The price of bitcoin fell to $8,200 on the Binance platform just hours after reaching a lifetime peak of $67,000. The cryptocurrency exchange blamed the sudden price drop on a “fault” in an institutional customer’s trading algorithm.
“While we are still investigating the occurrence, we have been informed by the broker that they have corrected their glitch and the situation looks to be resolved,” a spokeswoman said.
This comes only one day after Bitcoin rocketed to a lifetime record of $67,000, 6 months after its last peak. This rise, fueled by the launch of the ProShares Bitcoin Strategy ETF, seems to have peaked. The cryptocurrency was trading 3% lower at $62,852.
What Happened On Binance?
At around 07:34 EST, Bitcoin’s price plummeted from $65,760 to $8,200. Within a few seconds, it rebounded to virtually precisely the previous price. The exchange’s volume peaked at 592.8 Bitcoin during the meltdown, which is well over $40 million at today’s values.
Although the collapse happened only on Binance, it had a knock-on effect on the value of bitcoin on some other exchanges too. On Bitstamp, its price fell 2.3 percent during the same time but remained over $63,600. Bitcoin lost almost $1,000 on Coinbase.
The Binance drop also affected the soaring Ethereum price, which lost about $2,000 from its peak of now over $4,000 for ether.
The Cause Of The Collision
Binance attributed the Bitcoin flash collapse to a rogue algorithm used by an institutional trader. “One of our corporate traders informed us that they discovered a problem in their trading algos, which seems to have been the cause of the sell-off,” Binance said in a statement to Bloomberg. The firm said that the problem was remedied after the trader’s bug repair.
However, the flash fall occurred just after Binance’s CEO cautioned cryptocurrency traders that the following months will be volatile.
In finance, mistaken crashes like these occur when traders make errors in the specifics of their planned deals. Alternatively, when they submit the incorrect price or order size. If the value of the deal is high, it has the potential to overwhelm a whole exchange, resulting in a rapid and catastrophic fall. This is referred to as a flash crash.
An incident like these occurred in the mid 2010s when the whole of Wall Street experienced a flash collapse. While US stocks have been relatively stable since that time, the same could not be true for cryptos.
A Series Of Trading Mishaps
Binance’s sudden price drop is the newest in a series of cryptocurrency trading issues. Earlier this month, Synthetify, a new decentralized exchange, was forced to suspend trading soon after it launched due to incorrect data given by the Pyth Network.
In September, a glitch in the cryptocurrency data network Pyth’s software resulted in roughly a 90% decline in Bitcoin values for a short time.