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How Bitcoin and Ethereum plunged in minutes amidst unexpected correction

How Bitcoin and Ethereum plunged in minutes amidst unexpected correction

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On May 17, the price of Bitcoin plunged from around $7800 to $6700 within minutes in a flash crash on BitMEX. Immediately after, the price of Ethereum dropped from $240 to $190.

The abrupt decline in the price of Bitcoin was triggered by the placement of a large sell order on Bitstamp and other major crypto exchanges, which triggered contracts on margin trading platforms like BitMEX to become liquidated.

ethereum price is up 70%+ year-to-date
Most crypto assets like ethereum are still up more than 70 percent year-to-date (source: OnChainFX)

Eric Conner, a developer at Gnosis, said:

“For reference, someone put a 5,000 BTC sell on Bitstamp, which BitMEX uses for 50% of its feed and it appears to have tripped some algorithms which made a cascade on BitMEX.”

Conner suggested that the manipulation of the crypto market, possibly by a single whale, may hurt the chances of an exchange-traded fund (ETF) approval in the near-term.

Bitcoin’s bullish momentum disrupted?

The 5,000 BTC sell wall on Bitstamp that led to the sell-off of both bitcoin and Ethereum on BitMEX, led to a $30 billion drop in the valuation of the crypto market overnight.

Still, in the past seven days, the price of Bitcoin has surged from around $6200 to $8300, by more than 26 percent against the U.S. dollar.

Some analysts, including global markets analyst Alex Krüger, have said that the overnight 10 percent drop of most crypto assets could serve as evidence that the narrative of the viability of crypto assets as a safe haven against global financial instability is flawed.

He said:

“We can now put aside that nonsensical narrative of bitcoin as a hedge for US-China trade wars. The move up was engineered by a handful of parties, and so was this crash. Not as sexy, I know.”

As the short-term price action of Bitcoin and other major crypto assets gets absorbed by the market, investors still expect the market to sustain its positive sentiment and trend over the coming months.

While a minor pullback in the crypto market was expected by many investors, the magnitude in which assets fell came as a surprise to traders.

More Reason Why Bakkt is Compelling

In a sense, the short-term correction was triggered by a whale’s exploit of the current structure of the crypto market.

If the market had more trusted, regulated, and widely utilized platforms, it may have been more difficult to manipulate the market and the prices of major crypto assets.

Peter Brandt, a respected trader and technical analyst, said on May 13 that the launch of Bakkt, which is scheduled to occur in July with the approval of the Commodities and Futures Trading Commission (CFTC) could have a long-lasting impact on the state of the crypto market. Brandt said:

“This contract will be the death-nail in dozens and dozens of dishonest and il-liquid exchanges across the world as the industry drives toward standardized price discovery with custodian protection and a trade settlement process.”

Bitcoin and the rest of the crypto market recovered relatively quickly following a 10 percent drop, leaving a sign of relief after a rapid downside price movement.

Bitcoin

7 Dec at 4:10 pm UTC

$7,328.15

-7.14%

Bitcoin, currently ranked #1 by market cap, is down 7.14% over the past 24 hours. BTC has a market cap of $129.76B with a 24 hour volume of $29.95B.

Bitcoin Price Chart

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