When you BUY bitcoin, who is SELLING? And when you SELL bitcoin, who is BUYING?

When you buy Bitcoin, who is selling that Bitcoin to you? And when you sell Bitcoin, who exactly is buying that Bitcoin from you? Well, Bitcoin and the exchanges that make it work work just exactly like the stock market. Just like when you’re buying or selling a share of Tesla or SpaceX or Amazon or Apple stock, it works the exact same way, which is sometimes the person on the other side of the transaction, which is being facilitated by a cryptocurrency exchange like River or Coinbase, for example. Sometimes you are buying or selling from another person on the other side, but uh and that wants to do the opposite of what you want to do. So you log in and you see the price is, you know, $62,000 and you want to buy Bitcoin. Well, the question is who is selling you Bitcoin at $62,000. Well, it could be another individual uh who bought Bitcoin at 80,000. They’re tired of holding it at 60,000 and they’re just ready to get out, which is most of what’s happening right now. Most of the Bitcoin that is being sold right now is being sold from people who bought it for a price higher than it is today. They don’t understand what they what they hold. They got all excited because it was going up. Now it’s kind of going sideways or going down. They don’t know why. They don’t want to do the work of finding out. And so they’re capitulating when it’s when it’s down, which is a bad investment for them. Now, it’s a good investment for you, but it’s a bad investment for them because they’re not doing the work to understand why Bitcoin does what it does and why it eventually will be at a price much higher than the price they pay for it. So, some of the people on the other side of the transaction are people buying or selling that are doing the opposite of whatever you’re doing. So, if you’re buying, they’re selling for if you’re selling, they’re buying. Uh some of it is uh bitcoin miners who secure the network and they get a little bit of bitcoin from transaction fees every time that happens and they sell that bitcoin in order to pay for electricity and the cost of bitcoin mining equipment. And so some of the times when you are buying bitcoin it is being sold by a bitcoin miner but that’s a very small percentage. Uh also there are people called market makers. Market makers are constantly bidding uh the price of bitcoin buy and sell. So, for example, they’re always buying Bitcoin at $1 higher than the current price and selling bit or I should say they’re constantly selling Bitcoin at $1 higher than the current market price and buying Bitcoin at $1 lower than the current market price. And they bake basically make money because every time somebody puts in a market order, meaning you say, “Hey, I want to buy Bitcoin not at a specific price or sell it as at a specific price, but I just want to buy it period.” which is the vast majority of the way people buy Bitcoin is they just say, “I want to buy $100 or $1,000 or $10,000 right now.” And when they push that button, there are market makers who say, “Oo, great. I will sell you that Bitcoin at a dollar more than the current quoted price. And as soon as I get your money, I’m going to buy it uh I’m going to try to buy it uh if the price dips down $1 below the price I just sold it for.” Now, it only makes sense to do that if you’re doing very high volumes because you’re making money off what’s called the spread. The spread is that tiny little difference between what buyers and sellers are willing to buy and sell. You can actually see that spread on Coinbase Advanced. Oftentimes, the spread is less than one penny. on a uh a Bitcoin that is worth more than $60,000 per coin, the spread between the buyers and sellers is often less than one US dollar penny, which is a tiny tiny fraction of 1%. But again, if you’re buying and selling as a market maker, tens of millions of dollars of Bitcoin a day, you can make a lot of money uh off that, you know, one one penny per transaction or whatever it ends up being uh per Bitcoin. But again, that only makes sense if you have huge volumes, effectively zero fees from Coinbase because your volumes are so high. Uh, and that’s really the only way that makes sense. But so sometimes you’re buying from from a company that is a market maker that only plans to to hold the Bitcoin for a few seconds or a few minutes because whatever Bitcoin they buy from you, they’re going to turn around and sell as soon as the price is a fraction of a percent higher than it is now. And and vice versa. um if they buy Bitcoin from you, they’re planning to turn around and sell it the moment it’s a fraction of a penny higher than the price they paid for it, and they make it up in huge volumes. So, sometimes it’s a market maker, sometimes it’s a Bitcoin miner, sometimes it’s another individual. Um, and there’s a few other classes of people I’m immediately forgetting off the top of my head. If you ask Chat GPT, it’ll tell you there’s like four or five different people that are on, you know, different entities that are often on the other side of the transaction. But the short take is every time you buy Bitcoin, you’re buying it from somebody who no longer has it anymore after the transaction. And every time you sell Bitcoin, you are selling it to somebody and you no longer have it anymore. So for every buyer, there’s a seller. For every seller, there’s a buyer. And every Bitcoin transaction has a buyer and a seller. And the job of a Bitcoin uh exchange like River or Coinbase or Strike or Kraken or any of the other major ones, their job is to match up the buyers and sellers and to create that marketplace. Um, also there’s something called limit orders where you can buy or sell Bitcoin at a specific price. And so you can actually see on Coinbase in the advanced interface. They do not show you this in the standard interface, but if you go to Coinbase Advance, they will actually show you what’s called the order book, which is all the different bids and asks for Bitcoin. And typically, you can see that, you know, within a few pennies or a few dollars of the current market price, there’s all the Bitcoin you could possibly want to want to buy. And if too many people are buying all at the same time, it pushes the price up because the order book gets eaten up. the prices of people who are bidding pennies above the current price all get, you know, bought up and that pushes the price because the the next people available to sell are at higher and higher prices. So when there’s more demand, the price starts to rise and it can rise by dollars, pennies or dollars or thousands of dollars or even tens of thousands of dollars per Bitcoin. as demand outstrips supply, meaning the demand for Bitcoin buys up all of that cheaply priced Bitcoin and the mar the market makers and everybody else are constantly having to repric higher uh to make the economics of what they’re doing work. Uh and the reverse is true. In periods when the price is going down, what’s happening is too much uh there is more sellers than there are buyers, market makers are adjusting their prices so that they’re willing to buy or sell now at a lower price. and the order book that has those orders of people willing uh to sell. Uh again, if if selling overwhelms uh demand for the moment, it pushes the price lower because uh that’s the way the order book works. Uh if if there’s more demand than the supply, it’s going to force the price to rise. And if the there’s more uh supply than there is demand, that’s going to uh require the price to fall to be always in equilibrium. Now the cool thing about Bitcoin is 247, you know, all day, day and night, you know, worldwide in all currencies, Bitcoin has a price. So anytime, day or night, you can go get find the price of Bitcoin in the Romanian currency, the Thai currency, the Russian currency. I mean, it there’s always a price for Bitcoin and that is always set by supply and demand because Bitcoin is extremely liquid. Liquid, meaning there are people bidding for Bitcoin that are constantly selling it 247. There are market makers willing to provide that liquidity 247. And so you can always buy or sell as much Bitcoin as you want. Now, you might wonder, how much Bitcoin would I have to have to buy to move the price up? Well, Michael Sailor is famous for saying, uh, he has bought more, first of all, he’s bought more Bitcoin. He’s bought more than 50 billion dollars of Bitcoin for his company, which is called Strategy. MSTR is the ticker symbol. Uh MSTR stands for Micro Strategy, which is what their name used to be before they changed the name to strategy. But Michael Sailor has bought more Bitcoin than anyone else in the world, including billions of dollars of Bitcoin in a single week. and he often says look I can buy you know I can buy hundreds of millions of dollars of Bitcoin in the course of a few hours and the price will be dropping while I’m buying which of course you would think his purchasing power would uh you know would do the reverse you would think his him buying Bitcoin would result in the price rising but he says look I can buy hundreds of millions of dollars of Bitcoin while the price is falling and then as soon as I stop buying the price goes up because Again, even hundreds of millions of dollars in hours is not enough to alter the price of the marketplace. Bitcoin is so liquid with tens of billions of dollars traded every single day. Uh and it’s again traded in all currencies worldwide that you just have to have an enormous amount of Bitcoin uh that you’re trying to buy or sell. So if somebody said, “Look, I really want to move the price. What do I need?” I’d be like, “Well, you need like a billion dollars that you plan to use in the, you know, in the span of a couple hours. Maybe if you had billions of dollars you were planning to buy or sell in the span of a few hours, maybe you could move the price by a few hundred dollars, uh, or even $1,000, you know, one way or the other. But again, almost nobody has billions of dollars that they can deploy in, you know, a matter of hours. And so what? even if they do the price immediately stabilizes you know at a price a few hundred higher or lower after that uh transaction takes place. So Bitcoin is just an enormous market with huge liquidity. There is always somebody on the other side willing to take the trade. And you know last week uh not this week but last week uh strategy sold over $200 million of Bitcoin and the price went up that week. And other weeks they buy hundreds of millions of dollars of Bitcoin and the price is going down. So again, not even hundreds of millions of dollars is enough to push the price uh up or down because the total number of buyers and sellers worldwide is so enormous. uh again to the tune of you know something like $50 billion dollars of trading volume a day that a couple hundred million here or there just really doesn’t move the market one way or the other. It’s effectively you know like you know blowing into a swimming pool. Well the the the the greater forces of the wind in your yard is going to overwhelm whatever your breath can do. It’s the same thing here. it’s just a couple hundred million or even a billion or two really doesn’t move the market when worldwide trading volumes is is in the tens of billions or has crossed a hundred billion at various times. So that’s how it works. There’s always a buyer for every seller. There’s always a seller for every buyer. And Bitcoin is so liquid that there’s always somebody somewhere in the world buying when you’re selling or selling when you’re buying, which means you can always get whatever price is the quoted price for Bitcoin. You can always get that price for as much Bitcoin buying or selling as you want to do. And you don’t have to worry about altering the price when you are buying or selling because the market is so liquid and so monstrous that there’s no way that you or I could possibly move it. Really cool factor. And all markets work that way. The stock market works that way. All commodities, gold, silver, soybeans, wheat, uh you know, all markets work that way. And it’s really cool. It’s a really cool uh aspect of the free market that markets work that way. And in the case of Bitcoin, it is the most liquid uh currency worldwide in all other currencies other than maybe the US dollar or the US Treasury bonds. But Bitcoin is, you know, like a incredible worldwide phenomenon and it’s 24/7 unlike markets for virtually everything else, which makes it even more cool. So that’s how it works. Flip it out.