Whale dump of Bitcoin on Bitstamp
05/20/2020 20:28

What was the trade?

Over a period of less than 10 seconds (roughly 10:15:07-10:15:16 am CST), a trader sold over 1000 BTC on Bitstamp or more than $10 million. Trades were executed at prices from $9700 down to $9100. This resulted in a quite pronounced "wick" in the price candle chart below.

Was this a well executed trade?

Bitstamp and many other exchanges do not have sufficient liquidity in the order book at any given moment to handle a trade of this size. Certainly not with a market order or with a low price limit. As you can see from a Bitstamp order book prior to the trade (middle window above), there are roughly 10 BTC (give or take) available every $5 into the order book. So it's not surprising to see that a trade of 1000 BTC traded at prices more than $500 below the best available price.

Was there even liquidity available for a trade of this size?

Yes, but not at one moment in time. The order traded down to 9117.45, more than $500 below the best prices in the market. If we look at subsequent trades in the market, it took another 3-4 minutes for another 1000 BTC to trade, but these all occurred at prices above $9600.

How expensive of an execution mistake was this?

There are several ways to measure this. If we look at the traded prices relative to the mid-market price prior to the trade, then nearly $200,000 in edge was given up. If we instead take a very conservative approach and compare traded prices to the low price over the next 30 minutes, then the trader gave up over $70,000 in edge.

What can be done about this?

Anyone trading $10 million in bitcoin can be considered a sophisticated investor. Without knowing the rationale for quickly dumping such large size on Bitstamp, it's impossible to guess motivations. If the trader was interested in saving $70,000-$200,000, then it would have been smarter to break up the order into smaller pieces. Perhaps selling 100 or less BTC at a time. Certainly looking at market data through an aggregator like CoveTrader can give a better view of the liquidity across one or more exchanges and help inform trade execution decisions.

About CoveTrader

CoveTrader by Cove Markets is a platform for active traders of bitcoin and other cryptocurrencies. The crypto market is highly fragmented with dozens of exchanges and limited availability of trading tools. CoveTrader ties the market together in one powerful and transparent trading and analytics platform.

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