Bitcoin Flash-Crashes on Kraken Exchange Well Before Tether News

One of the most trafficked and trusted cryptoasset exchanges, Kraken, was yesterday the scene of a flash crash of Bitcoin which saw the crypto drop 20% in the span of less than five minutes, from roughly $5,450 to $4,357 and back.

Although this flash crash seemed anomalous when it happened, the recent news regarding the New York Office of the Attorney General’s (OAG) allegations surrounding Bitfinex and Tether (USDT) throws the event in a new light. The OAG has accused Bitfinex of having a $850 million shortfall on their books - which is far from the first time such allegations have been aimed at the exchange.

kraken flash crash(source:


The story was originally broken by the Wall Street Journal (WSJ) late last night (April 25, EST), while the crash occurred at about noon - several hours before the OAG filed an affirmation with the New York County Clerk against Tether and iFinex - Bitfinex’s parent company.

Thus the crash preceded both widespread reporting of the news, and (narrowly) public knowledge of the event itself.


The confluence of events could be a coincidence, and there has been no direct evidence found thus far to support the notion that someone with pre-public knowledge of the impending news dumped a large amount of bitcoin onto Kraken’s books.

However, another coincidence involving Bitfinex also occured yesterday, before both the Bitfinex/Tether news and the Kraken flash crash: bitcoin stolen from Bitfinex in the summer of 2016 during a hack was sent from known addresses yesterday, for the first time in years. The largest of these transactions, for 167 bitcoin, is viewable here and the originating (hacker’s) address can be verified here.


The only information we can immediately glean from this new receiving address is that it’s a multisignature wallet, beginning with the number “3.”

kraken flash crash(source:

The ongoing market reaction to the news has been fairly grim so far. The initial dump was fought back at $5,000; currently holding at $5,150, a return to the structure about the key $5.35K mark seems wholly unlikely at this time.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

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