Whale dump of Bitcoin on Bitstamp

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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.

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