Ask HN: How liquid is Bitcoin? | Hacker News Reader

Ask HN: How liquid is Bitcoin?

192 pointsAznHisoka103 comments

Let's say I have $1 million in Bitcoin? How easy would it be for me to sell it all in 1 day and get $1 million in cold, hard cash back?

If it's not feasible in 1 day, how many days roughly would it take to sell it all?

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$1MM is nothing. At current prices that is ~500 BTC. Looking at just the Bitfinex order book[1], you could sell this in one trade with <5% slippage. If you split it out in say 10 trades over 24 hours you would probably not move the market at all.

Most other exchanges also publish their complete order book so you can fairly easily view their liquidity and answer this question.

[1] https://www.bitfinex.com/order_book

Umm, isn't it impossible to actually cash out of Bitfinex?

If it is, use a different exchange there are lots of them.

Based on history I wouldn't trust any of 'em with $1,000, much less a million.

Why not?

they collapse and quite possibly the person operating it nicks off with all the btc https://cointelegraph.com/news/polands-bitcoin-exchange-bitc...

It is not. They do wire money back into your account. In fact, if you're a US person, then you are covered by FDIC rules. During the hack, Bitfinex didn't touch money that was in USD; for the rest there was a haircut.

USD or US citizen? I'm pretty sure my USD got a haircut.

You can cash out using btc, xmr, eur,hkd, no problem. USD is the only unusable currency.

You specifically cannot cash out with HKD. The only ActualMoney you can get out of Bitfinex at present is Taiwan NTD to a local account.

Thank you for correcting my error.

You can sell 500 BTC in one go while incurring roughly 4% slippage on Bitstamp[1].

Also, https://bitcoincharts.com/markets/ has order books for all the major exchanges, and includes a sell/buy calculator on the "Market Depth" tab for each exchange. But last time I checked (6-12 month ago), Bitstamp was the most liquid one for USD.

[1] https://bitcoincharts.com/markets/bitstampUSD_depth.html

> Looking at just the Bitfinex order book[1]

That's assuming that the order book hasn't been spoofed[1]. Those buy orders could very well disappear quite soon once the market starts to move in their direction.

[1] https://en.wikipedia.org/wiki/Spoofing_(finance)

Given you still can't get actual US Dollars out of Bitfinex, it is poor advice to take them as indicative of anything whatsoever about Bitcoin except as a cautionary tale.

> one trade with <5% slippage

5% slippage is huge. That is $50k on this $1m trade.

And that's to sell it all off instantly by putting in the absolute least amount of effort possible. The point is that exchanging a million dollars worth of bitcoin is not difficult.

Because nobody else has asked, when you say "cold, hard cash", do you mean that literally? As in a case full of physical greenback?

The literalness of "cold hard cash" is going to be very important here.

Into a digital account somewhere as USD? Fairly easy. As a million bucks in literal physical cash? something tells me that would be an absolute shitshow, since 10k cash withdrawl is enough to trigger special processes at most institutions.

You could arrange something in person, but you'd probably better bring those machines that check for fake money.

And a few guns, that are held by people who can use them.

Yeah really. A Craigslist post to do such a transaction at some back alley isn't going work; they'll wipe your entire family for $1 million. If you get ripped off, probably can't even complain, I'm sure cash transactions above a certain amount are illegal in many countries.

Does this mean that at $1 million amounts, bitcoin is more liquid than cash?

No, liquidity is the market's ability to make a transaction with an asset without affecting that asset's price, not how easily it can be exchanged. Cash transactions are pretty much as liquid as it's possible for anything to be. As another poster mentions above, a $1m bitcoin transaction has be to spread out over a day or two to not impact price, otherwise it can fluctuate several percent.

Yes, it is feasible to sell $1 million in BTC (444 BTC at present) in one day. Assuming you're in the U.S., my recommendation is to signup for a Gemini account and read about their daily auctions. They do more than enough volume to fetch you a good price. They're also a highly trusted and very professionally run exchange. I can't recommend them highly enough.

If that doesn't work for you for whatever reason, Bitstamp and Coinbase are both good options. Both have the daily volume to give you a good price on your 444 BTC. Coinbase has pretty strict daily withdrawal limits ($10k per day by default) whereas Bitstamp does not, so I'd try Bitstamp before Coinbase. However, Coinbase can increase those limits if you ask nicely.

Whatever you do, stay away from Bitfinex. They're currently not letting anyone withdraw money.

The last point is not true. Bitfinex withdrawals in btc, xmr, eur, hkd all work just fine. USD is the only unusable currency.

You could easily sell $1M in one day (e.g. in the Gemini auction) but you'd lose money due to slippage.

There are brokers and dark pools that could handle $1M without slippage.

Gemini specifically auctions to avoid slippage.

Given the proper completion of AML / KYC processes liquidating 1m and withdrawing is pretty painless (although I wouldn't recommend a single market sell) on the major US exchanges.

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Follow-up: the same question, but for $1m in index funds through Vanguard.

I'm gonna take a guess and say 5 minutes or less. I've moved much less index funds (magnitude of 10x less) and it was no problem.

For SPY for example instantly with no or max few cents slippage...

Average daily volume of VOO over the last 60 days is about 2,000,000 shares. At ~$200/share (it's actually about $220 right now), that's about $400m dollars daily, so unloading $1m would be well under 1% of shares traded in a typical day.

And notably the fraction of VOO shares traded on any given day to the total market cap of the fund is about 100:1. With bitcoin it's more like 10k:1. Thus the liquidity worries.

One security isn't really the right point of comparison though. Someone with a ton of money to park in "the market" obviously has the choice of doing so in a diverse portfolio from which they can sell in enormously high volume.

Bitcoin is just one thing.

No, lots of index fund investors don't have a diverse portfolio, they get the diversity through the index fund (see bogleheads).

A worldwide index fund from Vanguard is all you need if you want to own the whole market. Optionally add a few bonds to reduce volatility.

Unless you have millions of dollars to park, in which case a single security is a liquidity risk (which has nothing to do with diversity risk) and you take the obvious path of manually diversifying. Same treatment, different problem.

The point was that you can't "diversify" Bitcoin holdings like this. It's inherently illiquid on these scales.

What liquidity issues have there ever been with the big index funds?

If you try to dump $100M in shares of VOO (to finance a luxury hotel purchase, say), you'll flood the market and the share price will drop, and you either won't have access to your funds quickly or you won't get all your money back. There simply aren't enough interested buyers for your single security to absorb your giant sell order. This would not be true if you had manually diversified that holding, which is why no one with liquidity requirements holds single securities in anything like that kind of volume (i.e. people do it, but they do it for e.g. corporate board vote share reasons).

Again, though, the point is that while holdings in big funds only hit this level at really obscene order volume, bitcoin sees liquidity problems at something more like $1M orders.

Gotcha.

> bitcoin sees liquidity problems at something more like $1M orders.

$100k or less. http://www.coindesk.com/high-seas-bitcoin-trading-whales-sti...

Held as ETFs? Assuming it's in big ones like VOO, they can see $400M turnover in a business day, so if you're not picky about getting the best fill price and just sell at the bid, you should be able to do it within a minute or two. You can then call your broker for a wire transfer and have it in your bank account within the same day.

Or ask for a Bitcoin transfer and have it in seconds.

Well 45 min to 1050 min actually https://blockchain.info/charts/avg-confirmation-time

Confirmations are optional.

By what pathway do you believe it is possible to start a day with money in Vanguard, end the day with money in Bank of America, and hold ~$1 million in Bitcoin for some portion of the day.

Wiring a million dollars from Vanguard to BoA is a routine transaction, despite the degree of surprise that causes some geeks. More interesting commerce happens every day.

The Bitcoin transaction you have outlined, though, is not a routine transaction. I'd go further than that: it is impossible.

That's so mean.

The S&P500 index funds are linked to the S&P500 where there are multiple ways to trade and are arbitraged to the nearest cent. People have mentioned VOO & SPY already but most liquid are futures which are super liquid. Eg yesterday there was 2,394501,116,312=$78 Billion traded in the Chicago e-mini contract alone. Which is more than $3mil a second.

http://www.cmegroup.com/trading/equity-index/us-index/e-mini...

https://coinmarketcap.com/exchanges/volume/24-hour/

Trading volume on Bitfinex is in the 100s of million, and in the 10s of millions on most of the other exchanges.

You could do it in a day but it's probably the upper end of what you could trade without risking having an impact on the price. You'd want to be careful not to dump it all in one transaction.

That may not be real liquidity. It may be the same money going round and round. The famous "flash crash" of 2010 happened when a big mutual fund did a real sell, for cash, underestimating the real liquidity of the market. "Between 2:45:13 and 2:45:27, HFTs traded over 27,000 contracts, which accounted for about 49 percent of the total trading volume, while buying only about 200 additional contracts net." - SEC report.

In-exchange volume indicates nothing about actual US dollar liquidity.

That and the fact that you can't get actual US dollars out of Bitfinex. (Which is what triggered the present bubble - unable to withdraw their USD, people bought more cryptos with them because there was literally nothing else they could use them for.)

There are private brokers who will facilitate trades larger than this, and I know Xapo does (did?) as well. Transferring the money back to you may be the more difficult part, depending on where you are.

Order books are often disconcertingly thin. When GDAX restarted with a configuration error only allowing sells, the price went from $1184 to 6 cents in about 100 BTC of trades. This quickly recovered of course, but that's how thin it is. http://www.newsbtc.com/2017/04/16/gdax-bitcoin-price-briefly...

Large sales frequently cause $20-30 dips. http://www.coindesk.com/high-seas-bitcoin-trading-whales-sti...

So you'll want to take it slowly, and across multiple exchanges if you can. Check Reddit that a given exchange isn't having (what's the phrase) "problems with the traditional banking system", i.e. you can get ActualMoney out.

Also, don't go within a mile of Bitfinex - users still can't get hard currency out without a local Taiwan bank account (if even that still works).

Wow, this all sounds...sketchy.

Everything about Bitcoin, from the original software up, is built by amateurs from gaffer tape and string. (Bitcoinica->Bitfinex and Mt. Gox were literally "I know PHP, how hard can writing an exchange be?") It's reiterating the history of financial systems as well as financial regulation, in fast forward.

So, and this doesn't answer the one million dollar question.

I recently liquidated a much smaller amount (in the thousands ) of Bitcoin.

Using Kraken (no affliation) it probably took me about a month from transferring my btc from My private wallet to them, to having the ability to finally transfer to my bank account. This was largely due to the verification time, and some issues with the verification photo.

Once it was all setup the process was quick and painless.

probably a question better suited to r/bitcoin or some similar subreddit

If you want to sell and not incur slippage, bitfinex has an OTC market and Gemini has an auction market. Millions are changing hand everyday.

Depends on whether you want to hide the fact of the transactions. Going the legit way, suppose you don't

Then it is the matter of registering on an exchange and buying out all the bids. With 1m even now, you'll make a whole lot of turbulence in the market. After that just withdraw it to your bank accounts, you might have to have a chat with your exchange before that though

Aabout 1 billion dollars of trade volume per day.

http://coinmarketcap.com/currencies/bitcoin/#markets

If you had existing accounts with all the exchanges then yes you could do it in a couple of days. A lot of them have $10k or $20k limits. Also it can take some days to verify your account, which needs to be done for most exchanges.

1e6 USD / (1e4 USD / account) = 100 bitcoin exchange accounts

Any other solutions?

If you open an account with Gemini (large, legitimate US-based exchange) and go through their standard AML / KYC processes they will do unlimited USD wire transfers, both incoming and outgoing, for either personal or institutional accounts.

If you go through the standard AML / KYC processes at any of the other US-based exchanges the wire withdrawal limits go up significantly (hundreds of thousands) and there are similar upgrades in withdrawal limits across the major euro exchanges.

Cumberland mining, itbit otc, gemini daily auction. You could sell them easily with a typical 0.1% cost. Silbert's otc division probably (never traded with them though). $1mm is a pretty common trade nowadays.

Barry silbert can do it privately but any exchange can handle it

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