A flash drop of 87%! What happened to BTC?

BTC, which once broke through a new high of 66,000 US dollars, only has a price of 8,000 US dollars on the Binance US platform?

Some netizens said that they did not get the low price of US$8,000, but they were satisfied to buy it for US$23,000. But for currency holders, if there is a stop-loss order, they may be forced to close their positions and face a considerable loss.

On October 21, Binance’s U.S. trading platform showed that its price fell from $65,815 to $8,200, a decrease of 87%. On other trading platforms, the price during the same period was approximately US$64,200.

In this minute, the exchange’s BTC trading volume was 592.8, worth slightly less than 40 million U.S. dollars at current prices. Subsequently, the BTC price quickly rebounded to the level before the crash.

It is understood that due to the different supply and demand relationships between large platforms and small platforms, the prices of BTC and other cryptocurrencies are different in different exchanges. Furthermore, BTC does not have a fixed pricing method. Therefore, the crash did not extend to affect the prices of other platforms.

Fat-finger error or quantitative trading?

The platform said: The mechanism algorithm has loopholes.

This kind of slump is not only reminiscent of various “Fat-finger errors” that have appeared in history. When traders make mistakes in the details, such as entering the wrong price and order size, it will cause a market crash, such as the flash crash of the US stock market in May 2010.

A netizen said that Binance’s US platform currently has no margin trading and is a pure spot market. At that time, a large number of selling orders triggered a chain reaction, which caused a large number of currency holders to stop loss and leave the market. As a result, the price fluctuated so sharply.

In this regard, the Binance platform’s external explanation is that an institutional trader has a loophole in the trading algorithm, which seems to have caused the sell-off. The Binance US platform also stated that it continues to investigate the matter, but traders have now fixed the error, and the problem seems to have been resolved.

At present, the BTC transaction price on the platform has recovered to about 63,000 US dollars, with a change of about 3% within 24 hours.

The founder of Binance, Changpeng Zhao, tweeted only the day before, ‘indicating that the volatility of cryptocurrencies will be very high in the next few months.’ Immediately afterward, some netizens left a message below, ‘Are you talking about Binance America?’

After the clarification was issued, there were still criticisms from the outside world, pointing out that some trading platforms usually have similar fusing designs to prevent this situation. For example, in extreme cases, transactions can be automatically locked to avoid affecting market prices and prevent price fluctuations from becoming more prominent.

For example, Coinbase trading has so-called price protection. After the order is placed, if the limit order’s price exceeds a reasonable range, the trading platform will automatically cancel the transaction to avoid market collapse.

Lack of supervision and unreliable exchanges

A senior trader on the Internet sighed: ‘This kind of thing shouldn’t happen. Some people are liquidated, some can continue holding coins, some get compensation, and some don’t. This is unfair.’

In fact, due to the lack of supervision, the trading platform has the decisive power to make rules. Some netizens said that the platform could modify the trading rules at will. In the past, buying transactions in some extreme cases were judged to be invalid. For example, a netizen showed that he bought BTC at a meager price in 2019 but failed to cash it out.

In February of this year, a low price transaction of 300,000 Philippine pesos on the Philippine trading platform PDAX. At that time, the transaction price was only about 6,000 US dollars, and the market price exceeded 50,000 US dollars.

However, the exchange later explained that it was not based on blockchain transactions and transactions were not counted, and even required users who obtained BTC to return it. Otherwise, the trading platform might take legal action.

The enthusiasm for investors to pursue BTC has not yet receded: the first BTC ETF (BTIO) on the US market has been listed, and it has attracted more than 1.1 billion US dollars in just two days of trading. On the day of the release, the turnover was 1.008 billion US dollars, which is a record since The ETF with the second-highest trading volume continued to increase in subsequent trading volume.

The market’s enthusiasm for BTC is unprecedentedly high, but the transaction lacks supervision, and its own volatility risk is still the biggest problem facing BTC. As a result, some analysts believe that this “glitch” whether accidental or deliberate, will significantly weaken the upward trend of cryptocurrencies.

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