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>Holders of large amounts of bitcoin are often known as whales. And they’re becoming a worry for investors. They can send prices plummeting by selling even a po

davidmr 9y ago
Is there any currency or commodity or derivative for which that statement is not true? It seems self-evident that if you own a lot of something like gold, dollars, BTC, sterling, etc. and you sell it, its value relative to what you're selling it for declines.
- kazen44 9y ago
  the major difference between fiat and bitcoin in this case seems to be that the whales in case of fiat currency are either the central banks (like the FED and ECB) or large international banks who own a lot of currency?
  - empath75 9y ago
    in the case of diamonds, it's deBeers.
    - charlesdm 9y ago
      Used to be. Don't think they have the power over the market they used to have.
    - inglondon 9y ago
      There is also no derivatives market for diamonds
- FLUX-YOU 9y ago
  I'd bet that large holders of gold sell small amounts all the time without the market going nuts and kicking off volatility swings. But I could be wrong. It's less the mechanism and the implication that people imply by following whales. Why should a store-of-value market react when someone sells a small amount regardless of their current holdings?
  - icebraining 9y ago
    Who said anything about a small amount?
    - FLUX-YOU 9y ago
      The article that I quoted.
      - icebraining 9y ago
        Nope, it said "portion". It didn't say the size of said portion.
        FLUX-YOU 9y ago
        I don't think replacing "small amount" to "portion" in my posts really changes the point -- that a small amount (relative to the population of Bitcoin investors) of large players (by USD value) can influence the market price. If you want to argue a minimum amount that whales would need to sell to manipulate the markets, that's probably better for the thread than arguing about semantics.
  - pc86 9y ago
    I agree with you but this is an apples to oranges (or perhaps apples to 747s) comparison. The top 1000 holders of gold don't have anywhere near 40% of the market. Not to mention that 40% of the market for BTC is only a few million coins.
    - FLUX-YOU 9y ago
      Certainly, but most of us have limited choice about what investments to make -- same for any of the non-1000 that's participating in Bitcoin. It's not apples to 747s as far as their money goes. Which means Bitcoin proponents should really save the store-of-value label for later on down the road when it looks and behaves more like a store-of-value.
    - 9y ago
- yellowstuff 9y ago
  Buying any asset pushes the price up and selling pushes the price down. It's a matter of sensitivity. The Chinese government could probably push down the price of USD a few percent by announcing a policy change today, but one guy could potentially push Bitcoin prices down significantly with a keystroke.
  - tfha 9y ago
    At great cost to himself. Dumping coins like that is not free, you pay a huge price due to slippage.
    - christopheml 9y ago
      Interestingly enough, that's how Société Générale lost huge amounts of money following the discovery of Jerôme Kerviel's misbehavior. They recklessly closed their positions, shooting themselves in the foot in the process.
    - dazmax 9y ago
      But now they could also own put options.
- totalZero 9y ago
  That's a very intelligent point, but let's think specifically of BTC's utility as a store of value. A comparable alternative may be gold, and it would be fair to say that the gold market could be heavily impacted by a few large holders who choose to sell their holdings. However, those holders tend to be governments. Many of the top holders are fairly representative governments, so initialization of a mass gold dumping is less likely than if they were individuals or small corporate entities, I think. They would be throwing away value that belongs to a large group of citizens, and there would be trade ramifications because their trading partners would take it in the face on their own reserves. The real reason many people don't initiate aggressive sales is that, barring a mass exodus from a collapsing financial instrument where the price is going to drop anyway, nobody wants to hurt their own mark-to-market by pushing down the prices. The only exception to this would be a fire sale where there is a mandate to liquidate a holding in order to return value to creditors. Not only that, but price impact is often reversed by other, later trading. So even if your intention is to put selling pressure on the instrument, it may not have a very lasting impact on the price. However, if you assume everyone else will follow suit and race to the bottom, then there's a definite first mover advantage. That's almost certainly not the case for precious metals, and generally not the case for currencies issued by stable and relatively uncorrupt governments, but it may be the case for BTC because it is new, volatile, and unsecured/unbacked.
- deleted 9y ago
  [deleted]
- opportune 9y ago
  It only happens if the market is not there to "catch" the sell off. Say there are 1 000 000 X and the current market price is $100 each. If I have 40% of all X and I go to sell it, I first sell to everyone willing to buy X at $100 each. Then I sell to everyone willing to buy X at $99.9 each, etc. Once we stop selling at price Y, we've essentially sold X to everyone who would buy X for between Y and $100. Note that this implies selling off X always decreases its price. This is not true if Y is $100 (people were willing to buy more X at $100 than we had X at all), but even so a market usually has something like a bid-ask spread, so if we were trading a small amount of X we could maybe even sell it all off without moving the big price. So really, whether this crashes the market for X depends on how much people value X. If only a few people thought X was valuable, they probably all own it, so it's worthless. If everyone wants X and are willing to pay just a bit less to get it, Y doesn't really change much from $100. There are also non-currencies like equities that essentially have a price floor: below the price floor there is basically no risk that the item will ever be worth less than that (this could be determined by something like the total value of property owned by a business).
  - montecarl 9y ago
    You can look and see exactly how much the price of BTC would move on an exchange by looking at its order book. GDAX's charts[1] makes it easy to see this infact. You can just mouse over the order book and see how many $ it would take to move the price to a certain level. [1] https://www.gdax.com/trade/BTC-USD https://www.gdax.com/trade/BTC-USD
cuckmaster 9y ago
I think that's more because if you sell a huge percentage of any thing the price will drop, a huge sell order at market price will eat through an order book
astura 9y ago
It's not unprecedented https://en.wikipedia.org/wiki/Silver_Thursday https://en.wikipedia.org/wiki/Silver_Thursday
- FLUX-YOU 9y ago
  That's a good counter-point, and it's difficult to counter without some knowledge of manipulation within BTC markets.
superficker 9y ago
This can also happen to other things that are commonly seen as stores of value. For example, around 1300 Mansa Musa [1] gifted so much gold that he single-handedly crashed its price: "But Musa's generous actions inadvertently devastated the economies of the regions through which he passed. In the cities of Cairo, Medina, and Mecca, the sudden influx of gold devalued the metal for the next decade. Prices on goods and wares greatly inflated. To rectify the gold market, on his way back from Mecca, Musa borrowed all the gold he could carry from money-lenders in Cairo, at high interest. This is the only time recorded in history that one man directly controlled the price of gold in the Mediterranean." [1] https://en.wikipedia.org/wiki/Musa_I_of_Mali https://en.wikipedia.org/wiki/Musa_I_of_Mali
DINKDINK 9y ago
>Holders of large amounts of bitcoin are often known as whales. And they’re becoming a worry for investors. They can send prices plummeting by selling even a portion of their holdings. Written another way: People who would be financially penalized greatly for selling might sell! The media and public believe that a group of people who want nothing to do with fiat currency might all of a sudden decide that they were wrong all this time and take massive positions in fiat currencies. Why? My only guess is that the media believe people buy Bitcoin just to ride the wave up when what's actually happening is people are exiting the fiat system. This is why Bitcoin's price curve is similar to trading pairs associated with hyper inflation. A Venezuelan who holds dollars isn't going to suddenly want to take a huge long position on the Bolivar. At minimum they'd exchange the only minimum amount to transact with someone who doesn't except the dollar (or Bitcoin) yet.

davidmr 9y ago

Is there any currency or commodity or derivative for which that statement is not true? It seems self-evident that if you own a lot of something like gold, dollars, BTC, sterling, etc. and you sell it, its value relative to what you're selling it for declines.

kazen44 9y ago
the major difference between fiat and bitcoin in this case seems to be that the whales in case of fiat currency are either the central banks (like the FED and ECB) or large international banks who own a lot of currency?
- empath75 9y ago
  in the case of diamonds, it's deBeers.
  - charlesdm 9y ago
    Used to be. Don't think they have the power over the market they used to have.
  - inglondon 9y ago
    There is also no derivatives market for diamonds
FLUX-YOU 9y ago
I'd bet that large holders of gold sell small amounts all the time without the market going nuts and kicking off volatility swings. But I could be wrong. It's less the mechanism and the implication that people imply by following whales. Why should a store-of-value market react when someone sells a small amount regardless of their current holdings?
- icebraining 9y ago
  Who said anything about a small amount?
  - FLUX-YOU 9y ago
    The article that I quoted.
    - icebraining 9y ago
      Nope, it said "portion". It didn't say the size of said portion.
      - FLUX-YOU 9y ago
        I don't think replacing "small amount" to "portion" in my posts really changes the point -- that a small amount (relative to the population of Bitcoin investors) of large players (by USD value) can influence the market price. If you want to argue a minimum amount that whales would need to sell to manipulate the markets, that's probably better for the thread than arguing about semantics.
- pc86 9y ago
  I agree with you but this is an apples to oranges (or perhaps apples to 747s) comparison. The top 1000 holders of gold don't have anywhere near 40% of the market. Not to mention that 40% of the market for BTC is only a few million coins.
  - FLUX-YOU 9y ago
    Certainly, but most of us have limited choice about what investments to make -- same for any of the non-1000 that's participating in Bitcoin. It's not apples to 747s as far as their money goes. Which means Bitcoin proponents should really save the store-of-value label for later on down the road when it looks and behaves more like a store-of-value.
  - 9y ago
yellowstuff 9y ago
Buying any asset pushes the price up and selling pushes the price down. It's a matter of sensitivity. The Chinese government could probably push down the price of USD a few percent by announcing a policy change today, but one guy could potentially push Bitcoin prices down significantly with a keystroke.
- tfha 9y ago
  At great cost to himself. Dumping coins like that is not free, you pay a huge price due to slippage.
  - christopheml 9y ago
    Interestingly enough, that's how Société Générale lost huge amounts of money following the discovery of Jerôme Kerviel's misbehavior. They recklessly closed their positions, shooting themselves in the foot in the process.
  - dazmax 9y ago
    But now they could also own put options.
totalZero 9y ago
That's a very intelligent point, but let's think specifically of BTC's utility as a store of value. A comparable alternative may be gold, and it would be fair to say that the gold market could be heavily impacted by a few large holders who choose to sell their holdings. However, those holders tend to be governments. Many of the top holders are fairly representative governments, so initialization of a mass gold dumping is less likely than if they were individuals or small corporate entities, I think. They would be throwing away value that belongs to a large group of citizens, and there would be trade ramifications because their trading partners would take it in the face on their own reserves. The real reason many people don't initiate aggressive sales is that, barring a mass exodus from a collapsing financial instrument where the price is going to drop anyway, nobody wants to hurt their own mark-to-market by pushing down the prices. The only exception to this would be a fire sale where there is a mandate to liquidate a holding in order to return value to creditors. Not only that, but price impact is often reversed by other, later trading. So even if your intention is to put selling pressure on the instrument, it may not have a very lasting impact on the price. However, if you assume everyone else will follow suit and race to the bottom, then there's a definite first mover advantage. That's almost certainly not the case for precious metals, and generally not the case for currencies issued by stable and relatively uncorrupt governments, but it may be the case for BTC because it is new, volatile, and unsecured/unbacked.
deleted 9y ago
[deleted]
opportune 9y ago
It only happens if the market is not there to "catch" the sell off. Say there are 1 000 000 X and the current market price is $100 each. If I have 40% of all X and I go to sell it, I first sell to everyone willing to buy X at $100 each. Then I sell to everyone willing to buy X at $99.9 each, etc. Once we stop selling at price Y, we've essentially sold X to everyone who would buy X for between Y and $100. Note that this implies selling off X always decreases its price. This is not true if Y is $100 (people were willing to buy more X at $100 than we had X at all), but even so a market usually has something like a bid-ask spread, so if we were trading a small amount of X we could maybe even sell it all off without moving the big price. So really, whether this crashes the market for X depends on how much people value X. If only a few people thought X was valuable, they probably all own it, so it's worthless. If everyone wants X and are willing to pay just a bit less to get it, Y doesn't really change much from $100. There are also non-currencies like equities that essentially have a price floor: below the price floor there is basically no risk that the item will ever be worth less than that (this could be determined by something like the total value of property owned by a business).
- montecarl 9y ago
  You can look and see exactly how much the price of BTC would move on an exchange by looking at its order book. GDAX's charts[1] makes it easy to see this infact. You can just mouse over the order book and see how many $ it would take to move the price to a certain level. [1] https://www.gdax.com/trade/BTC-USD https://www.gdax.com/trade/BTC-USD

cuckmaster 9y ago

I think that's more because if you sell a huge percentage of any thing the price will drop, a huge sell order at market price will eat through an order book

astura 9y ago

It's not unprecedented https://en.wikipedia.org/wiki/Silver_Thursday https://en.wikipedia.org/wiki/Silver_Thursday

FLUX-YOU 9y ago
That's a good counter-point, and it's difficult to counter without some knowledge of manipulation within BTC markets.

superficker 9y ago

This can also happen to other things that are commonly seen as stores of value. For example, around 1300 Mansa Musa [1] gifted so much gold that he single-handedly crashed its price: "But Musa's generous actions inadvertently devastated the economies of the regions through which he passed. In the cities of Cairo, Medina, and Mecca, the sudden influx of gold devalued the metal for the next decade. Prices on goods and wares greatly inflated. To rectify the gold market, on his way back from Mecca, Musa borrowed all the gold he could carry from money-lenders in Cairo, at high interest. This is the only time recorded in history that one man directly controlled the price of gold in the Mediterranean." [1] https://en.wikipedia.org/wiki/Musa_I_of_Mali https://en.wikipedia.org/wiki/Musa_I_of_Mali

DINKDINK 9y ago

>Holders of large amounts of bitcoin are often known as whales. And they’re becoming a worry for investors. They can send prices plummeting by selling even a portion of their holdings. Written another way: People who would be financially penalized greatly for selling might sell! The media and public believe that a group of people who want nothing to do with fiat currency might all of a sudden decide that they were wrong all this time and take massive positions in fiat currencies. Why? My only guess is that the media believe people buy Bitcoin just to ride the wave up when what's actually happening is people are exiting the fiat system. This is why Bitcoin's price curve is similar to trading pairs associated with hyper inflation. A Venezuelan who holds dollars isn't going to suddenly want to take a huge long position on the Bolivar. At minimum they'd exchange the only minimum amount to transact with someone who doesn't except the dollar (or Bitcoin) yet.