Binance. US October 21st Flash Crash Dissection – Bitcoin Magazine

On October 21st, Binance.US experienced a flash crash that caused the Bitcoin price to drop 87%. The industry is maturing, but that is reminiscent of a time when flash crashes were commonplace.

A report from Arcane Research looked at this event beginning with the time it occurred on October 21 at 6:34 p.m. Synthetic Teamese time (i.e. 11:34 UTC). At this point in time, “suddenly high selling pressure wiped out the order book” on the stock exchange.

This caused Bitcoin to plummet to $ 8,200 in just 13 seconds. That loophole is enough for Binance.US to see a surge in trading volume with 550 BTC changing hands, Arcane Research reports.

The research company compared the normal sales volume of Binance.US with the sales volume triggered by the event. Arcane Research says the normal volume over the 4 hour period is 0.74 BTC, “which shows that this massive sell order (550 BTC) is exceptional”. The company added:

“What caused the flash crash? Someone’s “fat finger” mistake meant placing a limit sell order of $ 82,000? An engine failure? A combination? Binance has stated that it was caused by a bid in the trading algorithm of one of its institutional traders.

This entity has created a domino effect that permeates all Bitcoin trading platforms. The BTC price has dropped $ 1,000 as a result of this bug.

Then there are anomalies that appear in different exchanges. Kraken has seen the BTC / USD pair trade at “increasingly bearish” levels, Arcane Research said. On this platform, Bitcoin is trading at $ 55,500 while other exchanges are trading at $ 64,000.

As can be seen below, the event lasted until 6:35 p.m., with the price of Kraken falling steadily over this period. Arcane Research suggests that exchanges are less efficient during times of market volatility.

Source: Arcane Research

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Brett Harrison, President of FTX US, has comment about the event, explain the various trade orders and how they work when bitcoin increases volatility.

In this case, the BTC price is trending down and reducing the liquidity in the market as it keeps moving down.

“Falling prices will trigger stop-loss or take-profit orders, which are in themselves market orders and lead to more liquidity being filled. The combination of market orders and a lack of liquidity caused the price to drop extremely quickly. “

Harrison clarified that Binance US’s Bitcoin crash was caused by an organization putting up a large number of market orders to “clean up” bidders for the BTC / USD order book. This triggered a liquidation flow as BTC fell into the platform.

The FTX president cited the US futures market as an example of a similar case until there was a “guard rail”. This could “help to avoid short-term microstructured problems”.

Implementing these types of solutions, combined with others, could help bring more “maturity” to the crypto market, Harrison claimed.

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Annie

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