So 10 million would be 1/4 of the daily volume. By the way I didn't mean outright shorting it, just taking positions in both directions. 10 million clears the order books long too, a few 100 bucks up.
Let's say I put out a market order on the 3 exchanges for the whole 10 million. Price goes up 2-300 bucks probably. Then I immediately put a market sell order, thus the price drops 4-500 bucks. Then I keep repeating it until people get tired and nauseous....
In the process it doesn't matter if a lose a few mill here or there, don't forget I am the government, with unlimited resources.
Or going back to the shorting idea, I can just buy up bitcoins slowly over a few days probably slightly pushing the price up, then dump all of it... the order books are so shallow, specially if I would do it on 1 exchange....
I'm thinking we would bleed the government dry if they tried something like that. While the government is doing these market orders, we all have our limit orders ready and since the majority of bitcoins are not using margin, we can never get margin calls and get forced out. After we are filled, we immediately put in orders to sell a few hundred dollars higher so when the government does its next market order, we cash in and then rinse and repeat.