Yesterday was a weird one flash crash to see on various exchanges. The bitcoin (BTC) dollar rate shot down hard in a few minutes, with the crash on Binance.US being the most severe. What caused this crash?
Bitcoin’s price was consolidating somewhat quietly yesterday when the price suddenly shot down within a short period of time. On the US branch of Binance, the crash was bizarre, with a sudden drop of -88%. Bitcoin was worth $8,200 there for a while. In the end, 592.8 bitcoins were sold during the rapid crash.
Such errors are more common. For example, it may have been a trader who accidentally entered an incorrect price. Binance.US has now stated in a response that the fault is not with them. The mistake would have been made by an institutional client’s trading algorithm, so let the exchange know aan The Block:
“One of our institutional traders informed us that they had a bug in their trading algorithm. We are continuing to investigate the event but have been informed by the merchant that they have now fixed their bug and the issue appears to have been resolved”
According to sources from The Block, it is striking that neither the institutional client nor Binance.US itself have taken any security measures to prevent such errors. For example, trading algorithms should normally automatically cancel orders as soon as it detects certain things, such as incorrect prices. Also, many exchanges automatically cancel orders if they clearly contain an error.
Since the flash crash, the bitcoin price has fallen by a few percent and is back below the previous level all-time high (ATH). Whether it is because of this news is unlikely. Many traders will want to grab some profits now that bitcoin is at unknown heights. Read Michiel’s column published this morning here in which he takes a look at the prices of both bitcoin and ethereum (ETH)!
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