Market impact of selling on one exchange vs multiple exchanges _ BitcoinMarkets bitcoin price live

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Brainfart. Let’s say I want to sell 100 bitcoins [1], but I want to cause a maximum amount of market impact in the progress. [2]

What would be the most efficient way to do this? Several options come to mind:

• sell all bitcoins on a liquid exchange (bitfinex, BTC-e)

• sell all bitcoins on a illiquid exchange (kraken)

• sell all bitcoins on bitfinex 3x margin.

• sell all bitcoins on highly leveraged futures platform.

• simultaneously sell on multiple exchanges.

I’m not only interested in the correct answer. Rather, i would like to learn more over how the markets react when such events happen. The problem of market impact when buying or selling on a single exchange is well-studied, but i have not seen anything discussing multiple exchanges.

I would assume that it is most efficient to sell on an illiquid exchange, or combinations of illiquid exchanges in the hope that arbitrageurs follow my lead and sell on more liquid exchanges.Bitcoin price live but with margin trading into the mix, I’m not so sure anymore. The ultimate question i would like to answer is, how to i calculate market impact when selling on margin vs margin exchanges?

[1] I don’t have 100 bitcoins. [2] or consider the inverse question, how do i sell 100 bitcoin immediately with minimum market impact?


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Get more than 100 bitcoins before trying to make a meaningful impact on the market. It just isn’t enough to influence the price meaningfully.

Good bots running arbitrage use an index as a target, either intrinsic to the bot or external (winkdex, tradeblock, coindesk, etc) – there are shitty bots, but you can disregard those as the good bots will dominate thereby determining how the market at large reacts to large scale manipulative events.Bitcoin price live using tradeblock as an example, their index algorithm is intelligent – it weights each exchange price according to several factors. One of those factors compares spot price to average price of other exchanges, and reduces weight when a certain exchange deviates. So if someone market sells 3000 coins on bitfinex and their price is $20 lower than the average of other indexed exchanges, their price influences the composite index score the least. API health, volume, and other factors are also included in calculating weight to determine the index price.

So bots use an index to identify deviations and determine if they should buy or sell into those deviations. They also are funded across multiple exchanges, so in the bitfinex example, they would buy into the dip on bitfinex while immediately selling on coinbase, btce, okcoin to minimize market impact of their sells.Bitcoin price live

This maximizes arbitrage returns (large impact on deviating exchange pulls it back towards index rate, low impact on average exchanges preserving profit margin), minimizes risk (no waiting for fiat/BTC transfers while price is changing), and serves the purpose of arbitrage by profiting thru balancing the marketplace.

This is how exchange prices stay in balance so quickly these days compared to looser correlations several years ago. This is why many people wrongfully attribute diverse market participants as coordinated conspirators. This is why exchanges with similar banking access track more closely, while those with less common banking access deviate more greatly (more time required to move funds and balance accounts).

Tl;dr to maximize market impact, 100 bitcoins won’t cut it.

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If i have determined that the best way to impact the market with 1000 BTC is to sell all of them in a single market order on bitfinex

The real question is, why have you made this determination? This is a trivial trading situation. Refer to my post history if you’d like a numerical example in calculating slippage on market orders, which sounds like what you are looking for.

Market reactions to placing a market order depend on many factors: order volume, exchange liquidity, width of the spread to name a few. You name bitfinex, so let’s peek at the buy side of their book right now:

439.29000 0.0284

21000 0.2000

20000 10.335

02000 0.6100

00000 38.500

438.65000 15.796

46000 0.1500

43000 0.9000

42000 16.619

40000 0.0200

24000 15.904

23000 1.2100

22000 49.000

21000 15.211

15000 0.0500

13000 12.500

bitcoin price live

438 193

436 603

434 1063

432 1300

430 1481

428 1569

426 1750

424 2510

422 2698

420 3264

418 3572

416 3927

414 4174

412 4661

410 5270

There are large volume buys of $439.20 x 10.3 btc, $439.00 x 38.5 btc, $438.65 x 15.8 btc, $438.42 x 16.6 btc, $438.24 x 16 btc, $438.22 x 49 btc. Add up all these coins, and you get 144 btc, give or take. You can drive the price down by a dollar if you sell 150 BTC which would cost you around $65K. Driving the price that much has large affects on margin accounts. If you had 10,000 BTC, and market sold those? Looking at the full level 2 depth, selling 10000 BTC would drive the price down to at least $430, and I’d wager it would go even lower. You’d likely be triggering more margin calls with a 10K sell than a 100 sell, which would further increase sell pressure. The further down you drive the price, the worse your trade gets.Bitcoin price live ideally, you want the smallest market reaction to your order as possible, which often means splitting large orders across many exchanges, depending on their liquidity (volume & spreads).

There are way too many factors in play to explain each one here, honestly. But there is definitely a big difference between placing those volume orders. And I would wager the relationship with price is not linear.

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