Crypto Market Loses $20 Billion Over Bitcoin’s $1,000 'Flash Crash'

Over the last 24 hours the cryptocurrency ecosystem has lost a total of around $20 billion, likely over a ‘flash crash’ that saw bitcoin drop from around $7,700 to a $6,700 low on most cryptocurrency exchanges, caused by a 5,000 BTC sell order.

According to available data, the flagship cryptocurrency’s price suffered from a 5,000 BTC sell order on popular cryptocurrency exchange Bitstamp. On the exchange, BTC fell to a $6,200 low before it started recovering.

The massive sell order has led to various theories, as users on social media struggle to find out why anyone would dump $36.3 million worth of BTC and flash crash the market in such a way. While some believe the dump could’ve been caused by bots glitching, others point to potential market manipulation.

As some users pointed out, if the trader set up a large short position on a derivatives exchange like BitMEX could turn out to be profitable if it managed liquidate long positions. This is possible as BitMEX uses Bitstamp and Coinbase in its price index.

Other theories revolve around Bitfinex, as the 5,000 BTC dump occurred shortly after it was revealed a New York judge ordered its affiliated stablecoin issuer Tether to freeze transfers to it. As covered, both firms were accused of an $850 million ‘cover-up’ earlier this year.

At press time, bitcoin’s price has started to recover from the ‘flash crash’ as it’s currently trading at $7,260 after falling 8.9% in the last 24-hour period, according to CryptoCompare data.

Bitcoin's price performance in the last 24-hour period

Given the flagship cryptocurrency’s drop, most altcoins quickly followed suit, leading to a $20 billion for the cryptocurrency ecosystem. Most cryptocurrencies are down between 6% and 14% in the last 24 hours.

XRP, ether, and bitcoin cash, which managed to briefly outperform the market earlier this month, are down 6.4%, 6.7%, and 9.7% respectively, while TRON’s TRX and Stellar’s XLM – which saw its blockchain go down for two hours this week – are down by 14%.

Despite the drop most cryptocurrencies are still up so far this month. BTC, for example, has still seen its price rise by 25.8% in May, and by 39.3% in the last 30 days. What’s behind this year’s crypto market rally isn’t clear, although some analysts point to rising tensions between the US and China.

Bitfinex Wants to Offer 100x Leverage For Crypto Derivatives Trading

Michael LaVere
  • Bitfinex will offer 100x leverage trading for cryptocurrency derivatives
  • According to the exchange's CTO, the hedging product is "ready for prime time"

Cryptocurrency exchange Bitfinex revealed it wants to offer derivatives products with up to 100x leverage for cryptocurrency traders. 

Hedging On Cryptocurrency Derivatives

Chief Technology Officer Paolo Ardoino told The Block on June 25 that the cryptocurrency exchange was ready to ship a 100x leverage product for certain users. According to the post, the project has been under development for some time and is “now ready for prime time.” 

The product was referenced in last month’s whitepaper published by Bitfinex for its $1 billion private token sale of LEO, stating

“Qualified Bitfinex account holders will be able to trade a new hedging product through a derivatives wallet.”

The whitepaper originally claimed that the new hedging mechanism would be released by the end of June, a timetable that fits with Ardoino’s “ready for prime time” statement. 

Ardoino confirmed that only “verified” customers will be allowed access to the product, given the risks involved in such highly leveraged trades. 

The CTO also took to Twitter to quell user concerns over Bitfinex’s existing 3.3x margin trading. Ardoino explained 100x leverage will be “optional,” and that their current leveraged trading products will be unaffected by the release. 

Big Risk, Big Reward

Bitfinex is looking to compete with rival exchange BitMEX, who already offers 100x leverage through its bitcoin perpetual swap contract. However, Bitfinex claims its product is designed as a legitimate hedging tool for clients, rather than a gambling mechanism. 

Max Boonen, CEO of trading firm B2C2, believes the product will only appeal to retail hedgers, as large investors will shy away from the risks involved in 100x trading. 

According to Boonen, 

“There’s nothing wrong inherently about 100x. But as a commercial hedger you want lower leverage margin. The larger investor wouldn’t want to take the risk of 100X, typically. They don’t want to go balls to the wall.”

The cryptocurrency derivatives market has been heating up. Last week bitcoin-bull Mike Novogratz’s Galaxy Digital announced plans to offer cryptocurrency options contracts.

Binance has also reportedly been exploring futures trading. On June 24, Binance CEO Changpeng Zhao tweeted the exchange had executed its first margin liquidation for a BTC short.