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: TradingView.com)

Coincidence?

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.

krakenFlash2.png

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.

krakenflash3.png

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: TradingView.com)

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.

Institutional Derivatives Volumes Went Cold After Crypto Market Crash: CryptoCompare

  • Institutional derivatives trading plummeted following March's crypto market crash according to latest CryptoComapre report. 
  • Mar. 13 generated the highest daily volumes in cryptocurrency history, generating $75.9bn in trades. 

Volume trading on institutional derivatives plummeted following the crypto market crash in March. 

According to the  CryptoCompare March 2020 Exchange Review, institutional derivatives volumes tanked following the market crash on Mar. 12, which saw the price of bitcoin drop as low as $3,800. Trading volume across institutional exchanges, including CME, declined more than 43% in March compared to the month before. 

According to the report, 

Institutional appetite for derivatives products appeared to decline rapidly following the BTC crash, with CME losing 44% of volume compared to February. Trading volumes totalled $7.36bn in March compared to $13.1bn in February.

cryptocompare march 2020 guideVolume trading across crypto exchanges in March 2020 | Source: CryptoCompare

The report found that CME options trading, which launched in January of this year, have not seen significant improvements in volume and are far from generating the activity seen on rival crypto exchange Deribit. 

Despite the market crash, Mar 13. brought about the highest daily volumes in cryptocurrency history, generating $75.9bn in trades. Lower Tier exchanges accounted for the majority of the volume at $54.3bn, while Top Tier volumes also set a record at $21.6bn in daily trades. 

According to the report, spot volumes surged in Q1 2020, with Top Tier exchanges increasing month-on-month since December 2019. Even with the economic uncertainty of the coronavirus, spot volumes for Top Tier exchanges increased 35% on average vs February.

While crypto experienced its single largest day of volume trading, March’s overall volume failed to reach the same levels of Dec. 2017’s crypto bull run.

The report reads, 

Despite the March price crash, volume levels for these exchanges still haven’t reached those seen in the Dec-2017 bull run. Overall, volumes across all Top Tier exchanges increased 8.0% to $288Bn in March.

Binance was the largest Top Tier exchange by volume in March, trading $63.6bn, an increase of 19.2% over the month before. OKEx generated the second-largest volume of $47.7 bn, down 8.2% from February. Coinbase experienced the largest percent increase in volume trading during March, generating $13.3bn, up 41.9%.

Featured Image Credit: Photo via Pixabay.com