
What if a bulk of Bitcoin owners all try to cashout today? - ashitlerferad
Where&#x27;s all this invisible money gonna come from?<p>On 26 October 2013, a Hong-Kong based bitcoin trading platform owned by Global Bond Limited (GBL) vanished with 30 million yuan (US$5 million) from 500 investors.[204]<p>Mt. Gox, the Japan-based exchange that in 2013 handled 70% of all worldwide bitcoin traffic, declared bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement.[205]<p>On 3 March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before.[206][207][208] In a statement that now occupies their homepage, they announced on 3 March 2014 that &quot;As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors immediately.&quot;[209] Users can no longer log into the site.<p>Chinese cryptocurrency exchange Bter lost $2.1 million in BTC in February 2015.[210]<p>The Slovenian exchange Bitstamp lost bitcoin worth $5.1 million to a hack in January 2015.[211]<p>The US-based exchange Cryptsy declared bankruptcy in January 2016, ostensibly because of a 2014 hacking incident; the court-appointed receiver later alleged that Cryptsy&#x27;s CEO had stolen $3.3 million.[212]<p>In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $2 million in cryptocurrency. It subsequently relaunched its exchange in August 2016 and is slowly reimbursing its customers.[213][214]<p>In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex.[215]<p>In December 2017, hackers stole 4,700 Bitcoins from NiceHash a platform that allowed users to sell hashing power.[216][217] The value of the stolen bitcoins totaled about $80M<p>HYDN
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tga
You are mixing two separate things. If the bulk of Bitcoin owners were to try
to _sell_ all at once, most wouldn't have anyone to sell to, and the price
would go way down. This has nothing to do with exchanges (although at
increased load probably most of them would experience outages).

The second question is whether most exchanges would be capable to transfer out
all bitcoins they are currently storing for customers (a "bank run"). As far
as I know, exchanges aren't supposed to be running a fractional reserve
system, so they _theoretically_ shouldn't have a problem with this, given some
time to get data out of cold storage. Indeed, like banks a while ago, if they
did manage to lose (or spend/steal) a part of the amount they are storing,
they would simply go bankrupt at this point.

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thisisit
So much going on here.

> What if a bulk of Bitcoin owners all try to cashout today?

What happens during a bank run?

[https://www.investopedia.com/terms/b/bankrun.asp](https://www.investopedia.com/terms/b/bankrun.asp)

The chance of bank default rises. Something similar will happen.

> Where's all this invisible money gonna come from?

Bitcoin addresses are public. Recently there was a panic when a supposed whale
moved 10k, I remember correctly to an exchange.

> Hacks

Well, this adds an interesting angle to the whole topic. Most of the hacks
don't mention suspected bitcoin addresses. So, a hacker can run the coins
through a tumbler to get "clean" bitcoins.

For the nicehash hack, this is the suspected account:

[https://blockchain.info/address/1EnJHhq8Jq8vDuZA5ahVh6H4t6jh...](https://blockchain.info/address/1EnJHhq8Jq8vDuZA5ahVh6H4t6jh1mB4rq)

The coins are still in the account, unmoved. So, whether these guys can get
the "hidden" bitcoins and cause a crash is an interesting topic to think
about.

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lmlsna
You can't sell a Bitcoin without a buyer, that's how exchanges work. If there
is large sell demand, the price gets pushed down.

It would behoove a larger holder not to sell all at once as this would
certainly send the price downward. But at the moment, there is pretty clearly
sufficient demand for even the largest holder to dump everything over the
course of a week without setting off a panic. Normal average volume is
100-500k BTC/day.

But to answer your question, the price would plummet, and new entrants would
eagerly buy, that's where the money would come from.

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Aron
A rush for the exits at 10 global transactions per second, or about the rate
of Visa transactions in a Manhattan city block at lunch time.

~~~
zxcmx
This is hilarious but not at all accurate since BTC to USD is traded on
exchanges and not on the blockchain.

~~~
bryanbuckley
Don't think any exchanges allow you to email them your private key to credit
your trading account :(

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ubersoldat2k7
I think that what OP means is, where is all the real currency people have paid
for BitCoin, how are those assets guarded and how fast of a conversion from
all BitCoins to currency would take.

As I understand, you would need an exchange house, who receives real currency,
and puts it somewhere (bank accounts, investment funds or other financial
structures) from which the exchange (BTW, who controls the security of these
exchanges, how much of cash [like banks] they should have?) cannot cash out
immediately.

So, if 10 guys with 100BTC go to an exchange, and trade their BTC for Euros
and the exchange doesn't have the amount of Euro to exchange, what would
happen?

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teilo
It's pretty simple really. The price would drop precipitously and start a
selling frenzy as people try to preserve their investment.

Unlike the exchanges, you can't close down Bitcoin if there's a run on the
"bank," And unlike the banks, Bitcoin could only recover based purely on
market forces.

Well, to be sure, various governments could step in to control the cash
exchanges, but that is far more difficult with e-coins.

It would actually be fascinating to watch (from my perspective), because
without the possibility of central banks or governments stepping in to control
the bleeding, we would see what an entirely unregulated market would do in
such a circumstance. It would certainly give the economics PHDs something to
write about.

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golergka
[https://en.wikipedia.org/wiki/History_of_banking](https://en.wikipedia.org/wiki/History_of_banking)

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cdancette
You seem to ask three different things here :

\- what happens when everyone tries to cash out?

-> a crash. Bitcoin value will drop very fast.

\- where is all that money coming from?

-> it's coming from people buying exchanging Bitcoin against other currencies.

\- not sure why you cite all those thefts. Are you trying to ask why there are
such huge thefts? Bitcoin is still young and companies don't have strong
regulations like banks, so they might be less secure. This will be better with
time.

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grael
What do you mean by cash-out? You need to find people who are gonna buy these
bitcoins from you for their cash.

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Daviey
What happens if all gold is sold today?

I believe estimates are that there are 150,000-180,000 tonnes of extracted
gold in the world.

Lets say that is forty million US dollars per tonne.

Where does all the invisible money come from?

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divbit
I am going to hold my $3 of bitcoin forever. To the moon!

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zxcmx
The same thing that would happen if the bulk of AAPL shareholders tried to
cash out.

A new price would be discovered.

~~~
ashitlerferad
We'll see shortly.

~~~
zxcmx
Yes. Personally I think people are underestimating the utility of a new asset
class that's not london apartments or fine art for rich people to park their
money in.

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riston
Well, the same thing happens with banks.

