They are linked very closely, especially with a volatile market like crypto. Besides, the volume is 10x what it was when Novogratz unloaded $250M on a smaller market cap. A billion would certainly move the price, but it doesn't appear it would crash it.
I was playing around with automated trading algorithms this summer on GDAX. With a bankroll of only $2.5k USD I was routinely contributing $500k+ worth of trading volume each day (that's only 100 r/t trades with $2.5k).
Surely there's a lot more sophisticated high-volume trading algorithms taking place than what I did.
Take a look at GDAX's full book [1] -- Even going all the way down to a BTC price of $8600 (-50% current prices), there's only outstanding buy orders to consume 5169 BTC if someone entered a market sell order. Obviously that would trigger a lot of automated trades that don't live on the book but I think the assumption that "trading volume" == "liquidity" is very dangerous.
It’s been so crazy to see things like that just papered over in thread after thread. People talk about trading volume as though they have the faintest idea what the true, non manipulative volume is. The term “market cap” being thrown around as though anything remotely close to the figure could be realized.
I’m starting to lose sympathy for the people who are ultimately going to get hurt when this crashes. The signs are not hard to see at all.
Seriously though, given all these trades occur on god knows what kind of sketchy exchanges for all we know half that stuff is literally random inserts in a database with no bearing in reality at all. Toss in "innovative" things like Tether and who really knows what the true value of BTC is.
This stuff is gonna fail, and fail hard. Hopefully for good. BTC and the whole crypto bandwagon is a massive, massive waste of energy.
I don't disagree necessarily, but it's a very useful if somewhat flawed proxy I think? Any changes to the book are going to get arbed away pretty quickly, so a market sell is almost never a good idea with volume.
We've seen those and the price jumps back almost immediately because BTC trades on many exchanges and currency pairs.
If you wanted to measure the current book, I think you'd have to sum up the various fiat books across exchanges to get a good sense of what the market can bear at the moment.
edit: Thank you for forcing me to clarify my thinking, I shouldn't have directly linked volume to liquidity but absent good data I tend to associate them.
is not the same thing as liquidity