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The nominal market cap of BTC right now is about $129 billion. A $40m trade represents about 0.03% of the reported market cap. That a trade that small would cau

The nominal market cap of BTC right now is about $129 billion. A $40m trade represents about 0.03% of the reported market cap. That a trade that small would cause the market to crash by double digit percentage points is absolutely a sign of a thin market. Also, the slow speed of price propagation isn’t a sign that the market is thick, it’s a sign that the market is inefficient.

logicchains 7y ago
>That a trade that small would cause the market to crash by double digit percentage points is absolutely a sign of a thin market. It was only the market on a single exchange, Bitstamp, which is extremelly illiquid compared to the largest exchanges. The problem was that Bitmex, a much more liquid exchange, bases the settlement price of its popular perpetual Bitcoin swap on an index of just two exchanges, Bitstamp and one other, so manipulating the price on illiquid Bitstamp also screws with the price on liquid Bitmex.
- davidgerard 7y ago
  Coinbase's isn't much deeper. The real problem is that the exchanges all have separate order books, and it's hard to arbitrage between them. This is a recipe for volatility.
- village-idiot 7y ago
  I agree that Bitmex basing its settlement price on two less liquid exchanges is a bad thing. Personally given the number of margin traders being force liquidated, I suspect that BitMEX likes the lack of liquidity. However, if the issue was only a thin market on Bitstamp, the price fluctuations would have remained localized to Bitstamp and the futures market on Bitmex. But instead the price for bitcoin dropped by about $1k across the board, which to me signals thin markets everywhere.
antonvs 7y ago
That's not a relevant percentage. You'd need to look at the amount of Bitcoin that trades regularly. Also, I wasn't saying anything about slow speeds. I was saying that the ability of the market, on a single smaller exchange, to absorb a $40 million trade in 20 minutes is not traditionally what you'd call a thin market.
- jacques_chester 7y ago
  Suppose for the sake of argument you knew that this wouldn't require blockchain confirmation because it's an exchange trade. And suppose you knew that indexes follow exchanges. And suppose you knew that these exchanges are poorly scrutinised. To the point that, hmm, you could just trade with yourself to pump or dump the price. A market composed of yourself and yourself is, by any measure, pretty thin.
  - davidgerard 7y ago
    Now, you might think wash trading is rampant on bitcoin exchanges, but that's because it is. https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitfinex-benefits-from-fraudulent-trading-8bd66be73215 https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitf...

logicchains 7y ago

>That a trade that small would cause the market to crash by double digit percentage points is absolutely a sign of a thin market. It was only the market on a single exchange, Bitstamp, which is extremelly illiquid compared to the largest exchanges. The problem was that Bitmex, a much more liquid exchange, bases the settlement price of its popular perpetual Bitcoin swap on an index of just two exchanges, Bitstamp and one other, so manipulating the price on illiquid Bitstamp also screws with the price on liquid Bitmex.

davidgerard 7y ago
Coinbase's isn't much deeper. The real problem is that the exchanges all have separate order books, and it's hard to arbitrage between them. This is a recipe for volatility.
village-idiot 7y ago
I agree that Bitmex basing its settlement price on two less liquid exchanges is a bad thing. Personally given the number of margin traders being force liquidated, I suspect that BitMEX likes the lack of liquidity. However, if the issue was only a thin market on Bitstamp, the price fluctuations would have remained localized to Bitstamp and the futures market on Bitmex. But instead the price for bitcoin dropped by about $1k across the board, which to me signals thin markets everywhere.

antonvs 7y ago

That's not a relevant percentage. You'd need to look at the amount of Bitcoin that trades regularly. Also, I wasn't saying anything about slow speeds. I was saying that the ability of the market, on a single smaller exchange, to absorb a $40 million trade in 20 minutes is not traditionally what you'd call a thin market.

jacques_chester 7y ago
Suppose for the sake of argument you knew that this wouldn't require blockchain confirmation because it's an exchange trade. And suppose you knew that indexes follow exchanges. And suppose you knew that these exchanges are poorly scrutinised. To the point that, hmm, you could just trade with yourself to pump or dump the price. A market composed of yourself and yourself is, by any measure, pretty thin.
- davidgerard 7y ago
  Now, you might think wash trading is rampant on bitcoin exchanges, but that's because it is. https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitfinex-benefits-from-fraudulent-trading-8bd66be73215 https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitf...