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Mt. Gox trustee crashes bitcoin several times


Good news: the crypto crash had a clear external cause. Bad news: bitcoin has serious liquidity issues.

Update: According to a transcript of a Mt. Gox creditors meeting, trustee Nobuaki Kobayashi said the coins were sold "in a manner that would avoid affecting the market price," most likely through an over the counter (OTC) transaction.

The trustee of the ill-fated Mt. Gox bitcoin exchange crashed the market several times in the process of selling 65,000 of the estate's 200,000 remaining bitcoin, TrustNodes reports.

The coins were sold on exchanges in batches of thousands on 22 December (6,000BTC), 17 January (8,000BTC), 31 January (6,000BTC) and then a total of 18,000 on 5 February (moved in three batches of 6,000).

You can see the abrupt drops in the extremely scientific diagram below.

Source: LiveCoinWatch. Red directional attention indicators courtesy of Microsoft Paint.

In a court document, the trustee says they sold the bitcoin for the maximum amount they reasonably could and thought it was a good move to secure some credit while they could, although creditors are of two minds about it.

"I considered it necessary and reasonable to sell a certain amount of BTC and BCH at this point and secure a certain amount of money for distribution resources," the trustee wrote.

Reports say that the Kraken exchange was meant to be the bitcoin's destination, but Kraken's relatively thin BTC:JPY volume makes this seem unlikely. Typically a sale of this size might be done off the books, or through an auction. This is how hoards of seized criminal bitcoin are typically sold.

It's possible that the price drops were caused by factors other than the bitcoin sales, but this would be quite a coincidence. Also, other coins didn't experience similar drops until they followed the bitcoin down as cryptocurrency markets often do.

The suggestion that a Mt. Gox sale is behind a series of recent price crashes might be both good news and bad news for bitcoin enthusiasts.

The good news is that an anomalous event was behind the market crash, and it might not happen again. The bad news is that it highlights bitcoin's severe liquidity problems. Even staggering the sale of 65,000 coins over a month seemed to have a devastating effect on prices.

If (or when, for the naysayers) bitcoin bursts like a bubble, it's going to be an extraordinarily messy explosion.

Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, SALT, BTC, NANO

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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