Breaking Bitcoin Banyan Flash Crash in seconds

October 21St., 2021, the crypto exchange Binance US has experienced a bitcoin flash crash that has caused the price of BTC to fall by more than 80%. The industry is maturing, but these events are reminiscent of a time when a crypto flash was the usual business.

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A report from Arken Research dives deeper into the event, starting at 11:34:17 on the aforementioned date. At this point, the research firm claims, the exchange “suddenly massive selling pressure cleared the order book.”

This caused Bitcoin to drop to $ 8,200 for a full 13 seconds. Arken Research said the bracket was enough to make Binance US feel a spike in its trading volume with a 550 BTC change.

The research firm compares Binance US normal sales volume to this event. The former stood at 0.74 BTC in a 4-hour period, “This huge sales order (550 BTC)” was outstanding, Arken Research said while adding the following:

What is the cause of the accident? Does a thumbs up by someone mean placing a limit sale order at $ 82,000? An engine error? Combination? Binance said it was due to a bid on the trading algorithm of one of the institutional traders on the exchange.

This entity has created a domino effect that wreaks havoc across all bitcoin exchange platforms. The study claims that this bug has reduced the price of BTC by $ 1,000.

Since then, there have been irregularities with Kraken on various exchanges, with its BTC / USD pair trading at “increasing discounts”, Arken Research said. Bitcoin traded at $ 55,500 on this platform while other exchanges traded at $ 64,000 per BTC.

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As seen below, the event has been extended to 11:35:06 with the Kraken discount stabilizing around this time. Arken Research noted that this exchange works less efficiently during volatile markets.

Source: Arcane Research

Bitcoin down the trading rabbit hole

Brett Harrison, president of crypto exchange FTX US, commented at the event. He explains the different trading orders and how they work when Bitcoin increases its volatility levels.

In this case, the price of BTC has tended to go down and it has come down further as the liquidity in the market has decreased. Harrison says:

The prices of these trades will trigger stop loss or profit orders, which in itself will cause market orders and more liquidity to flow. The combination of market orders and the lack of liquidity spirals prices downwards in extremely fast fashion.

Harrison clarified that Binance US Bitcoin crashed due to an organization that set a large number of market orders “cleared the bid side” for the BTC / USD trading pair order book. It starts a liquidation cascade when the BTC descends to the platform.

The FTX president used the US futures market as an example of a different market that was suffering from this problem until the “Gardrell” was implemented. It can “help prevent short-term microstructure problems”.

Related Reading | Bitcoin futures are heating up, which is why BTC traders should expect instability

Implementing such solutions, in conjunction with others, could help bring more “maturity” to the crypto market, the executive claimed.

At the time of writing, BTC is trading at $ 60,412, down 4.5% on the daily chart.

BTC with moderate losses on the daily chart. Source: BTCUSD Tradingview

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