 BTC to the small bidders in the 800-900 range, the price will fall to 800$.  Some bidders will get scared and lower their bids even more, further away from his sell goal.

Now suppose someone puts up a bid for 150 BTC at 800$; then that seller would immediately sell his batch.

In this example, the existence of the big wall triggered a price drop that would have been delayed indefinitely without it.  Does this sort of thing happen in reality?  If so, is it common enough to negate the "protective" effect of big walls?