What happens if Bitcoin is sold in large quantities? Is it illegal?

Bitcoin has become the first choice for many people to invest with its high value. Most investors mainly make profits by buying low and selling high, but the fluctuations in the Bitcoin market have had a certain impact on the entire market. Therefore, when investors sell Bitcoin at a high price, some investors are curious about what will happen if Bitcoin is sold in large quantities in the market? According to data analysis, if a large-scale selling of Bitcoin occurs, it will trigger a sharp decline in price and an increase in volatility in the short term, and may aggravate the market liquidity tension and slippage risks. The following editor will analyze it in detail for you.

What happens if Bitcoin is sold in large quantities?

The large-scale selling of Bitcoin may cause price fluctuations and may aggravate market liquidity tension and slippage risks, while also damaging investor confidence and triggering a chain selling effect; in the long run, the market may need a longer time to restore balance, but arbitragers and investment institutions may also make arrangements at low levels, thereby gradually absorbing selling pressure. The following is a specific analysis:

1. Price fluctuation: Large-scale selling will cause a rapid price decline in a short period of time. Because the sell order exceeds the depth of the buy order, quickly digest the buy order and continue to go down to the bottom of the buying price. Selling pressure will amplify market volatility, and the implicit volatility indicators of various exchanges often rise significantly in the selling wave and maintain high fluctuations in the short term.

2. Liquidity and slippage risk: When the selling volume exceeds the depth of the order book, the transaction price will slide downward, and the seller bears a higher slippage cost; when the liquidity is tight, the slippage range can reach several percentage points. In addition, during the peak period of the sell-off, the on-chain transaction fees and the depth of the exchange orders were squeezed, further aggravating the price impact.

3. Market sentiment and confidence: Sudden large-scale selling will trigger market panic (FUD), reducing buying intentions in the short term, leading to chain selling and further reducing prices. The concentrated outflow of institutional funds (such as Bitcoin ETFs) will also amplify the selling effect. In February 2025, the Bitcoin ETF recorded a record-breaking net outflow of US$3.3 billion, aggravating negative sentiment in the market.

4. Chain reaction and systemic risks: Large-scale selling may trigger a liquidation in the derivatives market, and the long positions in perpetual contracts are forced to be closed, further pushing down the spot price. Similar to the chain effect during the FTX crash, the sell-off was transmitted to other crypto assets, triggering cross-market risk appetite shrinking and capital flight.

5. Long-term impact: Although the short-term impact is severe, after the selling pressure is released, the recovery of market liquidity will attract institutions and arbitrageurs to make arrangements at the bottom, thereby driving the gradual rebound of prices. The increase in transaction fees corresponding to the high volatility period will have a short-term impact on mining computing power and on-chain activity, but as long as the difficulty adjustment mechanism is operating normally, network security will not be subject to substantial threats.

Will Bitcoin be frozen if it sells in large quantities?

Bitcoin is sold in large quantities and may be frozen. The main reasons for the freezing include bank freezing and judicial freezing. ‌Banks in certain countries and regions do not allow bank accounts to participate in digital asset transactions. If the account involves digital asset transactions, some transaction permissions may be frozen or suspended. Account behavior may trigger the bank's anti-money laundering system, such as large-scale late-night transfers, frequent transactions with multiple people, and long-term balance in the card, etc., which may cause the account to be restricted from trading permissions‌1.

Judicial freezing is usually caused by the police freezing the relevant bank account based on the flow of funds after the victim reports the case. Even if you don't receive the funds in question directly, it may be because a transaction a few months ago was frozen. The freezing time is generally half a year, but the specific time varies depending on the region and case handling method.

To avoid freezing, investors are advised to ensure that all transactions comply with local laws and regulations and bank anti-money laundering and understanding your client (KYC) regulations. Save all transaction records and vouchers to provide proof when needed, use legal trading platforms to trade, and avoid using unregistered OTC platforms, which have a low success rate of judicial relief‌.

In order to reduce market volatility, investors are advised to split large-value positions into multiple small-value sell orders and execute them in batches to reduce the impact and slippage costs on market prices. At the same time, large-value transactions can be matched through the over-the-counter trading (OTC) platform, and use deeper buying quotes to reduce the pressure on the exchange order book on the price. The most important thing is to set a reasonable stop loss point and hedge it in combination with derivatives such as futures or options, which can effectively limit potential losses in the selling process.

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