My first idea would be to see if it's possible to create massive sell-offs by crashing through many people's "stop on loss" barriers.
For example, let's say that the exchange rate is 100 USD per bitcoin at the moment and that you have tons of people who would absolutely sell their bitcoins if it went below 90. I'm not in the bitcoin game, but I think mtgox offers "stop on loss" features so that people could get out of bitcoins automatically.
If you're sure that you want to be in bitcoins, but you think that there are a lot of scared players who put their "stop on loss" too high, you might be able to provoke some kind of selling avalanche by selling sufficiently many bitcoins at once. The price drops below 90, which triggers a lot of automated selling. This makes the price drop even further, triggering other stop on loss barriers, driving the price to 80 and so on.
With your $5 millions you buy up all those bitcoins at a rate of 50 USD per bitcoin when the avalanche stops. Then people realize what just happened and the price of bitcoins crawls back to 100 because that was more or less the fair market price.
The point is, with $5 million dollars you might have the power to create digital panics, a "flash crash", and use that to your advantage.
I don't know if $5 million is enough for that, and it's not a guaranteed return.
Someone sold off 5k bitcoins (~USD $450k at the time).
That's exactly what happened. Big sell off from 95 to 80ish, and then it sprang back to ~$90 today.
There's low confidence in it right now, but that's because most players are actual players. They aren't using bitcoins for groceries, like a bank reserve (yet). They're playing them like stocks.
5k bitcoin sell crashed the market?! To the tune of 100MM in market value loss on those transactions.
That just shows most people are hording it / not really selling or trading, and a few people are buying it, probably the majority of which are doing so because they need to spend it on SilkRoad or a gambling site.
The moment that goes away, or a few big holders decides to cash out, watch out.
It totally stands within reason that until it has wide spread adoption and regular people stop caring about what the exact exchange rate is that we will see large runs like that. As I stated, we have several people (myself included) invested to make money and take care of an investment, not to use a daily currency.
For example, let's say that the exchange rate is 100 USD per bitcoin at the moment and that you have tons of people who would absolutely sell their bitcoins if it went below 90. I'm not in the bitcoin game, but I think mtgox offers "stop on loss" features so that people could get out of bitcoins automatically.
If you're sure that you want to be in bitcoins, but you think that there are a lot of scared players who put their "stop on loss" too high, you might be able to provoke some kind of selling avalanche by selling sufficiently many bitcoins at once. The price drops below 90, which triggers a lot of automated selling. This makes the price drop even further, triggering other stop on loss barriers, driving the price to 80 and so on.
With your $5 millions you buy up all those bitcoins at a rate of 50 USD per bitcoin when the avalanche stops. Then people realize what just happened and the price of bitcoins crawls back to 100 because that was more or less the fair market price.
The point is, with $5 million dollars you might have the power to create digital panics, a "flash crash", and use that to your advantage.
I don't know if $5 million is enough for that, and it's not a guaranteed return.