Except that bitcoin doesn't have $400 million of liquidity. If you sold them you'd get way less than the current price suggests. I doubt many creditors would be willing to accept bitcoin directly.
What would happen to Bitcoin if the Mt. Gox trustee sold $4 million a day of Bitcoins for 100 days?
The problem with the Bitcoin world is that the "exchanges" are so cash-weak. They're not just exchanges; they're exchanges, brokers, and depository companies all in one. In real finance, those functions are separated. The NYSE has no stake in any transaction.
I can't believe I didn't see this sooner. I wonder if Coinbase will have to divest GDAX once regulation catches up.
Not really. Glass-Steagall separated investment banks from commercial banks. There is approximately no one fulfilling the role of commercial bank in bitcoin - no one taking bitcoin deposits and using them to underwrite bitcoin mortgages.
Generally exchanges, trading firms and brokers do not have to be separate in the US financial system. For example CME, the largest futures exchange, owns a small trading firm called GFX. IEX operates as both an exchange and a broker.
If you'd dump all that even across all major exchanges that support JPY, guess what, you will easily empty their order books followed by every other exchanges exploding into mass confusion with crazy arbitrage literally killing the market.
Has to be some off the book trade or auction when FBI sold a large sum.
If mtgox were still operational, they would probably take a loan (in yen) with the btc as collateral, if they needed the amount of money on a short notice (and provided they really owned the bitcoin by that exchange).
Do you have a suggestion as to who in Tokyo has 70 billion yen which they'd like to loan to a bankrupt entity owned by an accused embezzler whose main line of business was operating an international money laundering operation, with security being a hyper-volatile token with dubious liquidity?
The Silk Road coin auctions didn't affect the price too much. Parties buying large lots at auction probably aren't doing so to dump the coins on exchanges right away.
Yes, it creates some selling pressure, but the larger significance is as an event. And events in Bitcoin that 'should' be bearish have a way of affecting price in unexpected ways. Busting the Silk Road started the November 2013 bubble, a 30,000 coin market sell finished off the subsequent bear market, etc.