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How To Sell A Large Amount Of Bitcoin

The following article will teach you how you can “cash out” of a big sum of bitcoin safely, be it in person, through an exchange or even using a broker.

How Can Bitcoin Whales Exchange A Large Amount Of Bitcoin Without Crashing The Market?

Recently, the bitcoin community and casual spectators freaked out as the price of bitcoin took a sudden for the worst. The price of bitcoin dipped below $300 into the $280 to $260 range, the lowest the price it has been all year. This price drop tested many bitcoiners nerves. Many caved in and sold. While others bought more and for a cheaper price. This price decline, like many in the past, were caused by a Bitcoin Whale, a large holder of bitcoins, but for reasons that are still unclear.

There are many factors in a market as complex as bitcoin but it is safe to say that a 30,000 BTC sell order on BitStamp was mainly behind the decline. Someone, trying to manipulate the market, or just very green to trading practices, decided to sell 30,000 BTC. There was not enough buy orders to meet the demand. Orders ended up showing up, which caused the price to fall 10%, but the order was pulled shortly later which caused a 20% increase. Then the person decided to put the 30,000 BTC sell order again and caused the price to dip by 10%, below the $300 mark! Several hours later, the huge sell order had been eaten up by enough buy orders, causing the price to surge back up, to its current price of about $360-380.

Illiquidity, insufficient sell and buy orders, has plagued bitcoin for most of its life. Besides that, most of the coins in circulation today were mined in the earliest days of bitcoin and caused large amounts of bitcoin to reside in a few hands. These two factors have lead to bitcoin’s very volatile price, with this recent price movement being a clear example of that. Many people have claimed that these conditions lead to an unhealthy and easily manipulatable market. While we can’t say this for certain, most people think that was the goal of the Whale in the recent price decline. The reason being, it makes no sense to sell such a large amount of Bitcoin an exchange, due to slippage. Slippage is the amount of money lost when a person makes a sell order but there is inadequate demand and the market has to adjust the price. This causes the seller to lose the money he would’ve made if all his coins sold at the original price. In this recent case, the first coins, of the 30,000 BTC sell order, were sold much higher, near $400, the last of the coins sold at $260 – a dramatic difference and lost.

Why Is This?

The reason this happens is because of a negotiation between the market. Someone wants to get rid of a large amount of bitcoins and wants to do over an exchange. There is only so many people in the market at any given moment, who want buy bitcoins. The buyers with existing buy orders, bought bitcoins from 30,000 BTC sell order, at pre-crash market price. This leaves a vast amount of bitcoin left to be sold, though. New buyers must come along for the sell order, or in case a sell wall, to be dealt with. These buyers, at various degrees want to buy bitcoin, but they also see that this Bitcoin Whale really wants to sell bitcoin so the negotiation of the market takes place, causing the price to be lowered, lowered, and lowered. As the price declines, more and more people are incentivized to make the buy. When the price reached the floor of $260, the most reluctant or least interested buyers took the bait and bought because these bitcoin were very cheap. That is why selling such large amounts of bitcoin on exchanges is a bad idea for sellers looking to make a profit.

It is a mystery why this Bitcoin Whale decided to sell 30,000 BTC on BitStamp and take a loss. Many have claimed that he was trying to manipulate the market but there are few ways someone could have profited from something like this. He could’ve been an earlier adopter who originally got the bitcoins for pennies and just wanted to get rid of them as quickly and easily as possible. While Redditors spend hours arguing over the possibilities, the more interesting question remains, how does a Bitcoin Whale sell such a large amount of bitcoin properly?

Other Threats

File photo of JP Morgan Chase & Co headquarters in New York

Before I get to that, slippage isn’t the only thing Bitcoin Whales need to worry about when selling their virtual fortune. Bank can also cause huge problem for people dealing with such high volume. Many bitcoin businesses have bitten the dust because of banks closing their bank accounts. This hasn’t just happened to businesses but also, to people who have sold large amounts of bitcoin on exchanges.

For a number of reasons, all relating to law, banks put caps on the amount one can transact in a single day. The amount varies for each country, but in the US it is $5,000 to $10,000. If you make a sell that exceeds more than $10,000, when that amount it sent to your bank account it is most likely going to be frozen. That is why it is very difficult not just to sell large amounts of bitcoin on exchanges, but in general.

An alternative option is to the exchange in-person and in cash but this is still not super easy. While you are able to do the transaction without a problem, if you are the seller, you now have a large amount of cash you don’t know what to do with. Those laws, I mentioned earlier, still apply so even if you have received cash for bitcoin, it is still going to be several days of going to the bank and depositing large amounts of cash before all of it stored away safely.

Over The Counter

A whole market, hidden from the public eye, has popped up to serve Whales and wanna be Whales. People who are looking to do large transactions, like the 30,000BTC sell order, do their business in person and in cash, also known as Over The Counter (OTC). This market is not nearly as visible as ones like that exchanges facilitate.

protocol-27279_640This market can be found on the IRC, a communication protocol layered on top of the internet, by the hashtag #bitcoin-otc. For those unaware, IRC is a free and basic communication platform that is a hub for bitcoin activity, as well as other open source projects. Learn more about that here.

IRC does not have as many features or the beauty of Facebook or Twitter, but instead, its functionality is closer to reddit. It has a basic design, anonymity, and customizability. You can access IRC through a client that runs on your browser, like IRCCloud or a client that runs on your computer, like these. IRC is very simple to use and really interesting as you get familiar with it.

When dealing with such large sums, participants want to be safe and secure. This has led to most people, especially the whales, to use GNU Privacy Guard. GNU is a encryption program, similar to Pretty Good Privacy (PGP), that encrypts various things, including messages. GNU, unlike IRC, is a bit more complicated and not for the average user. If you are not familiar with encryption software, it might take a bit of studying but it is definitely possible. You can download it for free, here.

OTC trades are usually done in private, and while people do build up a reputation, it still remains based on trust. Unlike LocalBitcoins, there is no escrow or third party involved. It is extremely risky to trade such large amounts of money with strangers and that is why it best to be as knowledgeable as possible of the person you are exchanging with before you make the sale.

There are numerous advantages of OTC, though. You don’t have to pay any fees, which can easily add up with such large transactions. You have much more anonymity, as people will not be able to get your IP off IRC, if you don’t use a browser based client, and it doesn’t even require an email. With exchanges, like Coinbase, you will have to wait days to a whole week to receive your fiat money, but with OTC, you get the money right away.

If the idea of doing it by yourself scares you, or all this GNU and IRC business seems too much of a hassle, you can always get a broker to arrange and facilitate the transaction for you.

BTC Broker

Private, high volume brokers are a booming Bitcoin sector and increasingly, the choice of the Bitcoin wealthy to sell and buy bitcoins. Bitcoin brokers help connect buyers and sellers for big transactions. Depending on the broker and other circumstances, the broker will also mediate the exchange in person. For his role as a trusted third party, the broker takes a fee which can range from 1% to 7%. That can get a bit pricey but there are very few people who are in position to offer such a service.

Jonathan Harrison, of Satoshipoint, told Coindesk about a trade he broked, “Someone told me that he wanted to sell 12 grand-worth, we had a chat on Skype and entered an agreement, and so that was the deal done.” He went on to say that while he only does it occasionally, there are many brokers who specialize in Bitcoin OTC and have found a very profitable trade.

Mark Lamb, of Coinfloor, regularly brokers deals between people. He explained to Coindesk the service that brokers provide, “What you’re selling is trust. This OTC broker knows what they’re doing, vets the participants and knows the participants are going to settle and the trade is going to go through.”

Finding a broker is not that hard, despite the private nature of their dealings. If you ask around on various bitcoin subreddits, or IRC channels you are bound to find someone who is a broker or someone who can connect you to one. Another way, is to contact prominent bitcoin leaders and businesses owners. Bitcoin investment funds, like SecondMarket’s Bitcoin Opportunity Crop. are always looking for sellers. These types of people or institutions are usually the kind of people that are in the market to buy and sell huge amounts of Bitcoin. Charlie Shrem, Bitcoin advocate and entrepreneur, said in a reddit comment, “Today the OTC markets are going crazy. There is much more demand than supply currently, I have more buyers than sellers asking me to introduce them to sellers. Sellers don’t wanna sell because the exchange says the prices are too low, but in reality there is huge demand. ”

Brokers are the only professional way to exchange large amounts of bitcoin. They provide security, connections, and efficiency. Though they do take a cut, it is by far one of the best ways to sell or buy large amounts of bitcoin. Please remember this sector is still in the “who you know” phase which makes it futile for scammers. Please be careful when exchanging such large amounts.

Don’t Be That Whale

George Samman, of BTC.sx said that large holders are just too green when it comes to trading such large amounts. They don’t know how to massage and time the market correctly, when selling large amounts of bitcoins. He said to Coindesk, “they’re throwing in market orders and thinking that just because they see the price at one level, they’re going to get that price.” Brokers allow the most inexperienced traders to trade large amounts of bitcoin safely and not lose tons of money to slippage. The Whale who sold 30,000 BTC on BitStamp, is probably that kind of green trader Samman was talking about. Don’t be that whale and instead, exchange properly by using a OTC broker.

About Jack Cunningham

I am Jack Cunnningham.
  • Me

    I am trying to find someone who would like to purchase a ‘Large” amount of bitcoin

    • Jason Montana

      Hello Im interested in buying buying ”LARGE’ amount of bitcoins im located in NYC can you email me ASAP jdv1one@yahoo.com Thanks

  • Me

    Having a difficult time finding a broker to buy the amount of Bitcoin