8 ms·

Except that bitcoin doesn't have $400 million of liquidity. If you sold them you'd get way less than the current price suggests. I doubt many creditors would be

Except that bitcoin doesn't have $400 million of liquidity. If you sold them you'd get way less than the current price suggests. I doubt many creditors would be willing to accept bitcoin directly.

Simulacra 9y ago
So does that mean a gradual sell off? Disbursement and sale to lots of different entities? I'm just not clear why there would be any lack of movement on this.
- flyingfences 9y ago
  There's no (or rather, very slow) movement because it's a legal proceeding, not just a technological and economic challenge.
sp332 9y ago
The exchanges don't represent the whole market for bitcoins. In 2015, the US Marshals auctioned off tens of thousands of bitcoins seized from Silk Road accounts. The price on the exchanges went up for a few days around the auction, but recovered quickly afterward.
orblivion 9y ago
Maybe they could just transfer the bitcoin directly to the creditors.
EmielMols 9y ago
I imagine it would be easy enough to - at a discount - sell all the bitcoins to a (single) other party and have them sell the coins over time. Don't know if many entities would want to take such a position, but there are probably at least some. If mtgox were still operational, they would probably take a loan (in yen) with the btc as collateral, if they needed the amount of money on a short notice (and provided they really owned the bitcoin by that exchange).
- patio11 9y ago
  they would probably take a loan (in yen) with the btc as collateral Do you have a suggestion as to who in Tokyo has 70 billion yen which they'd like to loan to a bankrupt entity owned by an accused embezzler whose main line of business was operating an international money laundering operation, with security being a hyper-volatile token with dubious liquidity?
  - Simulacra 9y ago
    You mean besides the banks that made the same type of investments and exchanges after the U.S. banking crisis? Not to mention hedge funds.
kentt 9y ago
Are you assuming that mtgox would sell it as fast as possible and drive the markets down as much as possible? They've been in debt for years, surely taking a month to sell off the Bitcoin would not be unreasonable. Additionally large orders are not always done on the open market but are arranged privately. It is just as reasonable to assume they could sell them at a premium to an interested party who didn't want to drive up the market unnecessarily as the opposite which is the only one I ever see claimed. If anything, with the rising price, a premium seems more likely.
Animats 9y ago
Bitcoin supposedly has a $45 billion market cap, and you can't liquidate 1% of that without crashing the price? If that's the case, the market cap is totally fake. What would happen to Bitcoin if the Mt. Gox trustee sold $4 million a day of Bitcoins for 100 days?
- sp332 9y ago
  1% seems like a lot. Could you liquidate 1% of US dollars all at once? Or gold or... anything else really?
  - Animats 9y ago
    Liquidating 1% of a Fortune 500 company usually isn't that big a deal. Big funds do it routinely. Liquidating 0.1% in a day is nothing. The problem with the Bitcoin world is that the "exchanges" are so cash-weak. They're not just exchanges; they're exchanges, brokers, and depository companies all in one. In real finance, those functions are separated. The NYSE has no stake in any transaction.
    - ryanmarsh 9y ago
      We enacted Glass–Steagal specifically for reasons like this correct? I can't believe I didn't see this sooner. I wonder if Coinbase will have to divest GDAX once regulation catches up.
      - dmurray 9y ago
        > We enacted Glass–Steagal specifically for reasons like this correct? Not really. Glass-Steagall separated investment banks from commercial banks. There is approximately no one fulfilling the role of commercial bank in bitcoin - no one taking bitcoin deposits and using them to underwrite bitcoin mortgages. Generally exchanges, trading firms and brokers do not have to be separate in the US financial system. For example CME, the largest futures exchange, owns a small trading firm called GFX. IEX operates as both an exchange and a broker.
      - 9y ago
Obi_Juan_Kenobi 9y ago
Those coins would be sold at auction, not dumped onto exchanges. The Silk Road coin auctions didn't affect the price too much. Parties buying large lots at auction probably aren't doing so to dump the coins on exchanges right away. Yes, it creates some selling pressure, but the larger significance is as an event. And events in Bitcoin that 'should' be bearish have a way of affecting price in unexpected ways. Busting the Silk Road started the November 2013 bubble, a 30,000 coin market sell finished off the subsequent bear market, etc.

Except that bitcoin doesn't have $400 million of liquidity. If you sold them you'd get way less than the current price suggests. I doubt many creditors would be willing to accept bitcoin directly.

Simulacra 9y ago

So does that mean a gradual sell off? Disbursement and sale to lots of different entities? I'm just not clear why there would be any lack of movement on this.

flyingfences 9y ago
There's no (or rather, very slow) movement because it's a legal proceeding, not just a technological and economic challenge.

sp332 9y ago

The exchanges don't represent the whole market for bitcoins. In 2015, the US Marshals auctioned off tens of thousands of bitcoins seized from Silk Road accounts. The price on the exchanges went up for a few days around the auction, but recovered quickly afterward.

orblivion 9y ago

Maybe they could just transfer the bitcoin directly to the creditors.

EmielMols 9y ago

I imagine it would be easy enough to - at a discount - sell all the bitcoins to a (single) other party and have them sell the coins over time. Don't know if many entities would want to take such a position, but there are probably at least some. If mtgox were still operational, they would probably take a loan (in yen) with the btc as collateral, if they needed the amount of money on a short notice (and provided they really owned the bitcoin by that exchange).

patio11 9y ago
they would probably take a loan (in yen) with the btc as collateral Do you have a suggestion as to who in Tokyo has 70 billion yen which they'd like to loan to a bankrupt entity owned by an accused embezzler whose main line of business was operating an international money laundering operation, with security being a hyper-volatile token with dubious liquidity?
- Simulacra 9y ago
  You mean besides the banks that made the same type of investments and exchanges after the U.S. banking crisis? Not to mention hedge funds.

kentt 9y ago

Are you assuming that mtgox would sell it as fast as possible and drive the markets down as much as possible? They've been in debt for years, surely taking a month to sell off the Bitcoin would not be unreasonable. Additionally large orders are not always done on the open market but are arranged privately. It is just as reasonable to assume they could sell them at a premium to an interested party who didn't want to drive up the market unnecessarily as the opposite which is the only one I ever see claimed. If anything, with the rising price, a premium seems more likely.

Animats 9y ago

Bitcoin supposedly has a $45 billion market cap, and you can't liquidate 1% of that without crashing the price? If that's the case, the market cap is totally fake. What would happen to Bitcoin if the Mt. Gox trustee sold $4 million a day of Bitcoins for 100 days?

sp332 9y ago
1% seems like a lot. Could you liquidate 1% of US dollars all at once? Or gold or... anything else really?
- Animats 9y ago
  Liquidating 1% of a Fortune 500 company usually isn't that big a deal. Big funds do it routinely. Liquidating 0.1% in a day is nothing. The problem with the Bitcoin world is that the "exchanges" are so cash-weak. They're not just exchanges; they're exchanges, brokers, and depository companies all in one. In real finance, those functions are separated. The NYSE has no stake in any transaction.
  - ryanmarsh 9y ago
    We enacted Glass–Steagal specifically for reasons like this correct? I can't believe I didn't see this sooner. I wonder if Coinbase will have to divest GDAX once regulation catches up.
    - dmurray 9y ago
      > We enacted Glass–Steagal specifically for reasons like this correct? Not really. Glass-Steagall separated investment banks from commercial banks. There is approximately no one fulfilling the role of commercial bank in bitcoin - no one taking bitcoin deposits and using them to underwrite bitcoin mortgages. Generally exchanges, trading firms and brokers do not have to be separate in the US financial system. For example CME, the largest futures exchange, owns a small trading firm called GFX. IEX operates as both an exchange and a broker.
    - 9y ago

Obi_Juan_Kenobi 9y ago

Those coins would be sold at auction, not dumped onto exchanges. The Silk Road coin auctions didn't affect the price too much. Parties buying large lots at auction probably aren't doing so to dump the coins on exchanges right away. Yes, it creates some selling pressure, but the larger significance is as an event. And events in Bitcoin that 'should' be bearish have a way of affecting price in unexpected ways. Busting the Silk Road started the November 2013 bubble, a 30,000 coin market sell finished off the subsequent bear market, etc.