Shortly before 11pm EDT on Thursday night, we reported that cryptos suddenly jerked lower with Bitcoin flash-crashing over 15%, sliding as low as $6,395 on Bitmex XBTUSD perpetual swap – the most liquid bitcoin contract globally – before bouncing back.
The insta-crash, which took place in a news vacuum and without an immediate catalyst, looked technical and positioning-led on the derivatives side. Courtesy of our cryptocurrency derivative expert friends at Skew, below is a breakdown of what happen in those minutes that send Bitcoin over $1000 lower.
To start with, 5,000 bitcoin went through on European physical exchange Bitstamp between 3.45 a.m and 4.15 a.m (London time, UTC +1) crashing the price down to $6,178 on the exchange.
This $35 million volume shouldn’t have been too much of a deal in itself – Kraken had a similar event a few weeks back on the 25th of April – but Bitstamp accounts for 50% of the bitcoin index at Bitmex – the largest bitcoin derivatives exchange. This index is being used to trigger liquidations of the bitcoin XBTUSD perpetual swap contract – the most liquid derivatives instrument where trading occurs on margin and which traded $5bln+ daily over the last week.
As a result, more than $200mln of sell liquidations occurred which took the market down with it
As the crash accelerated, overleveraged positions got cleared, resulting in open interest down by a third from $630mln to $400mln
The Basis (Bitmex XBTUSD – Coinbase BTCUSD) instantly plunged to – 5% – very unusual to see the bitmex perp decoupling to such an extent.
Liquidity – measured by bid offer spread of $10mln in the XBTUSD order book – evaporated for a moment.
Overall, Sk3w concludes that “this was the first serious alert since bull market restarted on the 2nd of April. It’s also another serious session for bitcoin with > $12bln going through on the futures side in last 24h.“
d
Zero Hedge’s mission is to widen the scope of financial, economic and political information available to the professional investing public, to skeptically examine and, where necessary, attack the flaccid institution that financial journalism has become, to liberate oppressed knowledge, to provide analysis uninhibited by political constraint and to facilitate information’s unending quest for freedom. Visit https://www.zerohedge.com
This post has been republished with implied permission from a publicly-available RSS feed found on Zero Hedge. The views expressed by the original author(s) do not necessarily reflect the opinions or views of The Libertarian Hub, its owners or administrators. Any images included in the original article belong to and are the sole responsibility of the original author/website. The Libertarian Hub makes no claims of ownership of any imported photos/images and shall not be held liable for any unintended copyright infringement. Submit a DCMA takedown request.